November 19, 2010 12:35 pm

Something for the weekend

Ponzi schemes and other hedge fund frauds could be more easily identified, if research by a Vanderbilt professor is adopted

Nicolas Bollen a professor of finance at Owen Graduate School of Management at Vanderbilt University has demonstrated through research with Veronika Pool, assistant professor of finance at the Kelley School of Business at Indiana University that it may be possible to predict hedge fund fraud.

The pair have demonstrated that by monitoring funds and running a syntactic analysis they can identify “red flags” in some funds ie those funds which may warrant a much deeper investigation.

“The approach we’re validating for hedge fund monitoring is in some ways similar to the one used by the IRS to determine which tax returns to audit,” says Prof Bollen.

Looking at hedge funds in this way he adds is a fairly low-cost screening method which in turn means that financial regulation can “work without being prohibitively expensive”.

The writers have discovered several indicators for monitoring hedge fund fraud, including artificially smooth returns which could be the result of hedge fund managers deliberately smoothing returns by reporting moving averages and reporting losses differently to gains.

Prof Bollen says that this approach - of flagging up potential issues - could be used to deter fraud in a much wider range of investments.

“The flags may be different but the basic strategy is the same,” he says. This method can also be used he adds as a means of protecting client portfolios.

The paper was published earlier this month in Vanderbilt Business Intelligence.

Perceptions of “green” or eco fashion as being a must have item, or deeply unglamorous would appear to vary, depending whether you live in North America or Europe.

Research by Marie-Cécile Cervellon, Sandrine Ricard and Helena Hjerth, researchers at the International University of Monaco and Lindsey Carey, a researcher at Glasgow Caledonian University, has examined consumer interest and motivation for buying organic fashion.

The researchers discovered that North American consumers are far more inclined to consider green fashion favourably, perceiving eco-fashion consumers as “young, trendy and self confident”. In part they suggest, this is because eco-clothing brands have been launched by celebrities.

In contrast, their European counterparts view green fashion as unglamorous, worn by wealthy but unsophisticated middle aged women.

The writers state that the concept of green fashion is not clearly understood by the majority of respondents.

“There is a need to better inform consumers about the nature of organic fashion and to continue ‘glamorising’ both the communication and the products,.” says Ms Ricard. The writers suggest that if green fashion is to become a viable consumer option in Europe it has to be more attractive to younger consumers.

The paper, Green in Fashion, was presented at the International Marketing Trends Conference earlier this year.

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