Investor Preferences Research Articles

ESG components and equity returns: Evidence from real estate investment trusts

This study examines the relationships between the individual components of environmental, social, and governance (ESG) performance and future stock returns of US Real Estate Investment Trusts (REITs). The findings demonstrate a negative association between environmental performance and expected returns, while social performance shows a positive relationship with future returns. Moreover, the study investigates whether the observed negative (positive) relationship between environmental (social) performance and equity returns can be attributed to the predictability of ESG components on future firm fundamentals or investor preferences towards different ESG components. The results indicate that environmental performance has a detrimental impact on firm fundamentals in REITs, including future profits, external financing, and stock risk. Conversely, social performance exhibits a positive association with future firm fundamentals. Institutional investors do not significantly reduce ownership to REITs with strong environmental performance but increase their ownership of REITs with strong social performance. In summary, this study highlights that the relationship between ESG and equity varies depending on the specific ESG components under consideration.

Analysis of Portfolio Optimization Performance: Markowitz Model and Index Model in Capital Markets

In the post-pandemic era, marked by economic uncertainty and stock market volatility, investors are turning to Modern Portfolio Theory (MPT) to guide their investment decisions. This study aims to develop a robust mathematical framework for portfolio construction using the Markowitz Model (MM) and the Index Model (IM) with added constraints. The objectives are threefold: (1) to create a portfolio framework that reflects investor preferences using MM and IM with additional constraints, (2) to compare these models against the Gaussian Distribution using Python and Excel, (3) to compare the statistical data and correlation tests of daily logarithmic returns in Python with monthly excess returns in Excel, and (4) to evaluate their performance relative to the traditional Markowitz approach through Monte Carlo simulations.The methodology involves incorporating five additional constraints into the MM and IM models. The analysis uses 20 years of historical daily return data for ten stocks from various sectors, one equity index (S&P 500) as a risk-free rate proxy (1-month Fed Funds rate). Daily logarithmic returns are analyzed using Python, while Excel Solver and Solver Table are employed for monthly excess return data.

Socially responsible investments inside out: a new conceptual framework for investigating retail investor preferences

Socially responsible investments inside out: a new conceptual framework for investigating retail investor preferences

Geopolitical turmoil and investor green preference: Evidence from the corporate bond market

In this study, we analyze a sample of 1,630 corporate green bonds issued internationally between November 2012 and January 2024 to investigate the yield differences between green and non-green bonds. Our findings reveal a small greenium, particularly significant in the secondary market among carbon-intensive industries, first-time green bond issuers, and riskier issuances. We show that Geopolitical Risk (GPR) significantly influences the greenium in the secondary market, primarily driven by geopolitical acts rather than threats. Additionally, we establish that third-party certifications and corporate exposure to environmental risk are critical in explaining the GPR-greenium relationship. These results underscore the importance of GPR in enhancing investor preference for green bonds, offering important implications for both practice and policy.

Climate policy shocks and crowdfunding success of renewable technology campaigns

AbstractThis study uses Trump's withdrawal from the Paris Accord as an exogenous policy shock and investigates its impact on crowdfunding outcomes. We find that this major policy change negatively affects the funding success of renewable technology campaigns. Mechanism tests suggest that social trust and availability bias transmit the influence of climate policy shock on crowd backers' decisions. Further analyses indicate that Biden's consequential policy reversal recovers the investors' support towards renewable technology. Overall, the Trump administration's climate policy shock induces significant shifts in the consumption preferences of small investors and incurs negative externalities upon renewable technology in crowdfunding markets.

Measuring The Pulse of Sustainable Investment: A Systematic Review & Bibliometric Perspective

In recent times, increasing regulatory pressure and changes in investor preferences have led to an increase in the importance of sustainable investment at both academic and practitioner levels, with the field still occupying the formative stage. Therefore, the objectives of this study are to explore the intellectual underpinnings of and suggest future research avenues in the discipline of sustainable investment, as well as to conduct a systematic review and bibliometric analysis. In total 1,222 articles were selected from the Scopus database for the period 2013-2023. The study follows the SPAR-4-SLR protocol, involving performance analysis and science mapping using VOSviewer and the R-package. Network analysis revealed eight major clusters primarily focusing on firms’ financial performance, stock returns, contributions to climate change, economic growth, sustainable development goals, risk assessment, and corporate social responsibility. Additionally, the study developed a unified taxonomy model based on a causal framework that includes the foremost independent, mediating, moderating, and dependent variables, studied in the field of sustainable investment.

From ban to balance: How agricultural climate policies reshape rural asset allocation?

Environmental regulation on climate risk for promoting sustainable development is an important research topic that requires further attention. In response to the increasing awareness of agricultural climate and environmental protection, the implementation of the straw burning ban policy has been adopted in China. To gain a deeper understanding of the implications and effectiveness of the straw burning ban policy on rural households assets allocation behaviors, and this study utilizes China Family Panel Studies (CFPS) during 2010 to 2018 and employs the Difference-in-Differences (DID) estimation strategy to identify the causal effect. Accordingly, we draw several empirical findings. First, the straw burning ban policy has a significant impact on the assets allocation behaviors of rural households, leading to an increase in both risk and non-risk assets. Specifically, a preference for risky investments strongly exist following the occurrence of the straw burning shock. Second, we reveal significant reductions in the number of farmers and farming production costs, including expenses related to irrigation, seeds, and land usage. Conversely, we observe a significant increase in land renting and farmer machinery leasing activities. These effects are found to change the income patterns and thus affect household assets allocation behaviors. Third, the straw burning ban policy has a significant decline impact on household expenditures, specifically in total and housing expenditures, while welfare expenditure shows a positive increase as the preventive motivation. Finally, rural households affected by straw burning ban policy are significantly induced to increase allocation in short-term saving and non-financing assets, as well as in financing fixed-assets and financial investments.

IMPACT ASSESSMENT OF INFORMATION TECHNOLOGY ON INVESTMENT CHOICE DECISIONS OF ACADEMIC PROFESSIONALS

The substantial impact of information technology on investment decision-making is explored in this study, and strong empirical support is provided through a significant regression model. Understanding the extent to which technology influences investment choices is of utmost relevance in a time of fast technological advancement. The research makes use of a varied dataset that includes a variety of economic and market characteristics, employing robust statistical analysis to evaluate the relationship between technology and investment decisions. Our findings show that information technology and investing choices are statistically significantly correlated. The regression model illustrates how technology is increasingly being used into investment strategies and how it influences investors' decisions. This study emphasizes the importance of incorporating technical expertise into investment plans, with a focus on data analytics, artificial intelligence, and long-term tech investments. Furthermore, the ease with which mutual funds can be invested in, with alternatives for both novice and experienced investors, has made them a practical and accessible option as the study points mutual funds as the most preferred option for investment. Their liquidity and transparency also resonate with investors who appreciate the ability to monitor their investments easily and access their funds when needed. The results of the study highlight how crucial it is to comprehend investor preferences for financial goods. The popularity of mutual funds not only demonstrates their benefits but also emphasizes the necessity for financial institutions and advisors to customise their services and products in order to meet investor needs. KEYWORDS: Information Technology, Investment Choice Decisions, Mutual Funds

The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics

This analysis investigates the performance and underlying dynamics of the Fama–French Five-Factor Model (FF5M) in the context of the COVID-19 pandemic, exploring its implications on the U.S. stock market across 30 industries. Our findings reveal marked shifts in the significance of factors. The SMB (size) gained in strength, while the HML (value) factor rose and fell in response to shifting flight-to-quality, liquidity, and inflation concerns. Both the RMW (profitability) and CMA (investment) factors saw a decline in their overall significance during the pandemic. Our results illustrate the oscillation of investor preferences from 2018 to 2023, capturing three distinct periods: pre-COVID-19, COVID-19, and post-COVID-19.

Examining institutional investor preferences: The influence of ESG ratings on stock holding in China's stock market

Amidst the global rise in ESG investing, this study scrutinizes China's institutional investors' preference for high-ESG stocks. Utilizing A-share data from 2015 to 2022, our analysis reveals a strong preference for high-ESG stocks, driven by their potential to reduce operational risks, enhance profitability, and reputation. This preference is further amplified by significant analyst report coverage, yet moderated by disparities in ESG ratings. We also observe a distinct trend among independent investors, who favor high-ESG firms, particularly in non-state-owned sectors and in smaller companies within high-pollution industries. The findings suggest that guiding institutional investments towards ESG can steer China’s capital market towards more environmentally friendly businesses, thereby promoting sustainable economic development.

The relationship between heterogeneous institutional investors and operational performance: Evidence from mergers and acquisitions

This study investigates the relationship between institutional investors and the inventory performance of companies engaged in mergers and acquisitions (M&As). Specifically, we examine the role of institutional ownership in the selection of target firms and their post-M&A performance. Additionally, we analyze how the effects of institutional investors vary based on their investment horizons and strategies. Our regression analysis reveals that acquiring firms with a large proportion of short-term institutional investors are more inclined to target firms with low inventory levels. This tendency stems from the preference of short-term institutional investors for better current operational performance, which drives decision-makers to merge with leaner firms. In contrast, acquiring firms with long-term institutional investors are more focused on performance improvement, even if the target firms have large inventories at the time of the M&A.

Crypto Herf: Utilizing the Herfindahl Index to Assess Cryptocurrency Investment Preference

This paper utilizes the Herfindahl Index to assess university business major student investment preferences regarding cryptocurrency. This paper seeks to determine which cryptocurrency investment options are most desirable and, more importantly, ascertain the reasons for said investments. This paper reviews the real estate-based currency of the French Revolution in order to provide historical lineage for the popularity of cryptocurrency investment today.

Investors Decision making Behaviour in Insurance Investment Preference

This study focuses on understanding investors’ decision-making behavior in the context of insurance investment avenues. It employs the Flinder’s Decision Making Questionnaire, based on the decisional conflict model proposed by Irving Janis and Leon Mann in 1979. The questionnaire comprises 31 items that assess six dimensions of decision-making behavior: Vigilance, Hyper Vigilance, Defensive Avoidance, Procrastination or Postponement, Buck-Passing, and Rationalization. This study examines how these six dimensions influence investors’ decisions regarding insurance investment preferences. The objective is to analyze the patterns of investors’ decision-making behavior and their impact on investment choices in the insurance sector.

Green hotspots? Unveiling global hotspots and shifting trends in carbon credit projects

AbstractThis study examines the spatiotemporal patterns of verified carbon credit projects from 2004 to 2022, utilizing data from the Gold Standard Foundation (GSF) registry and employing spatial autocorrelation (Moran's I) and hot spot analysis (Getis‐Ord Gi*) in ArcGIS Pro. South Asia and East Africa emerged as key hotspots for carbon credit projects. Hotspots transitioned from China, Brazil, Peru, Panama, and Cambodia (2004–2016) to India, Kenya, Rwanda, and Uganda (2017–2022) with Turkey remaining a hotspot throughout the period. Overall, the analysis reveals a statistically significant Moran's I of 0.07 and a z‐score of 3.04, indicating spatial clustering of projects and a less than 1% likelihood that the clustering is a result of random chance. The spatial pattern and types of projects align with socio‐economic conditions and environmental protection objectives in different regions. Domestic energy efficiency projects are prevalent, such as improved cookstoves, biogas digesters, and borehole technologies for safe water access. These findings prompt the deduction that socio‐economic conditions wield substantial influence on investor preferences in carbon credit projects. Hence, the study contends that the overarching goal transcends mere carbon emissions mitigation; it extends to elevating the socio‐economic well‐being of local populations. By pinpointing geographical hotspots and elucidating temporal shifts, this study equips stakeholders with strategic insights into investment in carbon credit projects and highlights evolving investor interests in the carbon credit landscape, bridging the gap between environmental objectives and socio‐economic imperatives.

Golden Horizons: Investigating Shariah-Compliant Gold Investment Awareness Among Youth

Gold has long been regarded as a reliable medium of exchange and a store of value, owing to its inherent traits and functions associated with money. In the context of Malaysia, gold investment emerges as a lucrative and secure asset category for investors. They have the option to either physically possess and safeguard gold or opt for a more modern approach by establishing a gold investment account. Over recent years, there has been a noticeable growth in awareness among the public and seasoned gold investors in Malaysia. However, this upward trend has not been as pronounced among the younger demographic. This research aims to investigate the extent of awareness regarding Shariah-compliant gold investment among the young Muslim population in Terengganu, Malaysia. Utilizing a quantitative research methodology, data was collected through a survey administered by researchers via a Google Form, disseminated across various social media platforms. The study successfully obtained data from a sample of 120 respondents. The findings of this study reveal that, on the whole, the young Muslim generation in Terengganu exhibits a high level of awareness regarding Shariah-compliant gold investment. The significance of this research lies in shedding light on the dynamics of gold investment awareness, particularly within the context of Shariah compliance, among the youth in a specific region of Malaysia. The results provide valuable insights for financial institutions, policymakers, and educators seeking to tailor their strategies to enhance financial literacy and promote Shariah-compliant investment practices among the younger population. As Malaysia continues to evolve as a financial hub, understanding and addressing the investment preferences and awareness levels of its diverse demographic groups become crucial for fostering a robust and inclusive financial landscape. Since this study was conducted with small sample size and focusing in Terengganu only, it is strongly recommended to expand the research to other states in Malaysia.

Pay inequality for stability? Investment preference of the national team intervention in Chinese stock market

We examine the factors that affect the investment decisions of the “national team”, a direct intervention dominated by the central government in the Chinese stock market. By describing the investment preferences of the national team, we discuss the objectives of the intervention policy in implementation. We find that larger firms are more likely to receive investment. The national team prefers undervalued firms and is positively related to future stock returns. We also find that firms under central government control are more likely to receive investment from the national team. This may cause these investments to be relatively inefficient. We provide novel evidence to evaluate the policy and the positioning of the national team in terms of rationality, fairness, and efficiency, and we reveal a potential mechanism by which government intervention in financial markets may cause inequality in the real economy.

Sustainable energy practices and cryptocurrency market behavior

We examine the effects of energy usage on the return, volatility and jump processes in the Bitcoin (BTC) and Ethereum (ETH) markets. Our main finding indicates that while BTC returns respond significantly to changes in electricity consumption, the effect of electricity consumption on ETH returns is negligible. We attribute this discrepancy to BTC's relative energy inefficiency, which contrasts with ETH's commitment to transitioning to a more energy-efficient mining protocol over our sample period. Additionally, we show that the effect of electricity consumption on cryptocurrencies is mitigated by media coverage and policy uncertainty regarding the state of the economy, environment, and cryptocurrency markets. Our results suggest that when trading cryptocurrencies, investors consider their relative energy efficiency and price electricity consumption differently, highlighting the influence of the transition towards more sustainable energy practices on investor preferences and investment decisions in cryptocurrency markets.

Expansion or retrenchment: Corporate investment reactions to external security risks

Intensifying power competition has raised the need to understand how corporations react to international security dynamic challenges. Using data on Chinese A-share listed companies from 2012 to 2022, we developed an index to measure external security risk and empirically study the influence of external security risks on corporate investment behavior. These findings indicate that corporations reduce real investment and increase financial asset allocation when external security risk is high. Meanwhile, corporations tend to expand overseas investments to enhance international diversification and turn toward low-risk regions. The technology and strategic emerging sectors exhibit a higher preference for real investment during periods of high external security risk. Furthermore, entrepreneurs’ family-nation sentiment can inhibit corporate financial investment and promote real investment. This study contributes to understanding how the external security environment shapes corporate investment strategies. It also demonstrates how entrepreneurial spirit can influence corporate investment decisions during periods of high security risk.

Family firms’ equity entry modes: Bridging family business and international business

Abstract In the global economy, the international strategies of family firms, influenced by family ownership and management, remain underexplored. Bridging the family business and international business fields, we use the socioemotional wealth lens to examine 1,236 international expansions from 2007 to 2013. Categorizing firms into pure family, nearly pure family, borderline family, and non-family typologies, we assess the influence of internal (experience, knowledge) and external (country risk) factors on their entry modes. Results indicate that higher family involvement in ownership/management increases the preference for greenfield investments over acquisitions or equity alliances, a relationship further moderated by international experience and country risk. This study provides nuanced insights into the international behaviors of family firms.

The Impact of Policy Quality and Political Stability on Foreign Direct Investment in ASEAN Countries: An Institutional Economics Analysis

This investigation pivots on the impact of policy quality and political stability on foreign direct investment within ASEAN countries. Both facets form essential components of a country's political risk profile; a lower risk profile, characterized by sturdy policy quality and political stability, tempts investors to channel their capital into preferred investment destinations. Our research employs a panel data regression analysis across seven ASEAN nations; Indonesia, Malaysia, Singapore, Thailand, Vietnam, the Philippines, and Brunei Darussalam, from 2012 to 2022. The Common Effects Model emerged as the optimal panel model during our study. We found that policy quality negatively impacts foreign direct investment, signifying that investments are perceived unprofitable due to the policy quality in the ASEAN region. In counterpoint, political stability has a positive effect, confirming that stable political circumstances in the ASEAN region draw investor interest. These significant findings validate that policy quality and political stability significantly sway foreign direct investment within ASEAN countries, making them crucial considerations for prospective investors.