Search results

This paper examines the effect of cryptocurrencies on the portfolio risk-adjusted returns of traditional and alternative investments within an emerging market economy.

The paper employs daily arithmetic returns from August 2015 to October 2018 of traditional assets (stocks, bonds, currencies), alternative assets (commodities, real estate) and cryptocurrencies. Using the mean-variance analysis, the Sharpe ratio, the conditional value-at-risk and the mean-variance spanning tests.

The paper documents evidence to support the diversification benefits of cryptocurrencies by utilising the mean-variance tests, improving the efficient frontier and the risk-adjusted returns of the emerging market economy portfolio of investments.

This paper firmly broadens the Modern Portfolio Theory by authenticating cryptocurrencies as assets with diversification benefits in an emerging market economy investment portfolio.

As far as the authors are concerned, this paper presents the first evidence of the effect of diversification benefits of cryptocurrencies on emerging market asset portfolios constructed using traditional and alternative assets.

The purpose of this paper is to address two questions: did adoption of Statements of Financial Accounting Standards No. 132(R) and No. 158 affect neutrality of the financial reporting with regard to the disclosed expected rate of return (ERR) on pension assets assumptions, and did pension asset allocations change in response to the new recognition and disclosure requirements?

The author uses several measures of association between reported expected return and pension assets allocations to assess neutrality of the reported ERR. The series of tests explores changes in correlations between asset allocations and expected rates of return and changes in the implied risk premiums following adoption of Statements No. 132(R) and No. 158. Granger causality analysis is used to explore the second research question: did pension asset allocations change in response to the new recognition and disclosure requirements?

The empirical results are consistent with improved neutrality of financial reporting following adoption of Standard No. 132(R). There were no detectable changes in neutrality following adoption of Standard No. 158. While the data are consistent with portfolio allocations changing to a greater degree than did expected rates of return following Statement No. 132(R) adoption, the effect appears short-lived.

The overall results are consistent with Standard 132(R) having a positive effect on the neutrality of the reported ERR. Also, there is no evidence of persistent and systematic structuring of transactions around preferred financial reporting outcomes.

The purpose of this paper is to use the DuPont expansion to examine those factors underlying differences in (rates of) return on different crop portfolios over space (ten regions) and time (1960‐2004). The paper also estimates the impact of government payments on farmland values through its impact on farm profitability.

Businesses use the DuPont model to analyze the profitability of a business. This model includes three components: net profit margin, asset turnover, and financial leverage (or assets to equity). It is based on the relationships among these three components and is expressed as a product of ratios. For the purposes of the current study, accrued capital gains from (total) returns are excluded to focus on cash returns “cash flow”. Returns from current income are a “cash flow” available in the short run to pay financial obligations. Furthermore, returns from capital gains are not liquid; they are gains in wealth fully captured as capital gains/losses only in the longer term. Following the DuPont approach, the effect of government payments on farm asset values is equal to the sum of the effect of government payments on profit margins plus the effect of government payments on the asset turnover ratio.

The analysis focuses on agricultural profitability in the ten Economic Research Service (ERS) regions. By comparing the components of the DuPont expansion, profitability differences over time are analyzed. The results indicate that one cause of low profitability in the Corn Belt and Mountain regions is a perpetually low profit margin while the evidence for other regions supports lower asset efficiency. Results show that government payments impact the profit margin and affect value of farm assets in particular farmland values but not asset turnover ratio.

The use of DuPont expansion factor in agriculture is original and really helps us to understand the factors driving profitability in agriculture. Another innovation (originality) in this paper is the theoretical model that connects the DuPont expansion factor, government payments and its impact on farmland values.

We empirically investigate the hypothesis that the less transparent (more difficult to value) the target’s assets are the more likely it is that the acquiring firm can obtain higher short- and long-term returns. We analyze a sample of 1,538 friendly acquisitions partitioned in two separate dimensions: acquisitions of public versus private firms, and acquisitions of a firm’s assets versus acquisitions of a firm’s assets and its management. Using a sample of (nondiversifying) real estate transactions with a public REIT as the acquirer, we find that acquisitions of public firms have insignificant short-term abnormal returns. Acquisitions of private targets have positive and significant short-term abnormal returns. The acquirer’s abnormal returns are higher in both cases when the transactions involve acquisition of the target firm’s management. We find parallel results when analyzing the acquirer’s Q over the merger year and the three following years. Our conclusions are robust to the type of financing (cash, stock, or a combination) used in the acquisition.

This paper demonstrates that present value (PV) models can be viewed as multiperiod extensions of accrual income statements (AISs). Failure to include AIS details in PV models may lead to inaccurate estimates of earnings and rates of return on assets and equity and inconsistent rankings of mutually exclusive investments. Finally, this paper points out that rankings based on assets and equity earnings and rates of return need not be consistent, requiring financial managers to consider carefully the questions they expect PV models to answer.

AISs are used to guide the construction of PV models. Numerical examples illustrate the results. Deductions from AIS definitions demonstrate the potential conflict between asset and equity earnings and rates of return.

PV models can be viewed as multiperiod extensions of AISs. Mutually exclusive rankings based on assets and equity earnings and rates of return need not be consistent.

PV models are sometimes constructed without the details included in AISs. The result of this simplified approach to PV model construction is that earnings and rates of return may be miscalculated and rankings based as asset and equity earnings and rates of return are inconsistent. Tax adjustments for asset and equity earnings may be miscalculated in applied models.

This paper provides guidelines for properly constructing PV models consistent with AISs.

PV models are especially important for small to medium size firms that characterize much of agricultural. Providing a model consistent with AIS construction principles should help financial managers view the linkage between building financial statements and investment analysis.

This is the first paper to develop the idea that the PV model can be viewed as a multiperiod extension of an AIS.

The global banking environment is experiencing significant change as regulatory and geographical barriers to competition are reduced. As these barriers are removed, greater integration of banking services is developing throughout the world affecting the performance and structure of banking institutions. This research examines the stock returns and volatility of stock returns for a sample of banks in the United States, Europe, Canada and Japan. The general focus is to identify factors influencing the return and risk and to examine cross‐country differences in these factors. The results suggest that while size does not affect return volatility for any of the categories of banks, it does affect returns for banks in Japan, the U.S. and other non‐universal banking systems. Likewise, the investment in fixed assets appears consistently to adversely affect returns. A number of differences are found across country borders and across type of institutions (i.e. universal versus non‐universal banks).

The purpose of this paper is to inspect whether bank‐specific and macro‐economic determinants influence Islamic banks' profitability in the selected countries of different regions.

In order to achieve the study objective and to answer the question, the balanced panel data regression model has been used. Bank level data is used and this study examines the alternative measures ROA and ROE as a bank‐specific function and macro‐economic determinants.

The study results signify that banks with larger assets size and with efficient management lead to greater return on assets.

The paper shows that management efficiency regarding operating expenses positively and significantly affects the banks' profitability.

Real estate investment has been generally accepted as a value-adding proposition for a portfolio investor. Such an impression is not only shared by investment professionals and financial advisors but also appears to be supported by an overwhelming amount of research in the academic literature. The benefits of adding real estate as an asset class to a well-diversified portfolio are usually attributed to the respectable risk-return profile of real estate investment together with the relatively low correlation between its returns and the returns of other financial assets. By using the regime-switching technique on an extensive historical dataset, we attempt to look for the statistical evidence for such a claim. Unfortunately, the empirical support for the claim is neither strong nor universal. We find that any statistically significant improvement in risk-adjusted return is very much limited to the bullish environment of the real estate market. In general, the diversification benefit is not found to be statistically significant unless investors are relatively risk averse. We also document a regime-switching behavior of real estate returns similar to those found in other financial assets. There are two distinct states of the real estate market. The low-return (high-return) state is characterized by its high (low) volatility and its high (low) correlations with the stock market returns. We find this kind of dynamic risk characteristics to play a crucial role in dictating the diversification benefit from real estate investment.

The aim of the paper is to determine the dynamic relationships between REIT returns and those of other financial and real unsecuritized assets internationally.

Using a multi‐factor model the flexible least squares (FLS) coefficients of REIT returns against stock, bond and direct property returns are derived for the REIT markets of the USA, Australia, Japan and Singapore.

The correlation between REIT returns and those of other financial and real assets varies not only across countries but also inter‐temporally. REITs can certainly provide diversification benefits to a multi‐asset investment portfolio. However, due to the time‐varying nature of the correlation, active management is advised and REITs should be not be viewed as a complete substitute for direct property investment.

There are two major limitations to the study. Firstly, the sampling periods used are not the same across the countries due to differing market maturity. Secondly, there are also sheer differences in market sizes. However, as REIT markets around the world continue to grow and become more mature in terms of their breath and depth, there will be a richer set of data available for more in‐depth analyses based on the methodology presented here.

The conclusions on both mature and emerging REIT markets could provide some ideas for international investors as to how they should formulate their time‐varying investment strategies and reconstruct their portfolios as mature markets become more efficient and emerging ones more mature.

The inclusion of Asian markets enables investigation of the correlation between REITs and different assets in respect not only of different market conditions, but also different geographical locations and market maturity. The international dimension of this paper may appeal to readers and investors who are interested in identifying diversification opportunities around the globe, especially so when the capital and property markets around the world are becoming more integrated and globalized.

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.