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This paper investigates how a firm's status moderates the performance of its investment portfolio diversification strategy. We combine the investment diversification literature with the organizational status theory, arguing that status would weaken the benefits of a specialist strategy in their niche industry of investments while strengthening the positive consequences of a generalist strategy across various industries.

We collected our data using the Securities Data Company (SDC) Platinum VentureXpert database. A fixed-effects spline regression analysis for 2,201 US venture capital firms between 1969 and 2016 was used to test for a nonlinear relationship between the level of portfolio diversification and firm performance.

We found that status differences exist in the performance of a specialist strategy but not in that of a generalist strategy. Our results indicate that portfolio specialization in fewer number of industries has little impact on low-status firms, whereas high-status firms suffer significantly lower IPO success rates. In contrast, above-median portfolio diversification was found to be beneficial to both high- and low-status firms.

We specifically identify the impact of status on the performance of investment diversification strategies, an area of research which has received little attention. Further, our findings provide some practical implications for managers making investment decisions between specialist and generalist investment strategies, given their status within the market. Implications for understanding the roles of firm status in portfolio diversification strategies are discussed.

This study aims to investigate whether the zero-investment portfolio strategy generates higher excess returns for all listed companies in the Stock Exchange of Thailand (SET) or ESG100 stocks. The study period is from January 2016 to December 2020, a total of 60 months. The dividend yield is employed for categorizing the stock into value and growth stocks. The strategy of buying value stocks and short-selling growth stocks is then applied. The results show that investing using the zero-investment portfolio strategy can generate higher returns in an investment portfolio that consists of ESG100 stocks than in an investment portfolio that consists of all stocks in the SET. The optimal holding periods for investing in portfolios that consist of stocks in the SET are 6 months, 9 months, and 12 months, and the optimal holding periods for a portfolio that consists of ESG100 stocks is 6 months. To explain excess returns of stocks in the SET, the Fama and French (2015) five-factor model is employed. There is no relation between risk factors and excess returns for the holding period of 6 months and 12 months. However, excess return is found to have a negative relation with the market risk premium factor for a 9-month holding period. The excess returns of ESG100 stocks are also inversely correlated with investment factors for a holding period of 6 months.

The study presents the zero investment strategies based on the pricing impact of real earnings management (REM) on stock returns after taking into account the direction and endogeneity nature of REM.

The authors use standard portfolio methodology and Fama–Macbeth cross-sectional regression to analyze the data for this study. Both upward and downward form of REM has been examined. Accrual earnings management (AEM) has been controlled while examining the association between REM and stock returns.

The findings demonstrate that the REM anomaly exists in the Indian equity market and is consistent under different market conditions and investment horizons. It is robust after controlling for cross-sectional effects and AEM. Our subsequent analysis suggests that a decile-based zero investment portfolio strategy based on REM loadings generates an annual excess return of 17.90%. The presented annual excess return is highest among quantile and mean-based investment strategies. Further, the authors find that REM sorted proposed investment strategies outperform the AEM sorted investment strategies in all spheres.

The findings suggest that investors can form an arbitrage profitable investment strategy by taking a long position in the bottom 10% of negative REM stocks, and a short position in the top 10% of positive REM stocks.

This is the first study that examines the pricing impact of REM on stock returns and provides zero investment strategies by betting against REM.

The recommendation of the analyst report is not only limited to a small number of ratings, but also biased toward a buy opinion with the absence of sell opinion. As an alternative to this, this paper aims to extract analysts' textual opinions embedded in the report body through text analysis and examine the profitability of investment strategies. Analyst opinion about a firm is measured by calculating the frequency of positive and negative words in the report text through the Korean sentiment lexicon for finance (KOSELF). To verify the usefulness of textual opinions, the author constructs a calendar-time based portfolios by the analysts' textual opinion variable of each stock. When opinion level is used, investment strategy has no significant hedged portfolio return. However, hedged portfolio constructed by opinion change shows significant return of 0.117% per day (2.57% per month). In addition, the hedged return increases to 0.163% per day (3.59% per month) when the opening price is used instead of closing price. This study show that the analysts’ opinion extracted from text analysis contains more detailed spectrum than recommendation and investment strategies using them give significant returns.

The purpose of this study is to segment and profile socially responsible investment (SRI) funds based on investment strategies they use. Specifically, the paper investigates how different SRI strategies are applied and how they are related to fund-level characteristics, with the goal of recognising their potential dominant combinations in SRI practice.

Cluster analysis was complemented with one-way ANOVA to classify 147 SRI funds from 11 European countries into different groups based on the diversification (number and type) and application (intensity of usage) of the investment strategies. Discriminant analysis and chi-square tests were conducted to profile the clusters. Financial performance was examined by running multiple hierarchical regression and dominance analyses to determine meaningfulness of particular investment strategies within each of the SRI fund clusters.

Three basic SRI fund clusters were recognised: strong-intensity strategic heterogeneity, weak-intensity strategic heterogeneity and weak-intensity strategic homogeneity. The combination of SRI strategies used in the weak-intensity strategic homogeneity cluster significantly explained the variance in mid-term financial returns.

Fund managers may use these results to make more informed investment decisions on the selection and the application of SRI strategies.

Financial industry has significant and broad and not only economic but also social implications. This research effort results in better understanding of the SRI universe, potentially leading to a broader consideration of the societal impact of financial investment.

The author provided useful insights into existing bundles of SRI strategies used in the European SRI market, recognised dominant investment strategies within SRI strategy portfolios and reported how strategic variety is related to fund-level characteristics.

The purpose of this paper is to examine the profitability of return‐based investment strategies in the New Zealand stock market; 16 such strategies are examined for the period from January 1995 to December 2004.

The paper shows that, at the end of each month of the sample period, every security is ranked in ascending order using their past J‐month formation period cumulative return (J=3, 6, 9 and 12). Then these securities are allocated to three groups; group 1 represents the loser portfolio, while group 3 represents the winner portfolio. Finally, equally weighted average returns of winner and loser portfolios are calculated over the next K‐month holding period (K=3, 6, 9, and 12). The statistical significance of the returns earned from buying winners and shorting losers is tested in order to determine the profitability of proposed strategies.

The findings in this paper show that a strong momentum effect, rather than a reversal effect, is present in this market. For example, the strategy, which is based on a six‐month portfolio formation period and a six‐month holding period, generates a monthly return of 1.14 per cent. These strategies are most profitable when they are based on formation and holding periods of three‐to‐six months. Further analyses reveal that the profits generated by such investment strategies cannot be explained by either the small firm effect or the January effect.

The main implication of this paper shows that buying past winners and selling past losers is profitable in the short to medium run in New Zealand.

The use of modern portfolio theory (MPT) in the construction real estate portfolios has two serious limitations when used in an ex ante framework: the intertemporal instability of the portfolio weights; and the sharp deterioration in performance of the optimal portfolios outside the sample period used to estimate asset mean returns. Both problems can be traced to wide fluctuations in sample means. Aims to prove that the use of a procedure that ignores the estimation risk due to the uncertain in mean returns is likely to produce sub‐optimal results in subsequent periods.

This study extends previous ex ante‐based studies by evaluating ex post optimal portfolio allocations in subsequent test periods by using methods that have been proposed to reduce the effect of measurement error on optimal portfolio allocations.

While techniques designed to handle estimation risk in capital market studies have yielded promising results, they are not completely successful in improving out‐of‐sample performance in this case. It is hypothesised that such results are due to the cyclical nature of property and that the contrarian and mean‐reversion effects picked up in studies of stocks and bonds are not captured when an asset such as direct property is examined. This conclusion is also supported by the strong performance of the tangency portfolios, and in particular the classical unadjusted Sharpe portfolio, over the shorter horizons, which would be consistent with a cyclical momentum effect.

The results suggest that the consideration of the issue of estimation risk is crucial in the use of MPT in developing a successful real estate portfolio strategy.

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.

Past studies have shown that investment strategy using two popular metrics, the earnings‐price ratio (EP) and book‐to‐market ratio (BM) enable investors to reap abnormal returns. More recent development of another ratio, economic value‐added‐to‐market value (EVAM) can be seen as a hybrid of EP and BM ratios. The purpose of this study is to examine whether portfolios created by utilizing the EVAM ratio will generate higher returns than portfolios formed with EP or BM ratios.

Utilizing the EVA data obtained from Stern Stewart & Co. and financial data from COMPUSTAT and center for research in security prices (CRSP), portfolios are created following the Fama and French portfolio formation methodology. The authors form separate portfolios using EP, BM or EVAM ratios where firms are ranked by a ratio in year t, then split into deciles. Then portfolios are constructed in year t + 1 for each decile and equally weighted portfolio returns are calculated. The cumulative ten‐year returns are compared between portfolios formed with EP, BM and EVAM ratios.

There are three interesting findings. One, the EP portfolios depict results that have long been documented. That is, value stock (low price‐to‐earnings ratio firms) and growth stocks (high price‐to‐earnings ratio) exhibit the highest returns. Two, the ten BM portfolio performances are not statistically different. Three, the EVAM ratios indicate that the negative EVAM (lowest decile) portfolio exhibit the highest return and the second highest return is generated by the highest EVAM portfolio. The general results of the thirty portfolios show that the highest EVAM ratio (EVAM10) performs the best. However, the pairwise mean differences between EP, BM and EVAM portfolios do not show statistical differences over the 1995–2004 period.

Although investment strategies using EP ratio and BM ratio have been thoroughly studied, investment strategy using EVAM ratio has not. Given that it has been documented that EVA is a better conceptual measure of value, portfolio managers or investors would be interested to know whether utilizing EVA for investment strategy would earn a higher return than strategies that use EP or BM ratios.

The purpose of this paper is to examine how the risk of war aroused by North Korea’s threatening actions trigger strategic responses from US multinational enterprises (MNEs) operating in South Korea. The authors compare two competing perspectives of real options and risk diversification to see which prevails when US MNEs are facing risk of war.

The authors hand collected news articles regarding North Korea’s threatening actions that may trigger strategic responses from MNEs operating in South Korea. The authors use archival data of US MNEs to verify our results.

Empirical tests of the two competing perspectives reveal that US MNEs adopt the risk diversification strategy when threatened by the risk of war. However, as MNEs have more available foreign markets outside the host country that is at risk of war, MNEs tend to take an operational flexibility approach more seriously and shift their productions to the remaining global operations. The ownership structure of the subsidiary does not appear to have significant effect on US MNEs’ strategic risk management.

This paper compares two perspectives, namely, real options and risk diversification, to observe how US MNEs treat their subsidiaries when facing risk of war in South Korea.