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1.
Studies in Economics and Finance ; 40(3):411-424, 2023.
Article in English | ProQuest Central | ID: covidwho-2304052

ABSTRACT

PurposeThe purpose of this research is to analyze the Bitcoin (BTC) and Ether (ETH) long memory and conditional volatility.Design/methodology/approachThe empirical approach includes ARFIMA-HYGARCH and ARFIMA-FIGARCH, both models under Student‘s t-distribution, during the period (ETH: November 9, 2017 to November 25, 2021 and BTC: September 17, 2014 to November 25, 2021).FindingsFindings suggest that ARFIMA-HYGARCH is the best model to analyze BTC volatility, and ARFIMA-FIGARCH is the best approach to model ETH volatility. Empirical evidence also confirms the existence of long memory on returns and on BTC volatility parameters. Results evidence that the models proposed are not as suitable for modeling ETH volatility as they are for the BTC.Originality/valueFindings allow to confirm the fractal market hypothesis in BTC market. The data confirm that, despite the impact of the Covid-19 crisis, the dynamics of BTC returns, and volatility maintained their patterns, i.e. the way in which they evolve, in relation to the prepandemic era, did not change, but it is rather reaffirmed. Yet, ETH conditional volatility was more affected, as it is apparently higher during Covid-19. The originality of the research lies in the focus of the analysis, the proposed methodology and the variables and periods of study.

2.
International Journal of Energy Sector Management ; 17(3):552-568, 2023.
Article in English | ProQuest Central | ID: covidwho-2273440

ABSTRACT

PurposeThis paper aims to empirically investigate the extent to which interdependence in markets may be driven by COVID-19 effects.Design/methodology/approachThe current global COVID-19 pandemic is adversely affecting the oil market (West Texas Intermediate) and crypto-assets markets.FindingsThe authors find that the dependence structure changes significantly after the global pandemic, providing valuable information on how the COVID-19 crisis affects interdependencies. The results also prove that the performance of digital gold seems to be better compared to stablecoin.Originality/valueThe authors fit copulas to pairs of before and after returns, analyze the observed changes in the dependence structure and discuss asymmetries on propagation of crisis. The authors also use the findings to construct portfolios possessing desirable expected behavior.

3.
21st International Conference on Artificial Intelligence and Soft Computing, ICAISC 2022 ; 13588 LNAI:61-71, 2023.
Article in English | Scopus | ID: covidwho-2266637

ABSTRACT

Traditional approaches to financial asset allocation start with returns forecasting followed by an optimization stage that decides the optimal asset weights. Any errors made during the forecasting step reduce the accuracy of the asset weightings, and hence the profitability of the overall portfolio. The Portfolio Transformer (PT) network, introduced here, circumvents the need to predict asset returns and instead directly optimizes the Sharpe ratio, a risk-adjusted performance metric widely used in practice. The PT is a novel end-to-end portfolio optimization framework, inspired by the numerous successes of attention mechanisms in natural language processing. With its full encoder-decoder architecture, specialized time encoding layers, and gating components, the PT has a high capacity to learn long-term dependencies among portfolio assets and hence can adapt more quickly to changing market conditions such as the COVID-19 pandemic. To demonstrate its robustness, the PT is compared against other algorithms, including the current LSTM-based state of the art, on three different datasets, with results showing that it offers the best risk-adjusted performance. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.

4.
Frontiers in Environmental Science ; 2023.
Article in English | ProQuest Central | ID: covidwho-2260025

ABSTRACT

In recent years, changes in the climate environment have caused a considerable impact on the economy and finance, especially after the signing of the Paris Agreement decided to prevent the further increase in the earth's temperature and smoothly transformed into a low-carbon society, various markets have been affected to varying degrees, and at the same time, green bonds as an emerging environmental protection tool have sprung up and become the focus of many investors and researchers. The emergence and rise of eco-friendly investment opportunities such as green bonds is bound to have an impact on other markets, but little research has been done on their dynamic correlation with the U.S. stock market, crude oil and gold markets, especially in our current period of COVID-19 tensions, it is necessary to explore the dynamics between markets and the risk aversion of green bonds to climate change. In this paper, we study the dynamic correlation between three green investment vehicles (S&P Green Bond, China Green Bond, and Climate Bond) and three major markets, and explore whether the linkage between each market will be affected by economic risks and climate change risks by adding climate risk proxy indicators and economic policy uncertainties. This is not only of guiding significance for investors who are eco-friendly to judge the effectiveness of asset allocation and hedging in investment decisions, but also has certain reference for policymakers and market participants who want to achieve green investment, which will help the market to maintain a stable and smooth transition to a low-carbon economy in the event of pressure.

5.
Journal of Property Investment and Finance ; 2023.
Article in English | Scopus | ID: covidwho-2246142

ABSTRACT

Purpose: In 2014, real estate investment trust (REIT) emerged as a new alternative investment option in India. This research aims to give an empirical authentication of the Indian REITs performance from April 2019 to July 2022 across a range of investment variables. Design/methodology/approach: Using monthly total returns in Indian Rupee, risk-adjusted Indian REIT performance and investment portfolio characteristics are examined. Indian REITs' potential in a diversified multi-asset portfolio is analysed using the mean-variance analysis, asset allocation diagram and efficient frontier. Findings: During April 2019–July 2022, Indian REITs provided a lower return than stocks but outperformed bonds despite coronavirus disease 2019 (COVID-19) lockdowns, which hurt the traditional working from office concept. The study also examined REIT allocation to an Indian mixed-asset portfolio and the benefits of a diversified portfolio. Practical implications: Indian REITs provide a liquid, transparent alternative to direct property for investors seeking exposure to Indian real estate markets. Indian REITs gave real estate companies an extra funding source and investors an alternate asset. This paper explores Indian REITs' potential opportunities, given that domestic and foreign investors' demand for transparent property investment in India. The analysis found a positive early performance despite a challenging environment. Originality/value: This paper offers the first empirical performance validation of Indian REITs as a way to obtain exposure to commercial property in India and the REITs' role in a diversified asset portfolio. The authors' study improves investors' decision-making abilities by providing empirically validated, valuable and practicable property investing insights. © 2022, Emerald Publishing Limited.

6.
Korean Journal of Financial Studies ; 51(6):729-754, 2022.
Article in Korean | Scopus | ID: covidwho-2218049

ABSTRACT

Target date funds (TDFs) have their portfolios periodically adjusted according to the retirement dates of fund subscribers and are generally composed of several funds. TDFs attract attention in the recent pension market due to the increasing role of private pensions, the concern about the depletion and financial instability of the National Pension Fund, increased interest in stock and fund markets after COVID-19, and the introduction of the retirement pension default option. In particular, target date funds seeking globally diversified investment strategies could change the irrational investment behavior of pension assets that are still mainly invested with principal and interest-guaranteed products and consequent low returns. To this end, this study examines the current status and issues of TDF in the United States and Korea, and proposes ways to develop domestic TDF in the right direction. © 2022, Korean Securities Association. All rights reserved.

7.
Journal of Property Investment and Finance ; 2023.
Article in English | Scopus | ID: covidwho-2213094

ABSTRACT

Purpose: In 2014, real estate investment trust (REIT) emerged as a new alternative investment option in India. This research aims to give an empirical authentication of the Indian REITs performance from April 2019 to July 2022 across a range of investment variables. Design/methodology/approach: Using monthly total returns in Indian Rupee, risk-adjusted Indian REIT performance and investment portfolio characteristics are examined. Indian REITs' potential in a diversified multi-asset portfolio is analysed using the mean-variance analysis, asset allocation diagram and efficient frontier. Findings: During April 2019–July 2022, Indian REITs provided a lower return than stocks but outperformed bonds despite coronavirus disease 2019 (COVID-19) lockdowns, which hurt the traditional working from office concept. The study also examined REIT allocation to an Indian mixed-asset portfolio and the benefits of a diversified portfolio. Practical implications: Indian REITs provide a liquid, transparent alternative to direct property for investors seeking exposure to Indian real estate markets. Indian REITs gave real estate companies an extra funding source and investors an alternate asset. This paper explores Indian REITs' potential opportunities, given that domestic and foreign investors' demand for transparent property investment in India. The analysis found a positive early performance despite a challenging environment. Originality/value: This paper offers the first empirical performance validation of Indian REITs as a way to obtain exposure to commercial property in India and the REITs' role in a diversified asset portfolio. The authors' study improves investors' decision-making abilities by providing empirically validated, valuable and practicable property investing insights. © 2022, Emerald Publishing Limited.

8.
Front Public Health ; 10: 933264, 2022.
Article in English | MEDLINE | ID: covidwho-2163163

ABSTRACT

This study examines how the COVID-19 pandemic crisis affects the interactions between the stock, oil, gold, currency, and cryptocurrency markets. The impacts of the COVID-19 pandemic crisis on the optimal asset allocation and optimal hedged strategy are also discussed. Empirical results show that the volatility spillover significantly exists in most of the ten paired markets whereas the return spillover and correlation are significant only for the few paired markets. Moreover, the impact of the COVID-19 pandemic on the return spillover is the greatest followed by the correlation whereas the volatility spillover is not affected by the COVID-19 pandemic. Furthermore, the Quantitative easing (QE) implemented after the COVID-19 pandemic crisis increases the risk-adjusted return for each asset and minimum variance portfolio (MVP) and raises the correlation between two assets. In addition, most of the pairs of assets are not suitable to hedge each other except for a few pairs of assets. Regarding these few pairs of assets, the optimal hedge asset with the fewer hedge cost is accompanied by less risk reduction and vice versa. Finally, the investors should choose the euro to construct a portfolio to achieve risk diversification and to hedge gold or WTI to get the risk reduction. The above findings can help investors and fund managers make a useful investment strategy, optimal asset allocation, and effective hedged strategy. For example, the investors can use the volatility of one market to predict the volatility of another market and they can take a long position during the post-COVID-19 period but they should withdraw capital from the market when the QE tapering is executed. JEL classification: C52; C53; G15.


Subject(s)
COVID-19 , Gold , Humans , COVID-19/epidemiology , Pandemics , Investments , Risk Reduction Behavior
9.
Journal of Risk and Financial Management ; 15(8):337, 2022.
Article in English | ProQuest Central | ID: covidwho-2023840

ABSTRACT

This paper develops a dynamic portfolio selection model incorporating economic uncertainty for business cycles. It is assumed that the financial market at each point in time is defined by a hidden Markov model, which is characterized by the overall equity market returns and volatility. The risk associated with investment decisions is measured by the exponential Rényi entropy criterion, which summarizes the uncertainty in portfolio returns. Assuming asset returns are projected by a regime-switching regression model on the two market risk factors, we develop an entropy-based dynamic portfolio selection model constrained with the wealth surplus being greater than or equal to the shortfall over a target and the probability of shortfall being less than or equal to a specified level. In the empirical analysis, we use the select sector ETFs to test the asset pricing model and examine the portfolio performance. Weekly financial data from 31 December 1998 to 30 December 2018 is employed for the estimation of the hidden Markov model including the asset return parameters, while the out-of-sample period from 3 January 2019 to 30 April 2022 is used for portfolio performance testing. It is found that, under both the empirical Sharpe and return to entropy ratios, the dynamic portfolio under the proposed strategy is much improved in contrast with mean variance models.

10.
Front Psychol ; 13: 990610, 2022.
Article in English | MEDLINE | ID: covidwho-2022902

ABSTRACT

During the COVID-19 pandemic, the Chinese government implemented a "dynamic zero" epidemic prevention policy, which led to an increase in the likelihood of business shutdowns, increased uncertainty about people's income, and changes in people's psychological expectations, which in turn influenced their behavioral choices. This study aims to understand the impact of COVID-19 and other major public health emergencies on household financial asset allocation. To do so, we conducted an online survey of 712 people in China to measure household financial asset allocation behavior during three different time periods: pre-pandemic, mid-pandemic, and post-pandemic. At the same time, we analyzed the impact of sociodemographic characteristics on risk attitudes and the differences in household asset allocation decisions at different pre-pandemic time points among people with different risk attitudes. The results show that household financial asset allocation changed significantly before, during, and after the pandemic, and residents' precautionary savings increased. In addition, gender, education level, occupation, and annual income have significant effects on risk preferences. The pandemic leads to increased uncertainty in economic and social development, people's psychological expectations of economic development play an important role in household financial asset allocation.

11.
The Quarterly Review of Economics and Finance ; 2022.
Article in English | ScienceDirect | ID: covidwho-1977757

ABSTRACT

This study investigates whether commodities yield diversification benefits to stock portfolios for loss-averse investors using a sample of 16 individual futures contracts and one index of commodity futures. We confirm that commodities are extremely sensitive to market economic conditions. While the energy sector performs better under economic expansion periods, precious metals yield diversification benefits at most times. Livestock commodities display a high potential to reduce risk, especially during recessions. The role of commodities is similar during the global financial and European sovereign debt crises. Commodities are also relevant in the uncertain period of 2020–2022, although patterns are changing. During the COVID-19 period, precious metals do not increase performance, while at the beginning of the 2022 war in Eastern Europe, we find a generalized improvement in portfolios that outperforms all the other subperiods. Overall, this is not a myth, as there remains a diversification benefit, albeit a time-dependent one with a decreasing trend.

12.
Mathematical Problems in Engineering ; 2022, 2022.
Article in English | ProQuest Central | ID: covidwho-1950452

ABSTRACT

We examine the information transfer dynamics between global commodity and African equity markets to test their efficiency levels in a denoised transfer entropy approach. Our findings in the short- and medium-term scales lend support to the alternative hypothesis of market efficiency, whereas the transfer entropies at the long-term scale lend support to the efficient market hypothesis and the long-term market efficiency. Investing in a single commodity results in high uncertainty when the return pattern (history) of African equities is acknowledged. Similarly, investing in any single African equity results in high return uncertainty whilst accounting for the history of commodity markets’ returns. Short-term traders could monitor the loopholes in the market efficiency levels between global commodities and African equities to take advantage of arbitrage when needed, whilst long-term investors are assured of efficient market dynamics between global commodity markets and African equities. Regulation of markets may need to strategically incorporate news items as they fall due to either market.

13.
Journal of Economic and Financial Sciences ; 15(1), 2022.
Article in English | ProQuest Central | ID: covidwho-1893092

ABSTRACT

Orientation: Environmental, social and governance (ESG) factors have evolved from peripheral significance (2000s) to a leading factor (2022) for many corporates. Most are now assigned ESG grades;which are increasingly scrutinised by investors. Research purpose: An ideal milieu might involve rewards for responsible firms and penalties for culprits, but in a profit-driven world, this is not always true. Investors demand profitability so some trade-off is required. Motivation for the study: Recent work to measure and optimise portfolio performance while observing corporate conscientiousness is promising: return/risk profiles comparable to those attained by unconstrained portfolios appear possible. Research approach/design and method: Portfolio optimisation using Lagrangian calculus. As ESG scores worsen, portfolio performance should be adversely affected, and we then apply – for the first time – these portfolio optimising developments to emerging market corporates. Main findings: ESG grades have improved over time, with both a statistically significant risk reduction and an increase in returns (the reverse for deteriorating ESG grades). As volatility increases, optimal ESG grades increase slowly as associated Sharpe ratios decrease. This could be due to an option-like reliance of inherent value upon underlying volatility. Practical/managerial implications: With better knowledge of trends, asset managers who take ESG metrics into account can confidently assert that ESG compliant portfolios can generate healthy risk adjusted returns (Sharpe ratios) and that these values are improving over time. Contribution/value-add: ESG compliant portfolios have become viable investments while adhering to sensible, responsible investment principles. ESG scores are improving globally, albeit at different rates.

14.
IUP Journal of Accounting Research & Audit Practices ; 21(1):41-55, 2022.
Article in English | ProQuest Central | ID: covidwho-1824507

ABSTRACT

The study explores investing, along with a review of deep learning-based asset allocation. The objective is to analyze the relevant studies done across the world on deep learning and asset allocation. It is found that there is an association between age and investment decisions. A ranking framework regarding preferred avenues for investment purposes is also proposed. The statistical tools and techniques used are based on qualitative and quantitative analyses. The study paves the way for further research and development by decentralizing Artificial Intelligence (AI)-based portfolio management.

15.
Sustainability ; 14(5):2987, 2022.
Article in English | ProQuest Central | ID: covidwho-1742671

ABSTRACT

Infrastructure investment is essential for economic development for both developed and developing economies. We analyze the short-term return behavior and portfolio characteristics of the global, regional, and selected Asian countries’ infrastructure indexes during the pandemic over the sample period 3 July 2018 to 1 July 2021. According to the multivariate Glosten, Jagannathan, and Runkle (GJR) Generalized Autoregressive Conditional Heteroscedasticity (GARCH) with dynamic conditional correlation (DCC) model, infrastructure assets are very heterogeneous depending on the corresponding asset classes. Empirical evidence suggests that infrastructure can be treated as a separate asset sub-class within conventional financial assets. Moreover, we quantify the co-movements between returns on various listed infrastructure indexes and major asset classes, including equity, commodity, currency, and bond index returns. We find that infrastructure assets offer hedging potential against the USD index and USD denominated assets.

16.
Complexity ; 2022, 2022.
Article in English | ProQuest Central | ID: covidwho-1685748

ABSTRACT

We revisit the flight-to-quality (FTQ) and flight-from-quality (FFQ) occurrences vis-à-vis the stock-bond nexus across differing investment time scales in the COVID-19 era, using a novel technique hinged on a denoised frequency-domain transfer entropy. Our findings divulge that flights, both FTQ and FFQ, could be attained during stress periods. Generally, in the intermediate term of the COVID-19 pandemic, both Islamic and conventional bonds could act as safe havens, diversifiers, and hedges for international equities, and the same could be observed for international equities. We reiterate empirically that flights may improve the financial system’s stability and robustness by allowing diversity to be effective when it is most required. The findings have financial and portfolio implications for investors considering how to deploy their investments in the COVID-19 era. Our findings may impact policymakers’ responses to changes in various asset classes, allowing them to better monitor financial markets and adjust macroeconomic policies.

17.
Risks ; 10(1):15, 2022.
Article in English | ProQuest Central | ID: covidwho-1631361

ABSTRACT

This paper investigates the optimal asset allocation of a financial institution whose customers are free to withdraw their capital-guaranteed financial contracts at any time. In accounting for the asset-liability mismatch risk of the institution, we present a general utility optimization problem in a discrete-time setting and provide a dynamic programming principle for the optimal investment strategies. Furthermore, we consider an explicit context, including liquidity risk, interest rate, and credit intensity fluctuations, and show by numerical results that the optimal strategy improves both the solvency and asset returns of the institution compared to a standard institutional investor’s asset allocation.

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