Marco J. Menichetti

Enhanced Mean-Variance Portfolios: A Controlled Integration of Quantitative Predictors

The intuitiveness and practicality of mean–variance portfolios largely depend on the accuracy of moment estimates, which are subject to large estimation errors and are conditional on time. The authors propose a model that accounts for factor dynamics in a Bayesian setting, in which they endogenously derive the effect of estimation accuracy on the posterior distribution from a linear predictive regression model. By doing so, they capture upside return potential for periods of high factor-explained variance, while constraining downside risk for periods of low predictive quality. Results are robust in a simulation and an empirical setting.

Die Performance-Darstellung von Wertschriften-Portfolios

Big asset management funds have an incentive to identify portfolio managers who show ex post investment results maximizing the fund utility. This analysis cannot be restricted on rate of returns as they do not take into account different levels of return volatility. Therefore performance is a much better measure than a return rate. Performance is a measure describing the relation between return and risk of an asset. Asset management reports in Germany and the Principality of Liechtenstein show that portfolio reporting gives information on rates of return, but no information on portfolio risk and performance ratios.

Basel II und seine Bedeutung für Kleinstaaten

This paper deals with the consequences of banking regulation for banks and regulators in micro states. Up to now this topic had not been ana-lyzed in the literature.

Deregulation, Volatility, and Implications for Risk Management Concepts

Conceptual work on foreign exchange rate risk management has to accept three facts:’ Firstly, as relative purchasing power parity (PPP) does not hold in the short run, the firm faces real exchange rate risk. Secondly, the actual forward rate is a very poor predictor for future rates. Thirdly, hedging decisions, in reality, have positive impacts on firm value, even if capital market theory predicts the opposite. Therefore foreign exchange risk management is necessary and positive for both company and shareholders.