Non-systematic Risk Research Articles

Research on Hedging Ratio of Stock Index Futures to ETF Fund

Exchange Traded Funds (ETF) can largely avoid non-systematic risk, but investors often cannot avoid systemic risk, and the hedging function of stock index futures can do this. Therefore, hedging ETF with stock index futures has become a good investment strategy. Based on the trading data of the China Securities Index (CSI) 300 stock index futures and CSI 300 Exchange-Traded Fund (ETF), this paper analyzes the optimal hedging ratio of CSI 300 stock index futures by Ordinary Least Squares (OLS) and dynamic Error Correction Model - Generalized Autoregressive Conditional Heteroskedasticity (ECM-GARCH) model and compares the hedging performance predicted by the model to avoid the systematic risk of ETF. The results show that the hedging effect of the dynamic hedging model is better than that of the static model, and the ability to avoid systemic risk is also better. The predictions of both models show that stock index futures hedge ETFs very well. The dynamic model is more able to reduce the heteroscedasticity of the transaction data.

Do global extreme hazards and related attention lead to financial risks in the shipping market?

ABSTRACT This paper investigates the impacts of extreme hazards on the shipping market in terms of freight rates. We develop a unique measure of abnormal freight rate occurred in the period of extreme hazard by introducing the concept of abnormal return in the finance field and find that such impacts of extreme hazards tend to be positive. The impacts are attributed to systematic risks in the shipping market due to increasing costs and decreasing supply. We observe similar associations between individuals’ attention to hazards and freight rates, which are related to stakeholders’ expectations and thus cause non-systematic risks in the shipping market. Unlike the systematic risk, which has short-term effects on the freight rates and starts to fade in three months, the non-systematic risks caused by attention is long-lived. Stakeholders require higher premium for higher systematic and non-systematic risks in the shipping market. The impacts of extreme hazards and attention remain positive when the hazards are associated with the shipping market, non-Asia market, environmental pollution, and seasonal effects. Our results are robust when considering alternative measures of freight rates, potential endogeneity of COVID-19 and macroeconomic conditions. We provide stakeholders with suggestions on pricing, environmental protection, decision-making and market-forecasting.

The Impact of Systematic & Non-Systematic Risk on Stock Returns (Oil & Gas Sector) in Pakistan

The Impact of Systematic & Non-Systematic Risk on Stock Returns (Oil & Gas Sector) in Pakistan

APAKAH PENGUNGKAPAN KEBERLANJUTAN DAN PELAPORAN TERINTEGRASI DAPAT MENURUNKAN RISIKO IDIOSINKRATIK?

Abstract - Risk is something that most investors encounter when investing. Idiosyncratic risk is a risk that can be controlled and diversified to lessen it. Idiosyncratic risks arise due to internal firm conditions, which can stem from manager policies. This study aims to investigate the impact of sustainability disclosure and integrated reporting on idiosyncratic risks. This quantitative study uses research data from the financial reports of manufacturing businesses listed on the IDX between 2016 and 2020, found at www.idx.co.id. This study also makes use of data from www.financial.yahoo.com. Furthermore, this study uses monthly data on 10-year government bond yields from www.bloomberg.com. Purposive sampling was used to select 555 observations (firm-year) for this study. According to this study, sustainability disclosure has a beneficial influence on idiosyncratic risk when utilizing both the market and Fama-French models. Using the Fama-French model, this study discovered that integrated reporting had a favorable influence on idiosyncratic risk. Integrated reporting, on the other hand, has no influence on idiosyncratic risk when utilizing the market model. This study extends capital market-based financial accounting research by using non-financial data and information essential in making investment decisions in addition to financial report figures.
 Keywords: Disclosure; Investment; Non-Financial; Non-Systematic Risk

Investor interaction and the valuation of listed companies

We examine the impact of investor interaction on the valuation of listed companies. We have developed distinctive micro-databases and indicators to delve into the impact of investor interaction on the valuation of listed companies and understand its underlying transmission mechanism. The research shows that: firstly, improving the interaction between listed companies and investors can significantly improve the valuation of listed companies. Secondly, investor interaction helps to enhance the quality of information disclosure, curb the non-systematic risk of stocks, increase stock activity and liquidity, and plays a mediating role in improving the valuation of companies. Thirdly, investor interaction has a moderating effect on the valuation of listed companies by influencing trading behaviors such as shareholding ratio and turnover.

DO FAIR VALUE DECISIONS INCREASE IDIOSYNCRATIC RISK?

Systematic and non-systematic risk can both cause investment risk. Internal company conditions typically cause non-systematic risk. Diversification can help to mitigate this risk. This research aims to look into applying fair value to idiosyncratic risk. This quantitative study employs secondary data from manufacturing financial statements and stock data from the IDX. In addition, this study uses monthly data on 10-year government bond yields. Information on financial statements was obtained from www.idnfinancials.com, stock prices from www.finance.yahoo.com, and monthly 10-year government bond yields from www.bloomberg.com. In total, 575 observations were used in this study (firm-year). We used multiple linear regression analysis on panel data to test the research hypothesis. The study finds that managers' fair value accounting relates to idiosyncratic risk. The results of this test apply to both the market and the Fama-French models. This study contributes to knowledge development concerning fair value testing, which still needs to be improved in developing countries.

The Differences Between Systematic and Non-Systematic Risk and Alternative Approaches to Understanding Risk

This paper first states the differences between systematic and non-systematic risks from several aspects and secondly emphasizes the importance of risk recognition. Then an alternative approach used to understand risks, the Capital Asset Pricing Model (CAPM), is explained, for further measurement and understanding of Systematic and non-systematic risks, while there are still some limitations. Finally, some strategies that can be used in a real-time dynamic stock market are recommended, mainly focusing on the application of beta values.

국내상장기업의 부동산보유비율이 기업의 초과성과와 원천별 위험에 미치는 영향에 관한 실증분석

In this study, the risk-adjusted model (RAM: Risk Adjusted Model) was used to calculate excess performance of the seven sub-industries for 10 years from 2013 to 2022. In the analysis of the achievement of excess performance according to real estate ownership ratio, it was found that when real estate ownership ratio increases, high excess performance ratios are achieved in the business facility management and construction industries, while poor excess performance is achieved in the transportation, manufacturing industries. In the case of the wholesale and retail KOSPI, it shows high performance with a high real estate ownership ratio because of positive effect on core competencies due to the nature of the wholesale and retail business. When the excess performance ratio was low, the real estate ownership ratio increases the non-systematic at a greater extent. It can be inferred that real estate holding increases the non-systematic risk of a company. The reason of underperformance of the transportation, manufacturing industries is due to the greater increase in non-systematic risk than other industries when real estate ownership ratio increases.

Calculation of the discount rate for the Russian market in present-day conditions

Subject. This article focuses on the consideration of the algorithm and methodological approaches to assessing the cost of capital. Objectives. The article aims to develop a practical algorithm for assessing the cost of capital and calculating the discount rate based on ruble risk-free assets and Russian financial statistics. Methods. For the study, we used the Weighted Average Capital Cost (WACC) and Capital Asset Pricing (CAPM) models. Results. The article offers a tested step-by-step algorithm for calculating the cost of capital and risk premium loading to it using domestic financial statistics. It also justifies the need to take non-systematic risks out and beyond the weighted average capital cost and offers a deterministic mechanism for their assessment. Conclusions and Relevance. The author-developed algorithm for estimating the cost of capital, as well as methodological recommendations for its use, can be used by domestic investors to make the necessary decisions, as well as by the financial services of Russian companies to build the economic policy of the company. Using the proposed approach may help obtain a more adequate assessment of the cost of capital of Russian companies for domestic investors, thereby improving their competitiveness.

Practical Significance of Distinguishment between Systematic/Non-systematic Risks

This essay illustrates the help in distinguishing the systematic and non-systematic risks, through the detailed analysis on the key factors, characteristics of both systematic and non-systematic risks in the context of financial investment, based on the detailed clarification and analysis on these two risks, plus the actual cases to elaborate the typical cases concerning the two kinds of risks. It is concluded that the systematic risk has the features of inevitability, unpredictability and non-diversifiability, while the non-systematic risk has the opposite features of evitability, predictability, and most importantly the diversificability. Therefore, it is of great help for investors to distinguish these two risks, so that the investors could better hedge the risks by taking suitable countermeasures in constructing the investment portfolio, and ultimately achieve the balance point of risk and return. Last, by discussing the other approaches in understanding risks, it is concluded that although these perspectives are helpful for quantifying the risks, or for academic research, yet in the field of investment, the distinguish between systematic and non-systematic risk is still the basis of reasonable risk management.

An Overall Analysis of Risk and Risk Mane

The study reviews systematic risk and nonsystematic risk, comparing their distinct characteristics and introducing strategies for the minimization of risks, proposing potential solution and alternatives to the limitations of existing methods such as the simple duration concept. This paper aims to enrich the literature on risk and risk management and provide implications for firms on the topic of risk and risk management, ligaturing these strategies and processes with potential risks firms will face, thus regarding enterprise risk management strategies.

The Effect of the COVID-19 Pandemic on Corporate Risk and ESG Performance as Moderating Variable

This study aims to examine the effect of the Covid-19 pandemic on corporate Risk proxied as total Risk, Systematic Risk, and nonsystematic Risk (idiosyncratic) with ESG performance (environmental, social, and governance) as a moderating variable. This study took a sample of companies listed on the IDX in the Kompas100 index from 2018 to 2020. The results of this test show a positive influence of the Covid-19 pandemic on corporate Risk as measured by total Risk, Systematic Risk, and nonsystematic Risk. Then this test shows that ESG performance, both in combination and components, namely environmental performance (E) and governance performance (G), is proven to significantly weaken the positive relationship of the Covid-19 pandemic to total Risk and Systematic Risk, but insignificant to the company's nonsystematic Risk. In the ESG component, environmental performance (E) has the best coefficient and significantly weakens the positive relationship of the Covid-19 pandemic to all three risks, namely total Risk, Systematic Risk, and nonsystematic Risk. However, only social performance (S) was found to be insignificant in this study, weakening the relationship between the independent and dependent variables.

BRICS-T Ülke Piyasalarında Risk Ayrıştırma

In this study, the measurement and decomposition of risk were examined and the risks of the national stock market indices of the BRICS-T countries (Brazil, Russia, India, China, South Africa and Turkey) were measured using the monthly closing data for the 2009-2018 period, based on the US market. S&P 500 index was chosen as the market index. Accordingly, the total risks of the national stock market indices of the BRICS-T countries are calculated and separated into systematic and non-systematic risks. In addition, beta coefficients that measure the sensitivity to market movements were calculated based on 120-month data. The study findings show that the non-systematic risks of national stock exchanges in the BRICS-T community are generally quite low, and most of the risk is the systematic risk factor.

Real options appraisal for a reactive CSR strategy: the case of Facebook

The present research values reactive corporate social responsibility (CSR) policies using the theory of Real Options (RO). Its main goals are to determine the role of RO methodology as a business risk hedging function on reactive CSR strategies and to analyse whether the application of RO adds value to companies with reactive CSR strategies. The study illustrates Facebook’s reactive CSR policy and also demonstrates that RO can be used serve to hedge market risk (systematic risk), just like their equivalents in the financial markets but also to hedge business risks (non-systematic risk). In addition, it shows that despite the criticism that the use of reactive CSR strategies may arouse, they have a positive impact on the market when used at the right time in companies that do not have a brand positioning closely linked to CSR. Additionally, the article shows that decision-making is a fundamental part of managerial functions and whether the situation is considered as a structured or unstructured problem will determine the action to be taken. In this particular case the reactive CSR strategy relates to waiting as an outcome of a planned choice.

FEATURES OF THE APPLICATION OF FUNDAMENTAL ANALYSIS FOR A PORTFOLIO OF SHARES OF PUBLIC COMPANIES INVESTING IN CRYPTO ASSETS

The article discusses the strategy of indirect investment in cryptocurrency assets by compiling an investment portfolio of shares of public technology companies operating in the developing cryptocurrency market or investing in cryptocurrencies. When forming such a specialized portfolio, you can get the maximum level of profitability with a lower risk than when investing in cryptocurrencies directly, but only if you improve the methods of fundamental analysis. This is the goal set for achieving this research. The authors use the metrics of the world's largest analytical portals: GuruFocus, YahooFinance, Zacks, unfortunately, are not very popular among both Russian stock traders and portfolio investors. Each share, based on the values of the coefficients, is assigned a rating score, on the basis of which the coefficient of investment attractiveness is calculated. The purpose of portfolio diversification by sector and industry is to reduce non-systematic risk measured using the beta coefficient and the standard deviation of profitability. The results of calculations of the profitability and risk indicators of the formed portfolio are compared with the “benchmark” - the leading stock and cryptocurrency indices and conclusions are drawn about the feasibility of investing in this sector of the stock market.

RISIKO DAN MANAJEMEN RISIKO PADA PERBANKAN SYARIAH

An account officer will definitely face various risks related to disbursed financing. Risk is defined as a deviation from the realization of the plan that has been set as a target that may occur unexpectedly. Therefore, all companies, including Islamic banking, must have management of the risk itself. This study aims to determine the risk and management of risk in Islamic banking. The method used is literature study. The results of the study show that these risks can be classified into 2 groups, namely, first: systematic risk, second: nonsystematic risk. In this case Islamic banks make various efforts in the risk management process by developing written procedures that reflect the overall strategy and ensure its implementation. The procedures made must contain policies to identify, measure, and control risks in all banking activities including. The target of this risk management policy is to monitor and control the course of financing distribution activities with a reasonable level of risk in a directed, integrated and sustainable manner.

Risk Assessment Method of Agricultural Management Investment Based on Genetic Neural Network

At present, the economy has entered the new normal. In the environment of economic slowdown, agricultural operation and investment risk management is of great significance in investment activities. In order to avoid the related risks of the agricultural operation and investment, improve the stability of agricultural operation and investment risk assessment, and ensure the effect of the agricultural operation and investment risk assessment, an agricultural operation and investment risk assessment method based on genetic neural network is proposed. This method fully considers the global optimization capability of the genetic algorithm and optimizes the weights and thresholds of the BP neural network. According to the construction principle of the index system, from the perspective of systemic risk and nonsystematic risk, a risk assessment index system for agricultural business investment has been established. Based on the establishment of risk evaluation index system, using the genetic neural network method, the agricultural operation investment risk evaluation model is established to realize the agricultural operation investment risk evaluation. The experimental results show that the proposed method has a good effect on the risk assessment of the agricultural operation and investment and can effectively improve the stability of the risk assessment of agricultural operation and investment.

An Empirical Study of CAPM’s Applicability to Rare Earth Permanent Magnet Material Stocks

China has the world’s largest reserves of rare earth elements. Rare earth permanent magnet material has always been one of the popular industries in the investment market. CAPM is the basic asset-pricing model in financial economics. There are a number of studies conducted to examine the applicability of CAPM to stock markets in different industries and to investigate the modification method to improve the model’s prediction accuracy. In this study, seven leading enterprises in China’s rare earth permanent magnet material industry listed on the A-share market were selected as the research subjects. Based on CAPM, regression analysis was conducted on the monthly data from March 2016 to February 2022. The results demonstrated that using the ? coefficient to explain the risk of China’s rare earth permanent magnet industry is ineffective. The ultimate benefit was less affected by market indexes but mainly by non-systematic risks. CAPM has low applicability to China’s rare earth permanent magnet material industry and requires further improvement. Nevertheless, CAPM still has some guiding significance in making enterprise comparisons and investment decisions.

Portfolio Selection in NSE Expected Return & Risk through Markowitz Portfolio Theory

This article tells us about selection of portfolio from National Stock Exchange. Investors are more concerned about their objective minimizing risk and maximizing returns. They considering their tradeoff b/w risk and return from the portfolio, a financial economist, Harry Markowitz, proposed the So-called optimal portfolio theory in 1952. The aim of this article is to provide a practical study of Markowitz model on the Indian Stock Market (NSE) from 1st June 2009 to 30th June 2019.The Markowitz model has been widely used by investors, its application on National Stock Exchange is limited. From the data input which are monthly adjusted closing & daily adjusted closing prices. As a result, investors can select the optimal portfolio that maximizes portfolio return with respect to risk. It is vividly manifest that the investor tends to be risk averters, the attitude towards risk and return tends to play a vital role for the selection of the portfolio. Thus, there is the need to comprehend the investor’s attitude towards different portfolio choices. Diversification always reduces the non-systematic risk, it is also given by Morgan Kelly in 1994 gives the benefits of diversification (all the eggs in one basket: portfolio diversification of US households). In other words, diversification allows an opportunity for investments to grow with minimum volatility, security behave differently in different market conditions.

Social Environment and Healthy Investment Behavior: Joint Influence of Culture and Institution on China.

The influence of the social environment on healthy investment behavior is a vital research topic. This paper focuses on foreign direct investment (FDI) as an important part of its broad impact in improving the level of capital circulation and diversifying the non-systemic risk of a single country portfolio. Using data from 35 countries on direct investment in China, we find that the impact of the social environment on healthy investment behavior is mainly reflected in investors’ resistance to cultural distance and their benefit compensation across institutional distance. In addition, their joint influence is still negative, dominated by cultural distance, which can still verify that institutional distance mitigates the negative effect of cultural distance on FDI. Therefore, in order to promote international healthy investment behavior, it is feasible to improve both the mitigation effect of the institution in the short term and promote the level of cultural exchange in the long term, according to the research results of this paper.