Research Publications 2007 and below

This study assesses whether the widely documented momentum profits can be ascribed to time-varying risk as described by a GJR-GARCH(1,1)-M model.

Hedge fund indices have been criticised for a lack of representativity and for their biases, to the point that serious doubts about the usefulness of hedge fund indices have been raised by investors and regulators.

We describe an approximation method, based on binomial distribution adjustments, for constructing independent loss distributions.

Real estate, probably the most traditional of alternative classes, is enjoying renewed favour as institutional investors search for diversification benefits and competitive yields.

In the presence of non-normally distributed asset returns, optimal portfolio selection techniques require not only estimates of variance-covariance parameters, but also estimates of higher-order moments and comoments of the return distribution.

Several studies have put forward that hedge fund returns exhibit a non-linear relationship with equity market returns, captured either through constructed portfolios of traded options or piece-wise linear regressions.

In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes.

Fund ratings play a significant role in fund selection for investors: the funds being made available are more and more numerous and increasingly diversified in terms of assets and style management.

A partir d’un exercice de microsimulation de la TVA acquittée par les ménages, cet article cherche à éclairer la question de la répartition
des montants de TVA acquittée tout au long de la vie et ainsi illustrer la contribution relative des différentes classes d’âge au financement de la protection sociale dans l’hypothèse de la mise en oeuvre d’une « TVA sociale ».

Dans un contexte de persistance du chômage structurel des travailleurs peu qualifiés à un niveau élevé, la formation professionnelle peut constituer un levier essentiel de la politique publique. La loi du 4 mai 2004 relative à la formation professionnelle tout au long de la vie et au dialogue social est une traduction de cette volonté gouvernementale.

This paper investigates why traders hide their orders and how other traders respond to the detection of hidden depth.

This paper introduces a multivariate copula approach to Value-at-Risk estimation for fixed income portfolios.

In this paper, we introduce a suitable extension of the Black-Litterman Bayesian approach to portfolio construction in the presence of non-trivial preferences about higher moments of asset return distributions.

Soucieux de trouver rapidement une explication évitant de les remettre en cause, les dirigeants de certains pays européens ont mis en exergue le rôle une fois de plus néfaste qu'auraient joué les hedge funds dans la crise de cet été. Cette crise est le résultat d'un ajustement brutal du prix des actifs lié à une augmentation de l'aversion pour le risque de l'ensemble des investisseurs.

A recent publication1 by the EDHEC Risk and Asset Management Research Centre has drawn conclusions that highlight the shortcomings of well known capitalisation- or price-weighted stock market indices and argues that the choice of benchmark for asset allocation or performance measurement is a task requiring particular care.

The focus of this article will be on risk management within the context of a total-return futures program centered on commodities.

Risk aversion functions extracted from observed stock and option prices can be negative as shown by Aït-Sahalia and Lo (2000) and Jackwerth (2000).

In this paper, we examine how standard exchange-traded fixed-income derivatives (futures and options on futures contracts) can be included in a sound risk and asset management process so as to improve risk and return performance characteristics of managed portfolios.

This paper presents evidence of predictability in the time-varying shape of the U.S. term structure of interest rates using a robust recursive modelling approach based on a Bayesian mixture of multi-factor models.

On September 18th, 2006, market participants were made aware of a large hedge fund's distress.

Une étude conduite par Gérard Maarek pour le compte du pôle de recherche en Economie de l'EDHEC, et intitulée : La réforme du financement de la protection sociale, essais comparatifs entre la "TVA Sociale " et la " TVA Emploi ", montre que le gain attendu d'une baisse de 25 milliards d'euros des cotisations sociales (salariales ou employeurs), soit 3,8 % de la masse salariale brute (660 Mds d'euros) compensée par une hausse de 3,6 points de TVA, aurait sur le long terme un effet positif mais modéré sur l'emploi (+61 000 emplois) et permettrait une amélioration du solde du commerce extérieur (les importations baissent de 0,3 % ; les exportations sont plus soutenues avec une croissance de +1,7 %).

L'objectif de cet article est d'analyser l'effet de la mise en place d'une " TVA sociale " sur les inégalités et le pouvoir d'achat des ménages.

This paper focuses on the use of market variables that exploit the linkages between spot, futures and derivatives markets, as opposed to the business cycle indicators employed in most of the earlier studies.

Over the last few years, alternative investment strategies have dramatically gained in popularity.

This document outlines our position on the third quantitative impact survey on the standard formula for the calculation of capital requirements for insurance companies under Solvency II.

In this paper we provide a detailed critical analysis of various methodologies involved in the so-called passive replication of hedge fund returns, a subject that has sparked renewed interest following recent initiatives by major investment banks such as Merrill Lynch and Goldman Sachs.

Many investors do not know with certainty when their portfolio will be liquidated.

This article will argue that one can indeed intelligently invest in the commodity markets and will briefly touch on three approaches, which in turn are drawn from the Intelligent Commodity Investing book.

Leading pension plans use asset and liability management systems to optimizise their strategic decisions.

As part of a newly created research programme focusing on Best Execution and Operations Performance', EDHEC's research team has actively contributed to the review of existing approaches to measuring execution quality and recently introduced an innovative framework for analyzing transaction costs and measuring execution performance: EBEX.

Volatility is an alternative betaa risk premium captured by hedge fund managers and investment bank proprietary tradersthat is today moving closer to the mainstream and should be thought of as a veritable asset class.

A la suite de l'EDHEC Publication " Reconsidérer les effets de la protection de l'emploi en France ", ainsi que le Position Paper " Le contrat de travail unique : un outil de sécurisation des parcours professionnels ? ", cette note propose une analyse critique, faisant notamment référence à des travaux académiques publiés, des grandes mesures en faveur de l'emploi proposées par François Bayrou, Nicolas Sarkozy et Ségolène Royal.

Il y a quelques semaines, l'EDHEC s'est adressée aux candidats à la présidence de la république pour proposer une réforme du Code du travail propre à créer des emplois et à sécuriser les parcours professionnels.

In this paper, we examine how standard exchange-traded fixed-income derivatives (futures and options on futures contracts) can be made part of sound risk and asset management in such a way as to improve the risk and return performance characteristics of managed portfolios.

Dans un rapport intitulé : " Hedge Fund Performance: A Vintage Year for Hedge Funds? ", Véronique Le Sourd, Ingénieur de Recherche Senior à l'EDHEC Risk and Asset Management Research Centre, fournit un exposé détaillé de la performance de chacune des stratégies de hedge fund qui constituent les indices alternatifs EDHEC.

The relevance of the information ratio and the alpha, two leading performance measures for multi-index models, depends on the type of portfolio held by investors.

MiFID (The Markets in Financial Instruments Directive) is probably one of the most significant regulatory initiatives that is about to transform the European Capital Markets.

Labour legislation reform promises to be central to the debate surrounding the French economy in the upcoming presidential campaign.

This document contains our answer to CP20, a consultation process initiated by CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors) on the "Advice to the European Commission in the Framework of the Solvency II Project on Pillar I Issues".

The number of professionally managed funds in the financial markets is increasing.

In light of the changing face of risks and how they are perceived, the existing prudential rules are totally inadequate and the European Commission has established a vast project to overhaul the methods used to determine the solvency of insurance companies.

Grâce à une croissance économique soutenue dans plusieurs régions du monde, l'industrie de la gestion privée s'est octroyée une place considérable dans le paysage financier mondial.

The paper examines the role of non-normality risks in explaining the momentum puzzle of equity returns.

This paper compares a number of different approaches for determining the Value at Risk (VaR) and Expected Shortfall (ES) of hedge fund investment strategies.

This document contains our participation in the consultation process initiated by the CESR on the eligibility of hedge fund indices for the purpose of UCITS (CESR/06-530)

This paper, which is being written to provide an overview of the multitude of publications we have seen on hedge fund performance, is the result of a reading and analysis of about 200 studies on this subject.

De plus en plus de voix s'élèvent parmi les praticiens et les chercheurs, pour souligner les insuffisances de la logique traditionnelle du marketing qui ne suffit plus pour déployer des parades aux problèmes de croissance des offres discount, de décroissance des marchés et de baisse globale d'efficacité des actions marketing.

After collecting all available information on 109 hedge fund defaults between 1994 and 2005, we investigated two statistical methods in order to shed some light on the risk profile of hedge funds.

Cette étude met en évidence les effets bénéfiques d'une réforme de la protection de l'emploi consistant à instaurer un contrat unique en substitut du système dual actuel CDD-CDI. De façon originale, nous soulignons l'apport d'une approche en termes de cycle de vie pour définir les contours de ce contrat unique.

In this paper, the authors examine the question of the eligibility of hedge fund indices as financial instruments for use by European investment funds.

The Amaranth case is surprising in many ways. It is definitely a surprise that a well-respected multi-strategy hedge fund could lose about $6-billion in little over a week. It is perhaps an even greater surprise that such a loss would have little knock-on effects on the hedge fund industry and the wider capital markets.

We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index.

Depuis la mise en place de la Stratégie Européenne pour l'Emploi (SEE), l'Union européenne fixe des objectifs et définit des indicateurs destinés à développer un benchmarking des politiques sociales.

The profound changes in the risk management of insurance companies, brought about by the increasing complexity and variety of risks over the last two decades, have made it necessary to revise prudential regulations (Solvency II) and to adapt the international accounting standards (IFRS)

In a new survey, The EDHEC European ETF Survey 2006, the EDHEC Risk and Asset Management Research Centre has carried out an in-depth study on the use of ETFs (Exchange-Traded Funds) by European investors.

Recent finance research that draws on behavioral psychology suggests that investors systematically make errors in forming expectations about asset returns.

We examine how Amaranth, a respected, diversified multi-strategy hedge fund, could have lost 65% of its $9.2 billion assets in a little over a week.

This chapter will cover investing in commodities through futures contracts.

Academic criticism of classic Capital Asset Pricing Model (CAPM) performance measures is not new.

This article continues in the spirit of the August 2002 Quantitative Finance feature on Measuring Risk-Adjusted Returns in Alternative Investments.

An article in the June 2006 edition of the European Central Bank's Financial Stability Review (FSR) claims that hedge fund activities pose considerable risk to the financial system.

The article shows that country-specific exchange-traded funds (ETFs) enhance global asset allocation strategies.

In this paper we observe that it appears possible to time commodity markets by observing the (lagged) actions of various classes of market participants.

Most previous tests of hedge fund performance have failed to model the exposure of hedge fund returns to systematic non-normality risks, nor have they taken the tactical asset allocation decisions of hedge funds managers into account.

By now it has become well known that commodities have had superior performance over the past four and a half years.

In this paper, we consider an intertemporal portfolio problem in the presence of liability constraints.

In this paper, the authors examine the role of backwardation in the performance of passive long positions in soybeans, corn and wheat futures over the period of 1950 to 2004.

L'étude réalisée par Arnaud Cheron du Pôle de Recherche en Economie de l'EDHEC et intitulée " Le plan national d'action pour les seniors ": " bien, mais peut mieux faire ", établit que la faiblesse du taux d'emploi des seniors compte pour moitié dans le problème de l'emploi en France.

Despite institutional investors' growing interest in funds of hedge funds, little attention has been paid so far to their added value and/or the sources of their added value.

Enterré au terme d'un long débat parlementaire au printemps 2003 par monsieur Jean-Pierre Raffarin, le dossier des privatisations des sociétés concessionnaires d'autoroutes (cession de 50,4% d'ASF, 75,7% de SANEF et 70,2% d'APRR) a finalement refait surface le 8 juin 2005 lors d'un discours de monsieur Dominique de Villepin.

La réforme de l'Etat dans le but de le rendre plus efficace est une alternative à la privatisation des services publics.

The goal of modelling is to find one or more factors that offer the best explanatory power for a given variable.

Hedge funds have an absolute return performance objective stated independently of the global
market conditions.

The goal of modelling is to find one or more factors that offer the best explanatory power for a given variable.

The recent outperformance of commodities versus equities has caused a positive re-evaluation of commodities by both retail and institutional investors.

This article comprehensively covers the new field of natural-resources fund-of-funds investing.

In this article, we note how a set of active commodity strategies could potentially add value to an investor's commodity allocation.

This paper proposes a nonparametric efficiency measurement approach for the static portfolio selection problem in mean-variance-skewness space.

When an investor elects to invest in a commodity index product, that investor realizes that he or she will earn the inherent return of the asset class and will be able to do so cheaply, but will not be provided with any downside risk protection.

In this article, we provide the busy reader with a survey of articles that were written over the past four years on hedge funds.

For several months, investors and their advisors have been worrying about the profitability prospects for hedge funds.

We generalize Markowitz analysis to the situations involving an uncertain exit time.

Using an original database of 634 market neutral hedge funds, this study formally analyses the market neutrality of market neutral funds which are particular in the hedge fund universe since the only objective of these funds is to provide positive returns completely independent of the market conditions.

Two studies, by Watson Wyatt and UBS (both from March 2005), give a pessimistic view of the hedge fund industry's capacity to generate long-term returns, due to its increasing size.

In this paper, we emphasize the need for the hedge fund industry to adopt a consumer (investor)-driven approach, as opposed to the current producer (manager) perspective, and we call for the emergence of new types of offerings with characteristics better suited to the needs of institutional investors.

This paper presents a multi-period stochastic network model for integrating corporate financial and pension planning.

The delegation of asset management services is a source of potential agency problems between investors and their portfolio managers.

There is a requirement for decisions taken by risk managers in investment banks to be based upon reliable measures.

As a consequence of its greater maturity, the hedge fund industry has extended its investor base to
institutional investors, who are now faced with a large number of product offerings including not only single hedge funds, but also funds of funds and, more recently, investible indexes.

Following a growing concern among investors about the quality of hedge fund index return data, and given the lack of capacity and transparency specific to that industry, this paper questions from an academic perspective whether it is feasible or not to design hedge fund benchmarks satisfying all defining properties for a good index.

Hedge funds do not easily fit into the current way institutions go about investing.

This paper provides a risk framework for fiduciaries considering using a core-satellite approach to investing.

The Mt. Lucas index provides a systematic approach for capturing a portion of the return of trend-following commodity traders.

Selected hedge funds employ trend-following strategies in an attempt to achieve superior risk adjusted returns.

This article will discuss the practical issues involved in applying a disciplined risk management methodology to futures trading.

In a previous column, I touched upon the difficulty of using standard measures to evaluate a number of hedge fund strategies.

If you saw that a well-known Commodity Trading Advisor (CTA) was in a Top 20 CTA table with returns of 44.1% during the year 2000, you would probably think that CTA did a great job for his or her investors, right?