Naive portfolios, Brazilian stock funds, and individual investors

2017 ◽  
Vol 30 (3) ◽  
pp. 383-401
Author(s):  
Alexandre Carneiro ◽  
Ricardo Leal
Keyword(s):  
Transaction Costs ◽  
Emerging Market ◽  
Individual Investors ◽  
Stock Selection ◽  
Content Type ◽  
Emerging Stock Markets ◽  
Time Period ◽  
Out Of Sample ◽  
Additional Value ◽  
Practical Implications

Purpose The purpose of this paper is to contrast three investment choices within the reach of individual investors: naive portfolios of Brazilian stocks; actively managed stock funds; and the Ibovespa index, which represents passive management as well as to offer insights on the performance of professional asset managers in this large emerging market. Design/methodology/approach Equally weighted portfolios contained between 5 and 30 stocks to keep transaction costs low. Stock selection used the Ibovespa constituents and considered value (dividend yield (DY) and price-to-book ratio), momentum (past returns), and liquidity, as well as the Sharpe ratio (SR) over the 2003-2012 period, rebalancing three times a year. Findings Cumulative returns of naive portfolios are large. They frequently outperform the index for all values of n. They also outperform stock funds, particularly when the invested amount exceeds US$25,000, due to transaction costs. Yet, expected out-of-sample SRs corrected for errors in estimates are very low, suggesting that one should not count on this historical performance in the future. Naive portfolios may simply be more exposed to additional value, size, and momentum risks. Results are sensitive to time period selection. Practical implications Naive portfolios may be attractive to individual investors in Brazil relative to stock funds, which seem to strive to keep volatility low and may be better when the investment amount is low. There may be merit for value or momentum stock selection strategies when forming small equally weighted portfolios. Originality/value The paper contrasts realistic stock investing alternatives for individuals, it provides a view of stock fund performance in Brazil, and offers practical implications that may be pertinent in other emerging stock markets.

An empirical exploration of the performance of alternative option pricing models

2019 ◽  
Vol 11 (1) ◽  
pp. 23-49
Author(s):  
Aparna Prasad Bhat
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Emerging Market ◽  
Pricing Models ◽  
Content Type ◽  
Black Scholes ◽  
Out Of Sample ◽  
Hedging Performance ◽  
Practical Implications ◽  
Skewness And Kurtosis

PurposeThe purpose of this paper is to ascertain the effectiveness of major deterministic and stochastic volatility-based option pricing models in pricing and hedging exchange-traded dollar–rupee options over a five-year period since the launch of these options in India.Design/methodology/approachThe paper examines the pricing and hedging performance of five different models, namely, the Black–Scholes–Merton model (BSM), skewness- and kurtosis-adjusted BSM, NGARCH model of Duan, Heston’s stochastic volatility model and anad hocBlack–Scholes (AHBS) model. Risk-neutral structural parameters are extracted by calibrating each model to the prices of traded dollar–rupee call options. These parameters are used to generate out-of-sample model option prices and to construct a delta-neutral hedge for a short option position. Out-of-sample pricing errors and hedging errors are compared to identify the best-performing model. Robustness is tested by comparing the performance of all models separately over turbulent and tranquil periods.FindingsThe study finds that relatively simpler models fare better than more mathematically complex models in pricing and hedging dollar–rupee options during the sample period. This superior performance is observed to persist even when comparisons are made separately over volatile periods and tranquil periods. However the more sophisticated models reveal a lower moneyness-maturity bias as compared to the BSM model.Practical implicationsThe study concludes that incorporation of skewness and kurtosis in the BSM model as well as the practitioners’ approach of using a moneyness-maturity-based volatility within the BSM model (AHBS model) results in better pricing and hedging effectiveness for dollar–rupee options. This conclusion has strong practical implications for market practitioners, hedgers and regulators in the light of increased volatility in the dollar–rupee pair.Originality/valueExisting literature on this topic has largely centered around either US equity index options or options on major liquid currencies. While many studies have solely focused on the pricing performance of option pricing models, this paper examines both the pricing and hedging performance of competing models in the context of Indian currency options. Robustness of findings is tested by comparing model performance across periods of stress and tranquility. To the best of the author’s knowledge, this paper is one of the first comprehensive studies to focus on an emerging market currency pair such as the dollar–rupee.

Quality investing in the Indian stock market

2018 ◽  
Vol 44 (2) ◽  
pp. 127-141 ◽  
Author(s):  
Vaibhav Lalwani ◽  
Madhumita Chakraborty
Keyword(s):  
Stock Market ◽  
Quality Indicators ◽  
Quality Indicator ◽  
Emerging Market ◽  
Stock Selection ◽  
Content Type ◽  
Portfolio Returns ◽  
Long Run ◽  
Out Of Sample ◽  
Indian Stock Market

Purpose The purpose of this paper is to explore whether stock selection strategies based on four fundamental quality indicators can generate superior returns compared to overall market. Design/methodology/approach The sample of stocks comprises the constituents of BSE-500 index, which is a broad based index consisting of highly liquid stocks from all 20 major industries of the Indian economy. Portfolios are constructed on the basis of quality indicator rankings of companies and the returns of these portfolios are compared with the overall market. Excess returns on quality based portfolios are also determined using OLS regressions of quality portfolio returns on market, size, value and momentum factor returns. Findings The results suggest that two of the four quality strategies, namely Grantham Quality indicator and Gross Profitability have generated superior returns after controlling for market returns as well as common anomalies such as size, value and momentum. Combining value strategies with quality strategies do not yield any significant gains relative to quality only strategies. Practical implications For investors looking to invest in the Indian stock market for a long term, this study provides evidence on the performance of some fundamental indicators that can help predict long run stock performance. The findings suggest that investors can distinguish between high-performing and low-performing stocks based on stock quality indicators. Originality/value This is the first such study to look into the performance of quality investing in the Indian stock market. As most quality investing studies have been focussed on developed economies, this paper provides out-of-sample evidence for quality investing in the context of an emerging market.

Measuring the service gaps in the roles of quantity surveyors in the emerging market

2016 ◽  
Vol 23 (5) ◽  
pp. 1111-1131 ◽  
Author(s):  
AbdulLateef Olanrewaju
Keyword(s):  
Emerging Markets ◽  
Construction Industry ◽  
Design Methodology ◽  
Emerging Market ◽  
Supply And Demand ◽  
The Other ◽  
Primary Data ◽  
Content Type ◽  
Practical Implications ◽  
Survey Questionnaires

Purpose – The opportunities that the emerging markets present to the players in the construction industry means that the players need to expand on the scope and size of their responsibilities and duties to the stakeholders. Each of the professionals now demands more specialised and sophisticated services from one another. The other players in the construction industry now require more emerging responsibilities and duties from the quantity surveyors. The purpose of this paper is to examine the roles that “modern” quantity surveyors play by measuring the gaps that exist in the services that the quantity surveyors provide. Design/methodology/approach – Primary data are collected through survey questionnaires. In total, 23 roles played by modern quantity surveyors are identified and addressed to the respondents to rank the rate at which quantity surveyors provide these “emerging” services. The collected data were analysed statistically. Findings – The results of the findings led to the conclusion that the quantity surveyors were not meeting the expectations of other players. Therefore, for competitiveness, quantity surveyors need to better meet demand expectations. Research limitations/implications – This findings of this research are constrained to the services or functions that the quantity provide in the construction industry. Practical implications – This knowledge is valuable to academic institutions that offer quantity surveying programmes, to practicing quantity surveyors, governments, and other players in the construction industry. It will allow quantity surveyors to reconcile supply and demand expectations. Originality/value – There is no known conclusive empirical study on services offered by quantity surveyors in any emerging markets. Therefore, the findings offer a fresh understanding on the services of quantity surveyors not only in Nigeria but elsewhere. While some of the services are common, others are peculiar to emerging markets.

Home country underdevelopment and internationalization

2017 ◽  
Vol 27 (3) ◽  
pp. 217-230 ◽  
Author(s):  
Alvaro Cuervo-Cazurra ◽  
Ravi Ramamurti
Keyword(s):  
Emerging Markets ◽  
Comparative Advantage ◽  
Home Country ◽  
Emerging Market ◽  
Content Type ◽  
Emerging Market Multinationals ◽  
Economic Underdevelopment ◽  
Conceptual Paper ◽  
Practical Implications ◽  
At Home

Purpose The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization. Design/methodology/approach This paper is a conceptual paper. Findings We argue that the home country’s institutional and economic underdevelopment can influence the internationalization of firms in two ways. First, emerging-market firms may leverage innovations made at home to cope with underdeveloped institutions or economic backwardness to gain a competitive advantage abroad, especially in other emerging markets; We call this innovation-based internationalization. Second, they may expand into countries that are more developed or have better institutions to escape weaknesses on these fronts at home; we call this escape-based internationalization. Research limitations/implications Comparative disadvantages influence the internationalization of the firm differently from comparative advantage, as it forces the firm to actively upgrade its firm-specific advantage and internationalize. Practical implications We explain two drivers of internationalization that managers operating in emerging markets can consider when facing disadvantages in their home countries and follow several strategies, namely, trickle-up innovation, self-reliant innovation, improvisation management, self-reliance management, technological escape, marketing escape, institutional escape and discriminatory escape. Originality/value We explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.

scholarly journals The importance of specificity in occupation‐based social classifications

2008 ◽  
Vol 28 (5/6) ◽  
pp. 179-192 ◽  
Author(s):  
Paul S. Lambert ◽  
Koon Leai Larry Tan ◽  
Kenneth Prandy ◽  
Vernon Gayle ◽  
Manfred Max Bergman
Keyword(s):  
Design Methodology ◽  
Content Type ◽  
Service Grid ◽  
Theoretical Perspectives ◽  
Time Period ◽  
Technological Developments ◽  
Specific Occupation ◽  
Data Environment ◽  
And Gender ◽  
Practical Implications

PurposeThis paper aims to present reasons why social classifications which use occupations should seek to adopt “specific” approaches which are tailored to the country, time period and gender of the subjects under study.Design/methodology/approachThe relative motivations for adopting a specific approach to social classifications are discussed and theoretical perspectives on specificity and empirical evidence on the contribution of specific approaches are reviewed. Also the practical costs of implementing specific social classifications are evaluated, and the authors' development of the “GEODE” data service (grid‐enabled occupational data environment), which seeks to assist this process, is discussed.FindingsSpecific approaches make a non‐trivial difference to the conclusions drawn from analyses of occupation‐based social classifications. It is argued that the GEODE service has reduced the practical challenges of implementing specific measures.Research limitations/implicationsThere remain conceptual and pragmatic challenges in working with specific occupation‐based social classifications. Non‐specific (“universal”) measures are adequate for many purposes.Practical implicationsThe paper argues that there are few excuses for ignoring specific occupation‐based social classifications.Originality/valueThe paper demonstrates that recent technological developments have shifted the balance in the long‐standing debate between universal and specific approaches to occupation‐based social classifications.

The first two decades of Circular Economy in the 21st century: a bibliographic review

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
João Francisco Pinto Anaruma ◽  
Jorge Henrique Caldeira de Oliveira ◽  
Francisco Anaruma Filho ◽  
Wesley Ricardo de Souza Freitas ◽  
Adriano Alves Teixeira
Keyword(s):  
21St Century ◽  
Circular Economy ◽  
Review Of Literature ◽  
Content Type ◽  
Time Period ◽  
Number Of Publications ◽  
Two Stages ◽  
Academic Area ◽  
Practical Implications ◽  
Made In

PurposeThe purpose of this paper is to analyze and map the main areas of the Circular Economy literature of the first two decades of 21st century, offering a broad vision about the growth of the theme during these years.Design/methodology/approachThe research was divided into two stages: the first was a systematic review of literature and the second consisted on generation and analysis of bibliographic maps.FindingsThe publication indicates the prominence of China and European Union countries in the production of articles about Circular Economy. Furthermore, the topic is restricted to academic area, and that research on Circular Economy is still very focused on theory studies, even with exponential growth in the number of published articles about the theme since 2015. Finally, it also provides a collection of information as the principal authors, the most cited publications, citations, co-citations and countries that have most published beyond which are the most discussed topics.Research limitations/implicationsA possible limitation of the research is that it was performed only in the Scopus database. It may be suggested as future searches that other databases are included as well, and another suggestion is to reduce the time period between research samples due to the exponential increase in the number of publications and topics discussed lately.Practical implicationsThe results of this paper can guide future researches about the development of Circular Economy during the next decades or years and serve as a facilitator for researchers and for managers that want to know more about the topic.Originality/valueA mapping of the principal players and main discussions about Circular Economy made in the first two decades of the 21st century and an analysis about the growth and changes about the theme.

Estimating the destination of Mexican-based laundered funds: an application of the modified Walker-Unger model

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Juan Roman ◽  
Ana Machuca ◽  
Thomas Schaefer
Keyword(s):  
Money Laundering ◽  
Gross National Product ◽  
Physical Distance ◽  
Economic Effects ◽  
Content Type ◽  
Banking Secrecy ◽  
Financial Activity ◽  
Time Period ◽  
Money Launderer ◽  
Practical Implications

Purpose This study aims to apply the modified Walker-Unger model to show the degree of attractiveness of a country for Mexican-based money launderers to send their illicit funds for the 2000–2015 time period. Design/methodology/approach The modified Walker-Unger model is used to conduct the analysis, as it combines several independent variables related to an illicit financial activity. These allow the researcher to investigate the attractiveness of a market to money launderers and the possible economic effects of money laundering. In total, 13 categories of indicators were used, namely, gross national product per capita; banking secrecy; government attitude; society for worldwide interbank financial telecommunication membership; financial deposits; conflict; corruption; Egmont group membership; language; trade; culture, colonial background; and physical distance. Findings Model results suggest the preferred destinations for Mexican-based money launderers from 2000 to 2015 were Bermuda (i.e. from 2000–2004), Canada (i.e. in 2005 and 2006) and Monaco (i.e. from 2007–2015). Research limitations/implications Timing and availability of reliable data after 2015. Practical implications Aids in continuing to empirically validate the Walker-Unger model. There is little literature on models that quantify money laundering activity. Social implications May aid policymakers in targeting anti-money laundering policy to more relevant countries. Originality/value The first empirical investigation that looks to quantify money launderer activity in Mexico. Contributes to the limited literature of quantitative investigations on money laundering.

Digital platform enterprises and boundary decision

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Keyword(s):  
Transaction Costs ◽  
Case Studies ◽  
Business Performance ◽  
Design Methodology ◽  
Reading Time ◽  
Content Type ◽  
Digital Platform ◽  
Growth Outcomes ◽  
Pertinent Information ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Boundary decisions made by digital platform enterprises (DPEs) shape business performance and growth outcomes. Such operators can identify appropriate strategic approaches through a consideration of transaction costs, resource competence and cross-side networks effects (CNEs). Originality/value The briefing saves busy executives’ and researchers’ hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Flexibility decision pathways in the management of uncertainty in property development: experience from an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Timothy Oluwafemi Ayodele ◽  
Abel Olaleye
Keyword(s):  
Emerging Market ◽  
Survey Method ◽  
Property Development ◽  
Content Type ◽  
Significant Difference ◽  
Development Experience ◽  
High Level ◽  
Stratified Analysis ◽  
Management Of Uncertainty ◽  
Practical Implications

Purpose This paper aims to investigate the flexible decision pathways adopted by development advisors in the management of uncertainty in property development. Specifically, the study examines the quantitative techniques adopted by development advisors, the level of adoption of real options analysis (ROA) vis-à-vis the level of adoption of heuristics. Finally, the types of options exercised in property development were analysed. This was with a view to providing information that could mitigate the challenges of risk and uncertainty and increasing investment failure associated with property development in Nigeria, an emerging market. Design/methodology/approach The study adopted a survey method and was conducted on development advisors in property development companies/estate surveying and valuation firms in Nigeria. A total of 195 development advisors participated in the survey. The respondents were required to rate, on a five-point Likert scale, the level of adoption of the quantitative models, heuristics and the types of flexibility exercised during development. The data were analysed using mean rating, one-sample t-test and analysis of variance. Findings The results revealed that there was a preference for the use of traditional techniques, while probabilistic appraisal models and other contemporary methods such as ROA are seldom adopted by development advisors. While there was a significantly high level of adoption of heuristics, the stratified analysis examining the profile of the respondents and the level of adoption of ROA and heuristics suggests that years of experience influenced the level of adoption of both the ROA and heuristics by the development advisors. The analysis of the types of flexibility showed that staging/phasing and changing the initial use/design were the most prevalent flexibility pathways adopted during the development. However, the study found that there was no significant difference concerning the choice of flexibility being adopted by development advisors who used ROA and those who did not. Practical implications The study provides an understanding of the decision pathways adopted by development advisors in an emerging market like Nigeria. Originality/value The paper contributes to studies on decision-making pathways in the management of uncertainty under dynamic conditions by development advisors in emerging markets.

Development of empirically based customer-derived positioning taxonomy for consumer electronics sector in the Indian emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Natasha Saqib ◽  
Mir Shahid Satar
Keyword(s):  
Emerging Market ◽  
Consumer Electronics ◽  
Second Phase ◽  
Measurement Scales ◽  
Cross Sectional ◽  
Market Positioning ◽  
Content Type ◽  
Customer Perceptions ◽  
Visual Aesthetics ◽  
Practical Implications

PurposeAn Indian emerging market positioning taxonomy has been developed in response to the literature review's findings that existing positioning typologies/taxonomies are based on managerial perspectives rather than consumer/customer perceptions and are only developed for advanced countries.Design/methodology/approachThis study employs a three-step process for developing and validating a scale in order to conduct its research. In the first phase, items are generated and selected based on a literature review, focus groups and expert opinion. Exploratory factor analysis is used to fine-tune the scale in the second phase. Phase 3 uses CFA to establish convergent, discriminant and nomological validity through the use of CFA.FindingsA consumer-based taxonomy of positioning strategies were developed as a result of the research. Six distinct positioning strategies emerged that was named (1) Value for Money, (2) Functional (3) Premiumisation, (4) Promotional Campaign, (5) Brand Name (6) Visual Aesthetics.Research limitations/implicationsDeveloping and validating measurement scales will be made easier with the help of this paper. Target populations, industry and geography selection and a cross-sectional time horizon are just a few of the study's drawbacks.Practical implicationsThe study's practical implications include six factors/strategies that managers, advertising executives and marketing experts of consumer electronics companies in the Indian emerging market could use to position their products, resulting in the overall success of their organisations.Originality/valueThis study adds to the marketing literature by providing a solid theoretical foundation and a validated instrument for operationalising positioning strategies.

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