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1 – 10 of 842Alexandre Carneiro and Ricardo Leal
The purpose of this paper is to contrast three investment choices within the reach of individual investors: naive portfolios of Brazilian stocks; actively managed stock funds; and…
Abstract
Purpose
The purpose of this paper is to contrast three investment choices within the reach of individual investors: naive portfolios of Brazilian stocks; actively managed stock funds; and the Ibovespa index, which represents passive management as well as to offer insights on the performance of professional asset managers in this large emerging market.
Design/methodology/approach
Equally weighted portfolios contained between 5 and 30 stocks to keep transaction costs low. Stock selection used the Ibovespa constituents and considered value (dividend yield (DY) and price-to-book ratio), momentum (past returns), and liquidity, as well as the Sharpe ratio (SR) over the 2003-2012 period, rebalancing three times a year.
Findings
Cumulative returns of naive portfolios are large. They frequently outperform the index for all values of n. They also outperform stock funds, particularly when the invested amount exceeds US$25,000, due to transaction costs. Yet, expected out-of-sample SRs corrected for errors in estimates are very low, suggesting that one should not count on this historical performance in the future. Naive portfolios may simply be more exposed to additional value, size, and momentum risks. Results are sensitive to time period selection.
Practical implications
Naive portfolios may be attractive to individual investors in Brazil relative to stock funds, which seem to strive to keep volatility low and may be better when the investment amount is low. There may be merit for value or momentum stock selection strategies when forming small equally weighted portfolios.
Originality/value
The paper contrasts realistic stock investing alternatives for individuals, it provides a view of stock fund performance in Brazil, and offers practical implications that may be pertinent in other emerging stock markets.
Objetivo
Contrastar três opções de investimento ao alcance de investidores individuais: carteiras ingênuas de ações brasileiras; fundos de ações de gestão ativa; e o índice Ibovespa, que representa a gestão passiva. Oferecer informações sobre o desempenho de gestores de ativos profissionais neste grande mercado emergente.
Método
As carteiras igualmente ponderadas continham entre 5 e 30 ações para manter os custos de transação baixos. A seleção de ações utilizou os componentes do Ibovespa e considerou o valor (rendimento de dividendos e relação preço/valor patrimonial), momentum (retornos passados) e liquidez, bem como o Índice de Sharpe no período 2003-2012, rebalanceando três vezes ao ano.
Resultados
Os retornos acumulados de carteiras ingênuas são grandes. Eles frequentemente superam o índice para todos os valores de N. Eles também superam os fundos de ações, particularmente quando o montante investido excede US$ 25,000, devido aos custos de transação. Contudo, os Índices de Sharpe esperados fora de amostra corrigidos por erros nas estimativas são muito baixos, sugerindo que não se deve contar com este desempenho histórico no futuro. As carteiras ingênuas podem simplesmente estar mais expostas a fatores riscos adicionais, tal como os de valor, tamanho e momentum. Os resultados são sensíveis à seleção do período de tempo.
Implicações práticas
As carteiras ingênuas podem ser atrativas para os investidores individuais no Brasil em relação aos fundos de ações, que parecem se esforçar para manter a volatilidade baixa e podem ser melhores quando o valor do investimento é baixo. Pode haver mérito para estratégias de seleção de ações de valor ou momentum ao formar carteiras igualmente ponderadas pequenas.
Originalidade/valor
O artigo contrasta alternativas realistas de investimento em ações para indivíduos, oferece uma visão do desempenho dos fundos de ações no Brasil e oferece implicações práticas que podem ser pertinentes em outros mercados emergentes.
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Dimas Hartz Pinto, Celso Funcia Lemme and Ricardo Pereira Câmara Leal
– The purpose of this paper is to examine the risk-adjusted performance of Brazilian SRI stock funds.
Abstract
Purpose
The purpose of this paper is to examine the risk-adjusted performance of Brazilian SRI stock funds.
Design/methodology/approach
Risk-adjusted performance of 11 Brazilian socially responsible investment (SRI) funds relative to local index funds and matched pairs of funds.
Findings
SRI funds performed as well as portfolios representing the broad market on a risk-adjusted basis, both before and during the global financial crisis. Independent investment houses are not interested in SRI funds. Large financial conglomerates may see these funds as part of their corporate social responsibility image strategy.
Research limitations/implications
Brazilian SRI funds are a very small niche in the stock mutual fund universe of the country, thus, the small sample (universe) of SRI funds, as far as the author's knew. One cannot say that independent asset managers do not include SRI screening in their stock selection criteria. The use of SRI screening by the most prominent independent asset managers is a potential topic for future research.
Practical implications
Brazilian SRI funds did not represent an extra screening filter cost to their investors. The majority of asset managers do not consider this strategy important enough to deserve an exclusive vehicle.
Social implications
As SRI funds did not posit an extra screening cost, they may deserve a greater share of the mutual fund market, stimulating more SRI.
Originality/value
The performance of Brazilian SRI stock funds had not been examined in the international literature. Brazil has vast natural resources, a very large economy and the fourth largest mutual fund industry in the world, but was overlooked.
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James A. Sundali, Gregory R. Stone and Federico L. Guerrero
The purpose of this paper is to conduct a controlled experiment to examine the effect of goal setting and affect framed feedback on repeated asset allocation investment decisions.
Abstract
Purpose
The purpose of this paper is to conduct a controlled experiment to examine the effect of goal setting and affect framed feedback on repeated asset allocation investment decisions.
Design/methodology/approach
The design of the experiment is a 2×2 between subject design. Subjects allocated monies among four investments for 20 periods. One manipulation varied whether subjects received performance feedback in the form of a happy or sad face, while another manipulation varied whether subjects set a financial goal for themselves and received goal attainment performance feedback.
Findings
The main findings include: subjects initially allocate assets in a manner roughly consistent with their stated preference for risk; prior year asset performance leads subjects to make significant changes in portfolio asset allocation in a manner consistent with beliefs of positive autocorrelation in asset returns; and the addition of happy or sad faces to performance feedback information leads to even greater changes in asset allocation.
Originality/value
Using ideas from the theory on the self‐regulation of behavior and the role of affect in decision making, the authors develop an original framework to account for the results.
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In most portfolio performance studies, a reference portfolio is used to assess the performance of a portfolio manager. The choice of an appropriate reference portfolio is…
Abstract
In most portfolio performance studies, a reference portfolio is used to assess the performance of a portfolio manager. The choice of an appropriate reference portfolio is essential to yield a fair and unbiased evaluation of the manager. In the following analyses, category‐based benchmarks are assessed against established benchmarks to evaluate, which alternative accurately evaluates a portfolio manager's performance. The results indicate that the category‐based benchmarks are more appropriate comparison reference for evaluating the systematic risk of equity portfolios and equity security returns.
Jesse Alves da Cunha and Yudhvir Seetharam
Opinions have been divided on whether there is a rational explanation to the reason behind seasoned equity offerings (SEOs) or whether the explanation lies within the behavioural…
Abstract
Purpose
Opinions have been divided on whether there is a rational explanation to the reason behind seasoned equity offerings (SEOs) or whether the explanation lies within the behavioural intricacies attributed to stock market participants. The paper aims to discuss these issues.
Design/methodology/approach
This study investigates the long-run performance of firms conducting SEOs on the Johannesburg Stock Exchange (JSE) over the period of 1998–2015, by examining the return performance and operating performance of firms, along with the impact of investor sentiment on these variables.
Findings
The results of this study are inconsistent with the existing literature, which argues that the long-run performance of issuing firms signalled an initial underreaction to SEOs buoyed by over-optimistic investors.
Research limitations/implications
Instead, the long-run performance of issuing firms is adequately explained by the rational models centred on the risk-return framework, implying that investors are reacting swiftly to SEOs in an unbiased fashion.
Originality/value
Investor sentiment does not materially influence the long-run share performance or operating performance of issuing firms, casting doubt on the ability of the market timing theory to explain the long-run performance of SEOs. The authors thus find that SEO performance cannot be explained by behavioural-based reasoning, in contrast to some asset pricing studies on the JSE which indicate the role of sentiment in explaining returns.
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Gordon Wills, Sherril H. Kennedy, John Cheese and Angela Rushton
To achieve a full understanding of the role ofmarketing from plan to profit requires a knowledgeof the basic building blocks. This textbookintroduces the key concepts in the art…
Abstract
To achieve a full understanding of the role of marketing from plan to profit requires a knowledge of the basic building blocks. This textbook introduces the key concepts in the art or science of marketing to practising managers. Understanding your customers and consumers, the 4 Ps (Product, Place, Price and Promotion) provides the basic tools for effective marketing. Deploying your resources and informing your managerial decision making is dealt with in Unit VII introducing marketing intelligence, competition, budgeting and organisational issues. The logical conclusion of this effort is achieving sales and the particular techniques involved are explored in the final section.
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Stephen Lee and Simon Stevenson
In estimating the inputs into the modern portfolio theory (MPT) portfolio optimisation problem, it is usual to use equal weighted historic data. Equal weighting of the data…
Abstract
In estimating the inputs into the modern portfolio theory (MPT) portfolio optimisation problem, it is usual to use equal weighted historic data. Equal weighting of the data, however, does not take account of the current state of the market. Consequently this approach is unlikely to perform well in any subsequent period as the data is still reflecting market conditions that are no longer valid. The need for some return weighting scheme that gives greater weight to the most recent data would seem desirable. Therefore, this study uses returns data which are weighted to give greater weight to the most recent observations to see if such a weighting scheme can offer improved ex ante performance over that based on unweighted data.
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Judith Atherton and David C.L. Yap
This article describes a study of the risks, returns and correlations among international stock market averages, from the point of view of both the US and UK investor during the…
Abstract
This article describes a study of the risks, returns and correlations among international stock market averages, from the point of view of both the US and UK investor during the period 1970 to 1977. The data have been analysed in two ways. First they are treated as observations from a stochastic process, and discussed from a statistical viewpoint; then they are treated as deterministic measures of the market and are used to find optimum portfolios using a Markowitz model. The study leads to the conclusion that although it is impossible to predict which portfolio will be best in the future, an international diversification policy can reduce risk by about a half.
– The purpose of this paper is to test prominent calendar anomalies for Indian securities markets those are commonly reported for advanced markets.
Abstract
Purpose
The purpose of this paper is to test prominent calendar anomalies for Indian securities markets those are commonly reported for advanced markets.
Design/methodology/approach
The study considers closing values of 11 different indices of National Stock Exchange India, for the period 1994-2014. By using dummy variable regression technique, five different calendar anomalies namely day of the week effect, month of the year effect, mid-year effect, Halloween effect, and trading-month effect are tested. Also, the evidence of volatility clustering has been tested through the application of generalized autoregressive conditional heteroscedasticity (GARCH)-M models.
Findings
The results display weak evidence in support of a positive Wednesday effect. The results also display weak evidence in support of a positive April and December effect. The results show strong evidence in support of a positive September effect. The Halloween effect was not found significant. The test of mid-year effect provides evidence that the returns obtained on the second-half or the year are considerably higher than those obtained during the first half. The test of interactions effects showed possible presence of interactions among various effects. The GARCH-based tests display strong evidence in support of volatility clustering.
Practical implications
The results have several implications for investors, regulators, and researchers. For investors, the trading strategies based on results obtained have been discussed. Similarly, certain key implications for regulators have been described.
Originality/value
The originality of the paper lies in the long time frame and multiple indices covered. Also, the study analyses five different calendar anomalies and the interactions among these effects. These analyses provide useful insights regarding returns predictability for the Indian securities markets.
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How can managers optimally distribute rewards among individuals in a job group? While the management literature on compensation has established the need for equitable…
Abstract
Purpose
How can managers optimally distribute rewards among individuals in a job group? While the management literature on compensation has established the need for equitable reimbursements for individuals holding similar positions in a function or group, an objective grounding of rewards allocation has certainly escaped scrutiny. This paper aims to address this issue.
Design/methodology/approach
Using an optimization model based on a financial rubric, the portfolio approach allows organizations to envision human capital assets as a set (i.e. a team, group, function), rather than independent contractors. The portfolio can be organized and managed for meeting various organizational objectives (e.g. optimizing returns and instrumental benefits, assessing resource allocations).
Findings
This research introduces an innovative portfolio management scheme for employee rewards distribution. Akin to investing in capital assets, organizations invest considerable resources in their human capital. In doing so, organizations, over time, create a portfolio of human capital assets. The findings reduce large variances in rewards distribution yet serving employee and management considerations.
Practical implications
The research has tremendous implications for managers who can mitigate serious equitable rewards distribution issues by creating a process that exemplifies rewards distribution using four different rewards allocation scenarios based on varying managerial prerogatives.
Originality/value
This research is a unique model that addresses a pressing human resource issue by solution based on a usable and feasible optimization mechanism from financial portfolio theory.
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