This monograph presents the work of three groups of experts addressing the use of single-factor models to explain security returns: Edwin Burmeister, Richard Roll, and Stephen Ross explain the basics of Arbitrage Pricing Theory and discuss the macroeconomic forces that are the underlying sources of risk; Edwin J. Elton and Martin J. Gruber present multi-index models and provide guidance on their reliability and usefulness; and Richard C. Grinold and Ronald N. Kahn address multiple-factor models for portfolio risk.

A Practitioner's Guide to Factor Models

Stephen A. Ross

Edwin Burmeister

Richard Roll

Edwin J. Elton

Martin J. Gruber

Richard Grinold and Ronald N. Kahn

Business & Money

Research Foundation of CFA Institute

Finding a successful solution to the problem of investing in a pension fund, especially one created by a defined benefit plan, depends on reaching an understanding of the structure of its commitments. This book facilitates the process of understanding fund characteristics.

Understanding Corporate Pension Plans

Edmund A. Mennis

Chester D. Clark

Investment flows into emerging markets are material: According to the World Bank, during 2000, portfolio and foreign direct investment flows into the approximately 30 markets classified as “emerging” topped $250 billion. In this Research Foundation monograph, the authors summarize the numerous considerations facing investors in these markets and recommend appropriate responses to guide investors in particular circumstances.

Investing in Emerging Markets

Wei, Li

Robert F. Bruner

Robert M. Conroy

Elizabeth F. O'Halloran

Miguel Palacios Lleras

Stock options represent a significant claim against companiesthat should be reflected in their valuations, but valuing employee stock options is complex. Fortunately, in this Research Foundation of CFA Institute monograph, Mark Lang presents an excellent framework for valuing these claims by balancing the obligation of the company to fund outstanding options and future grants with the benefits arising from the incentive effects of options.

Employee Stock Options and Equity Valuation

Mark Lang

Understanding the quality of earnings is an essential part of processing and interpreting information. A high-quality earnings number will (1) reflect current operating performance, (2) be a good indicator of future operating performance, (3) and fairly annuitize the intrinsic value of the company. The authors of this Research Foundation of CFA Institute monograph discuss the types of earnings management techniques companies use, when earnings management is most likely to occur, and the role of directors, auditors, institutional investors, and analysts in monitoring management and improving earnings quality. They also examine how investors respond to earnings and highlight trading strategies based on earnings quality.

Earnings Quality

Patricia M. Dechow

Catherine M. Schrand

Many investors perceive, based primarily on anecdotal evidence, that analysts do not act independently. What the authors of this Research Foundation monograph provide is a scientific exploration of the evidence on the nature and causes of security analyst conflicts. This comprehensive and insightful analysis should help investors evaluate the integrity of sell-side research and help regulators adopt wise policies.

Security Analyst Independence

Jennifer Francis

Qi Chen

Donna R. Philbrick

Richard H. Willis

Conditional performance evaluation compares a fund's returns with the returns of a dynamic strategy that matches the fund's time-varying risk exposures. In this Reserach Foundation Monograph, the authors revisit the main empirical results of the conditional performance evaluation literature using a large, updated sample of mutual funds and expand and refine the treatment of conditioning information.

Conditional Performace Evaluation, Revisited

Wayne E. Ferson

Meijun Qian

At its core, the goal of a company is to create value. And corporate governance should work to ensure that this value is created. This monograph describes what a value-creating corporate governance system should be like, establishes the standards that allow financial analysts to study a governance system, and suggests how analysts can analyze a company's corporate governance system.

Corporate Governance and Value Creation

Jean-Paul Page

Several recent empirical studies have argued that the standard methods of assessing hedge fund risks and rewards may be misleading. This monograph reviews the empirical facts surrounding hedge fund investments and proposes several new quantitative models for modeling hedge fund return, risk exposures, and associsted performance statistics.

The Dynamics of the Hedge Fund Industry

Andrew W. Lo

This monograph explores central issues surrounding the use of tax-deferred investment accounts as a means of accumulating wealth and presents a useful framework, grounded in basic time-value-of-money concepts, that can be readily implemented by investment professionals (U.S. as well as non-U.S. based) in various tax environments (current as well as future).

Tax-Advantaged Savings Accounts and Tax-Efficient Wealth Accumulation

Stephen M. Horan

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Books by Research Foundation of CFA Institute