Performance of Option Based Strategy Benchmark Index

This paper develops “Strategy Benchmark Index (SBI)” using KOSPI200 options data from January 2004 to March 2017, and then investigates their performances. The SBIs were constructed in the same way as those published daily by CBOE. To effectively analyze the performance of these SBIs, we classified them into four types : (1) Return enhancement SBIs (six indices), (2) Volatility trading SBIs (two indices), (3) Directional trading SBIs (two indices) and (4) Other SBIs (two indices). The return enchancement SBIs include bechmark indices tracking the performance of various covered call strategies and put writing strategies, which are generally used to increase investment returns. The volatility trading SBIs include benchmark indices tracking the performance of well-known volatility trading strategies such as butterfly spread and condor. Benchmark indices tracking the performance of various types of zero-cost collar strategies are classified into the directional trading SBIs. Our empirical results are as follows. First, the risk-adjusted performances of nine SBIs of the total twelve SBIs constructed from KOSPI200 index options has been shown to be great. Second, from a portfolio perspective, some SBIs can be helpful to improve the portfolio performance of CRRA (Constant Relative Risk Aversion) investors. These results imply that passive investment strategies with KOSPI200 index options can provide additional benefits that both equities and bonds do not provide. Third, even when we use the traditional mean-variance framework other than expected utility theory to verify the economic benefit of the SBIs, our empirical results are found to be still valid. In conclusion, our results suggest that some passive investment strategies using KOSPI200 index options would be beneficial to long term investors.

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Sovereign Development Funds

10.1093/oxfordhb/9780198754800.013.30 ◽

2017 ◽

Author(s):

Peter Bruce-Clark ◽

Ashby H.B Monk

Keyword(s):

Financial Markets ◽

Global Economy ◽

Private Investment ◽

Dual Function ◽

Investment Strategies ◽

Objective Functions ◽

Expected Return ◽

Investment Returns ◽

High Investment

In a slowing global economy with diminished confidence in the long-term prospects of public financial markets, many institutional investors are looking for innovative, and often private, investment strategies to meet expected return targets. One source of potential inspiration has, perhaps surprisingly, come from the community of sovereign development funds. SDFs are strategic, government-sponsored investment organizations with dual objective functions: to deliver high financial performance, while fostering development. Despite expectations that this dual function inevitably leads to financial underperformance, certain SDFs have actually delivered consistently high investment returns, especially in private markets. As such, SDF strategies are increasingly being used as models for investment strategies among non-developmental investment organizations. This chapter explores the rise of SDFs, explains the differences between SDFs and SWFs, and substantiates variations in their models of governance and management. In doing so, its goal is to situate SDFs in the changing world of global financial markets and public policy.

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Investments, Market Timing and Portfolio Performance across Indian Bull and Bear Markets

Asia-Pacific Journal of Management Research and Innovation ◽

10.1177/2319510x18776403 ◽

2017 ◽

Vol 13 (3-4) ◽

pp. 98-109

Author(s):

Sunaina Kanojia ◽

Neha Arora

Keyword(s):

Stock Market ◽

Market Timing ◽

Investment Strategy ◽

Portfolio Performance ◽

Investment Strategies ◽

Bear Market ◽

Market Trends ◽

Two Phases ◽

The Universe

The returns generated from an investment alternative are exponentially higher when espoused with appropriate timings. This article expound on the market timing used by investors to formulate profitable investment strategies in the stock market, which requires gathering of information at both micro- and macro-levels along with market trends to make timely decisions and evaluating the universe of stocks available. The market trends are been broadly classified into bull and bear phases, which have dynamic influence on buying and selling in the stock market. Further, the study supports the retail investors’ participation in the market for long-term to generate higher returns as compared to other conventional alternatives. The study attempts to identify bull and bear market turning points using a formal turning point identification procedure and formulate a profitable investment strategy in bull or bear market phases to maximise the returns. Hence, the present study provides to understand how the two phases influence investment decisions and determine the implications of bull and bear market phases on investors’ investment strategy.

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The Role Of Growth In Long Term Investment Returns

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v21i1.1503 ◽

2011 ◽

Vol 21 (1) ◽

Cited By ~ 7

Author(s):

John Paul Broussard ◽

David Michayluk ◽

Walter P. Neely

Keyword(s):

Explanatory Power ◽

High Growth ◽

High Growth Rate ◽

Investment Strategies ◽

Growth Strategies ◽

Stock Valuation ◽

Holding Period ◽

Investment Returns

Stocks with a high valuation compared to fundamental values imply a high growth rate, yet these stocks have typically under-performed in subsequent years supporting Lakonishok, Shleifer and Vishney's (1994) contrarian investment strategies. The precise definition of growth and subtle differences of measuring growth are explored in assessing the role of growth in long-term investment decisions and stock valuation.  Results from a later period and with additional tests than employed by LSV indicate that growth is a primary valuation factor, and valuation measures such as E/P and B/M, are imperfect proxies for expected growth.  Growth appears mean reverting, but investors do not seem able to discern changes in growth rates and this miss-specification of expected growth may help explain the superiority of value versus growth strategies. In addition, investors’ naïve extrapolations of past growth provide explanatory power in future holding period returns.

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A neural computing-based cash price prediction using multi-layer perceptron (MLP) and feature selection for health economics

Current Signal Transduction Therapy ◽

10.2174/1574362414666191127111916 ◽

2019 ◽

Vol 14 ◽

Author(s):

Zinat Ansari

Keyword(s):

Feature Selection ◽

Health Economics ◽

Cash Flow ◽

Multi Layer Perceptron ◽

Asset Sales ◽

Fixed Asset ◽

Academic Fields ◽

Investment Returns ◽

Short And Long Term

Background: The present study proceeds to incorporate feature selection as a means for selecting the most relevant features affecting the prediction of cash prices in Iran in terms of health economics. Health economics are between academic fields that can aid in ameliorating conditions so as to perform better decisions in regards to the economy such as determining cash prices. Methods: Accordingly, a series of search algorithms, namely the Best-First, Greedy-Stepwise, and Ranker methods, are deployed in order to extract the most relevant features from among a 500 data samples. The validity of the methods was evaluated via the LMT procedure. The corresponding dataset used for this study constitutes a variety of features including net cash flow, dividends, revenue from short and long-term deposits, cash flow from investment returns, income tax, fixed asset purchases, fixed asset sales, long-term investment purchases, long-term investment sales, total cash flow from investment activities, financial facilities, and repayment of financial facilities. Results: The results were indicative of the superiority of the Ranker model using the RelieF-Attribute-Eval tool in Weka over the remaining classification methods. Ergo, the LMT approach could be employed to remove data redundancies and thereby accelerate the estimation process, while saving time and money. The results of the multi-layer perceptron (MLP) further confirmed the high accuracy of the proposed method in estimating cash prices. Conclusions: The present research attempted to reduce the volume of data required for predicting end cash by means of employing a feature selection so as to save both precious money and time.

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Commodity Exchange-Traded Funds

10.1093/oso/9780190656010.003.0013 ◽

2018 ◽

Author(s):

Christopher Milliken

Keyword(s):

Portfolio Diversification ◽

Futures Contracts ◽

Spot Price ◽

Exchange Traded Funds ◽

Investment Strategies ◽

Regulatory Structure ◽

Commodity Exchange ◽

Asset Class ◽

Exchange Traded Fund

Commodity exchange-traded funds (ETCs), which debuted in 2004, enable investors to access an asset class previously difficult or expensive to access. Although a small segment of the overall exchange-traded fund (ETF) universe, ETCs have grown in popularity with both speculators and investors looking for long-term portfolio diversification. Examples of the types of commodities that are now accessible through ETCs include gold, oil, and agricultural. The literature on ETCs is limited, but academic and industry work has centered on using futures contracts to replicate the performance of the underlying commodities spot price as well as the effect additional capital has had on the integrity of the futures market. This chapter covers this topic by reviewing the growth, investment strategies, and regulatory structure of ETCs as well as the underlying effects these funds have had on the underlying markets with which they engage.

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LifePlanning: A Better Retirement Planning Option for Our Times

Innovation in Aging ◽

10.1093/geroni/igaa057.368 ◽

2020 ◽

Vol 4 (Supplement_1) ◽

pp. 111-112

Author(s):

Rajiv Nagaich ◽

Carol Redfield ◽

Ben Harvill

Keyword(s):

Institutional Care ◽

Integrated Approach ◽

Retirement Planning ◽

Practice Research ◽

Care Needs ◽

Term Care ◽

Investment Returns ◽

The Many ◽

In The Beginning

Abstract Ten thousand turn 65 daily. Majority look forward to retiring in the beginning and then become afraid of outcomes they often hear about- dealing with institutional care, becoming a burden, or running out of money. This is not because retirees do not plan, but despite of having planned their entire life for retirement. Many employers provide financial retirement planning such as a 401K plan. Individuals have relied on employee benefit plans to ready themselves, yet few are “very confident” about it. Two-thirds of retirees say their most recent employers did “nothing” to help them transition into retirement; 16% are “not sure” what their employers did. Many may be overlooking important factors in their strategies. Among retirees who currently have a retirement strategy, 85% have factored Social Security and Medicare benefits into their strategy. Most have included on-going living expenses (79%), total savings and income needs (57%) into their plan. Fewer than half have considered other critical factors (e.g., investment returns, ongoing healthcare costs, inflation, long-term care needs, tax planning, etc.). Only 9% have contingency plans for retiring sooner than expected and/or savings shortfalls. The truth is that education offered by employers tends to be traditional planning advice, which may not be enough to address the concerns retirees will have in retirement. To this, we introduce a multi-disciplinary LifePlanning Framework which takes a wholistic, integrated approach in addressing the many complex issues of retirement found in health, housing, finance, legal, and family. Our results may impact future practice, research, and policy.

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Does Banking Management Affect Credit Risk? Evidence from the Indian Banking System

International Journal of Financial Studies ◽

10.3390/ijfs6030067 ◽

2018 ◽

Vol 6 (3) ◽

pp. 67 ◽

Cited By ~ 2

Author(s):

Laxmi Koju ◽

Ram Koju ◽

Shouyang Wang

Keyword(s):

Credit Risk ◽

Default Risk ◽

Banking System ◽

Capital Requirements ◽

Operating Efficiency ◽

Investment Strategies ◽

Empirical Results ◽

Bank Managers ◽

Credit Standards ◽

The Impact

This study investigated the impact of banking management on credit risk using a sample of Indian commercial banks. The study employed dynamic panel estimations to evaluate the link between banking management variables and credit risk. The empirical results show that an increase in loan portion over total assets does not necessarily increase problem loans. The findings suggest that high capital requirements and large bank size do not reduce default risk, whereas high profitability and strong income diversification policies lower the likelihood of default risk. The overall empirical results supported the “operating efficiency”, “diversification” and “too big to fail” hypotheses, confirming that credit quality in the banking industry is mainly driven by profitability, banking supervision, high credit standards and strong investment strategies. The findings are relevant to bank managers, investors and bank regulators, in formulating effective credit policies and investment strategies.

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Grantmaking Foundations’ Asset Management, Payout Rates, and Longevity Under Changing Market Conditions: Results From a Monte Carlo Simulation Study

Nonprofit and Voluntary Sector Quarterly ◽

10.1177/0899764019873972 ◽

2019 ◽

Vol 49 (2) ◽

pp. 424-447

Author(s):

Zvika Afik ◽

Simon Benninga ◽

Hagai Katz

Keyword(s):

Monte Carlo ◽

Asset Management ◽

Management Strategies ◽

Problem Area ◽

Life Cycles ◽

Investment Strategies ◽

Monte Carlo Simulation Study ◽

Success Stories ◽

Investment Returns ◽

Grantmaking Foundations

Today’s uncertain financial markets could affect foundations’ future grantmaking capacities. We review foundations’ financial decision-making patterns and their effect on foundations’ assets, longevity goals, and payouts. Using three fictional foundations with different longevity goals and grantmaking preferences, we demonstrate the delicate balance and tight nexus between asset management strategies, payout rates, and longevity. To do so, we perform stochastic Monte Carlo simulations of multiple foundation life cycles, conducted under diverse capital market scenarios. The findings suggest that foundations should (a) readjust their return expectations to today’s less favorable markets; (b) reduce their reliance on past portfolios’ investment returns or unique “success stories” in making decisions; (c) appreciate the strong interdependence between portfolio-mix, payout rates, and longevity; (d) consider effects of their particular mission/problem area on these parameters; and (e) use tailored projection analyses that simulate various investment strategies, payouts rates, and longevity to meet their grantmaking goals.

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The Currency Carry Trade: Selection Skill or Behavioral Bias

International Business Research ◽

10.5539/ibr.v9n9p176 ◽

2016 ◽

Vol 9 (9) ◽

pp. 176

Author(s):

Ian Hudson

Keyword(s):

Interest Rate ◽

Efficient Market Hypothesis ◽

Arbitrage Pricing Theory ◽

Carry Trade ◽

Interest Rate Parity ◽

Forward Premium ◽

Investment Returns ◽

Pricing Theory ◽

Premium Puzzle

Many attempts have been undertaken to solve the forward premium puzzle with little to no success. The global currency market is considered the most information efficient and transparent of all financial markets since it demonstrates a balance between over and under-reaction to information with remarkable consistency. The Efficient Market Hypothesis espouses investors cannot systematically outperform a benchmark since all investors have access to the same information. Therefore, the expected long-term rate of return for currencies is essentially zero. The Arbitrage Pricing Theory asserts investment returns are random. As such, traders cannot avail themselves of mispriced currencies. The assertion of Uncovered Interest Rate Parity is that bi-national interest rate variance is equal to the expected differential in exchange rates. This paper asks the following questions: does alpha persistence exist in currency carry trade funds or are its excess returns merely a collection of behavioral biases?

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Large-cap vs small-cap portfolio performance: new empirical evidence from ETFs

Review of Accounting and Finance ◽

10.1108/raf-03-2017-0056 ◽

2019 ◽

Vol 18 (1) ◽

pp. 71-94

Author(s):

Gerasimos Rompotis

Keyword(s):

Design Methodology ◽

Portfolio Performance ◽

Exchange Traded Funds ◽

Investment Strategies ◽

Time Data ◽

Content Type ◽

Risk Characteristics ◽

The Usa ◽

First Time ◽

Practical Implications

PurposeA well-documented pattern in the literature concerns the outperformance of small-cap stocks relative to their larger-cap counterparts. This paper aims to address the “small-cap versus large-cap” issue using for the first time data from the exchange traded funds (ETFs) industry.Design/methodology/approachSeveral raw return and risk-adjusted return metrics are estimated over the period 2012-2016.FindingsResults are partially supportive of the “size effect”. In particular, small-cap ETFs outperform large-cap ETFs in overall raw return terms even though they fail the risk test. However, outperformance is not consistent on an annual basis. When risk-adjusted returns are taken into consideration, small-cap ETFs are inferior to their large-cap counterparts.Research limitations/implicationsThis research only covers the ETF market in the USA. However, given the tremendous growth of ETF markets worldwide, a similar examination of the “small vs large capitalization” issue could be conducted with data from other developed ETF markets in Europe and Asia. In such a case, useful comparisons could be made, so that we could conclude whether the findings of the current study are unique and US-specific or whether they could be generalized across the several international ETF markets.Practical implicationsA possible generalization of the findings would entail that profitable investment strategies could be based on the different performance and risk characteristics of small- and large-cap ETFs.Originality/valueThis is the first study to examine the performance of ETFs investing in large-cap stock indicesvis-à-visthe performance of ETFs tracking indices comprised of small-cap stocks.

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