Set Of Financial Assets Research Articles

Management of Market Assets in Crisis

Introduction, Purpose . Most of the classic and modern investment models do not take into account the crisis processes in the economy. This happens mostly because crises are not studied well enough and serious researches are to be made in this sphere. Methods . This paper offers a model for estimating the market condition, considering the five edge states: crisis growth, growth, stagnation, recession, crisis recession. In this paper has been developed a crisis indicator, which can be the basis for determination of the crisis initial phase. Results . A concept of a dynamic portfolio model, adapting to the market changes, has been introduced to manage market assets. Adaptation of the investment portfolio occurs according to the crisis processes in economy. Investment is understood as a process of buying assets for profit-making. The term “strategic investment” is used to refer to long-range investments. Financial assets exist in various forms and may range from almost completely safe low yield government bonds to international assets that are at much greater risk and produce more profit. Discussion . Usually investor owns an assets bundle. A set of financial assets, bounded by a single investment strategy, is called an investment portfolio. Warren Buffett states that a profitable investment strategy should be long-ranged with selection of the right assets. For managing the market assets the authors suggest the use of the dynamic investment strategy which adapts to the crisis.

Cointegrated market-neutral strategy for basket trading

Cointegration among two or more variables can be found in many economic or financial data. A typical application is to form portfolios based on the cointegrated relationships found in a set of financial assets in an attempt to generate profits. However, some high-net worth investors may find these portfolios too risky, particularly during a bear market, and hence they lose interest in adopting them in their trading strategies. A plausible method to relieve such burden to the investors is to construct a cointegrated portfolio which is also market-neutral. We name such cointegrated market-neutral portfolio as COINMAN. In this paper, we will tackle the problem of identifying COINMAN. We will discuss how to determine the number of COINMAN portfolios available among a set of assets. Finally, we apply the proposed methodology to identify COINMAN portfolios consisting of the constituent stocks of Hang Seng Index and Hang Seng China-Affiliated Corporations Index in Hong Kong. Our empirical results demonstrate that the trading strategies based on COINMAN portfolios are more profitable and less sensitive to the market than their cointegrated counterparts.

Statistical rehabilitation of improper correlation matrices

The simplest way to describe the dependence for a set of financial assets is their correlation matrix. This correlation matrix can be improper when it is specified element-wise. We describe a new method for obtaining a positive definite correlation matrix starting from an improper one. The expert's opinion and trust in each pairwise correlation is described by a beta distribution. Then, by combining these individual distributions, a joint distribution over the space of positive definite correlation matrices is obtained using Cholesky factorization, and its mode constitutes the new proper correlation matrix. The optimization is complemented by a visual representation of the entries that were most affected by the legalization procedure. We also sketch a Bayesian approach to the same problem.

Limited Participation, Nominal Volatility, and Risk Sharing: Monetary Union and Financial Development

This paper explores the effects of nominal volatility and limited participation in asset markets on the risk sharing possibilities available to agents. When the set of financial assets is a decision of agents and is constrained by the resources available for investment, limited participation and nominal volatility can generate an inefficiently small number of financial assets. A monetary rule, such as a fixed exchange rate or monetary union, that reduces nominal volatility can foster the development of stock markets by increasing the number of equity securities. However, the welfare benefits and costs of a monetary union are asymmetrically distributed both across groups with different access to financial markets and across countries.

Taxation and household portfolio composition: US evidence from the 1980s and 1990s

This paper explores the relationship between household marginal income tax rates, the set of financial assets that households own, and the portfolio shares accounted for by each of these assets. It analyzes data from the 1983, 1989, 1992, 1995, and 1998 Surveys of Consumer Finances and develops a new algorithm for imputing federal marginal tax rates to households in these surveys. The empirical findings suggest that marginal tax rates have important effects on asset allocation decisions. The probability that a household owns tax-advantaged assets, such as tax-exempt bonds or assets held in tax-deferred accounts, is positively related to its tax rate on ordinary income. In addition, the portfolio share invested in corporate stock, which is taxed less heavily than interest bearing assets, is increasing in the household’s ordinary income tax rate. Holdings of heavily taxed assets, such as interest-bearing accounts, decline as a share of wealth as a household’s marginal tax rate increases.

A FACTOR ANALYTIC APPROACH TO AN EMPIRICAL DEFINITION OF MONEY

IN RECENT YEARS, several attempts have been made to develop an empirical definition of money. Not only have different methodologies been employed in arriving at the empirical definitions of money, but the definitions vary widely from study to study. Friedman and Meiselman [6] define money to be that set of financial assets which best explains nominal income. Friedman and Meiselman [6, p. 181] employ two criteria in determining the set of assets which defines the money supply. The first criterion is that the sum of the assets should have the highest correlation with income. The second criterion is that the sum of the assets should have a higher correlation with income than any of the components taken separately. Using these criteria, Friedman and Meiselman conclude that a proper empirical definition of money is the sum of currency, demand deposits, and time deposits at commercial banks. Using the same dual criteria, Timberlake and Fortson [13] argue that time deposits have insignificant explanatory power in predicting income, and Kaufman [10] argues that the definition of money changes depending upon whether financial assets are related to income in preceding, concurrent, or later periods. Another approach to defining money empirically is the employment of elasticities of substitution among financial assets [3], [5]. For example, Chetty [3, p. 278] estimates elasticities of substitution and uses these elasticities to take into account Gurley's [7] suggestion that financial assets be weighted by their corresponding degree of moneyness in defining the money supply. Chetty concludes that the money supply should be a weighted sum of currency, demand desposits, time deposits, deposits in mutual savings banks, and liabilities of savings and loan associations. In this paper, a methodological and statistical approach different from the studies previously cited is employed. The analysis involves a twostage procedure. In the first stage, a set of financial assets is considered simultaneously to determine relationships among the assets within the set. The dimension of the set of assets is then reduced by the multivariate statistical technique of factor analysis. In the second stage of the analysis, the Friedman-Meiselman dual criteria are applied to the factor analytic results to determine an empirical definition of money. It will be seen that the money supply is defined to be a weighted arithmetic average of the assets considered. The factor analysis model is presented in section I, and estimated results are presented in section II of this paper. In