Louis J. D'Antonio

A Risk-Return Measure of Hedging Effectiveness

With the formation of a formal market for the trading of financial futures in October 1975, a renewed interest in the futures contract as an investment vehicle has emerged. The traditional approach was to view investing in futures as a way of off setting potential price risk associated with a given spot position. While these descriptive scenarios (see [3], [6], [10], [12], [13], [14], and [19]) adequately illustrate the traditional hedging strategy, their simplifying assumptions introduce a lack of realism into the investment process. The implication drawn from many of these articles is that, if one is interested in risk reduction, one should simply take the opposite position in the appropriate number of futures contracts to totally offset ones existing spot position.

Socially Responsible Investing Growing Issues and New Opportunities

Socially responsible investing (SRI) is the practice of making investment decisions on the basis of both financial and social performance. The SRI movement has grown into a

Expanding Socially Screened Portfolios: An Attribution Analysis of Bond Performance

1.185 trillion business, accounting for about 1 in 10 U.S. invested dollars. Not surprisingly, the industry has suffered severe growing pains along the way in the form of issues of credibility, demand, and performance. And, to date, the product itself has been limited to equity investing. This article explores these critical issues and whether socially screened bonds can perform as well as or better than unscreened bonds. If so, whole new sets of opportunities are open to the social investor bent on making a buck and a difference.

A Risk-Return Measure of Hedging Effectiveness: A Reply

The concept of socially responsible investing (SRI) is appealing because it provides a link between good “corporate citizens” (Smith [1994]) and the individual citizen who, as an investor, can earn a return and send a message or a vote, and maybe even help influence corporate behavior whde fdfilhng h s or her own personal desire to be socially responsible. The idea of citizenship, either corporate or individual, is multidimensional in character. Carroll’s [1979] four dimensions of social responsibility economic, legal, ethcal, and philanthropic are applicable. The foundation for both is the need to earn a return. Without profits, the firm does not survive and cannot serve society’s needs. Investors who lose money can send no messages, influence no behavior, or support no social change. Both corporations and individuals are expected to obey the law and act ethically in the face of moral dilemmas. And both are expected to contribute to the quality of the communities in whch they live and work. At the nexus of corporate and individual citizenship is SRI. By making investment decisions based on a combination of financial and social performance measures, the individual has the opportunity to promote and reward those companies whose values and behaviors are socially responsible.

Socially Responsible Investing and Asset Allocation

In this reply, we point out that Chang and Shankars measure of hedging performance, which they label HE 1 , is not an adequate measure. We describe an alternative measure, labeled HBS, which has a number of desirable ex ante and ex post statistical properties.

Multiperiod hedging using futures: A risk minimization approach in the presence of autocorrelation

The returns of portfolios are compared to a traditional investment vehicle using several methods of asset allocation. The strategies are examined in the context of investor regret and it is determined that the investor following these strategies is likely to be quite pleased regardless of the asset allocation method.