Capital Portfolio Research Articles

Syndicated venture capital portfolio companies selection: a fuzzy inference system – agent-based approach

Venture capital is a unique source of funding for innovative firms because they have limited access to traditional capital markets. Regarding VCF’s point of view, start-up portfolio selection and VCF’ syndication have always been critical challenges. Hence, using integrated quantitative methods to get the best-known solutions is always being felt. In this paper, start-up portfolio selection is simulated which is more similar to real-world problems rather than other research. Regarding this goal, preferences of start-ups and their interaction with investors are considered. Concerning the complexity of the problem, the best-known model to simulate this problem is an agent-based model with fuzzy inference system core as a computational engine and also the problem optimization is done using a harmony search algorithm. By this procedure, not only the portfolio’s ROI is maximized but also VCF’ syndication and their share is determined. Finally, several numerical illustrations are implemented and comparisons are performed.

Asset Pricing Through Downside Risk Based Arbitrage Pricing Theory: Empirical Evidence from Pakistan Stock Exchange

This study extends the downside risk applications in multifactor asset pricing model by incorporating the downside risk spillovers from economic and financial factors to stock returns. We amplify the conventional APT model by replacing the variance-based betas with semivariance based downside betas that better capture the risk volatilities in varying market conditions. The inclusion of downside risk betas based on semivariance and semideviation methods in the augmented asset pricing model improves both the theoretical and methodological applications relative to the limitations and restriction of conventional APT factors model. The mean-variance hypothesis replaced by meansemivariance hypothesis and asymmetric behaviour of stock returns distribution, empirically suggest the use of an alternative factors model. The models based on downside risk premia for asset pricing in emerging markets. The study tested the downside risk-return relationship based on the excess monthly stock returns of listed PSX firms and observed economic, financial and global factors representing spillover triangulation from 1997 to 2017. The findings of the study indicate that the augmented DR-APT model with pricing restrictions of unconditional linear factors method could not be deserted over the targeted period of study. The selected observed pricing factors except exports are significant enough for pricing the security returns in the augmented DR-APT Model. Findings of the panel regression, likelihood ratio tests and F-test corroborate DR-APT as a better model to price stock returns in volatile situations compare to conventional APT model. Our findings are consistent with the downside risk-return framework based on mean semi variance hypothesis and have implications for managers and decision markets that incorporate downside risk in asset valuation, cost of capital estimations, portfolio construction and investment analysis decisions. Key Words: Downside Risk, Semi variance, Semi covariance, Downside Beta, Downside risk-based Arbitrage Pricing Theory (DR-APT).

Developing a hybrid intelligent system for optimizing syndicated venture capital portfolios

Developing a hybrid intelligent system for optimizing syndicated venture capital portfolios

Resilience Dynamics of Urban Water Supply Security and Potential of Tipping Points

AbstractCities are the drivers of socioeconomic innovation and are also forced to address the accelerating risk of failure in providing essential services such as water supply today and in the future. Here, we investigate the resilience of urban water supply security, which is defined in terms of the services that citizens receive. The resilience of services is determined by the availability and robustness of critical system elements or “capitals” (water resources, infrastructure, finances, management efficacy, and community adaptation). We translate quantitative information about this portfolio of capitals from seven contrasting cities on four continents into parameters of a coupled system dynamics model. Water services are disrupted by recurring stochastic shocks, and we simulate the dynamics of impact and recovery cycles. Resilience emerges under various constraints, expressed in terms of each city's capital portfolio. Systematic assessment of the parameter space produces the urban water resilience landscape, and we determine the position of each city along a continuous gradient from water insecure and nonresilient to secure and resilient systems. In several cities stochastic disturbance regimes challenge steady‐state conditions and drive system collapse. While water insecure and nonresilient cities risk being pushed into a poverty trap, cities which have developed excess capitals risk being trapped in rigidity and crossing a tipping point from high to low services and collapse. Where public services are insufficient, community adaptation improves water security and resilience to varying degrees. Our results highlight the need for resilience thinking in the governance of urban water systems under global change pressures.

The Taxation of Savings: The Italian System and International Comparison

After a brief review of the economic literature, the paper offers a comparative analysis of the main features of capital income taxation in Italy, the EU and the US. The paper also analyses the recent evolution of capital taxation and portfolio allocation in Italy. The findings point to high heterogeneity in the choice of the type of tax system, taxation level and forms of preferential taxation, suggesting no convergence towards a single model of taxation among countries. However, a common feature of most systems is that capital income is taxed more lightly than labour income. The heterogeneity in the tax treatment of households’ savings is likely to persist in the future; recent developments at international level concerning the transparency of taxation are expected to increase governments’ degrees of freedom in choosing their preferred tax system. Empirical evidence for Italy suggests that the tax burden on financial assets has increased in recent years but the evolution of financial assets over time is not particularly sensitive to tax changes.

Modern Features for Capital Portfolio Monitoring

Modern Features for Capital Portfolio Monitoring

Exchanges of innovation resources inside venture capital portfolios

I explore the prevalence of exchanges of innovation resources inside venture capital portfolios. I show that after companies join investors’ portfolios, several proxies of exchanges between them and portfolio companies (relative to matched nonportfolio companies) increase by an average of 60%. The increase holds when joining events are plausibly exogenous and when VCs’ bargaining power and potential conflicts of interest are low. Three novel mechanisms are supported: carve-outs, spawning, and recycling, whereby entrepreneurs divest innovation units, start new ventures, and reuse assets in other portfolio companies, respectively. Results suggest that returns to innovation are higher in venture capital portfolios.

Quantifying urban water supply security under global change

Urban water supply security is commonly measured in terms of per capita water availability at the city level. However, the actual services that citizens receive are influenced by several components, including (1) a city's access to water, (2) infrastructure for its treatment, storage and distribution, (3) financial capital for building and maintaining infrastructure, and (4) management efficacy for regulating and operating the water system. These four types of "capital" are required for the provision of public water supply services. A fifth capital “community adaptation” is needed when public services are insufficient. Here, we develop and test an integrated framework for the quantification of urban water supply security based on these five capitals. “Security” involves three dimensions: 1) the level of system function (i.e., supply services); 2) risks to these services; and 3) robustness of system functioning. We apply this Capital Portfolio Approach (CPA) to seven urban case studies selected from a wide range of hydro-climatic and socio-economic regions on four continents. Detailed data on urban water infrastructure and services were collected in two cities, and key stakeholder interviews and household surveys were conducted in one city. Additional cities were assessed based on publicly available utility and globally available datasets. We find that in cities with high levels of public services, adaptive capacity remains inactive, while cities with high levels of water insecurity rely on community adaptation for self-provision of services. Inequality in the capacity to adapt leads to variable levels of urban water security and the vulnerability of the urban poor. Results demonstrate the applicability of the presented framework for the assessment of individual urban water systems, as well as for cross-city comparison of any type of cities. We discuss implications for policy and decision-making.

The Total Risk Premium Puzzle?

The risk premium puzzle is worse than you think. Using a new database for the U.S. and 15 other advanced economies from 1870 to the present that includes housing as well as equity returns (to capture the full risky capital portfolio of the representative agent), standard calculations using returns to total wealth and consumption show that: housing returns in the long run are comparable to those of equities, and yet housing returns have lower volatility and lower covariance with consumption growth than equities. The same applies to a weighted total-wealth portfolio, and over a range of horizons. As a result, the implied risk aversion parameters for housing wealth and total wealth are even larger than those for equities, often by a factor of 2 or more. We find that more exotic models cannot resolve these even bigger puzzles, and we see little role for limited participation, idiosyncratic housing risk, transaction costs, or liquidity premiums.

External Learning Strategies and Technological Search Output: Spinout Strategy and Corporate Invention Quality

The strategic management of knowledge spillovers to employee ventures may provide firms with knowledge spill-ins or the potential to learn from the ventures that they have spun out. However, the mechanisms underlying knowledge spill-ins and their importance for external learning in uncertain technology environments have not been examined in detail. This article compares corporate venturing (CV) spinouts that are supported by parent firms with independent employee spinouts as well as other strategies for external learning, such as investments and alliances. An analysis of the patenting activities of leading corporations operating in the information and communication technology industry reveals that, ceteris paribus, when firms recombine unfamiliar knowledge components developed by their CV spinouts, their inventions are associated with higher quality than comparable firms’ inventions that recombine knowledge from the firm’s corporate venture capital portfolio ventures, allies, or employee spinouts. This effect is especially pronounced when CV spinout inventors hold parent-specific technological expertise. The results are robust across several econometric specifications that account for selection and intrinsic differences in external learning strategies. Furthermore, the results indicate that CV spinouts benefit their parent firms by reducing uncertainty relative to other strategic formats for external learning in unfamiliar technological areas. The detailed theoretical and practical implications derived from this research reflect perspectives on technology strategy and corporate renewal.

The Effects of Intra- and Extra-Industry Networks on Performance: A Case of Venture Capital Portfolio Firms

This study examines the influence of intra- and extra-industry networks on firm performance by using data on 1264 UK venture capital (VC) backed start-up companies. The ventures’ network was operationalized by connecting together the various portfolio companies sharing the same investor. Regression results show that the venture’s network has a strong impact on firm’s success. Yet, whereas extra-industry ties are directly and positively linked to the likelihood of the venture to reach a successful exit, intra-industry ties exert a negative impact on companies’ performances. However, interaction effects show that once a firm establishes a sufficient number of extra-industry ties, it is able to profit from the network in its industry of operation. Overall, these findings show that an optimal balance of ties is achieved through a diverse set of connections incorporating both intra- and extra-industry ties.

Making decisions after floods: a consistency check of drivers across multiple flood types

Bourgeoning flood hazards inflict significant negative effects on the welfare of households, particularly in developing countries. Rapid growth in scholarship on impacts and flood coping strategies from developing countries is therefore a justified consequence. However, identifying the determinants of coping decisions across space and time has so far attracted little attention, in spite of their policy implications. Current efforts have been largely limited to Isolated, individual case study floods of little relevance for broad–based policy prescription. This study examines the drivers for coping decisions, using predominantly quantitative data from 106 direct flash and riverine flood victims from six flood-affected communities in Cameroon. The capital portfolios of the Sustainable Livelihoods Framework were appropriated to categorize and identify key drivers for coping decisions. Descriptive analysis reveals that almost 70 percent of all flood victims predominantly adopted community–embedded, informal coping strategies, much in line with contemporary trends in the literature. Logistic regression analyses revealed that access to social, human, natural and physical capitals were consistent drivers of coping decisions, irrespective of flood type. Significant relationships were however observed only for flash floods (p=0.05). The results are strongly relevant, as the tested variables explained over 75 percent of the variance in the entire sample. The findings lead us to contend that policy is better informed by analyzing consistencies in drivers for flood coping decisions across space and time, especially if multiple case studies are modeled using similar methodologies. Further research is however necessary to ground this contention.

New Approach to Capital-Allocation Modeling Improves Performance Assessment

This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper OTC 28685, “Redefining Capital Investment: A Steady Hand in an Unsteady Time,” by Waleed Abughazaleh, Risk and Change Management, prepared for the 2018 Offshore Technology Conference, Houston, 30 April–3 May. The paper has not been peer reviewed. Copyright 2018 Offshore Technology Conference. Reproduced by permission. More than 57% of US industry megaprojects exceed their original budget and delivery timeline; this figure grows to more than 80% for megaprojects worldwide. These overruns translate into direct, significant reduction of capital-investment capability, often not realized until the capital is committed irreversibly. This paper presents a conceptual framework for capital-allocation management. This new framework, known as advanced risk and capital-allocation management (ARCAM), aims to synchronize risk, strategy, and capital decision modeling to provide better visibility of future performance of capital-investment opportunities. Challenges and Analysis Boardroom Discussions. Because long-term production outlook shapes capital investment, executives are cognizant of changes that may affect capital expenditure (CAPEX) and financial capability. In current context, capital investment refers to capital allocations within projects and any capital relative to the sale of certain divisions or the purchasing of assets. Now that companies have become leaner, strategy is shifting toward the ability to meet expected demand at a competitive cost. This can take the form of acquisition of distress assets, mergers, and targeted investments that permit flexibility in capital spending. The ability to retain control over capital requirements is paramount, and persistent cost over-runs within projects become a concern. This difficulty is compounded by delays in project completion. Companies invest in producing assets to meet short- and long-term production outlook, seeking flexibility to ensure that the only capital spent is that which will work toward meeting production requirements at the lowest cost in time to meet the forecasted demand. Although an oil company’s ability to influence oil pricing may be minimal, its entire competitive position will depend on the performance of its capital portfolio. Capital Projects and Opportunity Assessment. From discovery of prospect wells to first oil, hydrocarbon fields have a long life cycle marked by increasing commitment of capital. At every investment milestone, a best-effort decision accounts for a probability of success, as with any business investment. At the corporate level, each entity develops a framework for assessing the economic viability of its capital-investment opportunities. Still, project-performance data reflect a wide discrepancy between funding-investment decision estimates and delivery in terms of cost and schedule. The author’s observation of project-performance data and various project-opportunity-realization frameworks arrives at the conclusion that modifications are necessary to enhance objectivity, consistency, and continuity of opportunity analysis. These modifications form the basis of the ARCAM framework.

Bank Capitalization and the Cross-Section of Bank Stock Returns

We investigate the evolution of US bank capitalization and examine its role in the crosssection of bank stock returns. We use the book capital ratio (BCR), the market capital ratio (MCR) and the stressed capital ratio (SCR) as three proxies for bank capitalization and find that the MCR and the SCR have similar dynamics, while the BCR develops very differently. Our Fama-MacBeth cross-sectional regressions suggest a negative and significant relationship between bank capitalization and bank stock returns between 1994–2007, especially when bank capitalization is measured by the MCR or the SCR. We apply Fama-French factor models to estimate the risk-adjusted returns of our capital ratio-sorted decile portfolios and their sensitivities to systematic risk factors. We find that the BCR proxies for bank portfolio exposures to the market and value factors, while the MCR and the SCR contain some information on exposures to the market and size factors.

A multidimensional approach to the content of human capital

PropósitoUsando uma abordagem multidimensional, este paper teórico tem como objetivo a construção dum marco conceptual que explore as dimensões cognitivas e não cognitivas do capital humano, de modo a explicar como se pode tornar em fonte de vantagem competitiva.ConcepçãoNeste artigo apresentam-se várias proposições teóricas que podem ser testadas empiricamente em futuras pesquisas através da análise multinível. Partindo dum nível individual, determinam-se quatro configurações de capital humano, considerando as dimensões cognitivas e não cognitivas. Baseado nisto, a nível intermédio ou departamental debatem-se as interações do capital humano, tendo em consideração a complexidade do ambiente de tarefas e os processos psicossociais. Ditas interações constituem-se em microfundamentos que explicam como o capital humano pode influir em diferentes capacidades organizacionais a nível de empresa.AchadosA análise teórica realizada nos permite propor quatro configurações de capital humano ao combinar as dimensões individuais cognitivas e não cognitivas. Essas configurações formam um portfólio de capital humano que permitem classificar quatro tipos de trabalhadores. Aliás, este artigo mostra como se agrega o capital humano a nível departamental, gerando processos de surgimento do capital humano, os quais contextualizam-se pela complexidade dos ambientes de tarefas e dos processos psicossociais. O desenvolvimento destes processos de surgimento nos permite propor a associação de determinadas capacidades organizacionais como a de absorção, a de inovação e a tecnológica, com os elementos cognitivos do capital humano, enquanto que um segundo grupo de capacidades organizacionais (compromisso, liderança, proximidade com o cliente) está ligado a aspectos não cognitivos do capital humano.Originalidade/valorEste paper combina as dimensões individuais no estudo do conteúdo do capital humano desde uma perspectiva multinível e micro-fundacional, explicando os efeitos do surgimento do capital humano em diferentes capacidades organizacionais quando o capital humano se contextualiza a nível departamental. Este paper teórico seria mais um passo no conhecimento e medição do conceito do capital humano, enriquecendo o marco da Teoria Baseada nos Recursos.

Refugees' career capital welcome? Afghan and Syrian refugee job seekers in Austria

This study explores how refugees relocate, acquire, and convert cultural, social, and economic capital when entering the Austrian labor market. Drawing on Bourdieu's theory of practice, we conducted 35 semi-structured interviews with Afghan and Syrian refugee job seekers to investigate how the value of the capital forms changes when they move to a culturally distant field, and what strategies they use to develop their career capital portfolio. Findings reveal that (a) all capital forms are strongly devaluated; (b) refugees striving to use their cultural capital encounter unfamiliar labor market rules, occupational identity threats, and status loss; (c) acquisition and conversion of new capital require both the intricate interplay of capital forms and refugees' proactivity. The article concludes with a discussion of theoretical contributions and practical implications for refugee labor market integration.

Fluxo de capital e desigualdade de renda no Brasil (1981-2014)

Este artigo investiga a influência do fluxo de capital de portfólio sobre a distribuição de renda brasileira entre os anos de 1981 e 2014 com o uso do VEC. Os resultados indicam que esse fluxo impacta de forma desfavorável a desigualdade do Brasil. De acordo com o modelo de Demirguc-Kunt e Levine (2009), isso ocorreria em virtude da melhora das condições das famílias que já utilizam o mercado financeiro e pelo não acesso de famílias mais pobres a ele. Outro canal seria que esse mercado, ainda que se abrisse para as famílias pobres, não estaria fornecendo instrumentos para a obtenção de renda por meio de atividades produtivas.

Stress test of banks in India across ownerships: a VAR approach

PurposeThis paper aims to examine whether the Indian banking system is robust to withstand unexpected shocks from external and domestic macroeconomic factors after financial liberalization in 1992. As proposed by Demirgüç-Kunt and Detragiache (1998) and Kaminsky and Reinhart (1999) banking crisis follows financial liberalization. India embarked financial deregulation from 1992, whereas the ongoing global financial crisis (GFC) could jeopardize bank portfolios.Design/methodology/approachStress test is undertaken through the vector auto regressive (VAR) model to examine if decline in GDP, exchange rate volatility and foreign capital portfolio funds adversely impact bank asset quality through higher defaults. The VAR model is run for banks belonging to public, private or foreign ownership. Soundness of banks is measured by the non-performing assets (NPAs) with quarterly data from 1997 to 2014. Post-VAR estimation technique, Granger causality test (GC) and impulse response function (IRF) are used to check for robustness of the VAR model findings.FindingsThe authors found that there is little divergence among banks of different ownership in responding to the shocks from REER, foreign capital flows and GDP output gap. IRF shows that GDP shock to NPA of public and private banks takes more than nine and eight quarters to stabilize. Foreign banks are impacted by the same macroeconomic factors. The stress test exhibits that public banks are more vulnerable and need recapitalization. Moreover, domestic banks are not adversely affected by the GFC, and credit for this could be attributed to the Reserve Bank of India’s (RBI’s) regulatory policy.Research limitations/implicationsSurprisingly, capital market indices do not influence banks’ NPA, and this needs further investigation. The limitation arises from the fact that stock market index for banks was launched only in the early 2000. Missing data and limited number of banks shares traded in the market could explain the trivial results.Practical implicationsFindings of this study will be useful to RBI policymakers and bank managers. The exchange-rate risk faced by borrowers that lead to increased NPAs is an issue that the RBI would be interested to examine. The impact of foreign capital flows, adversely influencing the NPAs of banks, is a significant issue that the RBI is concerned with.Social implicationsBanking sector crisis has serious repercussions, causing loss of household savings and decline in confidence in the banking sector.Originality/valueThis topic was explored in India only by Bhattacharya and Roy in (2008). No other similar work has been done to the authors’ knowledge in stress test of banks in India across different ownership. The authors’ study period covers the GFC and shows that it has not caused devastation as it has in developed countries.

Asset Data Handover for a Large Educational Institution: Case-Study Approach

AbstractOwners of multiple facilities who maintain large capital portfolios are challenged with efficient maintenance to streamline operational processes and costs. Clearly defined and structured i...

Entry to Avoid Competition? Venture Capital and Firm Market Entry in U.S. Local Telephone Industry

This paper offers a novel investigation on how venture capital (VC) may affect market entry strategies of the funded firms. Specifically, we theorize that a venture capital's portfolio diversity, a...