Portfolio Of Securities Research Articles

Податкове регулювання інвестиційної діяльності банків України

The article is aimed at researching the tax regulation of investment activity of banks of Ukraine in the current conditions of development of the national economy; identifying the tax stimuli and deterrent factors of investment activity of banking institutions in the formation of investment portfolio. Tax regulation of the banking system directly influences the development of not only the monetary system, but also the national economy in general. Tax instruments for stimulating investment activity of banks are proposed to be grouped depending on the mechanism of influence, goals and types of investments. The dynamics of investments and their share in the assets of Ukrainian banks over the past five years are analyzed. The annual advance in the share of investments in the assets of Ukrainian banks shows an increase in the interest of banks in placing funds into investment objects. The assessment of the change in the composition and structure of the investment portfolio of Ukrainian banks for 2015–2019 was carried out, identifying that domestic banks focused on improving the liquidity of investments, i. e., financial instruments that can be sold at any time at favorable prices. The dynamics of the composition and structure of the portfolio of securities of domestic banks in recent years was researched, determining that the largest share for 2015–2016 made the securities for sale (more than 86%), while the securities before maturity amounted to more than 10%. When considering the structure of the portfolio of securities of banks during 2017-2019, it is specified that the most important is the proportion of investments in securities, which are accounted for at fair value through other comprehensive income, namely, more than 70%. Having examined the problems of domestic banking investment, we believe that stimulation in this direction should be carried out in terms of creating a favorable stable regulatory framework and an effective taxation regime.

THE STRUCTURE OF INFORMATION TECHNOLOGY FOR MANAGING PORTFOLIOS OF ENERGY SAVING PROJECTS AT METALLURGICAL ENTERPRISES

Purpose. In the implementation of investment projects, the process of industrial production, associated with the choice of the optimal supplier, customer, business partner; determining the best quality of products, minimizing the cost of purchasing and delivering material resources, etc.. This article analyzes the information technology of a software product to automate the decision support process in the financial investment activity of a metallurgical enterprise..Methodology. To solve the optimization problems, the following methods were applied: methods of studying the functions of classical analysis; indefinite Lagrange multipliers; variational calculus; dynamic programming; maximum principle; linear programming; nonlinear programming.. Findings The designed system, helping to make the most effective, comprehensive solution, can reduce the intellectual burden on the decision maker, minimize the number of routine operations and complex mathematical and economic calculations and, as a consequence, significantly reduce the time for decision. The advantage of the considered software product is that it is able to solve simultaneously two urgent tasks for today - to form the optimal portfolio of securities and to choose the optimal supplier of resources. Thus, it is convenient for metallurgical enterprises and will reduce the cost of purchasing software.Originality. This software product has no analogues at the moment, it is able to solve two current problems for today simultaneously - to form an optimal portfolio of securities, and to choose the optimal supplier, which will reduce the cost of purchasing materials and use these funds for the implementation of energy conservation projects at metallurgical enterprisesPractical value. The calculation method offered by the choice of the optimal supplier is universal and acceptable for the evaluation of enterprises in terms of different characteristics: the proposed methodology is based on a comprehensive, multidimensional approach to the evaluation of such complex phenomenon as the financial and economic activity of the enterprise; a flexible algorithm is used to obtain the valuation of enterprises, which realizes the possibilities of a mathematical model of comparatively-complex evaluation of the enterprise activity; the algorithm of calculations allows to move away from formation of conditional reference enterprise; the calculation is based on determining the interval of variation of features; the technique is based on bringing the numerical parameters to a single equivalent, which in this case is the approximation coefficient to the optimal value of the trait.

Influence of Investors’ Preference towards SBI Mutual Fund in Chennai City

In India, the savings from individual households contribute a large share in the capital appreciation. There are various ways such as purchase of real assets, Shares, stocks and securities in which the savings can be invested. Mutual Funds play a predominant role in collecting the funds from small investors and invest in balanced portfolio of securities. Investors have completely different outlook while they choose of investing in a specific avenue. The primary objective of investor is to safeguard his saving in safer and liquid investment opportunity taking into account his anticipation and his risk tolerance capacity. Hence, an attempt is made to identify the preferential attitude of investors and its influence on SBI mutual fund schemes taking into account social economic individual saving habit, social, economic, individual savings pattern and the level of confidence on investment schemes.

Применение математического моделирования при формировании инвестиционного портфеля коммерческого банка

The article touches upon the most urgent problem of creating the stock portfolio 
 of a commercial bank, where studying the strategies and tools of the bank’s investment activity and using mathematical models for its assessment help to identify the relationship between profitability and the risk of investing in securities. As a result of applied analysis and modeling of the portfolio structure, the optimal portfolio option is selected, which corresponds to a given level of risk and profitability, as well as to the investment strategy chosen by the bank. There has been analyzed the portfolio structure with specified characteristics of risk and profitability, according to the statistics of previous years. The types of documents have been systematized according to the compliance with the strategy of managing the portfolio of profitability growth, liquidity and risk minimization. Using the models of Markowitz, Tobin and other researchers of probabilistic portfolio assessment through covariance indicators and a correlation coefficient, there have been found the values of return on assets that can change in one direction or have a multidirectional nature, and allow to calculate dependence between the values of return on securities in the portfolio. There have been considered the following models: a portfolio model based on calculating the level of stock returns of LUKOIL JSC, Novatek JSC, Yandex; a portfolio model that includes risk-free assets with the highest level of reliability (government short-term bonds, federal loan bonds); capital asset pricing model which describes dependency between the risk and the required profitability. Based on these calculations there has been inferred the possibility of developing specific areas of the banking business in the field of securities transactions, including: saving funds (providing protection against inflation); capital growth (focus on the securities that have the potential for growth in market value); profitability (purchasing securities in order to obtain dividends on shares and interest on debt securities); liquidity (investments into financial tools that can be sold at any time at favorable prices); risk minimization. The results of the conducted analysis of correlation and regression of the securities portfolio have revealed the most preferred types of securities for growing profitability that are in the bank's portfolio: shares of the Russian oil company LUKOIL, the Russian gas company Novatek, Yandex cIA, as well as the federal loan bonds (based on the terms of calculating history dynamics since May 1, 2018 up to May 1, 2019)

Improvement of assets management in commercial banks

This paper analyses the banking practice of the Republic of Uzbekistan as it is necessary to develop stock transactions related to the issue of commercial bills in foreign currency. This concludes increasing the quantity and quality of securities in the investment portfolio.

DYNAMIC PROBLEM OF FORMATION OF SECURITIES PORTFOLIO UNDER UNCERTAINTY CONDITIONS

The analysis of known methods for solving the problem of forming a portfolio of securities in the face of uncertainty is carried out. Traditionally, the problem is solved under the assumption that for each type of asset, the values of the main statistical characteristics of the random value of their profitability (mathematical expectation and variance) are known. At the same time, the variance of portfolio returns, which is minimized, is used as a criterion for portfolio optimization. Two alternative approaches to solving the formulated problem are proposed. The first of them provides a decision on the criterion of the probability that the random total portfolio return will not be lower than the given. It is assumed that the random return for each type of asset is distributed normally and the statistical characteristics of the respective densities are known. The original problem is reduced to the problem of maximizing the quadratic fractional criterion in the presence of linear constraints. To solve this non-standard optimization problem, a special iterative algorithm is proposed that implements the procedure for sequential improvement of the plan. The method converges and the computational procedure for obtaining a solution can be stopped by any of the standard criteria. The second approach considers the possibility of solving the problem under the assumption that the distribution densities of random asset returns are not known, however, based on the results of preliminary statistical processing of the initial data, estimates of the values of the main numerical characteristics for each of the assets are obtained. To solve the problem, a new mathematical apparatus is used – continuous linear programming, which is a generalization of ordinary linear programming to the case when the task variables are continuous. This method, in the considered problem, is based on solving an auxiliary problem: finding the worst-case distribution density of a random total portfolio return at which this total return does not reach an acceptable threshold with maximum probability. Now the main minimax problem is being solved: the formation of the best portfolio in the worst conditions. The resulting computational scheme leads to the problem of quadratic mathematical programming in the presence of linear constraints. Next, a method is proposed for solving the problem of forming a portfolio of securities, taking into account the real dynamics of the value of assets. The problem that arises in this case is formulated and solved in terms of the general theory of control, using the Riccati equation.

RESEARCH OF MULTIPLE INVESTMENT STRATEGIES USING A SHORT AND LONG POSITION


 
 
 The construction of an optimal portfolio of securities is one of the main tasks of managing the financial system, in which individual assets are only a component part. However, each asset also requires a separate study.I gave the article building an investment portfolio with a zero strategy, comprising borrowing some assets and buying other assets for the same amount. The study comprised choosing the length of the historical horizon, the ranking criterion and the portfolio structure that ensured the maximum investor income.
 
 

Bank profitability and macroeconomic conditions: Are business models different?

AbstractThe paper investigates the impact of macroeconomic conditions on the profitability of EU banks by testing for differential effects according to the business model. We group banks into three business models using a hierarchical cluster analysis and find that using clusters based on the share of assets invested in loans reveals heterogeneity in the sensitivity of bank profitability to economic growth across business models. Our main result is that GDP growth, credit growth, and the risk‐free yield curve influence profitability as expected, but we also find that the effect of GDP growth is only significant for banks that have a high and medium share of assets invested in loans, and not for banks that hold large portfolios of securities. This difference depends on the impact of growth on asset write downs, especially those on loans and, to a lesser extent, on revenues. The results suggest that studies relating bank profitability to macroeconomic conditions should take the heterogeneity of business models into account.

Do fire sales create externalities?

We develop three novel measures of the incentives of equity mutual funds to internalize the price impact of their trading. We show that mutual funds with stronger incentives to internalize their price impact accommodate inflows and outflows by adjusting their cash buffers instead of trading in portfolio securities. As a result, stocks held by these funds have lower volatility, and flows out of these funds have smaller spillover effects on other funds holding the same securities. Our results provide evidence of meaningful fire sale externalities in the equity mutual fund industry.

Investment Portfolio Optimization on Russian Stock Market in Context of behavioral theory

The paper investigates possible investment portfolio optimization considering behavioral errors. The research rationale is due to the adaption of the investment recommendations for unqualified investors on the Russian stock market. In economic literature, the consequences of behavioral effects are not detailed enough when making a portfolio of Russian securities. The aim of the article is to make the most optimal portfolio based on the risk/reward ratio. The author made a hypothesis on applying various periods of profitability analysis to improve profitability indicators and increase the subjective probability of its achievement. To build a portfolio model, the behavioral portfolio theory and its optimization through linear programming were used. The study was based on modeling the investment portfolio of the most liquid stocks on the Russian stock market. Modified elements of the cumulative prospect theory with behavioral coefficients were used as indicators of profitability and probability. Based on the analysis results, the model of semi-annual portfolio analysis was proposed as a tool for portfolio optimization. The investor review of the portfolio semi-annual rate of profitability led to its best final index of effectiveness. In the medium-term assessment of portfolio profitability, the influence of behavioral factors decreases while maximizing returns with medium high risk. The research result is consistent with the basics of behavioral economics as the prospect theory regarding risk and loss aversion. Moreover, the factor of frequency of access to information and the degree of naive portfolio diversification with high profitability are promising areas for the development of research in behavioral finance. However, determining by the investor the objective probability to achieve the expected return level by using specific benchmarks is controversial.

КОНЦЕПТУАЛЬНЫЕ ОСНОВЫ ПОСТРОЕНИЯ ПОРТФЕЛЯ ЦЕННЫХ БУМАГ СО СВОЙСТВОМ ПРЕДИКТОРНОЙ ОПТИМАЛЬНОСТИ

Цель: построение такого портфеля ценных бумаг, который не обладает оптимальными свойствами в текущий момент времени, однако эти свойства предусмотрены в нем для ожидаемого будущего. Обсуждение: Сегодня глобализация принизывает все уровни инвестиционной сферы, а глобализационные факторы начинают главенствовать в инвестиционных процессах. Таким образом, в современных условиях адекватными следует признавать те подходы к моделированию инвестиционных процессов, в рамках которых удается учесть не только текущие, но и ожидаемые эффекты глобализации. Одним из таких подходов можно считать адаптивное моделирование. Результаты: предложен адаптивный подход к построению модели портфельного инвестирования, обладающей свойством предикторной оптимальности и учитывающей эффект глобализации.

On sparsity of eigenportfolios to reduce transaction cost

Purpose Transaction cost becomes significant when one holds many securities in a large portfolio where capital allocations are frequently rebalanced due to variations in non-stationary statistical characteristics of the asset returns. The purpose of this paper is to employ a sparsing method to sparse the eigenportfolios, so that the transaction cost can be reduced and without any loss of its performance. Design/methodology/approach In this paper, the authors have designed pdf-optimized mid-tread Lloyd-Max quantizers based on the distribution of each eigenportfolio, and then employed them to sparse the eigenportfolios, so those small size orders may usually be ignored (sparsed), as the result, the trading costs have been reduced. Findings The authors find that the sparsing technique addressed in this paper is methodic, easy to implement for large size portfolios and it offers significant reduction in transaction cost without any loss of performance. Originality/value In this paper, the authors investigated the performance the sparsed eigenportfolios of stock returns in S&P500 Index. It is shown that the sparsing method is simple to implement and it provides high levels of sparsity without causing PNL loss. Therefore, transaction cost of managing a large size portfolio is reduced by employing such an efficient sparsity method.

Generic Bank: Accounting for Debt Securities Sales and Impairments

ABSTRACT This case examines the accounting rules for debt security impairments with a particular focus on the role of securities sales in determining whether debt securities are impaired. Generic Bank's securities portfolio contains material unrealized losses, and the bank desires to sell debt securities near the close of the fiscal year to free up resources for liquidity purposes. The case permits an examination of possible financial reporting consequences from security sales transactions under ASC 326-30, and how the structure, timing, and necessity of sales interacts with financial reporting discretion. The case also allows students to take the role of either a bank executive or an external auditor to understand how different incentives may influence areas of judgment within financial reporting. The case requirements are appropriate for upper-level undergraduate or graduate financial accounting courses.

BANKING ACTIVITY ON THE UKRAINIAN STOCK MARKET

BANKING ACTIVITY ON THE UKRAINIAN STOCK MARKET

РАНГОВЫЙ ПОРТФЕЛЬНЫЙ АНАЛИЗ

Цель: применение эконометрической модели с дискретной зависимой переменной для построения портфеля ценных бумаг. Обсуждение: известна диагональная модель портфельного инвестирования, для построения которой Шарп применил линейную эконометрическую модель. Вместо линейной модели предложено для построения портфеля использовать нелинейную регрессионную модель с дискретной зависимой переменной. Это позволяет отражать бинарную природу доходности финансового актива с помощью вероятности получения положительного результата от вложений в актив. В результате вероятностные оценки становятся критерием, на основе которого необходимо формировать портфель. Для этого требуется новый подход, в котором используются принципы, отличные от принципов оптимизационного подхода. Результаты: предложено портфель ценных бумаг формировать на основе матрицы вероятностных предпочтений. Показано, что собственный вектор этой матрицы определяет структуру портфеля, который в силу своих свойств назван ранговым. Свойства рангового портфеля и методика его построения значительно расширяют возможности аппарата портфельного анализа.

Securities Analysis and Portfolio Management Using Artificial Neural Networks

Financial services institutions are adopting artificial intelligence and machine learning based solutions for accessing credit quality, market surveillance, fraud detection, and in many more areas. It enables institutions to make better decisions, better compliance management, better customer interaction, conduct surveillance and stress testing. Investors use artificial intelligence for developing portfolio by stock selection and asset allocation optimization for higher expected returns. We have analyzed the use of artificial intelligence by financial service institutions and its impact in service areas. We have reviewed existing and legacy methods used by financial institutions for various aspects of financial decisions such as security technical analysis, portfolio management etc. Applications of artificial intelligence and machine learning have changed overall approach in financial analysis and decision making domain. This paper emphasizes on use of artificial neural networks for predicting time varying expected return of financial time series and to optimize portfolio management.

Tainted portfolios: How impairment accounting rules restrict security sales

AbstractContrary to claims that fair value accounting exacerbated banks’ securities sales during the recent financial crisis, we present evidence that suggests – if anything – that the current impairment accounting rules served as a deterrent to selling. Specifically, because banks must provide evidence of their ‘intent and ability’ to hold securities with unrealized losses, there are strong incentives to reduce, rather than increase, security sales when market values decline to avoid ‘tainting’ their remaining securities portfolio. Validating this concern, we find that banks incur greater other‐than‐temporary impairment (OTTI) charges when they sell more securities. We then find that banks sell fewer securities when their security portfolios have larger unrealized losses (and thus larger potential impairment charges), and these results are concentrated in banks with homogenous securities portfolios, expert auditors, more experienced managers, and greater regulatory capital slack. Overall, our results suggest that – contrary to critics’ claims – the accounting rules appear to have reduced banks’ propensity to sell their securities during the financial crisis.

Performance Analysis of the Index Mutual Fund

A mutual fund is a professionally managed investment fund that pools together the savings of a number of investors who shares the common financial goals. These investors may be retail or institutional in nature. It offers small or individual investors access to professionally managed portfolios of equities, bonds and other securities. The paper is the study of the performance of Index fund. This is analyzed empirically since the period of 2012 – 2017. The main objective of this research is to evaluate the performance of Index funds. The study examined three parameters such as active returns, tracking error and Jensen’s alpha. In this paper the data has been collected from the secondary sources.

Does the number of holdings in a risk parity portfolio matter?

This empirical study is an endeavor to assess the impact of the number of securities in a risk parity portfolio on its performance. The study focuses on performance analysis of fifty, seventy-five and hundred stocks risk parity portfolio for emerging markets—India and China—and the developed market—the USA. Alpha of the risk parity portfolio has shown sensitivity to the change in the size as a number of holdings of the portfolio. The findings of this empirical study reveal that seventy-five stocks risk parity portfolio is in a sweet-spot for the full sample time period from Dec 2002 to Dec 2014. It not only generates statistically significant superior alpha, but also achieves a similar level of risk diversification as to fifty and hundred stocks portfolio. Testing of sub-periods of the full sample time period, which is coinciding with interest rate cycle, suggests that during the crucial period of financial crisis of 2008, seventy-five stocks portfolio shows the superior performance of alpha, Sharpe ratio and Treynor ratio over fifty stocks and hundred stocks portfolio with a similar level of risk diversification. However, the possibility of superior risk parity portfolio with a marginally higher or lower number than seventy-five stock portfolio cannot be denied.

Foreign Currency Mortgages Recast as Options on Commodity Futures

A foreign currency mortgage is debt for the purchase of residential property denominated in foreign currency. The borrower makes monthly payments in foreign currency. Devaluation of the domestic currency results in higher monthly payments. Practitioners have proposed solutions to avoid mortgage default. However, many of the practitioner solutions place excessive financial burdens on foreign lenders, while relieving domestic borrowers of responsibility. The goal of this paper is to present a solution that shares responsibility equitably between borrowers and lenders. First, we evaluate practitioner solutions by placing them in theoretical models. Then, the paper presents a solution, in which mortgages (loans) are viewed as derivatives (not loans). This is innovative, in that it takes mortgages out of banking and places them within investments. We recognize that investors have differential attitudes to risk. Accordingly, the proposed solution is presented in two contexts, i.e. from the perspective of a risk averse investor who shuns risk, or a risk taker, who is willing to take excessive risk to pursue returns. In the proposed solution, a call buyer may exercise the option, purchasing a futures contract to obtain the currency at a strike price that is less than the spot exchange rate. During the lengthy, uncertain delivery period, the exchange rate may vary more than the immediate period defined by the spot rate, in the form of jump diffusion models with stochastic volatility. The call buyer may purchase foreign currency at a strike price equal to the forward rates of a series of 1-period futures contracts with total life equal to the life of the mortgage. As strike prices continue to increase, with domestic currency depreciation, a repayment vehicle in the form of a portfolio of high-yielding securities is proposed, to produce the funds needed to meet forthcoming increases in monthly payments.