Search results

Offers an analytical tool that measures reinvestment rate risk. Expands the knowledge of the concept of reinvestment vis‐...‐vis the internal rate of return via the external rate of return. Concludes that investors should prefer investments that are less sensitive to reinvestment rate assumption than vice versa.

Existing empirical studies that document momentum trading strategies do not provide any insight on how investors choose the time horizon that is used to compute the past stock returns. Indeed, since past returns over overlapping time periods are positively correlated, it is hard to identify the exact historical time period on which investors base their trading strategies and to investigate whether such a period is unique. The purpose of this paper is to investigate this and reach some conclusions.

In this paper the author uses experimental setting to analyze how investors choose which of the past returns to use as a basis for their trading strategies and whether this choice depends on their investment horizon. The advantage of this experimental setting over the existing empirical research is the ability to control for the investment horizon of the subjects and the ability to provide the subjects with a hand‐picked set of stocks with uncorrelated past returns over overlapping time periods. In the study subjects were asked to make short‐term investment decisions based on historical short‐term realized returns over two time intervals of different lengths. In each treatment the subjects were divided into two groups based on the lengths of their investment horizons, which were set to match the lengths of time intervals used to compute the historical returns.

It was found that subjects followed momentum trading strategies based on both historical returns provided to them and paid more attention to the historical returns over the shorter time period. In addition, some evidence was found that subjects with longer investment horizons rely less on momentum strategies.

A wide sample was used to create an original set of observations and conclusions.

The purpose of this paper is to discuss the principal measures of performance used in property and other investment types. In particular, the briefing will explore the relationship of the expected IRR with the initial return, highlighting the role of growth in the investment dynamic.

This education briefing is an overview of investment growth models with worked examples.

The analysis of property growth models is akin to the Fisher and Gordon growth models used in other finance markets.

This comparison of the models can work for all forms of investment. Similarly, instead of looking at the overall return as the measure of comparison (expected vs required), it is possible to work backwards and deduce market expectations and compare these with the investors view on those variables.

This is a review of existing models.

Residential property in a multi‐asset portfolio context has been considered from two substantially different perspectives: institutional investor's and the household's perspective. This paper constitutes the first of two related surveys on the role of residential property in a multi‐asset portfolio. The paper provides an introduction to housing property investment at a macro level and reviews the main empirical issues related to housing investment in an institutional portfolio context. The literature in this regard generally supports the evidence that residential property is a more effective hedge against inflation than both shares and bonds. Additionally, the reviewed studies generally report that unsecuritised housing investment not only generates risk‐adjusted returns comparable to those of bonds and shares, but also exhibits low levels of correlation with classic asset groups of institutional portfolios.

This paper aims to analyse the effect of the investment duration, the overall market condition and the industry to which the investee firm belongs on exit returns realised by venture capital (VC) firms invested in Indian market, using hierarchical regression models.

The study examines the relationship that exist among the variables of interest by analysing all the 210 exits that happened in the Indian VC market over the period 2004–2017 by using analytical tools such as moving averages, hierarchical regressions and pooled ordinary least squares regression.

Exit return has an approximate U-shaped relationship with investment duration, and the turning point in the convex relationship happens around seven to eight years after investment. Returns are weakly related to the market condition, discarding the market timing hypothesis. Relationship patterns are found to be generally unvarying during the time period under study.

The results indicate VC funds in the Indian market tend to exit in a brief time span and gain substantial returns from the immediate exits beyond, which returns start dipping. This points to the illiquidity of the Indian VC market wherein the exits from “lemons” are quite tricky, which make them remain invested for longer durations and eroding the value substantially in the process. VC funds may make rational investment/exit decisions in the Indian market capitalising this knowledge.

This study empirically connects the value creating factors in a VC process to the established theories about the early stage investments and analyse the applicability and relevance of those theories in a market with high growth potential like India.

The aims of this paper are: first, to draw attention to the issues of displaced commercial risk (DCR) which arise as a result of the risk characteristics of profit‐sharing investment accounts (PSIA), the main source of funding of Islamic banks in most jurisdictions; and, second, to present a value‐at‐risk approach to the estimation of DCR and the associated adjustments in capital requirements.

The paper is based on empirical research into the characteristics of PSIA in practice, which vary to a greater or lesser extent from what one would expect them to be in principle, on an analysis of the capital adequacy and risk management implications that flow from this, and on an econometric formulation whereby the extent of DCR in Islamic banks may be estimated.

The findings are, first, that the characteristics of PSIA can vary from being a deposit like product (fixed return, capital certain, all risks borne by shareholders) to an investment product (variable return, bearing the risk of losses in underlying investments), depending upon the extent to which the balance sheet risks get shifted (“displaced”) from investment account holders to shareholders through various techniques available to Islamic banks' management. Second, the paper finds that this DCR has a major impact on Islamic bank's economic and regulatory capital requirements, asset‐liability management, and product pricing. Finally, it proposes an econometric approach to estimating DCR but report that individual Islamic banks generally lack the data needed to apply this approach, in the absence of which panel data for a population of Islamic banks may be used to estimate DCR for that population.

Empirically, the paper is thus limited by the lack of data just mentioned. Furthermore, the application of the proposed panel data approach has been left for future research.

The analysis of the issues and the development of the econometric model represent in themselves an original research contribution of some significance.

This study evaluated the effect of macroeconomic factors on residential real estate (RE) investment returns in the cities of Abuja and Lagos, Nigeria, with a view to guiding RE investors and researchers.

A survey research design was employed using a questionnaire to collect RE transaction data from 2008 to 2022 from estate surveying and valuation firms in the study areas. Rental and capital value data collected were used to construct rental and capital value indices and total returns on investment. The macroeconomic data used were retrieved from the archives of the Central Bank of Nigeria (CBN). Granger causality (GC) and multiple regression models were adopted to evaluate the effect of selected macroeconomic variables on residential RE investment returns in the study areas.

The study found a progressive upward movement in rental and capital values of residential RE investment in the study areas within the study period. Total and risk-adjusted returns on investment were equally positive within the study period. Only the inflation rate, unemployment rate and real gross domestic product (GDP) per capita were found to be the major determinants of residential RE investment returns in the study areas within the study period.

The secrecy associated with property transaction information/data by RE practitioners in the study areas posed a challenge. Property transaction data were not adequately kept in a way for easier access and retrieval in many of the estate firms and agent offices. Consequently, there was a lack of data that spanned the study period in some of the sampled estate firms or agent offices. This data collection challenge was, however, overcome by the excess time spent retrieving the required data for this study to ensure that the findings appropriately answer the research questions.

Inflation and GDP per capita have been found to be significant factors that influence residential RE investment performance in the study areas. Therefore, investors should pay attention to these identified macroeconomic factors for residential RE investment in the study areas whilst making investment decisions in order to mitigate a possible loss of income or return. The government should formulate and implement economic policies that would address the current high unemployment and inflation rates in Nigeria at large.

This study has extended and further enriched the existing body of knowledge in the field of RE investment analysis in Nigeria. To the best of the authors' knowledge, this study is the first to adopt the Cornish Fisher value-at-risk and modified Sharpe ratio models to analyse risk and risk-adjusted returns on residential RE investment, respectively, in Nigeria. It has therefore redirected the focus of RE researchers and practitioners to a more objective approach to RE investment performance analysis in Nigeria.

The change in CEO pay after their firms make large corporate investments is examined. Whether the change in CEO pay is a beneficial practice or harmful practice to firms is investigated.

A sample of firms that make large corporate investments is identified. For this sample, we identify the change in CEO pay before and after the investment, and we also measure the pay-for-size sensitivity of these investing firms.

For firms that make large corporate investments, CEOs get significantly more option grants when their firms’ stock returns are negative after the investments and these investing CEOs get more option grants than noninvesting CEOs.

The present study suggests that firms may have to increase CEO pay after large corporate investments to encourage investment. However, the results may also be consistent with an agency cost explanation. Future research should try to distinguish between the two explanations.

The study reveals a potential way to prevent CEOs from underinvesting.

The study provides important insights to shareholders on how to encourage CEOs to get their firms to invest, and on how to view CEO pay increases after their firms invest.

In this paper, we consider the relationship between the investment decision process and returns to investments in capabilities. We draw on characteristics of capabilities to develop a framework that identifies four components of the returns to an investment that are derived from industry-based versus firm-specific elements, and option and non-option elements. We then link these components to elements of the resource allocation process. In taking this approach we place the study of real options into the larger investment context, recognizing that they co-exist with and should be understood in conjunction with other investment characteristics. These arguments highlight the importance of connecting the investment process with realization of returns, thereby providing the conceptual foundations for a decision tool.

The paper uses 101 years of Chilean and international financial assets returns to investigate mean-variance optimal portfolio allocations. The key conclusion is that the share of international unhedged investments is substantial even in minimum risk portfolios (20%), unless the period 1980–2002 is assumed to be drawn from a different distribution and previous history is disregarded. In addition to that, the paper finds that mean-variance optimal investors would have generated substantial demand for an asset replicating the return profile of an efficient pay-as-you-go pension scheme. Labour income and departures from log-normality of returns might, however, affect the latter conclusion.