analyst forecasting errors additional evidence analyst forecasting errors are approximately as large as dreman and berry 1995 documented and an optimistic bias is evident for all years from 1985 through 1996 in contrast to their findings i show that analyst forecasting errors and bias have decreased over time moreover the optimistic bias in quarterly forecasts was absent for sp 2 firms with comparatively large amounts of market capitalization absolute value of earnings forecast and analyst following and 3 firms in certain industries

the effect of experience on security analyst underreaction abstract we examine if analysts more fully incorporate prior earnings and returns information in their current quarter forecasts as their experience following a firm increases we measure analyst firm specific forecasting experience as the number of prior quarters for which the analyst has issued an earnings forecast for the firm we find that analysts underreact to prior earnings information less as their experience increases suggesting one reason why analysts become more accurate with experience

having your cake and eating it too the before and after tax efficiencies of an extended equity mandate this article shows that extended mandates are especially effective for investors subject to taxes not only is the portfolio more efficiently positioned from a before tax perspective but it also offers significant after tax benefits from both increased loss harvesting and tax arbitrage between tax rates on long and short positions

comparisons and combinations of long and long short strategies market neutral long short strategies get their returns from alphas and short rebates long strategies get their returns from alpha and the market differing return and risk sources complicate their comparison partly because of the strong market referenced focus of conventional performance analysis compelling theoretical advantages of active return per unit of active risk suggest that long short strategies are better able to deliver excess return than are conventional institutional long strategies long short strategies even with tiny positive alphas are seen to improve investors efficient frontiers when added to a traditional t bill long portfolio mix mostly because their risk sources are uncorrelated surprisingly the improvement occurs even if long short strategies are sharpe ratio inferior to long strategies these results provide theoretical support for including long short strategies in most investors mix of assets

the efficiency gains of long short investing long short strategies have generated controversy and institutional interest for more than 10 years we analyzed the efficiency gains of long short investing where we defined efficiency as the information ratio of the implemented strategy the optimal portfolio relative to the intrinsic information ratio of the alphas the efficiency advantage of long short investing arises from the loosening of the surprisingly important long only constraint long short and long only managers need to understand the impact of this significant constraint long short implementations offer the most improvement over long only implementations when the universe of assets is large asset volatility is low and the strategy has high active risk the long only constraint induces biases particularly toward small stocks limits the manager s ability to act on upside information by not allowing short positions that could finance long positions and reduces the efficiency of traditional high risk long only strategies relative t

a test of lazear s theory of delayed payment contracts according to lazear workers and firms enter into long term implicit contracts that discourage shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts are less likely to occur in jobs in which it is comparatively simple to monitor worker effort this paper uses data from the national longitudinal survey and the dictionary of occupational titles to test that hypothesis in particular it tests whether jobs that involve repetitive tasks tend to be characterized by an absence of pensions mandatory retirement long job tenures and high wages for older workers

are those paid more really more productive the case of experience this study uses computerized personnel microdata on the white male managerial and professional employees at a major u s corporation to address the following question can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time our answer to this question based on both cross sectional and longitudinal information is that performance plays a substantially smaller role in explaining cross sectional experience earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience earnings profile this response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates relative productivity in the year of assessment we present a great deal of evidence which strongly supports this assumption

determinants of portfolio performance ii an update 1991 determinants of portfolio performance ii an update financial analysts journal vol 47 no 3 pp 40 48

earnings skewness and analyst forecast bias abstract we argue that if analysts objective is to provide the most accurate forecast by minimizing the mean absolute forecast error then the optimal forecast is the median instead of the mean earnings forecast bias is observed when the median is different from the mean in a skewed earnings distribution thus part of the observed analyst forecast bias could be a result of analysts efforts to improve forecast accuracy when the earnings distribution is skewed we find that earnings skewness is significantly related to analyst forecast bias we also provide evidence that the market adjusts for part of the skewness induced bias

whisper forecasts of quarterly earnings per share abstract we compare first call analyst forecasts of earnings to unofficial forecasts commonly referred to as whispers our analysis indicates that whispers are more accurate proxies for market expectations of earnings than are first call forecasts consistent with the claim in the professional press that whispers are increasingly becoming the true market expectation of earnings further trading strategies based on the relation between whisper and first call forecasts earn abnormal returns this suggests that whispers contain information not contained in first call forecasts and that at least part of this information is impounded in price prior to the earnings release

analyst forecasting errors and their implications for security analysis a comparison of 66 100 consensus estimates of wall street analysts with reported earnings for a large sample of nyse amex and otc companies demonstrates that their forecasts differ significantly from actual reported earnings a minority of estimates fall within a range around reported earnings considered acceptable to many professional investors the error rates are not meaningfully affected by the business cycle or industry groupings the average error also appears to be increasing over time these findings question the use of finely calibrated earnings forecasts that are integral to the most common valuation models and indirectly question the valuation methods themselves

leverage aversion and portfolio optimality portfolio volatility is the only source of risk in mean variance optimality but it fails to capture all the risks faced by leveraged portfolios these risks include the possibility of margin calls and forced liquidations at adverse prices and losses beyond the capital invested to recognize these risks the authors incorporated leverage aversion into the optimization process and examined the effects of volatility and leverage aversion on optimal long short portfolios

evaluating the impact of inequality constraints and parameter uncertainty on optimal portfolio choice we present new analytical results for the impact of portfolio weight constraints on an investor s optimal portfolio when parameter uncertainty is taken into account while it is well known that parameter uncertainty and imposing weight constraints results in reduced certainty equivalent returns in the general case there are no analytical results in a special case commonly used in the funds management literature we derive analytical expression for the certainty equivalent loss that does not depend on the risk aversion parameter we illustrate our theoretical results using hedge fund data from the perspective of a fund of fund manager our contribution is to formalize the framework to investigate this problem as well as providing tractable analytical solutions that can be implemented using either simulated or asset manager returns

loss function assumptions in rational expectations tests on financial analysts earnings forecasts abstract prior research concludes that financial analysts do not process public information efficiently in generating their earnings forecasts the ordinary least squares ols regression based tests used in prior studies assume implicitly that analysts face a quadratic loss function in contrast we argue that analysts likely face a linear loss function and hence try to minimize their absolute forecast errors we conduct and compare rational expectations tests using these two alternative loss functions we reproduce most prior findings of forecast inefficiency with ols regressions but find virtually no evidence of forecast inefficiency with least absolute deviation regressions where we explicitly assume a linear loss function

portfolio optimization with factors scenarios and realistic short positions this paper presents fast algorithms for calculating mean variance efficient frontiers when the investor can sell securities short as well as buy long and when a factor and or scenario model of covariance is assumed currently fast algorithms for factor scenario or mixed factor and scenario models exist but except for a special case of the results reported here apply only to portfolios of long positions factor and scenario models are used widely in applied portfolio analysis and short sales have been used increasingly as part of large institutional portfolios generally the critical line algorithm cla traces out mean variance efficient sets when the investor s choice is subject to any system of linear equality or inequality constraints versions of cla that take advantage of factor and or scenario models of covariance gain speed by greatly simplifying the equations for segments of the efficient set these same algorithms can be used unchanged for the long short portfolio selection problem provided a certain condition on the constraint set holds this condition usually holds in practice

capital asset prices with and without negative holdings prize lecture to the memory of alfred nobel december 7 1990 this abstract was borrowed from another version of this item

fundamentals of efficient factor investing corrected may 2017 combining long only constrained factor subportfolios is generally not a mean variance efficient way to capture expected factor returns for example a combination of four fully invested factor subportfolios low beta small size value and momentum captures less than half e g 40 of the potential improvement over the market portfolio s sharpe ratio in contrast a long only portfolio of individual securities using the same risk model and return forecasts captures most e g 80 of the potential improvement we adapt traditional portfolio theory to more recently popularized factor based investing and simulate optimal combinations of factor and security portfolios using the largest 1 000 common stocks in the us equity market from 1968 to 2015

60 years of portfolio optimization practical challenges and current trends abstract the concepts of portfolio optimization and diversification have been instrumental in the development and understanding of financial markets and financial decision making in light of the 60 year anniversary of harry markowitz s paper portfolio selection we review some of the approaches developed to address the challenges encountered when using portfolio optimization in practice including the inclusion of transaction costs portfolio management constraints and the sensitivity to the estimates of expected returns and covariances in addition we selectively highlight some of the new trends and developments in the area such as diversification methods risk parity portfolios the mixing of different sources of alpha and practical multi period portfolio optimization

trimability and fast optimization of long short portfolios optimization of long short portfolios through the use of fast algorithms takes advantage of models of covariance to simplify the equations that determine optimality fast algorithms exist for widely applied factor and scenario analysis for long only portfolios to allow their use in factor and scenario analysis for long short portfolios the concept of trimability is introduced the conclusion is that the same fast algorithms that were designed for long only portfolios can be used virtually unchanged for long short portfolio optimization provided the portfolio is trimable which usually holds in practice

the rewards to meeting or beating earnings expectations abstract this paper finds that firms that meet or beat current analysts earnings expectations mbe enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations further such a premium to mbe although somewhat smaller exists in the cases where mbe is likely to have been achieved through earnings or expectations management the findings also indicate that the premium to mbe is a leading indicator of future performance this premium and its predictive ability are only marginally affected by whether the mbe is genuine or the result of earnings or expectations management

the public value of improving a weather forecasting system in korea a choice experiment study abstractthe korean government plans to improve the quality of its weather forecasting system in order to increase its public utility the benefits arising from the implementation of this plan shoul

the myth of the absolute return investor the notion of absolute return investing is spreading like wildfire many people believe that superior returns can be achieved by managers with strong views and little regard for benchmarks this article attempts to define absolute return investing and figure out whether it exists the conclusion is that all investment returns consist of a beta part representing the correlation of the active portfolio with one or more market benchmarks or normal portfolios and an active alpha part thus all investing is relative return investing in which active returns are earned relative to an appropriate benchmark or mix of benchmarks

in defense of portfolio optimization what if we can forecast author response we thank richard o michaud david n esch and robert o michaud for their interest in our paper in their letter they suggest that our results are inconsistent with the canonical literature beca

has japan s long term employment practice survived developments since the 1990s japan s traditional long term employment practice loosely termed lifetime employment once attracted much attention but its fortunes have not been tracked since the 1990s the authors use micro data from the japanese government s basic survey on wage structure to estimate permanent full time workers tenure patterns in the years during and following japan s decade long recession mean tenure they find grew for both genders between 1990 and 2003 the main explanation for this trend was a changing relationship between tenure and the attributes of workers and firms rather than changes in the attributes themselves although the importance of the latter increased for some women beyond the tendency at the mean the authors find substantial variation notably workers who had gained employment protection under the traditional system mostly in large firms saw larger gains in mean tenure than did other workers this divergence the authors suggest could eventually exacerbate lifetime income inequality in

consensus expectations and international equity returns numerous studies of u s markets have shown that stock selection models have been able to isolate securities that earn returns above those predicted by a simple market model models examining the relation between analyst expectations and returns have been particularly useful unexpected earnings changes in analysts earnings per share forecasts the number of analysts revising their forecasts all these measures have been found to be useful in predicting abnormal returns in u s equity markets at least two of these measures changes in analysts eps forecasts and the number of analysts changing their forecasts are also related to abnormal returns in several international markets

a comparison of stated preference methods for environmental valuation this paper presents an empirical comparison of contingent valuation cvm and choice experiments which are used to value environmental quality changes both of these methods require individuals to state their preferences for environmental qualities however choice experiments differ from cvm in that environmental attributes are varied in an experimental design which requires respondents to make repeated choices between bundles of attributes the empirical application involved the effect of environmental quality changes arising from forest management practices on recreational moose hunting values significant differences were found between the values derived from the two methods however detailed examination of the implied choice behaviour suggested that respondents ignored substitute recreation areas in the cvm question restricting the choice experiment model to consider only the one site where quality was varied resulted in welfare estimates similar to the cvm model this highlights the importance of substitutes in environmental valuation and suggests that choice experiments may be more appropriate than cvm in some cases

seniority wages and productivity a turbulent decade why does a worker s wage tend to grow with seniority in the firm and what does this have to do with productivity two decades ago neoclassical labor economists thought that the theory of human capital provided a good answer to this question the last decade has however been one of puzzles and doubt at this point few would give an unambiguous answer and much hinges on the answer an attractive feature of human capital theory is that it yields a consistent and coherent explanation for several aspects of the employer employee relationship for example seniority systems layoff policies that vary with skill and the relationship between tenure and turnover can be explained in terms of human capital the fact that these explanations are connected leads however to something like a domino effect doubts about one cast doubt on the others if the human capital explanation for the wage seniority relationship is flawed then human capital explanations for other phenomena may require reevaluation in addition an important body of empirical research is built around the assumption that at any point in time a person s wage indicates the person s productivity included here is the extensive literature on the human capital earnings function as well as work on labor demand market discrimination and compensating differentials that assumption has become controversial in recent years in part because implicit contract theories predict that compensation will be redistributed over the period of the contract if a person s spot wage has little to do with spot productivity but rather is an instrument of a complex insurance or deferred compensation scheme then a reassessment of the empirical research may be necessary

portfolio frontiers with restrictions to tracking error volatility and value at risk abstract asset managers are often given the task of restricting their activity by keeping both the value at risk var and the tracking error volatility tev under control however these constraints may be impossible to satisfy simultaneously because var is independent of the benchmark portfolio the management of these restrictions is likely to affect portfolio performance and produces a wide variety of scenarios in the risk return space the aim of this paper is to analyse various interactions between portfolio frontiers when risk managers impose joint restrictions upon tev and var specifically we provide analytical solutions for all the intersections and we propose simple numerical methods when such solutions are not available finally we introduce a new portfolio frontier

how variation in signal quality affects performance the information coefficient ic the correlation between forecasted and realized return is a popular measure of signal quality as shown in this article variation in ic is an important source of active risk and ic variation has an effect on optimal portfolio structure contrary to popular belief the ability to take short positions in equity portfolios does not necessarily lead to superior performance managers who can maintain a stable ic over time will benefit from short extensions but managers who have an unstable ic may see their performance deteriorate from increased short positions

employment tenure and earnings profiles in japan and the united states comments the relationship between job tenure and annual earnings in japan has received considerable attention from social scientists examining employment contracts and the japanese compensation system in their widely cited article masanori hashimoto and john raisian 1985 using data for 1980 showed that japanese men have greater job tenure than comparable workers in the united states and that the earnings of japanese men rise more rapidly with increased tenure they found that an additional year of tenure increases earnings in both small and large firms in japan more than does an additional year of general market experience their results for the united states indicate that general market experience increases earnings more than an additional year of job tenure the 1970 s and 1980 s were a period of substantial change in japanese labor markets due to the rapid aging of the population and the restructuring of the economy following the oil crisis the present analysis extends the work of hashimoto and raisian by estimating earnings equations for japanese men for the years 1971 1976 1981 and 1986 specifically we wish to investigate whether hashimoto and raisian s findings have been stable over time or whether changes in the labor market have altered the importance of tenure relative to total labor market experience in the japanese labor market i changes in the labor market

expanding contingent value sample estimates to aggregate benefit estimates current practices and proposed solutions a mail survey was administered to a panel of colorado consumers to obtain estimates of willingness to pay wtp for preserving union park detailed socioeconomic data for all surveyed individuals was available a priori we develop and employ the multiple

the tax benefits of separating alpha from beta long only active investment strategies have an inherent flaw investors pay capital gains taxes on market related gains as well as on the alpha created by separating alpha and beta taxes can be r

on the optimality of long short strategies we consider the optimality of portfolios not subject to short selling constraints and derive conditions that a universe of securities must satisfy for an optimal active portfolio to be dollar neutr

multichoice logit modeling incomplete preference rankings of classical concerts in this article we develop an econometric model to analyze data on incomplete information on preferences the available information consists of groups of alternatives that are preferred to other groups of alternatives only for the most preferred group is a full ranking observed the resulting model is estimated on data concerning preferences on classical concerts

delayed payment contracts and a firm s propensity to hire older workers there are jobs for which firms employ older workers but tend not to hire new older workers this may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts can introduce a form of fixed costs into the employment relationship much as with hiring and training costs these fixed costs lead firms to hire primarily young long term workers while firms employ older workers workers who are serving out the last years of their contract they tend not to hire them this paper presents empirical evidence that is consistent with this argument

20 myths about long short popular conceptions of long short investing are distorted by a number of myths many of which appear to result from viewing long short from a conventional investment perspective long short portfolios differ fundamentally from long only portfolios in construction in the measurement of their risk and return and in their implementation costs furthermore long short portfolios allow greater flexibility in security selection asset allocation and overall plan structure

illiquidity position limits and optimal investment for mutual funds we study the optimal trading strategy of mutual funds that face both position limits and differential illiquidity we provide explicit characterization of the optimal trading strategy and conduct an extensive analytical and numerical analysis of the optimal trading strategy we show that the optimal trading boundaries are increasing in both the lower and the upper position limits we find that position limits can affect current trading strategy even when they are not currently binding and other seemingly intuitive trading strategies can be costly we also examine the optimal choice of position limits

individual analyst characteristics and forecast error the purpose of the study reported here was to investigate how characteristics of analysts affect their forecast errors previous research has found positive serial correlation in forecast errors which can be attributed to underreaction to new information especially to bad news the relationship between an analyst s behavior and that analyst s characteristics is not clear however because most previous work was based solely on consensus estimates by using detailed historical data i found a stronger serial correlation among the herd to consensus analysts that is the group with a small average distance between their forecasts and the consensus forecast than among other analysts moreover average distance to consensus itself has a positive serial correlation and it may be attributed to an analyst s personality optimistic or pessimistic i found strong positive serial correlation in the average distance to consensus among the herd to consensus analysts these results show that herd to consensus ana

the valuation of the ijmeer nature reserve using conjoint analysis this paper describes an application of conjointanalysis the subject of the valuation study isthe ijmeer nature reserve which will be partlydestroyed when the new residential area ijburgis built this paper addresses the followingquestion what is the extent of the loss ofgreen and recreational values in this study the conjoint analysis consists of threedifferent analyses based on a three piecevaluation question the respondents are askedto subsequently rank mark and indicate theacceptability of a set of six cards

portfolio constraints and the fundamental law of active management active portfolio management is typically conducted within constraints that do not allow managers to fully exploit their ability to forecast returns constraints on short positions and turnover for example are fairly common and materially restrictive other constraints such as market capitalization and value growth neutrality with respect to the benchmark or economic sector constraints can further restrict an active portfolio s composition we derive ex ante and ex post correlation relationships that facilitate the performance analysis of constrained portfolios the ex ante relationship is a generalized version of a previously developed fundamental law of active management and provides an important strategic perspective on the potential for active management to add value the ex post correlation relationship represents a practical decomposition of performance into the success of the return prediction process and the noise associated with portfolio constraints we verify the accuracy of these relati

conflicts of interest and analyst behavior evidence from recent changes in regulation regulation fd made analysts less dependent on insider information and diminished analysts motives to inflate their forecasts the global research analyst settlement had an even bigger impact on analyst behavior the mean forecast bias declined significantly whereas the median forecast bias essentially disappeared these results are similar for all analysts

performance attribution and the fundamental law the reported study operationalized the fundamental law of active management in the context of a factor based performance attribution system the system incorporates factor payoffs in the linear regression framework that many portfolio managers and external reviewers use to judge what is being rewarded in the market the study indicates that parameters of the fundamental law can be used to approximate and interpret the results of the regression based performance attribution system the procedure is illustrated by the use of security holdings returns and factor exposure data for two portfolios benchmarked to the s p 500 index for april 1995 to march 2004

global equity fund performance an attribution approach using data on portfolio holdings we examine the performance of 143 global equity funds over 2002 2012 we find that the average global equity manager outperforms the benchmark by 1 2 1 4 a year before fees attribution analysis reveals that the prime source of excess return is selecting stocks that beat their local markets modest contributions come from country selection most notably in emerging markets whereas currency effects are mixed our findings support considering active management in global equity markets at least for institutional accounts that pay annual fees of less than 1

a note on market neutral portfolio selection abstract long short equity strategies allow investors to benefit potentially from both undervalued and overvalued securities the present study develops a normative portfolio model under the practical conditions that a market neutral strategy entails the offsetting long and short equity holdings are established jointly and without any constraints by the underlying market index while accurately capturing institutional procedures for short selling the model contains the analytical and economic properties as required for a ranking approach to filter out any undesirable securities under consideration in view of its practical features the analysis should be of interest to practitioners for assisting their long short investment decisions

the effect of mandatory retirement on earnings profiles in japan using data from the japanese basic survey on wage structure for 1981 and 1986 the authors estimate the effect of the age of mandatory retirement on the rate of growth of earnings with job tenure i

optimizing tracking error constrained portfolios active portfolios subject to tracking error te constraints are the typical setup for active managers tasked with outperforming a benchmark the risk and return relationship of such constrained po

retracted relationship incentives and the optimistic pessimistic pattern in analysts forecasts we examine whether analysts incentives to maintain good relationships with management contribute to the optimistic pessimistic within period time trend in analysts forecasts in our experiments 81 experienced sell side analysts from two brokerage firms predict earnings based on historical information and management guidance analysts forecasts exhibit an optimistic pessimistic pattern across the two timing conditions early and late in the quarter and the effect is significantly stronger when the analysts have a good relationship with management than when their only incentive is to be accurate debriefing results indicate that analysts are aware of this pattern of forecasts and believe that this benefits their future relationships with management and with brokerage clients the analysts most frequently cite favored conference call participation and information access when describing benefits from maintaining good relationships with management our results suggest the following the optimistic pessimistic pattern in forecasts is in part a conscious response to relationship incentives information access is perceived to be a major benefit of management relationships and recent regulatory changes may have lessened but have not eliminated this conflict of interest source

on the strategic behavior of large investors a mean variance portfolio approach abstract one key assumption of markowitz s model is that all traders act as price takers in this paper we extend this mean variance approach in a setting where large investors can move prices instead of having an individual optimization problem we find the investors nash equilibrium and redefine the efficient frontier in this new framework we also develop a simplified application of the general model with two assets and two investors to shed light on the potential strategic behavior of large and atomic investors our findings validate the claim that large investors enhance their portfolio performance in relation to perfect market conditions besides we show under which conditions atomic investors can benefit in relation to the standard setting even if they have not total influence on their eventual performance the two investors two assets setting allows us to quantify performance and do sensitivity analysis regarding investors market power risk tolerance and price elasticity of demand finally for a group of well known etfs we empirically show how price variations change depending on the volume traded we also explain how to set up and use our model with real market data

analyst forecasting errors and their implications for security analysis an alternative perspective dreman and berry in the may june 1995 financial analysts journal offered a perspective on analyst earnings forecast errors and their implications for security analysis among other arguments they contended that the errors are too large to be reliably used by investors the forecasts are less accurate than forecasts by time series models the errors are increasing over time the analysts forecasts are too optimistic and the investment community relies too heavily on analyst forecasts this article provides an alternative perspective on these issues the argument is that analysts forecast errors are within 3 percent of an appropriate benchmark namely stock price that their forecasts generally are significantly more accurate than forecasts by naive or sophisticated time series models that analyst forecast errors have not been increasing over time that analysts have been too pessimistic in recent years and that the investment community by placing too much weight on forecasts made by time series

do analysts sacrifice forecast accuracy for informativeness analysts deviate from management guidance to correct for perceived earnings management although the deviations reduce forecast accuracy they improve forecast informativeness bringing the forecasts closer to the unmanaged earnings and reducing accruals mispricing an implicit assumption in the literature is that more accurate analyst forecasts i e estimates that are closer to the reported earnings are better for investors and that analysts objective is to forecast the reported managed earnings accurately our analysis suggests that this is not necessarily the case and that an inaccurate forecast can actually be more informative than an accurate one prior studies on analysts deviations from management guidance focus on analysts incentives to issue estimates that managers can beat these studies implicitly assume that analysts side with management against the interests of their clients our analysis indicates that analysts could also deviate from management guidance to provide useful valuation

on back testing zero investment strategies zero investment strategies typically involve forming a long portfolio in one set of securities and a short portfolio in another with the two identified by the use of some trading rule when back testing such strategies the ex post difference in their abnormal returns represents an unbiased estimate of their economic profitability in perfect markets and thus serves as an indication of market efficiency however regulation t s short selling constraints are a potentially significant imperfection facing retail and institutional investors after development of a procedure that recognizes these constraints in measuring returns the impact of these constraints on economic profitability is analyzed copyright 2000 by university of chicago press