Specific Portfolio Research Articles

Diversification in Business Valuation

Abstract The importance of the diversification and the related diversification factor in business valuation has not been studied in depth. In CAPM, due to the model assumptions, it is implied that an investor holds a perfectly diversified portfolio, which answers the question of diversification. The objective of this paper is to clarify the definition of diversification and to show how diversification effects can be incorporated into business valuation. Our research contribution entails demonstrating methods to capture the risk situation of an investor based on its asset allocation and then deriving the diversification effect from this assessment. As a methodological approach, we have opted for one that encompasses the most diverse degrees of diversification. Our analysis shows that this approach captures all non-hedged risks and thus performs a stand-alone valuation without diversification effects. If the diversification effect of a specific portfolio is to be included in the valuation, the analyst must shift from a stand-alone approach to a portfolio based approach, where the diversification factor cannot simply be equated with the correlation coefficient but must be calculated using various aggregation methods. Given that the conventional variance-covariance method excludes extreme risks, we propose the use of the copula approach. This approach can enhance risk modeling and yield more accurate results in diversification effect calculations. Our analysis demonstrates that it is possible to effectively model different diversification effects in business valuation. However, this entails substantial data expenses and demands a high degree of methodological expertise from the analyst.

Portfolio management: the case of the Norwegian Public Roads Administration

The interest in portfolio management has grown in time, especially due to the economical restrictions of the recent years. Selecting the best portfolio of projects and manage it to reach the strategic goals is therefore crucial, but the criteria to consider in the evaluation are getting more complex. The Norwegian Public Roads Administration (NPRA) is one of the actors that operate in complex environment, dealing with different portfolios and different types of projects. In the management of these portfolios, the new strategic initiative is to bring sustainability among the set of criteria to be evaluated. This is creating a challenge where the importance in selecting the projects to form the portfolio and manage the existing portfolios actively has grown with the difficulty of handling inhomogeneous criteria, also difficult to measure. The structure of NPRA’s portfolios has been investigated, conducting semi-structured interviews and analyzing strategic and organizational NPRA’s documents and tools used for portfolio management. The paper describes the different portfolios for the NPRA and focuses on the actual system for the selection and management of the portfolio of projects, for chosen specific portfolios. For each of them, the strengths and weaknesses for the project portfolio selection and management in NPRA are discussed, with the focus on sustainability as evaluation criteria. Literature and portfolio practice is used to evaluate criticalities for the public agency and to suggest further work to develop a coherent and effective portfolio management focused on sustainability.

The link between MiFID and Risk Appetite Framework as an application of best practices for wealth management and the entire value chain of the financial industry

After a short review of the MiFID regulations and the RAF, the paper identifies the link between them which allows to mitigate a balance sheet risk sustained by the financial intermediary and, at the same time, to improve its stability and value creation, through a maximization of customer loyalty. The client’s attitude towards risk can be summarized in these terms: "I don't like risk, but I like to win". Thus, a three-dimensional approach towards expected utility is suggested for estimating risk tolerance: risk aversion, loss aversion and reflection. In addition, a definition of the client's financial objectives is required, combined with greater disclosure - which allows the construction of a financial statement – to attest that risk-taking is indeed a luxury, as indicated by the metrics of the discretionary wealth ratio, and therefore, of the Standard of Living Risk (SLR). The next step consists in the determination of a set of portfolios along the efficient frontier where risk is represented by the expected shortfall, the determination of which belongs to a Generalized Extreme Value Theory logic. The client's objectives are described in terms of probability of success, where the latter is a function of an initial endowment, a potential positive contribution of financial resources over time as well as an expected return level. The above is expressed through a practical case that envisages the determination of a set of EGPF portfolios and the identification of the specific portfolio, obtained as a solution to a static and dynamic optimization problem, where the objectives have been formalized through the calculation of the associated utility

Probability Spaces Identifying Ordinal and Cardinal Utilities in Problems of an Economic Nature: New Issues and Perspectives

Prevision bundles identifying expected returns on risky assets are established. A probability space associated with risky assets is defined. In this research work, the optimization principle is based on the notion of distance. This is because problems of an economic nature are not handled in an axiomatic or intrinsic way, but they are investigated with regard to a given coordinate system. The latter is shown to be invariant. The notion of mathematical expectation applied to summarizing both monetary values and utilities is treated. Such a notion is extended to study portfolios of financial assets. Objective conditions of coherence connected with the notion of mathematical expectation are extended. Rational behaviors towards risk are based on them. A model representing diagrams considered inside the same coordinate system is shown. Such a model identifies as many optimal choices as pair comparisons it is possible to take into account in order to obtain a multilinear measure. The latter is the expected return on a specific portfolio of financial assets.

Exploring indicators for monitoring sociotechnical system transitions through portfolio networks

Abstract In this paper, we propose a method for tracking the evolution of sociotechnical niches supported by sustainability-focused project portfolios. Based on social network analysis (SNA), this method can be used to evaluate and monitor funding initiatives that seek to advance sociotechnical transitions. It is an important area of study because there is currently a lack of tools for measuring the success of efforts to promote transformative innovation. Conceptually, our approach is based on existing sociotechnical transition research and offers insights into how project networks evolve. We applied this method to a specific portfolio of food system projects that the European Institute for Innovation and Technology Climate-KIC supported. Our results show that SNA can provide a proper visual representation of the infrastructure that supports programme-based investment and can help us understand how specific network structures can support niche development and protect it from external pressures.

Social security coverage for couriers who work through digital platforms in Mexico: A role for a special scheme?

AbstractThe socio‐demographic characteristics of couriers who work through digital platforms in Mexico reveal that more than 85 per cent of these workers have completed full‐time secondary education and 83 per cent of these workers are young (aged 14 to 44). However, only 25 per cent are covered for health services and social security benefits. Against this backdrop, and guided by international experience, we set out a proposal to provide these workers with a tailored package of social security benefits. The proposal would require to categorize couriers who work through digital platforms as “digital workers”, introduce a special scheme for these workers based on voluntary affiliation, and offer a specific portfolio of benefits.

Biocompatibility and biodistribution of matrix-bound nanovesicles in vitro and in vivo.

Matrix-bound nanovesicles (MBV) are a distinct subtype of extracellular vesicles that are firmly embedded within biomaterials composed of extracellular matrix (ECM). MBV both store and transport a diverse, tissue specific portfolio of signaling molecules including proteins, miRNAs, and bioactive lipids. MBV function as a key mediator in ECM-mediated control of the local tissue microenvironment. One of the most important mechanisms by which MBV in ECM bioscaffolds support constructive tissue remodeling following injury is immunomodulation and, specifically, the promotion of an anti-inflammatory, pro-remodeling immune cell activation state. Recent in vivo studies have shown that isolated MBV have therapeutic efficacy in rodent models of both retinal damage and rheumatoid arthritis through the targeted immunomodulation of pro-inflammatory macrophages towards an anti-inflammatory activation state. While these results show the therapeutic potential of MBV administered independent of the rest of the ECM, the in vitro and in vivo safety and biodistribution profile of MBV remain uncharacterized. The purpose of the present study was to thoroughly characterize the pre-clinical safety profile of MBV through a combination of in vitro cytotoxicity and MBV uptake studies and in vivo toxicity, immunotoxicity, and imaging studies. The results showed that MBV isolated from porcine urinary bladder are well-tolerated and are not cytotoxic in cell culture, are non-toxic to the whole organism, and are not immunosuppressive compared to the potent immunosuppressive drug cyclophosphamide. Furthermore, this safety profile was sustained across a wide range of MBV doses. STATEMENT OF SIGNIFICANCE: Matrix-bound nanovesicles (MBV) are a distinct subtype of bioactive extracellular vesicles that are embedded within biomaterials composed of extracellular matrix (ECM). Recent studies have shown therapeutic efficacy of MBV in models of both retinal damage and rheumatoid arthritis through the targeted immunomodulation of pro-inflammatory macrophages towards an anti-inflammatory activation state. While these results show the therapeutic potential of MBV, the in vitro and in vivo biocompatibility and biodistribution profile of MBV remain uncharacterized. The results of the present study showed that MBV are a well-tolerated ECM-derived therapy that are not cytotoxic in cell culture, are non-toxic to the whole organism, and are not immunosuppressive. Collectively, these data highlight the translational feasibility of MBV therapeutics across a wide variety of clinical applications.

The Way to Invest: Trading Strategies Based on ARIMA and Investor Personality

In the field of financial investment, accurate prediction of financial market values can increase investor profits. Investor personality affects specific portfolio solutions, which keeps them symmetrical in the process of investment competition. However, information is often asymmetric in financial markets, and this information bias often results in different future returns for investors. Nowadays, machine learning algorithms are widely used in the field of financial investment. Many advanced machine learning algorithms can effectively predict future market changes and provide a scientific basis for investor decisions. The purpose of this paper is to study the problem of optimal matching of financial investment by using machine learning algorithms combined with finance and to reduce the impact of information asymmetry for investors effectively. Moreover, based on the model results, we study the effects of different investor personalities on factors such as expected investment returns and the number of transactions. Based on the time-series characteristics of price data, through multi-model comparison, we select the ARIMA model combined with particle swarm algorithm to determine the optimal prediction model and introduce the concepts of mean-variance model, Sharpe ratio, and efficient frontier to find the balance point of risk and return. In this study, we use gold and bitcoin price data from 2016–2021 to develop optimal investment strategies and study the impact of investor behavior on trading strategies.

Oil and the U.S. stock market: Implications for low carbon policies

We extend the existing understanding of the relation between oil prices and stock markets in two ways: (1) by evaluating the effects of the oil market on the U.S. stock market, at an aggregate level and for all forty-nine U.S. industry specific portfolios, and (2) by scrutinizing the dynamic nature of this relation within a Structural Vector Autoregression (SVAR) specification for a large set of rolling samples with fixed size. Results indicate that the effect of oil prices on the U.S. stock market depends on the type and timing of the shock. An oil supply shock generally does not have a statistically measurable effect on stock market performance. Conversely, an aggregate demand shock has a positive effect on nearly all sectors while an oil-specific demand shock has a negative effect on stock returns for most industries. These results suggest that investors can shift the portfolios consistent with smaller effects of oil-related shocks and the costs of carbon taxes and/or tradeable permits may be smaller than commonly thought if stock prices represent the net present value of profits.

416 - Family quality of life in Neurodegenerative Diseases and associated factors

Introduction:Neurodegenerative diseases (NDs) are one of the major causes of dependency among older people. Since family members assume most of the care, the impact of NDs goes beyond the patient and affects the functioning of the entire family. Nonetheless, the concept of Family Quality of Life (FQOL) is still insufficiently developed in this field: the literature has focused on family caregivers from an individual perspective, paying less attention to the family unit. Hence, the objectives were to describe FQOL of people with NDs and to identify factors associated, from a holistic point of view.Method:The sample consisted of 300 family members of patients with NDs (70% females; mean age: 62.4) living in the cross-border region of Spain-Portugal, mostly in rural areas. The majority were primary caregivers. They completed the FQOLS–ND via telephone. This survey examined how the family perceived its FQOL at the global and domain-level, in terms of attainment and satisfaction (measured on a 5-point Likert scale). It also collected data on diverse respondents’ and family characteristics.Results:The average score in Global FQOL was 3.65 (SD = 0.70) for attainment and 3.69 (SD = 0.47) for satisfaction. By domains, the highest value was found in Family Relations and the lowest in Support from services. Twenty hierarchical multiple regressions examined the potential predictors of Global FQOL and the nine domains for attainment and satisfaction. Medium predictive values (from R2=.14 to R2=.20) were found in Financial wellbeing (satisfaction), Support from services, and Leisure. The number of perceived barriers to social-health services was a significant predictor in all the explanatory models (the most frequently cited being: long wait for service, services not available, problems with transportation, lack of information, and financial costs).Conclusions:These results confirm that NDs are especially challenging in rural areas, where families feel more isolated and have fewer opportunities to receive professional support. Therefore, there is a need to design of a specific portfolio of services, resources and benefits that involves the key sectors of family welfare (public, private, third sector and family) and brings them closer to these areas, covering all the needs.

The Effects of Herding on Betas and Idiosyncratic Risk

This paper investigates the consequences of herding on systematic and idiosyncratic risk for stocks traded on S&P 500. Herding behavior is measured through a state-space model. Using monthly data from 1999 to 2017, different periods of herding and adverse herding are present. Evidence shows that the state space model identifies the significant herding effects on both risk measures for specific portfolios. Our findings validate the expected implications of herding on betas but not of adverse herding. In addition, the low-beta anomaly is not confirmed on our beta-based portfolios. On the other hand, we confirm the risk-return relationship. We attribute this evidence to overpriced values of high beta assets as well as to the effects of adverse herding on the systematic and idiosyncratic risk. Finally, we also show that the herding level could serve as a systematic driver of returns improving the portfolio performance of traditional ‘anomaly’ based strategies.

An Investigation of Volatility Transmission and Hedging Opportunities of Cryptocurrencies towards other Financial Assets

Asset allocation towards a specific portfolio is solely based on the diversification property among financial as well as non-financial assets. This paper is an attempt to see the investibility and role of diversification of cryptocurrencies with other financial assets. The study is utilizing the extensive data on Bitcoins and GSPC-Index, MSCI-Global Index, MSCI-Currency Index, COMEX closing Gold Price, and OPEC Crude oil Prices. The investigation aims to assess the direction and swap capability of the cryptocurrency (Bitcoin) towards the other global financial assets. The hypothesis of the study is whether the volatility created by bitcoin is transmitted towards the other financial assets using multivariate BEKK-GARCH methodology. The results indicated that any shock that appeared in bitcoin is significantly decreasing the volatility of all selected assets except MSCI-Global Index returns. The study found that the use of cryptocurrencies into the portfolio would offer diversification benefits to investors. The results are more beneficial for the risk-averse investor, who wants to hedge their portfolio through the inclusion of the negatively correlated security.

Computer-Aided Decision Making for Regional Seismic Risk Mitigation Accounting for Limited Economic Resources

Seismic risk mitigation levels for an existing building are a balance between the reduction of risk and the cost of rehabilitation. Evidently, the more that is paid the more risk is reduced; however, due to limited public budgets a practical approach is needed to manage the risk reduction program when a portfolio of buildings is concerned. Basically, decision makers face a challenge when there are a large number of vulnerable buildings and there is no plan for how to allocate the appointed budget. This study develops a technological platform that implements a decision-making procedure to establish how to optimally distribute the budget in order to achieve the maximum possible portfolio risk reduction. Decisions are made based on various presumed intervention strategies dependent on building’s level of risk. The technological platform provides an interactive, user-friendly tool, available online, that supports stakeholders and decision makers in understanding what the best economic resource allocation will be after selecting the available budget for a specific portfolio of buildings. In addition, the ease of use enables the user to analyze the extent of risk reduction achievable for different budget levels. Therefore, the web platform represents a powerful tool to accomplish two challenging tasks, namely optimal budget selection and optimal budget allocation to gain territorial seismic risk mitigation.

How to maximize profitability and minimize risk with dynamic stress testing

This paper offers a novel approach for optimizing banks’ accounts and portfolios by using both static and dynamic simulation analysis to perform stress tests using several strategies and scenarios driven by exogenous shocks, such as the Covid-19 pandemic. The results of this analysis are explored and discussed using real cases in which dynamic analysis in stress scenarios has been applied to specific banking portfolios that may be impacted by Covid-19.

Quantile-based optimal portfolio selection

In this paper the concept of quantile-based optimal portfolio selection is introduced and a specific portfolio connected to it, the conditional value-of-return (CVoR) portfolio, is proposed. The CVoR is defined as the mean excess return or the conditional value-at-risk (CVaR) of the return distribution. The portfolio selection consists solely of quantile-based risk and return measures. Financial institutions that work in the context of Basel 4 use CVaR as a risk measure. In this regulatory framework sufficient and necessary conditions for optimality of the CVoR portfolio are provided under a general distributional assumption. Moreover, it is shown that the CVoR portfolio is mean-variance efficient when the returns are assumed to follow an elliptically contoured distribution. Under this assumption the closed-form expression for the weights and characteristics of the CVoR portfolio are obtained. Finally, the introduced methods are illustrated in an empirical study based on monthly data of returns on stocks included in the S&P index. It is shown that the new portfolio selection strategy outperforms several alternatives in terms of the final investor wealth.

Shaping the directionality of sustainability transitions: the diverging development patterns of solar photovoltaics in two Chinese provinces

ABSTRACT This paper investigates how actors across spatial levels shape the directions of transition. We examine two Chinese provinces, Inner Mongolia and Jiangsu, with contrasting directionalities of solar photovoltaic (PV) development. The former developed PV as part of the large-scale centralized power system, and the latter focused on PV development as a core element of an alternative distributed form of power generation. We argue that three aspects have been key for understanding the divergent patterns: the specific portfolio of enacted institutional work; the type of interactions between niche and regime actors; and the selective leveraging of national institutional conditions by provincial actors.

Expert Ministers in New Democracies: Delegation, Communist Legacies, or Technocratic Populism?

This article examines the appointments and survival of expert ministers (i.e., ministers with educational and professional expertise in the portfolio to which they are appointed) in new democracies. Using a novel data set on 11 Central and Eastern European countries from 1990 until 2012, I test competing hypotheses derived from delegation theory, communist legacies approach, technocratic populism studies, and semi-presidentialism literature. The first study shows that experts without political experience (technocrats) have specific cabinet appointment patterns distinguishing them from party politicians and politically experienced experts. For example, technocrats have high chances of being appointed during an economic downturn. The conditional risk set survival analysis has revealed that compared to their politically experienced colleagues, technocrats have higher chances of remaining in their positions if there was a change in the PM’s candidacy. Moreover, they have long careers independently of the continuity of the PM’s party in government and the PM’s partisan status. Strikingly, patterns of portfolio specialization from the communist period remained in place after the regime change (e.g., expert ministers holding the portfolios of finance and economy). However, holding these specific portfolios does not decrease the minister’s risk of being dismissed. These findings have ramifications for issues surrounding cabinet formation, institutional choice, and populism in new democracies.

Modeling return and volatility spillover networks of global new energy companies

This paper constructs the returns and volatility system networks of the global new energy companies using the connectedness network approach. Then, it measures the information spillover direction and degree among the global new energy companies for the two systems, furthermore, exploring the rolling-windows estimating method to investigate the time-varying characteristics of the information spillover mechanism. It selects 20 large energy companies with a weighting greater than 1.24% from the NEX index and obtains the weekly stock prices for these companies from November 24, 2006 to January 4, 2019. Some new findings can be obtained: (1) The total information spillover degree among the global new energy companies is very high, especially for the volatility system. (2) The static and dynamic asymmetry indexes confirm the existence of asymmetric effect for the information transmission mechanism, which shows that the bad news does contribute more to the systemic risk of global new energy company stock market than the good news. (3) Some new energy companies act as net information transmitters, which are relatively important in the networks. These new findings could provide a reference for investors in the new energy sector to develop specific portfolios and risk management, as well as advise relevant policy makers.

Examining strategies behind universities’ technology transfer portfolio: how different patterns of resource consumption can lead to similar technology transfer profiles

PurposeThe purpose of this study is to analyse how different patterns of production factors consumption of Spanish universities lead to specific technology transfer (TT) profiles (outcomes).Design/methodology/approachAdopting a resource-based view perspective (RBV), qualitative comparative analysis (QCA) is used to analyse the relationship between different combinations of resources – human resources, financial resources and support services – and various portfolios of TT outcomes – intellectual or industrial property agreements, spin-offs and TT income.FindingsResults indicate that there is no unique formula of resource consumption that leads to a specific portfolio of TT outcomes. These results seem to reflect the characteristics and competencies added by universities, along with the characteristics of their socioeconomic context. From a RVB perspective, this indicates that the considered resources are substitutable.Practical implicationsThe effectiveness of university policies is expected to vary by university, for example depending on the type of resources that is most relevant in the university’s production process. To develop competitive advantages Spanish public universities must resort to internal intangible resources or specific and inimitable combinations of the available resources.Social implicationsSince Spanish universities are heterogeneous and display different TT portfolios they address the needs of different users.Originality/valuePrevious studies have failed to acknowledge the heterogeneity among universities. To perform the analysis QCA is used, an innovative methodology in the higher education sector that enables us to purposefully acknowledge institutional diversity (in both resources and results). This allows us to indirectly take into account the capabilities of universities using a more holistic approach to evaluate their competitiveness.

Shaping the Directionality of Sustainability Transitions: The Diverging Development Patterns of Solar PV in Two Chinese Provinces

A limited set of studies have addressed how actors shape the directionality of sustainability transitions. Building on recent institutional work literature, this article explores how specific institutional activities developed by both niche and regime actors across spatial levels shape the directions of transition. We examine two cases with contrasting directionalities: solar PV in the provinces of Inner Mongolia and Jiangsu, both located in China. The former developed PV as part of the large-scale centralised power system and the latter focused on PV development as a core element of an alternative distributed form of power generation. We investigate provincial differences as well as the state-provincial dynamics. The article therefore develops a multi-scalar understanding of institutional work. Our research findings suggest three aspects have been key for understanding the divergent patterns: the specific portfolios of enacted institutional work, the type of interactions between niche and regime actors and the selective leveraging of institutional conditions at national by provincial actors. Based on these findings we formulate four propositions and propose a novel conceptual framework to investigate how actors shape the directionality of sustainability transition.