Diversified Investment Strategies Research Articles

Behavioral Biases and Decision-Making in Investment among working individuals in the education sector

This study investigates the impact of behavioral biases on investment decisions among working individuals within the education sector. Behavioral finance theory serves as the theoretical foundation, emphasizing the role of psychological factors in shaping investment choices. The study employs a mixed-methods approach, combining surveys and in-depth interviews to gain insights into the investment behavior of educators, administrators, and support staff. Our findings reveal that a range of behavioral biases, including loss aversion, overconfidence, and herding, significantly influence investment decisions. Working professionals in the education sector often exhibit a strong preference for conservative investment strategies, even when market conditions may suggest otherwise. Psychological factors, such as fear of losses and a tendency to follow trends, play a vital role in shaping investment behavior. These biases are further exacerbated by a lack of financial literacy and investment education. The implications of this research suggest a need for targeted financial education programs to mitigate behavioral biases and enhance decision-making among working individuals in the education sector. Addressing these biases can lead to more informed and diversified investment strategies, potentially improving financial security and long-term wealth accumulation for this demographic. This abstract provides a brief overview of the research focus, methodology, key findings, and the potential implications of the study. It gives readers a clear understanding of the research's scope and significance.

Exploring Market Dynamics: A Qualitative Study on Asset Price Behavior, Market Efficiency, and Information Role in Investment Decisions in the Capital Market

This qualitative study explores market dynamics, asset pricing behavior, market efficiency, and the role of information in investment decisions within the financial markets. The research aims to provide insights into the underlying motivations, perceptions, and experiences of market participants, offering a comprehensive understanding of these complex phenomena. Employing qualitative methods such as semi-structured interviews and textual analysis, data was collected from a diverse range of participants including investors, financial analysts, and market regulators. The study found that market dynamics are influenced by various factors including investor sentiment, economic indicators, regulatory changes, and technological advancements. Behavioral biases among investors, such as herd mentality and overconfidence, challenge traditional theories like the efficient market hypothesis (EMH), indicating the presence of market inefficiencies. Moreover, information plays a central role in shaping investor perceptions and driving market trends, though concerns exist regarding the reliability of information sources in the era of social media and algorithmic trading. The study underscores the importance of investor education, diversified investment strategies, transparency, and regulatory interventions in fostering fair, efficient, and resilient financial markets. Moving forward, addressing these issues will be crucial for informed investment decision-making and advancing our understanding of financial market dynamics.

Global Equity Markets: An Empirical Study of Return Prediction and Diversification Benefits

My research delves into the equity market trends of China, Japan, and the UK in the post-2000 era. I analyze a dataset of macroeconomic variables from 2000 to 2022 to assess their ability to predict equity market returns. My study reveals that all three nations have seen an upward trajectory in their equity markets, with China's market experiencing the most substantial growth. In addition, I explore how macroeconomic variables affect stock prices and identify the variables that have the most significant impact on equity market returns. Finally, I conclude that a diversified investment strategy in multiple countries stock markets produces higher Sharpe ratios than any single-country investment.

Impact of Climate Policy Uncertainty, Clean Energy Index, and Carbon Emission Allowance Prices on Bitcoin Returns

This research aimed to investigate the relationship between climate policy uncertainty (CPU), clean energy (ENERGY), carbon emission allowance prices (CARBON), and Bitcoin returns (BTC) for the period from August 2012 to August 2022. The empirical analysis strategies utilized in this study included the Fourier Bootstrap ARDL long-term coefficient estimator, the Fourier Granger Causality, and the Fourier Toda–Yamamoto Causality methods. Following the confirmation of cointegration among the variables, we observed a positive relationship between BTC and CARBON, a positive relationship between BTC and CPU, and a negative relationship between BTC and ENERGY. In terms of causal associations, we identified one-way causality running from CARBON to BTC, BTC to CPU, and BTC to the ENERGY variable. The study underscores the potential benefits and revenue opportunities for investors seeking diversified investment strategies in light of climate change concerns. Furthermore, it suggests actionable strategies for policymakers, such as implementing carbon taxes and educational campaigns, to foster a transition towards clean energy sources within the cryptocurrency mining sector and thereby mitigate environmental impacts.

Identifying dynamic risk spillovers between crude oil and downstream industries: China's futures market perspective.

Interactions between crude oil and its downstream products are crucial but complex. The main purpose of this study is to examine the risk spillover relationships between the crude oil futures market and the petrochemical downstream futures market in the context of the COVID-19 epidemic in China. By combining the dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (DCC-GARCH) model and the Diebold-Yilmaz spillover index based on time-varying parameter-vector autoregression (TVP-VAR-DY), we investigate the dynamic correlations between Shanghai crude oil futures (INE) and the downstream futures in China's petrochemical industry chain. At the same time, we also incorporate the representative global crude oil futures (BRENT and WTI) in our study as a comparative analysis. Our results show a significant positive correlation between three crude oil futures and China's downstream future products, with a more pronounced link observed between INE and the downstream futures market. Moreover, the correlation between crude oil futures and various downstream products exhibits heterogeneity; that is, direct derivatives of crude oil show higher sensitivity to price fluctuations compared to products with longer production chains. Furthermore, the spillover results indicate that the international crude oil futures, particularly BRENT, primarily function as spillover transmitters, while INE mainly serves as the recipient. In the post-pandemic period, the international crude oil market still exhibits a high spillover effect, and the spillover effect of INE to polyvinyl chloride, pure terephthalic acid, and bitumen futures increased, reflecting market recovery in China to some extent. These results provide potential insights for policymakers, financial institutions, industry participants, and investors, emphasizing the importance of enhanced risk management, diversified investment strategies, and attention to market dynamics.

Portfolio Optimization Based on Main Board Stocks in China

Portfolio is one of the most critical factors in the investment process, which can effectively reduce investment risk, improve investment return, and achieve more diversified investment strategies according to the different needs and goals of investors. This paper focuses on Chinese stock market and selects five active stocks on the Main Board from Shanghai Stock Exchange. Closing prices from August 1,2022 to December 31,2022 of each stock are obtained from Tushare. Four portfolios are constructed in this paper, of which is equally-weighted, market-value-weighted, minimal risk and maximal Sharpe ratio. Monte Carlo simulation is constructed to obtain combinations with minimal risk and maximal Sharpe ratio. After obtaining weights of these tow combinations, it turns out that Sichuan Changhong Electric accounted for the max proportion in minimal risk portfolio while in maximal Sharpe ratio portfolio, China United Communications took up the largest proportion. Finally, according to the overall cumulative return curve, maximal Sharpe ratio portfolio is the optimal portfolio. This paper gives detailed insights of portfolio allocation and selection for investors.

Comparison of Long-Term Investment Strategies: DCA vs Lump-Sum Investing in the S&P 500 Index

This research delves into the realm of long-term investments, a domain often navigated by unsophisticated investors who prefer a hands-off, 'set and forget' approach. Central to this investigation are two dominant investment strategies: Dollar-Cost Averaging and Lump-Sum investing. The study meticulously compares the performance of these strategies over a significant 21-year period, from January 2002 to December 2022, a timeline punctuated by major market upheavals such as the Dot Com Bubble and the 2020 Coronavirus crash. Drawing data from the reputable Yahoo! Finance on the S&P 500 index, the research offers a robust backtest of both strategies. The results are illuminating: Lump-Sum investments, especially those made during the nadir of February 2009, realized returns amplifying the initial investment by up to 5.2 times, clearly overshadowing the returns from Dollar-Cost Averaging. Intriguingly, a fusion of both strategies, a hybrid approach, showcased even more impressive gains, hinting at the merits of a diversified investment strategy. Conclusively, within the parameters of this research, Lump-Sum investing emerges as the more potent strategy. However, the study also paves the way for future inquiries, especially concerning the potential of these strategies in the turbulent waters of volatile assets, exemplified by Bitcoin.

Designing diversified renewable energy systems to balance multisector performance

Renewable energy system development and improved operation can mitigate climate change. In many regions, hydropower is called to counterbalance the temporal variability of intermittent renewables like solar and wind. However, using hydropower to integrate these renewables can affect aquatic ecosystems and increase cross-sectoral water conflicts. We develop and apply an artificial intelligence-assisted multisector design framework in Ghana, which shows how hydropower’s flexibility alone could enable expanding intermittent renewables by 38% but would increase sub-daily Volta River flow variability by up to 22 times compared to historical baseload hydropower operations. This would damage river ecosystems and reduce agricultural sector revenues by US$169 million per year. A diversified investment strategy identified using the proposed framework, including intermittent renewables, bioenergy, transmission lines and strategic hydropower re-operation could reduce sub-daily flow variability and enhance agricultural performance while meeting future national energy service goals and reducing CO2 emissions. The tool supports national climate planning instruments such as nationally determined contributions (NDCs) by steering towards diversified and efficient power systems and highlighting their sectoral and emission trade-offs and synergies.

Target Date Funds: Current Status and Issues

Target date funds (TDFs) have their portfolios periodically adjusted according to the retirement dates of fund subscribers and are generally composed of several funds. TDFs attract attention in the recent pension market due to the increasing role of private pensions, the concern about the depletion and financial instability of the National Pension Fund, increased interest in stock and fund markets after COVID-19, and the introduction of the retirement pension default option. In particular, target date funds seeking globally diversified investment strategies could change the irrational investment behavior of pension assets that are still mainly invested with principal and interest-guaranteed products and consequent low returns. To this end, this study examines the current status and issues of TDF in the United States and Korea, and proposes ways to develop domestic TDF in the right direction.

Historical evolution and current state of investment of the Norwegian sovereign wealth fund in the stock market

Over the past three decades, Sovereign Wealth Funds (SWF) have grown to become key players in the global investment landscape. At the top of this list is the Norwegian SWF, with a volume of assets under management surpassing 1 billion US$1, of which 70% is invested in more than 9,000 listed companies worldwide. This paper offers a global and descriptive vision of the evolution of the distribution of investment in shares, taking into account criteria such as the economic sector to which it belongs, the region where the investment is made or the number of companies that attract this investment. It is concluded that the fund has chosen to consolidate a highly diversified investment strategy both geographically and by industry.

Social sustainability and the argan boom as green development in Morocco

Morocco markets argan oil as a fair-traded, organic health and beauty elixir that women extract in an ancient forest protected internationally to clean the world’s air. Since the 1990s, the kingdom has partnered with global governance organizations and foreign investors to develop the argan forest as a coveted natural resource, designated a UNESCO Biosphere Reserve in 1998. Large-scale investments in reforestation and “arganiculture” propose to mitigate carbon emissions, alleviate poverty, and empower women workers at proliferating state-subsidized argan oil cooperatives in the export-oriented commodity value chain. This impact evaluation of the booming argan enterprise weighs the social benefits and costs of a transnational push that prioritizes economic growth over social sustainability. Empirical data from 829 surveys with local residents depict an unregulated, informal commercial sector at odds with the inclusive neoliberal development narrative on the whole. Results show rural women and their communities exposed to risks in a centralized, market-driven extractivist industry geared toward consumers. The top-down argan boom has triggered new legislation and innovations in science and technology that have shifted control of the land, agroforestry practices, and oil extraction process from local producers to the state. Women and the rural poor have thus been divested of their patrimony and marginally sustained as manual labor rather than effectively empowered. Moving forward, rebalancing economic, environmental, and social sustainability priorities will require initiatives informed by empowerment indicators, revised regulatory policies, diversified investment strategies, and commitment to assuring compliance, transparency, and impartial assessment of benefits and costs to women workers.

Big Fish in a Small Pond: Institutional Trading of Penny Stocks

There has been a steady increase in institutional ownership of penny stocks over the past decades. Nevertheless, we show that penny stocks bought by institutional investors significantly underperform other penny stocks in subsequent four quarters. This poor performance is mainly driven by quasi-indexers, i.e., institutions with passive and widely diversified investment strategies. In comparison, dedicated institutions, i.e., those with low turnover but large average investments in portfolio firms and a commitment to “relationship investing”, have marginally significant ability in trading penny stocks.

News and subjective beliefs: A Bayesian approach to Bitcoin investments

The use of crypto-currencies in financial applications is receiving increasing interest. This paper relies on a Bayesian framework that combines market-neutral information with subjective beliefs to show an application of how Bitcoin can be exploited to build diversified investment strategies. By means of an intuitive procedure based on the Black and Litterman model, I propose to relate portfolio construction with the role of news in generating investors’ subjective beliefs, which are computed according to market reactions occurred after similar announcement events in the recent past. To test this approach, the analysis refers to an extremely volatile market phase for Bitcoin such as the interval from mid-2017 to mid-2018. Results indicate that Bitcoin can contribute to improve the risk-adjusted performances of diversified portfolios and that investors’ subjective beliefs can help to interpret the fundamental drivers of crypto-currencies’ market behaviors. This approach may also stimulate the investigation of more sophisticated strategies built according to the relationships between news and investors’ personal views on Bitcoin market dynamics.

Diversified Investment Strategy and the Operation of Internal Capital Market: The Moderating Effect of Corporate Governance Mechanism

This paper aims to examine the relationship between diversified investment and the operation of the internal capital market, and then further investigate the impact of corporate governance mechanism on the relationship between them. Using a sample of group-affiliated firms listed on the Shanghai and Shenzhen Stock Exchanges in China, from 2010 to 2017, we find that the operation of internal capital market Granger-causes the diversified investment and both of them have a non-linear relationship. Moreover, we also find that four factors of corporate governance mechanism (the type of ownership, the fraction of independent directors, managerial ownership, and whether the CEO is also the chairman of the board) have different moderating effects on the relationship between diversified investment and the operation of internal capital market. In addition, we conclude that the internal capital market plays a central role in the diversified investment strategy and improving corporate governance mechanism helps strengthen the relationship between diversified investment and the operation of the internal capital market.

A Segmentation Study of Non-Performing Loans Rates in Turkish Credit Market

Non-performing loans (NPLs) rate is one of the main risks in commercial banks and is also a critical measure of the bank’s financial performance and stability. Banks meet the growth rate of NPLs when the debtors are not able to meet their financial obligations in terms of repayment of loans. Regional diversification can impact NPLs rate as well as macroeconomic and bank-specific factors. The purpose of this study is to detect homogeneous credit risk groups by geographical locations. Diversification across regions can help banks and financial institutions to determine appropriate market areas and identify effective diversified investment strategies by reducing the overall risk of the credit portfolios.

A Segmentation Study of Non-Performing Loans Rates in Turkish Credit Market

Non-performing loans (NPLs) rate is one of the main risks in commercial banks and is also a critical measure of the bank’s financial performance and stability. Banks meet the growth rate of NPLs when the debtors are not able to meet their financial obligations in terms of repayment of loans. Regional diversification can impact NPLs rate as well as macroeconomic and bank-specific factors. The purpose of this study is to detect homogeneous credit risk groups by geographical locations. Diversification across regions can help banks and financial institutions to determine appropriate market areas and identify effective diversified investment strategies by reducing the overall risk of the credit portfolios.

Investing In Exchange Traded Funds

This article provides an overview of Exchange Traded Funds (ETFs) and discusses their features including creation, redemption, and trading mechanism. The article further describes the 10 broader categories and 96 sub-categories of ETFs, net assets and annual issuances of ETFs and merits and demerits of investing in ETFs. As a passive but diversified investment strategy, ETFs appear to be better investment vehicles in terms of taxes, lower management fees and expenses, and portfolio risk management. The strategic investment decision in ETFs however depends on investors’ objectives, attitudes towards risks, and time horizon of investment because investing in ETFs could have diverge implications especially during the formation and distribution phases of retirement or pension funds.

Optimal diversity in investments with recombinant innovation

The notion of dynamic, endogenous diversity and its role in theories of investment and technological innovation is addressed. We develop a formal model of an innovation arising from the combination of two existing modules, with the objective to optimize the net benefits of diversity. The model takes into account increasing returns to scale and the effect of diversification of investments on the probability of emergence of a third option. We obtain analytical solutions describing the dynamic behaviour of the values of the options. Next, diversity is optimized by trading off the benefits of recombinant innovation and returns to scale. We derive conditions for optimal diversity under different regimes of returns to scale. Threshold values of returns to scale and the recombination probability define regions where either specialization or diversity is the best choice. When the investment time horizon is beyond a threshold value, a diversified investment strategy is the best choice. This threshold will be larger for higher returns to scale. This problem is relevant to allocation of scarce funds by governments, research councils, firms and investors.

Dynamic correlations between REIT sub-sectors and the implications for diversification

The issue of whether Real Estate Investment Trusts (REITs) should pursue a focused or diversified investment strategy remains an ongoing debate within both the academic and industry communities. This article considers the relationship between REITs focused on different property sectors in a Generalized Autoregressive Conditional Heteroscedasticity-Dynamic Control Correlation (GARCH-DCC) framework. The daily conditional correlations reveal that since 1990 there has been a marked upward trend in the coefficients between US REIT sub-sectors. The findings imply that REITs are behaving in a far more homogeneous manner than in the past. Furthermore, the argument that REITs should be focused in order that investors can make the diversification decision is reduced.

The evolution of directors duties: bridging the divide between corporate governance and corporate social responsibility

However challenging the prospects, there are growing indications of large corporations taking their social and environmental responsibilities more seriously, and of these issues becoming more critical in the business agenda. The substance of company reports is changing, from purely environmental reporting up until 1999, to sustainability reporting (social, environmental and economic), which has become the mainstream approach of global companies. Though some of the expressed concern may be part of the discourse of political correctness, there does appear to be a significant shifting of opinion among executives. At the confluence of these multiple emerging initiatives and trends towards greater corporate social and environmental responsibility, there is emerging a dynamic stakeholder model for driving enlightened shareholder value (or more expansively, stakeholder values). This article examines how the duty to promote the success of the company offers legal encouragement to pursue responsible strategies on the part of directors and managers, and how legal and moral liability is converging. Similarly, the effect of the modern prudent investor rule is that institutional investor decision-makers are given latitude to follow a wide range of diversified investment strategies, provided their choice of investments is rational and economically defensible, they may sustain a portfolio balanced by environmental, social and governance criteria.