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1 – 10 of over 1000
Article
Publication date: 6 March 2019

Elise Alfieri, Radu Burlacu and Geoffroy Enjolras

The purpose of this article is to provide some insights on the true nature of bitcoin and to study empirically its performance by using robust models, widely used in the academic…

1755

Abstract

Purpose

The purpose of this article is to provide some insights on the true nature of bitcoin and to study empirically its performance by using robust models, widely used in the academic literature. Previous studies assess performance with simple measures such as the Sharpe ratio. Such measures are insufficient because they do not take into account the bitcoin’s specificities, such as the possibilities to diversify risk.

Design/methodology/approach

The authors use quantitative methodologies to assess the performance of financial assets. Performance is defined as a risk-adjusted return. The authors use regression analysis and measure bitcoin’s performance as the constant term (α) of the projection of its returns on the returns of relevant factors of risk.

Findings

Bitcoin has low correlation with the market index and with factor-mimicking portfolios, which indicates opportunities to diversify risk. The performance of bitcoin (α) is positive and significant; this result is robust across period and world region specifications.

Research limitations/implications

The true nature of bitcoin is subject of debate and needs further research. Furthermore, other factors should be considered in analysing the bitcoin’s performance, such as those related to investors’ behaviour or political risk.

Practical implications

The empirical results obtained in this paper may be used by professional portfolio managers to diversify risk and to enhance their portfolio’s performance.

Originality/value

This paper adds to the literature by arguing that bitcoin has the nature of common stock, and therefore, its performance has to be assessed with models that are relevant for this type of securities. This paper is the first using performance models that adjust returns for relevant sources of risk.

Details

The Journal of Risk Finance, vol. 20 no. 2
Type: Research Article
ISSN: 1526-5943

Keywords

Abstract

Details

The Savvy Investor’s Guide to Pooled Investments
Type: Book
ISBN: 978-1-78973-213-9

Article
Publication date: 10 May 2019

Cay Oertel, Thomas Gütle, Benjamin Klisa and Sven Bienert

The purpose of this paper is to analyze potential diversification benefits of American real estate assets for European investors. Since European real estate yields are compressed…

Abstract

Purpose

The purpose of this paper is to analyze potential diversification benefits of American real estate assets for European investors. Since European real estate yields are compressed due to several reasons, including high market liquidity and low interest rates, investment managers seek opportunities to provide attractive risk-return profiles for investors. Therefore, empirical proof for improvements to risk-return profiles is highly necessary in the outlined market environment.

Design/methodology/approach

The empirical study uses a classic mean-variance optimization approach. In order to isolate potential diversification benefits two investment environments are compared: first, an optimization for the European investment horizon is carried out. Subsequently, the same optimization is performed for European and American assets. For both scenarios, risk-return profiles are obtained and compared.

Findings

Two major findings can be stated: first, higher correlations between European and American markets can be observed for the present data in comparison to older studies. Second, the mean-variance optimization of solely European and then mixed European-American portfolios show improvements in risk-return profiles for the latter. Thus, diversification benefits of American properties for European real estate investors can be confirmed.

Practical implications

The empirical study reveals diversification benefits for European investors. Thus, the asset allocation of European investors could be affected by allocating capital toward the USA in order to improve risk-return profiles.

Originality/value

The value of the paper is a precise analysis of two markets, namely Europe as well as the US. Thus, the paper isolates the practical implications for European investors, who are trying to improve risk-returns profile by allocating capital toward the USA.

Open Access
Article
Publication date: 31 May 2019

Su Jin Lee, Jin Wan Cho and Jae Hyun Lee

This paper provides the methodology of estimating the risk-return relationship of alternative asset investments within the mean-variance framework. While conducting strategic…

318

Abstract

This paper provides the methodology of estimating the risk-return relationship of alternative asset investments within the mean-variance framework. While conducting strategic asset allocation, most of the institutional investors do not take into account the risk-return relationship of alternative assets, or use arbitrary policy numbers that do not properly reflect the characteristics of alternative assets. This paper borrows the concept of reference portfolio in developing the methodology of estimating the risk-return relationship of alternative investments. The reference portfolio is the benchmark portfolio used in strategic asset allocation by pension funds. This can serve as the opportunity costs of alternative investments. We use the realized IRR’s from actual investments, and estimate the risk-return characteristics of alternative investments. We find that by properly estimating the mapping relationship between the reference portfolio and alternative asset classes, we can incorporate the risk-return profile of these non-market assets within the mean-variance framework together with the other traditional asset classes.

Details

Journal of Derivatives and Quantitative Studies, vol. 27 no. 2
Type: Research Article
ISSN: 2713-6647

Keywords

Article
Publication date: 3 May 2016

Pat Auger, Timothy Devinney, Grahame Dowling and Christine Eckert

Socially responsible investment (SRI) funds have grown dramatically as an investment alternative in most of the developed world. The paper aims to discuss this issue.

Abstract

Purpose

Socially responsible investment (SRI) funds have grown dramatically as an investment alternative in most of the developed world. The paper aims to discuss this issue.

Design/methodology/approach

This study uses a structured experimental approach to determine if the decision-making process of investors to invest in SRIs is consistent with the process used for conventional investments. The theoretical framework draws on two widely studied concepts in the decision making and investment literature, namely, inertia and discounting.

Findings

The authors find that inertia plays a significant role in the selection of SRI funds and that investors systemically discount the value of SRIs.

Research limitations/implications

The results suggest that SRIs need to be designed to cater to the risk/return profiles of investors and that these investors need to be better informed about the performance of SRIs vs conventional investments to reduce their systematic discounting.

Originality/value

Unique experimental approach applied to investment alternatives in a manner that captures individual level variation.

Details

Annals in Social Responsibility, vol. 2 no. 1
Type: Research Article
ISSN: 2056-3515

Keywords

Article
Publication date: 8 July 2020

Stefan Prigge and Lars Tegtmeier

The aims of the research are twofold: (1) exploring whether football club stocks can be considered an asset class of their own; (2) investigating whether football stocks enable…

Abstract

Purpose

The aims of the research are twofold: (1) exploring whether football club stocks can be considered an asset class of their own; (2) investigating whether football stocks enable well-diversified investors to achieve more efficient risk-return combinations.

Design/methodology/approach

Using efficient frontier optimization, a base portfolio, with standard stocks and bonds, and a corresponding enhanced portfolio, which includes football stocks in the investment opportunity set, are defined. This procedure is applied to four portfolio composition rules. Pairwise comparisons of portfolio Sharpe ratios include a test for statistical significance.

Findings

The results indicate a low correlation of football stocks and standard stocks; thus, football stocks could be considered an asset class of their own. Nevertheless, the addition of football stocks to a well-diversified portfolio does not improve its risk-return efficiency because the weak performance of football stocks eliminates their advantage of low correlation.

Research limitations/implications

This study contributes to the evidence that investments in football are different from ‘ordinary’ investments and need further research, particularly into market participants and their investment motives.

Practical implications

Football stocks are not attractive to pure financial investors. Thus, football clubs need to know more about which side benefits are appreciated by which kind of investor and how much it costs to produce these side benefits.

Originality/value

To the best of authors’ knowledge, this is the first study to analyse the risk-return efficiency of football stocks from the perspective of a pure financial investor, i.e. an investor in football stocks who does not earn side benefits, such as strategic investors or fan investors.

Details

Sport, Business and Management: An International Journal, vol. 10 no. 4
Type: Research Article
ISSN: 2042-678X

Keywords

Article
Publication date: 4 November 2013

Nadine Gatzert

In financial planning, customers are typically confronted with choosing a premium payment scheme when investing in a mutual fund, which is often equipped with an investment…

Abstract

Purpose

In financial planning, customers are typically confronted with choosing a premium payment scheme when investing in a mutual fund, which is often equipped with an investment guarantee to provide downside protection. Guarantee costs may thereby also be charged differently depending on the provider. The paper aims to investigate the impact of the premium payment method on different performance measures for a mutual fund with an investment guarantee.

Design/methodology/approach

The paper compares a fund with annual and upfront premiums as well as constant guarantee costs versus the guarantee price as an annual percentage fee of the fund value, always ensuring that the present value of premium payments is the same for all product variants. The paper further studies the relevance of the guarantee level and the contract term.

Findings

The results emphasize that even though the present value of premiums paid into the contract is the same, the type of premium (upfront versus annual) as well as the type of guarantee cost (upfront versus annual fee) has a considerable impact on the performance.

Practical implications

Providers can thus make a product more attractive for consumers by individually adjusting the premium scheme depending on their preferences and by making the resulting risk-return-profile transparent, while keeping the other contract characteristics unchanged (e.g. extent of the guarantee).

Originality/value

To date, there has been no comprehensive analysis with specific focus on the impact of different premium payment schemes (in particular with respect to savings premiums and guarantee costs) on risk and return of a mutual fund with otherwise given contract characteristics such as the underlying fund strategy and the investment guarantee, even though the premium scheme itself can already have a considerable impact on the terminal payoff distribution and thus risk-return profiles. In addition, such an analysis can provide important information for consumers and providers in designing and choosing attractive products by simply adjusting the premium scheme (if possible) instead of or in addition to changing other product features.

Details

The Journal of Risk Finance, vol. 14 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 18 April 2017

Hisham Al Refai, Mohamed Abdelaziz Eissa and Rami Zeitun

The risk-return relationship is one of the most widely investigated topics in finance, yet this relationship remains one of the most controversial topics. The purpose of this…

Abstract

Purpose

The risk-return relationship is one of the most widely investigated topics in finance, yet this relationship remains one of the most controversial topics. The purpose of this paper is to investigate the asymmetric volatility and the risk-return tradeoff at the sector level in the emerging stock market of Jordan.

Design/methodology/approach

Data consist of daily prices for 22 sub-sectors spanning from August 1, 2006, to September 30, 2015, covering the periods of pre, during, and after the global financial crisis. The EGARCH-M model is used to document the patterns of asymmetric volatility of sub-sector returns and the risk-return tradeoff during the non-overlapping three sub-sample periods.

Findings

The major findings of this study are as follows. In the pre-crisis period, the results suggest some evidence of a positive relationship between risk and return. The results also reveal that good news has more effect than bad news during the same period. In the crisis period, there is a negative but insignificant risk-return relationship and negative shocks have more impact than positive ones. In the post-crisis period, the authors find positive but insignificant risk-return tradeoff with weak evidence of volatility asymmetry.

Practical implications

The results have major implications for investors willing to engage their investment decisions in the Amman Stock Exchange (ASE) and for policymakers who seek to attract and retain regional and international investors. Since the empirical investigation is conducted at the sector level, the study may aid investors to target specific sub-sectors with positive and significant risk-return tradeoff. In addition, investors need to monitor the asymmetric patterns which make the level of risk-aversion more susceptible to coming news. For policymakers, the latest infrastructure reforms are crucial to achieving the potential for growth but the ASE market authority needs to undergo further reforms and provide various promotional incentives.

Originality/value

Although there are numerous studies on asymmetric volatility and risk-return tradeoff, there is a lack of parallel studies at the sector level for both developed and emerging stock markets. Such assessment at the sector level is crucial for international investors after their choice of countries or markets for better choice of portfolio diversification and allocation of financial resources.

Details

International Journal of Emerging Markets, vol. 12 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 1 January 2001

Helmut Mausser and Dan Rosen

Standard market risk optimization tools, based on assumptions of normality, are ineffective for evaluating credit risk. In this article, the authors develop three scenario…

Abstract

Standard market risk optimization tools, based on assumptions of normality, are ineffective for evaluating credit risk. In this article, the authors develop three scenario optimization models for portfolio credit risk. They first create the trading risk profile and find the best hedge position for a single asset or obligor. The second model adjusts all positions simultaneously to minimize the regret of the portfolio subject to general linear restrictions. Finally, a credit risk‐return efficient frontier is constructed using parametric programming. While scenario optimization of quantile‐based credit risk measures leads to problems that are not generally tractable, regret is a relevant and tractable measure that can be optimized using linear programming. The three models are applied to optimizing the risk‐return profile of a portfolio of emerging market bonds.

Details

The Journal of Risk Finance, vol. 2 no. 2
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 18 August 2022

Hans Philipp Wanger and Andreas Oehler

The purpose of this paper is to investigate whether downside-risk measures help to explain why households largely refrain from investing in Exchange Traded Funds that replicate…

Abstract

Purpose

The purpose of this paper is to investigate whether downside-risk measures help to explain why households largely refrain from investing in Exchange Traded Funds that replicate broad and internationally diversified market indices, so-called XTFs, although studies frequently recommend to do so.

Design/methodology/approach

The paper analyzes whether evaluating risk in terms of downside-risk measures which reflect households' interpretation of risk closer than the standard deviation (SD) of returns, yields less risk-return-enhancements, and thus, fewer incentives for households to invest in XTFs. Household portfolios are compiled by combining stylized portfolio compositions that involve multiple asset classes and German households' security holdings. The data set covers the period from January 2014 to December 2016 and includes 47,388 securities.

Findings

The results indicate that none of the downside-risk measures can help to explain the reluctance of households to invest in XTFs. On the flip side, the results show that all stylized household portfolios can enhance the risk-return position from employing XTFs, regardless of the underlying risk measure. This supports the advice to invest in XTFs and extends it upon households that evaluate risk in terms of downside-risk.

Originality/value

To the best of the authors' knowledge, this study is the first to investigate risk-return-enhancements from XTFs while simultaneously considering various downside-risk measures and multiple asset classes of household portfolios.

Details

Review of Behavioral Finance, vol. 15 no. 3
Type: Research Article
ISSN: 1940-5979

Keywords

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