John Hull, Andrew W. Lo and Roger M. Stein were named winners of the $10,000 Harry M. Markowitz Award for their paper, "Funding Long Shots."
The award was announced Tuesday by the Journal of Investment Management and New Frontier Advisors in a joint statement.
The paper explores the increasing difficulty in funding long shots, which the authors call investment-related projects with "low probabilities of success, significant delays before cash flows are realized, large initial investments and large payoffs — relative to up-front payments — in the unlikely event of success," according to the statement.
The paper says while undertaking these kinds of investments is crucial to battling societal challenges, hedge funds, venture capital funds and other high-risk investment vehicles currently struggle to finance them. Pooling these investments into a single portfolio financed by securitized debt is one possible solution posed by the paper.
Mr. Hull is professor of derivatives and risk management at the University of Toronto's Rotman School of Management; Mr. Lo, the Charles E. and Susan T. Harris professor of finance and director of the laboratory for financial engineering at the Massachusetts Institute of Technology's Sloan School of Management; and Mr. Stein, adjunct professor at New York University's Stern School of Business.
The awards, which recognize the impact of Mr. Markowitz's work as a financial economist and mathematician in both theoretical and applied finance, are sponsored by New Frontier and the JOIM. Winners were selected by a panel of Nobel laureates in economics.
Also given special distinction awards were Ananth Madhavan and Aleksander Sobczyk for their paper, "Does Trading By ETF and Mutual Fund Investors Hurt Performance? Evidence From Time and Dollar-Weighted Returns," and Thomas M. Idzorek and James X. Xiong for their paper, "Quantifying the Skewness Loss of Diversification."
