Hedging potentials of green investments against climate and oil market risks

PurposeThis study aims to examine the ability of clean energy stocks to provide cover for investors against market risks related to climate change and disturbances in the oil market.Design/methodology/approachThe study adopts the feasible quasi generalized least squares technique to estimate a predictive model based on Westerlund and Narayan's (2015) approach to evaluating the hedging effectiveness of clean energy stocks. The out-of-sample forecast evaluations of the oil risk-based and climate risk-based clean energy predictive models are explored using Clark and West's model (2007) and a modified Diebold & Mariano forecast evaluation test for nested and non-nested models, respectively.FindingsThe study finds ample evidence that clean energy stocks may hedge against oil market risks. This result is robust to alternative measures of oil risk and holds when applied to data from the COVID-19 pandemic. In contrast, the hedging effectiveness of clean energy against climate risks is limited to 4 of the 6 clean energy indices and restricted to climate risk measured with climate policy uncertainty.Originality/valueThe study contributes to the literature by providing extensive analysis of hedging effectiveness of several clean energy indices (global, the United States (US), Europe and Asia) and sectoral clean energy indices (solar and wind) against oil market and climate risks using various measures of oil risk (WTI (West Texas intermediate) and Brent volatility) and climate risk (climate policy uncertainty and energy and environmental regulation) as predictors. It also conducts forecast evaluations of the clean energy predictive models for nested and non-nested models.

Measuring Dependence in a Set of Asset Returns

An index measuring the degree of dependence in a set of asset returns is defined as the ratio of an equivalent number of independent assets to the number of assets. The equivalence is based on either attaining the same optimized value enhancement or spread reduction. The value enhancement is the difference in value of a value maximizing portfolio and the maximum value delivered by the components. The spread reduction is the percentage reduction attained by a spread minimizing portfolio relative to the smallest spread for the components. Asset values or bid and ask prices of portfolios, are modeled by conservative valuation operators from the theory of two price economies. The dependence indices fall with the number of assets in the portfolio and they are explained by a measure of concentration applied to normalized eigenvalues of the correlation matrix along with the average level of correlation, the level of the (Rudin and Morgan, 2006) portfolio diversification index and the number of assets in the portfolio. A time series of the indices constructed on the basis of the S&P 500 index and the nine sector ETF's reveals a collapse during the financial crisis with no recovery until 2016, with a peak in February 2020 and a COVID crash in March of 2020. Furthermore, factor dependence benefits are richer than those found in equity indices. Dependence benefits across global indices are not as strong as dependence benefits across an equal number of domestic assets, but they rise substantially for longer horizons of up to three years.

Oil price shocks, economic policy uncertainty, and green finance: a case of China

This study investigates the long- and short-run effects of crude oil price (COP) and economic policy uncertainty (EPU) on China's green bond index (GBI) using the quantile autoregressive distributed lag model. The empirical results show that COP and EPU produce a significant positive and negative influence on GBI in the long-run across most quantiles, respectively, but their short-run counterparts are opposite direction and only significant in higher quantiles. Thus, major contributions are made accordingly and shown in the following aspects. The findings emphasise the importance of understanding how COP and EPU affect China's green bond market for the first time. In addition, both the long- and short-run effects are captured, but long-run shocks primarily drive the green bond market. Finally, time- and quantile-varying analyses are adopted to explain the nexus between COP and EPU to GBI, which considers not only different states of the bond market but also events that occur in different time periods. Some detailed policies, such as a unified and effective green bond market, an early warning mechanism of oil price fluctuation, and prudent economic policy adjustments, are beneficial for stabilising the green finance market.

HERDING BEHAVIOR IN FRONTIER NORDIC COUNTRIES

This paper investigates herding behavior of investors in three frontier Nordic countries from July 1,2002 until July 30, 2021, under different market conditions and during three crises that occurred in this period. As estimation methods, we use both OLS and quantile regression and determine that both up and down market, high and low volatility induce a weak herding behavior for at least one quantile in almost all Nordic countries examined, except for Latvia. At the same time, we find that crises determine a more prominent herding behavior in Nordic countries, but do not influent the behavior of investors from Latvia, that tend to remain rational even in stressful conditions.

Barriers to integrating lean construction and integrated project delivery (IPD) on construction megaprojects towards the global integrated delivery (GID) in multinational organisations: lean IPD&GID transformative initiatives

PurposeThe architecture, engineering and construction (AEC) industry encounter substantial risks and challenges in its evolution towards sustainable development. International businesses, multinational AEC organisations, technical professionals, project and portfolio management organisations face global connectivity challenges between business units, especially during the outbreak of novel coronavirus pandemic, to manage construction megaprojects (CMPs). That raises the need to manage global connectivity as a main strategic goal of global organisations. This paper aims to investigate barriers to integrating lean construction (LC) practices and integrated project delivery (IPD) on CMPs towards the global integrated delivery (GID) transformative initiatives and develop future of work (FOW) global initiatives in contemporary multinational AEC organisations.Design/methodology/approachA two-stage quantitative and qualitative research approach is adopted. The qualitative research methodology consists of a literature review to appraise barriers to integrating LeanIPD&GID on CMPs. Barriers are arranged into six-factor clusters (FCs), with a conceptualisation of LeanIPD&GID, GID strategy placements and FOW global initiatives with multiple validations. This analysis also involved semi-structured interviews and focus group techniques. Stage two consisted of an empirical questionnaire survey that shaped the foundation of analysis and findings of 230 respondents from 23 countries with extensive cosmopolitan experience in the construction of megaprojects. The survey examined a set of 28 barriers to integrating LeanIPD&GID on CMPs resulting from a detailed analysis of extant literature after validation. Descriptive and inferential statistical tests were exploited for data analysis, percentage scoring analysis, principal component analysis (PCA) and eigenvalues were used to elaborate on clustered factors.FindingsThe research conceptualised LeanIPD&GID principles and proposed GID strategy placements for LeanIPD&GID transformative initiatives and FOW global initiatives. It concluded that the most significant barriers to integration of LeanIPD&GID on CMPs are "lack of mandatory building information modelling (BIM) and LC industry standards and regulations by governments”, "lack of involvement and support of governments”, "high costs of BIM software licenses”, "resistance of industry to change from traditional working practices” and "high initial investment in staff training costs of BIM”. PCA revealed the most significant FCs are "education and knowledge-related barriers”, "project objectives-related barriers” and "attitude-related barriers”. Awareness of BIM in the Middle East and North Africa (MENA) region is higher than LC and LC awareness is higher than IPD knowledge. Whilst BIM adoption in the MENA region is higher than LC;the second is still taking its first steps, whilst IPD has little implementation. LeanBIM is slightly integrated, whilst LeanIPD integration is almost not present.Originality/valueThe research findings, conclusion and recommendation and proposed GID strategy placements for LeanIPD&GID transformative initiatives to integrating LeanIPD&GID on CMPs. This will allow project key stakeholders to place emphasis on tackling LeanIPD&GID barriers identified in this research and commence GID strategies. The study has provided effective practical strategies for enhancing the integration of LeanIPD&GID transformative initiatives on CMPs.

Impact of Financial Technology on Improvement of Banks' Financial Performance

This study investigates the main financial technologies adopted by banks to improve their financial performance. The study population consists of commercial banks listed on the Amman Stock Exchange and Abu Dhabi Securities Exchange, and includes financial information and data from 2012 to 2020. A total of 115 questionnaires, consisting of five questionnaires for each bank, were distributed to the study population in Jordan and the United Arab Emirates. The dependent variable is financial performance, while the independent variable is financial technology (FinTech). Multiple linear regression analysis was conducted to test the hypotheses. The results showed that FinTech has a positive effect on both total deposit and net profits. This study recommends that banks be encouraged to adopt inclusive strategies to attain sustainable development.

Exploratory study: Financial behaviour of qualified financial professionals during South Africa's lockdown

Orientation: Financial behaviour is known for the direct or indirect management of funds through inter alia spending, saving and borrowing. Research purpose: This study aimed to investigate the financial behaviour of qualified financial professionals and how it compares with behaviour since the national lockdown regulations in South Africa were imposed in March 2020. Motivation for the study: Several studies found that higher levels of financial knowledge are often associated with more desirable financial behaviour, but because of individual psychological resource differences, people in a similar economic situation may experience different levels of financial threat. Research approach/design and method: An empirical study using a survey, which is supported by an underlying literature review. Main findings: Survey results showed that most respondents do not track actual expenditure against budgets;however, this tendency changes with an increase in age. Financing through loans decreases with an increase in the age of respondents. Cash flow considerations were identified since the national lockdown regulations were imposed, addressed mostly by an increase in saving initiatives. Where qualified financial professionals use financial advisors, it is predominantly for advising on retirement and investment strategies. An association was found between the age of respondents and the likelihood of utilising the services of financial advisors for taxation savings. Practical/managerial implications: It is recommended that the findings on how qualified financial professionals managed their funds prior to and after the national lockdown should be used as guidance by others. Contribution/value-add: The study provides information that the lockdown did not necessarily result in major changes in the financial behaviour of the qualified financial professionals in the study.

Regime specific spillover between Dow Jones Islamic Market World Index, Islamic gold-backed crypto currencies and the blockchain halal index

PurposeThe purpose of this paper is to explore the relationship between Dow Jones Islamic Market World Index, Islamic gold-backed cryptocurrencies and halal chain in the presence of state (regime) dynamics.Design/methodology/approachThe authors have used the Markov-switching model to identify bull and bear market regimes. Moreover, the dynamic conditional correlation, the Baba, Engle, Kraft and Kroner- generalized autoregressive conditional heteroskedasticity and the wavelet coherence models are applied to detect the presence of spillover and contagion effects.FindingsThe findings indicate various patterns of spillover between halal chain, Dow Jones Islamic Market World Index and Islamic gold-backed cryptocurrencies in high and low volatility regimes, especially during the COVID-19 pandemic. Indeed, the contagion dynamics depend on the bull or bear periods of markets.Practical implicationsThese present empirical findings are important for current and potential traders in gold-backed cryptocurrencies in that they facilitate a better understanding of this new type of assets. Indeed, halal chain is a safe haven asset that should be combined with Islamic gold-backed cryptocurrencies for better performance in portfolio optimization and hedging, mainly during the COVID-19 period.Originality/valueTo the best of the authors' knowledge, this paper is the first research on the impact of the halal chain on the Dow Jones Islamic Market World Index return, Islamic gold-backed cryptocurrencies returns in the bear and bull markets around the global crisis caused by the COVID-19 pandemic.

A Hybrid Approach for the Assessment of Risk Spillover to ESG Investment in Financial Networks

In this paper, we present a framework for evaluating risk contagion by merging financial networks with machine learning techniques. The framework begins with building a financial network model based on the inter-institutional correlation network, followed by analyzing the structure and overall value changes of the financial network under the stress of a liquidation shock. We then examine the network's evolution over time. We also use three machine learning techniques to assess the abnormal volatility of important financial institutions in the financial network. Finally, we evaluate the spillover effects of risk volatility in financial networks on ESG investments. The findings suggest that the financial network becomes more robust as the connections among financial institutions become more intricate. This leads to an improvement in the ability of the financial network to withstand systemic risk events. Overall, our study provides evidence of the negative impact of risk spillovers in financial networks on ESG investments, highlighting the need for a more sustainable and resilient financial system. This innovative framework combining financial network modeling and machine learning prediction provides a deeper understanding of the evolution of financial networks and a more accurate evaluation of abnormal volatility in financial networks.

Quantile Dependence between Crude Oil Returns and Implied Volatility: Evidence from Parametric and Nonparametric Tests

We examine the daily dependence and directional predictability between the returns of crude oil and the Crude Oil Volatility Index (OVX). Unlike previous studies, we apply a battery of quantile-based techniques, namely the quantile unit root test, the causality-in-quantiles test, and the cross-quantilogram approach. Our main results show evidence of significant bi-directional predictability that is quantile-dependent and asymmetric. A significant positive Granger causality runs from oil (OVX) returns to OVX (oil) returns when both series are in similar lower (upper) quantiles, as well as in opposite quantiles. The Granger causality from OVX returns to oil returns is only significant during periods of high volatility, although it is not always positive. The findings imply that the forward-looking estimate of oil volatility, reflecting the sentiment of oil market participants, should be considered when studying price variations in the oil market, and that crude oil returns can be used to predict oil implied volatility during bearish market conditions. Therefore, the findings have implications regarding predictability under various conditions for oil market participants.

Did the Market Indices of G7 Countries Recover Evenly from the Start of COVID-19 (January 2020) Through December 2021?

Earlier work documented how COVID-19 affected the performance of the stock market indices around the world (Bieszk-Stolorz and Dmytrow, 2021;Lento and Gradojevic, 2021). Research has yet to investigate the longer-term recovery of these market indices. From a buy-and-hold perspective, this paper compares the recovery of indices in G7 countries and Hong Kong from the beginning of the pandemic in January 2020 to June 2021. The empirical results show that the null hypothesis of equal individual monthly returns in the indices of G7 countries and Hong Kong cannot be rejected. However, the null hypothesis of equal buy-and-hold returns in the indices of G7 countries and Hong Kong from January 2020 through June 2021 can be rejected, indicating that the market recovery status among the G7 countries and Hong Kong from the start of COVID-19 in January 2020 through June 2021 has been uneven and unequal. Copyright © 2022 GMP Press and Printing.

ESG INVESTING STRATEGY THROUGH COVID-19 TURMOIL: ETF-BASED COMPARATIVE ANALYSIS OF RISK-RETURN CORRESPONDENCE

This paper examines the risk-return correspondence of ESG investing strategy through turmoil induced by the COVID-19 pandemic. The ESG segment demonstrates growth in the attractiveness of investments, and the investigation of their risk-return characteristics is significant. The goal of this article is to present the results of our research devoted to two ETF groups passing through a pandemic. One group of ETFs corresponds to low-level ESGs (ESG score <2.5), and another to high-level ESGs (ESG score >7.5). A comparative analysis focuses on risk estimations before, during, and after shock. It applies three approaches to measuring risk and a specially constructed pair of indicators. Additionally, trading volume parameters are analyzed. The results indicate differences in passing through shock for the abovementioned groups. Before shock, the second group was slightly less risky. During shock, the first group demonstrated strong linear dependency between the deepness of the shock and recovery rate, unlike the second. After shock, the second group showed a sharper increase in risk. Moreover, it demonstrated a higher correlation inside the group and a correlation with S&P500 returns. These results also reveal that dependency risk changes from the diversification level of the ETF portfolio. A complex analysis of trading volume activity and the Cowles-Johns ratio indicated the essential difference between groups. The final results indicate that ETFs from the ESG score >7.5 group were more strongly affected by COVID-19 shock. This can be expressed by the more severe "jitters” of returns and trading after the shock. The obtained results can be applied in the practice of forming portfolio investment strategies. © 2022 Authors. All rights reserved.

Risk hedging properties of infrastructure: a quantile regression approach

PurposeThis paper aims to examine the hedge, diversifier and safe haven properties of the global listed infrastructure sector and subsector indices against two traditional asset classes, stocks and bonds, and four alternative asset classes, including commodities, real estate, private equity and hedge funds during extreme negative stock market movements.Design/methodology/approachUsing dynamic conditional correlation and quantile regression, the authors analyze a data set of 12 indices comprising listed infrastructure and traditional asset classes from 2010 to 2019.FindingsOverall, the findings indicate that listed infrastructure acts as an effective diversifier but not as a strong safe haven or hedge when considered in a multiasset context. With minor exceptions, listed infrastructure cannot be concluded as a safe haven against other asset classes under investigation.Practical implicationsThe present study has implications for institutional investors looking to incorporate infrastructure in their multiasset portfolios for increased portfolio diversification benefits.Originality/valueDespite the increased influence of infrastructure as an asset class, to the best of the authors' knowledge, this is the first study to investigate the hedge, safe haven and diversifying properties of infrastructure in a multi-asset context.

At the Frontier of Sustainable Finance: Impact Investing and the Financial Tradeoff, Evidence from Private Portfolio Companies in the United Kingdom

Drawing from the extremely novel impact investing landscape and the limited existing literature on the topic, it appears that investing in social enterprises should come at the cost of partially sacrificing financial returns to invested capital. This paper investigates the existence of this tradeoff by assessing how the performance of impact investing funds compares to that of traditional private equity and venture capital operators. Focusing on portfolio firm operating performance, we construct a dataset of 85 impact-investing observations and 5310 traditional observations over the period ranging from 2009 to 2020, in order to compare the performance of the traditional investor-backed firms with those of sustainable companies participated by social impact investors. Advanced matching methods such as Radius and Kernel matching suggest that the composition of the shareholding structure significantly affects the profitability of the company, with traditional firms outperforming their socially-concerned counterparts. Looking instead within the subsample of impact investor portfolio companies, and focusing only on the post-investment observations, we analyze how the percentage owned by the impact investors impacts the performance of the owned companies. The results show that, similarly to traditional ownership, a greater share controlled by impact investors leads to higher returns.

Narrative Economics

Earnings forecasts, a quantitative indicator of company value, is ranked fourth by fund managers as a service analysts can offer them. 1. Almost half failed within a year, demonstrating the power of a good story over sustained economic analysis as a driver of investment. [...]it is far from clear how you do this in a world where balance sheet assets/liabilities are "marked to market”, putting market value on both the left- and right-hand side of the proposed valuation model. [...]to speak of price variations being caused by accounting variables seems a bit odd really. Shiller (2019, p. 238) notes: […] certain stories that recur with mutations play a significant role in our lives. [...]our Queen in reassuring the nation that we will defeat COVID-19 recalled her youthful address to evacuate children in the Second World War.

Hungarian SMEs' role and opinion about research, development and innovation projects

Innovation is one of the solutions and an important factor in our fast-paced and rapidly changing world. Only new solutions and innovative ideas can respond to the rapidly changing environment and its challenges. Dynamic change requires all economic actors to be flexible and open to innovation and novel solutions. The recent events of the coronavirus crisis, the previous economic growth constraints, have been solved through innovation. We look to ongoing research for solutions to the world's challenges. In many cases, these answers come from the areas and businesses most in need. In this paper, we want to assess the perception of RDI projects and the potential of different enterprises from a project, programme and portfolio management perspective. © 2022 IEEE.

Short and Long-Run Association between Crude Oil and Cryptocurrency: An Insight of Vector Error Correction Model

It is co-movement or cointegration among asset classes that assist investors in acting as a safeguard in the financial market from a well-diversified portfolio. There are tremendous amounts which are parked in crude oil and cryptocurrency. This paper investigates the short and long-run association of crude oil with cryptocurrency. The proxies of cryptocurrency are Bitcoin, Ethereum and Tether. We collect the monthly observations of these constituent series extending from December 2017 to February 2021. For empirical analysis, we apply the Johansen cointegration test, Vector Error Correction Model (VECM) and Impulse Response Function (IRF) to examine the relationship. Johansen cointegration test is employed to check cointegration when we have more than two variables, and VECM helps to know the short-run dynamic adjustment. The result reveals that there is long-run causality in crude oil derived from Bitcoin, Ethereum and Tether but not short-run causality. It implies to the investors and portfolio managers that they can only diversify their investment in this two-asset class in a short period.

Explaining the Gamestop Short Squeeze using Ιntraday Data and Google Searches

This article examines the recent short squeeze of the GameStop (GME) stock in early 2021. This event, although not the only case of short squeeze, has some idiosyncratic features that makes it extremely interesting, mainly because it was organized by non-institutional investors through social media like Reddit. Using intraday data during the period 4/1/2021-26/3/2021, we conclude that volume and Google searches provide useful information which enable us to explain the GME performance. Moreover, we show that information on volume and Google searches can provide investors with valuable data, but the faster investors have access to this information, the greater the advantages. This analysis could be very useful for scholars and practitioners who examine profitable investment strategies when such conditions emerge in the markets, and it also provides some thoughts for regulators regarding the impact of networks, social or not, on the stability of the financial markets.

Fund style drift and stock price crash risk – analysis of the mediating effect based on corporate financial risk

PurposeThis paper aims to identify the direct impact of fund style drift on the risk of stock price collapse and the intermediary mechanism of financial risk, so as to better protect the interests of minority investors.Design/methodology/approachThis paper takes all the non-financial companies on the Chinese Growth Enterprise Market from 2011 to 2020 as study object and selects securities investment funds of their top ten circulation stocks to study the relationship between fund style drift and stock price crash risk.FindingsFund style drift is likely to add stock price crash risk. Financial risk is positively correlated with stock price crash risk. Fund style drift affects stock price crash risk via the mediating effect of financial risk, and fund style drift and financial risk have a marked impact on the stock price crash risk of non-state enterprises, yet a non-significant impact on that of state-owned enterprises.Originality/valueThis paper links fund style drift with stock price crash risk in an exploratory manner and enriches the study perspectives of relationship between institutional investors' behaviors and stock price crash risk, thus enjoying certain academic value. On the one hand, it furnishes a new approach to the academic frontier issue concerning financial risk and stock price crash risk, and proves that financial risk is positively correlated with stock price crash risk. On the other hand, it regards financial risk as a mediating variable of fund style drift for stock price crash risk and further explores different influencing mechanism of institutional investors' behaviors.

An alternative interest-free home financing model

PurposeThis study aims to determine the relationship between the banking industry and home financing by conducting a regression analysis between the mortgage loan interest rates and the number of housing sales, and based on the results of the analysis, this paper proposes a new and alternative interest-free home financing model by directing the savings of the people in pension funds into real estate investment funds (housing fund), specifically established to provide a bank loan-free home financing solution. Diminishing Musharakah (partnership) is also integrated into the model from an interest-free and saving economy perspective. The model developed also provides opportunities to increase the size of the real estate investment funds and provide alternative investment tools to pension funds.Design/methodology/approachWhile the global financial crisis resulted from the mortgage crisis in the USA in very recent history, the world has been experiencing the evolution of a new health crisis, COVID-19, a pandemic that has been heavily affecting the global economy in the past two years. The housing sector is among one of the major industries that may be affected by this new global crisis because of the high dependency of the current home financing models on the banking industry, which is carrying the burden of the pandemic. The rapid increase in global debt volume, housing prices, inflation and interest rates are observed as bad signs that may increase the risks of the housing industry. A potential decrease in purchasing power because of high inflation rates may decrease the welfare of people and reduce the income level. While the total debt keeps increasing worldwide, and central banks are considering increasing the interest rates, any potential default in the repayment of the mortgage loans may trigger a new mortgage crisis as the bank loan-dependent financing system of the housing industry lacks alternatives. Thus, a relationship analysis between the banking and housing sectors is required to figure out the dependency of home financing on the banking industry, and a new sustainable home financing model is needed to protect the housing industry and the homebuyers from a negative effect of a new possible financial crisis.FindingsThe results of the analysis exhibit that there is a strong negative relationship between the mortgage loan interest rates and the total home sales. As a result, the new model is suggested and this new model is tested in an emerging country, Turkey, with the real housing sector and economic data where the interest rates are high and the home prices are booming. The results exhibit that the new interest-free home financing model provides a more economic financing solution compared with the high financing costs of bank loans.Research limitations/implicationsThe model proposed in this study is unique, and there is no such system that has integrated the pension funds, the real estate investment funds and diminishing partnership in one ecosystem. It is expected that the model may decrease the dependency of home financing on the banking industry and decrease the risks of the housing sector in the case a new financial crisis occurs.Social implicationsWhile providing a sustainable and alternative interest-free home financing tool, the model also provides individuals who do not prefer to use any bank loan because of religious or other concerns an opportunity to purchase their houses.Originality/valueThe model proposed in this study is a unique and original model that aims to provide a bank loan-free, sustainable home financing solution by integrating the pension funds, real estate investment funds and diminishing partnership in one ecosystem.