Traditional Asset Research Articles

Adding Art to Your Portfolio: A New Risk Assessment Framework

This article presents a new framework to evaluate the merits of an art investment that differs substantially from previous studies. First, it assumes that the investor already holds a portfolio consisting of more traditional assets and is planning to add art to it. This is far more realistic than the usual academic set up in which it is assumed that the investor is planning to deploy a given amount of cash among many assets, one of which is art. Second, the approach departs from the traditional Markowitz’s mean-variance framework in two important ways: (i) the efficient frontier is constructed based on cumulative returns, rather than average returns, and risk is assessed via potential losses and not volatility; and (ii) it relies on a semi-parametric approach to generate synthetic data based on the Gaussian copula and historic returns. Finally, an alternative risk metric, based on losses and not volatility, is introduced. The usefulness of this framework is demonstrated with an example based on art sales auction data.

Do cryptocurrencies integrate with the indices of equity, sustainability, clean energy, and crude oil? A wavelet coherency approach

AbstractThe paper examines market co‐movement between pairs of financial assets in the time‐frequency domain. Recent finance literature confirms the integration of cryptocurrencies and financial assets, which may bring more investments with the possibility of surplus liquidity in the cryptocurrency segment, leading to financial instability. The novelty of this paper is examining the integration of cryptocurrencies and the indices of equity, sustainability, renewable energy, and crude oil for the daily observations from 2015 to 2021 by using the wavelet coherency method. The empirical results signify no integration in the short‐term scales and grow stronger in the medium‐term scales, especially during the COVID‐19 period, and further exhibit weaker heterogeneous associations in the long‐term scales. However, the sustainability, clean energy indices follow similar dynamics of the equity market and crypto pairs. In contrast, the global crude oil index showcases the minor integration with cryptocurrencies compared with other traditional asset classes. Hence, the cryptocurrency market fails to confirm the safe haven features, especially during the COVID‐19 periods (Medium‐term), which facilitate the domestic and international investors expecting to hedge their price risk in equity markets using cryptocurrencies may have to look for short‐term. The lead–lag heterogeneous effects of the asset‐pairs may pave arbitrage opportunities for investors.

Investigating the nature of interaction between crypto-currency and commodity markets

This paper investigates the dynamic relationship and volatility spillovers between cryptocurrency and commodity markets using different multivariate GARCH models. We take into account the nature of interaction between these markets and their transmission mechanisms when analyzing the conditional cross effects and volatility spillovers. Our results confirm the presence of significant returns and volatility spillovers, and we identify the GO-GARCH (2,2) as the best-fit model for modeling the joint dynamics of various financial assets. Our findings show significant dynamic linkages and volatility spillovers between gold, natural gas, crude oil, Bitcoin, and Ethereum prices. We find that gold can serve as a safe haven in times of economic uncertainty, as it is a good hedge against natural gas and crude oil price fluctuations. We also find evidence of bidirectional causality between crude oil and natural gas prices, suggesting that changes in one commodity's price can affect the other. Furthermore, we observe that Bitcoin and Ethereum are positively correlated with each other, but negatively correlated with gold and crude oil, indicating that these cryptocurrencies may serve as useful diversification tools for investors seeking to reduce their exposure to traditional assets. Our study provides valuable insights for investors and policymakers regarding asset allocation and risk management, and sheds light on the dynamics of financial markets.

Commodity momentum and reversal: Do they exist, and if so, why?

AbstractQuestions as to why differences in momentum and reversal patterns seem to emerge in commodity futures compared with spot markets, and how these patterns can be explained, remain unanswered. To investigate these questions, I examine 23 commodities over a period of 60 years. I first show that including the net convenience yield in the definition of commodity spot returns reconciles the differences in the results for commodity spot and futures markets. Both commodity futures and spot markets exhibit quantitatively consistent momentum and reversal effects. An initial momentum effect is followed by a reversal effect and then another momentum effect. These observed patterns in commodities can be jointly explained by a combination of traditional asset pricing factors and a basis factor related to the net convenience yield.

Safe-haven properties of green bonds for industrial sectors (GICS) in the United States: Evidence from Covid-19 pandemic and Global Financial Crisis

The Covid-19 pandemic unfolds the vulnerability of financial markets at the time of rare disasters. To hedge the mean-dependent risk, investors rely upon traditional assets such as gold; however, the tail-dependent risk, especially during market turbulence, considerably dampened the hedging effectiveness. On the contrary, green bonds emphasize sustainable investment in the long term and have become an inevitable tool to hedge against financial risks, and climate risks, and rare disasters. Thus, this study explores the hedging and safe haven aspects of the bullish market of green bonds against bearish markets of industry sectors across the United States (U.S.) over the period of 1st January 2008 to 7th May 2021, including the Global Financial Crisis and the Covid-19 pandemic. The findings of cross-quantilogram analysis disclose that green bonds reap diversification benefits during overall market conditions as well as market turmoil, hence confirm the safe-haven behavior of green bonds. Furthermore, our results disclose that the potential role of investment in green bonds can reboot the economy without affecting low-carbon transition targets.

Beyond Fama-French Factors: Alpha from Short-Term Signals

Short-term alpha signals are generally dismissed in traditional asset pricing models, primarily due to market friction concerns. However, this paper demonstrates that investors can obtain a significant net alpha by applying a combination of signals to a liquid global universe and with advanced buy/sell trading rules that mitigate transaction costs. The composite model consists of short-term reversal, short-term momentum, short-term analyst revisions, short-term risk, and monthly seasonality signals. The resulting alpha is present in out-of-sample and post-publication periods and across regions, translates into long-only applications, is robust to incorporating implementation lags of several days, and is uncorrelated to traditional Fama-French factors.

NFTs, DeFi, and other assets efficiency and volatility dynamics: An asymmetric multifractality analysis

This paper examines the efficiency and asymmetric multifractal features of NFTs, DeFi, cryptocurrencies, and traditional assets using Asymmetric Multifractal Cross-Correlations Analysis covering the period from November 2017 to February 2022. Considering the full sample with a significant variation among asset classes, the study reveals DeFi-DigiByte is the most efficient while the cryptocurrency-Tether is the least efficient. However, S&P 500 showed high efficiency before COVID-19, and DeFi-Enjin Coin advanced as the most efficient asset during COVID-19. The volatility dynamics of NFTs, DeFi, and cryptocurrencies follow strong nonlinear cross-correlations, but evidence of weaker nonlinearity exists in traditional assets. Additionally, the sensitivity to smaller events in bull markets is high for NFTs and DeFi. The findings have significant implications for portfolio diversification when an investor's portfolio set includes traditional assets and cryptocurrency and relatively new blockchain-based assets like NFTs and DeFi.

Geoacoustic Inversion Using Simple Hand-Deployable Acoustic Systems

This article proposes the use of a simple, low-cost, hand-deployable pair of experimental assets to conduct geoacoustic inversion at sea. The system consists of an expendable, fully mechanical acoustic source called a rupture induced underwater sound source (RIUSS) and a new ropeless passive acoustic mooring called a TOSSIT (not an acronym). Used together, RIUSS and TOSSIT enable the collection of acoustic data suitable to perform single-hydrophone geoacoustic inversion. The method is illustrated using data collected on the New England Mud Patch in May 2021 from a relatively small (22 m) and inexpensive chartered fishing vessel. Modal time-frequency dispersion from 15 to 385 Hz is extracted from the TOSSIT/RIUSS data using warping, and used as input for Bayesian transdimensional geoacoustic inversion. The inversion results compare favorably to results obtained with data collected on the same track with traditional assets (e.g., a vertical line array) during the 2017 Seabed Characterization Experiment, even when jointly inverting for the water-column sound speed profile and seabed geoacoustic parameters. This further demonstrates inversion repeatability in a given location using data sets collected years apart, and under different (and potentially unknown) oceanographic conditions.

NAVIGATING THE LEGAL VOID: DIGITAL ESTATE PLANNING IN INDIAS DEVELOPING LEGAL SYSTEM

With the proliferation of digital technology and the increasing use of the internet, digital assets have become an integral part of our lives. In todays world, it is common to have a digital presence in the form of online accounts, email, social media, and cloud storage. These digital assets, along with traditional assets, need to be protected and managed in the event of death or incapacity. This is where digital estate planning comes into play.This research paper aims to explore the importance of digital estate planning and the laws surrounding it in India. The paper begins by defining digital estate planning and identifying the types of digital assets that need to be protected. It then discusses the potential consequences of failing to plan for digital assets and the importance of having a digital estate plan in place.The paper then examines the laws in India that govern digital estate planning. It finds that while there is no specific legislation on digital estate planning, existing laws such as the Information Technology Act and the Indian Contract Act, provide some guidance on the management and distribution of digital assets.The paper also discusses the challenges associated with digital estate planning in India, including the lack of awareness about the importance of digital estate planning, the absence of a centralized registry for digital assets, and the difficulty in accessing and managing online accounts after the owners death.Finally, the paper concludes that while the laws in India are evolving to address digital estate planning, there is still a long way to go. It recommends that individuals take proactive steps to manage their digital assets and seek professional help to create a digital estate plan that addresses their specific needs.In conclusion, digital estate planning is a critical aspect of modern-day estate planning. This research paper highlights the importance of having a digital estate plan in place and identifies the laws in India that govern digital estate planning. It also highlights the challenges associated with digital estate planning in India and provides recommendations for individuals to protect their digital assets. As technology continues to evolve, it is essential to stay informed and take the necessary steps to manage our digital lives effectively.

Return and volatility properties: Stylized facts from the universe of cryptocurrencies and NFTs

Stylized facts of returns and volatility are an important approximation tool for empirical finance studies, especially in the area of young and new assets. In this paper, we examine the return and volatility properties of four non-fungible tokens (NFTs) and four cryptocurrencies from 24th January 2018–2nd August 2022. The results show the following: Firstly, the returns of both NFTs and cryptocurrencies have fat tails, with evidence of tail exponents following the inverse cubic-law, along with clear persistence behavior. Secondly, all returns exhibit volatility clustering, albeit to varying degrees, and the detected absence of inverse volatility-asymmetry challenges the safe-haven property often documented for cryptocurrencies. Thirdly, return-based long-memory is slightly more intense than volatility-based long-memory, especially for NFTs, which demonstrate a predictability contesting market efficiency. These findings are generally consistent with previous findings on equities, implying that the return and volatility behavior of NFTs and cryptocurrencies is leaning towards that of traditional assets.

Practical Applications of Private Markets—From Alternative to Mainstream: Evolution during the Past 30 Years and Key Trends and Challenges for the Decades to Come

In <b><i>Private Markets—From Alternative to Mainstream: Evolution during the Past 30 Years and Key Trends and Challenges for the Decades to Come</i></b>, from the June 2022 special 30th anniversary issue of <b><i>The Journal of Investing</i></b>, Erik Knutzen (of <b>Neuberger Berman</b>) explains the dramatic growth and evolution of private markets since the 1980s. Back then, private equity (PE) was a small and exotic sector for only the most sophisticated investors. In the decades since, however, PE has grown into a multitrillion-dollar global industry that owns thousands of companies, while the number of publicly listed companies has dropped to about half of what it was in the 1990s. The author explains the key drivers of these events: regulatory changes, the evolution of credit markets, broader acceptance of PE among institutional investors, PE’s relatively high returns, growth and innovation in the PE sector, PE’s diversification and return-smoothing benefits, PE’s better alignment for long-term investors, and the fact that private markets are becoming more liquid. Private markets likely will continue to grow due to PE’s higher expected returns, institutional investors’ need to close the “return gap” between expected and target returns, and the fact that PE is increasingly grouped with traditional assets in asset allocation frameworks.

Exploit momentum in Cryptocurrency Market

Researchers put efforts into explanations of the momentum phenomenon and improvements of the momentum strategy since the emergence of momentum in 1993. Interested in anomalies appearing as exhibited in traditional asset markets, adequate studies are launched on the nascent phenomenon emergers in the last decade, the cryptocurrency market. Recent studies have shown that there is hardly any cross-sectional momentum in the cryptocurrency market. To explore the momentum anomaly additionally in the cryptocurrency market, this paper implemented a time-series momentum on cross-sectional winners for improvement. Previous studies have introduced detecting the turning point between long-term slow time-series factor and short-term fast time-series factor contributes to predicting the trend well. Furthermore, a threshold decided by a certain machine learning model suggests better performance. In this paper. A multilayer perceptron (MLP) is utilized to learn the weights of time-series factors. The combination of cross-sectional momentum and time-series momentum shows advantages and the MLP learned weighted strategy is preferable.

Forecasting the stock-cryptocurrency relationship: Evidence from a dynamic GAS model

The impact of cryptocurrency on other assets has become a subject of intense research, given the rise of digital currency over the last decade. However, unlike traditional assets, cryptocurrency has been subject to extreme movements in price and volatility. As a result, it has become important for investors and risk managers to model and forecast volatility and correlation between digital currency and other assets. This paper utilises a multivariate generalised autoregressive score (GAS) model to study the time-varying dependence between stock prices (S&P500, NASDAQ, Dow Jones Industrial) and cryptocurrencies (Bitcoin and Ethereum). The results show that the GAS framework outperforms the traditional DCC-GARCH model, capturing the volatility persistence and non-linearity between stock and cryptocurrency. Regarding the correlations, while we identify a time-varying relationship, the strength of this relationship is in the low-to-moderate range. In addition, our forecasting exercise shows that the GAS specification has superior forecasting ability beyond certain horizon days compared to the DCC-GARCH model.

Is the environmental, social and corporate governance score the missing factor in the Fama-French five-factor model?

Background: Companies are increasingly encouraged to focus on the creation of sustainable value. Financial research institutions evaluate companies’ performance based on pre-established indicators relating to environmental, social and governance (ESG). These scores are intended to inform decisions by equity investors, among others. However, traditional asset pricing models do not include ESG scores.Aim: The purpose of this research is to discover whether the inclusion of ESG scores in the Fama-French five-factor model (FF5F) will improve the model’s predicting power.Setting: Financial research institutions aim to improve the information environment in the South African capital markets. Johannesburg Stock Exchange (JSE)-listed firms are also required to produce integrated reports, emphasising responsible investment.Method: For the largest 40 JSE-listed companies, data over the 5-year period from 2015 to 2019 were employed to compare the predicting power of the FF5F model before and after the inclusion of ESG scores.Results: The results showed that the predictive power of the FF5F model is only marginally improved when the ESG scores are incorporated.Conclusion: These findings indicate that equity returns are not significantly influenced by ESG scores. This research provides the basis for further endeavours on the share-price implications of ESG performance.Contribution: This research contributes to the growing strand of literature on responsible investment and the creation of sustainable value. The research also offers a theoretical contribution by connecting literature on asset pricing with work on sustainability.

Non-fungible tokens: a hedge or a safe haven?

ABSTRACT This study conducted the econometric analysis to test the hedge and safe haven effects of Non-fungible Tokens (NFTs) on major traditional asset markets in the global financial system. We investigate the estimates of these effects in times of extreme market conditions and the COVID-19 crisis. Our empirical results show evidence of the hedge and safe haven properties of NFTs, confirming two main findings: (i) NFTs act as a hedge and safe haven for particular stock markets and oil, bond, and USD indices, even though the degree of effects varies across asset classes; and (ii) NFTs also serve as sheltering facilities for the markets mentioned above, with more substantial safe haven benefits for bond and USD indices during the recent pandemic crisis.

Beyond social prescribing-The use of social return on investment (SROI) analysis in integrated health and social care interventions in England and Wales: A protocol for a systematic review.

With increasing costs of healthcare in England and Wales following the COVID-19 pandemic, finding alternatives to traditional medical interventions is more important than ever. Social prescribing provides a way of addressing health and well-being through using non-medical methods that may help relieve costs to the NHS. Evaluating interventions, such as social prescribing, which have high social (but not easily quantifiable) value, can be problematic. Social return on investment (SROI) is a method of assigning monetary values to both social value as well as traditional assets, so provides a way of evaluating social prescribing initiatives. This protocol outlines the steps that will be taken in a systematic review of the SROI literature surrounding social prescribing-type integrated health and social care interventions based in the community in England and Wales. Online academic databases such as PubMed Central, ASSIA and Web of Science will be searched, as will grey literature sources such as Google Scholar, the Wales School for Social Prescribing Research (WSSPR) and Social Value UK. Titles and abstracts from the articles returned by the searches will be reviewed by one researcher. Those selected for full text review will be independently reviewed and compared by two researchers. Where the researchers disagree a third reviewer will help resolve any differences. Information collected will include identifying stakeholder groups, assessing the quality of SROI analyses, identifying intended and unintended changes of social prescribing interventions, and comparing social prescribing initiatives in terms of SROI costs and benefits. Quality assessment will be independently conducted on the selected papers by two researchers. The researchers will discuss to obtain consensus. Where there is disagreement, a third researcher will resolve these cases. A pre-existing quality framework will be developed and used to assess the quality of the literature. Protocol registration Prospero registration number: CRD42022318911.

Empirical Analysis of Bitcoin and Major Cryptocurrencies Prices

Cryptocurrency is a relatively new phenomenon that is attracting a lot of interest. On the one hand, it is built on a brand-new technology whose full potential has yet to be realised. On the other hand, it performs similar services to other, more traditional assets, at least in its current form. The development of theoretical models of cryptocurrencies has received a lot of academic attention. Many elements have been mentioned in the theoretical literature on cryptocurrencies as potentially important in cryptocurrencies' pricing. The cryptocurrencies with a market value of over $100m between 01/01/2018 and 12/05/2021 have been selected for this research. Time series analysis has been done to investigate the price relationship between cryptocurrencies. The results pointed out as major cryptocurrencies' prices are linked to Bitcoin prices.

Crypto Assets: A New Way of Diversifying Your Investments

International investments have gained momentum since the start of this century. Many investors in the developed economies invest in the growing economies to seek prospects of higher returns. This has become evident in the last two decades, especially after the financial crisis of 2008, when investors were forced to think outside of the box in order to get proper returns for their investments. Investing has become even more challenging when investors are faced with low and even negative yields, especially in the investments on short and medium term. This is where crypto assets come in the picture. Namely, with the appearance of the blockchain technology and all of the new opportunities it brings, crypto assets appeared as a new way for investors to diversify their investments and get higher returns. Though they bring additional choices to investors, they can also be very tricky and should be taken into consideration when investing with high cautiousness, simply because the technology they are based on is relatively new and not very much regulated, thus they bring higher risk than the traditional assets and fiat currencies that are already available. Having that in mind, this paper goes over the pricing, volatility and correlation of crypto assets with other currencies. Additionally, we look at the way they are regulated so far, how accessible is the market for them and their behavior vs the traditional fiat currencies. Lastly, we come to the conclusion that crypto assets, though being more volatile and riskier than fiat currencies, do in fact bring additional return to an investor’s portfolio and should be used carefully according to the individual risk and return preferences. There is still a lot to be examined and researched about crypto assets so that they can be better utilized in the future by investors.

Better Not Forget: On the Memory of S&amp;P 500 Survivor Stock Companies

This study explores the dependency structure of S&amp;P 500 survivor stocks. Using a hand-collected sample of stocks that survived in the S&amp;P 500 since March 1957, we employ rescaled/range analysis to investigate survivors. First, we find nonlinearities in the return processes of survivor stocks due to Paretian tails. Second, the return processes of very long-lived outliers exhibit long-term memories with Hurst exponents that significantly exceed one half on average. Third, sample-split tests reveal that the memory on average has virtually not changed over time—that is, survivor stocks do not forget. Fourth, and last, the long-term memory of survivor stocks appears to be unrelated to their exposures to traditional asset pricing risk factors.

Can cryptocurrency solve the problem of financial constraint in corporates? A literature review and theoretical perspective

Purpose This paper aims to attempt to examine some of the unique features of cryptocurrency and the reasons for its growing market acceptability. Given the expanding size of cryptocurrency markets, the present study strives to identify whether it can be used as an alternative financial asset in place of traditional financial assets to meet firms' financial constraints. It also provides issues for future research in the area of cryptocurrency markets. Design/methodology/approach This paper analysed 94 research papers from databases such as ScienceDirect, Proquest, EBSCO, Emerald Insight and Web of Science. Articles connected to cryptocurrency, financial assets and corporate financial constraints research were explored. VOSviewer software has been used to visualise the specified body of literature and identify eight clusters in previous literature using keyword and abstract analysis. Findings Studies reveal that cryptocurrency markets are independent of traditional financial markets and cryptocurrency returns have less correlation with traditional financial asset classes. This can be an advantage to firms, especially during times of crisis when traditional financial assets are impacted by significantly lower returns, while cryptocurrencies can serve as an alternative. Realtime data reveals that during the pandemic, cryptocurrencies had the maximum growth in returns which also happened to be a time when firms faced severe cash constraints. While accepting cryptocurrency as a means of exchange is still under review by regulatory authorities, it can be considered an alternative asset for investment purposes. Firms can take advantage of it to overcome financial constraints and thus reap the gains from holding crypto assets for precautionary reasons. Originality/value The present study investigates using cryptocurrency as an alternative financial asset to solve the financial constraint problem in corporates. The issues regarding volatility, cyber securities, gold returns, long-term and short-term returns have been some of the most prominent studies in the area of cryptocurrency. The present study uses eight theme-based clusters to identify the role of cryptocurrency as an alternative investment class and examines evidence-based research regarding the financial returns from holding cryptocurrency over certain traditional asset classes such as gold, currency or stocks. In recent years, it has been found that investors' growing interest in holding cryptocurrency as part of their financial portfolio has led to the substantial appreciation of cryptocurrency prices. To the best of the authors’ knowledge, the study will be a novel attempt to identify the role of cryptocurrency as an antidote to the companies’ financial constraints and liquidity issues.