This paper proposes a filtering methodology for portfolio optimization when some factors of the underlying model are only partially observed. The level of information is given by the observed quantities that are here supposed to be the primary securities and empirical log-price covariations. For a given level of information we determine the growth optimal portfolio, identify locally optimal por...

Many practitioners point out that the speculative profits of institutional traders are eroded by the difficulty in gauging the price impact of their trades. In this paper, we develop a model of strategic trading where speculators face such a dilemma because of incomplete information about time-varying market liquidity. Unlike the competitive market makers that they trade against, informed trade...

Since the 1997 reform FTSE 100 stocks trade on the London Stock Exchange in a fragmented market. These stocks can be traded either on the electronic order book, SETS, or through dealers posting voluntary quotations. The UK regulator does not enforce any quote display requirement, and best execution requirements are satisfied when prices for off-SETS trades are at least as good as the prices ava...

Recent literature discusses the persistence of skewness and tail risk in hedge fund returns. The aim of this paper is to suggest an alternative skewness measure  which is derived as the normalized shape parameter from the skew-normal distribution. First, we illustrate that the skew-normal distribution is better able to catch the characteristics of hedge fund returns than the normal distributio...

We present a simple, Glosten-Milgrom type equilibrium model to analyze the decision of informed traders on whether to use limit or market orders. We show that even after incorporating an order’s price impact, not only may informed traders prefer to use limit orders, but the probability that they submit limit orders can be so high that limit orders convey more information than market orders. We ...

Vector autoregressive models are increasingly being used in the analysis of relationships within and between financial markets. In such models, there are circumstances that require zero entries in the coefficient matrices. Such circumstances can be particularly relevant in the context of markets with special characteristics, such as emerging economies. This paper shows that a direct extension o...

This paper describes the Italian real estate investment funds industry, providing an overview of the distinctive features and risk factors of this sector. By using accounting and supervisory data, we: (1) compute the returns of the real estate assets in the portfolio of these funds; (2) construct a price index and a total return index of the real estate assets held by the Italian funds; (3) def...

in the recent economic literature, an important finding is the causal relationship between financial development and economic growth. before the 1970s, the most of economists believed that economic growth could be reached only by accumulation of physical capital. in the 1970s and after the pioneering works of mckinon (1973) and shaw (1973), this orthodox view was criticized by a vast amount of ...

A widely debated issue in recent years is cyber crime. Breaches in security of accessibility, integrity and confidentiality of information involve potentially high explicit and implicit costs for firms. This paper investigates the impact of information security breaches on stock returns. Using event-study methodology, we provide empirical evidence on the effect of announcements of cyber attacks...

The concept of efficient portfolios plays an important role in modern financial theory and practice. Although there is an extensive and growing literature that focuses on testing portfolio efficiency, outside of mean-variance optimization, which has several serious shortcomings, no systematic methodology for building efficient portfolios from inefficient indices has been developed. This paper a...