International Asset Research Articles

The Progressive Development of International Law on the Return of Stolen Assets: Mapping the Paths Forward

Abstract The return of stolen assets represents a ‘fundamental principle’ of the United Nations Convention against Corruption (UNCAC). The convention’s inclusion of a chapter on asset recovery was considered a groundbreaking achievement at the time of the treaty’s conclusion in 2003. The treaty negotiations concerning these provisions, however, were highly controversial, and the discussions did not benefit from a substantial body of practical experience concerning the return of stolen assets. In the 20 years since the treaty’s conclusion, states have acquired some experience with asset return, and the gaps and limitations in UNCAC’s regime governing asset recovery have become apparent. Article 57 of UNCAC, concerning asset return and disposal, exemplifies the need for progressive development of international asset recovery laws. Article 57 requires ‘updating’ or supplementation because the provision does not adequately address major recurrent issues, such as the recipients, use and monitoring of returned assets; the transparency of the asset return process; and the participation of civil society in the process. Normative development could involve formal law reform, within the UNCAC legal framework, but it could also involve more informal legal change, outside of the UNCAC regime. The Global Forum on Asset Recovery represents an important example of legal change that raises issues of both accountability and effectiveness.

The normative development of laws on asset preservation and confiscation: An examination of emerging best practices

Abstract The practice of international asset recovery appears to be in the process of moving beyond the provisions contained in the United Nations Convention against Corruption (UNCAC). These provisions were negotiated twenty years ago, and are now insufficient given the serious contemporary challenges involved in tracing, preserving, confiscating, and returning assets. This article focuses on the limitations of UNCAC’s provisions concerning the preservation and confiscation of foreign assets. These limitations, and the need for progressive development, appear to have been recognized by the UNCAC Review Mechanism, which monitors the implementation of UNCAC by states parties. The Review Mechanism has begun encouraging states parties to adopt “good practices” that go beyond UNCAC’s minimum requirements. In doing so, however, the Review Mechanism has not offered guidance on how exactly states parties ought to go about implementing the best practices that they have identified. The asset recovery laws of Canada, Switzerland, and the United Kingdom demonstrate the need for further consideration of how domestic asset recovery laws ought to be developed. These laws highlight some of the difficult issues raised by more flexible, informal, and rapid forms of international cooperation in the asset recovery context. In particular, they underscore the challenges involved in balancing the general, public interest in combating corruption and recovering stolen assets with respect for and protection of human rights.

Clustering asset markets based on volatility connectedness to political news

To assess similarities in international asset markets’ responses to political news, we construct a political news index using advanced natural language processing. We then examine how the volatility across international asset markets is connected to the development of our political news index by measuring the daily directional connectedness using a VAR-based framework. Finally, we apply an unsupervised algorithm to cluster markets based on their volatility connectedness to political news. Our analysis reveals eight distinct clusters that reflect the markets’ sensitivities to political dynamics. This data-driven analysis offers insights into the influence of political developments on market volatility.

Global Diversification: Unveiling the Benefits of International Asset Investments

The following paper discusses diversification benefits and the role of both domestic and international diversification in reducing risk and increasing growth. It transitions into describing asset classes and their roles in building a diverse portfolio. It then discusses international securities and how global assets can mitigate risks associated with domestic markets. Lastly using data from the past 15 years, It shows examples of constructing diverse portfolios with international securities and their potential for growth and lower risk based on a variety of performance metrics.

Nontraded Sector Growth Risks and Economic Sizes in International Asset Pricing

Output fluctuations in nontraded sectors are an important country-specific risk factor because nontraded outputs are only consumed domestically. In interest rate markets, countries with higher nontraded output growth risks are associated with stronger motives for precautionary savings and lower interest rates. In currency markets, strategies with higher exposures to nontraded output growth risks offer higher average excess returns. Economic sizes play an important role in exacerbating the pricing impact of nontraded output growth risks as it requires larger international trades to mitigate nontraded output risks of larger economies. However, because economic sizes are functions of outputs in equilibrium, output growth risks also explain this role of economic sizes in international asset pricing. This paper was accepted by Agostino Capponi, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.03697 .

Sectors versus borders: interest group cleavages and struggles over corporate governance in the age of asset management

Abstract Universally invested asset managers like BlackRock have established a dominant position in equity markets around the globe. While extant contributions have explored their voting behaviour and role in shaping corporate governance at the firm level, less is known about their potential to build interest coalitions with other business groups, and their leverage over state-level corporate governance institutions. This article investigates conflict over a far-reaching reform to co-determination in Germany. Qualitative content analysis of over 100 stakeholder statements yields that asset managers forge coalitions with short-term-oriented investors to abolish key tenets of corporatist institutions. However, a domestic countercoalition of financial and non-financial firms prevented momentous institutional change. This article improves our understanding of international asset managers’ preferences and highlights coalition building as a key determinant of the political power of international finance. By aligning the costs of institutional change for incumbents, corporatist institutions continue to act as shields against financialization.

La Agenda 2030 en la Organización Mundial del Turismo: comunicando sostenibilidad

Tourism is an international asset that generates incomes that place it among the main economic activities of many countries. There is growing concern about the sustainability of tourism. The World Tourism Organization (UNWTO) is the international reference organization in charge of aligning this economic sector with the 2030 Agenda for Sustainable Development. This research has focused on showing how the UNWTO follows the 2030 Agenda in the design of its campaigns. Through the review of academic sources, UNWTO campaigns and the semi‐structured interview conducted with its communication director, the type of communication for social change that the institution carries out to promote sustainable tourism has been identified. The UNWTO has made a great effort to communicate the 2030 Agenda as its effective roadmap, despite not giving the task as concluded. The communication designed and implemented is a tool for sustainable development.

Cultural diplomacy in the national construction of Brazil: the French artistic mission of 1816

The purpose of this paper is to analyze the role played by Portuguese authorities alongside Joachim Le Breton in the establishment of the 1816 French artistic mission to Brazil, as an international movement that could be understood as a notable predecessor to what we know today as cultural diplomacy. Cultural diplomacy is a term that often refers to the instrumentalization and projection of culture into the international arena. In this sense, culture was leveraged as an international asset for the construction of the Brigantine monarchy in Brazil. In this article we propose a wider approach in which “European culture” is instrumentalized by a state to elevate a colony to an Empire, capable of accommodating its European ruling class and sovereign.

International asset pricing with heterogeneous agents: Estimation and inference

This paper empirically validates (Constantinides and Ghosh’s, 2017) heterogeneous-agents consumption-based asset pricing model for predicting expected returns in international equity markets. Using the model’s implications, we proxy the unobservable state variable driving income shocks with the principal component of consumption growth cumulants across agents. We confirm that both the level and changes in this cross-sectional consumption risk serve as pricing factors, emphasizing the importance of higher moments like skewness. The estimated structural parameters obtained from the Euler equations are statistically significant and plausible, while the factor risk premium estimates align with theoretical expectations. Our approach effectively explains the emerging versus developed premium, outperforming traditional methods reliant on cross-sectional variance. Our findings, robust across different model specifications and asset menus, highlight the imprecision of consumption-based factor risk premia estimates when limited to developed markets, a limitation mitigated by including emerging markets. The model demonstrates a 60% explanatory power, surpassing the global Fama–French model.

Analysis of Disneys Acquisition of 21st Century Fox

Disney has recently made a momentous announcement regarding its acquisition of 21st Century Fox, a deal that is poised to revolutionize the entertainment industry. Valued at a staggering $71.3 billion, this acquisition will grant Disney control over Foxs film and television studios, cable networks, and international assets. With the addition of Foxs assets, Disney will emerge as an even more dominant force in the entertainment industry, boasting a vast library of content and a formidable presence in both film and television. This study will offer a comprehensive analysis of the acquisition. With fewer major players in the market, there are concerns about the impact on competition and the potential for increased prices for consumers. However, Disney has stated that the acquisition will enable it to better compete with new industry players, such as Netflix and Amazon. By merging its own content with that of Fox, it will be able to offer a more comprehensive streaming service, which is becoming increasingly vital in the era of cord-cutting. Overall, the acquisition of 21st Century Fox by Disney is a momentous development in the entertainment industry, with far-reaching implications for both companies and consumers. While there are concerns about the impact on competition, the deal is likely to bolster Disneys position in the market and enhance its ability to compete with new industry players.

Unraveling market mysteries: a comprehensive review of financial anomalies and puzzles

This comprehensive literature review consolidates various market anomalies and puzzles, providing an aggregated perspective to understand these complex dynamics that challenge the traditional Efficient Market Hypothesis. We examined numerous academic works to reveal insights into long-term return irregularities, earnings management influence on equity offerings, and information uncertainty’s impact on stock returns. The review delves into unique phenomena like persistent mutual fund performance, the day-of-the-week returns, the January effect, weather-induced mood shifts on the market, and the dynamics of multiple anomalies. International asset pricing and weekend anomalies were also discussed, with a particular focus on cryptocurrency efficiency. Incorporating behavioral finance perspectives, we explored social transmission bias, emotional finance, biased beliefs, investor optimism, sentiment, and global market inefficiencies. The influence of unique events and seasonal factors, such as the Super Bowl, daylight saving time, and the Halloween effect, were also analyzed. The review concludes by highlighting the evolving landscape of market anomalies, discussing ma- chine learning approaches to anomaly research, investor behavior challenges, and the disappearing anomalies in country and industry returns. It sets the groundwork for holistic comprehension of market anomalies, suggesting future research directions such as exploring new data sources, comprehensive theoretical modeling, and the role of technology, market regulations, and environmental changes on market anomalies.

Flights to safe assets in bond markets: Evidence from emerging market economies

This paper investigates cross-border flights to safety (FTS) in sovereign bond markets from the perspective of emerging market economies (EMEs). Accurate identification of such events provides a detailed picture of sharp changes in prices of international assets and potential sources of EMEs' financial fragility. We construct new measures of the FTS occurrence and magnitude by focusing on extreme movements in long-term bond markets vis-à-vis the US for a diverse group of 21 EMEs. An adaptable time-series anomaly detection algorithm is used to recognize patterns in daily data on bond returns from 2002 to 2021. The paper shows that the FTS episodes in the entire sample of EMEs turn out to be short-lived and map well into periods of international financial and economic downturns. The results from panel-data models indicate that country-specific factors, in particular economic fundamentals, matter more for the FTS magnitude than for their mere occurrence. This supports the notion that flights from bond markets are usually triggered by shocks originating outside of EMEs, but the magnitude of these events may materially depend on their domestic conditions, including macroeconomic stability and policy factors. Moreover, the country-specific factors are more important when FTS episodes are driven by external financial risk and US monetary policy rather than shifts in global economic activity.

Dual role of the country factors in international asset pricing: The local factors and proxies for the global factors

Considering that the popular Fama–French–Carhart (FFC) factors are actually long–short stock portfolios, we (i) test if the FFC six country factors are globalized, (ii) compare the pricing performance of the global, country, and local (orthogonalized) factors, and (iii) examine the pricing implications of the globalized country factors. We find: Most country factors are significantly globalized as measured by R2 from regressing the country factors on the global factors. The R2, however, varies greatly across countries and factor types, ranging from 0.03 for the Hong Kong value factor to 0.88 for the U.S. market factor during 1990–2017. In terms of asset pricing, the country factors perform the best and the local factors the worst. The well-known outperformance of the country factors over the global factors in pricing arises from the “dual role” the country factors play in partially integrated markets, i.e., the country-specific local factors and proxies for the global factors.

Diversification with international assets and cryptocurrencies using Black-Litterman

PurposeThe aim of the study was to analyze the performance of Black-Litterman (BL) portfolios using a views estimation procedure that simulates investor forecasts based on technical analysis.Design/methodology/approachIbovespa, S&P500, Bitcoin and interbank deposit rate (IDR) indexes were respectively considered proxies for the national, international, cryptocurrency and fixed income stock markets. Forecasts were made out of the sample aiming at incorporating them in the BL model, using several portfolio weighting methods from June 13, 2013 to August 30, 2022.FindingsThe Sharpe, Treynor and Omega ratios point out that the proposed model, considering only variable return assets, generates portfolios with performances superior to their traditionally calculated counterparts, with emphasis on the risk parity portfolio. Nonetheless, the inclusion of the IDR leads to performance losses, especially in scenarios with lower risk tolerance. And finally, given the impact of turnover, the naive portfolio was also detected as a viable alternative.Practical implicationsThe results obtained can contribute to improve investors practices, specifically by validating both the performance improvement – when including foreign assets and cryptocurrencies –, and the application of the BL model for asset pricing.Originality/valueThe main contributions of the study are: performance analysis incorporating cryptocurrencies and international assets in an uncertain recent period; the use of a methodology to compute the views simulating the behavior of managers using technical analysis; and comparing the performance of portfolio management strategies based on the BL model, taking into account different levels of risk and uncertainty.

Forced migration governance in Tunisia: Balancing risks and assets for state-making during independence and democratization

ABSTRACT What explains the variation in states’ governance of forced migration? Why are some groups of forced migrants welcomed and others not? We argue that this depends on whether accommodating a particular group of forced migrants is perceived as an asset or risk to broader political developments at play. Drawing on qualitative material from Tunisia between 1950 and 2020, thepaper analyses how the Tunisian state has dealt differently with the large-scale arrival of forced migrants from neighbouring countries after its independence in 1956 and throughout its democratic opening since 2011. We show that during the Algerian War of Independence, perceptions of displaced Algerians as international assets outweighed perceptions of domestic economic and political risks. This resulted in Tunisia’s supportive-open approach towards the nearly 200,000 Algerians who were welcomed as prima facie refugees and provided humanitarian assistance. In contrast, the estimated 500,000 Libyans who arrived after 2011 have been perceived both as domestic economic and ideological assets and as important political risks – domestically and internationally. This explains Tunisia’s largely laissez-faire approach, whereby state authorities initially welcomed Libyans but refrained from providing humanitarian assistance and residence permits. In both cases, Tunisian authorities had to carefully balance national sovereignty and international obligations in their forced migration governance.

Factor investing and currency portfolio management

Currency-specific pricing factors are pervasive in international asset pricing. However, portfolio and risk management based on forex factors, instead of individual currencies, are rarely discussed. This paper tries to fill this gap by modelling dynamic correlations and non-normality among forex factors. By considering the four most popular forex factors: the dollar risk factor, the carry trade factor, the currency momentum factor, and the currency value factor, we find that a dynamic conditional correlation copula (DCC-copula) model with skewed-t kernel fits the joint distribution well. We show that, for risk-averse investors who focus on factor investing or employ the forex factors to resize the specific risk exposure, ignoring the tail dependence structure of forex factors brings significant costs.

The global factor structure of exchange rates

We propose a model-free methodology to estimate international stochastic discount factors (SDFs) that jointly price cross-sections of international stocks, bonds, and currencies in markets with frictions. We theoretically establish a SDF decomposition into one global factor and a currency basket. We show that our global factor prices a large cross-section of international asset returns, not just in- but also out-of-sample, across different currency denominations. Moreover, the pricing ability of the global factor is largely independent of the market structure or the size and type of market friction.

The Risk Premium on Mediterranean Emerging Stock Markets

In this paper, we test a conditional version of the international asset pricing model, using the multivariate GARCH process of De Santis and Gerard (1998). The model is estimated, over the period January 1997-March 2007, for five markets: the global, USA, Egyptian, Turkish and Israeli markets. We analyze a version of the ICAPM with a constant market risk price as well as the exchange rate risk price, while the conditional covariances vary over time. The results show that risk premium vary significantly across markets and over time, for all stock markets the contribution of currency premium to the total risk premium is economically significant. This study confirms that currency risk is a significant factor in the international valuation of financial assets.

Media Negativity on Foreign Countries and International Asset Allocation

Media Negativity on Foreign Countries and International Asset Allocation

Economic Narratives and International Asset Pricing

Economic Narratives and International Asset Pricing