Expense Ratio Research Articles

Leveraged Exchange-Traded Funds Versus Investing on Margin

Motivated by the SEC’s recent discussion on leveraged exchange-traded funds (LETFs) and LETFs’ rapid growth, this study provides an analytical and empirical comparison of the performance of LETFs versus traditional investing on margin. First, we prove that the return distribution of LETFs has higher skewness than that of a market portfolio on margin, which may reduce downside risks for investors. Second, we empirically test the daily-return model used in literature to construct LETF returns, and find that the published expense ratio may underestimate the actual cost of those funds for investors. Third, using historical data, we replicate the returns of LETFs and market portfolios on margin. The empirical results show that across different holding periods, the returns of the LETF strategies are higher (lower) than that of market portfolios on margin during strong (moderate) bull and strong (moderate) bear markets. LETFs also provide lower downside risks, and a simple strategy based on the 3× LETF can generate higher risk-adjusted return. Moreover, we find that the LETFs are less risky during every bear market since 1927.

Does bank competition inhibit the formation of zombie firms?

The intensified competition in China's banking industry is an important embodiment of gradual financial reform. Based on the Annual Survey of Industrial Enterprise Database, we find that the probability of forming zombie firms decreases by 0.48% with 1% increase of city-level bank competition. The result still holds when we introduce an IV based on the number the bank branches in 1937 when China's bank industry was at the boom before the World War II. The underlying mechanism is that the financial expense ratio of zombie firms increases by 0.17% with 1% increase of bank competition, which supports the “competition-stability” view. We also introduce the exogenous shock event of China's WTO accession and proxy variable from the survey on foreign banks in 1935 when China's bank industry was at the boom before the war, and the results are still robust.

Evaluating the Cost of Managing Real Estate Mutual Funds

We investigated the relationship between real estate mutual fund expense ratios, advisory fee, and total assets managed by real estate mutual funds. We also evaluated if cost efficiencies in management (dollar operating cost as well as advisory fee) were associated with scale in real estate investment trusts (REITs), our results showed that dollar cost increases in real estate mutual funds were less than proportionate to increases in assets, suggesting economies of scale for real estate mutual funds. Average cost elasticity for funds varied depending upon fund size, index versus non-index fund, institutional versus retail funds, global versus US real estate funds, and share class of funds. Cash flows were negatively related to the cost of managing a fund. We also found cost efficiencies in the advisory fee charged by real estate mutual funds contributed to economies of scale in the overall cost of fund management.

On the Benefits of Scale Economies in Asset Management

Scale economies in asset management, coupled with strong competitive forces, have benefitted investors through greater market access and lower costs. The authors quantify these scale economies using data on 27,643 US open-end funds comprising $28.7 trillion in assets. Scale economies are pervasive and are experienced by both index and active managers. The authors develop a framework based on fund size and expense ratios to show that economies of scale in index management have led to significant reductions in costs for both index and, via competition, active investors. Using this framework, they evaluate a proposal by the Federal Trade Commission to amend antitrust regulations in a way that would significantly affect the ordinary course of investment activities of US asset managers and could reverse nearly three decades of cost reduction.

Portfolio Management Services in India: Returns and Incentives

On the back of booming equity markets and falling interest rates, Indian high net worth investors have flocked to Portfolio Management Services (PMS) funds in India with substantial assets under management of INR 18,07,939 crores. However, there is scant academic literature on the performance of PMS funds in India which charge high fees compared to passive index funds. The purpose of this study is twofold. First, describe the performance of PMS funds in India as compared to their respective benchmark. Secondly, review the incentives fees structure of PMS funds and recommend regulatory changes needed to address the shortcomings. The principal results indicate that majority of PMS funds have failed to outperform the benchmark in the short-term and medium-term periods. In the long-term period, however, largely PMS funds have beaten the benchmark returns. The implications of this study are two-fold in the Indian market context. First, high net worth individuals in India must invest via PMS funds only if their investment time horizon is at least ten years. For the short to medium-term, it will be better to invest in index funds due to their meager expense ratio and returns, which are like the benchmark indices. Second, Indian policymakers must increase the minimum hurdle rate based on which the variable performance fee is charged to ensure portfolio managers are rewarded if they generate abnormal risk-adjusted returns. This study contributes to academic literature by focusing on the performance and incentives of PMS funds market in India, which is largely unexplored till now.

Formation of information base of financial risk controlling in agricultural organizations using the model of integrated financial risk assessment

Subject. The article describes the development of algorithm for implementation of a model for integrated assessment of financial risk in agricultural organizations. Objectives. We aim at defining the integrated index of financial risk assessment, based on indicators of financial risk controlling, as a system of monitoring the risk factors in the financial activities of the organization, to create the informational base of financial risk controlling. Methods. The study rests on methods of statistical analysis, namely representative sampling and grouping. Results. The paper defines the integrated indicator of financial risk assessment on the basis of indicators of financial risk controlling and its parameters, in particular, the multi-factor indicator that includes the product of unilaterally directed values of indicators of return on sales, the share of current assets in total assets, the ratio of other income and other expenses. We determine an algorithm for implementing a model of integrated assessment of financial risk and updating the financial risk controlling. Conclusions. High risks, including seasonal risks, and revenues from government budgets, influence the financial result of agricultural organizations. Non-core income and expenses have a significant impact on the final result, which should also be taken into account, when assessing the financial risk. Our conclusions are underpinned and confirmed by calculations. They can be used in strategic planning for funding sources and areas of financial resource distribution to mitigate the overall financial risk.

Assessment of the Influence of Adaptability Factors on the Effectiveness of Managing Changes in Enterprises by Fuzzy Logic

The article is devoted to solving the urgent issue of identifying factors to stimulate staff that will best provide flexibility and the ability to manage changes in the operating system of the enterprise. The purpose of the study is to identify the correlation between the transformation ability of enterprises and the adaptive capabilities of the main driver of change management – personnel, and to identify internal factors that are the drivers of change. The study was conducted on the example of data from Ukrainian construction companies. The McKinsey “7S” model is used as a conceptual framework to identify such factors. According to the model, all factors are grouped by the following components: strategy, skills, shared values (corporate culture), structure, staff, systems, and style. Since the purpose of the study is to identify the impact that adaptive capabilities of staff have on the flexibility and ability to transform the company, the paper describes a model of the impact of factors of the group “staff” on the flexibility and effectiveness of change. The simulation was performed using tools of fuzzy logic. As a result, it was determined that the effectiveness of transformations is influenced by the following indicators: productivity (output), the administrative burden on wages (the ratio of administrative expenses to wages in operating expenses), the availability of employees with higher education among management staff, the experience of management staff, the ratio of labor costs to wage costs. The proposed evaluation system allowed to identify key factors for the transformational ability of enterprises, which will, if necessary, purposefully influence them, achieving the desired level of flexibility and providing adaptive capabilities of the enterprise system. Prospects for further research should be the creation of models based on fuzzy logic, which take into account the influence of factors in the formation of strategy, skills, corporate culture, structure, systems, and style on the transformation ability of enterprises in construction

Credit constraints and the survival and growth of beginning farms

PurposeCredit may help farmers survive and grow by helping farm households cope with farm or off-farm income variation and by allowing farmers to adopt more efficient production technologies and take advantage of scale economies. This study estimates how credit constraints affect the survival and growth of beginning farms and explores how this effect varies depending on the age of the farm operator.Design/methodology/approachFarms businesses are classified as credit constrained using a measure of repayment capacity: the interest expense ratio (interest expenses relative to gross income). Linked data from consecutive Agricultural Censuses are used to track individual farms over time.FindingsResults show that beginning farms with a high interest expense ratio take on less new debt over the subsequent five years. These credit-constrained farms were found to have lower five-year survival and growth rates than similar unconstrained farms. The negative effect of being constrained on growth is greater for farms with operators younger than 40 years old.Practical implicationsThe finding that credit constraints impede the growth and survival of beginning farms supports a rationale for targeted loan programs designed to help beginning farmers. Results suggest that some of the benefits from these programs will be greater for farms with younger operators.Originality/valueThis study is the first to estimate the effect of credit constraints on the survival and growth of farm businesses. The expansive farm-level panel dataset, which includes almost all beginning farmers in the US, allows for precise coefficient estimates while controlling for numerous farm and operator characteristics.

Yarsagumba collection and marketing: A key income source of people in Api Nampa conservation area, Darchula, Nepal

Yarsagumba the Himalayan gold rush is the major part of the economy of the himalayan people in the Darchula distict. Our study was conducted in Khandeshwori region of the the Darchula district to quantify the contribution of Yarsagumba on the total household income of the harvester and to reveal the problems releated to its harvesting and selling. Income from Yarshagumba accounted upto 68% in this region. Geo-physical problems were observed most during collection along with significant conflicts and lower productivity. Price variation is the major market problem of those Yarshagumba harvesting peoples. Social factors like family size, adult members and educational factors have significant impact in total collection and income. The highest price obtained was Rs.18408.33, average price was Rs.15308.33 and the lowest price was Rs. 10205. Benefit to cost or expenses (BC) ratio found in research area was 5.13. Having sharp eye vision school children were taken for the collection and have to leave school for time. Although the data is emerging on medicinal use and market of Yarshagumba little systematic research has explored village level harvesting practice and socioeconomic impacts, especially in this region of Nepal.

PENGARUH LOAN TO DEPOSIT RATIO DAN BEBAN OPERATIONAL PER PENDAPATAN OPERASIONAL TERHADAP RETURN ON ASSET PADA PT. BANK MEGA Tbk YANG TERCATAT DI BURSA EFEK INDONESIA (BEI)

The purpose of this study was to determine the effect of Loan to Deposit Ratio (LDR) and Operating Expenses per Operating Income (BOPO) on Return On Assets (ROA) at PT. Bank Mega Tbk in 2010-2019. This study uses secondary data obtained through documentation in the form of annual financial reports from PT. Bank Mega Tbk, officially accessed from www.bankmega.com Data analysis was carried out using Descriptive Analysis, Classical Assumption Test consisting of Normality Test; Non-Multicollinearity Test; Non Heteroscedasticity Test; and Non-Autocorrelation Test, Model Feasibility Test consisting of Multiple Correlation Test (R); Determination Correlation Test (R Square); and the F Test (Anova), as well as the Effect of Causality Test consisting of the Simple Linear Regression Coefficient; Multiple Linear Analysis; and Hypothesis Testing (T Test).The results of the study found that the Loan to Deposit Ratio on Return On Assets at PT Bank Mega in 2010-2019 with a significant value of 0.826 where 0.826 > 0.05 means that the Loan to Deposit Ratio has no effect on Return On Assets. Operating Expenses per Operating Income on Return On Assets at PT Bank Mega in 2010-2019 with a significant value of 0.000 where 0.000 < 0.05 means that Operational Expenses per Operating Income have an effect on Return On Assets. And Loan to Deposit Ratio and Operating Expenses per Operating Income on Return On Assets at PT Bank Mega in 2010-2019 with a significant value of 0.010 where 0.010 < 0.05 means that Loan to Deposit Ratio of Operating Expenses per Operating Income has a joint effect on Return On Assets.

MICRO AND MACROECONOMIC DETERMINANTS OF THE FINANCIAL PERFORMANCE OF LIFE INSURANCE FIRMS IN INDONESIA: AN EMPIRICAL EVIDENCE

Insurance sector is an integral part of financial system which offers an important contribution in the nation’s economy. It provides long terms fund for investment which leads to improving financial and non-financial infrastructural facilities. The financial performance of insurance firms, therefore, is an important aspect needing special attention. The paper’s objective is to investigate the impact of micro and macroeconomic indicators on the financial performance of life insurance firms. Based on the Indonesia Financial Service Authority (IFAS) database, a set sample of 30 life insurance firms for the periods of 2011-2018 was generated. Panel data regression analysis was performed to test the formulated hypotheses. Random effect model was identified as the appropriate model indicating that differences in the characteristics between the studied life insurance firms have an effect on the dependent variable, in this case the return on equity. Based on the resulted model, it is revealed that the financial performance i.e. return of equity is affected consecutively by economic growth, expense ratio and current ratio in different direction and magnitudes.

КАЛЬКУЛЮВАННЯ І АНАЛІЗ СОБІВАРТОСТІ АВІАПЕРЕВЕЗЕНЬ

Аbstract. The article summarizes the theoretical aspects of the processes of calculation and analysis of the cost of air transportation. In Ukraine, planning, accounting and analysis of operating costs is carried out in two main aspects ‒ economic elements and cost items. Aviation enterprises use International Accounting Standards 1 ″Presentation of Financial Statements″ to disclose information on expenses. In particular, this standard provides that an entity must disclose all items of expenses that are recognized in the reporting period in a single ″Statement of profit or loss and other comprehensive income″. A feature of the costing process of aviation enterprises is that they use not only the typical nomenclature of items recommended by ICAO, but also use costing on dry leasing terms (without a crew) when carrying out leasing operations; prime cost under wet lease conditions (with crew); cost price on ACMI terms. In this case, it is advisable to allocate the following cost items, which the airline has an impact on, to determine the cost of aviation work ‒ these are four items: 1) Aircraft; 2) Crew; 3) maintenance; 4) insurance. The purpose of the analysis of the cost of air transportation is to identify untapped reserves of its reduction and contribute to this reduction. The objectives of the analysis are: ‒ identification of trends in operating costs and production costs; ‒ assessment of the validity and intensity of the plan at the cost of production; ‒ determination of the dynamics and degree of implementation of the plan at cost; ‒ determination of the factors that influenced the dynamics of cost indicators, the magnitude and causes of deviations of actual costs from planned ones; ‒ analysis of the cost of certain types of products (carriage of goods, passengers, etc.); ‒ evaluation and determination of the optimal ratio of income and expenses. The analysis process is proposed to be carried out in five stages. At the first stage, analyze the dynamics and implementation of the cost plan for economic elements and costing items. At the second stage, establish the composition of costs and structure, analyze the changes that have occurred in the cost structure. At the third stage, it is supposed to carry out a factorial analysis of the influence of the total amount of costs and the rate of variable costs per unit volume of air transport operations using methods of deterministic factorial analysis. The fourth stage is the study of the dynamics, the implementation of the plan, the conduct of inter-farm comparisons and the determination of the influence of factors on the consumption rate. At the fifth stage, an analysis of industry-specific, specific indicators in dynamics is carried out, implementation is carried out according to plan, and the influence of factors on the change in the cost of a flight, flight hour, tonne-kilometer, passenger-kilometer, reduced tonne-kilometer is quantified. The analysis is carried out both with the help of economic and logical traditional methods (comparison, absolute and relative values, tabular, graphical), and methods of deterministic factor analysis (chain substitutions, absolute differences, etc.). Since the ways to reduce the cost are derived from the factors that affect it and they act in combination, the main directions for reducing them in practice will be to increase the degree of extensive and intensive use of aircraft and save costs in all respects. Keywords: operating costs, cost, methodology, analysis, costs, factors, production reserves, air transportation, airline.

Analiza prihoda i rashoda tokom pandemije COVID-19 - slučaj preduzeća sektora I - usluge smeštaja i ishrane beogradske berze

The operations of companies in the field of tourism and catering have changed to a significant extent with the emergence of the COVID-19 pandemic. The aim of the work is to determine whether there have been changes in the income and expenses of hospitality companies in the Republic of Serbia with the onset of the COVID-19 pandemic. The research in the paper was carried out on the example of 15 companies listed on the Belgrade Stock Exchange within Sector I-Accommodation and Food Services, where their income statements for 2019 and 2020 were used as a data source. For research purposes, horizontal analysis and ratio analysis were used. In the largest number of observed hospitality companies in 2020, a decrease in income and expenses was recorded compared to 2019. Also, it was determined that in the largest number of observed companies, there was an increase in the ratio of total expenses and total income during the observed period. The results of the work can be of importance primarily to the management and owners of catering companies, in order to see the impact of the COVID-19 pandemic on financial performance, but they can also be useful to investors when making decisions about investing their funds, i.e. to economic policy makers when defining measures to overcome the consequences of the crisis.

Social Benefits of Financial Performance - an Econometric Analysis of Financial Management of Indian Microfinance Institutions (MFIs)

The microcredit facilities that are imparted by Microfinance Institutions (MFIs) to the low-income clientele, usually in the form of small loans for microenterprise and income-generating activities have been linked with increasing financial inclusion in India. This study explores the econometric relationship among the aggregate gross loan portfolio, operational efficiency and average number of active borrowers of MFIs in India with the understanding that financial exclusion renders the poor vulnerable to monetary shocks. It was observed that healthy aggregate gross loan portfolio (considered here as a proxy for asset position) and operational efficiency (ratio of administrative expenses to financial revenue) of an MFI does not hamper financial inclusion (number of active borrowers) in the society, rather better financial performance of MFIs improves the financial inclusion at the macro level. Hence, financial performance of an MFI does not come at the cost of social performance. The research paper further provides impetus to the policy makers in India to corroborate the MFIs with large asset values to efficiently allocate their resources to sustain a large number of borrowers.

JD.com: Operations Research Algorithms Drive Intelligent Warehouse Robots to Work

JD.com pioneered same-day delivery as a standard service in China’s business-to-consumer e-commerce sector in 2010. To balance the urgent need to meet growing demands while maintaining high-quality logistics services, the company built intelligent warehouses that use analytics to significantly improve warehouse efficiency. The brain of the intelligent warehouse system is the dispatching algorithm for storage rack-moving robots, which makes real-time dispatching decisions among robots, racks, and workstations after solving large-scale integer programs in seconds. The intelligent warehouse technology has helped the company decrease its fulfillment expense ratio to a world-leading level of 6.5%. The construction of intelligent warehouses has led to estimated annual savings of hundreds of millions of dollars. In 2020, JD.com delivered 90% of its first-party-owned retail orders on the same day or on the day after the order was placed. The agility of such intelligent warehouses has allowed JD.com to handle 10 times the normal volume of orders during peak sales seasons and has also helped the company respond quickly to COVID-19 and ensure the rapid recovery of production capabilities.

Mutual Funds’ Performance Sensitivity to Funds’ Attributes. Case Study: Saudi Mutual Funds

This study contributes to the academic literature on faith-based mutual funds, by offering a comparative investigation of Islamic vs. conventional funds’ performance sensitivity to changes in a list of seventeen relevant funds’ attributes, all in the context of the Saudi market. The performance measures investigated are the excess return, selectivity and timing. The study took place from 2011 to 2015, with a sample of 200 Active Saudi funds, 137 Islamic and 63 conventional. Findings indicated that fund size, management fees, expense ratio cash and price-earnings ratio were irrelevant to both Islamic and conventional fund performances. In addition, we noticed similarities in both Islamic and conventional funds’ performances sensitivities towards turnover, unsystematic risk, investment target, past performance, age and management tenure. They however react differently towards a change in the price-to-book ratio. On the other hand, fund systematic risk, cashflow-to-book ratio and faith factors are exclusively relevant to Islamic funds, while fund growth and objective only affect conventional fund performance. Finally, selectivity and timing appear to be mutually exclusive, suggesting management specialization. This work appears to be the first comparative analysis of its kind. A larger, multi-regional sample, and a longer study period will provide better insights.

Is Mutual Fund Flow Related with Fund Performance? An Empirical Study of Regular Plan Mutual Funds in India

This paper examined the fund flow and fund performance relationship using sample data of 144 Indian open-ended equity and balanced regular mutual funds, consisting of eight different fund categories from April 2014 to March 2018. We observed a significant positive association between fund flow and fund recent past performance through Sirri and Tufano (1998) fractional flow model, piecewise regression, and Fama-MacBeth’s (1973) regression. The results reported that retail investors were sensitive towards the fund’s recent past performance and it indicated the relative sophistication in the Indian mutual fund industry. The findings, as supported by the negative and significant coefficients of all panels, suggested that retail investors preferred investing in less risky funds. The study provided insights into the investment behavior, too, in terms of fund flow and their relationship with funds’ recent performance, risk, expense ratio, fund category flow, fund’s age, asset management company’s age, and the experience of the fund manager. This is a pioneering work that estimated the regular plan fund flow-performance relationship post regulatory reforms, such as the introduction of direct plans, the extra commission allowed to beyond the top 15 cities (B15 cities) distributors, introduced by the Securities and Exchange Board of India.

Rasio Profitabilitas: Mengukur Performance dan Tingkat Kesehatan Perbankan yang Terdaftar di BEI Tahun 2020

The Covid-19 pandemic in Indonesia is still ongoing to this day causing the performance and health level of banking profitability to decline and the financial condition of the country disrupted. Banking profitability can be seen in the value of Return On Asset (ROA) to see the effectiveness of banking in making profits by utilizing total assets. The study aims to analyze the effect of financial ratios consisting of Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Loan to Deposit Ratio (LDR), Operating Expenditures to Operating Income (BOPO), and Net Interest Margin (NIM) on Return On Asset (ROA) on banking going public listed on the Indonesia Stock Exchange (IDX) during 2020 during the Covid-19 pandemic. The population in this study was 40 banks with 160 data. Data analysis methods use descriptive statistical tests, classical assumption tests, multiple linear regression tests, t-tests, f-tests, and determination coefficient tests. The results of the study proved that partially the variables CAR, LDR, and BOPO had a negative and significant effect on ROA. NIM has a positive and significant influence on ROA. While NPL has no influence and is not significant to ROA in banks registered with IDX in 2020. Simultaneously car, NPL, LDR, BOPO, and NIM variables have a significant effect on ROA. The implications of the results of the study prove that in the time of the Covid-19 pandemic, the condition of banks registered with the IDX is still healthy and meeting the minimum CAR ratio below 8%, meaning that banks still earn profits from the results of credit capital management to customers. The level of insecurity of the number of bad loans is still low and can still overcome. The value of the operating expense ratio of banking operating.

Efficiency evaluation of the pension funds: Evidence from India

The purpose of this article is to investigate the technical efficiency of Indian pension funds using data envelopment analysis (DEA) and to assess the reasons of inefficiency if any. This article analyzes the efficiency performance of all the pension funds available to Indian subscribers from the year 2015–2019 using radial measurers (BCC) of DEA based on secondary data collected from the annual reports of New Pension System Trust. Findings indicate that the average efficiency of Indian pension funds was 75.38% and this sector experienced overall stability in the average efficiency levels during the study period. Almost 40% of the pension funds operated efficiently in one or more years during the study period. The minimum slack was found in the input “expense ratio.” This confirms that risk associated with investments is the cause of inefficiency and not the expense ratio in the Indian pension sector. Tobit regression is applied to explore the main drivers of efficiency in the India pension funds. The study finds that fund size has positive association with the efficiency of the pension funds. Public sector funds were more efficient than the private sector funds. This study is first of its kind that has assessed the efficiency of Indian pension funds. The study brings into light the operating characteristics and efficiencies of the Indian pension funds for the period 2015–2019 and therefore holds important insights for policy makers, practitioners, and decision‐makers.

Shadow Insurance? Money Market Fund Investors and Bank Sponsorship

Abstract We argue that bank holding companies (BHCs) extend shadow insurance to the prime institutional money market funds (PI-MMFs) they sponsor and that PI-MMFs price this shadow insurance by charging investors significantly higher expense ratios and paying lower net yields. We provide evidence that after September 2008, expense ratios at BHC-sponsored PI-MMFs increased more than at non-BHC-sponsored PI-MMFs. Despite higher expense ratios, BHC-sponsored PI-MMFs did not experience larger redemptions than non-BHC-sponsored PI-MMFs. In addition, we show that expense ratios increased with BHCs’ financial strength and the likelihood of their support; however, this expense ratio differential disappeared after the 2016 MMF reform. (JEL G2, G21, G23, G28, H12, H81)