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PhD in Finance
E W S L E T T E
December 2012/May 2013 – Double Issue
In this issue: Editorial.............................................................................................................................................................................................................1 Core faculty strengthened ...................................................................................................................................................................... 4 Faculty and student interviews................................................................................................................................................................5 Programme and faculty news ..................................................................................................................................................................9 EDHEC-Risk Institute news ....................................................................................................................................................................15 EDHEC Business School news ...............................................................................................................................................................22 Important information for prospective applicants .......................................................................................................................22
Mind the gap
EDHEC Business School believes that academic research has a vital role to play in promoting innovation and constantly raising professional standards. With a century-long tradition of serving the needs of the business community, it strives to become the European school most noted for its impact on the business world and the economy. This ambition centrally depends on the school’s research activities which are not only expected to contribute to its academic reputation and enrich its traditional degree programmes, but also to structure its engagement with business and government. While it is conventional for academic institutions to state that they create value for society through highquality scholarship and research, there are frequent disconnects on the one hand between the orientation given to research by scholars and the needs and expectations of practitioners and on the other hand between the dissemination avenues trodden by the academic community and the media venues frequented by the wider community. In this model, research develops endogenously under the guidance of the academic community and seeps out into the wider world from scholarly journals. When problems faced by society have often motivated developments in the most theoretical of fields, how relevant can it be to allow the academic study of
Professor Noël Amenc, Associate Dean for Development, EDHEC Business School, Director, EDHEC-Risk Institute
business to develop separately from its practice? If business research has value for society, should not business schools be expected to optimise the ways and formats in which it is delivered to those it is intended to serve? Designed in this context, EDHEC Business School’s ‘Research for Business’ policy aims to build bridges for two-way communications between academic research and business practice. It does so first by seeking the input of leading practitioners and cofunding of research and development investments by the industry so as to focus research efforts on issues that correspond to genuine industry and community expectations. It then actively broadcasts research results towards practitioners and the wider
Newsletter PhD in Finance December 2012/May 2013 - 1 -
community using formats and media venues adapted million practitioners worldwide and for influential to these audiences and organises a dialogue on the trade publications, such as Investment and Pensions Europe or AsianInvestor. Key research results are practical implications and applications of findings. also highlighted by way of press releases distributed Established in 2001, EDHEC-Risk Institute to 32,000 journalists. Outreach efforts also include spearheaded this policy in the area of risk and live events that see research results and applications investment management and has grown to become being discussed on the occasion of the annual the leading centre for transferring knowledge drawn research conference circuit that the Institute from research to the investment industry. Present organises for the benefit of practitioners in Europe, on three continents, it boasts a team of ninety Asia and North-America and at ad-hoc research permanent professors, engineers and support staff, presentations across the world. In the first quarter of as well as forty-eight research associates from the 2013, industry outreach events organised by EDHECRisk Institute drew close to 1,500 participants from financial industry and affiliate professors. over fifty countries. The Institute systematically seeks to validate the academic quality of its research through publications The Institute’s research is also integrated into the in leading scholarly journals. Its researchers have School’s degree programmes, into the executive published articles in top academic publications– education seminars that EDHEC-Risk Institute has including Journal of Finance, Journal of Financial and been offering in the world’s financial capitals since Quantitative Analysis, Journal of Financial Economics, 2004, and into the unique PhD in Finance programme Management Science and Review of Financial it has been offering to practitioners since 2008. Finally, Studies–and in leading practitioner-oriented the fundamental and applied research conducted at journals such as Financial Analysts Journal, Journal EDHEC-Risk Institute also serves as a foundation for of Portfolio Management and Journal of Investment proprietary research and development efforts that allow the Institute and selected partners to develop Management to cite only generalist publications. new offerings for the industry. To optimise exchanges between the academic and business worlds, the Institute publishes documents targeted at a wide audience of professionals and contributes to regulatory consultations. Its documents include industry surveys that compare current practices and the latest research advances, publications that summarise the Institute’s research on key topics, and ‘position papers’ that present its views on the most pressing issues facing investors, financial institutions, and markets. In the first quarter of 2013, the Institute released a ‘position paper’ on smart beta, a major survey of ETF trends, a document analysing industry reactions to earlier work on the flaws of corporate bond indices, and six studies on themes such infrastructure investments, pension Since inception, the Institute’s annual research conferences have attracted over 10,000 participants from some fifty countries worldwide. liabilities and sovereign risk, the quality of Asian stock market indices, dynamic allocation in assetliability management and the convergence between mainstream and alternative asset management. It Since the beginning of the academic year, EDHEC-Risk also contributed its views and analysis on financial Institute has signed new partnerships and unveiled indices and benchmark setting processes to the new initiatives which illustrate its commitment to International Organisation of Securities Commissions bringing academe and industry closer and improve (IOSCO), the European Banking Authority and the practices through the medium of research. European Securities Market Authority. In the field of research, milestones to date this year These documents are distributed via the Institute’s include the creation of a joint research programme website and summarised both for the Institute’s in the area of risk and investment management monthly newsletter that is circulated to over 1.6 with the department of operations research and
Newsletter PhD in Finance December 2012/May 2013- 2 -
3 - . through the invention of a new business model where flagship indices corresponding to popular strategies are made available free of charge. it ambitions to train a new breed of practitioners who will combine their practical field expertise with the research skills acquired through the programme to produce their own research to advance the frontiers of knowledge in finance and foster innovation in the financial industry. With this venture. The newly endowed research chair will explore issues in the areas of asset allocation. a flat fee is charged for access to the platform’s risk-based customisation and advanced analytics and asset owners are not required to pay fees on assets under management when they replicate the platform’s indices. and benefits from the Institute’s repute. Newsletter PhD in Finance December 2012/May 2013. The programme with Princeton University is predicated on the idea that state-of-the-art risk management techniques are a key source of value in investment management. this activity aims to revolutionise the index provision world through the promotion of a new approach enabling investors to choose and control the risks of smart beta indices. and advanced uses of risk indicators in risk management. The first course in the series is planned for the end of the year on Yale’s New Haven campus and at EDHEC Risk Institute– Europe in London. In terms of outreach activities. transparency and the capacity to integrate research developments in the area of benchmark construction without any particular commercial bias. The inaugural edition of the EDHEC-Risk Days North America will take place in New York on 8-9 October 2013. With respect to the development new products and services for the industry. This academic affiliation is synonymous with scientific rigour. Europe and North-America and has signed a landmark agreement with Yale School of Management to design and deliver a programme leading to a joint certificate. EDHEC-Risk Institute is positioning itself as the leading alternative index provider from the academic world. Primarily targeting finance executives in full-time jobs. The EDHEC-Risk Institute PhD in Finance programme is based on a rigorous curriculum. infrastructure equity investment management and benchmarking. infrastructure debt investment and governance. the coming weeks will be marked by the launch of ERI Scientific Beta. A different and major way in which the Institute helps bring academe and practice closer together is through its unique doctoral programme. portfolio decisions and regulatory guidance.financial engineering of Princeton University and the endowment of five new research chairs at EDHEC-Risk Institute. Organised around an online platform. The EDHEC-Princeton Institutional Money Management Conference will continue to take place in New York and will be the favoured venue to promote the results of the institutions’ joint research programme. A structured programme of courses will give participants the opportunity to earn a “Certificate in Risk and Investment Management” awarded by Yale School of Management and EDHEC–Risk Institute. and risk assessment and performance reporting. All of these activities reflect the efforts of EDHECRisk Institute to optimise the impact of its research on investment practices. it will focus on improved measures and models for risk indicators. through the provision of total transparency on the methodologies and compositions of the indices available on the platform. the Institute has renewed its partnership with CFA Institute to jointly offer seminars derived from the Institute’s research advances to the CFA charter-holder community in Asia. the Institute has announced it would be extending its annual research conference circuit to North America. innovations and regulations in investment banking. The focus of the Yale-EDHEC initiative will be on utilising the latest insights from the academic research conducted by both partners to help investment professionals better understand and implement advanced investment approaches and methodologies. The event will provide finance professionals in the region with access to state-of-the-art research and best practices in investment and risk management and with the opportunity to exchange views on the current topics of most relevance to the profession and discuss research insights produced by professors and researchers from EDHEC-Risk Institute. delivered by expert faculty drawn from the world’s best institutions. resources and creative atmosphere. In terms of executive education.
His research focuses on private equity funds and addresses investment issues. consults and writes industry-focused reports. he had been with the University of Amsterdam for six years. Florencio López-de-Silanes. the Journal of Finance.Ludovic Phalippou. University of Oxford .Rama Cont. Abraham Lioui. University of Toronto . University of Chicago . PhD in Finance (INSEAD) University of Oxford Lecturer in Finance. the Review of Financial Studies and the Journal of Economic Perspectives as well as in leading practitioner journals including Financial Analyst Journal and Harvard Business Review. Pierre Mella-Barral. Santa Clara University .Federico Bandi. Georgia State University . His research focuses on private equity funds and in particular on areas that are of interest to investors. liquidity and measurement of returns.Faculty strengthened We are delighted to report that Professor Ludovic Phalippou has agreed to join the EDHEC-Risk Institute PhD in Finance affiliate programme faculty. University of Oxford .Sanjiv Das. San Diego . the Journal of Financial and Quantitative Analysis and the Review of Financial Studies. He has published in leading journals such as the Journal of Economic Perspectives. Imperial College London . University of Chicago . His research has also received considerable attention from the investment community and the media. University of California. Duke University Michael Brandt. René Garcia. Stéphane Gregoir. He is a member of the Editorial Board of the Financials Analysts Journal. Prior to joining the University of Oxford in 2011. Saïd Business School Specialist in private equity funds Ludovic Phalippou is Lecturer in Finance at the University of Oxford Saïd Business School.Peter Christoffersen. University of Wisconsin–Madison . Professor Phalippou also speaks at practitioner conferences. He was previously an Associate Professor of Finance at the University of Amsterdam. in particular questions of risk and performance measurement. Johns Hopkins University .Torben Andersen.António Mello.Nicholas Polson.Fernando Zapatero. University of Pennsylvania . Professor Phalippou strengthens an exceptional team of international scholars that brings together eleven senior economics and finance scholars drawn from the EDHEC Business School faculty and twentytwo affiliate professors from foremost research institutions around the world.Tarun Ramadorai.Jérôme Detemple.Tim Bollerslev.4 - . He has received several best paper awards and research grants. Duke University .Allan Timmermann. University of Southern California Newsletter PhD in Finance December 2012/May 2013. Lionel Martellini. Affiliate faculty Vikas Agarwal. Raman Uppal. Ekkehart Boehmer.Harrison Hong. Duke University . Princeton University . He will teach an elective seminar on Private Equity in Singapore in 2014. MA in Economics and MSc in Mathematical Finance (USC).Yacine Aït-Sahalia. He has published in top academic journals such as the Journal of Finance. Jakša Cvitanić. He is a member of the Editorial Board of the Financial Analysts Journal. Princeton University .Pietro Veronesi. Princeton University . London School of Economics .Ravi Bansal. which he had joined upon completing his PhD. such as risk management.Jianqing Fan. Ludovic Phalippou. Frank Fabozzi. Professor Phalippou is a University Lecturer in Finance at the Saïd Business School of the University of Oxford. EDHEC-Risk Institute PhD in Finance programme faculty: Core faculty (EDHEC Business School) Giuseppe Bertola. Boston University Francis Diebold. Northwestern University .Mikhail Chernov.
performance evaluation and persistence in performance. professionals should publish their research in good performance evaluation. Mack Robinson College of Business. A lot of the participants are While I do research on various types of institutional professionally involved in money management–there investors. Have you had the opportunity to teach a course like this before? Yes and no. I was happy to answer these questions research their own ideas. What was lot of the early work on hedge funds. J. I have developed a course on hedge fund and trading strategies for graduate students at Georgia State University and I have been teaching it Vikas Agarwal. their risk-taking behaviour–how to characterise these risks. there was a great blend of So the link to the elective seminar academic curiosity and business acumen and it seemed is pretty obvious… Yes. PhD in Finance programme. formatting articles for interested to work in the field to build on this to publishing. Newsletter PhD in Finance December 2012/May 2013. conflicts of interest and agency issues. working on market microstructure and I was looking and also there was something for me to learn in the at mutual funds. I trust I was picked for this course because of participants were really able to understand and absorb my expertise in the area of hedge funds. I teamed up with my supervisor and we did a taught a course like this to professionals. journals. for the last three years. who had co-founded way street. this was really a twoof the school. conflicts of interests and agency issues. Narayan Naik. etc. was even a hedge fund manager in the class–so this I started doing research on hedge funds when I was was an informed audience with a solid interest for the doing my PhD in Finance at the London Business material. The course the information. What happened is that an alumnus type of questions they asked. What was your experience of teaching whether performance persists over time–and what the this PhD in Finance course? implications are for investors and the overall markets. They were not shy to ask questions. and biases in commercial hedge fund databases. risk management and asset allocation involving hedge funds. but I have never to me. EDHEC-Risk Institute course I assembled for the PhD programme. the emphasis is on their practical implications rather than their What is your research focus? My focus is on institutional investors and how their technical aspects. something that after-class informal is totally focused on hedge funds and reviews the discussions with participants confirmed. managerial incentives arising from compensation contracts. but of course the treatment at the Master’s level is not as Taught an elective seminar on Hedge Funds academically rigorous and while I sometime discuss research articles with Master’s students. because I think these into five chapters: biases in hedge fund databases. my name is associated with hedge funds. too often the questions the last 15 years. The review is structured and share my own experiences. performance persistence. institutional investment and intermediation through funds of hedge funds. was was particularly well suited to my teaching style. While exploring great was that participants asked deep questions from various facets of hedge funds has kept me busy over a practitioner’s point of view. aired at industry presentations focus on short-term performance and do not fully exploit the potential of ideas. Associate Professor of Finance. which School. my supervisor.Faculty and student interviews FACULTY INTERVIEW: Vikas Agarwal implicit and explicit managerial incentives.5 - . Patrick Fauchier. The concept of the programme is unique a successful Funds of Hedge Funds group wanted to and intriguing and I did not know what to expect. The topics covered include risk-return characteristics of hedge funds. compensation influences their performance. I foster research on hedge funds and provided the data have presented to practitioners a lot. I have also researched mutual funds. performance and information content of portfolio holdings. This has been fantastic. We also extant literature with a view to give participants a had a lot of ‘philosophical’ discussions about things solid grounding in the area and help those who are like the refereeing process. Initially. In class discussions. There are similarities with the Georgia State University and Affiliate Faculty.
To be able to really stand out. focusing on one’s skills and expertise also creates barriers to entry.. i. Do not aim for marginal improvements on existing work. holdings exhibit superior performance up to 12 months. you presented a working paper in the programme’s research workshop. we find that the returns of self-reporting funds are higher than those of comparable but non-reporting funds. you have to address interesting questions. it looks at the unintended consequences of disclosure and why institutions avoid disclosure and what can be learned from disclosure. We tried to determine whether institutions were hiding positions for window-dressing purposes or to preserve private information against the risk of front-running. Termination of self-reporting is followed by both return deterioration and outflows from the funds. although the difference is not significant using alternative choices of performance measures.6 - . We find that funds initiate self-reporting after positive abnormal returns that do not persist into the reporting period. the propensity to self-report is consistent with the trade-offs between the benefits (e. Finally.”). the current issue of the Journal of Finance carries one of your articles and another one is forthcoming in Management Science. and compares them against their counterparts.Speaking of articles and good journals. can you tell us more about these papers? The paper I presented looks at firms that simultaneously manage hedge funds and funds of hedge funds to determine whether this is associated with value creation and/or agency problems. Identify questions that are relevant and grounded in theory first and then find out how these can be addressed. Also. Newsletter PhD in Finance December 2012/May 2013. We find evidence in favour of value creation in both types of vehicles when hedge fund firms start funds of funds and we find that agency problems dominate when funds of funds start hedge funds. The other piece of advice I gave participants was to look at their competitive advantages and play to their strengths. access to prospective investors) and costs (e. but at the same time selecting third party funds might improve a firm’s hedge fund management skills and/or the experience of hedge fund management may make the firm better at selection. The evidence we found is consistent with funds holding and withholding private information to reduce the price impact of disclosure: confidential holdings are disproportionately associated with information‐sensitive events such as mergers and acquisitions or investments in stocks with greater information asymmetry. I basically told participants that they had to think outside the box because there is a lot of research going on out there.g.. we looked at the quarter‐end equity holdings of hedge funds that are disclosed with a delay through amendments to SEC Form 13F (funds can request the confidential treatment of certain holdings. the fund(s) of funds may make suboptimal investments into the firm’s hedge funds. these findings suggest that successful hedge fund firms diversify into funds of funds to deliver superior performance and to generate additional revenues for themselves in the form of second layer of fees. the paper forthcoming in Management Science analyses the biases related to self-reporting in hedge fund databases. and tend to take longer to build. To do so.e. So the study examines simultaneously managed hedge funds and funds of hedge funds. omitting those off their original filings and filing amendments at the expiry of the confidentiality period.. With both types of vehicles under one roof. What advice could you give to PhD students looking to identify a suitable topic for their research work assuming they are targeting publication? This is something I discussed in the classroom and informally at breaks. Fund of fund firms diversifying into the hedge fund business experience sub-par performance and their forays into the new arena tend to be short lived. The article in the Journal of Finance is on the confidential filings of hedge funds and was covered in the course. Delayed disclosure is allowed when it is “necessary or appropriate in the public interest or for the protection of investors. We also observe that fund of fund creation by hedge funds is correlated with the original fund closing to new investment. Collecting one’s own unique dataset is also one way to come up with radically new approaches. smaller capitalisation and lesser analyst coverage. think big and out of the box. Together. Finally.g. We do so by matching Form 13F information to five databases of self-reporting hedge funds between 1980 and 2008. partial loss of trading secrecy and flexibility in selective marketing).
but I wanted to be assured of the quality. modelling possibilities. client mandates within institutional asset management were typically quite narrowly defined and the investment objective was more about delivering relative return alpha. it naturally raises deeper questions about financial markets. a friend of mine who shared my keen interest for finance forwarded the EDHEC-Risk Institute newsletter to me and I found out about the programme.STUDENT INTERVIEW: Neo Teng Hwee trades. which offers core courses conducted in block weeks is indeed innovative. typically seek absolute return over relative return and are more willing to give managers the freedom in terms of scope or strategies. Hence. In 2003. Overall. The online platform which is available Neo Teng Hwee. building a family. I have attended many elective seminars which cater to a wide range of interests. In Asia. I completed did a Master’s in Financial Engineering at the National University of Singapore. In 2008. passing the comprehensive exam is a requirement to continue in the programme. we run Asia-centric portfolios as our Asian clients still have a strong home bias. I made the switch over to investment management within the private wealth industry. The format. the option has become progressively difficult. For the first eight years. As a finance practitioner. especially since you work in private wealth management – an area that is not always associated with state-of-the art techniques? I have actually had a different experience with institutional clients generally being more conservative in their approaches to equity or bond management. I had always been drawn towards academia as I enjoy thinking and reading about new frontiers in finance even though many of these ideas may not be immediately applicable in a commercial sense. In my current position. which stood me in good stead for the PhD in Finance programme. even though your area of research may not be related to majority of the early coursework. Like most US PhD programmes. exotic derivatives. which involves a fair amount of mathematical detail. the exposure equips one with a comprehensive foundation in finance. these seminars are delivered by the top scholars in their fields. I was a portfolio manager with an institutional asset management firm. This was important factor for me as doing this programme was more about true learning rather than getting another piece of paper. some of these questions can be pursued through rigorous research. As regards academia. Singaporean. So what has been your experience over the last three years? The initial part of the programme was not easy as the core courses follow the curriculum of a PhD in finance programme and the pace was relatively quick. on the other hand. collectively leading frontier research in finance. as well as risk management. For example. some clients deploy leverage to enhance returns or to pursue a variety of carry Newsletter PhD in Finance December 2012/May 2013. As I come across more ideas. To me. Why did you undertake a PhD. I ran some checks on the school and found that the assembled core and affiliate faculty comprises individuals who are the very best in their respective fields. In addition. I am working on research that uses volatility models and the elective given by Professor Tim Bollerslev of Duke University was very helpful for my dissertation. I had always considered taking a career break to pursue a PhD early on. Participants who are professionals were expected to go through the theoretical foundation. The small class size permits in-depth discussion and interaction. I like the balance in terms of technical rigour and the applications. while the private wealth industry is more willing to experiment with new ideas. Executive Director and Head of Portfolio Management for Asia. I head up a team managing assets mostly invested in Asia and Emerging Markets. A decade ago. 42 Could you tell us about your background? I have spent the last 18 years of my career principally in investment management. as one goes through the lifecycle of starting a career. premier Swiss private bank. I have checked with some friends working as academics and they also attested to the quality of the faculty and the curriculum. It seems you were doing fine. For example. However. Singapore. alternative investments and systematic strategies are fairly common in the high net worth industry. Private clients.7 - .
the fundamental belief is that it is beneficial for professionals to undergo doctoral level training in the scientific research methods which would yield insights that would have an impact on the industry. Professionals who are immersed in the inner workings of the industry do bring their own set of perspectives to the problem and discussion. particularly between bonds and equities.8 - . as well as his active and extensive research and publication activities. develop the program. Working on these topics allows me to learn and use some of the latest advances in econometric modelling. which is not your typical MBA experience. There is much that can be learned from the academic community which originates the theoretical framework which we understand about markets and valuing assets. René Garcia. like learning the language in which these ideas are deliberated in academia. it is worth highlighting that successful completion of the programme requires commitment. Quite unusually.through mobile devices means you do not have to take that many days off nor fly to different locations to attend the electives. I had to understand these models. copulas. read the relevant literature. When I started with the dissertation. So in the end. more than the insights derived from my paper. etc. During another elective seminar on behavioural finance held in Singapore. writing takes almost as much or even more time. estimate the models. Hence. He is committed and takes my progress seriously. in a way. After that I kind of fashioned my paper along those lines. This process does give me the confidence to tackle and understand new areas in the future and I do have a few projects in mind after my PhD. Understanding cross-asset dynamics helps me in my role as a professional investor in these markets. Some amount of passion is needed to persevere through the process. the point of going through the entire research process is to help a person develop as an independent researcher. This has also been echoed by René Garcia from time to time. sets high standards for the final work we produce. I knew very little about dynamic correlation models. frame the question and modelling strategy. something you enjoyed and something that was yet achievable within the time frame and also within one’s abilities. be trained to be an independent researcher and hopefully be part of the wider research community. Professor Harrison Hong of Princeton University. how did you choose your topic and what did you learn from the experience? I have always been interested in cross-asset class dynamics. The second is on extreme risk and asymmetric dependence. which is something the literature has largely ignored. time and an adequate background. The research workshop was given by Professor Peter Christoffersen of the University of Toronto. Newsletter PhD in Finance December 2012/May 2013. Speaking of the dissertation. Brushing up on maths. I have recently discovered that coming up with the model and doing the programming is one extensive part of the research process. To me. looking at Asian bonds and equities and I extended the work to explore other issues. tail dependence. statistics and computer programming before starting the programme would be good as the pace is relatively quick. However. The dissertation was not easy – particularly finding a topic that is original. who presented a paper on whether the potential for international diversification was disappearing using a novel dynamic asymmetric copula correlation model. While the pitch may be made to a professional audience. he still finds the time to offer a lot of advice and we have held meetings each time he has come to Singapore. the programme is ideal for anyone who would like to learn about finance deeply. Despite his heavy involvement with the programme. The elective seminars are also helpful to give you a quick overview of the body of research that has been done in a certain area. He said that we could model our dissertation on the approach of a good paper we admire. one cannot avoid working through the technical details. Who do you think the programme is for? This programme is unique in a sense that it is not a PhD programme just for fresh graduates pursuing an academic career. My advisor. interpret the results and finally communicate the results and why it matters in a publishable paper. Going through a PhD is. gave a piece of advice on writing a paper for beginner researchers like myself. However. but for which there appears to be some evidence in emerging markets. However. my first paper was on volatility transmission and dynamic correlation between bonds and equities – this is the paper I will be presenting at the EDHEC-Risk Days Asia in May. it was a research workshop that helped to set the direction. it was a challenge to frame the research question precisely so that it would qualify as an original contribution to the field.
Lecturer in Finance at the University of Oxford Saïd Business School. from estimation of continuous-time models to Markov switching models. affiliate faculty member Federico Bandi. Topics to be discussed will range from behavioural finance to microstructure. Professor of Finance at the Santa Clara University Leavey School of Business. Peter Christoffersen. Professor of Economics at Princeton University and Allan Timmermann. Professor of Finance and Economics and Director of the Bendheim Center for Finance at Princeton University. Returning to the seminar faculty roll for 2013/2014 and 2014 are EDHEC-Risk Institute core faculty professor. and from volatility modelling to option pricing. Teaching for the first time in the programme is programme affiliate faculty member Ludovic Phalippou. PhD in Finance candidates in the entering classes of October 2012 and February 2013 will advance to the second stage of the curriculum and start selecting elective seminars that expose them to the latest research advances in specific fields. Ekkehart Boehmer. EDHEC Business School and Member.9 - . from high-frequency econometrics to long-term asset pricing. The following electives are scheduled in Europe over the 2013/2014 academic year: Estimation of Continuous-time Models Behavioural Finance Markov Switching Models Volatility Modelling An Introduction to High Frequency Financial Econometrics Federico Bandi (JHU) Harrison Hong (Princeton) Allan Timmermann (UC San Diego) Tim Bollerslev (Duke) Yacine Aït-Sahalia (Princeton) Another five seminars are offered in Singapore in 2014: Private Equity Empirical Option Pricing Microstructure Long-Run Risks in Asset Prices Advances in Modelling and Data Science Ludovic Phalippou (Oxford) Mikhail Chernov (LSE) Ekkehart Boehmer (EDHEC) Ravi Bansal (Duke) Sanjiv Das (SCU) Professor Boehmer elected Director of the European Finance Association Ekkehart Boehmer. elective seminars are delivered by some of the leading authorities in each field and provide PhD in Finance candidates with additional opportunities to engage with senior scholars from the world over. with five elective seminars now offered each academic year both in Europe and in Asia. Professor of Economics and Professor of Finance at the Duke University Fuqua School of Business. J. Professor of at the University of California San Diego. Harrison Hong. Professor of Finance. Electives offered in 2013/2014 in Europe and 2014 in Asia form a balanced portfolio of seminars presenting conceptual advances and state-of-theart quantitative methods. Ravi Bansal. Candidates must take a total of at least five electives in their second and third years. Professor at the Johns Hopkins Carey Business School. providing them with opportunities to develop a specialisation and acquire additional knowledge and skills necessary for their dissertation work. Professor of Finance at the London School of Economics. Sanjiv Das. As always.Programme and faculty news 2013-2014 electives unveiled After completing their core courses. programme participants can tap into an unprecedented breadth of expertise over the course of their studies. Fuqua Professor of Finance and Tim Bollerslev.B. EDHEC-Risk Institute Ekkehart Boehmer. and PhD in Finance affiliate faculty members Yacine Aït-Sahalia. Chair Professor of Finance at EDHEC Business School and Assistant Academic Director for Asia of the EDHEC-Risk Institute PhD in Finance has been elected to serve as director of the European Finance Association for a period of three Newsletter PhD in Finance December 2012/May 2013. Professor of Finance at the Rotman School of the University of Toronto. Mikhail Chernov.
investment. information systems. EDHEC Business School and Member. financial theory and its application. Professor Uppal joins a team of senior scholars working at premier research institutions.years. he is a former editor of the Review of Financial Studies and the Review of Finance. marketing. Its scope covers all aspects of management related to strategy. Now in its sixtieth year. behavioural economics. EDHEC-Risk Institute Raman Uppal. Professor of Finance at the Northwestern University Kellogg School of Management and Director of the American Finance Association. It includes Newsletter PhD in Finance December 2012/May 2013. as a member of the editorial board of Mathematics and Financial Economics. Chair in Corporate Finance at the Department of Banking and Finance of the University of Zurich and Annette Vissing-Jorgensen. organisations.10 - . innovation. studies on organisational. finance. whose current Managing Editor is Franklin Allen. and organisations as well as all functional areas of business. entrepreneurship. judgment and decision making. Management Science is the leading scholarly journal for scientific research into the practice of management. Chair Professor of Finance at EDHEC Business School has become an associate editor in the finance department of Management Science. Raman Uppal. As associate editor. business strategy. Professor of Finance. and money and banking. decision analysis. Professor Uppal joins editorial board of Management Science Given its wide scope. and individual decision making and welcomes both theoretical and empirical research addressing management issues. information technology. The journal’s finance department is headed by three co-editors: EDHEC-Risk Institute PhD in Finance affiliate faculty member Jérôme Detemple of Boston University. the 40th annual conference will be held at Cambridge Judge Business School on 28-31 August 2013. financial markets. optimisation. Professor of Economics and Professor of Finance at the Wharton School of the University of Pennsylvania. The Association’s annual conference allows researchers to present their work in the fields of corporate finance. managerial. stochastic models and simulation. and as an advisory board member of the International Review of Financial Analysis. entrepreneurship and innovation. The other two directors for the 2013-2015 term are Kjell Nyborg. Management Science sets a standard for scientific rigour and its audience includes academics at business and engineering schools and managers open to the application of quantitative methods in business. Itay Goldstein of the University of Pennsylvania and Wei Jiang of Columbia University. Professor Uppal also serves as an associate editor of the Review of Asset Pricing Studies and the Critical Finance Review. the journal is published monthly and allocates the editing work to thirteen departments: accounting. It provides a framework for better dissemination of information and exchange on the continent and on a global scale. The Association also publishes the Review of Finance. The European Finance Association is Europe’s leading professional society for finance academics and practitioners with an interest in financial management. operations management. It is one of the most influential journals in business management.
Joanne Segars. the concept will be exported to North America. Mark Fawcett. Rothschild and THEAM–Doctor Mantilla-Garcia led a workshop titled “Solvency II Efficient Risk Transfer”.11 - . the Institute’s annual conferences have attracted over 10.Faculty. Igor Lojevsky introduced work titled “Multi-country Study of Yield Curve Dynamics in a Monetary Policy Framework .An Open Economy Perspective”. EDHEC-Risk Institute Scientific Director.000 participants from some fifty countries worldwide. candidates and graduates contribute to success of EDHEC-Risk Days Over 900 practitioners attended the EDHEC-Risk Days Europe conference held in London on 26-27 March 2013. Daniel MantillaGarcia (2011). PensionsEurope Chief Executive Officer. The EDHEC-Risk Days give industry participants access to some of the latest research advances in the fields of investment and risk management and allow them to discuss the implications and applications of new concepts and results with the Institute’s research team. Ten years ago. presented his latest work on asset allocation and portfolio construction at the event. EDHEC-Risk Institute introduced a new type of conference aiming to bring insights drawn from its research programmes to investment professionals. Professor Lionel Martellini. was involved in the sponsored section of the programme. BNP Paribas Securities Services. United Kingdom Pension Protection Fund Executive Director of Financial Risk. giving two parallel session presentations on “Investing in Low Volatility Strategies” and “Reconciling LongTerm Optimal Investing Strategies with Short-Term Funding Risk Constraints” and two plenary session presentations titled “New Frontiers in Passive Investment: From Asset Allocation to Risk Allocation” and “Beyond the Separation Theorem in ALM: How to Evaluate the Contribution of Corporate Bonds to the Performance and Risk of Global Asset Allocation?” Newsletter PhD in Finance December 2012/May 2013. Professor Noël Amenc. Matti Leppälä. Lyxor Asset Management. the EDHEC-Risk Days were organised in Asia for the first time and in 2013. Timo Löyttyniemi. BNP Paribas Securities Services Head of Public Affairs. United Kingdom National Employment Savings Trust Chief Investment Officer. Finnish State Pension Fund Managing Director. Florence Fontan. United Kingdom National Association of Pension Funds Chief Executive. EDHEC-Risk Institute research assistant and PhD in Finance candidate François Cocquemas delivered the introductory presentation to the Pension Fund Roundtable which was moderated by Investment and Pensions Europe Editor. Chris Verhaegen. and included contributions by EDHEC-Risk Institute Director. ERI Scientific Beta. and European Insurance and Occupational Pensions Authority Occupational Pensions Stakeholder Group Chair. Professors Raman Uppal and René Garcia cochaired the third edition of the PhD Forum at which programme candidates Igor Lojevsky and Rehan Syed and fresh graduate Carlos Campani (2013) presented their dissertation work. As Head of Research for Koris International. The EDHEC-Risk Days Europe which took place 26-27 March in London attracted over 900 practitioners and included research presentations by PhD in Finance core faculty as well as programme candidates and graduates. one of the event’s key partners–along with Amundi ETF. Martin Clarke. Eaton Vance. Liam Kennedy. Rehan Syed presented research on the “Conditional Performance Evaluation of Asset Allocation Funds” and Carlos Campani discussed his work on “Optimal Portfolio Strategies in the Presence of Regimes in Asset Returns”. Another programme graduate. In 2012. Since inception.
• Book-to-Market and the Cross-Section of Expected Returns in International Stock Markets. Pierre. Kim. No. April 2013. Dashan. Plyakha. Journal of Economic Dynamics & Control. Turan. Appearing are articles in scientific journals co-authored by faculty members publishing under their EDHEC Business School or EDHEC-Risk Institute affiliations. • Measuring Financial Risk and Portfolio Optimization with a Non-Gaussian Multivariate Model. Yuliya. May 2013. Markus.Recent and forthcoming articles by faculty Below is a selection of articles published by programme faculty members over the last quarter as well as forthcoming publications. Prandi. Kounchev. Juan (Julie). pp268-276. Valentina. Hutin. • A Binomial-Tree Model for Convertible Bond Pricing. Min Jeong. Lionel. Patrice. Michel . Volume 22. Issue 2. López-de-Silanes. • On Model Ambiguity and Money Neutrality. Ulrich . Victor. Kim. Young Shi. Xiaoyan. Volume 49. Frank. February 2013. Jakša. Stoyan. pp1020-1033. Quarterly Journal of Economics. • Measuring Local Individual Housing Returns from a Large Transaction Database. Issue 2. pp2877-2882. Andrew. 3: pp79-94. Bandi. Martellini. Review of World Economics. Habib. Volume 39. Issue 3. Federico and Corradi. and Trade. Volume 26. February 2013. Forthcoming in the Journal of Financial and Quantitative Analysis. European Journal of Operational Research. July 2013. Fabozzi. Frank. Florencio. Maury. La Porta. Rafael. Grigory. Geneviève.12 - . • Optimal corporate strategy under uncertainty. 2. Cvitanic. Jang Ho. Xuhu. Volume 45. Forthcoming in Journal of Financial and Quantitative Analysis. Huali. Journal of Macroeconomics. Winter 2013. Woo Chang. Fabozzi. pp977–988. Rachev. Forthcoming in Applied Economics. Svetlozar. DeMiguel. Volume. • Nonparametric Nonstationarity Tests. • Robust Portfolios that Do Not Tilt Factor Exposure. Ekkehart and Wu. Stéphane. Raman. René. Zacharias. Gennaioli. December 2012. Rachev. Habib. • Short Selling and the Price Discovery Process. Glaser. Boehmer. López-deSilanes. Yang. pp287-322. Governments. • Finance. Stoyanov. Mignacca. Issue 20. No. Ognyan. pp3148. Volume 128. Lioui. Winter 2013. • Improving Portfolio Selection Using Option-Implied Volatility and Skewness. Andrei. Forthcoming in Review of Financial Studies. Rosella . Allying. • Time Consistent vs. Garcia. • Shackling short sellers: The 2008 shorting ban. Issue 1. Frank. Patrice. Number 107/108. Journal of Banking and Finance. Daniel*. Zhang. • Entrepreneurial Spawning and Firm Characteristics. Michel and Mella-Barral. Lioui. Fabozzi. pp101115. Frank. Boehmer. Frank. Milanov. Bertola. Florencio. Svetlozar.. Time Inconsistent Dynamic Asset Allocation: Some Utility Cost Calculations for Mean Variance Preferences. Krasimir. Fabozzi. Chen. and Trading Assets. Sautner. Kim. * Daniel Mantilla-Garcia is a 2011 graduate of the EDHEC-Risk Institute PhD in Finance programme Newsletter PhD in Finance December 2012/May 2013. 201 Issue 1. • Dynamics of Contract Design with Screening. and the Choice between Merging. Volume 34 Issue 4. Giacometti. Charles. Kim. Gregoir. Ekkehart. Forthcoming in Econometric Theory. Pierre. Lioui. Tristan-Pierre. Forthcoming in Management Science. Journal of Fixed Income. Issue 1. Volume 37. Bali. Journal of Mathematical Economics. Annals of Economics and Statistics. Wan. pp325-343. Forthcoming in European Journal of Operations Research. • Skills. Shleifer. Jones. April 2013. Svetlozar. Core Capabilities. Anna. p1066-1096 • Human Capital and Regional Development. Frank. • A Model-Free Measure of Aggregate Idiosyncratic Volatility and the Prediction of Market Returns. Volume 226. Abraham and Poncet. Journal of Portfolio Management. December 2012. Forthcoming in Journal of Finance. Annals of Operations Research. Volume 149. • Opening the Black Box: Internal Capital Markets and Managerial Power. Fabozzi. Vilkov. Volume 37 Issue 5. Mantilla-Garcia. Cakici. Domenico. Uppal. • Optimal Benchmarking for Active Portfolio Managers. Nusret. Young Shin. Kim. Issue 12. Huang. July/ December 2012. • CVaR Sensitivity With Respect To Tail Thickness. Fabozzi. pp105-164. Forthcoming in the May 2013 issue of Management Science. January 2013. Mella-Barral. Mathieu. Rachev. Giuseppe and Lo Prete. Hege. March 2013. Nicola. Abraham. Review of Financial Studies. Abraham and Poncet.
Recent and forthcoming faculty presentations – a selection Annual Meeting of the Allied Social Science Associations The 73rd annual meeting of the American Finance Association took place in San Diego on 4-6 January 2013. the latter being chaired by affiliate faculty member Ravi Bansal of Duke University. Risk Premia and the Expectation Hypothesis” by programme affiliate faculty member Yacine Aït-Sahalia of Princeton University. ”When Some Investors Head for the Exit” and “Do Managers Do Good with Other Peoples’ Money?”). and Asset Prices”.and State-Dependent Pricing: A Unified Framework” by EDHEC-Risk Institute Professor René Garcia was presented along with work titled “Improving U. Affiliate faculty member Mikhail Chernov of the London School of Economics chaired a session titled “Macro Uncertainty and Financial Volatility”. the 2013 North American Winter Meeting of the Econometric Society featured work on “The Term Structure of Variance Swaps. Serving as discussant in the session on the “Econometrics of Derivatives Markets” hosting this paper was affiliate faculty member Torben Andersen of Northwestern University. Professor Pastor closed the first day with a presentation titled “Are Stocks for the Fourteen member of the PhD in Finance programme faculty contributed as presenters. Peter Christoffersen of the University of Toronto (“The Economic Value of Realized Volatility: Using High-Frequency Returns for Option Valuation”). Long-Run Risks.” Also appearing on the programme was work by programme affiliate faculty members Vikas Agarwal of Georgia State University (“Determinants and Implications of Fee Changes in the Hedge Fund Industry”). Harrison Hong of Princeton University (“Do Security Analysts Discipline Credit Rating Agencies?”. Asset Pricing and Portfolio Allocation in the Long Run Professor René Garcia co-chaired the conference on “Asset Pricing and Portfolio Allocation in the Long Run” organised by the Society for Financial Econometrics (SoFiE) and the Graduate School of Economics of the Getulio Vargas Foundation in Rio on 13-14 December 2012. Taking place concurrently was the 2013 Annual Meeting of the American Economic Association at which work on “Time. GDP Measurement: A Forecast Combination Perspective” by affiliate faculty member Francis Diebold of the University of Pennsylvania. as part of the annual meeting of the Allied Social Science Associations.13 - . Professor Bansal fittingly opened the conference with a review of his work on “Volatility. Programme affiliate faculty member Pietro Veronesi served as a discussant in sessions dedicated to international corporate finance and development and macro finance. Ludovic Phalippou of Oxford University (“Acquiring Acquirers: New Evidence on the Drivers of Acquirer’s Announcement Returns in Corporate Takeovers”) and Tarun Ramadorai of the University of Oxford (“How Do Regulators Influence Mortgage Risk? Evidence from an Emerging Market”). Professor Harrison Hong served as discussant in a session on “Social Interactions and Economic Choices”. Professor Aït-Sahalia also served as a discussant in a session on “Nonstationary Time Series”. The conference’s keynote speakers were affiliate faculty members Ravi Bansal and Frank Diebold as well as Professor Darrell Duffie of Stanford University and Professor Lubos Pastor of the University of Chicago.S. Ten programme faculty members were featured on the programme this year. discussants and chairpersons to the Annual Meeting of the Allied Social Science Association held in San Diego on 4-6 January 2013 Newsletter PhD in Finance December 2012/May 2013. António Mello of the University of Wisconsin–Madison (“Globalization. Also part of the Annual Meeting of the Allied Social Science Associations. EDHEC-Risk Institute professor Ekkehart Boehmer presented his work titled “International Evidence on Algorithmic Trading. Product Market Competition and Corporate Investment”).
Professor Abraham Lioui chaired the asset pricing track of the Tenth International Paris Finance Meeting organised by the European Financial Data Institute and the French Finance Association.” Fifth Annual Hedge Fund Research Conference Professor René Garcia was this year again a coorganiser of the Annual Hedge Fund Conference in Paris. including work by affiliate ‘ faculty members Tarun Ramadorai of the University of Oxford and Jérôme Detemple of Boston University. The meeting took place in Paris on 20 December 2012 and saw presentations of close to fifty articles by researchers from the world over. Professor Pierre Mella-Barral will present joint work with EDHEC-Risk Institute PhD in Finance graduate Vijay Vaidyanathan (2012) at the 30th annual meeting of the French finance association (AFFI) taking place in Lyon on 28–31 May 2013.Long Run?”. Amongst the conference’s discussants were René Garcia. whose fifth edition took place on 24-25 January 2013 in Paris. titled “Money for Nothing? Understanding Variation in Reported Hedge Fund Fees” and “A Structural Model of Dynamic Market Timing: Theory and Estimation”. Professor Ekkehart Boehmer presented his work titled “International Evidence on Algorithmic Trading” at the Second edition of the Institut Louis Bachelier conference on Market Microstructure. Professor Detemple also discussed a paper titled “A Classical Moment-Based Approach with Bayesian Properties: Econometric Theory and Empirical Evidence from Asset Pricing” authored by Professor Benjamin Holcblat of BI Norwegian Business School. Professor Jakša Cvitanic will be amongst the plenary speakers at the Frontiers in Financial Mathematics 2013 conference to be held on 4-7 June 2013 at the Institute of Bankers in Dublin. EDHEC-Risk Institute PhD in Finance graduate Gideon Ozik (2011) and candidate Samuel Sender.14 - . respectively. President of the Econometric Society Jean-Charles Rochet of Zurich University and Professor Damiano Brigo of Imperial College. held in Paris on 10-13 December 2012. Focused on “Labour Market Policies and the Crisis.” the workshop aimed to identify policies and reforms that may suitably support the recovery. Professor Diebold opened the second day with a look at “A Markov-Switching Multi-Fractal Inter-Trade Duration Model.S. with Application to U.” and Professor Duffie closed the event with a discussion on “Information Percolation in Segmented Markets. which took place in Frankfurt on 17-18 December 2012. Work on “Institutional Investment and Intermediation in the Hedge Fund Industry” coauthored by affiliate faculty member Vikas Agarwal was presented at the event. programme affiliate faculty Professor Yacine Aït-Sahalia. Work on “Robust Economic Implications of Nonlinear Pricing Kernels” by Professor René Garcia will be presented at the North American Summer Meeting of the Econometric Society. PhD in Finance affiliate faculty member Yacine Aït-Sahalia. Director of the Princeton University Bendheim Centre for Finance will be one of the event’s four keynote speakers along with Nobel Laureate Professor Robert Engle of New York University. he presented the European Economic Advisory Group 2013 Report on the European Economy at the Swiss RE Centre for Global Dialogue in Zurich. Miscellanea Professor Giuseppe Bertola co-organised the Ninth Joint European Central Bank/CEPR Labour Market Workshop. On 1 March 2013. Equities. Director of the Bendheim Centre for Finance and Professor of Finance and Economics at Princeton University contributed to the North American Winter Meeting of the Econometric Society Newsletter PhD in Finance December 2012/May 2013. to be held on 10-13 June 2013.
the passage of time in project finance is associated with spread changes and credit risk migrations. EDHEC-Risk Institute. such as a fixed-mix strategy or even a utility-maximising strategy ignoring the presence of these constraints. Lionel. March 2013. the weight allocated to performance assets must be reduced. supported by Natixis. The notion of a potential convergence between macroeconomic policies aimed at supporting longterm growth and the need to invest in long-term. This paper examines the credit risk characteristics of infrastructure debt and shows how the endogenous nature of credit risk in project finance allows for the selection of higher quality projects that can tolerate high levels of initial leverage and how the planned deleveraging of special purpose entities creates a dynamic credit risk profile. This research was produced as part of the “AssetLiability Management and Institutional Investment Management” Research Chair at EDHEC-Risk Institute. supported by BNP Paribas Investment Partners. and the infrastructure project lifecycle offers diversification potential that should not be ignored. 124 pages. Martellini. where the positive effect of de-leveraging on credit risk tends to more than offset that of increasing uncertainty associated with more distant horizons. Instead. Frédéric and Ismail. few practical solutions have emerged and. Omneia. they may be more difficult to implement in practice. Milhau. stable fixed income products for institutional investors is attractive. this publication casts new light on the debate by showing that short-term constraints and long-term investing need not be mutually exclusive and can naturally coexist within the context of a long-term investing strategy that respects short-term performance constraints.EDHEC-Risk Institute news A selection of recent EDHEC-Risk Institute publications • “Who is Afraid of Construction Risk?”. a strategy with no risk budgeting. Romain. More… The two motives behind dynamic asset allocation decisions. As a result. because they involve the pricing of an insurance put and the computation of its deltas. February 2013. which typically imply a reduction to equity allocation after a market downturn. Building on previous EDHEC-Risk Institute’s research on dynamic allocation in asset-liability management. The empirical analysis in this study has two important implications. However. optimal risk-controlled strategies respect the constraints while opening wider access to the performance block. Vincent. • “Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints”. 96 pages. However. which has a negative effect on performance. namely the insurance and the hedging motives. it is often argued that dynamic insurance strategies. must be very conservative: to ensure that wealth will stay above the floor. In particular. This research was produced as part of the “Investment and Governance Characteristics of Infrastructure Debt Instruments” Research Chair at EDHEC-Risk Institute.15 - . The authors suggest that investors should embrace construction risk in properly structured infrastructure debt portfolios. More… Newsletter PhD in Finance December 2012/May 2013. First. they have also shied away from financing new projects for fear that their construction period represents too great and too unnecessary a risk for them to take. it shows that in order to respect short-term constraints. are often perceived as inconsistent and mutually exclusive. it shows that optimal strategies yield higher expected utility than sub-optimal risk-controlled strategies such as Constant Proportion Portfolio Insurance. are intrinsically pro-cyclical and miss the opportunity to invest in equities when they are particularly inexpensive. Second. Deguest. EDHEC-Risk Institute. while investors have expressed interest in the kind of long-term debt that is commonly found in infrastructure project finance. Blanc-Brude.
Newsletter PhD in Finance December 2012/May 2013. The study aims to analyse the usage of ETFs in investment management and to provide a detailed account of the current perceptions and practices of European investors in ETFs. Increased levels of usage. More… Padmanaban. Tang. ETFs on fixed income indices. Joenväärä. This paper sheds light on the convergence of mainstream and alternative investment management and on the drivers of performance and risk for different types of UCITS funds. These analyses show that investors who want to capture the Asian market premium will do so in a better way if they use indices designed with an efficient weighting scheme. This study addresses that question by analysing ten major Asian equity indices over the past decade along three dimensions: efficiency. Lin*. 116 pages. Le Sourd. Nikhil. Mukai. Masayoshi. This year saw the publication of ETF guidelines by the European Securities and Markets Authority.• “The EDHEC European ETF Survey 2012”. Nicolas. Overall. Gonzalez. Its results suggest that the ETF market is still growing and that it has potential for further growth. it observes that the standard Asian indices are heavily concentrated in a few large-cap stocks. Juha and Kosowski. EDHEC-Risk Institute. and do not have the expertise to conduct stock picking in the region. 76 pages. February 2013. • “Assessing the Quality of Asian Stock Market Indices”. especially so for ETFs on emerging market equities. in partnership with Amundi ETF.16 - . Narasimhan*. Shah. In particular. February 2013. Felix. February 2013. the vast majority of respondents support regulatory requirements for the disclosure of securities lending revenues and costs by ETF providers. With respect to the second dimension. The EDHEC European ETF Survey 2012 presents the results of a comprehensive survey of 212 European exchange-traded fund (ETF) investors. which aim to increase investor protection through increased levels of disclosure and transparency. Goltz. Therefore. satisfaction and demand for product development are observed across a variety of asset classes. Eric. Robert. Asian equity indices are also found to exhibit severe fluctuations in style and sector exposures. concentration and stability. Noël. Most indices allocate as much as 60% of the index weight to only one-fifth of the stocks in the universe. EDHEC-Risk Institute. Shirbini. 152 pages. Véronique. as well as ETFs on new forms of indices. in line with what is observed with their European and US counterparts. The key requirement for most investors is that an ETF tracks a systematically constructed index rather than implementing discretionary investment decisions. The study also finds that recent launches of ETFs tracking strategy indices or smart beta indices seem to be blurring the traditional boundaries between active and passive investment. the question of index quality in Asia is an important issue. More… • “An Analysis of the Convergence between Mainstream and Alternative Asset Management”. Amenc. Nikolaos. There has been increasing demand for Asian equity indices as global investors seek exposure to the region’s growth. This research was produced as part of the “CoreSatellite and ETF Investment” Research Chair at EDHEC-Risk Institute. the study finds that investors are supportive of the guidelines and feel that they have improved investor protection. EDHEC-Risk Institute. Tessaromatis. It finds that all indices analysed display a pronounced lack of risk/reward efficiency.
the paper discusses whether techniques employed by hedge funds can be transported to the UCITS and mutual fund space Second. January 2013. supported by the Prime Brokerage Group at Newedge. EDHEC-Risk Institute. The study’s contribution is threefold: in a first part. they offer more favourable liquidity terms and performance seems to converge when liquidity matched groups are compared. This research was produced as part of the “Infrastructure Equity Investment Management and Benchmarking” research chair at EDHECRisk Institute. which differ by country. Finally. important domicile effects related to firm and fund performance are identified. However.First. it provides an academic analysis of the main techniques that are currently used by hedge fund managers. François Cocquemas*. January 2013. This paper attempts to explain why this has been the case and what new research and benchmarking efforts are necessary to create investment solutions that realign expectation and observed investment performance. This research was produced as part of the “Advanced Modelling for Alternative Investments” research chair at EDHEC-Risk Institute. the paper provides an empirical comparison of the performance of UCITS and non-UCITS hedge funds. The study uncovers an important liquidity-performance trade-off in the sample of UCITS hedge funds. it discusses what approaches to benchmarking and portfolio construction might best capture the characteristics of underlying infrastructure and highlights the need for new data collection and appropriate benchmarking methodologies. The paper finds that UCITS hedge funds underperform other hedge funds on a total and risk-adjusted basis. Techniques are categorised into three groups: (i) risk management. the experience of investors and available research evidence have been different and rather mixed. Results also show that hedge funds generally have lower volatility and tail risk than UCITS hedge funds. Next. EDHEC-Risk Institute. computes estimates for the corresponding public pension liabilities under several discount Frédéric Blanc-Brude. it economically motivates a range of hypotheses regarding differences in performance and risk between the two categories and empirically tests them using one of the most comprehensive hedge fund databases constructed to date. This paper highlights a recent research quandary with respect to infrastructure equity investment which has also been a source of interrogation for final investors: Newsletter PhD in Finance December 2012/May 2013. The study reviews pension provision in the European Union. As UCITS regulations impose several investment restrictions. (ii) alpha generation and (iii) leverage. 48 pages. The goal of this short study is to provide a broad picture of explicit and implicit pension liabilities in the pension systems of European Union countries together with an assessment of the risks each of them face. as well as to inform the regulatory debate in relation to institutional investing in long-term assets like infrastructure equity.17 - . More… • “Towards Better Consideration of Pension Liabilities in European Union Countries”. it discusses the nature of underlying infrastructure equity and what mechanisms explain its investment characteristics. Based on regulatory constraints. 88 pages. which is consistent with hurdles to the transportation of the risk management techniques that was discussed. while the economics of underlying infrastructure investment suggests a low and potentially attractive risk profile. in partnership with Meridiam Infrastructure and Campbell Lutyens. More… • “Towards Efficient Benchmarks for Infrastructure Equity Investments”. it reviews the rationale for infrastructure investing by insurance companies and pension funds and the extant empirical research on the performance of existing investment routes and vehicles. Finally.
in the quarter century since inception of UCITS. December 2012. Finally. or even Portugal. More… * François Cocquemas is an EDHEC-Risk Institute PhD in Finance candidate and Narasimhan Padmanaban and Lin Tang were participants in the programme at the time of writing. considers pension fund assets. complexity and non-financial risks. Amenc. It then resituates non-financial risks in the European regulatory agenda and examines the questions of the responsibility for non-financial risks and restitution. 104 pages. above 200% in 8 countries and up to 483% for Belgium. in partnership with CACEIS. or sometimes as a result of. the integration of non-financial risks in the prudential oversight of the fund management industry. Now managing over EUR6 trillion in assets. an issue tat was brought to the fore during the global financial crisis and undermined the reputation of quality Newsletter PhD in Finance December 2012/May 2013.18 - . while the situation of countries such as Spain. UCITS have proven hugely successful not only in the European Union. The 1985 Undertakings for Collective Investment in Transferable Securities (UCITS) Directive established the regulatory framework for the growth of a pan-European market for retail investment funds. is relatively better. of the UCITS label. non-financial risks increased unchecked by. Luxembourg or Denmark for example. and the creation of a subset of UCITS that minimises non-financial risks through restrictions on investments and practices. This publication chronicles the materialisation of non-financial risks during the global financial crisis and looks at the causes of the rise of non-financial risks in the fund management industry. This approach leads to solvability analyses that are substantially different from those habitually taken into account by ratings agencies or investors: countries with virtuous public finances according to standard metrics. Even for a high discount rate of 5%. EDHEC-Risk Institutes recommends caution in the analysis of sovereign solvency risk. such as Sweden. and the responsibility for information on non-financial risks. but also across the world where the UCITS brand has become synonymous with high level of investor protection. On the basis of these results. The present value of pension liabilities is found to be very sensitive to the discount rate chosen. the link between distribution. Noël and Ducoulombier. Frédéric. focusing on the organisation of and responsibility for information on non-financial risks. are much less virtuous if their public pension commitments are taken into account. This research was produced as part of the “Risk and Regulation in the European Fund Management Industry” Research Chair at EDHEC-Risk Institute. it makes proposals towards better management of nonfinancial risks. More… • Proposals for Better Management of Non-Financial Risks within the European Fund Management Industry”. However. calls for further transparency in the area of public finances and for the inclusion of explicit criteria on pension liabilities in the framework for the coordination of national policies in the European Union. Italy. regulation. but is not negligible in any event. EDHEC-Risk Institute. accrued-to-date liabilities are around or above 100% of 2010 GDP in 18 out of 27 countries.rate hypotheses. and discusses the main risks and uncertainties threatening these valuations.
overseeing or regulating funds. The research will aim to provide a better understanding of the nature and investment profile of equity investment in infrastructure assets. it will contribute to review the treatment of infrastructure equity investment in the context of solvency models for long-term investors. Doctor Blanc-Brude has more than ten years of research experience in the infrastructure sector and has published numerous academic papers on this topic. They will be delivered by foremost experts from EDHEC-Risk Institute and Yale School of Management faculty. It will focus on fostering data collection and aggregation from investors and on improving the benchmarking of return distributions for direct and indirect investment in infrastructure equity by developing an academically-validated and industryrecognised index. pension schemes and sovereign investment vehicles. advising. The programme is targeted towards seasoned investment industry professionals managing. The results of the chair will allow investors to assess the different opportunities within the asset class and contribute to the implementation of policy reforms that will help to shape the infrastructure investment industry. The first seminar in the series is planned for the end of the year on Yale’s New Haven campus and at EDHEC Risk Institute–Europe in London. Europe and Asia. In particular. alternative investment. Yale School of Management Campus.19 - . multi-management and structured product investment. These seminars will be part of a structured programme and participants will have the opportunity to attain a Yale SOM – EDHEC–Risk Institute “Certificate in Risk and Investment Management” demonstrating the successful completion of advanced work.EDHEC-Risk Institute and Yale School of Management partner in executive education Meridiam Infrastructure and Campbell Lutyens endow a Research Chair on infrastructure at EDHEC-Risk Institute Meridiam Infrastructure and Campbell Lutyens have joined forces to endow an EDHEC-Risk Institute Research Chair on “Infrastructure Equity Investment Management and Benchmarking” for a period of three years. New Haven. Newsletter PhD in Finance December 2012/May 2013. The new research chair will be managed from Singapore by EDHEC Risk Institute–Asia Research Director Doctor Frédéric Blanc-Brude and will also include the contribution of Senior Research Engineer Doctor Omneia Ismail. fixed-income investment. Connecticut. The Yale-EDHEC-Risk Seminars will draw on the latest academic insights to help investment professionals better understand and implement advanced investment approaches and methodologies and better manage complexity in investment decisions. The programme includes seminars on strategic asset allocation and investment solutions. equity investment. More… Institute EDHEC-Risk Institute and Yale School of Management (Yale SOM) have entered into a strategic partnership agreement to jointly offer executive education training courses in the area of risk and investment management in North America.
EDHEC-Risk Institute PhD in Finance Academic Director Professor René Garcia presented work produced as part of the ”Advanced Modelling for Alternative Investments” research chair endowed by Newedge at EDHEC-Risk Institute. In the opening session of the afternoon. EDHEC-Risk Institute Scientific Director and PhD in Finance core faculty member Professor Lionel Martellini and Princeton University Professor John Mulvey presented the day’s agenda in the context of the joint research and industry outreach programme established by EDHEC-Risk Institute and the department of Operations Research and Financial Engineering at Princeton University. but also as diversifiers and extreme risk hedging tools.20 - .Second EDHEC-Princeton Institutional Money Management conference a success Institute Over 150 investment managers attended the second edition of the EDHEC-Princeton Academia Meets Practice conference On 3 April 2013. The model revolves around investor disagreement about cash-flows and short-selling constraints. Abnormal performance is measured by the expected return times a riskadjustment function that is indexed by a risktolerance parameter. The final presentation of the morning saw John Mulvey underline the trends towards higher allocation to alternative and illiquid assets. over 150 investment managers gathered at the Princeton Club in New York City for the second edition of the EDHEC-Princeton Institutional Money Management Conference. It predicts that when aggregate disagreement is low. In the second session of the day.. Contrary to standard models. Professor Garcia looked at non parametric hedge fund modelling and discussed its implications for hedge fund performance evaluation. the approach presented captures the non-linear exposure to risk factors in a way that is not limited to shapes resembling standard option payoff patterns. make a case for rebalancing portfolios to target allocations and explained how dynamic strategies mimicking the decisions and processes taken within illiquid asset categories could be used to synthetically rebalance portfolios. equity risk and proposed an approach to factorbased diversification. They emphasised the programme’s focus on improving risk management techniques for the investment management industry. These predictions are verified using measures of disagreement about stock earnings and economic uncertainty. The format of the conference was designed to facilitate the exchanges of views between academics and practitioners. it involved presentations by members of the faculty of Princeton University and EDHEC-Risk Institute. credit.e. The approach yields Newsletter PhD in Finance December 2012/May 2013. Professor Martellini then introduced his ongoing work on the need to switch from an asset allocation approach to risk allocation mindset. currencies and commodities and options on these risk factors. In the face of a number of key changes of paradigms affecting the investment industry. The model is applied to various hedge fund indices. explaining how traditional asset allocation typically results in very high exposure of multiclass portfolios to just one factor. Princeton University Professor of Economics and Finance and EDHEC-Risk Institute PhD in Finance affiliate faculty member Harrison Hong presented a model that imports behavioural finance into the standard CAPM framework to explain why high beta assets are more prone to speculative overpricing than low beta ones. sub-indices and individual hedge funds and considering a set of risk factors including equities. followed by a discussion with the audience. i. expected return increases with beta due to risk-sharing. bonds. expected return initially increases but then decreases with beta. the event was intended to provide selected investment professionals with the latest academic insights related to institutional money management. In their introductory comments. The main idea is to risk-adjust payoffs in a way that accounts for the asymmetry or tail risk exposures created by the dynamic strategies pursued by the hedge funds. but when it is large.
an investment boutique focused on sustainability investing. Further tests show that non-scalability is linked to the private equity firm structure with independent or less hierarchical firms. The prestigious Funds Europe Awards. Excess returns to currency carry trades indicate positive and statistically significant risk premia. not higher moments. innovation. the winners of which were announced at a ceremony held at The Tower of London on 29 November. Performance is not found to be scalable: investments held by firms at times when a high number of other simultaneous investments are managed underperform. now in their eighth year. 4. as in a rare disasters models. Princeton University Assistant Professor of Economics and Finance Jacob Jurek looked at the pricing and hedging of currency risk. In the final session of the afternoon EDHEC Business School Professor and EDHEC-Risk Institute PhD in Finance core faculty member Florencio López-de-Silanes presented his recent work on the determinants of private equity investment returns. The panel of judges. cost of debt and market sentiment. was the inaugural winner of the category. without reliance on return time series and to formally decompose the contributions to currency risk premia across jump and diffusive components and pricing kernel moments. that there exists a very important relation between duration and returns and large underperformance in emerging countries. The Institute was the only organisation to receive a special commendation for the excellence of its work at the event. Investment return performance is driven by stock-market returns during investment’s life as well as recent private equity inflow/return/homeruns.21 - .sizable differences in performance between the linear and the nonlinear risk adjustment. in the key areas of performance. Local currency premia range from 0. 2012. set out to recognise personal and company achievements and contributions within the European funds community and to credit publicly those who have advanced the cross-border agenda in the funds industry. this observation supports the idea that private equity profits do not solely stem from taking advantage of debt tax treatment or capturing the value premium but involve skills. Professor Frank Fabozzi delivered the event’s concluding remarks. the article finds that private equity investments are held on average four years and only 12% are quick flips. Analysing returns on 7. development. As faculty member of EDHEC Business School and visiting faculty at Princeton University. scored entries for excellence. The research work presented assembles a framework to extract instantaneous estimates of currency risk premia from currency options. and those with managers of similar professional backgrounds exhibit smaller diseconomies of scale. Interestingly. growth. Other companies short-listed for the award were Investit and Lipper.64% (NZD) and are driven primarily by diffusive rather than jump risks. In the second afternoon session. demonstrated clearly and concisely. SAM. A substantial number of entries were received in each of the 21 categories. Empirical results show that the average model-implied risk premium for the carry trade risk factor replicating portfolio is 1. and commitment to Europe and to the industry. client service.96% when using realised returns) and that these carry-trade risk premia are driven by jumps (68% of total currency risk premium) which exert their influence primarily through the variance of the pricing kernel. Newsletter PhD in Finance December 2012/May 2013.34% per annum (vs. most often the nonlinear risk adjustment reduces the performance but for some sub-classes it enhances their performance. A comparison of hedged and unhedged trades indicates disasters contribute 10% of the currency risk premium. EDHEC-Risk Institute distinguished at the Funds Europe awards EDHEC-Risk Institute was honoured with a “Highly Commended” distinction in the European Thought Leadership category at the Funds Europe Awards 2012.40% (JPY) to 1. state-variables extracted from currency option markets are largely orthogonal to drivers of interest rates. This is consistent with theories of diseconomies of scale from hierarchy and communication costs.500 private equity investments from 1971 to 2005. that the median internal rate of return (IRR) is 21% gross of fees with one out of ten investments going bankrupt and one in four achieving an IRR above 50%. composed of leading professionals with a wealth of funds industry experience.
please contact Ms.000 people over the duration of the event. Introduced with the previous edition.000 square meter “village” that welcomes over 10. event partners and visitors can meet and relax in the atmosphere of a 12. and the Americas. Originally a touring regatta. The “village” also serves as the largest informal recruitment forum in Europe. the event has been taking place in a single harbour since 1980 and has diversified to include a land trophy. information sessions are scheduled in the following cities on the following dates: • Abu Dhabi/Dubai – 30 April • Shanghai – 11 May • Singapore – 15-16 May • London – 10 June • Melbourne – 18 September • Sydney – 26 September To register for a presentation. Now in its sixth edition and attracting some eighty teams. the sand trophy competition revolves around tournaments in beach soccer. The sea trophy is registered in the official calendar of the French sailing federation. is a new category aimed at companies or individuals who have published ground-breaking research or opinion that judges consider most relevant and vital to solving challenges faced by asset managers. Brigitte Bogaerts. The sea trophy brings together close to two hundred sailing boats. Programme presentations Programme presentations will be held in Asia. Created twenty years ago. Newsletter PhD in Finance December 2012/May 2013. held from 19 to 27 April 2013 in France’s Brittany region. the land trophy attracts a hundred and fifty teams that compete in a multi-sports raid for a week while being given the opportunity to discover the hinterland’s landscapes and cultural heritage. including Europe’s largest fleet of Grand Surprise.22 - . it is the leading student sporting event in Europe. the Residential track: The next deadline for application for February 2014 admission into the Asia-based programme or October 2014 admission into the Europe-based programme is 15 December 2013. and from provider selection to more effective performance measurement. Europe. EDHEC Business School news EDHEC Sailing Cup celebrates 45th anniversary Important information for prospective applicants Application Information Executive track: The next deadline for application for October 2013 admission into the Europe-based programme or February 2014 admission into the Asia-based programme is 31 May 2013 EDHEC-Risk Institute is seeking to matriculate around fifteen new executive track participants in Asia and in Europe Some 3. ranging from operational risk management to diversification. beach volley and beach rugby. for a week of regattas in which student teams from over 20 countries compete. part of the Individual and Company Awards. Organised by a team of fifty EDHEC Business School students. a sand trophy and a kite trophy.The European Thought Leadership category. In the next three months.000 participants from the world over headed to Brest to take part in the 45th edition of the EDHEC Sailing Cup. Contest participants. kite trophy is the only team kite surfing competition in France and takes place over the first week-end of the EDHEC Sailing Cup.
7th Floor New York City .Institute EDHEC-Risk Institute 393 promenade des Anglais BP 3116 . Ludgate London EC4M 7RB United Kingdom Tel: +44 207 871 6740 EDHEC Risk Institute—Asia 1 George Street #07-02 Singapore 049145 Tel: +65 6438 0030 EDHEC Risk Institute—North America 1230 Avenue of the Americas Rockefeller Center .06202 Nice Cedex 3 France Tel: +33 (0)4 93 18 78 24 EDHEC Risk Institute—Europe 10 Fleet Place.23 - .NY 10020 USA Tel: +1 212 500 6476 EDHEC Risk Institute—France 16-18 rue du 4 septembre 75002 Paris France Tel: +33 (0)1 53 32 76 30 Newsletter PhD in Finance December 2012/May 2013.
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