Peter Flaschel and Alfred Greiner
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199751587
- eISBN:
- 9780199932825
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199751587.001.0001
- Subject:
- Economics and Finance, Economic Systems
This book on Flexicurity Capitalism provides four rigorously formulated approaches to an analysis of the current and future evolution of capitalism from a Marx-Keynes and Kalecki- Schumpeter (MKS) ...
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This book on Flexicurity Capitalism provides four rigorously formulated approaches to an analysis of the current and future evolution of capitalism from a Marx-Keynes and Kalecki- Schumpeter (MKS) perspective. It does so in self-contained ways, focusing on macrodynamical models of the working of modern capitalist societies in the tradition of Classical and Keynesian authors, augmented by a modern reformulation of Schumpeterian ’Competitive Socialism’, the flexi(bility-se)curity approach currently intensively debated in the EU area. On this basis the book provides a novel approach to the study of the future of capitalism, a topic that has never been more important than now -- since the prosperity phase after World War II. It supplies an alternative to those discussions of current forms of capitalism which focus on the status quo of such economies, instead of providing an ideal scenario first, on the basis of which compromises between the status quo and the 'ideal' can be discussed. The employed modelling approaches, of an advanced type, are aimed at the post-graduate level of economic teaching. The chapters of the book can be utilised independently of each other but, nevertheless, provide a unique approach to macrodynamic theorizing that is firmly rooted in the MKS tradition of the understanding of the growth dynamics of capitalist economies.Less
This book on Flexicurity Capitalism provides four rigorously formulated approaches to an analysis of the current and future evolution of capitalism from a Marx-Keynes and Kalecki- Schumpeter (MKS) perspective. It does so in self-contained ways, focusing on macrodynamical models of the working of modern capitalist societies in the tradition of Classical and Keynesian authors, augmented by a modern reformulation of Schumpeterian ’Competitive Socialism’, the flexi(bility-se)curity approach currently intensively debated in the EU area. On this basis the book provides a novel approach to the study of the future of capitalism, a topic that has never been more important than now -- since the prosperity phase after World War II. It supplies an alternative to those discussions of current forms of capitalism which focus on the status quo of such economies, instead of providing an ideal scenario first, on the basis of which compromises between the status quo and the 'ideal' can be discussed. The employed modelling approaches, of an advanced type, are aimed at the post-graduate level of economic teaching. The chapters of the book can be utilised independently of each other but, nevertheless, provide a unique approach to macrodynamic theorizing that is firmly rooted in the MKS tradition of the understanding of the growth dynamics of capitalist economies.
Tomas Björk
- Published in print:
- 2004
- Published Online:
- October 2005
- ISBN:
- 9780199271269
- eISBN:
- 9780191602849
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199271267.003.0006
- Subject:
- Economics and Finance, Financial Economics
This chapter derives the dynamics of (the value of) a so-called self-financing portfolio; the price dynamics of various assets (e.g. stocks, bonds, financial derivatives) is considered as a given. A ...
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This chapter derives the dynamics of (the value of) a so-called self-financing portfolio; the price dynamics of various assets (e.g. stocks, bonds, financial derivatives) is considered as a given. A model is first studied in discrete time. The length of time is then tended to zero to obtain the continuous time analogs. A practice exercise is included.Less
This chapter derives the dynamics of (the value of) a so-called self-financing portfolio; the price dynamics of various assets (e.g. stocks, bonds, financial derivatives) is considered as a given. A model is first studied in discrete time. The length of time is then tended to zero to obtain the continuous time analogs. A practice exercise is included.
Sharan Jagpal
- Published in print:
- 2008
- Published Online:
- September 2008
- ISBN:
- 9780195371055
- eISBN:
- 9780199870745
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195371055.003.0005
- Subject:
- Business and Management, Marketing
This chapter examines the conditions under which the multiproduct firm should use market share as a metric for resource allocation. It distinguishes short- and long-run effects, analyze the effects ...
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This chapter examines the conditions under which the multiproduct firm should use market share as a metric for resource allocation. It distinguishes short- and long-run effects, analyze the effects of competition, and show how the discount rate affects the firm's revenue- and volume-based market shares. In particular, it shows how the firm can use marketing-finance fusion to choose the optimal performance metrics for managers so that they focus on maximizing long-run performance.Less
This chapter examines the conditions under which the multiproduct firm should use market share as a metric for resource allocation. It distinguishes short- and long-run effects, analyze the effects of competition, and show how the discount rate affects the firm's revenue- and volume-based market shares. In particular, it shows how the firm can use marketing-finance fusion to choose the optimal performance metrics for managers so that they focus on maximizing long-run performance.
Tony Van Gestel and Bart Baesens
- Published in print:
- 2008
- Published Online:
- January 2009
- ISBN:
- 9780199545117
- eISBN:
- 9780191720147
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199545117.003.0005
- Subject:
- Mathematics, Applied Mathematics, Mathematical Finance
This chapter discusses portfolio models. The main components of the risk of a single loan, exposure at default, loss given default and probability of default, impact on an aggregated level the ...
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This chapter discusses portfolio models. The main components of the risk of a single loan, exposure at default, loss given default and probability of default, impact on an aggregated level the portfolio loss distribution are explained in Section 5.2. Common measures of portfolio risk are reviewed in Section 5.3. Section 5.4 illustrates the impact of concentration and correlation on portfolio risk measures. Portfolio model formulations are reviewed conceptually in Section 5.5 and an overview of the current industry models is given in Section 5.6. Some of these models also include the risk of changing interest rates and spreads. The Basel II portfolio model for regulatory capital calculation is explained in detail in Section 5.7. Application and implementation issues are reviewed in Section 5.8. The concepts of economic capital calculation and allocation are summarized in Section 5.9 and a survey of risk-adjusted performance measures is given.Less
This chapter discusses portfolio models. The main components of the risk of a single loan, exposure at default, loss given default and probability of default, impact on an aggregated level the portfolio loss distribution are explained in Section 5.2. Common measures of portfolio risk are reviewed in Section 5.3. Section 5.4 illustrates the impact of concentration and correlation on portfolio risk measures. Portfolio model formulations are reviewed conceptually in Section 5.5 and an overview of the current industry models is given in Section 5.6. Some of these models also include the risk of changing interest rates and spreads. The Basel II portfolio model for regulatory capital calculation is explained in detail in Section 5.7. Application and implementation issues are reviewed in Section 5.8. The concepts of economic capital calculation and allocation are summarized in Section 5.9 and a survey of risk-adjusted performance measures is given.
Moshe A. Milevsky and Vladyslav Kyrychenko
- Published in print:
- 2008
- Published Online:
- January 2009
- ISBN:
- 9780199549108
- eISBN:
- 9780191720734
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199549108.003.0012
- Subject:
- Business and Management, Pensions and Pension Management
The latest generation of variable annuity contracts contains equity options plus longevity insurance, sometimes thought to be attractive to purchasers willing to take on financial risk. This chapter ...
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The latest generation of variable annuity contracts contains equity options plus longevity insurance, sometimes thought to be attractive to purchasers willing to take on financial risk. This chapter examines whether this is indeed the case. Using a unique database, it documents that policyholders do in fact adopt higher equity exposures when these riders are selected. It also examines the theoretical merits of the marketing advice, by deriving the optimal asset allocation in the presence of these guarantees. The chapter concludes that more aggressive equity allocations can indeed be justified in many, although not all, product structures.Less
The latest generation of variable annuity contracts contains equity options plus longevity insurance, sometimes thought to be attractive to purchasers willing to take on financial risk. This chapter examines whether this is indeed the case. Using a unique database, it documents that policyholders do in fact adopt higher equity exposures when these riders are selected. It also examines the theoretical merits of the marketing advice, by deriving the optimal asset allocation in the presence of these guarantees. The chapter concludes that more aggressive equity allocations can indeed be justified in many, although not all, product structures.
Raimond Maurer, Olivia S. Mitchell, and Ralph Rogalla
- Published in print:
- 2010
- Published Online:
- September 2010
- ISBN:
- 9780199592609
- eISBN:
- 9780191594618
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199592609.003.0006
- Subject:
- Business and Management, Pensions and Pension Management
This paper examines how labor income volatility and social security benefits influence life‐cycle household portfolios. Specifically, it examines the quantity and location of household saving, taking ...
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This paper examines how labor income volatility and social security benefits influence life‐cycle household portfolios. Specifically, it examines the quantity and location of household saving, taking into account liquid financial wealth and annuities, and stocks versus bonds. Higher labor income uncertainty and lower old‐age benefits boost demand for stable income in retirement, but also when young. In addition, a declining equity glide path with age is appropriate for the worker with low income uncertainty but for the high‐income risk worker, equity exposure rises until retirement. We also evaluate how changes in social security benefits influence retirement risk management.Less
This paper examines how labor income volatility and social security benefits influence life‐cycle household portfolios. Specifically, it examines the quantity and location of household saving, taking into account liquid financial wealth and annuities, and stocks versus bonds. Higher labor income uncertainty and lower old‐age benefits boost demand for stable income in retirement, but also when young. In addition, a declining equity glide path with age is appropriate for the worker with low income uncertainty but for the high‐income risk worker, equity exposure rises until retirement. We also evaluate how changes in social security benefits influence retirement risk management.
Roderick Martin, Peter D. Casson, and Tahir M. Nisar
- Published in print:
- 2007
- Published Online:
- September 2007
- ISBN:
- 9780199202607
- eISBN:
- 9780191707896
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199202607.003.0003
- Subject:
- Business and Management, Finance, Accounting, and Banking
Different types of institutional investors have different propensities to engage, influenced by the regulatory environment, the size and distribution of their portfolios, their time horizons, and the ...
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Different types of institutional investors have different propensities to engage, influenced by the regulatory environment, the size and distribution of their portfolios, their time horizons, and the financial incentives of fund managers, as well as by corporate performance. The chapter identifies the costs and benefits of engagement. USS Limited is examined as a case study of a major pension fund, with an articulated investment philosophy.Less
Different types of institutional investors have different propensities to engage, influenced by the regulatory environment, the size and distribution of their portfolios, their time horizons, and the financial incentives of fund managers, as well as by corporate performance. The chapter identifies the costs and benefits of engagement. USS Limited is examined as a case study of a major pension fund, with an articulated investment philosophy.
Roderick Martin, Peter D. Casson, and Tahir M. Nisar
- Published in print:
- 2007
- Published Online:
- September 2007
- ISBN:
- 9780199202607
- eISBN:
- 9780191707896
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199202607.003.0005
- Subject:
- Business and Management, Finance, Accounting, and Banking
Private equity funds contribute heavily to the performance of the firms in which they invest beyond the provision of capital. Through detailed examination of seven case studies of private equity ...
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Private equity funds contribute heavily to the performance of the firms in which they invest beyond the provision of capital. Through detailed examination of seven case studies of private equity funds and portfolio companies, this chapter shows how private equity funds provide ‘commercial savvy’ and international connections to the companies in which they invest, as well as sector-specific knowledge. The funds may involve themselves in areas traditionally considered as matters of concern to investors, such as corporate strategy, and in matters normally considered the province of managers, such as innovation and employee skill development.Less
Private equity funds contribute heavily to the performance of the firms in which they invest beyond the provision of capital. Through detailed examination of seven case studies of private equity funds and portfolio companies, this chapter shows how private equity funds provide ‘commercial savvy’ and international connections to the companies in which they invest, as well as sector-specific knowledge. The funds may involve themselves in areas traditionally considered as matters of concern to investors, such as corporate strategy, and in matters normally considered the province of managers, such as innovation and employee skill development.
Terry Gourvish
- Published in print:
- 2002
- Published Online:
- September 2007
- ISBN:
- 9780199250059
- eISBN:
- 9780191719516
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199250059.003.0007
- Subject:
- Business and Management, Business History
This chapter discusses the significance of the disposal of the British Railways Board's subsidiary businesses. These include British Transport Hotels, Sealink and the harbours, property portfolio, ...
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This chapter discusses the significance of the disposal of the British Railways Board's subsidiary businesses. These include British Transport Hotels, Sealink and the harbours, property portfolio, and catering and advertising businesses. The sale of assets provided cash to address British Rail's financial problems, particularly during the recession of the early 1980s. In the late 1980s, the disposals contributed to cash resources, thereby assisting in the Board's efforts to reduce PSO while financing investment without additional borrowing.Less
This chapter discusses the significance of the disposal of the British Railways Board's subsidiary businesses. These include British Transport Hotels, Sealink and the harbours, property portfolio, and catering and advertising businesses. The sale of assets provided cash to address British Rail's financial problems, particularly during the recession of the early 1980s. In the late 1980s, the disposals contributed to cash resources, thereby assisting in the Board's efforts to reduce PSO while financing investment without additional borrowing.
Brad M. Barber
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199573349
- eISBN:
- 9780191721946
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199573349.003.0015
- Subject:
- Business and Management, Public Management, Pensions and Pension Management
Many public pension funds engage in activism by using their pooled ownership of stock to affect changes in the corporations they own. The merits of activism depend on (1) the conflicts of interest ...
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Many public pension funds engage in activism by using their pooled ownership of stock to affect changes in the corporations they own. The merits of activism depend on (1) the conflicts of interest between corporate managers and shareholders, and (2) the conflicts of interest between portfolio managers and investors. These conflicts lead to two types of activism: shareholder activism and social activism. Portfolio managers can use their position to monitor conflicts that might arise between managers and shareholders (shareholder activism), but they can also abuse their position by pursuing actions that advance their own moral values or political interests at the expense of investors (social activism).Less
Many public pension funds engage in activism by using their pooled ownership of stock to affect changes in the corporations they own. The merits of activism depend on (1) the conflicts of interest between corporate managers and shareholders, and (2) the conflicts of interest between portfolio managers and investors. These conflicts lead to two types of activism: shareholder activism and social activism. Portfolio managers can use their position to monitor conflicts that might arise between managers and shareholders (shareholder activism), but they can also abuse their position by pursuing actions that advance their own moral values or political interests at the expense of investors (social activism).
Shanta Acharya and Elroy Dimson
- Published in print:
- 2007
- Published Online:
- May 2007
- ISBN:
- 9780199210916
- eISBN:
- 9780191705816
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199210916.003.0007
- Subject:
- Economics and Finance, Financial Economics
Colleges in Oxford and Cambridge have invested in property, bonds, and equity-like assets including private equity; they also own original works of art, rare books, vintage wine, and other such ...
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Colleges in Oxford and Cambridge have invested in property, bonds, and equity-like assets including private equity; they also own original works of art, rare books, vintage wine, and other such assets that would typically have been bequeathed to them. The range of assets may not have been significantly enlarged recently, but financial innovation has created more options whereby traditional assets can be accessed in a more efficient manner. This chapter examines issues that relate to overall asset allocation, primarily because it is this that shapes the individual portfolio.Less
Colleges in Oxford and Cambridge have invested in property, bonds, and equity-like assets including private equity; they also own original works of art, rare books, vintage wine, and other such assets that would typically have been bequeathed to them. The range of assets may not have been significantly enlarged recently, but financial innovation has created more options whereby traditional assets can be accessed in a more efficient manner. This chapter examines issues that relate to overall asset allocation, primarily because it is this that shapes the individual portfolio.
Shanta Acharya and Elroy Dimson
- Published in print:
- 2007
- Published Online:
- May 2007
- ISBN:
- 9780199210916
- eISBN:
- 9780191705816
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199210916.003.0008
- Subject:
- Economics and Finance, Financial Economics
Experienced investors recognize that understanding the risk profile of the overall portfolio lies at the heart of any assessment of investment alternatives. Attempting to identify the risks to ...
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Experienced investors recognize that understanding the risk profile of the overall portfolio lies at the heart of any assessment of investment alternatives. Attempting to identify the risks to college endowment portfolios (on a scale of 1 to 5 with 1 being not very important and 5 very important), with reference to various aspects of portfolio risk (such as market risk, risk relative to benchmark, liquidity risk, fiduciary risk, and ‘other’ risk factors), provides clues to the risk framework within which colleges in Oxford and Cambridge invest. A majority (85%) of colleges consider their investment committees as being responsible for risk management of endowment assets, with about half reporting that the job is done internally without the assistance of any expert external guidance. The involvement of investment consultants in managing portfolio risk, is minimal. Even in Oxford, where more institutions reported using the services of investment consultants, only 15% of Colleges used a consultant in risk management.Less
Experienced investors recognize that understanding the risk profile of the overall portfolio lies at the heart of any assessment of investment alternatives. Attempting to identify the risks to college endowment portfolios (on a scale of 1 to 5 with 1 being not very important and 5 very important), with reference to various aspects of portfolio risk (such as market risk, risk relative to benchmark, liquidity risk, fiduciary risk, and ‘other’ risk factors), provides clues to the risk framework within which colleges in Oxford and Cambridge invest. A majority (85%) of colleges consider their investment committees as being responsible for risk management of endowment assets, with about half reporting that the job is done internally without the assistance of any expert external guidance. The involvement of investment consultants in managing portfolio risk, is minimal. Even in Oxford, where more institutions reported using the services of investment consultants, only 15% of Colleges used a consultant in risk management.
Stephen D. Cohen
- Published in print:
- 2007
- Published Online:
- May 2007
- ISBN:
- 9780195179354
- eISBN:
- 9780199783779
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195179354.003.0003
- Subject:
- Economics and Finance, International
This chapter deals with the definitions and descriptions — many of which are neither self-evident nor universally understood — that articulate the defining characteristics of FDI and MNCs. First, the ...
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This chapter deals with the definitions and descriptions — many of which are neither self-evident nor universally understood — that articulate the defining characteristics of FDI and MNCs. First, the structure, governance, and objectives of the basic corporation — the first stage and underlying persona of an MNC — are spelled out. The next section reviews different terms used to refer to what in this book are dubbed MNCs and explains how these terms emanate from different perceptions of the behavior and management of multinational businesses. The final section specifically defines what constitutes an MNC and what constitutes FDI.Less
This chapter deals with the definitions and descriptions — many of which are neither self-evident nor universally understood — that articulate the defining characteristics of FDI and MNCs. First, the structure, governance, and objectives of the basic corporation — the first stage and underlying persona of an MNC — are spelled out. The next section reviews different terms used to refer to what in this book are dubbed MNCs and explains how these terms emanate from different perceptions of the behavior and management of multinational businesses. The final section specifically defines what constitutes an MNC and what constitutes FDI.
Ion Bogdan Vasi
- Published in print:
- 2011
- Published Online:
- January 2011
- ISBN:
- 9780199746927
- eISBN:
- 9780199827169
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199746927.003.0004
- Subject:
- Political Science, Environmental Politics
This chapter examines the way in which environmental groups and activists shape the energy policymaking processes in countries that have very good wind potential but a social context that is less ...
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This chapter examines the way in which environmental groups and activists shape the energy policymaking processes in countries that have very good wind potential but a social context that is less favorable to the environmental movement. It shows that the environmental movement can contribute to the adoption and implementation of policies such as a renewable portfolio standard (RPS) through its campaigns against nuclear power, air pollution, and global climate change. However, while environmental groups mobilize large green‐energy advocacy coalitions to shape the adoption and implementation of pro–renewable energy policies, their ability to reach their goals is severely limited when they lack influential political allies and when they face a biased mass media and less‐favorable public opinion. The environmental movement in the United Kingdom influenced the revision of the Renewables Obligation (RO) policy and the adoption of a feed‐in tariff. In the United States and Canada, environmental groups had little impact on the federal policymaking process but contributed to state and provincial governments' decisions to adopt renewable portfolio standards and feed‐in tariffs.Less
This chapter examines the way in which environmental groups and activists shape the energy policymaking processes in countries that have very good wind potential but a social context that is less favorable to the environmental movement. It shows that the environmental movement can contribute to the adoption and implementation of policies such as a renewable portfolio standard (RPS) through its campaigns against nuclear power, air pollution, and global climate change. However, while environmental groups mobilize large green‐energy advocacy coalitions to shape the adoption and implementation of pro–renewable energy policies, their ability to reach their goals is severely limited when they lack influential political allies and when they face a biased mass media and less‐favorable public opinion. The environmental movement in the United Kingdom influenced the revision of the Renewables Obligation (RO) policy and the adoption of a feed‐in tariff. In the United States and Canada, environmental groups had little impact on the federal policymaking process but contributed to state and provincial governments' decisions to adopt renewable portfolio standards and feed‐in tariffs.
Hendrik S. Houthakker and Peter J. Williamson
- Published in print:
- 1996
- Published Online:
- November 2003
- ISBN:
- 9780195044072
- eISBN:
- 9780199832958
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/019504407X.003.0010
- Subject:
- Economics and Finance, Financial Economics
The previous chapter outlined the nature of futures contracts and some of the institutional aspects of the markets in which they are traded; this chapter analyzes the forces that determine the prices ...
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The previous chapter outlined the nature of futures contracts and some of the institutional aspects of the markets in which they are traded; this chapter analyzes the forces that determine the prices of different futures contracts, their relationship to the current market price (known as the spot price), and derives a satisfactory theory of futures prices. Different determinants are explored of the prices of both commodity futures (contracts based on a tangible commodity) and financial futures (those based on another financial instrument or index). After looking at the role of futures in ‘programme trading’ and the realities of so‐called portfolio insurance through the use of futures and options – a concept that was put to the test by the ‘Black Monday’ crash of 1987 – the chapter concludes by discussing futures as an investment. The five sections of the chapter (which is a discussion with respect to the USA) are as follows: Profits and losses on various transactions; Relations among spot and futures prices; Hedgers, speculators, and market equilibrium; The role of expectations; and Futures and portfolio management.Less
The previous chapter outlined the nature of futures contracts and some of the institutional aspects of the markets in which they are traded; this chapter analyzes the forces that determine the prices of different futures contracts, their relationship to the current market price (known as the spot price), and derives a satisfactory theory of futures prices. Different determinants are explored of the prices of both commodity futures (contracts based on a tangible commodity) and financial futures (those based on another financial instrument or index). After looking at the role of futures in ‘programme trading’ and the realities of so‐called portfolio insurance through the use of futures and options – a concept that was put to the test by the ‘Black Monday’ crash of 1987 – the chapter concludes by discussing futures as an investment. The five sections of the chapter (which is a discussion with respect to the USA) are as follows: Profits and losses on various transactions; Relations among spot and futures prices; Hedgers, speculators, and market equilibrium; The role of expectations; and Futures and portfolio management.
Meir Statman
- Published in print:
- 2004
- Published Online:
- January 2005
- ISBN:
- 9780199273393
- eISBN:
- 9780191601675
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199273391.003.0004
- Subject:
- Economics and Finance, Financial Economics
This chapter argues that the behavioural portfolio theory offers a good description of investor behaviour and a basis for good policy prescriptions. The theory states that investors view with ...
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This chapter argues that the behavioural portfolio theory offers a good description of investor behaviour and a basis for good policy prescriptions. The theory states that investors view with portfolios not as a whole, but as distinct layers in a pyramid of assets where layers are associated with specific goals, and where attitudes towards risk vary across layers. Unlike the mean-variance theory which offers portfolio descriptions that investors do not follow, the behavioural portfolio theory offers prescription of pyramid portfolios that are closer to reality.Less
This chapter argues that the behavioural portfolio theory offers a good description of investor behaviour and a basis for good policy prescriptions. The theory states that investors view with portfolios not as a whole, but as distinct layers in a pyramid of assets where layers are associated with specific goals, and where attitudes towards risk vary across layers. Unlike the mean-variance theory which offers portfolio descriptions that investors do not follow, the behavioural portfolio theory offers prescription of pyramid portfolios that are closer to reality.
John Y. Campbell and Luis M. Viceira
- Published in print:
- 2002
- Published Online:
- November 2003
- ISBN:
- 9780198296942
- eISBN:
- 9780191596049
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198296940.003.0002
- Subject:
- Economics and Finance, Financial Economics
Reviews the theory of portfolio choice for short‐term investors, and explains the special cases in which long‐term investors should make the same choices as short‐term investors. When investors’ ...
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Reviews the theory of portfolio choice for short‐term investors, and explains the special cases in which long‐term investors should make the same choices as short‐term investors. When investors’ relative risk aversion does not depend on their wealth, investment horizon is irrelevant for investors who have only financial wealth and who face constant investment opportunities. Even if investment opportunities are time‐varying, the investment horizon is still irrelevant for investors whose relative risk aversion equals one. However, there is strong empirical evidence that these conditions fail in various ways, thus allowing for legitimate arguments for horizon effects on portfolio choice.Less
Reviews the theory of portfolio choice for short‐term investors, and explains the special cases in which long‐term investors should make the same choices as short‐term investors. When investors’ relative risk aversion does not depend on their wealth, investment horizon is irrelevant for investors who have only financial wealth and who face constant investment opportunities. Even if investment opportunities are time‐varying, the investment horizon is still irrelevant for investors whose relative risk aversion equals one. However, there is strong empirical evidence that these conditions fail in various ways, thus allowing for legitimate arguments for horizon effects on portfolio choice.
Volbert Alexander, George M. von Furstenberg, and Jacques Mélitz (eds)
- Published in print:
- 2004
- Published Online:
- August 2004
- ISBN:
- 9780199271405
- eISBN:
- 9780191601200
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199271402.001.0001
- Subject:
- Economics and Finance, Economic Systems
Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly ...
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Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly critical for the choice of currency denomination. Conversely, the exchange value and prospective usefulness of small currencies becomes less certain, and transaction costs for them may rise. Economic instability is invited as currency and portfolio substitution with the dominant international currency denomination increase the likelihood of currency mismatches and financial crises. In view of these failings of many of the financially small currencies, the number of currencies worldwide well may shrink greatly in the decades ahead.Drawing lessons mostly from contemporary developments, this book analyzes current approaches to overcoming excessive monetary division within integrating regions. It focuses on the effects of monetary or currency unions on trade among members and on their financial development and stability. In the process, contributors analyze the promise and subversion of hard pegs such as that attempted by the currency board of Argentina. They also examine unilateral dollarization -- adopted in a few countries formally, and in many more informally without giving up the local currency -- and multilateral monetary union in Europe. There the euro functions as an innovative, non-hegemonic form of internationally shared and co-managed fiat money that will also be adopted by the 2004 class of European-Union accession countries in coming years.Less
Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly critical for the choice of currency denomination. Conversely, the exchange value and prospective usefulness of small currencies becomes less certain, and transaction costs for them may rise. Economic instability is invited as currency and portfolio substitution with the dominant international currency denomination increase the likelihood of currency mismatches and financial crises. In view of these failings of many of the financially small currencies, the number of currencies worldwide well may shrink greatly in the decades ahead.
Drawing lessons mostly from contemporary developments, this book analyzes current approaches to overcoming excessive monetary division within integrating regions. It focuses on the effects of monetary or currency unions on trade among members and on their financial development and stability. In the process, contributors analyze the promise and subversion of hard pegs such as that attempted by the currency board of Argentina. They also examine unilateral dollarization -- adopted in a few countries formally, and in many more informally without giving up the local currency -- and multilateral monetary union in Europe. There the euro functions as an innovative, non-hegemonic form of internationally shared and co-managed fiat money that will also be adopted by the 2004 class of European-Union accession countries in coming years.
David M. Wilkinson
- Published in print:
- 2006
- Published Online:
- September 2007
- ISBN:
- 9780198568469
- eISBN:
- 9780191717611
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198568469.003.0004
- Subject:
- Biology, Ecology
Tradeoffs are a fundamental aspect of biodiversity as they prevent a few species from monopolizing the planet. Well-known ecological concepts, such as the niche, only make sense in the context of ...
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Tradeoffs are a fundamental aspect of biodiversity as they prevent a few species from monopolizing the planet. Well-known ecological concepts, such as the niche, only make sense in the context of this more fundamental idea of tradeoff. The resulting biodiversity will have a positive Gaian effect, that is, it will tend to make an ecological community more stable than if it was composed of a smaller number of species. Biodiversity does not evolve to help stabilize the system (except in the limited sense that taxon poor systems may be more prone to extinction), it is an inevitable by-product of tradeoffs and other processes such as geographical isolation. One potentially important way to think about the Gaian effect of biodiversity is the idea of the ‘portfolio effect’ from economics, although other ideas, such as Grime's ‘transient species’ are also important.Less
Tradeoffs are a fundamental aspect of biodiversity as they prevent a few species from monopolizing the planet. Well-known ecological concepts, such as the niche, only make sense in the context of this more fundamental idea of tradeoff. The resulting biodiversity will have a positive Gaian effect, that is, it will tend to make an ecological community more stable than if it was composed of a smaller number of species. Biodiversity does not evolve to help stabilize the system (except in the limited sense that taxon poor systems may be more prone to extinction), it is an inevitable by-product of tradeoffs and other processes such as geographical isolation. One potentially important way to think about the Gaian effect of biodiversity is the idea of the ‘portfolio effect’ from economics, although other ideas, such as Grime's ‘transient species’ are also important.
Vincent Antonin Lépinay
- Published in print:
- 2011
- Published Online:
- October 2017
- ISBN:
- 9780691151502
- eISBN:
- 9781400840465
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691151502.003.0004
- Subject:
- Economics and Finance, Financial Economics
This chapter presents a detailed description of the management of the traders' huge portfolios. Traders of capital guarantee products (CGPs) sit at the intersection of several exchanges. This ...
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This chapter presents a detailed description of the management of the traders' huge portfolios. Traders of capital guarantee products (CGPs) sit at the intersection of several exchanges. This delicate position owes much to the design of the products they manage: CGPs involve complex combinations of underlying securities that traders are not expert in but must still buy and sell. The chapter introduces a crucial actor in the trading room: the pricer—a computational machine that provides traders with the market values of their contracts. In a market in which products are designed to create asymmetry between the bank and its clients or other competing banks, pricers that provide traders with values and risks produce the only knowledge available.Less
This chapter presents a detailed description of the management of the traders' huge portfolios. Traders of capital guarantee products (CGPs) sit at the intersection of several exchanges. This delicate position owes much to the design of the products they manage: CGPs involve complex combinations of underlying securities that traders are not expert in but must still buy and sell. The chapter introduces a crucial actor in the trading room: the pricer—a computational machine that provides traders with the market values of their contracts. In a market in which products are designed to create asymmetry between the bank and its clients or other competing banks, pricers that provide traders with values and risks produce the only knowledge available.
