Search results
1 – 10 of over 7000Chonghui Jiang, Yongkai Ma and Yunbi An
The main purpose of this paper is to investigate whether Chinese investors can benefit from international diversification and where these benefits are to be found.
Abstract
Purpose
The main purpose of this paper is to investigate whether Chinese investors can benefit from international diversification and where these benefits are to be found.
Design/methodology/approach
This paper applies an expanding optimization procedure, which is different from the econometric methods or Monte Carlo simulations adopted in many empirical investigations in the literature. The authors' analysis is based on various realized portfolios that are set up at different dates in the sample period.
Findings
Based on a stream of realized portfolios, the authors show that Chinese investors can gain substantially in terms of risk reduction as they venture into foreign markets, regardless of the region into which they choose to diversify and whether in‐sample or out‐of‐sample performance is evaluated. However, the optimal strategies under consideration cannot achieve higher out‐of‐sample expected returns and risk‐adjusted returns than does the domestic investment.
Originality/value
In contrast with those in the literature, the authors' analysis is based on the out‐of‐sample performance of a series of realized optimal portfolios. Their method can address time‐varying correlations that are ignored in most previous research. In addition, this method not only allows them to analyze sizes of diversification benefits but also enables them to examine the major characteristics of international portfolios to gauge the effectiveness of different diversification strategies.
Details
Keywords
Md Hakim Ali, Md Akther Uddin, Mohammad Ashraful Ferdous Chowdhury and Mansur Masih
On the backdrop of growing importance of Shariah compliant equity markets, the purpose of this paper is to study cross-country portfolio diversification benefits for investors…
Abstract
Purpose
On the backdrop of growing importance of Shariah compliant equity markets, the purpose of this paper is to study cross-country portfolio diversification benefits for investors with major trading partners of Saudi Arabia, namely, USA, China, Japan, Germany and India, who have already invested or tend to invest in Saudi Arabian stock market.
Design/methodology/approach
The authors have investigated time invariant, dynamic correlations at different investments horizons of the investors among Islamic asset classes by applying relevant econometric techniques like multivariate generalized autoregressive conditional heteroscedastic –DCC and continuous wavelet transforms. For robustness, this study also applied maximal overlap discrete wavelet transform.
Findings
The findings tend to indicate that the Saudi Arabian investors have portfolio diversification benefits with all major trading partners in the short-term investment horizon. Interestingly, Saudi Arabian market has the least portfolio diversification benefits with the Chinese market. However, in the long run, all markets are correlated, yielding minimum portfolio diversification benefits and most importantly Saudi Arabian investors have portfolio diversification benefits with the Indian Islamic equity market in almost all investment horizons. The findings are highly consistent across different econometric technique estimations.
Research limitations/implications
The authors are only considering five major trading partners of Saudi Arabia. Also, the authors are using S&P and FTSE shari’ah index. Moreover, the time period of the study is constrained by the availability of shari’ah indices. Econometric limitations are also well documented in the literature.
Practical implications
The results could be beneficial for the investors, portfolio managers, hedge fund managers and institutional investors and also could be useful for the policy makers in their policy-making decisions.
Originality/value
Only very few studies have looked into the benefits of international portfolio diversification from the perspective of local investors as well as the portfolio diversification benefits with the major trading partners of Saudi Arabia. One of the novelties of the method is to make the stock investors, practitioners and policy makers aware of the portfolio diversification benefits available at different time scales such as 4, 8, 16, 32, 64 and 256 trading days as investment holding periods to unveil the true dynamics of co-movement between those different assets.
Details
Keywords
Muhammad Rizky Prima Sakti, Mansur Masih, Buerhan Saiti and Mohammad Ali Tareq
The purpose of this paper is to examine the extent to which the Indonesian Shariah compliant investors can benefit from the portfolio diversification with the Islamic indices of…
Abstract
Purpose
The purpose of this paper is to examine the extent to which the Indonesian Shariah compliant investors can benefit from the portfolio diversification with the Islamic indices of its trading partners and selected commodities such as gold, crude oil, and cocoa.
Design/methodology/approach
The authors use daily time series data covering both Islamic and commodity indices starting from June 4, 2007 until December 30, 2016 by the application of multivariate-generalized autoregressive conditional heteroscedastic and continuous wavelet analysis.
Findings
The findings tend to indicate that investors with exposure in Shariah compliant indices of Indonesia and wanting to gain more diversification benefits should invest either in the USA or India Islamic equity. Instead, the greater benefits will be obtained by Shariah compliant investors if they invest in the USA Islamic indices during long-term investment horizons. If investors want to invest in medium investment horizons, investing in India Islamic equity is a viable option. The findings further suggest that gold has a role of diversification benefits as a “safe haven” instrument for investors. It is advisable for the investors that have exposure in commodities (gold, crude oil, and cocoa) and want to invest in Indonesian Islamic equity, they should hold the portfolio for not more than 16 days to gain diversification benefits.
Originality/value
The results of this study are expected to have crucial implications for the Indonesia Shariah compliant investors and portfolio managers because it will help them to understand portfolio diversification benefits with different stock holding periods or investment horizons.
Details
Keywords
Buerhan Saiti and Nazrul Hazizi Noordin
The purpose of this paper is to quantify the extent to which the Malaysia-based equity investors can benefit from diversifying their portfolio into the conventional and Islamic…
Abstract
Purpose
The purpose of this paper is to quantify the extent to which the Malaysia-based equity investors can benefit from diversifying their portfolio into the conventional and Islamic Southeast Asian region and the world’s top ten largest equity indices (China, Japan, Hong Kong, India, the UK, the USA, Canada, France, Germany and Switzerland).
Design/methodology/approach
The multivariate GARCH-dynamic conditional correlation is deployed to estimate the time-varying linkages of the selected conventional and Islamic Asian and international stock index returns with the Malaysian stock index returns, covering approximately eight years daily starting from 29 June 2007 to 30 June 2016.
Findings
In general, in terms of volatility, the results indicate that both Asian and international Islamic stock indices are more or less volatile than its conventional counterparts. From the correlation analysis, we can see that both the conventional and Islamic MSCI indices of Japan provide more diversification benefits compared to Southeast Asian region, China, Hong Kong and India. Meanwhile, in terms of international portfolio diversification, the results tend to suggest that both the conventional and Islamic MSCI indices of the USA provide more diversification benefits compared to the UK, Canada, France, Germany and Switzerland.
Originality/value
The findings of this paper may have several significant implications for the Malaysia-based equity investors and fund managers who seek for the understanding of return correlations between the Malaysian stock index and the world’s largest stock market indices in order to gain higher risk-adjusted returns through portfolio diversification. With regard to policy implications, the findings on market shocks and the extent of the interdependence of the Malaysian market with cross-border markets may provide some useful insights in formulating effective macroeconomic stabilization policies in the efforts of preventing contagion effect from deteriorating the domestic economy.
Details
Keywords
This study investigates the diversification benefits of multiple cryptocurrencies and their usefulness as investment assets, individually or combined, in enhancing the performance…
Abstract
Purpose
This study investigates the diversification benefits of multiple cryptocurrencies and their usefulness as investment assets, individually or combined, in enhancing the performance of a well-diversified portfolio of traditional assets before and during the pandemic COVID-19.
Design/methodology/approach
This paper uses two optimization techniques, namely the mean-variance and the maximum Sharpe ratio. The naïve diversification rules are used for comparison. Besides, the Sharpe and the Sortino ratios are used as performance measures.
Findings
The results show that cryptocurrencies diversification benefits occur more during the COVID-19 pandemic rather than before it, with the maximum Sharpe ratio portfolio presenting its highest performance. Furthermore, the results suggest that, during COVID-19, the diversification benefits are slightly better when using a combination of cryptocurrencies to an already well-diversified portfolio of traditional assets rather than individual ones. This serves to improve the performance of the maximum Sharpe ratio portfolio, and to some extent, the naïve portfolio. Yet, cryptocurrencies, whether added individually or combined to a well-diversified portfolio of traditional assets, don't fit in the minimum variance portfolio. Besides, the efficient frontier during COVID-19 pandemic dominates the one before COVID-19 pandemic, giving the investor a better risk-return trade-off.
Originality/value
To the best of the author's knowledge, this is the first study that examines the diversification benefits of multiple cryptocurrencies both as individual investments and as additional asset classes, before and during COVID-19 pandemic. The paper covers all analyses performed separately in previous studies, which brings new evidence regarding the potential for cryptocurrencies in portfolio diversification under different portfolio strategies.
Details
Keywords
Mejda Bahlous and Rosylin Mohd. Yusof
The purpose of this paper is to assess the benefits to investors of international diversification among only Islamic funds. Compared to conventional investors who are not…
Abstract
Purpose
The purpose of this paper is to assess the benefits to investors of international diversification among only Islamic funds. Compared to conventional investors who are not restricted in their choice of funds, Islamic investors are restricted to investing in shari’a-compliant funds, thus giving up some diversification benefits. The possibility of international diversification among only Islamic funds may thus help Islamic investors to invest in accordance to their religious beliefs and still benefit from diversification.
Design/methodology/approach
The paper assesses the benefits of diversification by analyzing the extent of co-integration among four regional Islamic funds and by estimating the short-term and long-term structural dynamics of and among these funds. The paper uses an Autoregressive-Distributed Lag (ARDL) approach to testing the long-run relationships among these funds and use variance decomposition and impulse response functions to examine the structural dynamics of the relationship between these funds. These methods can also be used for predictive purposes and represent, in authors opinion, a useful approach that complements the traditional methodology of static covariance matrix to find the efficient frontier at a given moment in time.
Findings
The results indicate that international diversification can help reduce risk if Asia Pacific Islamic funds and MENA region Islamic funds are invested contemporaneously and/or Asia Pacific Islamic funds and North America Islamic funds, and/or Europe funds and MENA funds. The paper also finds that investors would benefit from investing in North American funds and MENA funds both in the long run and in the short run. Conversely, the paper finds that Europe funds and North American funds are co-integrated in the long-run precluding the opportunity for substantial diversification benefits from these particular portfolio mixes.
Research limitations/implications
The long-run analysis helps passive fund managers and investors in composing their portfolio by providing evidence that some portfolio mixes of different regional Islamic funds lead to better risk return performance than one regional Islamic fund portfolios. The short-run analysis however helps the active fund managers and investors as it suggests that diversifying in the short run and reviewing their portfolio on a regular basis would be beneficial as well.
Originality/value
This analysis justifies the promotion of Islamic finance as the negative correlation between several Islamic funds across the regions studied suggests better opportunities of investments via international diversification making Islamic funds more desirable.
Details
Keywords
Aswini Sukumaran, Rakesh Gupta and Thadavilil Jithendranathan
The purpose of this paper is to examine whether there exist significant benefits from diversification into frontier markets for an Australian investor in comparison to a US…
Abstract
Purpose
The purpose of this paper is to examine whether there exist significant benefits from diversification into frontier markets for an Australian investor in comparison to a US investor.
Design/methodology/approach
The study uses the computationally efficient ADCC GARCH model to estimate time-varying correlations of returns. The authors also compare the results to DCC GARCH correlations in order to test whether the results are model-specific. Optimal portfolios with several restrictions were constructed and the results from Australian and US investors were compared. The study also uses a holding out period that is rebalanced at the end of each quarter using new portfolio weights.
Findings
The study finds that there are significant benefits for the Australian investor from diversifying into frontier markets. However, the benefits to the US investor are much higher than that of an Australian investor. The results from the holding out period also present significantly higher benefits to the US investor compared to the Australian investor.
Originality/value
This study examines the diversification benefits to the Australian investor from frontier markets and compares the benefits of the Australian and the US investors. The results emphasise the potential benefits from including frontier markets in the portfolio. The paper also presents a holding out period analysis.
Details
Keywords
Ramazan Yildirim and Mansur Masih
The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe…
Abstract
The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe, and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic–dynamic conditional correlations (MGARCH–DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCH-DCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the time-scale-dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g., Portfolio Management and Strategic Investment Management).
Details
Keywords
Graeme Newell and Muhammad Jufri Marzuki
Healthcare property has become an important alternate property sector in recent years for many international institutional investors. The purpose of this paper is to assess the…
Abstract
Purpose
Healthcare property has become an important alternate property sector in recent years for many international institutional investors. The purpose of this paper is to assess the risk-adjusted performance, portfolio diversification benefits and performance dynamics of French healthcare property in a French property portfolio and mixed-asset portfolio over 1999–2020. French healthcare property is seen to have different performance dynamics to the traditional French property sectors of office, retail and industrial property. Drivers and risk factors for the ongoing development of the direct healthcare property sector in France are also identified, as well as the strategic property investment implications for institutional investors.
Design/methodology/approach
Using annual total returns, the risk-adjusted performance, portfolio diversification benefits and performance dynamics of French direct healthcare property over 1999–2020 are assessed. Asset allocation diagrams are used to assess the role of direct healthcare property in a French property portfolio and in a French mixed-asset portfolio. The role of specific drivers for French healthcare property performance is also assessed. Robustness checks are also done to assess the potential impact of COVID-19 on the performance of French healthcare property.
Findings
French healthcare property is shown to have different performance dynamics to the traditional French property sectors of office, retail and industrial property. French direct healthcare property delivered strong risk-adjusted returns compared to French stocks, listed healthcare and listed property over 1999–2020, only exceeded by direct property. Portfolio diversification benefits in the fuller mixed-asset portfolio context were also evident, but to a much lesser extent in a narrower property portfolio context. Importantly, this sees French direct healthcare property as strongly contributing to the French property and mixed-asset portfolios across the entire portfolio risk spectrum and validating the property industry perspective of healthcare property being low risk and providing diversification benefits in a mixed-asset portfolio. However, this was to some degree to the loss or substitution of traditional direct property exposure via this replacement effect. French direct healthcare property and listed healthcare are clearly shown to be different channels in delivering different aspects of French healthcare performance to investors. Drivers of French healthcare property performance are also shown to be both economic and healthcare-specific factors. The performance of French healthcare property is also shown to be different to that seen for healthcare property in the UK and Australia. During COVID-19, French healthcare property was able to show more resilience than French office and retail property.
Practical implications
Healthcare property is an alternate property sector that has become increasingly important in recent years. The results highlight the important role of direct healthcare property in a French property portfolio and in a French mixed-asset portfolio, with French healthcare property having different investment dynamics to the other traditional French property sectors. The strong risk-adjusted performance of French direct healthcare property compared to French stocks, listed healthcare and listed property sees French direct healthcare property contributing to the mixed-asset portfolio across the entire portfolio risk spectrum. French healthcare property’s resilience during COVID-19 was also an attractive investment feature. This is particularly important, as many institutional investors now see healthcare property as an important property sector in their overall portfolio; particularly with the ageing population dynamics in most countries and the need for effective social infrastructure. The importance of French direct healthcare property sees direct healthcare property exposure accessible to investors as an important alternate real estate sector for their portfolios going forward via both non-listed healthcare property funds and the further future establishment of more healthcare REITs to accommodate both large and small institutional investors respectively. The resilience of French healthcare property during COVID-19 is also an attractive feature for future-proofing an investor’s portfolio.
Originality/value
This paper is the first published empirical research analysis of the risk-adjusted performance, diversification benefits and performance dynamics of French direct healthcare property, and the role of direct healthcare property in a French property portfolio and in a French mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of French direct healthcare property in a portfolio; particularly where the strategic role of direct healthcare property in France is seen to be different to that in the UK and Australia via portfolio replacement effects. Clear evidence is also seen of the drivers of French healthcare property performance being strongly influenced by healthcare-specific factors, as well as economic factors.
Details
Keywords
Graeme Newell, Anh Khoi Pham and Joseph Ooi
REITs have taken on increased significance in Asia in recent years, with Singapore REITs (S-REITs) becoming an important property investment vehicle since 2002. The purpose of…
Abstract
Purpose
REITs have taken on increased significance in Asia in recent years, with Singapore REITs (S-REITs) becoming an important property investment vehicle since 2002. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of S-REITs in a mixed-asset portfolio context in Singapore over 2003-2013. The post-GFC recovery of S-REITs is also assessed.
Design/methodology/approach
Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of S-REITs over 2003-2013 is assessed, with efficient frontiers and asset allocation diagrams used to assess the role of S-REITs in a mixed-asset portfolio. Sub-period analyses are conducted to assess the post-GFC recovery of S-REITs.
Findings
S-REITs delivered strong risk-adjusted returns, being the best-performed asset class, but with little portfolio diversification benefit over 2003-2013. Whilst taking on reduced risk, but with less portfolio diversification benefits in recent years, S-REITs are seen to be robust relative to the other major Singapore asset classes; contributing significantly across the risk spectrum; particularly in the post-GFC period, where S-REITs have been the best-performed asset class in Singapore.
Practical implications
The results highlight the important strategic role of S-REITs in a Singapore mixed-asset portfolio. The strong risk-adjusted performance has highlighted the robustness of S-REITs, with S-REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum; particularly in the post-GFC period. This robustness highlights the ongoing strategic role of S-REITs in a Singapore mixed-asset portfolio, as well as the ongoing development of S-REITs as an important pan-Asia hub for REITs.
Originality/value
This paper is the first published empirical research analysis of the risk-adjusted performance of S-REITs and the role of S-REITs in a portfolio. Given the increased significance of REITs in Asia, this research enables empirically validated, more informed and practical property investment decision-making regarding the role of S-REITs in a mixed-asset portfolio and S-REIT performance in a post-GFC context.
Details