Investment Uncertainty Research Articles

Research on the Impact of ESG Rating Divergence on Financial Markets

This study explores the multifaceted impacts of Environmental, Social, and Governance (ESG) rating divergence on financial markets, focusing on both equity and bond markets. Despite the growing importance of ESG criteria in investment decisions, discrepancies in ESG ratingsstemming from varying methodologies, standards, and data qualitypose significant challenges. We analyze how these divergences affect corporate reputations, influence investor behavior, and consequently, impact market volatility, funding costs, and liquidity. Our findings indicate that ESG rating discrepancies can lead to increased funding costs, heightened market volatility, and reduced market liquidity, all of which contribute to increased uncertainty for investors. The study suggests that the resolution of these issues requires the harmonization of ESG standards, enhanced regulatory oversight, and greater transparency in rating methodologies. Through comprehensive analysis, this paper contributes to understanding the implications of ESG rating divergence and proposes actionable strategies for stakeholders to mitigate its adverse effects, thereby fostering a more stable and transparent market environment.

Pengaruh Ketidakpastian Globalisasi Keuangan dan Investasi Asing Langsung Terhadap Pertumbuhan Ekonomi dengan Pendekatan Akuntansi Arus Dana di Indonesia Tahun 2019-2022

Economic growth is an important indicator that reflects changes in a country's economic conditions toward a better state. Using a cash flow accounting approach, this study examines the effect of uncertainty in financial globalization and foreign direct investment on economic growth in Indonesia from 2019 to 2022. Indonesia's economic growth has fluctuated significantly during the COVID-19 pandemic, with a sharp decline in 2020 and recovery in 2021 and 2022. Global uncertainty and international conflicts, such as the Russia-Ukraine war, have also affected the global and domestic economies. Partial Least Square (PLS) analysis techniques and secondary time series data are used in this study’s quantitative methodology. The findings indicate that while foreign direct investment has a positive and considerable impact on economic growth, financial globalization uncertainty has no discernible impact on Indonesia’s economic growth. These result highlight the role that foreign investment plays in stimulating economic growth as well as the necessity of enacting laws that promote an environment that is favorable to investment. The cash flow accounting method offers a more thorough view of how foreign direct investment affects the domestic economy.

Sustainable production and consumption: assessing the economic viability of traditional and organic yerba mate cultivation

In response to the growing consumer demand for organic products, this study examines the economic viability of traditional versus organic Yerba Mate (Ilex paraguariensis) cultivation in Paraná State, Brazil. The research uses a robust financial analysis framework to compare production expenses, projected profits, and associated risks over a fifteen-year horizon for a single hectare of land. The analysis employs the multi-index methodology to provide empirical evidence and analytical insights into the economic and risk profiles of both traditional and organic agricultural practices. This study further enhances the evaluation by incorporating the Monte Carlo Method and Crystal Ball software, transforming key financial indicators into stochastic variables. This approach allows for a nuanced risk assessment that captures the inherent uncertainties in agricultural investment. The findings indicate a significant economic advantage for organic farming, with an organic return on investment (ROI) of 12.03%, substantially outperforming the 3.99% ROI of conventional methods. Moreover, the research highlights the improved risk-adjusted returns of organic farming, showing an almost negligible probability of encountering a negative net present value (NPV), specifically P(NPV_organic ≤ 0) ≈ 0. The results underscore the financial viability and reduced risk of organic Yerba Mate cultivation, positioning it as a strategic alternative to traditional agricultural methods. These insights align with current market trends favoring sustainable and health-conscious consumer choices and provide critical guidance for stakeholders in the farming sector. This study contributes to the academic discourse on sustainable agriculture and offers practical implications for enhancing economic sustainability and resilience in farming practices.

Energy policy uncertainty, financial development and public-private investment in BRIC nations

The transition to sustainable energy systems requires substantial investment, yet the impact of policy uncertainty on investment decisions remains poorly understood, particularly in emerging economies. While previous studies have examined various determinants of energy investment, the interplay between energy policy uncertainty (EPU) and financial sector development (FSD) in shaping public-private energy investments has received limited attention. This study investigates how EPU influences public-private energy investments in BRIC nations and examines FSD's moderating role. Using an ARDL model on data from 1998–2022, we find that EPU significantly deters investment, while FSD exhibits a positive influence. Notably, FSD moderates the negative impact of EPU, suggesting that robust financial sectors can buffer against policy uncertainty's adverse effects. These findings provide crucial insights for policymakers in emerging economies, highlighting the importance of stable policy frameworks and developed financial markets in facilitating energy transition investments.

The impact of regional emergency logistics response capacity on sustainable economic growth in China

To assess the impact of China’s regional emergency logistics response capabilities on economic growth sustainability, this study develops a set of comprehensive indicators. It applies the entropy weight method combined with the TOPSIS method to evaluate these capabilities across regions. Based on panel data from 30 provinces in China from 2012 to 2021, this study employs panel models, panel quantile regression, and panel threshold models to analyze the impact of emergency logistics response capability on sustainable economic growth. By measuring the regional emergency logistics response capability and examining its effects on the sustainability of economic growth, this research provides foreign investors with a clearer understanding of the ability of different regions in China to handle unexpected public incidents. This, in turn, helps reduce investment uncertainty, mitigate certain risks, and offers valuable insights for enhancing the efficiency of international investments in China. Key findings are: (1) Since 2018, the establishment of the Ministry of Emergency Management has significantly improved China’s regional emergency logistics capabilities, with the eastern region outperforming the central and western regions. (2) Enhancing China’s emergency logistics response capability helps improve the sustainability level of economic growth. This reflects how China’s emergency management departments can mitigate the adverse impacts of public emergencies on economic growth by transforming social logistics into emergency logistics. (3) As emergency response capabilities have strengthened, their impact on economic sustainability initially decreased but later increased.

Beyond the Event Window: Earnings Horizon and the Informativeness of Earnings Announcements

ABSTRACT The impact of earnings announcements (EAs) on investor uncertainty depends not only on how much new information they contain but also on how long it would take comparable information to arrive in the future through alternative sources, which I term “earnings horizon.” Using a structural model of periodic EAs, I show that earnings horizon is not captured by standard empirical measures of earnings informativeness or timeliness based on the event-study approach. However, earnings horizon can be estimated using patterns in return volatility over firms’ reporting cycles, which indicate that EAs have a short horizon and thus reduce investor uncertainty by one-third the amount suggested by event studies. Moreover, these patterns indicate that it takes investors considerably longer than the three- to five-day windows commonly applied in event studies to fully process EAs and that more frequent financial reporting may significantly enhance EAs’ informativeness. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: C58; D82; D84; G10; G12; G14; G30.

Simulation of the growth and yield of the species Gmelina arborea Roxb

Forests are being threatened worldwide mainly due to the increase in demand for wood and that more than 50% is extracted from them. This is largely because forest plantations grow at a slow rate and supply the market. Given that, one of the fundamental goals of forestry research is the construction of growth and yield models to be used as a planning tool. In this way, the proposal of this work is to show how through the modeling and simulation of the growth of a forest stand, the uncertainty of investors is reduced because it allows to quantify the production of wood that will be obtained. The study was based on data obtained from inventories conducted between 2012 and 2015 in 31 permanent plots of Gmelina arborea Roxb., located in three municipalities of Tolima: Armero, Coello, and Guamo. Based on the inventory data, three regression models were implemented. These results will be particularly useful for silvicultural management planning since the implemented methodology can be applied in other regions of the world and with other varieties of forest species. As an additional stimulus for investors, in the simulation it is possible to quantify carbon capture in a technical way to be offered in the carbon bond market.

Investment Feasibility Analysis Using Discounted Cash Flow Valuation Method (Case Study: Gold Mine in Pit A PT XYZ)

Investment in the mining sector carries a high risk, so a comprehensive financial evaluation is required to ensure project feasibility. This study assesses the financial feasibility of gold mining investment in Pit A, PT XYZ, for the period 2025 to 2036. The purpose of this study is to evaluate the feasibility of the project through the analysis of key financial indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PBP) using the Discounted Cash Flow (DCF) method. The DCF method was chosen due to its ability to project future cash flows and incorporate them into a comprehensive assessment of the potential benefits and risks of the project. In addition, sensitivity analysis was conducted to see the effect of changes in important variables such as revenue, cost of goods sold (COGS), and capital expenditure (capex) on the financial results of the project. The results show that the project is financially viable, with a positive NPV of US$404.16 million, an IRR of 52.10%, and a PBP of 3.32 years, all of which indicate a strong return on investment. Further sensitivity analysis shows that the project remains robust under various scenarios of changes in key variables. This study contributes to the investment evaluation literature in the mining sector by offering a more integrated approach to addressing investment uncertainty and risk through the combined use of the DCF method and sensitivity analysis.

A Global Perspective on Renewable Energy Implementation: Commitment Requires Action

Meeting renewable energy targets is one of the most significant global challenges to achieving SDG 7—Ensure access to affordable, reliable, sustainable, and modern energy for all. This study focuses on the global energy transition to understand the factors that influence success or failure in achieving targets. First, the gap between the stated targets and our predictions was calculated. Next, the roles of economic, political, and environmental variables in determining this gap were analyzed. Data were collected from 63 countries from 2000 to 2022, ensuring the global representativeness and robustness of the results. Many countries may struggle to meet their renewable energy targets. Political stability, regulatory quality, and investment freedom play a remarkable role in helping countries get closer to achieving their targets. More industrialized countries with large populations face greater challenges due to high energy intensity. This paper aims to predict the propensity of countries to meet their energy targets by integrating the forecasting and analysis of the economic, political, and geographical factors that influence a green transition. The results provide new insights into how socioeconomic and geopolitical differences influence the energy transition, offering insights for more effective policies. It is argued that accelerated administrative procedures are needed to reduce investment uncertainty and improve energy systems’ flexibility. In addition, involving local communities in the decision-making process is important to ensure the acceptance of RE projects. Finally, introducing energy markets that reflect the characteristics of renewable sources is recommended to facilitate a more rapid and sustainable transition.

A game-based power system planning approach considering real options and coordination of all types of participants

With the ongoing advancement of global power marketization, the increasing diversity of stakeholders in the power market and their interactions have a significant impact on power system planning and operation. Traditional methods employ game theory to describe the interactions among market participants. However, these approaches fail to include all relevant participant types and overlook the long-term uncertainty value of planning schemes. Therefore, this paper proposes a game theory-based power system planning approach considering real options (RO) and coordination of all types of participants. First, the dynamic gaming interaction among supply-transmission-demand is studied, and the independent system operator is integrated into the game planning framework based on the overall perspective of power market operation. Moreover, the new power supply, grid planning, and operation of distributed generation (DG) are taken as decision variables based on the RO theory, and a game decision model of all participants in the power system planning considering the investment uncertainty is constructed. Finally, the iterative search algorithm is employed to solve the model, and the framework is validated based on the IEEE 30-bus system. The results indicate that through collaborative planning involving various market participants, Generation Companies and Transmission Companies expand their investments to maximize profits, while large power consumers reduce their investment in DG and instead increase their direct power purchases to lower costs. Moreover, these participants are inclined to pursue projects with higher asset value volatility, which further enhances their profit. By integrating RO theory with game theory, the proposed approach establishes a comprehensive planning framework that effectively addresses investment uncertainty. This integration enables market participants to make more optimal decisions, ultimately leading to an enhancement in the long-term economic performance of the power system.

Development of multi-forecasting model using Monte Carlo simulation coupled with wavelet denoising-ARIMA model

The analysis and prediction of stock market prices are crucial areas of research due to their complex, chaotic, and nonlinear features. As a result, making significant gains in stock market investments is a crucial task. However, expert and intelligent modeling techniques can help in achieving positive stock market returns. In this study, we use the Monte Carlo (MC) simulation method to generate multiple future values of the time series of closing prices of a particular stock of BSE using a combination of wavelet denoising and the autoregressive integrated moving average (ARIMA) model. The multiple future realizations of stock prices produced by the Monte Carlo (MC) simulation can help minimize risk and uncertainty in stock market investments. Firstly, we use wavelet analysis to detect significant noise levels in the time series at each scale in discrete wavelet decomposition, which is then eliminated by an appropriate wavelet denoising method. Next, the time series of denoised stock prices is fitted with a suitable ARIMA model, and the future values are obtained using this model. The future values of the denoised time series are simulated using MC simulation. The results of the study show that simulated forecasts obtained by MC simulation using the integrated wavelet-denoising-ARIMA model become more accurate with increasing simulation count than by applying a single ARIMA model to noisy stock price series. It has also been observed that MC simulation reduces the standard error of estimates to one half when the number of simulations is quadrupled.

Mekanisme Jual Beli Emas Online di Platform Tokopedia Emas Perspektif Hukum Islam

Digital gold transactions on Tokopedia have become a popular modern investment option due to their convenience and flexibility. However, the legality of these transactions from an Islamic perspective remains debated, creating uncertainty for Muslim investors. This study examines Tokopedia Emas's online gold trading practices through the lens of Islamic law. Using a descriptive qualitative approach, the research gathered data through interviews, literature review, and content analysis. The findings suggest that while Tokopedia's gold trading practices generally comply with Sharia principles, the majority of scholars still consider them invalid, or haram. This is primarily due to the lack of immediate physical delivery of the gold and the presence of non-cash and installment-based transactions, which could lead to usury (riba). Although the DSN-MUI Fatwa Number 77/DSN-MUI/V/2010 permits such transactions, the study advises Muslims to avoid any form of trade that could involve usury. Therefore, it concludes that online gold transactions, as conducted on this platform, do not align with Islamic legal standards.

How to facilitate in-depth digitalization in enterprises?

ABSTRACT Digitalization is the new engine for enhancing long-term production efficiency in enterprises. However, as a high-investment, high-risk, and long-duration activity, the returns from digitalization are fraught with considerable uncertainty. This paper begins from the perspective of maximizing corporate profits and constructs a static equilibrium analysis framework to explore the digitalization strategies of enterprises under varying degrees of return uncertainty. It is discovered that as the uncertainty of digital investment returns gradually decreases, the optimal strategies for industrial enterprises evolve from ‘not undergoing digitalization’ to ‘undergoing preliminary digitalization’, and finally to ‘undergoing in-depth digitalization’. Based on these findings, this paper proposes corresponding policies to promote in-depth digitalization in enterprises.

Trading off managerial and investor uncertainty in firm disclosure: Evidence from R&D investments and management guidance

AbstractClassic disclosure theory suggests that investor uncertainty increases the probability of discretionary disclosure, while managerial uncertainty decreases this disclosure. Because R&D projects are inherently risky, R&D‐intensive firms face high managerial uncertainty as well as high investor uncertainty. This paper empirically examines how R&D intensity impacts the provision, horizon, and content of management earnings guidance. To address endogeneity concerns, state‐level R&D tax credits serve as an instrumental variable for R&D intensity. I find that high R&D firms do not provide less earnings guidance than low R&D firms. However, they issue more quarterly guidance but less annual guidance. This substitution strengthens when there is high managerial uncertainty about the success of R&D projects. Consistent with litigation risk leading to asymmetric disclosure incentives, the decrease in annual earnings guidance is concentrated in positive guidance. Overall, the results imply that firms modify the horizon and content of their earnings guidance by substituting long‐term positive guidance with short‐term guidance when managerial uncertainty discourages the issuance of the former.

Features of the innovative approach in the formation of regional industrial policy

The article is considering the phenomenon of blurring boundaries between economic sectors, the merging of various stages and functions within the production process occurs, which is a distinctive feature of modern economic development. The authors emphasize imbalance in the distribution of capital: in conditions of excess financial resources throughout the national economy, there is a shortage of funds allocated for innovative projects. A key aspect of this problem is the lack of a long-term perspective and development strategy among economic entities. It is substantiated that insufficient attention to the development and implementation of risk management strategies leads to underestimation of the value of innovations with a long-term perspective, and in order to effectively overcome innovation shortsightedness, necessary an integrated approach that includes not only improving corporate culture and developing innovation infrastructure, but also improving legal and regulatory environment. The concept of innovative short-sightedness is considered, which reflects the underestimation of future benefits and the narrowing of the planning horizon of economic agents. Attention is focused on the fact that government policy and regulation can also have a significant impact on innovation activity; an imperfect legal framework in the field of intellectual property or unpredictability of tax policy creates uncertainty for entrepreneurs and investors, which can discourage investment in innovative projects. It is argued that in the context of industrial policy formation, the most significant aspects are the establishment and support of economic entities. It is emphasized that industrial policy should be focused on stimulating the primary links of production; it can be aimed at ensuring the development of high-tech sectors of the economy, which can become the driving force of innovative growth and increasing the competitiveness of national producers in world markets. In the realm of investment strategies, significant attention is directed towards crafting standards for utilizing approaches that simplify the integration of intellectual assets into economic systems, all while considering the expected duration of product viability.

Budget politics in Indonesia

Budget politics in Indonesia is a very complex process, ranging from central to local government. The budget planning process involves planning, approving, executing, and evaluating, all of which require close coordination and cooperation between institutions. The main challenges in Indonesia's budget politics are the misallocation of funds, inequality between regions, growing debt, inflation, and unstable prices. The economic implications of inefficient budget politics are far-reaching. Imbalances between revenues and expenditures can increase the debt burden and interest costs, reducing the space for productive public spending. Inequalities in budget allocations can slow economic growth and increase social inequality. In addition, uneven financial decentralization exacerbates inequality between regions. Inflation rates fuelled by increased public spending without an increase in goods and services can reduce people's purchasing power. Budget policy uncertainty also brings uncertainty for investors, which can reduce private investment and hamper economic growth. Overall, reforms in the budget distribution process, improved financial management capacity, and a commitment to inclusive and data-driven policies are urgently needed. These measures are essential to meet the challenges and ensure sustainable and equitable development for all Indonesians.

Political uncertainty and revenue sharing in international contracting

This study investigates a critical source of political uncertainty for foreign investors in a centralised political system: leadership turnover within local governments. Our stylised model suggests that risk-averse foreign investors, faced with this uncertainty, tend to offer a larger revenue share to their local partners in international joint ventures (IJVs). This incentivises local officials to provide the necessary authorisations and public inputs for IJVs. Using a unique Chinese dataset that links city-level leadership changes with firm-level incentive structures, our empirical analysis provides robust evidence supporting this framework.

Without mandated demand for greenhouse gas removal – High integrity GtCO2-scale global deployment will be jeopardized: Insight from US economic policy 2020–23

Greenhouse gas removals (GGRs) will be essential at GtCO2-scale to offset residual emissions and achieve global net zero by 2050. Engineered GGRs have the greatest long-term, large-scale CO2 storage potential and, therefore, offer opportunities to realize high-integrity removals. However, the most prominent engineered solutions are capital-intensive, generate expensive offset credits, and have achieved minimal market penetration. The United States has established policies subsidizing GGR deployment value chains which generate high-integrity removals to bring down engineered GGR costs. The US regime has the potential to result in substantial GGR cost reductions which will likely have implications on the policy frameworks for global GGR technology deployment. To date, research addressing the impact of US policies on the commercial imperatives and investment uncertainties for the global GGR sector is limited. Using a mixed methods approach, this contribution unpacked the motivations of early private sector actors. It did this by identifying characteristics of the most investable GGR business models and policy implementation requirements to establish the nascent sector, which will be critical to the GGR sector becoming a global multi-trillion-dollar, self-sustaining market. The analysis reveals that cost reduction alone will be insufficient to establish a high-integrity global GtCO2-scale sector. Systemic market risks, especially certainty of offtake through demand-side incentives, need to be `addressed. Therefore, the development of a stable and sustainable GGR sector, both in the US and globally, will remain problematic due to the inability to attract large-scale private capital investment.

Foreign equity lookback options with partial monitoring

A lookback option on foreign equity reduces the uncertainty of foreign investment by delivering the benefit of hindsight. Despite its high marketability, purchasing the option is stalled due to the failure to meet customized demands. This paper proposes foreign equity lookback options with partial monitoring and floating strike price to control the option premiums. We establish the expected value of the extreme of an underlying process when the specific condition, covering various payoffs of the lookback options, is satisfied. It is exploited to derive the unified closed-form pricing formula. We demonstrate the properties of the option prices through numerical examples.

ЗАЛУЧЕННЯ ІНОЗЕМНИХ ІНВЕСТИЦІЙ В ЕКОНОМІКУ УКРАЇНИ: ТЕНДЕНЦІЇ, ПРОБЛЕМИ ТА ПЕРСПЕКТИВИ ПОВОЄННОГО ВІДНОВЛЕННЯ

The global environment for international business and cross-border investment remains challenging in 2023. Although the economic obstacles that shaped investment trends in 2022 have subsided somewhat, they have not disappeared. Commodity prices, which spiked during the war in Ukraine, have come down, but the war continues and geopolitical tensions remain high. Recenupheavals in the financial sector in some developed countries are adding to investor uncertainty. The purpose of the study is to identify trends, diagnose problems, and develop promising directions for attracting foreign investment to the economy of Ukraine. In order to solve the set goal, the following scientific tasks were solved in the course of the study: the dynamics of the inflow of foreign investments and the structure of FDI into the national economy were analyzed by regional characteristics and by types of economic activity; the deterioration of the investment attractiveness of the national economy due to the reduction of the stock of FDI of Ukraine and the decrease of the index of investment attractiveness is substantiated; identified the strengths and weaknesses, opportunities and threats of attracting foreign investments to the economy of Ukraine based on the results of the SWOT analysis. In order to solve the set goal, the research determined FDI trends in the national economy and made conclusions about "investment shocks" associated with the global financial crisis of 2008, the start of the war in Donbas, COVID-19 and the full-scale war in Ukraine. This conclusion was reached by comparing the dynamics of the Investment Attractiveness Index of Ukraine with the flow of FDI into Ukraine, the trends of which were synchronized. For greater thoroughness of the research, the main foreign investors in the corporate segment were identified by the authors as companies (brands) that already had facilities in Ukraine at the time of the full-scale war and corporations that announced their intention to reinvest funds in Ukraine to support their assets. The authors substantiated the strengths and weaknesses, opportunities and threats of attracting foreign investments to the economy of Ukraine based on the results of a SWOT analysis.