EDHEC Business School Research Articles

Mathematical Models and Methods for Infrastructure Investments: A Critical Analysis of the Models and Methodologies for Infrastructure Investments, Proposed by EDHEC Business School and Moody’s

The work of seeking more appropriate models for infrastructure finance is critical due to the fact that there is a gap between the amount of infrastructure the world will need in order to support expected rates of economic growth ($3.3 trillion spent annually) and what they are currently investing ($2.5 trillion spent annually). The G20 hope the private sector can fill this gap. One of the problems with the mostly private market for infrastructure project finance is that there is currently no standard, or particularly appropriate financial model in use. The EDHEC Infrastructure Institute (EDHEC) has published over twenty reports on the subject of debt and equity infrastructure investments, which contain mathematical models that were created to develop benchmarks for these kinds of investments. Moody’s have also published research that discusses the methodology they use for rating infrastructure project finance. This paper is a critical analysis of the research published by EDHEC and Moody’s on the subject of valuing and rating infrastructure project finance. Through their work EDHEC have taken a big step towards standardising valuation methods in a hitherto opaque market. Their model is significantly more robust than Moody’s static rating system, which does not take into account the dynamic and path-dependent nature of risk and returns in infrastructure projects.

Understanding Job Search Processes for a Better Job Search Experience

Job search scholarship has established the job search as a self-regulatory, within-individual process that individuals engage in as they pursue new employment opportunities. Traditional scholarship has focused on job search quantity –the degree of effort exerted–and offers received as a result of job search efforts potentially at the neglect of understanding factors that impact job search quality. Therefore, recent job search scholarship has begun to shift away from this conventional paradigm to instead focus on the quality of job seekers job search experiences and different factors that impact job seeker well-being and perceptions. This symposium includes four papers that address job seeker well-being (e.g., psychological resources) and job search quality (e.g., types of search effort) as well as investigating psychosocial aspects of job seekers search experiences (e.g., degree of network centrality, volunteer work while unemployed). These papers are indicative of current trends in the job search literature and represent promising new streams for future research areas. The symposium also platforms preeminent job search scholar, Dr. Connie Wanberg, as the discussant of these works in progress. THE ROLE OF JOB SEARCH EXPERIENCE IN THE EMERGENCE OF ANTI-IMMIGRANT ATTITUDES Presenter: Serge P. Da Motta Veiga; EDHEC Business School Presenter: Shuhua Sun; Tulane U. Presenter: Ray Fang; Boise State U. VOLUNTEER WORK DURING UNEMPLOYMENT: DOES IT PAY OFF? A 5-WAVE LONGITUDINAL STUDY Presenter: Sarah Van Den Hee; U. of Amsterdam Presenter: Edwin A.J. Van Hooft; U. of Amsterdam OPPOSING EFFECTS OF HUMAN CAPITAL AND SOCIAL CAPITAL ON JOB SEARCH SELF-REGULATION Presenter: Jomel Wei Xuan Ng; National U. of Singapore THE INFLUENCE OF CHALLENGE AND HINDRANCE APPRAISALS ON SEARCH BEHAVIOR AND IMPRESSION MANAGEMENT Presenter: Rebecca MacGowan; U. of Arkansas Presenter: Mahira Ganster; U. of Arizona Presenter: Nitya Chawla; Texas A&M U. Presenter: Jerel Slaughter; U. of Arizona

Practical Applications of Modeling Price Dynamics, Optimal Portfolios, and Option Valuation for Cryptoassets

In <b><i>Modeling Price Dynamics, Optimal Portfolios, and Option Valuation for Cryptoassets</i></b>, from the Summer 2021 issue of <b><i>The Journal of Alternative Investments</i></b>, <b>Yuan Hu</b> and <b>Brent Lindquist</b>, both at <b>Texas Tech University</b>, and <b>Frank Fabozzi</b>, of <b>EDHEC Business School</b>, emphasize the need for the development of a cryptocurrency index and associated hedging and trading vehicles, all designed to be consistent with modern portfolio theory. In an example, they create smart-beta-like cryptoasset indexes and suggest tracking them with a tradable ETF, and they show how to value options based on such indexes. Essentially, the authors provide a unified framework for applying financial theory to this new investment class, which consists primarily of risky assets–despite the commonly used label of currencies. The main message is that risk analysis, portfolio optimization, and derivative pricing should all be done within the same model.

Practical Applications of Novel Risks Virtual Panel Discussion, December 2021

In connection with the release of the <b><i>The Journal of Portfolio Management</i></b> 2021 special issue on novel risks, <b><i>JPM</i></b> editor <b>Frank Fabozzi</b> moderated a virtual panel discussion on novel risks and their importance to investors. The panelists were <b>Richard Berner</b> (<b>New York University</b>), <b>Irene Monasterolo</b> (<b>EDHEC Business School</b>), <b>Joe Simonian</b> (<b>Autonomous Investment Technologies</b>), and <b>Wylie Tollette</b> (<b>Franklin Templeton</b>). The full panel discussion is available for viewing at https://www.pm-research.com/novel-risks/watch. The panelists highlighted the following novel risks as challenges for investors in the current environment: 1) the search for yield in a return-starved word, 2) inflation at levels that have not been seen for three decades in most of the developed world, 3) bloated balance sheets at central banks, 4) ESG risks (including climate risk), 5) geopolitical risks, 6) pandemic risks, 7) cyber risks, 8) model risk, 9) risks associated with digital assets, and 10) risks associated with nonbank financial intermediation. The panelists noted that the paucity of relevant historical data for analyzing the novel risks means that investors must turn to other techniques, such as scenario analysis and stress testing, for managing such risks. Moreover, the challenge of analyzing novel risks is compounded by the fact that they may produce nonlinear effects and may interact in ways that cause them to amplify each other (e.g., environmental risks and geopolitical risks). The challenge is further amplified by the fact that many novel risks are primarily relevant over time horizons longer than one or two years. As noted by panelist Joe Simonian, “we tend to overestimate the changes that will occur in the next one or two years and underestimate the changes that will occur over the next 10 years.”

Practical Applications of Modeling Price Dynamics, Optimal Portfolios, and Option Valuation for Cryptoassets

In <b><i>Modeling Price Dynamics, Optimal Portfolios, and Option Valuation for Cryptoassets</i></b>, from the Summer 2021 issue of <b><i>The Journal of Alternative Investments</i></b>, <b>Yuan Hu</b> and <b>Brent Lindquist</b>, both at <b>Texas Tech University</b>, and <b>Frank Fabozzi</b>, of <b>EDHEC Business School</b>, emphasize the need for the development of a cryptocurrency index and associated hedging and trading vehicles, all designed to be consistent with modern portfolio theory. In an example, they create smart-beta-like cryptoasset indexes and suggest tracking them with a tradable ETF, and they show how to value options based on such indexes. Essentially, the authors provide a unified framework for applying financial theory to this new investment class, which consists primarily of risky assets–despite the commonly used label of currencies. The main message is that risk analysis, portfolio optimization, and derivative pricing should all be done within the same model.

Practical Applications of Modeling Price Dynamics, Optimal Portfolios, and Option Valuation for Cryptoassets

In Modeling Price Dynamics, Optimal Portfolios, and Option Valuation for Cryptoassets, from the Summer 2021 issue of The Journal of Alternative Investments, Yuan Hu and Brent Lindquist, both at Texas Tech University, and Frank Fabozzi, of EDHEC Business School, emphasize the need for the development of a cryptocurrency index and associated hedging and trading vehicles, all designed to be consistent with modern portfolio theory. In an example, they create smart-beta-like cryptoasset indexes and suggest tracking them with a tradable ETF, and they show how to value options based on such indexes. Essentially, the authors provide a unified framework for applying financial theory to this new investment class, which consists primarily of risky assets–despite the commonly used label of currencies. The main message is that risk analysis, portfolio optimization, and derivative pricing should all be done within the same model. TOPICS:Currency, options, statistical methods, VAR and use of alternative risk measures of trading risk

The Non-Instrumental Aspect of Social Networks: Integrating the Intra-and Inter-personal Processes

Because social network is seen as a form of capital, social network, and social capital research is often closely related. As a result, social network research has largely focused on the instrumental aspect of social networks, such as how it is related to access to information, promotion, and innovation. The purpose of this symposium is to go beyond this instrumental view and show-case four papers that investigate the non-instrumental implication of social networks. Specifically, the symposium discusses how network composition influences unethical behavior, how the nature of ties impacts cognitive capability (e.g. face memory), how psychological experiences of power and status lead to different brokerage strategies, and how homophily has different reputation implications for men and women. In addition, the symposium integrates both the intrapersonal (e.g., norm perception, face memory, the psychological experiences of power and status) and interpersonal processes (e.g., reputation) associated with social networks, whereas the previous literature has largely focused on the interpersonal processes (e.g., access to information and resources, trust, interpersonal perception). Multicultural Network Increases Unethical Behavior By Enhancing Norm Looseness and Moral Relativism Presenter: Jiyin Cao; Stony Brook U.-State U. of New York Presenter: Siyu Yu; New York U. Face Memory and Networks Presenter: Daniel Z. Levin; Rutgers U. To Bridge or not to Bridge? How Power and Status Affect Brokerage Processes Presenter: Alessandro Iorio; Carnegie Mellon U. - Tepper School of Business Presenter: Catherine Shea; Carnegie Mellon U. - Tepper School of Business Gender and Rank Homophily in Friendship Networks and the Reputation for Leadership Presenter: Diane Kang; U. of Kentucky Presenter: Ajay Mehra; U. of Kentucky Presenter: Mohamed Hédi Charki; EDHEC Business School Presenter: Nabila Boukef; U. côte d'Azur, Skema, France Presenter: Theresa M. Floyd; U. of Montana Presenter: Stephen P. Borgatti; U. of Kentucky

Practical Applications of Can Commodity Price Uncertainty Indexes Be Improved by Capturing Media Information? The Case of Oil Price Uncertainty

Practical Applications In Can Commodity Price Uncertainty Indexes Be Improved by Capturing Media Information? The Case of Oil Price Uncertainty from the Spring 2020 issue of The Journal of Alternative Investments, authors Yosef Bonaparte (of the J.P. Morgan Center for Commodities at the University of Colorado-Denver), Frank J. Fabozzi (of the EDHEC Business School in Nice, France), and David Koslowsky (of the University of Wisconsin-Superior) present a new and improved method of predicting how much oil prices will fluctuate in the future. Traditional oil price volatility indexes, such as the OVX index, only use historical pricing data on oil options and reflect the market’s expectation about future price volatility. The authors find that the OVX by itself tends to underpredict actual oil price volatility, and note that the changes in oil price volatility have correlated with changes in the frequency of news media reports on oil price uncertainty. They therefore create a new index, the OPUX, that includes data on the frequency of news media reports and social media posts on oil price uncertainty. They find that OPUX predicts actual oil price volatility more accurately than OVX, and they recommend using indexes that incorporate the frequency of news media reports for purposes of predicting future price volatilities. TOPICS:Commodities, mutual funds/passive investing/indexing, information providers/credit ratings

INVITED EDITORIAL COMMENT

1. Marcos Lopez de Prado 1. is a senior managing director at Guggenheim Partners in New York, NY, and a research fellow at the Lawrence Berkeley National Laboratory in Berkeley, CA . (lopezdeprado{at}lbl.gov) 2. Frank J. Fabozzi 1. is a professor of finance at EDHEC Business School in

EDITORIAL COMMENTS

1. Francois Cocquemas 1. is The FMRC Research Scholar at Vanderbilt University in Nashville, TN and a PhD candidate at EDHEC Business School in Nice, France. (francois.cocquemas{at}owen.vanderbilt.edu) 2. Robert E. Whaley 1. is the Valere Blair Potter Professor of Management and

Practical Applications of Economics: An Empirical Science Capable of Forecasting Economic Events?

Despite the assumptions of modern macroeconomic theory, the financial markets and the way that money is generated and distributed have a huge influence on the economy. “The financial system and the process of money creation are a source of instability in the economy,” says Sergio Focardi , Visiting Professor of Quantitative Finance at Stony Brook University . Focardi discusses the article he co-wrote with Frank Fabozzi , Professor of Finance at EDHEC Business School and Editor of The Journal of Portfolio Management . They argue that investors need to understand the theoretical limitations of today’s economic theory and practice and why economic forecasts frequently do not capture reality. Given the limitations of the theory and the complexity of economies, asset managers need to be prudent and not ignore that crises will happen, Focardi and Fabozzi advise.

Practical Applications of Recent Trends in Equity Portfolio Construction Analytics

The growth of big data and advances in data analytics offers asset managers new challenges-and opportunities. Affordable cloud computing services and software tools are now widely available, allowing managers the ability to accessand analyze large data sets, which can be used to more effectively create, implement and manage smart beta and other portfolio optimization strategies. Recent Trends in Equity Portfolio Construction Analytics offers a state-of-the-art review of equity portfolio analytics and lays out the current developments in market analytics and asset allocation models. It was co-written by Dessislava Pachamanova, Associate Professor of Operations Research at Babson College, and Frank Fabozzi, Editor of JPM and Professor of Finance at the EDHEC Business School in Nice, France. TOPICS:Portfolio construction, equity portfolio management, in markets

Practical Applications of Can We Predict Stock Market Crashes?

In this <b><i>Practical Applications</i></b> report, <b>Sergio Focardi</b> and <b>Frank Fabozzi</b> discuss how they employ complexity economics as a foundation for their research published in <b><i>The Journal of Portfolio Management</i></b>’s <b><i>40th Anniversary Issue</i></b>. Focardi describes how he and Fabozzievaluate the creation and destruction of bubbles. Complexity economics is the proposition that the economy is a multi-agent system that is constantly in motion and reconstructing itself. Focardi and Fabozzi show how complexity economics can help assess the probability of major reversals of market trends and estimate the likelihood, timing and impact of a financial crisis.Focardi is a Visiting Professor of Finance at <b>Stony Brook University (New York)</b> and Fabozzi is Professor of Finance at <b>EDHEC Business School</b> and a member of the <b>EDHEC Risk Institute</b>.

The Impact of IFRS 8 on Geographical Segment Information

Journal of Business Finance & AccountingVolume 42, Issue 3-4 p. 273-309 Article The Impact of IFRS 8 on Geographical Segment Information Edith Leung, Corresponding Author Edith LeungAddress for correspondence: Edith Leung, Erasmus School of Economics, Erasmus University Rotterdam, PO Box 1738, 3000 DR, Netherlands. e-mail: leung@ese.eur.nlSearch for more papers by this authorArnt Verriest, Arnt Verriest The first author is from Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands. The second author is from EDHEC Business School, Roubaix, France. The authors are grateful to Peter Pope (Editor) and an anonymous referee for detailed and valuable comments. We also greatly appreciate comments from Daniel Bens, Willem Buijink, Peter Easton, Philip Joos, Maarten Pronk, Jeroen Suijs and Leo van der Tas and seminar participants at Tilburg University and the 2014 JBFA conference. (Paper received October 2014, revised version accepted November 2014)Search for more papers by this author Edith Leung, Corresponding Author Edith LeungAddress for correspondence: Edith Leung, Erasmus School of Economics, Erasmus University Rotterdam, PO Box 1738, 3000 DR, Netherlands. e-mail: leung@ese.eur.nlSearch for more papers by this authorArnt Verriest, Arnt Verriest The first author is from Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands. The second author is from EDHEC Business School, Roubaix, France. The authors are grateful to Peter Pope (Editor) and an anonymous referee for detailed and valuable comments. We also greatly appreciate comments from Daniel Bens, Willem Buijink, Peter Easton, Philip Joos, Maarten Pronk, Jeroen Suijs and Leo van der Tas and seminar participants at Tilburg University and the 2014 JBFA conference. (Paper received October 2014, revised version accepted November 2014)Search for more papers by this author First published: 27 November 2014 https://doi.org/10.1111/jbfa.12103Citations: 36 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume42, Issue3-4April/May 2015Pages 273-309 RelatedInformation

Practical Applications of Commercial Real Estate Risk Management with Derivatives

Commercial real estate is a huge and significant investment in many global institutional portfolios, but the use of derivatives in this market has been quite limited to date. That’s a pity. Portfolio managers who are willing to step forward and apply some of the derivatives tools currently available in commercial real estate will find immediate and practical benefits, say authors Frank Fabozzi, Professor of Finance at <b>EDHEC Business School</b> and Editor of <b><i>The Journal of Portfolio Management</i></b>, and <b>Kent Business School</b> professors Silvia Stanescu and Radu Tunaru. For this <b><i>Practical Applications</i></b> report, we spoke with <b>Greg MacKinnon</b>—Director of Research at the <b>Pension Real Estate Association</b> and co-editor of the <b><i>JPM Special Real Estate Issue</i></b> in which the article appeared. <b>TOPICS:</b>Real estate, CMBS and commercial mortgage loans, interest-rate and currency swaps

INVITED EDITORIAL COMMENT

1. Noël Amenc 1. is a professor of finance at EDHEC Business School, Ceo of Eri Scientific Beta, and the Director of EDHEC-Risk Institute In Nice, France . (noel.amenc{at}edhec-risk.com) 2. Lionel Martellini 1. is a professor of finance at EDHEC Business School, a senior scientific

Practical Applications of Book-to-Market and the Cross-Section of Expected Returns in International Stock Markets

A number of studies of the US equity market have attempted to explain the “value premium,” which refers to the higher average returns, over the long run, of value stocks purchased at low prices relative to their book value. But what part of the value premium (taking book-to-market as a proxy) has higher predictive power for estimating future returns, particularly in the international markets? <b>Turan G. Bali</b>, the Robert S. Parker Chair Professor of Business Administration in the <b>McDonough School of Business at Georgetown University</b> in Washington, DC, That’s pretty much restates the premise without adding anything to it. This <b><i>Practical Applications</i></b> report showcases their findings in <b><i>Book-to-Market and the Cross-Section of Expected Returns in International Stock Markets</i></b>, which appeared in the Winter 2013 issue of <b><i>The Journal of Portfolio Management</i></b>. Bali, <b>Nusret Cakici</b> and <b>Frank J. Fabozzi</b> extend the analytical method and findings of the 2008 Fama and French study for the US equity market to the six non-US G7 countries: The United Kingdom, Germany, France, Italy, Canada and Japan. Cakici is Professor of Finance in the <b>School of Business at Fordham University</b> in New York. Fabozzi is Professor of Finance at <b>EDHEC Business School</b> and is a member of the <b>EDHEC-Risk Institute</b> in Nice, France.

Trust and Distrust: Two Sides of the Same Coin?

While the study of trust is an enduring area of research, a nascent but growing body of work has focused on organizational distrust. This symposium is aimed at advancing research by encouraging discussion on the relationship between trust and distrust in organizations. The symposium is composed of four studies of organizational distrust (one theoretical and three empirical) that examine key conceptual and empirical challenges across a range of contexts, levels of analysis, and research methods. Discussant Roy Lewicki will integrate the papers, comment on the state of the research on organizational distrust, and propose directions for future research. Organizational Distrust: Conceptual Foundations and Empirical Approaches Presenter: Shiau-Ling Guo; Purdue U., West Lafayette Presenter: Fabrice Lumineau; Purdue U. Disentangling the Role of the Law in Providing a Context to Repair Interorganizational Trust Presenter: Mohamed-Hedi Charki; EDHEC Business School Presenter: Nabila Boukef Charki; U. of Paris Dauphine Exploring Distrust - A Study in the Current Turmoil of the British Public Sector Presenter: Rosalind H. Searle; Coventry Business School Presenter: Antoinette Weibel; Konstanz U. Presenter: Ann-Marie Nienaber; Coventry Business School Presenter: Alison Legood; Coventry Business School Distrust and Trust in Organizations: A Critical Reexamination Presenter: Sim B. Sitkin; Duke U. Presenter: James Denton Emery; Duke U.

Practical Applications of Choose Your Betas: Benchmarking Alternative Equity Index Strategies

Investors are struggling to get a handle on alternative equity index strategies, which are proliferating. These strategies are widely known as smart beta. The typical route of using prepackaged index strategies, which mix stock selection and diversification, is not the way to go, warn <b>Noël Amenc</b>, a Professor of Finance at EDHEC Business School in London and Director of the EDHEC-Risk Institute; <b>Felix Goltz</b>, Head of Applied Research at the EDHEC-Risk Institute; and <b>Ashish Lodh</b>, a Quantitative Analyst at ERI Scientific Beta. Conventional prepackaged index strategies expose investors to additional risk factors that they may not want to include in their portfolios. Instead, the trio recommends that investors adopt a two-step approach that meets their own risk parameters. In this Practical Applications report, Amenc outlines the two-step approach explored in <b><i>Choose Your Betas: Benchmarking Alternative Equity Index Strategies</i></b>, which was published in the Fall 2012 issue of <b><i>The Journal of Portfolio Management</i></b>.

Asset Allocation with Shadow Assets

1. Bernd Scherer 1. is a professor of finance at EDHEC Business School in London, UK and CIO at FTC Capital in Vienna, Austria. (bernd.scherer{at}edhec.edu) <!-- --> 1. To order reprints of this article, please contact Dewey Palmieri at dpalmieri{at}iijournals.com or 212-224-3675. The wealth of most investors contains both financial assets as well as nonfinancial assets. The author defines shadow assets as (mostly) nonfinancial and nontradable assets that are exogenous to the investor’s asset allocation decision, such as human capital, nonfinancial sovereign assets (e.g., underground oil reserves), the present value of future alumni contributions for university endowments, or the nonlisted family business for the client of a family office. Ignoring shadow assets is unfortunate, as it is the existence and nature of shadow assets that distinguishes private investors, university endowments, sovereign wealth funds, and family offices and hence leads to different demands for risky securities. Shadow assets influence the outcome of asset allocation decisions via their covariance with financial assets and their effect on total wealth. Adding shadow assets has two effects on investors: It makes investors more aggressive and can create demand for hedges. Investment advice in the client’s best interests needs to incorporate shadow assets as well as shadow liabilities, as optimal allocations differ considerably when shadow components are properly accounted for TOPICS: [Wealth management][1], [portfolio theory][2] [1]: https://www.pm-research.com/topic/wealth-management [2]: https://www.pm-research.com/topic/portfolio-theory