K. Geert Rouwenhorst
Professor of Finance & Deputy Director
of the International Center for Finance
 
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Geert Rouwenhorst specializes in international finance, asset pricing, and business cycles. His research examines the tradeoff between risk and return in international developed and emerging stock markets, strategies for portfolio selection, and the behavior of financial markets over the business cycle, Current work focuses on issues related to mutual fund settlement and global real estate markets.


Current Projects:

In my 1999 Financial Analyst Journal article I reported that country selection continued to be more important than sector selection in Europe. Using data through the August of 2000, and using the new MSCI industry assignments, I find that industry effects are at least of similar magnitude as country effects.




Many US mutual funds ignore value relevant information when calculating daily Net Asset Values. The problem is particularly severe for funds that invest in foreign markets. The graph shows the cumulative return to a simple day-trading strategy that switches in and out of foreign stock funds based on publicly available information. Joint research with William Goetzmann and Zoran Ivkovich discusses methods for improving the informational efficiency of the NAV computation.



History of Financial Innovation:

What are the origins of financial contracts as they exist today?

1. The Origins The Anglo-Saxon Origins Mutual Funds are often traced back to the Foreign and Colonial Government Trust of 1868. Almost a century earlier Abraham van Ketwich founded two multiple unit investment trusts, Eendracht Maakt Magt (1774), and Concordia Res Parvae Crescunt (1779). The latter existed for 114 years before it was liquidated in 1893.

2. 18th century International Investment Funds and the Debt of the United States. French and Dutch investors were the major foreign financiers of the American revolution. In addition to international loans, foreign investors also invested in the domestic debt of the United States through investment trusts that were formed to speculate on the future credit of the country. Depicted is a Treasury certificate made out to Daniel Crommelin and Sons - a Dutch merchant bank that organized a number of these trusts.

3. Depository Receipts and investing in 19th century Russia. Stock substitutions were popular among small investors, because they enhanced liquidity and saved on transactions cost associated with investing in foreign markets. Investment banks would purchase securities in the foreign market and issue certificates in the domestic market that were fully backed by the foreign assets. Any interest or dividends on the foreign securities would simply be passed on to the certificate holders. Pictured are an 1854 inscription in the book of public debt in the name of Hope and Co, Ketwich and Voomberg, and Widow W. Borski - an association of Dutch merchant banks specializing in stock substitutions - and an 1857 depository receipt issued in the Dutch market.

4. 18th century Stock Options. The Keyserliche Indische Companie was a competitor of the Dutch East India Company. Various brokers in Antwerpen traded call options on Keyserliche shares during the beginning of the 18th century. The contract had all the features of modern call options: a right to buy a share at a fixed price on or before a prespecified date. For this right the buyer of the option paid the seller a premium. (Click on the image to the right to view a picture of the original contract. Click here to view a translation of the contract.)


If you have suggestions for additions to my list of financial innovations - please email me