Development Of Investment Strategies Research Articles

Practical Applications of Evaluating Trading Strategies

Warning! You are likely relying on false research to inform your investment choices, according to an article in The Journal of Portfolio Management’s 40th Anniversary Issue . Investors often rely on financial research when developing investment strategies, but this could be a huge mistake, warn Campbell Harvey and Yan Liu. In their article, Evaluating Trading Strategies , Harvey and Liu tell researchers they are finding seemingly successful trading strategies by chance. They tell investors they need to be a lot more skeptical of investment proposals. The article was awarded Best Article in The 16th Annual Bernstein Fabozzi/Jacobs Levy Awards . In a video interview, available online at http://bit.ly/1DgcZ2X, Cam refers to proposed guidelines for researchers and Wall Street’s surprising reaction to them. This report comprises excerpts from the video, which is intended to jump start the conversation. For a deeper understanding, read their article in The Journal of Portfolio Management’s 40th Anniversary Issue .

Теоретические аспекты разработки инвестиционной стратегии предприятия

Теоретические аспекты разработки инвестиционной стратегии предприятия

Supplier development investment strategies: a game theoretic evaluation

Supplier development is a critical competitive endeavor for organizations and their supply chains. Investigation into this area has increased over the past few years, yet further understanding of suppler development is needed. Specifically, recent supplier development investment practices have shown a shift from standalone actions by organization or supplier to joint actions between organization and suppliers. Faced with this phenomenon, the goal of this paper is to develop a theoretic model based on the Cobb–Douglas production function. The study focuses on determining optimal supplier development investment strategies with respect to joint actions that increase supplier production capability for the benefit of both the focal organization and its suppliers. The supplier development investment strategies mainly refer to joint actions between an organization and multiple suppliers through capital resources (tangible) investments, knowledge (intangible) investments, and sharing cost of capital resources (tangible) investments. Using various game theoretic models, we reveal how supplier development investment strategies and profits of all the members are affected by various buyer-supplier relationships and investment returns to scale reasons. Whether the focal organization (buyer) has any incentives to share cost of capital resources (tangible) investments is also investigated. Our first finding is that supplier development investment activities motivation is derived from increases in supply volume for the “increasing returns to scale” situation, and derives from increasing the organization and suppliers’ marginal profit in the “decreasing returns to scale” situation. Secondly, the cooperative relationship is more economically beneficial to the supply chain, but it also requires more capital resources and knowledge expenditures (investments) than a non-cooperative relationship. Thirdly, through numerical analysis it is found that the cooperative relationship can not obtain Pareto efficiency for all the members of the supply chain when using the Nash bargaining model. Additional gaming insights and implications are also provided from parametric analysis. Opportunities for further research are also presented.

Realized volatility and absolute return volatility: a comparison indicating market risk.

Measuring volatility in financial markets is a primary challenge in the theory and practice of risk management and is essential when developing investment strategies. Although the vast literature on the topic describes many different models, two nonparametric measurements have emerged and received wide use over the past decade: realized volatility and absolute return volatility. The former is strongly favored in the financial sector and the latter by econophysicists. We examine the memory and clustering features of these two methods and find that both enable strong predictions. We compare the two in detail and find that although realized volatility has a better short-term effect that allows predictions of near-future market behavior, absolute return volatility is easier to calculate and, as a risk indicator, has approximately the same sensitivity as realized volatility. Our detailed empirical analysis yields valuable guidelines for both researchers and market participants because it provides a significantly clearer comparison of the strengths and weaknesses of the two methods.

Trading Strategy for Stock Index Futures Based on Disposition Effect

Grinblatt and Han (2005) argued that unrealized capital gains and expected returns are positively related in the U.S. stock markets. This study investigates the possibility of developing investment strategies for stock index futures using the positive relation. Probing the trading data of futures on KOSPI200 during the period of 1995~2013, several interesting results are obtained. First, the strategy of building long positions when the unrealized capital gain is greater than zero produces positive profit which is statistically significant. Second, the profitability of this strategy during December is significantly positive while the profitability during January is insignificant. Third, the strategy generates positive profit during the second half year while the profitability of the first half year is insignificant. These results imply that it is possible to develop investment strategy by extracting some information from the unrealized capital gains.

Analysis of Extension Needs of Commercial Farmers in North-West Province, South Africa

The study examines extension needs of commercial farmers in the North West province. Commercial farming is one of the most important rural development investment strategies that can have both direct and indirect impact on poverty and food security. The sampling frame of the study consists of 88 farmers which is the study population and a sample of 32 farmers was selected for the study. Data was collected using a structured questionnaire which was subject to analysis using SPSS. Frequency counts and percentages were used to describe demographic characteristics, multiple regression analysis was used to determine the relationship between information needs and socio-economic characteristics of commercial farmers. The results of multiple regression analysis show that the significant determinants of commercial farmers information needs were attitude to public extension (t = 2.84,); marital status (t = -4.00); educational level (t = 2.107) membership of farmers groups (t = 2.168,) and extension contacts (t = 1.78).

Firm characteristics that drive the momentum pattern in the UK stock market

Previous studies have estimated the company characteristics of previous winners and losers to explore the momentum effect. Using UK data, this study focuses on the characteristics of companies that actually generate the momentum pattern. These are previous winners who keep performing well (WW) and past losers who consistently perform poorly (LL). This study illustrates that WW and LL firms may exhibit market-based characteristics similar to those of young, low-priced, small capitalisation companies, but that there are significant differences. Accounting and fundamental signals (e.g. profitability, value/growth) tend to distinguish winners from losers. Based on firm characteristics, we further develop investment strategies that can outperform significantly the profitability of the momentum strategy.

Development of Investment Strategies of Energy Efficiency Programs in Korea

Since Korean energy efficiency program is generally run through subsidy program toward consumers regarding support target high efficiency devices, more rational investment plan shall be established considering yearly budget level input to each program, energy saving, or traits of device supply. Evaluation of energy efficiency program, however, is conducted based on 'California Standard Practice Test' regarding yearly plan and performance of the program thus it is not effectively reflected to the establishment of plan for next year. Due to such reasons, proper portfolio construction of energy efficiency program through the priority determination between each program and rational investment allocation is not achieved in regards to current plan of the energy efficiency program. This paper presents the methodology to establish optimizing investment planning for energy efficiency program based on the portfolio theory.

Tales from the Downside: Risk Reduction Strategies

High market volatility has driven the development of investment strategies advertised to deliver reduced risk without reduced return. The “low-volatility” equity anomaly (low-risk stocks may have similar or greater returns than high-risk stocks) is best exploited by investors as part of the toolkit of a broader active strategy. “Tail risk” strategies can provide protection in extreme market events, but their persistent negative carry (ongoing cost) make them unappealing to most investors. Managed futures and global macro hedge fund strategies have desirable downside risk protection characteristics combined with positive returns and alpha for skilled investors. Investors can increase their downside protection by allocating part of their hedge fund or opportunistic asset category to managed futures and global macro strategies.

Shaping climate policy in the housing sector in northern Chinese cities

What are relevant urban development investment strategies for improving building energy efficiency (BEE) and decarbonizing the urban district heating supply in rapidly urbanizing China? Different trajectories of BEE and energy supply technologies are compared in the urban context in a northern Chinese city. Vigorous improvement of BEE will significantly enhance the prospective financial capacity to facilitate deployment of backstop technologies (e.g. carbon capture and storage) in order to decarbonize the energy supply and achieve the long-term targets of low-carbon buildings. Carbon finance instruments should be used to facilitate public policy to accompany the necessary transition in the urban development process. The government-run efficiency procurement scheme will overcome the problem of insufficient incentive and high transaction costs associated with individual Clean Development Mechanism projects. Appropriate investment strategies (allocation of financial resources over the time frame) will allow local governments to harness the large potentials of carbon emissions mitigation while minimizing the risk of long-term technical lock-in in the built environment in Chinese cities.

Development, Implementation and Evaluation of Multistage Investment Strategies

Construction of optimal investment portfolio is very complicated task due to many diverse factors which might affect risk and return of the portfolio in the future. Values and impact level of unique factors on the portfolio are changing over time; therefore every investor should take into account the fact that there always will be a certain level of risk associated with any portfolio involving stocks. There is a number of ways to form a collection of most appropriate stocks and bonds for investment portfolio as well as to allocate weights of assets based on various criteria. All of these methods, dedicated for selection and allocation of assets, have their specific features and some disadvantages. In order to be able to conclude which of the asset selection methods have least disadvantages, four popular techniques were analysed and compared. These techniques were based on different variables: correlation coefficients between asset returns, maximisation of the utility function (diverse values of risk aversion coefficients were analysed), selection of assets with highest historical returns, and employment of modified price-to-earnings ratio. The article deals with multistage extension to the mean-variance and expected utility maximisation portfolio choice. Multistage investing consists of several essential stages, where each stage forms a basis for the next stage by providing useful input data, derived by stage-specific analysis. For construction of optimal portfolio the following stages are used: asset allocation, security selection, investment strategy development, construction of the model and its evaluation. After asset allocation was made and stocks for the portfolios had been selected, different theoretical asset allocation models (equal weight asset allocation, Markowitz model, Capital Asset Pricing Model (CAPM), model where risk free asset is incorporated when constructing a portfolio) have been modified and adapted in order to become suitable for real market situation. Such prerequisites as normal distribution of stock returns were not satisfied by most Lithuanian companies’ stocks when different interims were investigated, therefore authors set a presupposition that distribution properties of the stocks can be disregarded when Markowitz and CAPM models were applied to real market. Some other changes for the prerequisites of models were made; otherwise these theoretical models could not have been applied to Lithuanian market. After all models had been applied in Lithuanian equity market, back testing was carried out and certain characteristics of outcomes of different investment strategies were compared. Results were judged against characteristics of popular stock exchange indices of Baltic States in order to obtain conclusions. Most models were developed for broad financials markets (global markets). In the paper we analyse financial market of Lithuania. Since this market does not fit assumed conditions of general models, the models were slightly modified to apply for Lithuania market. The results of portfolio were compared with Baltic States index. It was concluded that the highest return rate is achieved by constructing the investment portfolio with employing modified Capital Asset Pricing Model. The best technique for selecting stocks proved to be the maximisation of utility function when risk aversion coefficient A=3. In addition to this, after comparison of different asset selection methods, it was noted that the highest value of the Sharpe ratio was achieved by utilising the same technique. After investigation it was noted that investors should add a risk free asset into portfolio of stocks because it usually improves the results of most portfolios, irrespective of their contents. Constructing portfolios based on asset allocation according to indices analysed in the paper is not recommended because characteristics of indices were worse than the ones of constructed portfolios. Stocks of every company quoted in NASDAQ OMX Baltic (2011) Stock Exchange in Vilnius Official list for more than 10 years (2001 beginning – 2010 end) were investigated. Stocks of 14 companies satisfied preset 10 year interim criterion.DOI: http://dx.doi.org/10.5755/j01.ee.23.2.1542

Impact Analysis of Taung Irrigation Scheme on Household Welfare among Farmers in North-west Province, South Africa

The study examines the impact of Taung irrigation scheme on the household welfare among farmers in the North West Province. Irrigation farming is one of the most important rural development investment strategies that can have both direct and indirect impact on poverty and food security. The sampling frame of the study consists of 137 farmers and a sample of sixty farmers was selected for the study. The relationship between the household welfare and the independent variables were estimated using an ordinary least square regression estimation procedure. The dependent variable used to capture household welfare is per capita expenditure. Per capita expenditure is used as a proxy for per capita income and employed as a measure of welfare. The results of the multiple regression analysis shows that the independent variables relate significantly to knowledge levels of the extension officers with an (=2.25, p<.05) an R (.67). The significant determinants of household welfare amongst farmers were age (t=1.78), gender (t=1.76), educational level (t=2.48), household head type (t=1.87), access to natural capital (t=-1.95) and socio-economic status (t=2.47).

From the authors

Most discoveries in empirical finance are false, as a consequence of selection bias under multiple testing. Although many researchers are aware of this problem, the solutions proposed in the literature tend to be complex and hard to implement. In this article, the author reduces the problem of selection bias in the context of investment strategy development to two sub-problems: determining the number of essentially independent trials and determining the variance across those trials. The author explains what data researchers need to report to allow others to evaluate the effect that multiple testing has had on reported performance. He applies his method to a real case of strategy development and estimates the probability that a discovered strategy is false. <b>TOPICS:</b>Statistical methods, performance measurement

A theory-based innovation systems framework for evaluating diverse portfolios of research, part two: macro indicators and policy interventions

This framework for multi-level evaluation of scientific research is a bridge between social science theory and the provision of effective feedbacks to governments so they can overcome systemic blockages to innovation and successful outcomes of research policy. Starting with the idea of innovation network theory and organizational theory involved in the research environment survey, a small set of indicators is suggested at micro, meso, and macro levels. Data from this integrated set of indicators can identify the blockages and suggest corrections. This paper concentrates on the macro-level indicators. Three familiar kinds of government policy lever — capital, capabilities, and coordination modes — are discussed. However, the discussion of ways in which these interventions can correct blockages is far more complex than has previously been acknowledged in the evaluation literature. The proposed framework is an important step for evaluators and policy-makers to develop research, technology and development investment portfolios and strategies more effectively. Copyright , Beech Tree Publishing.

7.3.2 Optimization of Research and Development Investment Strategies

AbstractAn enterprise must make up‐front investments in applied research and development (R&amp;D) to mature technologies to a point where they can be successfully deployed. These decisions are based on expected return from the investment and the cost, schedule and technical risks facing each R&amp;D project. Periodically, the decisions are revisited to see if changes in project performance and cost/schedule/risk estimates warrant a change in project funding. Common approaches to this problem involve either Monte Carlo simulation of outcomes for a decision policy, or optimization of decision variables based on some objective. This paper outlines an approach to R&amp;D project selection where both simulation and optimization are used to determine an investment strategy, given project interdependencies and uncertainties in utility, cost, schedule and technical performance. The problem is formulated as a discrete sequential stochastic decision problem and uses heuristics to narrow the solution space and find a reasonable (though non‐optimal) solution.

An Analysis of the Determinants of Transaction Frequency of Institutional Commercial Real Estate Investment Property

This study examines the correlation of the frequency of the sale of investment‐grade property with national, regional and local variables, including property‐ and owner‐specific characteristics. More specifically, the study identifies the primary factors that “explain” intertemporal changes in transaction frequency in the underlying properties used to develop the National Council of Real Estate Investment Fiduciaries (NCREIF) index. Understanding these factors yields important information that can be used by firms when forming market expectations and developing investment strategies.

DETERMINATION OF EFFICIENCY OF INVESTMENTS IN CONSTRUCTION

Decision making is associated with ranking problems aimed to obtain a set of preference order of solutions. People can make mistakes choosing the best object for investments. Due to high cost of such mistakes, such a choice should be well founded. A major goal of paper is to develop a theoretical basis for creating a decision support system aimed to increase building construction and reconstruction investment efficiency by applying multiattribute decision making approaches and mathematical modelling. To achieve the goal, the following problems have to be solved: to analyse new models currently used in developing investment strategies in building construction and reconstruction, to make a classification of construction investment projects and to describe the stages of determining the efficiency of construction investments, to create a family of multiattribute decision methods to be used in the analysis of investment projects in building construction and reconstruction, to create multiple attribute decision support system based on the multiattribute methods developed for determining the efficiency of construction and reconstruction investment projects.

Determination of efficiency of investments in construction

Abstract Decision making is associated with ranking problems aimed to obtain a set of preference order of solutions. People can make mistakes choosing the best object for investments. Due to high cost of such mistakes, such a choice should be well founded. A major goal of paper is to develop a theoretical basis for creating a decision support system aimed to increase building construction and reconstruction investment efficiency by applying multiattribute decision making approaches and mathematical modelling. To achieve the goal, the following problems have to be solved: to analyse new models currently used in developing investment strategies in building construction and reconstruction, to make a classification of construction investment projects and to describe the stages of determining the efficiency of construction investments, to create a family of multiattribute decision methods to be used in the analysis of investment projects in building construction and reconstruction, to create multiple attribute...

Goals-Based Investing

This article examines opportunities to improve wealth management by combining traditional finance theory with the observations of behavioral finance. Areas of focus include risk measurement, risk profiling, and methods for managing behavioral biases. In the area of risk measurement, the author stresses the importance of capturing investor preferences and goals and proposes several measures that are consistent with this objective. The author also critiques common risk profiling techniques, advocating separate risk tolerance estimates for separate goals rather than an overall risk tolerance for each investor, noting that the total portfolio framework of traditional finance is inconsistent with investors9 tendencies towards mental accounting. A better result may be achieved by linking individual strategies to a specific goal or goals. The author describes a process for implementing his recommendations through examples, considering the challenges of investing to meet current lifestyle expenses and investing for a fixed planning horizon. The article closes with a call to align investment strategy development with common investor goals, arguing that this will promote consistency between the investment principles of the practitioner and the perspective of the individual investor.

Education for Development: Analysis of Investment Choices

The principal aim of this book is to make planners and policymakers more aware of the problems that can arise in developing investment strategies for education and the analytical tools and information that are available to help solve them. It draws both on World Bank analysis and research and on the wider literature on planning educational investment. Among the topics discussed are the contribution of education to economic and human development, cost-benefit analysis, the demand for educated manpower, finance, the efficiency and quality of education, equity considerations, and the links between investment in education and in other sectors.