Investment In Australia Research Articles

Australia–Japan energy partnerships for regional security and decarbonisation

Australia and Japan stand at a pivotal juncture in their energy futures, with shared imperatives of ensuring energy security, affordability, and sustainability. As key players in the global energy landscape, their collaboration holds the potential to shape the trajectory of the Indo-Pacific’s energy transition, as outlined in Japan’s ‘New Plan for a Free and Open Indo-Pacific’ (FOIP). A central aspect of this collaboration involves securing liquefied natural gas (LNG) supplies from Australia to Japan and the region while simultaneously decarbonising the supply chain through carbon capture and storage (CCS) and advancing hydrogen technologies. Both nations recognise the significance of natural gas in ensuring regional energy security and affordability. Japan, heavily reliant on energy imports, particularly LNG, is motivated by past crises and geopolitical tensions to diversify its energy sources. The partnership between Australia and Japan not only addresses Japan’s energy needs but also influences the power dynamics within the Indo-Pacific. Challenges such as regulatory uncertainties and policy shifts dampen confidence for Japanese investors in Australia’s energy sector. Despite this, CCS technology offers a promising pathway to reduce emissions from natural gas production, with infrastructure facilitating low-emission hydrogen production. Policy coherence and streamlined regulations are essential to fostering innovation and scaling up these technologies. Collaboration on CCS and hydrogen commercialisation presents opportunities for both nations to lead the energy transition. Japan’s ambitious plans to increase its domestic hydrogen supply highlight the potential for joint efforts.

Startups and Angel Investors

The general objective of the research was to determine the advances related to the startups and angel investors. The specific objectives of the research are to identify the most successful angel investors and the countries where angel investors invest the most. Methodology, in this research, 41 documents have been selected, carried out in the period 2018 – 2024; including: scientific articles, review articles and information from websites of recognized organizations. Results, startups have a significant impact on the economy of countries, and go hand in hand with innovation and receiving timely investment. Unicorns achieve global recognition. The largest global markets for venture funding are The United States, China and United Kingdom. Conclusions, angel investors play an important role in financing startups, so it is necessary that they have support from government institutions. The top angel investors in the U.S are Peter Thiel, Ron Conway and Naval Ravikant. The top angel investors in Europe are: Avi Eyal, Danny Rimer and Philippe Botteri. The top angel investors in China are: Neil Shen (Sequoia China / ByteDance / Hong Kong, China), Richard Liu (5Y Capital / Xiaomi / Hong Kong, China) and Zhen Zhang (Gaorong Capital / Pinduoduo / Beijing, China) (Forbes, 2023). Here are 3 angel investors in Africa that should be on your radar: Jérémy Goillot, Réna Kakon and Axel Peyrere. The top angel investors in Australia are: Tracie Clark, Lisa Siganto and Richard Moore. The largest global markets for venture funding are The United States, China and United Kingdom. United Kingdom, Germany and France are the countries in Europe where business angel investments the most.

Reasonable Conjecture and Demonstration of Fama-French Model and Its Applications in Australia and US

Fama-French three-factors model and Fama-French five-factors model have been considered as significant models for calculating stock returns and estimating potential risk events. However, as Fama and French did in 2015, one reasonable conjecture has been come up with: Is there any extra factors could be added into the Fama-French five factors model? This paper raises a reasonable conjecture about the number of factors in Fama-French model and use the method of data analysis process with R software. Then this paper prove that the Fama-French five-factors model is still the most reliable to estimate the returns of portfolios currently based on the statistical data summaries. Besides, this paper also talks about the application and applicability of Fama-French models in Australia and US with some real cases and data analysis process. The result of this study shows that the applicability of Fama-French models is confirmed in both Australia and US. So the investors in Australia and US could use Fama-French models to estimate their expected return for some specific candidate projects and choose the best one to make investment based on the analysis results.

Institutional trading in stock market anomalies in Australia

AbstractThis study examines the role played by institutional investors in Australia. With a unique database that provides comprehensive coverage of institutional ownership, this study is the first to examine the overall performance of all institutions in the Australian equity market. Institutional investors do not outperform the market. Examining their trading activities in greater detail, we find that institutional investors do not exploit well‐known stock market anomalies, with the exception of momentum. Institutional investors are also found to sell loser stocks heavily at the end of the financial year, thus contributing to a strong quarter‐end momentum effect.

The Extent to Which Obesity and Population Nutrition Are Considered by Institutional Investors Engaged in Responsible Investment in Australia - A Review of Policies and Commitments

IntroductionResponsible investment (RI), in which environmental, social and governance (ESG) considerations are incorporated into investment decision making, is a potentially powerful tool for increasing corporate accountability and improving corporate practices to address broad societal challenges. Whilst the RI sector is growing, there is limited understanding of the extent to which pressing social issues, such as obesity and unhealthy population diets, are incorporated within RI decision making. This study aimed to investigate the extent to which obesity prevention and population nutrition are considered by Australian institutional investors engaged in responsible investment.MethodsA desk-based review was conducted of investment approaches of prominent Australian asset managers and superannuation funds identified as engaged in responsible investment. Relevant information on the incorporation of ESG issues related to obesity and population nutrition was extracted for each investor, drawing on websites, published policy documents and annual reports. Strategies were categorized as: (1) negative/exclusionary screening; (2) positive/best-in-class screening; (3) norms-based screening; (4) ESG integration; (5) sustainability-themed investing; (6) impact/community investing; and (7) corporate engagement and shareholder action. These strategies were compared across investors and by themes related to obesity and population nutrition.ResultsEighteen of the 35 investors indicated that they applied investment strategies that considered issues related to obesity and population nutrition. The most commonly identified strategy was ESG integration (n = 12), followed by sustainability-themed investing (n = 6), and positive screening (n = 4). The ways in which obesity and population nutrition were considered as part of these approaches included relatively high-level general health considerations (n = 12), considerations around the healthiness of food company product portfolios (n = 10), and consideration of specific company nutrition policies and practices (n = 4). The specificity and depth to which RI strategies were disclosed varied.ConclusionThere is significant potential for investment decisions to contribute to efforts to address key social issues, such as obesity and unhealthy diets. Some institutional investors in Australia have recognized the potential importance of incorporating obesity- and population nutrition-related issues into decision-making processes. However, the extent to which these considerations translate into investment decisions and their impact on companies in the food sector warrant further exploration.

The Protection of Investors and the Compensation for their Losses: Australia

The concept of ‘investor protection’ has a long-standing legal pedigree in relation to the business corporation. Since the early 20th century, when Berle and Means famously highlighted shareholder vulnerability in the modern public corporation, investor protection has been an important ideal in corporate and securities law. In more recent times, the level of investor protection has been treated as a litmus test for a jurisdiction’s quality of corporate governance and, also, as directly contributing to capital market structure. An array of legal strategies exists around the world to address the perceived problem of investor vulnerability. Some of these strategies focus on shareholder protection. Others focus on encouraging greater investor participation as a self-help mechanism. Disclosure constitutes an important regulatory technique from the perspective of both investor protection and investor participation in corporate governance. Its effectiveness depends, however, on enforcement. This paper examines, from a comparative perspective, protection of investors in Australia in circumstances where the corporation has released inadequate, or false and misleading, information, on which investors rely to their detriment. The paper analyzes Australia’s “twin peaks” regulatory framework, focusing on the performance of key regulators within that framework. It also considers the distinctive public and private enforcement mechanisms available to protect investors and the continuous disclosure regime, which applies under Australian law. The paper examines whether these mechanisms provide investors, who have relied on deficient corporate information, with adequate protection and relief. Finally, the paper considers the relatively recent advent of shareholder class actions in Australia, and their impact on private enforcement and the overall regulatory matrix.

Operating Cash Flow and Earnings Under IFRS/GAAP: Evidence from Australia, France & UK

The purpose of this paper is to investigate the difference in the value relevance of operating cash flow and earnings in stock price before and after the mandatory IFRS adoption. The study basically uses Feltham and Ohlson (1995), Joos (1997) and other related studies valuation model. Using a sample of firms from 3 IFRS countries from 2003 to 2012, we find that operating cash flows seem to be more value relevance than earnings within and across country border after a switch to IFRS in Australia and the UK, and earnings seem to be more value relevance than operating cash flows in France. Additionally, Operating cash flow and earnings convey incremental explanatory power to explain share prices in Australia, France and the UK. After a switch to IFRS in 2005, our study shows that the difference in account number (operating cash flows and earnings) reduces across country border but increases within country when both the IFRS and local accounting standards are used. Taken together, our findings suggests that after a swift to the mandatory IFRS adoption, even though income statement and the statement of cash flow are very vital for strategic decisions, investors in Australia and UK are more likely to pay more value relevance to the statement of cash flow than income statement whereas in France, income state is more required than statement of cash flow.

Institutional investors in Australia: Do they play a homogenous monitoring role?

This paper examines whether the presence of institutional investors in Australian publicly listed firms has an impact on firm performance. Our findings provide evidence that institutional investors are not a homogenous group of investors and that it is important to distinguish them by investment objective and their monitoring ability to exert influence. Results show that while institutional investors taken as a homogenous group appear to play an important governance role in terms of future firm performance, our analyses of the three broad typologies of institutional investors and by their respective sub-categories reveal differing conclusions. While pressure-resistant institutional investors (i.e., independent and having only investment relationship) significantly improve the short-term performance of Australian listed firms, they do not show any long-term monitoring ability. The impact of pressure-sensitive institutional investors is less clear, which is consistent with the view that these investors have some existing and potential business ties with the investee firms. More interestingly, we find that “faceless” investors via nominee and trustee institutions play an important monitoring role in creating a long-term firm value. Results have policy implications on the monitoring abilities of institutional investors in Australia.

Operating cash flow and earnings under IFRS/GAAP: evidence from Australia, France & UK

The purpose of this paper is to investigate the difference in the value relevance of operating cash flow and earnings in stock price before and after the mandatory IFRS adoption. The study basically uses Feltham and Ohlson (1995), Joos (1997) and other related studies valuation model. Using a sample of firms from 3 IFRS countries from 2003 to 2012, we find that operating cash flows seem to be more value relevance than earnings within and across country border after a switch to IFRS in Australia and the UK, and earnings seem to be more value relevance than operating cash flows in France. Additionally, Operating cash flow and earnings convey incremental explanatory power to explain share prices in Australia, France and the UK. After a switch to IFRS in 2005, our study shows that the difference in account number (operating cash flows and earnings) reduces across country border but increases within country when both the IFRS and local accounting standards are used. Taken together, our findings suggests that after a swift to the mandatory IFRS adoption, even though income statement and the statement of cash flow are very vital for strategic decisions, investors in Australia and UK are more likely to pay more value relevance to the statement of cash flow than income statement whereas in France, income state is more required than statement of cash flow.

The asymmetric price adjustment between REIT and stock markets in Asia-Pacific markets

This paper applies the threshold error correction model to examine the relationship for real estate investment trusts (REITs) and stock, and their asymmetric adjustment behaviors in six Asian/Pacific financial markets: Australia, Japan, Singapore, Taiwan, Korea, and Hong Kong. Our results show that there has been long-term equilibrium in REIT and stock indices in most of these markets. To earn exceptional profits, it is recommended that investors can sell (buy) the REITs when the indices of REITs are lower (higher) than equilibrium in Australia, Singapore and Taiwan; on the other hand, they should sell (buy) when the REIT market goes up (down) in Hong Kong and Japan. A causality test revealed that previous information about stocks predicted changes in the REITs in all the Asian/Pacific markets. One can also find that the lead–lag relationships are significant. The threshold EC model predicts two-way causality under both the regimes for the financial markets in most countries during all the sample periods. In addition, the adjustment speeds for the stock indices are faster than that for the REIT indices as disequilibrium occurs. This paper also finds that the previous mentioned trading strategies generally remained the same during the period of sub-prime mortgage crisis. However, the threshold EC model predicts one-way causality for both the regimes for the financial markets in most countries during this crisis period. In addition, we also find that the severe shock in REIT markets led investors in Australia and Taiwan to be more conservative during this period. The REIT indices had more effect on stock indices after the sub-prime mortgage crisis. According to the empirical results, we can infer that the degree of market imbalance and the occurrence of the sub-prime mortgage crisis induce the changes in the investment behavior of market participants.

The ‘Liability of Foreignness’: Chinese Investment in Australia

In the case of Chinese investment in Australia, most of the investment is undertaken by Chinese state-owned enterprises. As a consequence, they can leverage the massive resources available to them, and thus able to bypass some of the stages implicit in the internationalization thesis. These advantages are at the same time creating a problem for Chinese investors in Australia. Their ‘foreignness’, and in particular, their ownership has become a liability. They invoked fear and anxiety amongst the larger population and institutional friction is real. Australian companies, its media and government (including politicians and public officials) have found the idea of a putative Chinese takeover of Australia challenging and confronting. Using the case of Chinalco's bid for Rio Tinto, I seek to show how these institutional differences and the different logics engendered are played out and its attendant effects. The paper shows that theoretically and at a practical level, the internationalization of Chinese firms is a real challenge; it also argues that both Chinese firms and their Australian hosts have lessons to learn from each other. Arguably, there are also lessons for emerging firms and their internationalization into developed markets economies.

The Development of the Institutional Investor: The Case of Australian Life Insurers 1945-85

This paper considers the post-war development of asset management practices among Australian life insurers, which have historically been among the largest institutional investors in Australia. A complex process of adaptation and organisational restructuring allowed life insurers to transform from basic investors of policy-holders’ funds to large multifaceted institutional investors in just three decades. Three stages in the development of investment practices are identified. These phases trace the process of expanding existing knowledge bases; diversification; and the acquisition of new skills; consolidation and the integration of these skills into institutional structures; thus completing one cycle of organisational learning and setting the stage for the next.

ARDL bounds tests and robust inference for the long run relationship between real stock returns and inflation in Australia

This paper conducts an empirical investigation into the long run relationship between real stock returns and inflation in Australia by employing the ARDL bounds tests. There exists a stock return–inflation long run relationship, and the long run parameters are non-linear functions of those of the conditional error correction model. The OLS estimates of the latter model constitute the long run parameter estimates and their standard errors are estimated by delta methods. The long run model estimates so constructed can be biassed and inconsistent, and the delta method is derived assuming asymptotic normality, which does not hold in this investigation. In this paper, to overcome these limitations of the traditional methods, we employ the bias-corrected bootstrap method. As a consequence, the robust and reliable statistical inference can be made on the long run return–inflation relationship. The empirical results show that the expected inflation had no significant effect on real stock returns, while the observed inflation had a significant and negative effect. Furthermore, the data generating process of the returns–inflation relationship was not affected by the change in monetary policy regime in the early 1990s. These findings imply that Australian stocks have been very effective instruments for hedging against expected inflation. Because of the resilience of Australian economy to the current global financial and economic crisis, this finding has implications for long term domestic and foreign investors in Australia.

The impact of liquidity and transaction costs on the 52-week high momentum strategy in Australia

In this paper we investigate the profitability of the 52-week high momentum strategy in the Australian equity market over the period 1996—2008. We provide the first examination of the economic significance of the strategy by applying short-sale restrictions and utilizing bid-and-ask prices and trading volume to proxy for transaction costs and liquidity constraints, respectively. Testing reveals that the strategy yields significantly positive raw returns when concentrated purely on the more liquid stocks in the market, with significantly negative returns evident among illiquid stocks. This suggests that the anchor-and-adjust bias on which the strategy is based only exists among stocks with sufficient liquidity. Furthermore, the 52-week high strategy comprising liquid stocks fails to produce significant dollar profits once short-sale restrictions, transaction costs and liquidity constraints are accounted for. We therefore conclude that the 52-week high momentum trading strategy is not of practical use to investors in Australia.

Stock market synchronicity – an alternative approach to assessing the information impact of Australian IFRS

AbstractHow has the mandatory adoption in 2005 of International Financial Reporting Standards in (IFRS) affected information flow for investors in Australia? This paper investigates impact by examining synchronicity issues. Morck et al. (2000) label the degree to which stock prices depend upon market and industry wide information as market synchronicity, and the degree to which they reflect firm specific information as idiosyncratic dependency. Increased synchronicity can signal several events, including a loss of confidence in firm specific accounting data, reduced transparency, or evidence of a greater degree of cross sectional comparability. We develop and test three theoretical models on the impact of IFRS and find a general decrease in synchronicity in the first two post‐IFRS years, followed by a reversion to a significantly higher level in later years. Further tests reveal lower analyst forecast earnings errors post‐IFRS. Results provide restrictive support for the International Accounting Standards Board contention that IFRS accounting provides higher specific and comparable information content – at least for sophisticated financial analysts.

Australia’s equity home bias and real exchange rate volatility

The main purpose of this paper is to consider the effect of real exchange rate volatility on equity investment by Australian investors. Equity investment is of major importance to savers and investors in Australia. Also real exchange rate volatility is an important influence on Australia’s financial integration in the global economy. Analysis of the effect of real exchange rate volatility on Australia’s equity home bias is important since Australian dollar is a commodity currency. There is a close relationship between Australia’s terms of trade and real exchange rate volatility. Home bias is measured on the basis of free float-adjusted market capitalization in recognition of the fact that closely held shares are not available to ordinary investors. Real exchange rate volatility is measured by deviations from purchasing power parity on a bilateral basis between Australia and 35 countries. The cross-border equity investment data over the period 2001–2007 are from International Monetary Fund’s Coordinated Portfolio Investment Survey. Australian investors are found to invest significantly less in a country if the real exchange rate volatility of that country is relatively high (results that are robust to standard control measures and generalized method of moments).

Multi-period portfolio choice and the intertemporal hedging demands for stocks and bonds: International evidence

We investigate the intertemporal hedging demands for stocks and bonds for investors in the U.S., Australia, Canada, France, Germany, Italy, and U.K. Using the methodology of Campbell et al. [Campbell, J.Y., Chan, Y.L., Viceira, L.M., 2003a. A multivariate model of strategic asset allocation. Journal of Financial Economics 67(1), 41–81], we solve a multi-period portfolio choice problem for an investor in each country with an infinite horizon and Epstein–Zin–Weil utility, where the dynamics governing asset returns are described by a vector autoregressive process. We find sizable mean intertemporal hedging demands for domestic stocks in the U.S. and U.K. and considerably smaller mean hedging demands for domestic stocks in the other countries. An investor in the U.S. who has access to foreign stocks and bonds displays small mean intertemporal hedging demands for foreign stocks and bonds, while investors in Australia, Canada, France, Germany, Italy, and the U.K. who have access to U.S. stocks and bonds all exhibit sizable mean hedging demands for U.S. stocks.

CHINESE INVESTMENT IN AUSTRALIA

Chinese investment in Australia is emerging as an important part of the Australia‐China economic relationship. This paper overviews the major characteristics of Chinese investment in Australia up to the present: its volume, form, sectoral distribution, and major players. It then discusses the policies that have been driving recent increases in investment and those that are likely to have a more profound impact over the longer term.

The Significance of Infrastructure in Australian Investment Portfolios

Infrastructure has taken on increased investment importance in recent years with the growth in listed and unlisted infrastructure funds, and increased interest in infrastructure as an asset class by superannuation funds. In addition to the traditional listed infrastructure companies, a number of major institutional investors in Australia have become increasingly involved in infrastructure funds; this includes Macquarie, AMP, Babcock and Brown, Hastings and James Fielding. The purpose of this paper is to assess the significance of these infrastructure funds in Australia; particularly highlighting the leading infrastructure funds, types of infrastructure investment and superannuation fund investment in infrastructure. The investment characteristics and performance of infrastructure over 1995-2006 will also be assessed, as well as the potential role of infrastructure in portfolios. Strong performance has been shown by the infrastructure sectors, as well as providing diversification benefits in a portfolio; with infrastructure volatility having reduced in more recent years as the sector has matured.

Geared Equity Investments: A Case Study of Tax Arbitrage Down Under

Geared Equity Investment (GEI) contracts are an over-the-counter financial derivative product offered by Macquarie Bank, Ltd, to individual investors in Australia and New Zealand as a managed-risk investment in local shares carrying significant tax shield benefits. Upon issuance, a geared equity contract has three stakeholders: (1) the investor; (2) the issuer; and (3) the national tax authority. We assess the value of these contracts to each stakeholder and their support for tax arbitrage. We find that the national tax authority provides a significant subsidy to GEI contracts via tax shield benefits. These benefits support investor tax arbitrage in certain cases and issuer tax arbitrage in all cases examined.