US Investment Research Articles

Analysis of dependence structure among investor sentiment, policy uncertainty and international oil prices

The behavioural aspect of finance and economics has an embedded importance in the literature. This paper provides an evidence of the interrelationship of international oil prices with economic policy uncertainty, consumer sentiments and US investor sentiment proxies. To test the underlying dependence structure, we employ time invariant and time-varying copula methods due to dynamic return patterns of our sampled indices. Our analysis reveals an underlying relationship of investor sentiments and economic policy uncertainty with international oil prices not only during normal periods but also in the periods of financial turmoil. Results of our nonlinear causality highlight potential of bidirectional spillover between oil prices and investor sentiment indices across all quantiles. This helps in understanding that a volatile international oil market may have significant impact on investor sentiments and economic policy uncertainty and vice versa. [Received: December 20, 2019; Accepted: June 17, 2020]

Original Sin Redux

We explore the relationship between portfolio flows and financial conditions by using a unique and comprehensive database of US investor flows into emerging market government bonds. We find that mutual funds display a more procyclical pattern of flows relative to other investor types. Delving into the dynamics of portfolio flows at monthly frequency reveals that dollar appreciation amplifies the sell-off in EM local currency bonds, but not dollar-denominated bonds, possibly reflecting clientele effects of stickier investors toward dollar-denominated bonds. Our findings underscore how borrowing in domestic currency has not insulated emerging markets from fluctuations in global financial conditions.

Managing Political Risk in International Portfolios

We show that internationally diversified portfolios carry sizeable political risk premia. Using a portfolio selection model with tail risk, we obtain political efficient frontiers from skewed return distributions to manage political risk, and design an inference test to draw conclusions. We find that politically hedged international portfolios of US investors realize performance gains against a broad market index (and other benchmarks). Currency hedging does not eliminate political risk. The diversification gains increase for long-horizon investors. Qualitatively identical results are obtained for Eurozone and Japan. Our findings inform the home equity bias puzzle literature, and are robust to several model specifications.

Rents and Intangible Capital: A Q+ Framework

In recent years, US investment has been lackluster, despite rising valuations. Key explanations include growing rents and growing intangibles. We propose and estimate a framework to quantify their roles. The gap between valuations — reflected in average Q — and investment — reflected in marginal q — can be decomposed into three terms: the value of installed intangibles; rents generated by physical capital; and an interaction term, measuring rents generated by intangibles. The intangible-related terms contribute significantly to the gap, particularly in fast-growing sectors. Our findings suggest care in a pure-rents interpretation, given the rising role of intangibles.

What Goes Around Comes Around: How Large Are Spillbacks From US Monetary Policy?

We quantify spillbacks from US monetary policy based on structural scenario analysis and minimum relative entropy methods applied in a Bayesian proxy structural vector-autoregressive model for the time period from 1990 to 2019. We find that spillbacks account for up to half of the overall slowdown in domestic real activity in response to a contractionary US monetary policy shock. Moreover, spillbacks materialise as stock market wealth effects impinge on US consumption, and as Tobin's q effects impinge on US investment. In particular, a contractionary US monetary policy shock depresses global equity prices, weighing on the value of US households' portfolios; and it depresses earnings of US firms through declines in foreign sales inducing them to cut back investment. Net trade does not contribute to spillbacks because US monetary policy shocks affect exports and imports similarly. Finally, spillbacks materialise through advanced rather than through emerging market economies, consistent with their relative importance in US foreign equity holdings and US firms' foreign demand.

What Goes Around Comes Around: How Large are Spillbacks from US Monetary Policy?

We quantify spillbacks from US monetary policy based on structural scenario analysis and minimum relative entropy methods applied in a Bayesian proxy structural vector-autoregressive model estimated on data for the time period from 1990 to 2019. We find that spillbacks account for a non-trivial share of the overall slowdown in domestic real activity in response to a contractionary US monetary policy shock. Our analysis suggests that spillbacks materialise as Tobin’s q/cash flow and stock market wealth effects impinge on US investment and consumption. Contractionary US monetary policy depresses foreign sales of US firms, which reduces their valuations/cash flows and thereby induces cutbacks in investment. Similarly, as contractionary US monetary policy depresses US and foreign equity prices, the value of US households’ portfolios is reduced, which triggers a drop in consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and imports similarly. Finally, spillbacks materialise through advanced rather than emerging market economies, consistent with their relative importance in US firms’ foreign demand and US foreign equity holdings.

A Comprehensive Study on Private Sector’s R&D Incentivization Landscape in USA and India: Lessons Drawn for India

Research and Development (R&D) is one of the most essential attributes of national socio-economic growth. The United States of America (USA) is the global powerhouse and the world’s largest R&D spender with 581.6 Billion USD in PPP global R&D investments. Although, India is the 6^th largest R&D spender of the world and annually invests nearly 68 Billion USD in PPP investment in R&D which is nearly 80% less than that of the US. The US invests 2.8% of its GDP for R&D and India contributes only 0.69%. The unsatisfactory positioning of India in R&D parameters can be attributed to less than 50% participation of the private sector in the national R&D ecosystem in contrast to the US where private sectors contribute more than 70% of the total federal R&D investments. In order to enhance R&D investments in India, the private sector needs to be incentivized for stimulating its engagements in R&D. US executes strong financial support under its common programmes SBIR and STTR executed by each federal agency and creation of a Small Business Administration assemblage for business R&D. The Federal government also practices one of the most generous tax incentives on R&D expenditure incurred by the private sector across the globe. India has limited financial support provided by TDB and few ministerial departments and agencies such as DSIR and BIRAC. Moreover, India has radically truncated its tax incentivization scheme of 200% super deduction to 100% super deduction on private sector’ R&D expenditure. In the present study, a notable suggestion for enhancing private sector engagements in R&D has been drawn from the US system. The major recommendations include the introduction of target-based research credits, tax incentives on increased R&D expenditure to benefit all types of industries, creation of common industry R&D support programmes in each ministerial set up on lines of SBIR and STTR and enhancing the scope of eligibility of Industries and R&D expenditure as qualifying to avail government R&D incentives in India.

On the Determinants of the Likelihood and Extent of Listed US Firms’ Disclosures on Climate Change Risk

This paper investigates the determinants of the likelihood and extent of climate change risk disclosures made by US firms through SEC filings, using a sample of 6129 US domiciled firm years for the period from 2009 to 2017 that feature (or do not feature) disclosures about climate change risk made according to general disclosure principles for the reporting of material risks under SEC Regulation S-K. A growing number of US and international institutional investors regard climate change risk information as material to their decision-making process. The potential risks associated with climate change also have attracted growing attention from policy makers and standard setters. We identify factors that are associated with the likelihood of firms disclosing information on climate change risk, and their extent, contributing information that should be useful in assessing the effectiveness of the current US disclosure requirements.

Consider the Capabilities of Flexible Fabric‐Reinforced Pipe

According to AWWA, US investment needs for buried drinking water infrastructure total more than $1 trillion nationwide over the next 25 years. With various technologies available, water utilities have effective, potentially cost‐saving options for pipeline rehabilitation, including flexible fabric‐reinforced pipe.

The Trump Administration’s Impact on US Investment Policy

Abstract This article reviews the Trump Administration’s impact on US investment policy – meaning, US policy regarding the promotion and protection of US investment abroad – at the close of the Administration. In short, the Administration’s impact on US investment policy was substantial by any measure. It withdrew the United States from the Trans-Pacific Partnership, which was effectively the largest investment agreement ever negotiated, and it also renegotiated the North American Free Trade Agreement and replaced it with the United States-Mexico-Canada Agreement (USMCA), which features a novel approach to investor-state dispute settlement. The Administration’s impact on US investment policy was also shaped by steps it chose not to take, including its decision not to replicate its approach in the USMCA in its amendments to the Korea-United States Free Trade Agreement, re-start the United States-China Bilateral Investment Treaty or Trans-Atlantic Trade and Investment Partnership negotiations or re-visit dozens of US investment agreements that are currently in force. This article reviews these decisions with a view to considering the challenges and opportunities that await future US policymakers in the executive and legislative branches with respect to US investment policy.

US INVESTMENTS IN PRIORITY SECTORS OF THE ECONOMY OF KAZAKHSTAN

In the conditions of self-isolation, a small and medium business suffered as a result of a pandemic, however, large business remained afloat due to large “long money”. Large business in Kazakhstan is mainly a raw material business, i.e., the mining industry, as a priority, has not suspended its activities. The tasks in the field of attracting investment remained the same. For Kazakhstan, in the direction of attracting foreign investment, firstly, it is worth identifying competitive sectors of the economy. Secondly, clearly understand the key factors in the development of these industries. Thirdly, to conduct a comparative analysis and assess the advantages and disadvantages in relation to other countries, which will be the main competitors in this industry. Fourth, identify potential investors. Fifth, optimize the activities of the coordinating agency or body that is responsible for investments in Kazakhstan. For US investors, the stock market in Kazakhstan is very small. It presents mainly companies in the mining and financial sectors of the economy, as well as the public sector. The limited financing opportunities in the stock market do not allow providing higher returns on investment funds, and this in turn negatively affects the influx of potential investors and investors.

The behaviour of US investors during presidential elections

PurposeThis study examines the influence of the presidential elections on the behaviour of US investors according to the trading activity of two of the most popular investment vehicles: exchange-traded funds and close-ended funds.Design/methodology/approachBased on the fact that investors in these two investment vehicles differ by, at least, two demographic factors that influence investment decisions, age and labour status, inferences are made about the degree of interest and the amount of trading activity that presidential elections provoke.FindingsThe evidence demonstrates that, during the last four US presidential elections, exchange-traded funds' investors trade significantly more than close-ended funds' investors during several event windows centred on the day of an election in which a republican candidate is elected. Close-ended funds' investors are more active during the election of a democratic candidate, although the statistical evidence in that regard is weak. Thus, it appears reasonable to conclude that younger investors who are gainfully employed are induced to trade by a presidential election in which a republican candidate prevails. Apparently, a democratic victory does not provoke the same behaviour.Originality/valueAlthough the relation between politics and economics is not an unexplored topic, it is not clear whether the presidential elections themselves constitute an event that triggers the trading behaviour of investors.

Financial Regulatory Actions over the Cycle

This paper shows that regulatory actions against misconduct in the financial industry are driven by business cycles. Using text mining techniques, we construct a new database of regulatory actions based on US investment advisor filings distinguishing between state, federal, and self-organized regulators. Our data cover 9,750 regulatory actions and fines across 49 states over the 1990-2019 period. We then show that the number of regulatory actions responds to the business cycle with a lag. It is consistently lower following economic boom periods and higher following busts. To establish causal evidence, we combine our data with information on 24 million federally administered military contracts that affect state-level business cycles. Exploiting these contracts, we find that after a positive state-level output shock, regulatory actions decrease up to 60 months at the state regulatory level, but increase at the federal-level. Measures based on regulatory fines mirror this pattern. Our findings suggest that state-level regulatory actions are pro-cyclical, and federal-level regulatory actions are counter-cyclical, suggesting that different levels of regulatory agencies respond differently to business cycles.

The invisible supporters

Abstract This article examines how written feedback is used to support the production of texts for purposes of reuse. The case study refers to an entrepreneur training program at the University of Texas at Austin. In the program, Korean startups are trained in understanding the US market, and developing pitches that convince US investors. They are supported by Quicklook® reports. A Quicklook report delivers snapshots of the market receptivity for the startup’s product. Market analysts write the reports. In the final stage of drafting, program staff members supervise the report author. This study investigates how supervisors use commenting and how the goal of creating a highly reusable text source guides the feedback process. The database was examined quantitatively (frequency of drafting and commenting) and qualitatively (functional comment types). The results offer valuable insights into actual writing processes in business settings and how professionals interact to ensure a reusable product. The findings indicate a broad range of comment functions. Overall, we distinguish two main categories: feedback activities focusing on Quicklook reports as reusable resource, and feedback activities focusing on collaboration and workflow. Each category includes functional comment types. Further research is needed to learn more about professional strategies of reflecting on text quality, the quality of assessments, or the ratio between detected and real deficiencies of a document.

Investors' Trading, Market Timing, and Implementation Shortfall: Evidence from the US Financial Market

In this research, we evaluate the US investors' trading pattern and choice of market timing in the presence of implementation shortfall. Results show that when investors decide to trade, implementation shortfall is being ignored. It is observed that stock performance on Wednesday is positive in the presence of positive and significant implementation shortfall i.e., traders do not seem to manage implementation shortfall during trading on Wednesday. It is also observed that investors seem to ignore the implementation shortfall in April. This behavior seems to persist in other types of market times such as turn-of-the-month, week-of-the-month, and quarter-of-the-year effects on implementation shortfall. We conclude that investors behave aggressively to buy stocks during certain days and times of the year ignoring implementation shortfall.

What We Say And What We Do: Why US Investments In Children's Health Are Falling Short.

This article explores the gap between what Americans say we believe with respect to spending on child health and what we actually do, which falls short of norms in other developed countries. Three possible reasons are identified: a lack of information about the effectiveness of government programs affecting child health, the idea that "investments" in child health should pay for themselves, and ideological preferences that prioritize other goals and that may themselves be rooted in this country's racial history. These factors are not mutually exclusive, and all may be at play simultaneously.

Retail Raw: Wisdom of the Robinhood Crowd and the COVID Crisis

Robinhood (RH) investors increased their holdings in the March 2020 COVID bear market, indicating an absence of collective panic and margin calls. This steadfastness was rewarded in the subsequent bull market. Despite unusual interests in some “experience” stocks (e.g., cannabis stocks), they primarily tilted towards stocks with high past share volume and dollar-trading volume, itself mostly big stocks. From mid-2018 to mid-2020, an aggregated crowd consensus portfolio (a proxy for the household-equal-weighted portfolio) had both good timing and good alpha.

Restrictions On USGlobal Health Assistance Reduce Key Health Services In Supported Countries.

The 2017 expanded Mexico City Policy prohibits non-US-based nongovernmental organizations from receiving US global health assistance if they either perform or refer for abortion services. We study the effects of the expanded policy on implementing partners of US-funded HIV programming by the President's Emergency Plan for AIDS Relief (PEPFAR) via a primary survey in all recipient countries and key-informant interviews in South Africa and the Kingdom of Eswatini (May-November 2018). Survey results showed that 28percent (56 of 198) of organizations reported stopping or reducing at least one service in response to the policy. Reported service reductions included reducing the delivery of information about sexual and reproductive health, pregnancy counseling, contraception provision, and HIV testing and counseling. Interview data highlighted how these reductions were often a result of decreased patient flows or implementation of the expanded policy beyond what is required. Reductions disproportionately harmed pregnant women, youth, and key populations such as sex workers and men who have sex with men. Reduced delivery of sexual and reproductive health services has the potential to negatively affect many intended beneficiaries of PEPFAR funding, especially in areas with high HIV prevalence. Policy makers must respond to disruptions in service delivery and end any implementation that undermines US investment in high-quality HIV and sexual and reproductive health services.

Expected effects of the US tax reform on other countries: global and local survey evidence

The Tax Cuts and Jobs Act constitutes the largest change to the US tax system since the 1980s and thoroughly alters the way in which multinational companies are taxed. Current assessments on the reform’s international impact vary widely. This article sheds light on the tax reform’s expected effects on other countries. We first use representative German business survey data to analyze the impact of the reform on German firms. Many firms with substantial US revenues or capacities in the USA intend to expand US investment in response to the reform, in particular large firms and manufacturing companies. The effects on investment in Germany are ambiguous: While some firms substitute between investment locations, others expand in both countries. We subsequently extend our analysis to a global level using worldwide survey data. The results suggest a negative impact on tax revenues and investment in countries with close economic ties to the USA.

Lumpy Investment in Dynamic General Equilibrium

Microeconomic lumpiness matters for macroeconomics. According to our DSGE model, it explains roughly 60% of the smoothing in the investment response to aggregate shocks. The remaining 40% is explained by general equilibrium forces. The central role played by micro frictions for aggregate dynamics results in important history dependence in business cycles. In particular, booms feed into themselves. The longer an expansion, the larger the response of investment to an additional positive shock. Conversely, a slowdown after a boom can lead to a long lasting investment slump, which is unresponsive to policy stimuli. Such dynamics are consistent with US investment patterns over the last decade. More broadly, over the 1960-2000 sample, the initial response of investment to a productivity shock with responses in the top quartile is 60% higher than the average response in the bottom quartile. Furthermore, the reduction in the relative importance of general equilibrium forces for aggregate investment dynamics also facilitates matching conventional RBC moments for consumption and employment.