The positive relationship between money flows into investment products and their return performance is an important market indicator for market practitioners and academics. We study the impact that active versus passive investment styles have on this relationship. We further evaluate the effects of a passive approach in two crucial stages: portfolio selection and asset allocation. We find that while both elements weaken the relationship between flows and returns compared to actively managed products, the asset allocation component is more dominant.
The recent movement of oil prices has brought many forecasts about what is coming in the near future. This is natural since the plunge in prices has been dramatic after 2014 and oil is an essential source of energy worldwide. This paper examines the probabilities of spot price scenarios. We model prices through stochastic processes focusing on the Schwartz-Smith model. The calibration is based on the term structure of future prices. Since the conditional distribution is log-normal we define the probability of a certain value of the spot price in a given time horizon. We found that the recovery of crude oil prices will be slow in the next four years. Moreover, the scenario of prices under US$ 20/barrel has the same probability as being greater than US$ 50/barrel. The methodology has many applications, mainly for government planning and for oil companies in their capital budget decisions.
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