Aggressive Investment Research Articles

Ambiguity of tone in annual reports and bank risk taking

AbstractIn this paper, we examine whether abnormal ambiguity of tone in banks' 10‐K filings is associated with banks' risk‐taking behaviour. We estimate abnormal ambiguous tone using residual of a tone model that disentangles the obfuscation component from the information component in the ambiguous tone. We find that banks that intentionally use more ambiguous tone in 10‐K filings exhibit higher risk taking subsequently, consistent with the argument that an intentional ambiguous tone adds to the opacity of financial statements, which potentially masks managerial risk‐taking activities and curbs market discipline from external stakeholders. Our results remain robust to alternative model specifications and sensitivity tests which address potential endogeneity concerns. Furthermore, banks with higher abnormal ambiguous tone are associated with more aggressive investment decisions. Together, our findings suggest that abnormal ambiguous tone in annual reports is informative of banks' risk‐taking activities.

A System Dynamics Supply Chain Analysis for the Sustainability Transition of European Rolled Aluminum Products

This research presents a system dynamics model to study the interaction among demand and supply evolutions, government regulations, sustainable adoption trends, investments in different decarbonization technologies, and environmental requirements for the European Aluminum Rolled Product Supply Chain (ARPSC). It allows stakeholders to assess the quantitative impact of investing in decarbonization technologies on supply chain sustainability. Investing in decarbonization technologies reduces greenhouse gas (GHG) emissions. The most substantial GHG emission reductions can be achieved if upstream ARPSC actors invest according to an aggressive investment strategy between 2031 and 2040. However, even with an aggressive investment strategy, investing in decarbonization technologies alone is likely to be insufficient to achieve the European Green Deal goals. Furthermore, barriers to investment in decarbonization technologies and a low rate of progress in doubling the European Union’s circularity rate may put extra stress on achieving the European Green Deal goals for the European ARPSC. Instead, ARPSC actors will additionally need to optimize the recycling of aluminum rolled products and adopt strategies for resource sufficiency, e.g., by sharing cars and using packaging multiple times.

Independent directors’ connectedness and bank risk-taking

This study examines the role of independent directors’ network centrality in bank risk-taking. Following the shareholder-incentive hypothesis and social-network theory, we predict and find that independent directors’ connectedness is positively associated with bank risk-taking. The results hold after a battery of robustness checks and endogeneity tests. Furthermore, consistent with the influence channel of networks, we show that connectedness empowers independent directors, whereas influential independent directors facilitate aggressive investment. We also find that the risk-taking effects are more pronounced for complex banks and banks with higher equity capital, higher income diversity, and lower cost-efficiency.

Effect of GST on WCM and Profitability of FMCG Sector in India

Working capital primarily consists of a company’s current assets, or the part of its financial resources that are converted from one kind of resource to another as operations are carried out on a daily basis. Working capital management is regarded as a key component of a company’s profitability. This study examines the working capital relationship with firm’s profitability. An optimal working capital is essential for enhancing the value of an organization. The impact of GST is significantly evident on all transactions of FMCG sectors, especially during stock transfer between two branches of a company, during which period the funds get blocked. This study considered 55 FMCG manufacturing firms, listed in BSE for a period of 12 years starting from 2012 to 2023. Multiple regression model was used to test the hypothesis. The study established a low working capital turnover ratio, which indicates quick realization of inventory, and creates the demand for funds to procure more stock for production purpose. The working capital turnover was used to gauge aggressive investing practices. An aggressive investment strategy is indicated by a low working capital turnover ratio, and a conservative strategy is indicated by a high ratio.

How do underwriting and investment activities affect P&C insurers’ capital adjustments? Evidence from Canada

AbstractUsing a sample of 83 Canadian property-casualty insurance companies from 1996 to 2010, we examine the impact of underwriting and investment choices on the insurers’ capital level and adjustment speed. An aggressive investment policy (risky equity investments) and a heavy reliance on reinsurance underwriting activities have the opposite effect on insurers’ capital level, though both lead to a slower capital adjustment speed. Meanwhile, insurers reshuffling their underwriting and investments significantly change their capital. With an integrated framework that considers underwriting cycles and regulatory pressure, insurers are slower in their capital adjustments in hard markets of the underwriting cycle, and higher regulatory pressure for an insurer moderates the positive relationship between capital level and adjustment speed.

Monitoring Transformation Processes in the Economy Using the Example of the IT Industry

The purpose of the research is to develop and test a methodology for monitoring transformation processes in the economy that intensified after the introduction of sanctions by Western countries (on the example of the IT-industry). The methodology is based on the Harvard paradigm of industry analysis (Structure- Conduct- Performance) and includes five stages. At the first, the basic conditions of the industry are assessed and the demographics of enterprises, industry barriers, intensity of competition and economies of scale are analyzed. The second analyzes the market structure that has developed in the industry and the intensity of competition using the concentration coefficient and the Herfindahl- Hirschman index. At the third stage, the behavior of industry enterprises is analyzed on the basis of summary statements and consolidated reports, as well as median values of indicators for enterprises. In the course of analyzing the behavior of enterprises, their market and operational efficiency, investment and financial activity are assessed. The type of growth and productivity of production factors is established by constructing the industry production function. Particular attention is paid to indicators of transformation processes — added value, labor productivity and return on capital. At the fourth stage, industry enterprises are grouped into four groups according to D. Birch’s method: fast-growing enterprises, large businesses, enterprises implementing an aggressive investment strategy and the rest of small businesses. At the fifth stage, indicators of the effectiveness of state economic policy are assessed. Calculations performed based on data from 2,451 enterprises in the IT industry showed that transformation processes in the industry have intensified, new enterprises are entering the industry, their operational and market activity is increasing, non-current assets and equity capital are growing. However, payments for investment activities do not allow us to draw an unambiguous conclusion about high investment activity; in addition, there is no significant influx of long-term borrowed capital into the industry, which hinders its development. Positive changes in the industry are largely associated with active government policy, which promotes the transition to domestic software, influencing the methods of fiscal policy, while monetary policy instruments are not used actively enough. The methodological basis of the study was formed by general scientific principles and methods: abstraction, generalisation of approaches of foreign and domestic authors to sectoral analysis, grouping, comparison, generalisation, as well as economic and mathematical methods. The result of the work is the methodology of industry monitoring, as well as the indicators of IT-industry development for the period 2018–2022 obtained during its testing. The article may be useful for analysts assessing the development of industries within the framework of industry analysis or industrial policy monitoring.

Comparative Analysis of Private and Public Mutual Funds: A Performance Evaluation

Abstract: The mutual fund industry is a popular investment avenue that offers investors the opportunity to invest in a diversified portfolio of securities. The industry has witnessed significant growth in recent years, with investors seeking to maximize their returns and reduce risk. This paper presents a comprehensive comparative analysis of private and public mutual funds in terms of their performance. The study aims to evaluate the risk-adjusted returns, expense ratios, fund size, asset allocation, and other relevant factors of both private and public mutual funds to determine which type of fund offers better performance. To conduct the analysis, a sample of four private and four public mutual funds was randomly selected, and their performance was evaluated using various performance metrics such as Sharpe ratio, Treynor ratio, and Jensen's alpha. The data was analyzed using statistical tools such as U test, t-test, and regression analysis. The study found that private sector mutual funds performed comparatively better than public sector mutual funds in terms of risk-adjusted returns, expense ratios, and asset allocation. Private sector mutual funds had higher Sharpe ratios and Treynor ratios compared to public sector mutual funds, indicating that they generated higher returns per unit of risk taken. Private sector mutual funds also had lower expense ratios, indicating that they charged lower fees to investors. In terms of asset allocation, private sector mutual funds had a higher allocation towards equity securities compared to public sector mutual funds, which had a higher allocation towards debt securities. The study also identified significant differences in the investment strategies, portfolio management, and investor base of private and public mutual funds. Private sector mutual funds had a more aggressive investment strategy, with a higher allocation towards equity securities, whereas public sector mutual funds had a more conservative investment strategy, with a higher allocation towards debt securities. Private sector mutual funds were also found to be more actively managed compared to public sector mutual funds. Private sector mutual funds had a higher percentage of assets under management from retail investors, while public sector mutual funds had a higher percentage of assets under management from institutional investors. The study provides valuable insights to investors, fund managers, and policymakers regarding the performance of private and public mutual funds. The findings suggest that investors may benefit from investing in private sector mutual funds due to their higher risk-adjusted returns, lower expense ratios, and higher allocation towards equity securities. Fund managers may also benefit from the study by gaining insights into the investment strategies and portfolio management practices of private and public mutual funds. Policymakers may use the study to design policies that promote the growth and development of the mutual fund industry. Overall, this study contributes to the existing literature on mutual funds by providing a comprehensive comparative analysis of private and public mutual funds in terms of their performance. The study adds to our understanding of the factors that affect the performance of mutual funds and provides insights into the investment strategies and portfolio management practices of private and public mutual funds.

Volatility and Herding Bias on ESG Leaders’ Portfolios Performance

We here analyze the factor loadings given by the CAPM, the Fama–French three (FF3), and the five-factor model (FF5), and test the performance and the validity of adding two more factors (volatility and dispersion of returns) to the FF5 factor model of European index-based ESG leaders’ portfolios. Our ESG leaders’ portfolios generated significant negative alphas during 2012–2022, corroborating the literature’s negative argument. The negative abnormal returns of ESG leaders’ portfolios are homogeneous across the three ESG pillars. We conclude that European ESG leaders’ portfolios are biased toward large cap and value stocks with robust operating profitability and against aggressive investments. As robustness tests, we examine Global ESG leaders’ index-based portfolios, producing the same results but with reduced importance in some loading factors like profitability and investment strategy. Furthermore, we deduced that European and Global ESG leaders’ portfolios tilt towards volatility and herding bias.

The Study of Risk Management of Financial Derivatives -Taking the Archegos Liquidation Event as Example

In recent years, the market economy has declined due to the impact of COVID-19. Whether the person is a consumer or an investor, they both want to get more out of it. However, people often may be blinded by this idea of quick success, and then lose a lot. Taking the Archegos liquidation event as an example, this article analyzes the risk management of financial derivatives and their effectiveness when the financial market fluctuates through case studies. Through analysis, it can know that when buying or investing in an aggressive investment company, it may bring them high returns and may also bring them huge risks. Because they obtain returns through some of the characteristics of financial derivatives, it is very risky. The impact of this event on Nomura was analyzed by using the method of event research. Furthermore, through this incident, it found some loopholes and problems in financial management and gave rationalization suggestions.

Aggressive investment choices – Do cultural values and past investing experiences play a role?

PurposeThe study assesses impact of individual cultural values on investment choices (aggressive or conservative), of 450 investors with behavioural biases and risk propensity in serial as mediators in the relationship.Design/methodology/approachThe study used serial mediation analysis using Hayes model 6 for creating six models.FindingsFindings of the study indicated that individualism traits are inclined to aggressive investment choices due to presence of overconfidence biases. Uncertainty avoidance and longtermism traits of investors resulted in aggressive investment choices due to presence of herd mentality bias. The moderating impact of past investing experiences was found significant.Originality/valueThe study indicates the importance of cultural values and past investing experiences of investors that may develop biases to assess investment choices and decisions of investors.

Application of descriptive statistics methods to Kazakhstan stock market

The article discusses the methods of descriptive statistics and its application for the most liquid shares of the Kazakhstan stock market KASE (trading codes: HSBK, KZTK, CCBN, KZTO, KCEL, KEGC, KZKAK) from 2007 to 2022. Descriptive statistics are calculated for each stock, such as average return, variance, sample range, standard deviation, coefficient of variation, kurtosis, and skewness. The coefficients of the regression equation and the coefficient of determination R2 are estimated, which show the relationship between the market return and the return on an individual stock. The comparative analysis of index growth of stocks was carried out from 2013 to 2022. The histogram of the frequency distribution of KASE market returns based on annual and monthly periods and its empirical distribution function have been constructed. The hypothesis about the normal distribution of returns according to the Pearson criterion was tested. The distributions of returns for many stocks do not fully correspond to the normal distribution and have a positive skewness, i.e. have a long tail on the right side. The market curve has been constructed that characterizes the dependence of stock returns on the level of risk. According to this curve, it is established that HSBK stocks are the most risky of all the considered stocks, undervalued and attractive investments for investors using an aggressive investment strategy. KEGC stocks are less risky and very attractive investments for investors who use a more conservative investment strategy in the Kazakhstani stock market.

Fast forward? Time compression attempts and post‐IPO performance

AbstractResearch SummaryAn initial public offering (IPO) expands a firm's access to funding and enables future‐oriented strategic investments. Though aggressive investments can open new opportunities and speed the construction of relative advantage, this aggression risks time compression diseconomies and maladaptive learning from rushed experiences. We propose a firm's investment tempo and industry velocity combine to affect the trajectory of a firm's post‐IPO performance. Agent‐based simulation modeling suggested that aggressive, up‐tempo investment sped the construction of relative advantage in low‐velocity industries. Empirical analyses of multiyear post‐IPO windows in real firms supported this. In contrast, simulations and analyses of real firms suggested up‐tempo investment was maladaptive in high‐velocity industries as the combination of fast investment and fast industry change was often more than boundedly rational agents could cognitively handle.Managerial SummaryCongratulations! By taking your firm public, you can now finance strategic investments in R&D and CAPX that would have been impossible when your company was private. Rapid investment can open new opportunities, sharpen your firm's skills, and build competitive advantage. However, rapid investment is risky because you can waste time recovering from hastily made mistakes and learn bad habits when new experiences arrive too quickly for managers to assimilate. We found the relationship between investment speed and firm profitability depended on industry velocity. Counterintuitively, rapid investment was ill advised in high‐velocity industries because the combination of fast investment and fast industry change was often more than managers could cognitively handle. In contrast, rapid investment worked well in low‐velocity industries, which placed fewer strains on decision makers.

Target benefit versus defined contribution scheme: a multi-period framework

AbstractA target benefit plan (TBP) is a collective defined contribution (DC) plan that is growing in popularity in Canada. Similar to DC plans, TBPs have fixed contribution rates, but they also implement pooling of longevity and investment risk. In this paper, we formulate a multi-period model that incorporates two sources of risk – asset risk and labor income risk for active members. We present an optimal investment and retirement benefits schedule for TBP members with a fixed contribution rate. Using Australian data from 1965 to 2018, we evaluate the performance of the optimal TBP scheme and compare it to the optimal DC scheme. By adopting the benefit–investment strategy derived in this paper, we demonstrate the stability of benefit distribution over time for a TBP scheme in this stochastic formulation. To outperform the DC scheme’s benefit payment, careful consideration shall be given to the benefit target in the TBP scheme. A high target may not be achievable, while a low target can impede the accumulation momentum of the fund’s wealth in its early stages. Moreover, a TBP fund’s investment strategy is primarily influenced by the wealth target, with more aggressive investments in risky assets as the wealth target increases. This analysis may shed light on the possible improvements to retirement planning in Australia. Although the results are sensitive to the choice of model parameters, overall, the proposed TBP promotes system stability in various scenarios.

Multi-period portfolio optimization based on credibilistic lower and upper VaR ratios

Emerging markets, such as the Chinese financial market, are occasionally subject to extreme risk events that result in investor losses during the investment process. To address the challenge of investment selection amidst market fluctuations, considering the fuzzy uncertainty and tail risk compensation based on the asymmetric perspective, we propose to use the lower VaR ratio and the upper VaR ratio as investment objectives to construct a multi-period credibilistic portfolio selection model. The study reveals that the cumulative returns and terminal wealth of the constructed model surpassed those of the benchmark models, delivering greater social and economic welfare to investors. During extreme events, investors could promptly adjust their portfolio structure to achieve higher investment returns. Investors who prefer the lower VaR ratio tend to make conservative investment decisions and allocate a higher proportion to defensive assets, such as bonds and risk-free assets. Conversely, investors who favor the upper VaR ratio are inclined to adopt aggressive investment strategies and allocate a larger proportion to high-risk stocks. The findings demonstrate that the proposed model offers differentiated investment decisions, and the research conclusions serve as valuable references for investors engaged in multi-period asset allocation and risk management.

Forecasting the Return of Carbon Price in the Chinese Market Based on an Improved Stacking Ensemble Algorithm

Recently, carbon price forecasting has become critical for financial markets and environmental protection. Due to their dynamic, nonlinear, and high noise characteristics, predicting carbon prices is difficult. Machine learning forecasting often uses stacked ensemble algorithms. As a result, common stacking has many limitations when applied to time series data, as its cross-validation process disrupts the temporal sequentiality of the data. Using a double sliding window scheme, we proposed an improved stacking ensemble algorithm that avoided overfitting risks and maintained temporal sequentiality. We replaced cross-validation with walk-forward validation. Our empirical experiment involved the design of two dynamic forecasting frameworks utilizing the improved algorithm. This incorporated forecasting models from different domains as base learners. We used three popular machine learning models as the meta-model to integrate the predictions of each base learner, further narrowing the gap between the final predictions and the observations. The empirical part of this study used the return of carbon prices from the Shenzhen carbon market in China as the prediction target. This verified the enhanced accuracy of the modified stacking algorithm through the use of five statistical metrics and the model confidence set (MCS). Furthermore, we constructed a portfolio to examine the practical usefulness of the improved stacking algorithm. Empirical results showed that the improved stacking algorithm could significantly and robustly improve model prediction accuracy. Support vector machines (SVR) aggregated results better than the other two meta-models (Random forest and XGBoost) in the aggregation step. In different volatility states, the modified stacking algorithm performed differently. We also found that aggressive investment strategies can help investors achieve higher investment returns with carbon option assets.

Flattering or Really Understanding? Research on Stock Recommendations by Sell-Side Analysts in China

This article investigates whether the business relationships between brokerage firms and listed companies influence sell-side analysts’ stock recommendation ratings. Using the recommendation data of A-share listed companies disclosed by China’s domestic brokerage firms from 2004 to 2019, this article finds that sell-side analysts of brokerage firms that have securities underwriting relationships with listed companies are inclined to give those companies investment evaluations that are more-positive than evaluations from non-affiliated analysts. After a series of robustness tests and alleviating endogenous problems, such as the self-selection of underwriting relationships and of the sell-side analysts’ coverage samples, the empirical result remains unchanged. Using an event study method to compare differences in the cumulative abnormal returns of stocks during the event window of the recommendation releases, the authors find that it is information advantage rather than collusion of interests that leads affiliated sell-side analysts to issue more aggressive investment recommendations. Further research shows that “client pressure” will enhance the investment rating enthusiasm of analysts of related brokerage firms, whereas “peer pressure” will not weaken the investment rating enthusiasm of them, thus verifying the robustness of causality. The findings in this article enlighten the regulatory authorities and the capital market about the characteristics of stock recommendations of related brokerage firms’ analysts and the motives behind these recommendations, which is of great significance in protecting the interests of investors.

Portfolio Construction and Performance in 2022 based on Index Model

Investment has always been a course of knowledge, data and information. Different investors follow different investing strategies and develop different investment portfolios. Traditional investment portfolios seek for stability by diversifying the risks to products from a wide range of industries. However, in recent years, the rise of investment in Information Technology industry encouraged more aggressive investments and correspondingly the portfolio constructions should be more aggressive. This study will investigate the performances of the stocks of the leading companies in the IT industry and train the Index Model and test its projections. It finally arrives at the conclusion that though the price trends of different stocks in the IT industry differ a lot and are fluctuating a lot, the Index Model is applicable to the data from 2020-2021 and is proved to work through year 2022. Therefore, with sufficient admit to potential limitations and risks in the future, a more aggressive way to invest in the IT industry is somehow developed. These results shed light on guiding further construction of portfolio.

Factors Affecting Firm Value With Profitability As A Mediating Variable In Consumer Cyclicals Sector Companies

With profitability as a mediating variable, this research aims to empirically investigate the effect of investment and financing policies on firm value. The financial reports and annual reports in 2018-2021 from the cyclicals sector listed on the Indonesia Stock Exchange (IDX) were used in obtaining research data. There were 228 research samples obtained through purposive sampling. This study uses path analysis to test the research results. The research results show that profitability is influenced by investment policies and financing policies. Firm value is not influenced by financing policy and investment policy through profitability. Firm value is significantly influenced by investment policies, profitability, and financing policies through profitability. It can be concluded that profitability is influenced by aggressive investment policies and aggressive financing policies, firm value is also influenced by aggressive investment policies.

Managerial compensation and firm performance: The moderating role of managerial ownership and other governance factors

AbstractThis study looks at how executive compensation affects firm value and the extent to which this relationship is sensitive to managerial ownership and corporate governance factors. We use data from UK FTSE 100 firms for the period 2007–2012, generating a total of 578 firm‐year observations. Consistent with optimal compensation theory, we find that the managerial compensation –firm value is more sensitive to executives’ ownership levels and other corporate governance indicators. Our results remain robust to alternative econometric models. We contribute to the literature on corporate governance and firm value . While the paper builds on the executive bonus compensation literature, it also furthers our understanding on the extent to which managerial ownership, institutional ownership, board size and non‐executive ownership matter in the executive bonus compensation—corporate value relationship with specific emphasis on UK FTSE 100 firms. Our second contribution is related to the moderating role of managerial (executive) ownership. We show that as executives residual interests go up, managers become more conscious of the firm's idiosyncratic risk, and hence lessen their aggressive investment and financing strategies culminating in lower firm value.

Dynamic analysis of the investment decision of electric vehicle charging facilities and the promotion effect measurement for electric vehicles

This paper aims to analyze the deep reason why there exists hesitation when investors decide whether invest in EV charging facilities (ECFs). To this end, a series of theoretic models are built and derived, and some enlightening results are got. The main results confirm that charging facility investors are insufficiently motivated to follow a moderately aggressive investment strategy in the early stages of EV development. For stimulating ECFs’ investment, the marginal conditions in which the investors choose active or conservative investment strategies to lay out charging facilities are analyzed, and the effects under different ECFs investment strategies are quantized in terms of driving the market development of EVs. Based on the findings, relevant policy suggestions are proposed. Finally, to verify the gained results, a case study in the context of China is given.