Antony Jackson

The Impact of Foreign Trades on Emerging Market Liquidity

From January 2008 to December 2010, aggressive foreign investor–initiated trades on the Indonesian Stock Exchange aided the price discovery process but increased the degree to which individual stocks’ liquidity tracked overall market liquidity.

Financial Institution Credit Assessment and Implications for Portfolio Managers

Fixed-income portfolio managers who invest under a constraint based on ratings agency ratings may be tempted to reach for yield by overweighting the securities of financial institutions. The higher yields of such securities, however, are compensation for increased risk.

A simple scheme for allocating capital in a foreign exchange proprietary trading firm

We present a model of capital allocation in a foreign exchange proprietary trading firm. The owner allocates capital to individual traders, who operate within strict risk limits. Traders specialize in individual currencies, but are given discretion over their choice of trading rule. The owner provides the simple formula that determines position sizes – a formula that does not require estimation of the firm-level covariance matrix. We provide supporting empirical evidence of excess risk-adjusted returns to the firm-level portfolio, and we discuss a modification of the model in which the owner dictates the choice of trading rule.