Riskiness Of Investment Research Articles

Развитие и модернизация российских предприятий добывающих и обрабатывающих отраслей с применением цифровых технологий в условиях трансформирующегося мира: инвестиционный аспект

The changes that have taken place in the world order in recent years are reflected in scientific concepts de-scribing transformation processes. In the eighties of the XX century, the SPOD-world was replaced by the VUCA-world, and total digitalization, the coronavirus pandemic and geopolitical conflicts gave rise to the BANI-world, the transition to which from the VUCA-world, according to many researchers, is not yet complete. The era of change is affecting businesses that need to plan for and invest in their future. In a highly uncertain environ-ment, forecasting is difficult but necessary. Moreover, this should be done taking into account the peculiarities inherent in the present period of time – the high level of riskiness of investments, the innovative nature of the digital technologies used, and so on. Enterprises in the extractive and manufacturing industries are of key im-portance for the Russian economy. Their development and modernization are identified by the President of the Russian Federation V.V. Putin as a priority direction of the state policy. Putin has identified their development and modernization as a priority direction of state policy. Companies in Russia’s extractive and manufacturing industries have a high degree of wear and tear on machinery and equipment and need to upgrade them. In modern conditions, it is advisable to do it on an innovative basis, using digital technologies that allow to reduce transaction costs, level the influence of the human factor on some processes, increase the speed of product development and creation, etc. Currently, some Russian extractive and manufacturing companies are imple-menting various digital solutions, but in order to meet the Government’s objectives of import substitution, tech-nological sovereignty and digital transformation, the number of such companies must increase significantly. However, there are limitations to the incorporation of digital technologies in the activities of enterprises due to uncertainty and the risks it generates, the significant amount of investment required to implement projects for the development and modernization of enterprises using digital technologies, and the need not to increase the level of social tension in society. State support measures are aimed at overcoming these obstacles, the use of which, according to the authors of the article, will allow to solve not only the problems of enterprises using them, but also to transfer the developed technologies to other enterprises and other industries.

INVESTMENTS IN SERBIAN PIG PRODUCTION – INFLUENCE OF REGIONAL DISPARITIES

Pig production is one of the most important elements of Serbian livestock breeding sector. Although it faces numerous challenges, there is not enough research focused on its economic effectiveness. The goal of this research is to analyze influence of regional disparities on economic efficiency of investments in Serbian pig production. The main methodological approach was to determine the present value of investments in pig production (for Mačva and Šumadija regions). Authors applied sensitivity and scenario analysis, as well. Riskiness of investments is compared using standard deviation and coefficient of variation of the expected present value. The results indicated significant influence of labor costs on net cash flows (especially in Šumadija region). Analysis revealed that (in usual circumstances) investments in pig production in Mačva region are more economically efficient. Nevertheless, rather small increase in pig price could lead to equal present values in both regions. It was determined that investments are riskier in Šumadija region.

Constant or Variable? A Performance Analysis among Portfolio Insurance Strategies

In this paper, we propose a comparison among three portfolio insurance strategies, namely the constant proportion portfolio insurance, the time-invariant portfolio protection, and the exponential proportion portfolio insurance, via an in-depth performance analysis. We aim to ascertain whether strategies characterized by variable parameters can outperform those with constant parameters by measuring potential returns, investment riskiness, downside protection capability, and ability to capture market upside. The results, achieved in a model-free framework by exploiting bootstrapping techniques, advise that no winning strategy exists overall, even when considering different volatility regimes, rebalancing frequencies, and protection levels.

Economic efficiency of an investment project for the laying (restoration) of protective forest strips in the Dinsk district

The purpose of the study is to substantiate the economic efficiency and riskiness of an investment project for laying (restoring) shelterbelts on the example of the municipality Dinskoy district of the Krasnodar Territory, located on the territory of the fifth alluvial-loesslike flat landscape with plowed steppes. An analysis was made using GIS technologies of the current state of the existing field-protective forest belts in the territory under consideration, the areas of their laying and the volume of necessary repair work were determined. A project for laying (restoring) a system of field-protective forest belts has been developed, the amount of necessary capital investments in forest reclamation measures has been determined, and expected indicators of efficiency and riskiness of investments have been calculated. In the course of the study, it was taken into account that without timely work to restore forest belts, the yield of winter wheat, the main agricultural crop in the region, could be reduced by 30–70 % in the long term, which would result in large losses in cash receipts and profits for commodity producers. It has also been proven that for the effective implementation of the proposed project, it is important to provide state subsidies for at least 30 % of the amount of capital investments incurred

Investment climate of countries in conditions of financial instability

The article points out that financial crises are especially dangerous for the investment climate of developing countries or countries with transitional economies. It considers approaches to the interpretation of the concept of «investment climate of a country» and its features. Based on that, the author's own interpretation of this concept is presented as a complex of political, legal, financial, economic, social, institutional, innovative, infrastructural and other conditions of investment activity of recipients and other subjects of the investment system, which affect the investment process, facilitating or impeding it with a purpose of attracting investments into a certain country. It is determined that the main cause of financial instability in recent years has been the Covid-19 pandemic, which has led to a decrease in investment activity, insufficient liquidity of investments and a decline in their attractiveness in many sectors, and a deterioration in the investment climate in the world. It is noted that global financial instability has a negative impact on the countries' investment climate, which is reflected in: a decrease in investor trust in investment objects; increased riskiness of investments; and rising costs of attracting foreign investment to the country. The author analyses changes in the total volume of investments in the world for the period 1990–2021, which indicates a more favourable investment climate in economically developed countries, but it is more affected by financial instability compared to developing countries. It is established that in order to ensure a favourable investment climate in Ukraine, the legislative framework provides guarantees for investors' activities, opportunities for public-private investment partnerships, etc. The author identifies the shortcomings that make the investment climate in Ukraine unfavourable. The list of measures to improve the investment climate of world countries in the context of financial instability is substantiated. It is noted that ensuring an attractive investment climate in the country in crisis conditions is possible only through a targeted investment strategy and a specific system of measures that will provide conditions for economic recovery after the recession.

Investor reactions to key audit matters: Financial and non‐financial contexts

AbstractWe investigate how a disclosed risk item and key audit matter (KAM) relatedness combine to affect investors' riskiness assessment in financial and non‐financial contexts. When management disclose a high‐risk item, we find that investors react the same way across contexts with KAM relatedness having no effect. When management disclose a low‐risk item, investors react differently in each context. When a KAM is related to the disclosed financial (non‐financial) low‐risk item, investors assess investment riskiness higher (lower) than when a KAM is unrelated to the low‐risk item. Our findings indicate the varying communicative value of KAMs across financial and non‐financial contexts.

Machine Learning's Algorithm Profoundly Impacts Predicting the Share Market Stock's Price

The stock market is a type of trading where an investor invests their money in a company’s share. In the stock market, an investor with fast and accurate decisions can make money hand over fist. But the inconsistent nature of the stock market makes the decision critical and investment risky. To sort out it, the researcher has developed an Artificial intelligence and machine learning model with the lowest error percentage to forecast the stock price. The author discusses the importance and benefits of forecasting in the share market. The main aim of this paper is to explore the various technologies used to predict the share market stocks. The report also highlights the factors why prediction is not 100% accurate and whether it is possible or not.

Surrender contagion in life insurance

Modern life insurance policies embed a surrender option that entitles policyholders to terminate their policy early for its cash value. Mass surrenders–spiking surrenders of life insurance policies within a short period–are widely documented prior to many life insurer failures, but their impacts on insurers are rarely quantified. This paper builds a model of mass surrenders in a heterogeneous pool consisting of a minority of financially guided policyholders who make rational surrender decisions and a majority of individual policyholders who are subject to herd. By revising the self-excitation in the Hawkes process to a contingent event-accumulation-excitation, we introduce a history-dependent surrender process for the individuals whose contagious behavior can be triggered contingent on past surrenders becoming salient. We then incorporate it into a life insurance pricing framework and study mass surrenders’ impacts on contract valuation and default risk of the insurer, allowing for its structural default under regulatory solvency intervention. Our numerical results show that while contagion aligns individual policyholders’ surrender behavior with the optimal surrender of financially guided ones, it jeopardizes their financial positions in favor of equity holders. Surprisingly, surrender contagion only mildly enlarges an insurer’s bankruptcy rate, which is not driven by strict solvency regulation. Despite its public perception of posing a significant risk to insurers as similar to a bank run, surrender contagion does not critically threaten insurers’ solvency: To prevent insurers’ bankruptcies, their investment riskiness and leverage pose more of a concern to regulators.

ALARP Criteria to Estimate Acceptability and Tolerability Thresholds of the Investment Risk

Assessing the riskiness of investments in civil works is an integral part of the decision-making process. The main limitation is the absence, both in the regulatory landscape and in the literature of the sector, of threshold values that can guide the analyst in expressing an assessment on the acceptance of the investment risk. The aim of the paper is to define a risk management model that overcomes this gap by introducing acceptability and tolerability thresholds for project risk. The idea is to jointly use: (i) the As Low As Reasonably Practicable (ALARP) logic, from which the concepts threshold of acceptability and tolerability of risk derive, for the first time applied to assess the project risk in the civil field; (ii) the Capital Asset Pricing Model (CAPM) and statistical methods to define an innovative methodology for estimating the aforementioned threshold values. According to the proposed approach, these risk limit values can be specified according to both the investment sector and the socio-economic context of the project. The implementation of the methodology in the civil company sector in Europe allows to validate the described model. The elaborations show that the financial performance of the project is widely acceptable if the Expected Internal Rate of Return is greater than 7.8%; unacceptable if the expected rate of return is less than 5.6%; and tolerable as an ALARP if the expected rate is between 5.6% and 7.8%. The estimated acceptability and tolerability thresholds can provide the economic operator with a more immediate and consistent evaluation of the triangular balance of risks, costs, and benefits. This allows the decision-making process to become more rational and transparent.

Basic economic principles of the digital transformation in Russian agriculture

The article presents a monographic analysis of global developments in the digital agriculture. The structural-functional model of the system formation of digital agriculture was proposed. The links between its elements and the external environment was established. The system of organizational and economic principles was developed in transition of commodity producers to digital agriculture, ensuring the maximum efficiency of its functioning and establishing the full mastering of technologies of precision agriculture as an obligatory stage. We developed a private methodology for assessing the economic efficiency and riskiness of investments in the development of innovations in the digitalization of regional crop production.

Drivers of economic and financial integration: A machine learning approach

We propose a new approach to identifying drivers of economic and financial integration, separately, and across emerging and developed countries. Our advanced machine learning technique allows for nonlinear relationships, corrects for over-fitting, and is less prone to noise. It also can tackle a large number of highly correlated explanatory variables and controls for multicollinearity. Results suggest that general economic growth, increasing international trade, and contained population growth have helped emerging countries catch up to the level of the economic integration of developed countries. However, slow financial development and a high level of investment riskiness have hindered the speed of emerging countries’ financial integration. Furthermore, the results suggest that integration is a gradual process and is not driven by cyclical or transitory events.

FEATURES OF PUBLIC ADMINISTRATION IN SHAPING STRATEGY OF VENTURE INVESTMENT OF BUSINESS ENTERPRISES

The purpose of this study is to define the content of the category “venture investment”, and to establish the relationship between the concepts of “venture investment” and “venture capital”, to analyze the state of venture investment in Ukraine and determine its role in innovative development of the economy, to systematize international experience consider the possibility of its adaptation in Ukraine. Object of research: venture capital in the system of financing innovation processes in the modern economy. The methodological basis of the study is a set of general scientific and special methods of cognition. Methods of analysis and synthesis, generalization and scientific abstraction were used in the formation of the conceptual and categorical apparatus. The analysis of approaches to understanding the essence of venture investment, its components was carried out using dialectical and systemic-structural methods. The application of the historical and logical method, induction and deduction made it possible to study the genesis of the theory of economics and enterprise management, the factors of the strategy of development of venture investment of business entities. Within the framework of the study of the current state of venture investment, calculation and analytical methods of observation, measurement, analysis and comparison are used. Conclusions. Based on the above study, we can assume that venture capital is a combination of financial, human and intellectual resources, which with a high level of risk is invested in the development and implementation of high-tech products of companies that are in their infancy and initial development and are not listed on the stock market and in case of success brings its owner a profit that is much higher than the industry average. Despite the riskiness of investments, venture investments have a number of attractive prospects and advantages. As world experience shows, venture-backed companies are better prepared to innovate, grow faster and create more jobs in the future.

Drivers of Economic and Financial Integration: A Machine Learning Approach

We propose a new approach to identify drivers of global market integration using an advanced machine learning technique. We differentiate across economic and financial integration as well as across emerging and developed countries. Our approach allows for nonlinear relationships, corrects for over-fitting, and is less prone to noise. Moreover, it is able to tackle a large number of highly correlated explanatory variables and controls for multicollinearity. Results suggest that general economic growth, increasing international trade, and contained population growth have helped emerging countries to catch up to the level of the economic integration of developed countries. However, slow financial development and a high level of investment riskiness have hindered the speed of emerging countries' financial integration. Furthermore, the results suggest that integration is a gradual process and is not driven by cyclical or transitory events.

Consequences of Cov-Lite Loans

Recent years have seen a new trend in commercial bank lending—loans with no financial covenants. These covenant light, or cov-lite, loans raise concerns about excessive risk to lenders due to lack of monitoring. In this study, we examine the consequences of cov-lite loans. Focusing on rated, institutional loans, we find that cov-lite loans are more likely to default than loans with financial covenants. Further, we find minimal evidence that investment riskiness is different for cov-lite borrowers but find evidence that cov-lite borrowers have worse future performance than other borrowers. The results collectively suggest a benefit to financial covenants to lenders which is lost when they issue cov-lite loans.

A Genetic Algorithm (GA) Approach to the Portfolio Design Based on Market Movements and Asset Valuations

Vulnerable nature of price forecasts, such as an unpredictability of future and numbers of socio-economic factors that affect market stability, often makes investment risky. Earlier studies in Finance suggested that constructing a portfolio can promise risk-spread gains. While Fund Standardization improved the traditional theories by reducing the computational complexity and by associating every interaction in the portfolio, such a method still cannot become a winning strategy because it does not measure the current value or the relative price of each asset. Inspired by the works of finding returns per risk, we attempt to design an optimal portfolio by searching products that have potential to grow further. More specifically, we first analyze risk-adjusted returns in the previous periods and use their inertia as a momentum. However, because historic movements alone do not fully elucidate future changes nor guarantee positive returns, we scored the relative values of each stock to make more informed estimations. Using the Capital Asset Pricing Model, we measured the values of each stock and determined those undervalued. In this study, we applied a Genetic Algorithm to optimize portfolios while incorporating the momentum strategy and the asset valuations. The proposed GA model was tested in two separate markets, S&P500 and KOSPI200, and projected greater profits than that from both the previous method with momentum method and the market indexes. From the experimental results, the proposed CAPM+ method was found to be very effective in financial data analysis and to lay a groundwork for a sustainable investment execution.

What makes an investment risky? An analysis of price path characteristics

We examine the influence of financial asset historical price path characteristics on investors’ risk perception, return beliefs and investment propensity. To that end, we run a series of survey experiments in which we present various price patterns to individuals with vested interest in financial matters. Our findings reveal that price paths with identical daily and monthly returns (and consequently identical return standard deviation) can lead to substantially different risk perception by investors, indicating that historical volatility is insufficient to explain risk perception. Salient features such as highs, lows and crashes are the most influential drivers of perceived risk in price paths. Return forecasts are primarily driven by past overall returns and the most recent price developments. Perceived risk and return beliefs strongly predict investment propensity.

What Makes an Investment Risky? An Analysis of Price Path Characteristics

We examine the influence of financial asset historical price path characteristics on investors' risk perception, return beliefs and investment propensity. To that end, we run a series of survey experiments in which we present various price patterns to individuals with vested interest in financial matters. Our findings reveal that price paths with identical daily and monthly returns (and consequently identical return standard deviation) can lead to substantially different risk perception by investors, indicating that historical volatility is not sufficient to explain risk perception. Salient features such as highs, lows and crashes are the most influential drivers of perceived risk in price paths. Return forecasts are primarily driven by past overall returns and the most recent price developments. Perceived risk and return beliefs strongly predict investment propensity.

Human Capital and Investment Policy

The literature relates human capital costs to firm leverage (Berk, Stanton, and Zechner (2010) and Chemmanur, Cheng, and Zhang (2013)) and mergers and acquisitions (Lee, Mauer, and Xu (2017)). In this paper, we study the relation between a firm’s human capital costs and investment policy. We argue that employees demand higher pay to compensate for the additional unemployment risk borne by firm’s investment riskiness. We first present a simple theoretical setting to illustrate the positive effects of investment riskiness on average employee pay. We then empirically examine the relation. We find a significantly positive relation between investment riskiness (as proxied by cash flow volatility and unlevered stock return volatility) and human capital cost (as measured by CEO compensation and average employee pay). The effect is stronger in low-pay firms than high-pay firms, and non-technology firms than technology firms. We further investigate four channels through which investment riskiness possibly influence human capital costs: corporate diversification, R&D expenditures, advertising expenditures, and total value of acquisitions in a year. We find that while diversification negatively affects human capital cost, the rest of the three channels have positive effect on human capital costs. Lastly, we show that firms adjust their investment policy based on labor intensity. Our results are robust after accounting for the endogeneity concerns. Overall, our research contributes to the nascent but growing literature on the impact of human capital on firm decisions.

Analýza výkonnosti amerického a evropského akciového trhu z pohledu amerického a evropského investora

The paper is focused on the analysis of stock market returns of American and European stock market for different investment horizon from the view of an American and European investor. The paper also partly resumes, in the part of analysis of USD/EUR exchange rate influence on market returns of mentioned stock market, research paper REJNUŠ, O., ŠOBA, O.: Changes in the USD/EUR exchange rate and their impact on the return of stock indexes from the viewpoint of a European and of an American investor. ACTA UNIVERSITATIS AGRICULTURAE ET SILVICULTURAE MENDELIANAE BRU- NENSIS, Vol. LII, No. 6, 2004, pg. 145–159, ISSN 1211-8516.The development of both American and European stock market is put on the development of two, structure-similar Standard & Poor’s exchange indexes, particularly S&P 500 and S&P Europe 350. According to the USD/EUR exchange rate, there were used the values published by FED, with the oldest data there were accepted the count ECU to EUR. The data were taken both from the weekly closing values of mentioned stock indexes and weekly closing values of USD/EUR exchange rate.The analysis was done with using the methods of quantification of „running market returns“ (recount to the average annual values) of indexes from the view of both investors within the set investment horizon. The elemental statistical level characteristic – simple average, median and statistical characteristic of variability – standard deviation and variation coefficient were quantified from this time series of annual running market returns. The analysis, which was purposely oriented to six basic different long investment horizon (1 year, 2 years, 3 years, 5 years, 7 years, 10 years), has approved that in focused term of 1980–2004 the market returns of picked stock market from the view of both investors (American and European) was generally higher in longer investment horizon than in the shorter investment horizon. The values of variation coefficient in particular investment horizon indicated the decreasing riskiness of investments in analyzed markets with elongating length of investment horizon, from view of both investors on both stock markets. The influence of the exchange rates changes on the values of quantified characteristic of indexes market returns (stock markets) was relatively insignificant, so the conclusions of the mentioned research paper, which resumes partly this paper, where in practice verified.

Refinancing Risk, Managerial Risk Shifting, and Debt Covenants: An Empirical Analysis

Does risk shifting incentives or risk management incentives dominate when firms rollover large amounts of maturing debt? The empirical evidence supports the risk management hypothesis by identifying a hump-shaped relation between long-term debt maturity and firm risk. Using difference-in-differences approach that relies on the ex-ante variation in long-term debt at the onset of the crisis of 2007, I find that firms with greater exposure to rollover risk increase R&D intensive investments. This paper high-light that the incentive to avoid financial distress plays a significant role in explaining the riskiness of investments.