Do Fund Managers Misestimate Climatic Disaster Risk

2020 ◽  
Vol 33 (3) ◽  
pp. 1146-1183 ◽  
Author(s):  
Shashwat Alok ◽  
Nitin Kumar ◽  
Russ Wermers
Keyword(s):  
Disaster Risk ◽  
Fund Managers ◽  
Major Disaster ◽  
Money Managers ◽  
Over Time

Abstract We examine whether professional money managers overreact to large climatic disasters. We find that managers within a major disaster region underweight disaster zone stocks to a much greater degree than distant managers and that this aversion to disaster zone stocks is related to a salience bias that decreases over time and distance from the disaster, rather than to superior information possessed by close managers. This overreaction can be costly to fund investors for some especially salient disasters like hurricanes and tornadoes: a long-short strategy that exploits the overreaction generates a significant DGTW-adjusted return over the following 2 years.

Fidelity Magellan Fund, 1995

2017 ◽  
pp. 1-16
Author(s):  
Robert F. Bruner
Keyword(s):  
Financial Performance ◽  
Equity Markets ◽  
General Information ◽  
Efficient Markets ◽  
Fund Managers ◽  
Risk Return ◽  
Money Managers ◽  
Efficient Markets Hypothesis ◽  
Over Time

This case reviews the financial performance of the Fidelity Magellan Fund up to mid-1995. In essence, the Magellan Fund has managed to “beat the market” over time under three different fund managers despite its enormous size ($51 billion at the date of the case). The tasks for the student are to assess the adequacy of this performance, evaluate its likely sources, and opine on its sustainability. The case affords the opportunity to consider the appropriateness of various possible benchmarks in a risk-return framework and to assess the reasonableness of the efficient-markets hypothesis. The case can be used in an introductory finance course to present general information about equity markets and the behavior of large, sophisticated money managers.

Other Bond Products

2019 ◽  
pp. 325-344
Author(s):  
Erik Devos ◽  
Robert Karpowicz ◽  
Andrew C. Spieler
Keyword(s):  
Social Impact ◽  
Balance Sheet ◽  
Cash Flows ◽  
Disaster Risk ◽  
Risk Transfer ◽  
Catastrophe Bonds ◽  
Insurance Policies ◽  
Social Impact Bonds ◽  
Natural Disaster Risk ◽  
Over Time

Over time, the availability of investable bond products has expanded considerably to include bonds focused on social improvements (social impact bonds), life settlement securitization (death bonds), natural disaster risk transfer (catastrophe bonds), environmental improvements (green bonds), and collateralized bonds (covered bonds). Social impact bonds are geared toward positive social change to provide financing to programs that are otherwise ignored or underfunded. Death bonds are bonds backed by the cash flows from life insurance policies. Catastrophe bonds enable spreading the risk of natural disasters or human catastrophes to a broader investor base. Green bonds are issued to raise funds to revitalize brownfield sites or underdeveloped areas and geared toward energy efficiency and pollution control, sustainable agriculture, and clean transportation. Covered bonds are issued against a pool of assets but remain on the issuer’s balance sheet providing safety in the event of bankruptcy. This chapter briefly discusses each of these products.

scholarly journals Assessment of Perception on Disaster Proneness of Lembang Fault in District of Cisarua, West Java Indonesia

2021 ◽  
Vol 936 (1) ◽  
pp. 012014
Author(s):  
A P Handayani ◽  
R Abdulharis ◽  
A Pamumpuni ◽  
I Meilano ◽  
S Hendriatiningsih ◽  
...  
Keyword(s):  
Social Research ◽  
Disaster Risk ◽  
West Java ◽  
Ground Acceleration ◽  
Ground Shaking ◽  
Acceleration Data ◽  
Major Disaster ◽  
Resilient Communities ◽  
Major Fault ◽  
The Government

Abstract The Lembang Fault is a major fault located at the northern Bandung. This fault has a high disaster risk, including ground shaking, surface rupture, and possible landslides or liquefaction. This fault can cause earthquakes of 6.5-7 magnitude, making 8 million people in four Regencies and Cities around West Bandung Regency, Cimahi City, Bandung City and Bandung Regency exposed to major disaster risk. This research focuses on assessing the Perception of Disaster Proneness of the Lembang Fault in the District of Cisarua, West Java, Indonesia. This research was conducted using a case study and deductive-qualitative approach. In addition, this research was carried out by combining engineering and social research methodologies. The survey location point is determined based on hazard data (Peak Ground Acceleration data), vulnerability data (covering building density, slope, curvature, soil character, distance from faults, etc.) and population density data. This study indicates that the public’s perception of the disaster in the Lembang Fault is very subjective. How they act is based on experience or based on their beliefs. Therefore, an essential part of this research is assessing and measuring the community’s perception of the Lembang Fault towards disasters that may arise. The government must make serious efforts to convey that the disaster in the Lembang fault is much bigger and can happen at any time. Therefore, building resilient communities that genuinely understand the dangers of living in disaster-prone areas is essential.

scholarly journals The persistence of risk levels of general equity funds in an emerging market economy

2013 ◽  
Vol 2 (4) ◽  
pp. 22-28
Author(s):  
Rousseau Lötter
Keyword(s):  
Emerging Market ◽  
Risk And Return ◽  
Adjusted Risk ◽  
Risk Levels ◽  
Fund Managers ◽  
Related Risk ◽  
Equity Funds ◽  
Future Risk ◽  
Investment Styles ◽  
Over Time

The persistence of risk levels of local General Equity unit trusts is evaluated. Variations in absolute and market-adjusted returns are measured to determine whether investors can use historical risk as a proxy for future risk levels. The General Equity funds are fairly homogenous, and different funds should exhibit stable risk levels if the fund managers’ investment mandates and investment styles remain stable over time. The results indicate a degree of absolute and market-adjusted risk stability over time. The market-adjusted risk and return relationship remained stable through the 2008 global crises, indicating that, on average, the fund managers maintained their benchmark-related risk exposures. Both the absolute and market-adjusted results indicate no statistically significant relationship between risk and return for the 2000 to 2012 period.

China’s Approach to Disaster Risk Reduction: Human Security Challenges in a Time of Climate Change

2017 ◽  
Vol 4 (1) ◽  
pp. 26-49 ◽  
Author(s):  
Neil Renwick
Keyword(s):  
Natural Disasters ◽  
Risk Reduction ◽  
Disaster Risk Reduction ◽  
Knowledge Exchange ◽  
Human Security ◽  
Disaster Risk ◽  
Asia Pacific ◽  
Chinese Government ◽  
Major Disaster ◽  
The World

Natural disasters strike at people’s lives across the world but hit underdeveloped countries and societies’ poorest hardest. Those living in the Asia-Pacific region are significantly more likely to experience natural disaster than those in any other part of the world. China is one of the most exposed to natural disasters, with a long history of devastating events and remains at high risk. China has undertaken major disaster risk reduction (DRR) reforms. Importantly, China is also increasingly committed to international cooperation over DRR within a Sendai Framework. Adopting a Human Security perspective, this article explains and critically evaluates China’s DRR reforms. It highlights China’s increased willingness to collaborate with international agencies over knowledge exchange and capacity building to improve its domestic DRR and contribute to the international DRR system. The study argues that China’s reforms are a work in progress, but demonstrating improvement. It argues that China’s expressed wish for closer international DRR cooperation is a new opportunity to mainstream China and it is incumbent on the international community and Chinese Government to build on emerging collaboration and grasp this long-overdue opportunity.

scholarly journals Under the Volcano: Mount Mayon and Co-Volcanic Societies in the Philippines

2020 ◽  
Vol 26 (1) ◽  
pp. 7-29
Author(s):  
Greg Bankoff
Keyword(s):  
Urban Planning ◽  
Risk Reduction ◽  
Disaster Risk Reduction ◽  
Volcanic Hazards ◽  
Disaster Risk ◽  
The Philippines ◽  
Volcanic Soils ◽  
Under The Volcano ◽  
Agricultural Yields ◽  
Over Time

Rich volcanic soils have long attracted human settlements, which have traded the risk of eruption against the benefits of higher agricultural yields. Yet little research has been done on how societies have normalised the risks and adapted to living in proximity to volcanoes, or how those modifications, in turn, might have influenced the effects of eruptions and their consequent hazards. In short, people have co-evolved with volcanoes to create 'co-volcanic societies'. By looking closely at the Philippines and focusing on one region of southern Luzon around Mount Mayon, this article addresses the question of how people and the volcano have 'co-adapted' to living in proximity to one another over time. It also suggests that to make societies more resilient to volcanic hazards, a better understanding of this relationship is required not only to improve current disaster risk reduction policies but even to inform everyday urban planning and civil engineering decisions.

scholarly journals Development of a Flash Flood Confidence Index from Disaster Reports and Geophysical Susceptibility

2021 ◽  
Vol 13 (14) ◽  
pp. 2764
Author(s):  
Andrew Kruczkiewicz ◽  
Agathe Bucherie ◽  
Fernanda Ayala ◽  
Carolynne Hultquist ◽  
Humberto Vergara ◽  
...  
Keyword(s):  
Remote Sensing ◽  
Disaster Risk Reduction ◽  
Flash Flood ◽  
Disaster Risk ◽  
Geophysical Data ◽  
Risk Levels ◽  
Flood Susceptibility ◽  
Confidence Index ◽  
Current Risk ◽  
Over Time

The analysis of historical disaster events is a critical step towards understanding current risk levels and changes in disaster risk over time. Disaster databases are potentially useful tools for exploring trends, however, criteria for inclusion of events and for associated descriptive characteristics is not standardized. For example, some databases include only primary disaster types, such as ‘flood’, while others include subtypes, such as ‘coastal flood’ and ‘flash flood’. Here we outline a method to identify candidate events for assignment of a specific disaster subtype—namely, ‘flash floods’—from the corresponding primary disaster type—namely, ‘flood’. Geophysical data, including variables derived from remote sensing, are integrated to develop an enhanced flash flood confidence index, consisting of both a flash flood confidence index based on text mining of disaster reports and a flash flood susceptibility index from remote sensing derived geophysical data. This method was applied to a historical flood event dataset covering Ecuador. Results indicate the potential value of disaggregating events labeled as a primary disaster type into events of a particular subtype. The outputs are potentially useful for disaster risk reduction and vulnerability assessment if appropriately evaluated for fitness of use.

Multi-Hazard Scenarios and Dynamic Risk

2021 ◽  
Author(s):  
Joel Gill ◽  
Ekbal Hussain ◽  
Bruce Malamud ◽  
Robert Šakić Trogrlić
Keyword(s):  
Natural Hazards ◽  
Urban Poor ◽  
Disaster Risk ◽  
Dynamic Nature ◽  
Change Over Time ◽  
The Public ◽  
Multiple Hazards ◽  
Risk Equation ◽  
Dynamic Risk ◽  
Over Time

<p>In this paper, we discuss the dynamic nature of risk through the lens of multi-hazard relationships and scenarios. Disaster risk is commonly expressed as (Risk = Hazard × Exposure × Vulnerability). This expression does not communicate the extent to which each term (and therefore risk and impact) can change over time, and any relationships between the four variables. To better convey and discuss multi-hazards and dynamic risk, in July and August 2020 we held two virtual workshops (40 and 35 participants) as part of the GCRF Tomorrow’s Cities Research Hub, which has as its focus four cities Istanbul, Kathmandu, Nairobi, and Quito, with a particular emphasis on the urban poor. During the two workshops, participants (including those from academia, NGOs, and the public sector) from each city generated multi-hazard scenarios that can be used to improve the understanding of dynamic risk and we highlighted three main examples of dynamic risk: (1) The hazard term can involve multiple hazards, with relationships between hazards, and the likelihood or magnitude of single natural hazards and multi-hazard scenarios varying over time. (2) Both the exposure and vulnerability components of the risk equation change over time, and can contribute to the triggering, amplification (or reduction) of multi-hazard events. (3) Progression through multi-hazard scenarios can influence or drive changes in both exposure and/or vulnerability terms.<strong> </strong>These three statements illustrate the dynamic nature of each component of the risk equation and the existence of relationships between each term. Furthermore, they demonstrate how understanding the multi-hazard landscape and potential multi-hazard scenarios can help to enrich understanding of dynamic risk. This understanding of multi-hazard scenarios can be used to consider potential interventions where risk is dynamic.</p>

The Genesis of Home Bias? The Location and Portfolio Choices of Investment Company Start-Ups

2008 ◽  
Vol 43 (1) ◽  
pp. 245-266 ◽  
Author(s):  
Jerry T. Parwada
Keyword(s):  
Mutual Funds ◽  
Institutional Investors ◽  
Home Bias ◽  
Investment Management ◽  
Investment Company ◽  
Local Bias ◽  
Fund Managers ◽  
Portfolio Choices ◽  
Money Managers ◽  
Start Ups

AbstractFund managers' bias toward geographically proximate securities is a well-researched phenomenon, yet the origins of managers' location choices have received little empirical scrutiny. This paper traces the employment and geographic heritage of 358 entrepreneurial fund managers and analyzes the determinants of where they locate their firms and stock selections. The evidence suggests that start-ups tend to be based close to the origins of their founders and in regions with more investment management firms, banking establishments, and large institutional money managers. New money managers show a strong local bias in their equity holdings, three times the levels previously documented for mutual funds. The propensity to invest closer to home correlates strongly with the presence of sub-advisory opportunities from institutional investors in the vicinity. While home bias levels between managers who relocate with their start-ups and the rest of the entrepreneurs are similar, preferences for stocks that were formally local persist.

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