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- Markus K Brunnermeier, Heje Lasse, Pedersen, Franklin Allen, Yakov Amihud, David Blair +9 others
- 2005

We provide a model that links a security's market liquidity — i.e., the ease of trading it — and traders' funding liquidity — i.e., their availability of funds. Traders provide market liquidity and their ability to do so depends on their funding , that is, their capital and the margins charged by their financiers. In times of crisis, reductions in market… (More)

- Victor Demiguel, Lorenzo Garlappi, Raman Uppal, Pierluigi Balduzzi, John Birge, Michael Brennan +15 others
- 2007

We evaluate the out-of-sample performance of the sample-based mean-variance model, and its extensions designed to reduce estimation error, relative to the naive 1/N portfolio. Of the 14 models we evaluate across seven empirical datasets, none is consistently better than the 1/N rule in terms of Sharpe ratio, certainty-equivalent return, or turnover, which… (More)

- Ravi Jagannathan, Tongshu Ma, Torben Andersen, Gopal Basak, Louis Chan, Gregory Connor +11 others
- 2002

Green and Hollifield (1992) argue that the presence of a dominant factor is why we observe extreme negative weights in mean-variance-efficient portfolios constructed using sample moments. In that case imposing no-shortsale constraints should hurt whereas empirical evidence is often to the contrary. We reconcile this apparent contradiction. We explain why… (More)

- Torben G Andersen, Tim Bollerslev, Francis X Diebold, Clara Vega, Ricardo Cabellero, Dean Croushore +16 others
- 2001

Using a new dataset consisting of six years of real-time exchange rate quotations, macroeconomic expectations, and macroeconomic realizations (announcements), we characterize the conditional means of U.S. dollar spot exchange rates versus German Mark, British Pound, Japanese Yen, Swiss Franc, and the Euro. In particular, we find that announcement surprises… (More)

- Geert Bekaert, Campbell R Harvey, Warren Bailey, Bernard Dumas, Wayne Ferson, Steve Grenadier +2 others
- 1999

We propose a measure of capital market integration arising from a conditional regime-switching model. Our measure allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integrated later in the sample. We find that a number of emerging markets exhibit time-varying integration.… (More)

- François Longin, Bruno Solnik, David Bates, Michael Brandt, Bernard Dumas, Paul Embrechts +4 others
- 2001

Testing the hypothesis that international equity market correlation increases in volatile times is a difficult exercise and misleading results have often been reported in the past because of a spurious relationship between correlation and volatility. Using " extreme value theory " to model the multivariate distribution tails, we derive the distribution of… (More)

- Peter Carr, Morgan Stanley, Michael Brennan, Darrell Duffie, Bernard Dumas, Dimitri Faguet +5 others
- 1997

While American calls on non-dividend-paying stocks may be valued as European, there is no completely explicit exact solution for the values of American puts. We use a technique called randomization to value American puts and calls on dividend-paying stocks. This technique yields a new semiexplicit approximation for American option values in the… (More)

- Mark Schroder, Costis Skiadas, John Campbell, George Constantinides, Kent Daniel, Darrell Duffie +11 others
- 1999

We develop the utility gradient (or martingale) approach for computing portfolio and consumption plans that maximize stochastic differential utility (SDU), a continuous-time version of recursive utility due to D. Duffie and L. Epstein (1992, Econometrica 60, 3533394). We characterize the first-order conditions of optimality as a system of forwarddbackward… (More)

- Suleyman Basak, Georgy Chabakauri, Ravi Bansal, Tomas Bjork, Peter Bossaerts, Darrell Duffie +5 others
- 2007

Mean-variance criteria remain prevalent in multi-period problems, and yet not much is known about their dynamically optimal policies. We provide a fully analytical characterization of the optimal dynamic mean-variance portfolios within a general incomplete-market economy, and recover a simple structure that also inherits several conventional properties of… (More)