Portfolio revision and optimal diversification strategy choices

2014 ◽  
Vol 10 (4) ◽  
pp. 537-564
Author(s):  
Mourad Mroua ◽  
Fathi Abid
Keyword(s):  
Transaction Costs ◽  
Tracking Error ◽  
Investment Strategy ◽  
Selection Strategy ◽  
Revision Procedure ◽  
Content Type ◽  
Efficient Frontiers ◽  
Statistical Inferences ◽  
Diversification Strategies ◽  
International Portfolios

Purpose – Since equity markets have a dynamic nature, the purpose of this paper is to investigate the performance of a revision procedure for domestic and international portfolios, and provides an empirical selection strategy for optimal diversification from an American investor's point of view. This paper considers the impact of estimation errors on the optimization processes in financial portfolios. Design/methodology/approach – This paper introduces the concept of portfolio resampling using Monte Carlo method. Statistical inferences methodology is applied to construct the sample acceptance regions and confidence regions for the resampled portfolios needing revision. Tracking error variance minimization (TEVM) problem is used to define the tracking error efficient frontiers (TEEF) referring to Roll (1992). This paper employs a computation method of the periodical after revision return performance level of the dynamic diversification strategies considering the transaction cost. Findings – The main finding is that the global portfolio diversification benefits exist for the domestic investors, in both the mean-variance and tracking error analysis. Through TEEF, the dynamic analysis indicates that domestic dynamic diversification outperforms international major and emerging diversification strategies. Portfolio revision appears to be of no systematic benefit. Depending on the revision of the weights of the assets in the portfolio and the transaction costs, the revision policy can negatively affect the performance of an investment strategy. Considering the transaction costs of portfolios revision, the results of the return performance computation suggest the dominance of the global and the international emerging markets diversification over all other strategies. Finally, an assessment between the return and the cost of the portfolios revision strategy is necessary. Originality/value – The innovation of this paper is to introduce a new concept of the dynamic portfolio management by considering the transaction costs. This paper investigates the performance of a revision procedure for domestic and international portfolios and provides an empirical selection strategy for optimal diversification. The originality of the idea consists on the application of a new statistical inferences methodology to define portfolios needing revision and the use of the TEVM algorithm to define the tracking error dynamic efficient frontiers.

Platform investment strategy on reducing transaction costs

Kybernetes ◽  
2017 ◽  
Vol 46 (5) ◽  
pp. 893-911 ◽  
Author(s):  
Shanshan Zhang ◽  
Ping He
Keyword(s):  
Numerical Analysis ◽  
Transaction Costs ◽  
Design Methodology ◽  
Investment Strategy ◽  
The Other ◽  
Research Directions ◽  
Content Type ◽  
Optimal Decisions ◽  
Good Research ◽  
Mathematical Derivation

Purpose This paper aims to investigate the investment strategy of a two-sided platform on reducing transaction costs of two user sides and to study the pricing problem of the platform. Design/methodology/approach Mathematical derivation is used to compute the optimal decisions of a two-sided platform on pricing and investment. Numerical analysis is used to illustrate the findings. Findings It is found that the demand of one user side decreases in the maximal transaction costs reduction to this side but increases in the maximal transaction costs reduction to the other side. It is also found that a platform should never choose the investment in such a way that the maximal transaction costs reductions of two user sides are the same. Research limitations/implications Several limitations exist in this paper, most of which exist due to the assumptions. These limitations could be good research directions in the future. For example, only one platform’s decision is considered, and platforms’ competition is not taken into account. Considering other platforms’ competition, the decisions of the users and the platform would be different. Originality/value From the transaction costs perspective, this paper finds that a platform should never choose the investment in such a way that the maximal transaction costs reductions of two user sides are the same. This conclusion has not been found in previous literature.

scholarly journals Autonomous Mobile Robot Navigation in Sparse LiDAR Feature Environments

2021 ◽  
Vol 11 (13) ◽  
pp. 5963
Author(s):  
Phuc Thanh-Thien Nguyen ◽  
Shao-Wei Yan ◽  
Jia-Fu Liao ◽  
Chung-Hsien Kuo
Keyword(s):  
Robot Navigation ◽  
Tracking Error ◽  
Unmanned Vehicles ◽  
Mobile Robot Navigation ◽  
Selection Strategy ◽  
Localization And Mapping ◽  
Pure Pursuit ◽  
Stable Performance ◽  
Large Curve ◽  
Moving Speed

In the industrial environment, Autonomous Guided Vehicles (AGVs) generally run on a planned route. Among trajectory-tracking algorithms for unmanned vehicles, the Pure Pursuit (PP) algorithm is prevalent in many real-world applications because of its simple and easy implementation. However, it is challenging to decelerate the AGV’s moving speed when turning on a large curve path. Moreover, this paper addresses the kidnapped-robot problem occurring in spare LiDAR environments. This paper proposes an improved Pure Pursuit algorithm so that the AGV can predict the trajectory and decelerate for turning, thus increasing the accuracy of the path tracking. To solve the kidnapped-robot problem, we use a learning-based classifier to detect the repetitive pattern scenario (e.g., long corridor) regarding 2D LiDAR features for switching the localization system between Simultaneous Localization And Mapping (SLAM) method and Odometer method. As experimental results in practice, the improved Pure Pursuit algorithm can reduce the tracking error while performing more efficiently. Moreover, the learning-based localization selection strategy helps the robot navigation task achieve stable performance, with 36.25% in completion rate more than only using SLAM. The results demonstrate that the proposed method is feasible and reliable in actual conditions.

Heuristic biases in investment decision-making and perceived market efficiency

2018 ◽  
Vol 10 (1) ◽  
pp. 85-110 ◽  
Author(s):  
Syed Zulfiqar Ali Shah ◽  
Maqsood Ahmad ◽  
Faisal Mahmood
Keyword(s):  
Financial Markets ◽  
Market Efficiency ◽  
Negative Impact ◽  
Investment Decisions ◽  
Sampling Technique ◽  
Investment Strategy ◽  
Individual Investors ◽  
Content Type ◽  
Specific Investment ◽  
The Relationship

Purpose This paper aims to clarify the mechanism by which heuristics influences the investment decisions of individual investors, actively trading on the Pakistan Stock Exchange (PSX), and the perceived efficiency of the market. Most studies focus on well-developed financial markets and very little is known about investors’ behaviour in less developed financial markets or emerging markets. The present study contributes to filling this gap in the literature. Design/methodology/approach Investors’ heuristic biases have been measured using a questionnaire, containing numerous items, including indicators of speculators, investment decisions and perceived market efficiency variables. The sample consists of 143 investors trading on the PSX. A convenient, purposively sampling technique was used for data collection. To examine the relationship between heuristic biases, investment decisions and perceived market efficiency, hypotheses were tested by using correlation and regression analysis. Findings The paper provides empirical insights into the relationship of heuristic biases, investment decisions and perceived market efficiency. The results suggest that heuristic biases (overconfidence, representativeness, availability and anchoring) have a markedly negative impact on investment decisions made by individual investors actively trading on the PSX and on perceived market efficiency. Research limitations/implications The primary limitation of the empirical review is the tiny size of the sample. A larger sample would have given more trustworthy results and could have empowered a more extensive scope of investigation. Practical implications The paper encourages investors to avoid relying on heuristics or their feelings when making investments. It provides awareness and understanding of heuristic biases in investment management, which could be very useful for decision makers and professionals in financial institutions, such as portfolio managers and traders in commercial banks, investment banks and mutual funds. This paper helps investors to select better investment tools and avoid repeating expensive errors, which occur due to heuristic biases. They can improve their performance by recognizing their biases and errors of judgment, to which we are all prone, resulting in a more efficient market. So, it is necessary to focus on a specific investment strategy to control “mental mistakes” by investors, due to heuristic biases. Originality/value The current study is the first of its kind, focusing on the link between heuristics, individual investment decisions and perceived market efficiency within the specific context of Pakistan.

Do corporate diversification and earnings management practices affect capital structure?

2015 ◽  
Vol 7 (4) ◽  
pp. 360-378 ◽  
Author(s):  
Ranjitha Ajay ◽  
R Madhumathi
Keyword(s):  
Capital Structure ◽  
Earnings Management ◽  
Management Practices ◽  
Negative Relationship ◽  
Corporate Diversification ◽  
Content Type ◽  
Diversification Strategies ◽  
Market Product ◽  
Diversified Firms ◽  
The Impact

Purpose – The purpose of this paper is to empirically examine the impact of earnings management on capital structure across firm diversification strategies. Design/methodology/approach – The study focuses on firms operating in the manufacturing sector (diversified and focused). Panel data methodology compares diversification strategies and identifies the impact of diversification strategy with earnings management practices on capital structure decision. Findings – International and product diversified firms have lower levels of leverage than focused firms in their capital structure. Asset-based earnings management is positive for diversified (market/product) firms. Earnings management using discretionary expenditure (project based) is found to be higher for market diversified but product-focused firms. Earning smoothing method is found to be significant for focused firms and shows a negative relationship with capital structure. Originality/value – This study offers an insight into the relationship between corporate diversification, earnings management and capital structure decisions of manufacturing firms. The results provide an important contribution to accounting and strategy literature. A distinction is made between market- and product-diversified firms and influence of earnings management practices (asset-based, project-based and earnings smoothing (ESM)) on capital structure decisions. Diversified firms (market/product) tend to have lower levels of leverage than focused firms and earnings management practices within firm groups significantly influence the capital structure decisions.

Research of Building Intelligent Investment Decision Mode for Investment Portfolio — Using Taiwan Electronic Stock as an Example

2010 ◽  
Vol 13 (04) ◽  
pp. 621-645 ◽  
Author(s):  
Wen-Rong Jerry Ho ◽  
C. H. Liu ◽  
H. W. Chen
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Strategy ◽  
Return Rate ◽  
Selection Strategy ◽  
Stock Selection ◽  
Taiwan Stock Exchange ◽  
Book To Market Ratio

This research uses all of the listed electronic stocks in the Taiwan Stock Exchange as a sample to test the performance of the return rate of stock prices. In addition, this research compares it with the electronic stock returns. The empirical result shows that no matter which kind of stock selection strategy we choose, a majority of the return rate is higher than that of the electronics index. Evident in the results, the predicted effect of BPNN is better than that of the general average decentralized investment strategy. Furthermore, the low price-to-earning ratio and the low book-to-market ratio have a significant long-term influence.

Factors affecting transaction costs in megaprojects: a qualitative comparative analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dedong Wang ◽  
Hui Li ◽  
Yongqiang Lu
Keyword(s):  
Comparative Analysis ◽  
Transaction Costs ◽  
Qualitative Comparative Analysis ◽  
Asset Specificity ◽  
Necessary Condition ◽  
Content Type ◽  
Factors Affecting ◽  
Relational Contract ◽  
Factors Influencing ◽  
Project Costs

PurposeThe purpose of this study is to examine the factors influencing the transaction costs (TCs) in megaprojects to provide a basis for controlling project costs.Design/methodology/approachThis study selects six factors influencing the TCs in megaprojects from the perspective of TC theory and relational contract theory (RCT) through literature review. On the basis of crisp-set qualitative comparative analysis (QCA), this study tests combined factors influencing the TCs and the interaction between them.FindingsResults show that in megaprojects, TCs are affected by combination factors. The combination of asset specificity, uncertainty, transaction frequency and trust and the combination of asset specificity, reputation and trust will control TCs in certain situations. In the configuration leading to high project TCs, the combination of environmental and behavioral uncertainties is a necessary condition.Originality/valueThis paper fills up the research gap in the field of megaproject TCs, and researchers can focus on this field in the future.

Earnings management when firms face mandatory contributions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yiyi Qin ◽  
Jun Cai ◽  
Steven Wei
Keyword(s):  
Earnings Management ◽  
Negative Impact ◽  
Investment Strategy ◽  
Fiscal Year ◽  
Management Behavior ◽  
Indicator Variable ◽  
Stock Market Returns ◽  
Content Type ◽  
Early Results ◽  
Reported Earnings

PurposeIn this paper, we aim to answer two questions. First, whether firms manipulate reported earnings via pension assumptions when facing mandatory contributions. Second, whether firms alter their earnings management behavior when the Financial Accounting Standard Board (FASB) mandates disclosure of pension asset composition and a description of investment strategy under SFAS 132R.Design/methodology/approachOur basic approach is to run linear regressions of firm-year assumed returns on the log of pension sensitivity measures, controlling for current and lagged actual returns from pension assets, fiscal year dummies and industry dummies. The larger the pension sensitivity ratios, the stronger the effects from inflated ERRs on reported earnings. We confirm the early results that the regression slopes are positive and highly significant. We construct an indicator variable DMC to capture the mandatory contributions firms face and another indicator variable D132R to capture the effect of SFAS 132R. DMC takes the value of one for fiscal years during which an acquisition takes place and zero otherwise. D132R takes the value of one for fiscal years after December 15, 2003 and zero otherwise.FindingsOur sample covers the period from June 1992 to December 2017. Our key results are as follows. The estimated coefficient (t-statistic) on DMC is 0.308 (6.87). Firms facing mandatory contributions tend to set ERRs at an average 0.308% higher. The estimated coefficient (t-statistic) on D132R is −2.190 (−13.70). The new disclosure requirement under SFAS 132R constrains all firms to set ERRs at an average 2.190% lower. The estimate (t-statistic) on the interactive term DMA×D132R is −0.237 (−3.29). When mandatory contributions happen during the post-SFAS 132R period, firms tend to set ERRs at 0.237% lower than they would do otherwise in the pre-SFAS 132R period.Originality/valueWhen firms face mandatory contributions, typically firm experience negative stock market returns. We examine whether managers manage earnings to mitigate such negative impact. We find that firms inflate assumed returns on pension assets to boost their reported earnings when facing mandatory contributions. We also find that managers alter earnings management behavior, in the case of mandatory contributions, following the introduction of new pension disclosure standards under SFAS 132R that become effective on December 15, 2003. Under the new SFAS 132R requirement, firms need to disclose asset allocation and describe investment strategies. This imposes restrictions on managers' discretion in making ERR assumptions, since now the composition of pension assets is a key determinant of the assumed expected rate of return on pension assets. Firms need to justify their ERRs with their asset allocations.

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.

The strategic choice of contract types in business process outsourcing

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ling Ge ◽  
Xiaoyan Wang ◽  
Zhilin Yang
Keyword(s):  
Transaction Costs ◽  
Business Process ◽  
Strategic Choice ◽  
Probit Model ◽  
Major Theme ◽  
Direct Impact ◽  
Business Process Outsourcing ◽  
Content Type ◽  
Coordination Costs ◽  
Adaptation Costs

PurposeHow to determine the appropriate contractual structure for an outsourcing relationship has been a major theme in the business process outsourcing (BPO) literature. Drawing on transaction cost economics, this study aims to examine how anticipated coordination and adaptation costs in a BPO relationship affect the choice of contract types. Specifically, this research categorizes contracts types (fixed-price, time and materials and hybrid contracts) based on levels of contract design comprehensiveness and flexibility to change.Design/methodology/approachThe research setting is the BPO for a focal firm, involving a contractor. Data from 153 US companies are collected using a structured questionnaire on senior executives of functional areas of marketing, IT and finance. Hypotheses were tested using ordered probit model.FindingsThe results show that maturity is negatively associated with anticipated adaptation costs, while modularity and IT detachability are negatively related to anticipated coordination costs. Furthermore, adaptation costs have a direct impact on the choice, whereas the anticipated coordination costs do not have a significant direct impact on contract choice. The strength of adaptation costs' impact, however, is significantly reduced when coordination costs are high.Originality/valueThis study explicitly examines the role of anticipated coordination and adaptation costs in shaping the strategic choice of contract types in the BPO market. By differentiating the two types of anticipated transaction costs, this research enables a better understanding of the dynamics between transaction characteristics, anticipated transaction costs and contract types in complicated relationships such as BPO relationships.

Global adaptive neural backstepping control of a flexible hypersonic vehicle with disturbance estimation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
He-Wei Zhao ◽  
Li-bin Yang
Keyword(s):  
Rbf Neural Network ◽  
Tracking Error ◽  
Hypersonic Vehicle ◽  
Nonlinear Dynamic Model ◽  
Content Type ◽  
Lateral Dynamics ◽  
Disturbance Estimation ◽  
System A ◽  
Complexity Problem ◽  
Velocity Tracking

Purpose This paper aims to discuss the precise altitude and velocity tracking control of a hypersonic vehicle, a global adaptive neural backstepping controller was studied based on a disturbance observer (DOB). Design/methodology/approach The DOB combined with a radial basis function (RBF) neural network (NN) was used to estimate the disturbance terms that are generated by the flexible modes of the hypersonic vehicle system. A global adaptive neural method was introduced to approximate the unknown system dynamics, with robust control terms pulling the system transient states back into the neural approximation domain externally. Findings The globally uniformly ultimately bounded for all signals of a closed-loop system can be guaranteed by the proposed control algorithm. Additionally, the command filtered backstepping methods can avoid the explosion of the complexity problem caused by the backstepping design process. In addition, the effectiveness of the proposed controller can be verified by the simulation used in this study. Research limitations/implications Normally lateral dynamics issue should be discussed in the process of control system designed, the lateral dynamics are not included in the nonlinear dynamic model of hypersonic vehicle used in this paper, merely the longitudinal flight dynamics are discussed in this paper. Originality/value The flexible states in rigid modes are considered as the disturbance of the system, which is estimated by structuring DOB with NN approximations. The compensating tracking error and prediction error are used in the update law of RBF NN weight. The differential explosions complexity derived from the backstepping procedure is dealt with by using command filters.

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