Are positive reactions to bad news plausible? The consideration of fraud in audit and reporting delays


Andrew Yim


In June 2009 came the news of the alleged fraud in Countrywide Financial, one of the largest mortgage loan providers in the US before the credit crunch hit. The allegation against Countrywide reminded people of an unfulfilled role of auditors in the financial market: fraud detection.

Considering previous literature, the majority of which focuses on accounting fraud, this paper focuses on the misappropriation of assets and draws a range of conclusions.

Updated: 14/01/2013
Views: 5,908

Monetary policy, asset prices and actuarial practice


Philip Booth

The operation of monetary policy may have an impact on securities markets and asset values. This is of relevance to many in the actuarial industry, particularly to actuaries who work in non-bank financial institutions such as pension funds and insurance companies.

This review paper presents mainstream theories of monetary policy and draws out the implications that are regarded as most important for actuaries and actuarial research.

Updated: 14/01/2013
Views: 5,539

What does equity sector orderflow tell us about the economy?

Investors rebalance their portfolios as their views about expected returns and risk change.

In this study empirical measures of portfolio rebalancing were used to back out investors' views, specifically their views about the state of the economy.

Contrary to many theories of price formation, did trading activity therefore contain information that that is not entirely revealed by resulting relative price changes?

Updated: 28/12/2014
Comments: 37
Views: 7,219

Short-Selling Bans around the World: Evidence from the 2007-09 Crisis


Alessandro Beber


Most regulators around the world reacted to the 2007-09 crisis by imposing bans or constraints on short-selling. These were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured varying degrees of stringency. This 2011 article by Professor Alessandro Beber explores the ban on short-selling to identify their effects on liquidity, price discovery and stock prices.

Updated: 18/12/2014
Comments: 2
Views: 6,386

Value averaging and the automated bias of performance measures

Value averaging is a formula investment strategy which can be shown to achieve a lower average cost and higher IRR than alternative strategies.

Updated: 15/12/2014
Comments: 20
Views: 6,118

Measuring investors historical returns: hindsight bias in dollar-weighted returns

In this paper we show that this approach is affected by hindsight bias in the dollar-weighted return.

Updated: 03/11/2011
Views: 5,381

Dollar cost averaging - the role of cognitive error

This paper shows that DCA's continued popularity can be regarded as the result of a specific and demonstrable cognitive error.

Updated: 04/12/2014
Comments: 11
Views: 7,081

Downside risk and the size of credit spreads

We use a panel of investment-grade corporate bonds to investigate why credit spreads are so much larger than expected losses from default. We begin by confirming that systematic factors contribute very little to spreads, even if higher moments or downside effects are incorporated.

Updated: 24/10/2011
Views: 7,488

The flow-performance relationship around the world

We use a new dataset to study how mutual fund flows depend on past performance across 28 countries. We find that flows are convex in past performance creating an incentive for managers to take excessive risk.

Updated: 24/10/2011
Views: 7,572