Asset Diversification Research Articles

Determinan Efisiensi Bank Umum Syariah di Indonesia dengan Profitabilitas sebagai Pemoderasi

This paper explores the Effect of Asset Diversification, Capital Adequacy Ratio (CAR), Credit Risk, and Liquidity on the Efficiency of Islamic Commercial Banks in Indonesia with Profitability as Moderating Variable and Bank Size as Control Variable during 2014-2018 .Based on the purposive sampling method, 12 banks were selected. This study uses multiple linear regression as a method of data analysis. The results showed that asset diversification and credit risk moderated by profitability had an insignificant negative effect on efficiency. Credit risk and CAR had an insignificant positive effect on efficiency. Meannwhile liquidity, capital adequacy ratio moderated by profitability have significant negative effect on efficiency,. Furthermore, asset diversification moderated by profitability, Liquidity moderated by profitability, and Bank Size (Size) have a significant positive effect on efficiency. The results of this study are expected to be a reference regarding the efficiency of Islamic commercial banks.

Disaster Risk Reduction Lessons from February 7, 2021 Flash Flood in Uttarakhand Province of India

204 people were killed, while two hydropower projects located in close proximity to Rini (13.2 MW) and Tapoban (520 MW) were severely damaged in Dhauliganga flood of February 7, 2021, in the Indian Himalaya. In addition, it caused massive loss of farm animals, agricultural land, property and infrastructure. This incidence occurred during the winter season when the discharge of glacier fed rivers is minimal, and the region did not experience rains around the time of the flood. Based on a detailed review of post-disaster search and rescue efforts, and bottlenecks faced by disaster managers, authors recommend (i) scientific documentation of past catastrophic events, (ii) detailed assessment of the risk posed by various hazards, (iii) legally binding disaster risk assessment, and a reduction mandate for major infrastructure projects, (iv) robust, reliable and redundant warning generation and dissemination infrastructure, (v) diversification of assets, and (vi) creating a dedicated cadre of Disaster Risk Reduction (DRR) professions.

Forecasting Bitcoin price direction with random forests: How important are interest rates, inflation, and market volatility?

Bitcoin has grown in popularity and has now attracted the attention of individual and institutional investors. Accurate Bitcoin price direction forecasts are important for determining the trend in Bitcoin prices and asset allocation. This paper addresses several unanswered questions. How important are business cycle variables like interest rates, inflation, and market volatility for forecasting Bitcoin prices? Does the importance of these variables change across time? Are the most important macroeconomic variables for forecasting Bitcoin prices the same as those for gold prices? To answer these questions, we utilize tree-based machine learning classifiers, along with traditional logit econometric models. The analysis reveals several important findings. First, random forests predict Bitcoin and gold price directions with a higher degree of accuracy than logit models. Prediction accuracy for bagging and random forests is between 75% and 80% for a five-day prediction. For 10-day to 20-day forecasts bagging and random forests record accuracies greater than 85%. Second, technical indicators are the most important features for predicting Bitcoin and gold price direction, suggesting some degree of market inefficiency. Third, oil price volatility is important for predicting Bitcoin and gold prices indicating that Bitcoin is a substitute for gold in diversifying this type of volatility. By comparison, gold prices are more influenced by inflation than Bitcoin prices, indicating that gold can be used as a hedge or diversification asset against inflation.

Portofolio dan Diversifikasi Investasi Pasca Covid-19 Kajian Portofolio Saham Kapitalisasi Tinggi Di Indonesia

In portfolio theory, financial researchers understand that every (n) asset in portfolio could potentially reduce portfolio risk until it reaches undiversified level. Our research offers a novel idea in creation of diagonal matrix as mini simulation to proved this statement. In general, there are two main purposes of this article, first is to check whether our diagonal matrix simulation able to confirm old theory of diversification concept in financial literature. The second purpose is to check whether certain capitalization-based portfolio would be less volatile and become major answer to diversify investment asset during COVID-19 uncertainty situation. The result confirms our goal and objective with several question in the future. It is clear that diagonal matrix in this research has a limitation in the implementation. It will cause average expected return to be equal for every (n) asset portfolio. But we believe that with several input and improvement in the future, it would be very great tool to teach undergraduate students (especially financial major) to understand the diversification concept. Keywords: Portfolio Theory, Asset Diversification, COVID-19 Investment Study, Diagonal Matrix Simulation, Capitalization Based Portfolio

The Impact of Indirect Competition on Bank Net Interest Margins: Microfinance Evidence from Pakistan

The study aims to investigate the impact of growth in microfinance initiatives on the net interest margins of commercial banks in Pakistan. Using data from the world bank MIX database and Thomson Reuters, we conducted a GLS random effect estimation on an unbalanced panel of Pakistani banks from 2010 to 2018. We find that credit quality, solvency, bank size, earning asset diversification, and market concentration impact banks' net interest margins. In addition, we find growth in development finance institutions to significantly affects commercial bank margins. Microfinance institutional growth is found to reduce net interest margins. Besides microfinance institutions, the growth of specialised microfinance banks is also found to impact the spread negatively. This indirect effect may be evidence of the improved efficiency derived from higher competition or the fact that microfinance institutions may be using conventional banks as a permanent source of funds to become financially sustainable. The role of microfinance growth is not considered in literature since microfinance institutions are very different from conventional banks regarding lending volume and size. This study contributes to the existing theoretical and empirical literature on net interest margins by showing a positive role of indirect competition on banks' net interest margins. Therefore, policymaking focusing on improving conditions that enhance competition to bring bank spreads closer to regional levels may be needed.

MAE-CAD: An IP-Based Core Network Asset Discovery Technology Based on Multiple Autoencoders

With the continuous development of the network, the number of network assets continues to increase. Despite the convenience diversified network assets bring, it also poses new challenges to IP-based network asset management. Traditional asset discovery technologies mainly analyze network traffic, and detect relevant information (operating system, running software, etc.) of IP-based assets through methods such as active discovery, passive discovery, and discovery methods based on cyberspace search engines. These methods assign the same weight to all network IP-based network assets, and it is difficult to effectively analyze diversified network assets. In this paper, we propose the concept of IP-based core network assets, and collect the data of the relevant network assets based on this concept. Then, we construct a dataset and establish feature engineering for data preprocessing. As there is currently no relevant IP-based core network asset detection method, we propose an IP-based core network asset discovery technology based on pretraining of multiple autoencoders, MAE-CAD. The results show that our method can achieve 95.74% in Acc and 95.04% in F1 in the experimental environment (Acc = 98.11% and F1 = 97.16% in the actual network environment because of duplicate samples). In addition, MAE-CAD has excellent robustness. In an environment where the proportion of data is extremely unbalanced, when the IP-based core network asset data in the training set only accounts for 1/200 (0.5%), MAE-CAD can still obtain 92.91% in Acc and 91.57% in F1.

Local Beta: Has Local Real Estate Market Risk Been Priced in REIT Returns?

This paper studies the pricing of the risk associated with the location of the assets. The local real estate market risk is measured by ‘local beta’, which combines the systematic risk of local property markets and the property allocation strategy of real estate firms. The empirical results confirm a higher equity return for a firm with higher exposure to the most volatile property markets, particularly for REITs which are more geographically concentrated. For REITs with highly diversified assets, local real estate risks are not reflected in REIT returns. For those REITs with most concentrated assets, a one standard deviation increase in the local beta will lead to a 4.7% increase in the annual return. Investors can use REITs’ local real estate risk as an information tool to construct a long-short investment portfolio of real estate firms and can achieve a significant non-market performance of 4.9% per annum.

Hazardous lending: The impact of natural disasters on bank asset portfolio

This paper examines how banks adjust their asset structure in response to changes in loan demand following natural disasters. We demonstrate how banks’ asset diversification strategy helps clients smooth consumption and supports local recovery. In the empirical section, we apply the difference-in-differences method and determine that U.S. commercial banks increase real estate lending after disasters and sell government bonds to finance this disaster-driven credit surge. The theoretical section presents a novel multiple-asset dynamic credit allocation model that explains our empirical findings. We use model simulations to predict and quantify the potential impact of climate change on the asset structure and profitability of banks given different scenarios.

Asset diversification, financial well-being, quality of life, and mental health: a study in Brazil

RESUMO Este trabalho buscou investigar a relação entre diversificação, bem-estar financeiro (BEF) e qualidade de vida (QV) e saúde mental, e compreender como o BEF medeia essa relação, considerando uma amostra de 1.047 investidores brasileiros cadastrados na Comissão de Valores Mobiliários (CVM). Na literatura nacional e internacional, não foram encontrados estudos que buscassem identificar o papel mediador do BEF entre a diversificação e a QV e a saúde mental, como se propõe neste estudo. Esta pesquisa pode auxiliar corretoras e instituições financeiras, possibilitando um novo olhar sobre o perfil dos investidores e suas carteiras. Ainda, amplia as perspectivas sobre os estudos de finanças pessoais e saúde mental no Brasil e no mundo. A mediação foi realizada por modelagem de equações estruturais estimada por mínimos quadrados robustos ponderados na diagonal (robust diagonally weighted least squares [RDWLS]). Como proxy de diversificação, adotou-se “classes de ativos”. Para QV, adotou-se a escala World Health Organization Quality of Life (WHOQOL-100), enquanto para mensurar saúde mental (depressão e ansiedade) usaram-se os inventários de Beck. Para BEF, utilizou-se a medida do Serviço de Proteção ao Crédito (SPC) do Brasil. Os resultados apontaram forte relação de mediação do BEF entre o grau de diversificação (classes de ativos) e as escalas de QV e saúde mental (ansiedade e depressão). Constatou-se que o nível de diversificação está relacionado com o aumento dos níveis de ansiedade e depressão e com a redução da QV no curto prazo, mas, quando mediado pelo BEF, reduz os níveis de ansiedade e depressão e aumenta a QV.

A Coexistence Analysis of Blockchain, SCADA Systems, and OpenADR for Energy Services Provision

The advent of blockchain technology allows the raise of new business models for the electricity market, opening the way also to end-users and letting them offer regulation services to the power grid. Thanks to the characteristic of being distributed, the blockchain technology could be a solution to balancing problems caused by the penetration of renewable sources, implementing a platform for Demand-Response programs delivery. Demand-Response allows consumers to respond to market signals by increasing or reducing their energy consumption, contributing to greater flexibility and stability of the grid and to a more efficient use of infrastructures and energy resources. Currently, Demand-Response is carried out by controlling aggregates of loads, storage or generating units managed by centralized Supervisory Control and Data Acquisition systems such as SCADA. Regulatory changes and the increasing penetration of renewable sources distributed over the territory are turning the whole electricity system into a smart-grid. More recently and with reference to the end-users participation in regulation services, smartness is achieved through the so-called Internet of Things, which can be considered the modern equivalent of SCADA, but with the possibility of to being applied to distributed and diversified assets. For this reason, great efforts have been made to study the interoperability and coexistence between Internet of Things and blockchain, two emerging paradigms that are gaining popularity in the energy world. Limited or no contribution can instead be found in the literature on the integration of SCADA systems and blockchain. Indeed, in order to ensure an easier and faster widespread application of blockchain in the context of power systems, it is interesting to study its possible coexistence with legacy and more established industrial technologies such as OpenADR or SCADA. In Europe, the prevailing technology is the latter one. For this reason, in this paper, the coexistence of blockchain technology with SCADA systems is discussed. In particular, both Hyperledger Fabric blockchain and SCADA systems are considered together to assess the feasibility of aggregation of energy resources for Demand-Response, as well as the relevant measured data. The analysis is carried out by first presenting the two different paradigms: the centralized data acquisition in trusted environments and analysis via OpenADR and SCADA, and the global, distributed and secured ones with the blockchain. Then an architecture for the integration of SCADA and blockchain technology is proposed and the related challenges within the frame of a project for innovative technologies DR programs implementation are outlined.

Asymmetric interdependencies between cryptocurrency and commodity markets: the COVID-19 pandemic impact

<abstract><p>Using NARDL methodology, this research investigates some asymmetric and non-linear interconnections between leading cryptocurrency and commodity returns. Thus, this study explores potential interconnections between these cryptocurrencies and commodity markets in the period between March 07, 2018, and March 26, 2021. This paper splits the entire sample period into two independent sub-periods in order to enhance robustness: pre-COVID and COVID, to examine the impact of the pandemic on these markets. Our results confirm that the most relevant interconnection (in terms of cointegration, short- and long- asymmetry, and the persistence of the lags) between cryptos and commodities is focused on COVID-19, the pandemic sub-period, in line with previous literature. Finally, the study reveals that some cryptocurrencies such as Tether could serve as a diversifying asset or even a safe haven, in certain scenarios, in investment strategies.</p></abstract>

The Effect of Productive Asset Diversification on Discretionary Behavior on Allowance for Loan Losses

The first objective of this study is to determine whether the discretionary behavior is built by diversification or concentrated productive asset financing. Discretionary behavior reflects the value of additional losses to form Allowance for Loan Losses or ALL based on several management motivations. The formation of ALL aims to maintain the quality of productive assets and the health of banks. Discretionary behavior is estimated from the difference between the total ALL and the non-discretionary component presented through a portfolio of economic impairment. Specifically, the concentration of banking asset financing in this study is classified based on the type of loan. This study examines the effect of the concentration of asset financing on loan distribution toward discretionary behavior. This research was conducted in several commercial banks in Indonesia.

International Diversification and MNE Innovativeness: A Contingency Perspective of Foreign Subsidiary Portfolio Characteristics

We advance research on how international diversification affects MNEs’ innovativeness by reconciling contradictory views on the role of international diversification for innovation. We do so by developing a portfolio perspective of MNE innovation that moves beyond foreign R&D subsidiaries to consider firms’ entire international footprints and by theorizing that MNE innovativeness depends on the interplay of geographical (i.e., regional diversification and institutional distance) and organizational (i.e., asset diversification and functional mandate breadth) characteristics of the foreign subsidiary portfolio. We test our proposed relationships on a unique multi-source panel dataset of Japanese listed electronics firms (266 firms and their 4505 subsidiaries between 2007 and 2015 resulting in 1936 firm-year observations and 28,350 subsidiary-year observations). We find that the institutional distance and asset diversification of the foreign subsidiary portfolio constrain the extent to which geographical (regional) diversification can enhance MNEs innovativeness. We also find that, at high levels of geographical diversification, MNEs with low levels of institutional distance and asset diversification in the foreign subsidiary portfolio tend to achieve higher innovativeness. Lastly, we did not find empirical support for functional mandate breadth as affecting how geographical diversification influences MNE innovativeness. Overall, the study highlights that, for a nuanced understanding of MNE innovativeness, managers need an encompassing and deliberate portfolio-level strategy that explicitly considers the interrelatedness of geographical and organizational characteristics.

Sustainable Livelihood Strategies of The Riverine Communities at Sadong Jaya, Sarawak, Malaysia: Role of Capital Assets

The aim of this paper is to explore the role of capital assets in sustaining the livelihoods of the riverine communities with special focus on physical and human capitals. The study was carried out at Sadong Jaya, a sub-district under Asajaya District, Samarahan, Sarawak. It is located at the lower Sadong River lying in the Southwest of Sarawak in the Borneo Island. Due to the dynamic nature of the local environment with its unique geographical location prone to flash flood and monsoon flood, it is crucial to examine the role of physical and human capitals in affecting livelihood strategies adopted by the local communities. A mixed method approach encompassing exploratory study and descriptive analysis was adopted. Multistage sampling techniques were used to select 11 villages along the lower estuarine, middle estuarine and upper estuarine areas, followed by systematic sampling technique employed to select 243 heads of households for face-to-face interviews to find out their livelihood strategies and vulnerabilities faced by them. Data collection involved observation techniques, two FGDs and in-depth interviews with various stakeholders. The findings show that riverine communities at Sadong Jaya utilize diversified livelihood strategies by optimizing the use of capital assets available to sustain their livelihoods. Communities who are better equipped with an enhanced and diversified assets base are more resilient. The study found that infrastructures such as roads and bridges, water supply, drainage systems, watergates and education facilities enable the riverine communities to intensify and diversify economic activities, widen job opportunities and market opportunities. As accessibility to education and training facilities is made available to the locals through better connectivity facilitated by various physical infrastructure, more riverine communities are involved in non-agricultural economic activities and out-migrating to cities and abroad. The paper concludes that provision of basic physical and educational amenities is crucially imperative as a policy recommendation to ensure that the riverine communities are able to enhance their livelihoods strategies for uplifting their standards of living.

Do the diversification of income and assets spur bank profitability in Bangladesh? A dynamic panel data analysis

Purpose This paper aims to explore the effects of bank diversification (i.e. diversification of income and diversification of assets) on Bangladeshi banks’ profitability. Design/methodology/approach Using a dynamic panel data model with system generalized methods of moments, the authors examine an unbalanced panel data from 32 banks spanning 318 bank-year observations from 2007 to 2016. Findings The findings indicate a significant positive association of income diversification and asset diversification on bank profitability. Therefore, the results show that banks can generate profit from diversification of income and diversification of assets. Originality/value One of the rare attempts to investigate the relationship between diversification and profitability in Bangladesh’s banking sector is this report. The authors anticipate the results to have major consequences for Bangladeshi bank regulators and other related economies.

Does Livelihood and Asset Diversification Contribute to Pastoralist Resilience?: the Case of Il Chamus, Baringo County, Kenya, 1980-2018

Abstract In studies of pastoralism, the concept of resilience has normally been applied to the analyses of post-shock recoveries ('bounce backs') within an ecological framework and and limited time and spatial perspectives. When temporal and spatial parameters are relaxed to span multiple decades and geographies with widespread social changes and numerous shocks and recovery periods, understanding what resilience for pastoralists should look like is exceedingly complex and challenging. This article examines livelihood and asset diversification among Il Chamus of Baringo County, Kenya over a 35+ year period (1980-2018) in the context of significant changes. It suggests that 'successful resilience' among pastoralists involves much more than the continuity of a pastoralist livelihood in a particular place. By addressing diversification trends among households both in towns and rural spaces, the study shows that both better-off and poor households pursue non-pastoral strategies and assets, and that livestock remains an important real and symbolic form of capital even for those who work in towns. Finally, the article concludes that studies of pastoralist resilience should consider long-term continuities and changes associated with market expansion and the strengthening of rural-town linkages, in order to understand how pastoral livelihoods evolve not just in response to short-term shocks but also to challenges and opportunities that wider socio-economic changes present.

How Does Bank Diversification Affect Efficiency? Insights of the Central Europe

This study empirically aims to investigate the influence of diversification on cost efficiency in the context of 10 Central European countries’ (such as Hungary, Poland, Germany, Slovakia, Slovenia, Romania, Croatia, Serbia, Czech Republic and Switzerland) banks from 2011 to 2017 and employs two-stage least squares (2SLS) estimator as a methodological approach. It uses cost efficiency (EFF) and diversification (asset and income) as the main explanatory variables. Our baseline results show that asset and income diversification have a negative and significant effect on bank efficiency. Leverage (LEV) and the growth of gross domestic product (GDP) do not influence bank efficiency. From the bank control and macro-economic level variables, it is found that one-year lagged cost efficiency (EFFLAG), assets diversification (AD), income diversification (ID), assets growth (AG), return on assets (ROA), return on equity (ROE), net interest margin (NIM) and rate of inflation (INFR) have a significantly negative relationship with the bank efficiency in the Central European countries. More importantly, both ID and AD tend decreasing the efficiency in the region.

Factors Related to Small- and Mid-Capitalization Pharmaceutical Company Success Using Stock Performance as a Surrogate.

BackgroundDeveloping novel pharmaceuticals demands substantial investment despite high uncertainty of success and ultimate market value. While many established drug companies are highly profitable and have large portfolios of diversified assets, much of new drug innovation, a very high-risk, high-reward gambit, stems from smaller companies striving to bring their first products to market. While drug costs, and thus pharmaceutical company profits, can be controversial, it is unquestionable that the products from these companies provide great benefit to humanity. Hence, the ongoing success of the industry as a whole is quite relevant from a public health perspective.MethodologyWe sought to investigate factors influencing pharmaceutical company success using company stock performance on major US indices as a surrogate. As the profitability of large-capitalization (cap) pharmaceutical companies is well established, we focused on small- and mid-cap companies in this analysis. Small- and mid-cap pharmaceutical companies (both currently active and now defunct) and historical share prices were captured, including company details and the nature of drug pipelines. Funding by US academia was acquired via CMS.gov Open Payments and categorized into contributions < or ≥$100,000. Stock performance was considered good (+ ≥25%), mediocre (±25%), or poor (- ≥25%). Univariate and multivariate associations were assessed.ResultsOf the 420 companies included in the analysis, 101 (24%) had good, 76 (18%) mediocre, and 243 (58%) poor performance. The following were associated with performance in univariate analysis: initial public offering (IPO) price (P < 0.001), time from IPO (P < 0.001), number of drug programs (P = 0.019), and academic funding (P = 0.00013), with trend for diverse pipelines (both oncology and nononcology programs under development) (P = 0.069). On multivariate analysis, IPO price was inversely associated (P < 0.0001), while academic funding (P < 0.0001) and more drug programs (P = 0.0025) were positively associated with performance. Analysis of pharmaceutical IPOs since 2000 suggests a 20% rate of outright company failure.ConclusionsThe majority of included companies had lackluster stock performance, suggestive of low potential for drug development success and high probability of financial disaster. Robust drug pipelines and academic collaboration seem to be strongly related to company success.

Corporate focus, residential assets, and the performance of French REITs

AbstractThis paper raises the question of the specific impact of the share of residential assets on the performance of real estate investment trusts (REITs). In the literature, many articles questioning the importance of the nature of assets held in general (and residential assets in particular) do not take the level of diversification of REITs into account. We incorporate this factor into our analysis and integrate our measure of the effects of residential assets in a framework controlling for the impact of the diversification of the type of real estate assets held. Based on French data, we question whether REITs holding residential assets perform better than REITs holding little or no residential assets for a given level of diversification. We do not detect any significant diversification effect on the performances of French REITs. We also test the impact of asset diversification on REITs market volatility. We provide some evidence that firms with strongly concentrated balance sheets are more volatile than diversified firms, but this effect is weaker for REITs holding mostly residential rather than other types of assets.

POLYVARIANCE OF SCIENTIFIC APPROACHES TO UNDERSTANDING THE ESSENCE OF THE CONCEPT «INVESTMENT SERVICES»

The article reflects the results of scientific research of alternative approaches to the interpretation of the definition of investment services. The advantages and disadvantages of the target, production, product, process, instrumental, infrastructural, resource and opportunistic approaches to understanding the essence of the concept of “investment service” are identified and systematized. An improved definition of the concept of an investment service is the result of the choice of an investment idea, analysis of investment information and the use of investment technologies by investment firms in order to realize the financial interests of clients - individual and institutional investors, taking into account their investment profile (expected investment return, maximum losses, risk tolerance and the duration of the investment horizon). The proposed author's approach to the interpretation of the concept of an investment service takes into account the totality of such attributive features as complementarity, substitutionality, analyticity, manufacturability, personification, riskiness and timing. It was found that the providers of investment financial services are investment firms - legal and non-legal entities that on an ongoing basis provide at least one type of investment services to third parties and / or carry out at least one type of investment activity. The recipients of investment services are clients of investment companies - individual and institutional investors. The circle of financial interests of investors was determined, including: increase and mobilization of additional financial resources; accumulation of savings; formation of an optimal investment portfolio in terms of profitability, risk, liquidity, etc .; reducing the negative impact of information asymmetry on investment choice; reduction of transaction costs of investment operations; expanding the list of investment alternatives and deepening the diversification of investment assets; redistribution of risks associated with the provision of investment services. It is established that the definition of an investment service is derived from the generic concept of a financial service. However, if the concept of a financial service is always associated with cash flow, then in the case of the provision of investment services, cash flow is conditioned by the formation and use of investment capital.