Investment Perspective Research Articles

Trade integration and research and development investment as a proxy for idiosyncratic risk in the cross-section of stock returns

Although consumption-based asset pricing constitutes a solid body of work for the purpose of relating asset prices and macroeconomics, most empirical tests put into question the representative investor perspective. Furthermore, most approaches accounting for untraded risks, such as the Constantinides-Duffie model, face the problem of correctly quantifying idiosyncratic risk. In this paper we exploit the strong relationship of income inequality with trade openness and research and development (R&D) investment to proxy the cross-sectional variance of consumption growth by the growth rate of imports plus exports (trade openness) and the growth of the domestic expenditure in R&D. Moreover, we use these variables as a part of the information set used by investors to determine the unconditional version of the conditional consumption-capital asset pricing model (CCAPM). Our results show that both trade openness and R&D investment allow the linearized version of the Constantinides-Duffie model and the conditional CCAPM to greatly outperform the classic CCAPM for different sorts of stock portfolios, contributing significantly to reducing pricing errors. Hence, our results constitute a step forward in the attempt to relate asset prices and income inequality in a tractable way.

Optimization of an inventory system with partial backlogging from a financial investment perspective

AbstractIn some real inventory systems, item sales can be adjusted to a stable demand rate along the inventory cycle. For instance, home appliances, electrical products, lounge furniture, home water supply, etc., are items with a stable demand rate. In this work, we analyze an inventory system for an item of this type, where the demand rate is constant. Shortages are allowed, and it is assumed that a fraction of demand during the stock‐out period is backlogged. It is supposed that the shortage costs (backorder cost and lost sales cost) have an affine structure: a fixed cost plus a linear cost that depends on the period of time where shortages exist. In this paper, instead of the maximization of the profit per unit time, or the minimization of the average inventory cost per unit time, the objective is the maximization of the return on inventory investment, which is a quotient defined as the average profit divided by the average inventory cost. The optimal inventory policy is obtained in a closed form under this new perspective. Moreover, it is shown that the optimal policy that maximizes the return on inventory investment is, in general, different from the one that maximizes the profit per unit time. In addition, the new optimal perspective offers some advantages. The optimal inventory policy that maximizes the return on investment does not depend on the unit selling price. Therefore, the inventory manager does not need to change his/her inventory policy if this price changes. These advantages are not usually present when the objective is the maximization of the profit per unit time. Numerical examples are provided to illustrate the theoretical results developed in this work. A sensitivity analysis of the optimal policy with respect to the system input parameters is also developed.

Asymmetric housing information diffusions in China: An investor perspective

Over the past few decades, numerous attempts have been made to examine ripple effects using housing prices. What seems to be lacking, however, is a return to investor behaviour in terms of how it inspires inter-city spillovers. We thus propose the price-to-rent (P/R) ratio as a quantitative anchor in regard to how investor sentiment affects future housing values. By utilising a time-varying spillover approach based on monthly housing prices and rents across first-tier cities in China, it becomes clear that the characteristics of investment-driven diffusions are short-lived and more sensitive to economic policy changes in 2014 (the new normal initiative) and 2018 (strict housing control measures). Finally, in addition to good and bad perspectives, there is asymmetric evidence to show that negative outlooks such as a great fear of loss generally play a dominant role in the information transmission process, while a strong repercussion of good news in 2019 has subsequently been dampened by the COVID-19 pandemic.

기업의 ESG 활동이 기업 이미지, 지각된 가격 공정성 및 소비자 반응에 미치는 영향

Recently, environment, social, and governance (ESG) are becoming increasingly important in corporate management. Although previous research has mainly focused on financial benefits from the investor perspective, consumer perceptions of ESG activities have received little attention. The purpose of this study was to provide a psychological mechanism of how consumer perceptions of ESG activities. Specifically, the purpose of this study is to examine (1) how ESG affects corporate image (perceived warmth-competence), (2) how perceived corporate image influence perceived price fairness, and (3) these effects may affect consumer response such as brand attitude, loyalty, and willingness to pay more towards corporate. The proposed research model was tested using structural equation modeling. According to the results of data analysis, the results revealed that (1) environment of ESG had a positive impact on perceived warmth and social of ESG had a positive impact on both perceived warmth and competence. Also, governance of ESG had a positive impact on perceived competence. Furthermore, perceived warmth and competence toward corporate had a positive impact on perceived price fairness, which results in brand attitude, loyalty, and willingness to pay more. The interpretations of these findings and the implications are also discussed.

The impact of investor structure on stock price crash sensitivity: Evidence from China's stock market

Stock price crash sensitivity refers to the conditional probability of a stock crash when the market collapses. It focuses on individual stocks' sensitivity to the market crash and can affect stock pricing significantly. Although the crash sensitivity of China's stock market is very high as a whole (Weigert, 2016), different individual stocks show varying degrees of crash sensitivity. This paper, adopting the perspective of institutional investors, explores the reasons for the difference in crash sensitivity in China's stock market, and finds that: First, institutional investors' shareholdings is positively related to firms' stock price crash sensitivity. However, after dividing institutional investors into professional (represented by financial institutions) and non-professional institutional investors (represented by general legal persons), we find that only professional institutional investors' shareholdings is negatively related to firms' stock price crash sensitivity. Second, the impact of professional institutional investors on the crash sensitivity is influenced by stock liquidity and media sentiment: when the stock liquidity of listed companies is good or the media sentiment is strong, the negative impact of professional institutional investors on the crash sensitivity is accordingly high. This paper, by highlighting the investor structure, attempts a pioneering exploration of the influencing factors of the difference in stock price crash sensitivity in China. Our empirical results enrich research on stock price crash sensitivity and the heterogeneity of institutional investors. They can also serve to guide regulatory authorities' development of institutional investors and efforts to maintain market stability.

The lost generation of entrepreneurs? The impact of COVID-19 on the availability of risk capital in Canada

PurposeCanada has lagged in access to capital for high-potential, growth-oriented new ventures, but has made considerable strides in the past decade. This study aims to examine the evolving state of the market for risk capital in Canada during the COVID-19 pandemic, providing a critical assessment of government policy from the perspective of angel investors and diverse communities of entrepreneurs.Design/methodology/approachA thematic analysis was conducted of seven COVID-19 roundtable discussions hosted by the National Angel Capital Organization that included 51 global and national-level business and political leaders. The analysis extracted the most salient details from the discussions, distilling them into timely and actionable insights for policymakers.FindingsThe analysis suggests that the government’s economic policy response to the COVID-19 crisis fails to address the sudden liquidity problems faced by new ventures. Entrepreneurs and angel investors have remained resilient, rallied as a community and demonstrated an extraordinary level of trust. Traditionally under-represented communities of entrepreneurs are more affected by the crisis than others.Practical implicationsThe findings and recommendations are of relevance to policymakers interested in post-COVID-19 economic policies to address the unique challenges faced by start-ups and ensure their full contribution to economic recovery.Originality/valueThe paper presents several policy recommendations and proposes a novel framework to describe the impacts of the pandemic on different categories of start-ups.

Macroeconomic Impact of Pension System Upon Private Pension Funds Scheme. Empirical Evidence from Central and Eastern European Countries

Abstract The significance of retirement savings and private pension funds increased in the latest decades and gathered important amounts of capitals. The purpose of this paper is to investigate the macroeconomic effects of pension systems from an investment perspective in five Central and Eastern European countries. The analyzing process regarding several underlying macroeconomic effects of pension systems started from the premises that there is a strong connection between the structure of pension systems, the national economy and the development of the financial sector. The econometric tests were processed and applied by using pool data regression models and the method Pooled Instrumental Variables (IV) - Two-stage Least Squares (2SLS). The main conclusion highlights that the interest rate at deposits is correlated with the amount of incomes earned by population, inflation rate, severe material deprivation rate and the investment strategy of private pension funds.

Is CSR Expenditure Relevant to the Firms in India?


 
 
 The present study examines the relevance of Corporate Social Responsibility (CSR) expenditure to the firms in the mandatory regime in India. The paper has its theoretical basis from the instrumental aspect of the Stakeholder theory, which assumes a positive influence of CSR over financial performance. Therefore, the study hypothesizes that the firms which fulfill the CSR expenditure requirement will exhibit higher stock returns and lower systematic risk. Since India mandated CSR in the year 2014, the data of four years (2016-2019) for the sample of 426 National Stock Exchange (NSE) listed Indian firms are taken to employ the OLS regression method. The CSR expenditure in the mandatory regime was not found to be relevant to the firms because of an insignificant positive impact of mandatory CSR expenditure on stock returns. Thus, the instrumental aspect is not supported by the findings. However, the findings indicate a decrease in the systematic risk of the firms. Only a few studies in India investigated this phenomenon in the mandatory regime. Further, the contributions of the study to the CSR literature are fairly useful from the perspective of firms, investors, policy-makers, regulators, scholars, and countries that are planning for legislating CSR.
 
 

Investment Risk for Long-Term Investors

Investment risk is addressed from the perspective of long-term investors, with key concepts being discussed and methods outlined for evaluating risk over long horizons. The main themes include: the need to focus on shortfall versus objectives and sources of sustained loss, rather than return volatility; the potential influence of path dependence; and the benefit of directly modelling the wealth accumulation process. A framework is presented that decomposes the drivers of wealth accumulation into initial expected returns, discount rate risk, cash flow risk and reinvestment risk. Approaches are highlighted for forming distributions of accumulated wealth, while demonstrating the importance of incorporating prevailing market conditions into any risk analysis. Alternatives to the Standard Risk Measure used for Australian superannuation funds are discussed.

Investment Perspectives in Human Resources Management and Its Contribution on Organizational Performance and Competitive Advantages

Abstract
 The dynamics of business environment signed by the volatility, uncertainty, complexity and ambiguity (VUCA) is urging organizations to rethink and redefine their business strategies and the source of their performance and competitive advantage. Human resources (human capital) hold the most important role in achieving organizational goals through the alignment of human capital investment and the organizational strategy. This article investigates on how the organization manage and align the investment in human resources (human capital) with the strategy of the organization and does investment in human capital have impact to the organizational performance and contribute to the creating value and competitive advantages of the organization. Based on the literature reviews and previous researches, we found that the alignment of investment in human resource (human capital) and organizational strategy is mediated by strategic performance management system namely Balanced Scorecard. The investment in human resources (human capital) has positive impact on organizational performance. Finally, The investment in human resources (human capital) has positive contribution to value creation and competitive advantages of the organizations.

On the taxation of deposits and bonds and the need to qualify passive income

Subject. The article discusses the taxation of interest income from deposits and bonds in the Russian Federation from perspectives of individual investors and the State, classification of people’s income into active and passive. Objectives. We outline actions to adjust the fiscal policy on personal income tax to unify the taxation and stimulate the innovating activity of individuals. Methods. The study is based on methods of logic and comparative analysis. Results. Tactically, payers of interest income are now bound to inform taxpayers on accrued interest income, and the need to qualify coupons of government, municipal and corporate bonds for relief. The strategic result is determined as the need to qualify active and passive income. Conclusions and Relevance. The findings can be an agenda of the State Duma of the Russian Federation and promulgated in the Tax Code of the Russian Federation.

Long-Horizon Stock Returns Are Positively Skewed

At long horizons, multiplicative compounding induces strong-to-extreme positive skewness into stock returns; the magnitude of the effect is primarily determined by single-period volatility. Consequently, at horizons greater than five years, returns --individual or portfolio-- will be positively skewed under reasonable parametrizations. From an investor perspective, the strong positive skewness implies that the mean compound return will serve as a poor guide for typical long-horizon outcomes. Moreover, the large effects of compounding on higher-order moments are shown to affect the validity of Taylor expansions used to approximate preferences for skewness, when applied to returns of annual or longer horizons.

Navigating the factor zoo around the world: an institutional investor perspective

The literature on cross-sectional stock return predictability has documented over 450 factors. We take the perspective of an institutional investor and navigate this zoo of factors by focusing on the evidence relevant to the practicalities of factor-based investment strategies. Establishing a sound theoretical rationale is key to identifying “true” factors, and we emphasize the need to recognize data-mining concerns that may cast doubt on the relevance of many factors. From a practical investment perspective, much of the factor evidence documented by academics may be more apparent than real. The performance of many factors is dependent on the inclusion of small- and micro-cap stocks in academic studies, although such stocks would likely be excluded from the real investment universe due to illiquidity and transaction costs. Nevertheless, a parsimonious set of factors emerges in equities and other asset classes, including currencies, fixed income, and commodities. These factors can serve as meaningful ingredients to factor-based portfolio construction.

Test Of Nominal Prices Of Sukuk In Indonesia

The nominal price of the sukuk has become an important element for companies and investors in determining the real value of the company from the perspective of companies and investors. The company determines the type of contract, maturity, maturity based on the type of contract and size of the company as an important element in determining the nominal price of sukuk according to research in 2016. A mathematical model has been formulated in the form of a multiple linear regression equation. This model has not been tested for reliability so that testing and research is needed in another year. 2019 is a comparative year for conducting research. The research was carried out in an exploratory manner. The sample used was 134 sukuk circulating in Indonesia. The result of the research shows that the nominal price of the sukuk predicted by the old model is correlated with the nominal price of the current sukuk at the 5% significance level.

The disability employment gap in European countries: What is the role of labour market policy?

Across Europe, the labour market participation of persons with disabilities remains lower than that of persons without a disability. Our research examines this disability employment gap, looking specifically at its variation by country and gender. Additionally, we test the influence of labour market policies – testing both the social investment perspective and the welfare scepticism perspective – on the size of the gap, in an effort to determine whether a more generous welfare state raises or lowers the employment rate of people with disabilities. Using the European Union Statistics on Income and Living Conditions (EU-SILC), we show that Southern European countries have the smallest disability employment gap. Whereas stricter employment protection legislation is found to be beneficial for people with disabilities on the labour market, other labour market policies specifically intended to benefit this group do not strongly affect their chances on the labour market. These findings support the social investment perspective and show that social policies can have a positive effect on the employment of people with disabilities.

Romanian Equity Investments and Currency Risk: A Euro-Based Perspective

Abstract This paper assesses the benefits and risks of international investments made on the Romanian stock market, from the perspective of euro-based investors. We investigate the contribution of exchange rate volatility to the total risk of these investments over a period of nine years, between January 2011 and December 2019, by using monthly values for the exchange rate between the Romanian leu and Euro and monthly values of the Romanian stock index. Our findings indicate that, on average, Romanian leu depreciated against euro, causing currency losses for the euro-based investor, counterbalanced by the Romanian index mean return, higher than euro countries index mean return during the period under analysis. However, comparing the exchange rate volatility with the volatility of the local index market, we find that that exchange rate returns have lower standard deviations values, which may suggest that the exchange rate volatility does not seem to be an additional factor to the total volatility of the Romanian stock market returns denominated in euro. This conclusion is supported by the values obtained for lambda, a synthetic indicator which measures the proportion of the volatility attributable to exchange rate fluctuations from the total volatility of the euro-based investor returns. Combined, these results imply that currency risk has only a moderate and controllable influence on international investments made by a euro-based investor on the Romanian stock market

Current Status and Prospective of Offshore Wind Power to Achieve Korean Renewable Energy 3020 Plan

This review comprehensively reviewed floating offshore wind power generation technology, which is being newly developed as a mid- to long-term plan for wind energy. From the perspective of investment per megawatt (MW), offshore wind power is still about 50 percent more expensive than land wind power. Nevertheless, many advanced countries began to investigate the data because they wondered why they were immersed in development and investment, and why offshore wind facilities installed on the beach and floating offshore wind installed in the middle of the sea, unlike the land wind we knew. We looked at the basic principles of offshore wind power generation and the technologies used in facilities, and looked at the advantages and disadvantages of offshore wind power generation compared to land wind power generation, and what differences between fixed offshore wind farms and floating offshore wind farms. It is investigated whether it is a realistic plan to verify residents’ opposition to the installation of offshore wind power facilities, the possibility of commercialization such as high operational management costs, and the feasibility of installing facilities for renewable energy 3020 as mid- to long-term goals. In addition, it compares foreign cases with offshore wind power development complexes in Korea, marine wind power generation complexes in operation, and high wind power in Scotland, the first floating offshore wind power in Ulsan, Korea, to overcome difficulties in installing facilities and suggest directions for domestic offshore wind power development. In addition, in Korea, where there are not many countries suitable for wind power generation unlike overseas, it was decided to investigate whether floating offshore wind power could be the answer as planned. The reason why the government is pushing for investment in renewable energy such as solar power and wind power is because energy sources from the sun are eco-friendly. However, the U.S. and Europe, which started the wind power project early, are having difficulty in handling the wings of wind power generators. The energy source looked at the contradictions caused by environmental pollution in the treatment of waste, although it was environmentally friendly, and investigated how waste was treated and utilized overseas. Compared to other countries that entered the offshore wind power business earlier, domestic power generation projects are in their infancy and should focus on developing technology and co-prosperity with neighboring residents rather than on excessive expansion.

An overview of employment generation in the sectors of GHANA’S economy: Foreign direct investment perspective

As foreign direct investment (FDI) contributes to economic growth and development of the host country, it also serves as a basis of employment creation in an economy. Over the past years, FDI has helped accumulate capital for developmental projects in most developing and least developed countries. This study provides an overview of job creation through FDI inflow within the Ghanaian economy by considering the number of jobs allocated to the various sectors. The study makes use of a descriptive statistical method that quantitatively supports data analysis. The results show that as the total FDI registered projects decrease, the number of expected jobs to be created also declines. The outcome also revealed that the service sector enjoys a higher percentage of the FDI registered project and the total number of employments generated within the selected period. The result further indicates that about 84% of the aggregate jobs created were for Ghanaians. The outcome also showed that the tourism and export trade sectors’ performance towards job generation from FDI inflow is lower than other sectors of the economy. It is suggested that the government should continue to put in a great effort to make the country’s business environment much friendly for investors. Keywords: FDI, employment, sectors, Ghana, economic growth, trade inflow.

Status and path of intergenerational transmission of poverty in rural China: A human capital investment perspective

This paper focused on the intergenerational transmission of poverty in rural China by estimating the intergenerational transmission of earnings and stated its mechanism from the perspective of human capital investment before children participated in the labor market. The data used in this study were longitude data collected in 2 000 households of 100 villages among 25 counties across five provinces in 2005, 2008, 2012, 2016, and 2019. Qualitative and quantitative methods were adopted. We found a significant intergenerational transmission of earnings in rural China, especially for the pairs of father–children and parents–children. The intergenerational earnings’ elasticities were much less than those in urban areas, which indicated better social mobility in rural areas than that in urban China. The children with parents who could earn much were more likely to be invested before they participated in the labor market, gain a high education and have more skills. Three cases further showed that the mechanism of human capital investment in children breaking the intergenerational transmission of poverty and promoting social mobility.

Explaining mutual fund behavior through the structure‐conduct‐performance lens

AbstractThis paper examines mutual funds. These are economically important as the largest institutional investors, and form an important principal‐agent relationship as custodians of retirement savings. Despite a huge literature, there is no agreed explanation of mutual fund behavior. This analysis links mutual fund research across disciplines under the structure‐conduct‐performance paradigm (SCP), which is widely used in strategy research to explain firm actions and results. SCP explains mutual fund actions after placing the fund manager at the center of fund operations, where their conduct is driven by structure of markets and the funds management industry. Structural influences on fund managers include unpredictability of markets, the oligopolistic nature of the mutual fund industry, and disengagement of clients. As a result, funds derive income as commission on assets under management, which is sub‐optimal for clients. In addition, fund managers' conduct is driven by their homogeneity and socialization with competitors and investee firms. While the most obvious role of fund managers is construction of investment portfolios, outperformance is not their sole, or perhaps even principal, objective. The SCP lens offers insights into mutual funds of value to fund managers, investors, regulators and executives of investee firms. This paper impounds evidence from real‐world data in theory to offer an actor‐centric perspective of investment which is an archetypal practitioner driven discipline.