The term structure of equity factor diversification

2020 ◽  
Vol 21 (1) ◽  
pp. 23-35
Author(s):  
Julien Fouquau ◽  
Cecile Kharoubi
Keyword(s):  
Risk Factors ◽  
Term Structure ◽  
Point Of View ◽  
Dependence Structure ◽  
Copula Functions ◽  
Momentum Strategies ◽  
Content Type ◽  
Time Horizons ◽  
Long Run ◽  
Factor Investing

Purpose Risk factor investing has grown in popularity in recent years and has become a cornerstone of investment portfolios. The goal of factor investing is to generate more returns in the long run. This paper aims to studies the term structure of equity factor. The authors consider the point of view of an American investor and use risk, diversification and performance measures. Design/methodology/approach The authors combine two methodologies as follows: wavelets and copulas. The authors use daily, weekly and monthly equity factor returns to calibrate wavelets and copulas. Copula functions are useful instruments to describe “joint” fluctuations in different markets, especially to capture nonlinearities, providing a reasonable alternative to the assumption of joint normality. To check robustness, the authors propose three different wavelet mother functions to decompose the data and three different time horizons and the authors add a complementary exercise based on performance and diversification measurement without wavelet transform. Findings The authors identify temporal horizons for which diversification benefits would be optimized with the decrease in the level of dependence or even the inversion of the dependence structure. Thus, investors seeking diversification with factor investing have to care about the considered horizon: size and book to market factors seem to provide better diversification in the short term. Momentum strategies seem to deliver better diversification in the long run. All the results are very consistent. Originality/value Very few papers have documented the diversification properties of the equity risk factors. While factors are built to capture systematic risk premia, their diversification properties are still poorly understood. It is necessary to take into account non-normality of risk factors and to study the diversification over different time horizons. The solution is to use wavelet methodology to decompose returns into temporal series of different maturities.

scholarly journals Identifying fiscal inflation in India: some recent evidence from an asymmetric approach

2020 ◽  
Vol 25 (50) ◽  
pp. 363-393
Author(s):  
Javed Ahmad Bhat ◽  
Naresh Kumar Sharma
Keyword(s):  
Monetary Policy ◽  
Trade Openness ◽  
Output Growth ◽  
Point Of View ◽  
Fiscal Deficit ◽  
Dynamic Nature ◽  
Price Inflation ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose Among the many factors fueling the inflationary tendencies in an economy such as monetary shocks, structural shocks, demand shocks, external shocks and demographic changes, the issue of inflation (INF) has also been found to be related to fiscal policy decisions of the government. The purpose of this study is to investigate the inflationary tendencies in India particularly from the fiscal point of view. The study also examines the influence of other potential determinants such as output growth rate, interest rate, trade-openness (TO) and oil price inflation (OPI). Design/methodology/approach To examine the dynamic nature of association between fiscal deficit and inflation, the study applies the Toda-Yamamoto (1995) test and Breitung and Candelon (2006) test to investigate the nature of causality in time and frequency domain frameworks. In addition, to scrutinize the possibility of a long-run association, that too from an asymmetric point of view, the study applies a Non-linear Autoregressive Distributed lag model (NARDL) given by Shin et al. (2014). Finally, non-linear cumulative dynamic multipliers are used to trace the traverse between disequilibrium position of short-run and subsequent long-run equilibrium of the system. Findings The authors found a unidirectional causality from fiscal deficit to inflation in case of time domain analysis and no feedback causality is reported. However, in case of frequency domain design, causality from fiscal deficit to inflation is found at low frequencies only, i.e. no short-run causality is established and hence dynamic nature of the relationship between the two variables is vindicated. Using NARDL model, the results document the existence of an asymmetric long-run direct association between fiscal deficit and inflation. However, an increase in deficit is found to be more inflationary and a decrease affects the inflation with a lower magnitude. The asymmetric impact of fiscal deficit on inflation can be explained through the existence of liquidity constraints, consumption-investment downward inflexibility and the downward price stickiness. Contractionary monetary policy action is found to be more effective than an expansionary one, signifying the asymmetric influence of monetary policy actions on the inflation of India. Similarly, in a supply-constrained economy with downward price rigidity, the authors found an asymmetric impact of output growth and output decline on inflation. As regard to the trade-openness, although an asymmetry is reported, the signs refute the validation of Romer (1993) hypothesis. Finally, the impact of oil price inflation on the inflationary pressures is according to theory but the coefficients are devoid of statistical significance. Practical implications These results indicate some important policy recommendations. Fiscal consolidation strategy should be executed in an appreciable manner to achieve the sound fiscal health and lower INF. The disciplined fiscal strategy would also be imperative for an effective monetary policy. Monetary authorities should possess noticeable credibility to manage the macroeconomic system and policy stances should be implemented according to requirements of the economy. Growth in output should be encouraged to have two-fold benefits to the economy – reducing INF on the one hand and fiscal deficits on the other. Originality/value The study contributes to the existing literature in the following ways. First, taking note of dynamic nature of the relationship between these two variables, the study examined the deficit INF nexus in a dynamic and asymmetric framework. The novelty of the study is ensured by the very nature of it is the first study in case of India to identify the fiscal INF in an asymmetric configuration. The authors applied a NARDL model, given by Shin et al. (2014) to examine the existence of any cointegrating relationship in an asymmetric paradigm. Second, the nature of causality between fiscal deficit and INF has been examined in a time domain and FD framework to portray precisely the casual interactions between these two variables in the short-run and long run. The study will, therefore, enrich the existing literature along the asymmetric lines.

Building a model of researching the sustainable entrepreneurship in the tourism sector

Kybernetes ◽  
2014 ◽  
Vol 43 (3/4) ◽  
pp. 377-393 ◽  
Author(s):  
Katja Crnogaj ◽  
Miroslav Rebernik ◽  
Barbara Bradac Hojnik ◽  
Doris Omerzel Gomezelj
Keyword(s):  
Policy Making ◽  
Initial Step ◽  
Point Of View ◽  
Levels Of Analysis ◽  
Future Research ◽  
Sustainable Entrepreneurship ◽  
Content Type ◽  
Requisite Variety ◽  
Long Run ◽  
Tourism Sector

Purpose – The tourism sector is heavily dependent on entrepreneurship and cannot survive in the long run if it is not both sustainable and entrepreneurial at the same time; these three areas – entrepreneurship, sustainability, and tourism – are rarely linked in research and are not reflected in appropriate policy-making measures. Thus, the purpose of this paper is to develop a conceptual multilevel model that will provide a requisitely holistic means for studying sustainable entrepreneurship in the tourism sector. Design/methodology/approach – In the process of developing a model, the authors took into account the principle of requisite variety and considered various dimensions related to sustainable entrepreneurship implicated at three levels of analysis – namely, individual (entrepreneur), organizational (SME), and national/regional (tourism destination). Findings – The proposed model provides systemic and systematic views on sustainable entrepreneurship in the tourism sector and contains various levels of analysis. The holistic framework for studying sustainable entrepreneurship in the tourism helps highlight influential elements from an economics point of view as well as their measurable and internationally comparable outcomes. Originality/value – The suggested model represents an initial step toward the measurement of sustainable entrepreneurship in tourism at various levels, thereby making a valuable contribution to future research designs seeking to evaluate the benefits of sustainable entrepreneurship. The paper provides an important foundation for evidence-based policy making with the aim of fostering requisitely holistic behavior and innovative, responsible, and sustainable entrepreneurship practices in the tourism sector.

Excess liquidity premia of single-name CDS vs iTraxx/CDX spreads: 2007-2017

2019 ◽  
Vol 37 (1) ◽  
pp. 18-27
Author(s):  
Mariya Gubareva
Keyword(s):  
North America ◽  
Term Structure ◽  
Credit Default Swap ◽  
Liquidity Premium ◽  
Content Type ◽  
Long Run ◽  
Excess Liquidity ◽  
The Mean ◽  
Liquidity Premia ◽  
Risk Parameters

Purpose The aim of this research is twofold. First, we study average levels of liquidity for long-run through-the-cycle periods, which potentially allow eliminating procyclicality from risk parameters used for expected credit-loss calculations. Second, we investigate to what extent the relative illiquidity of individual credit default swap (CDS) contracts affects their spreads in comparison with the respective CDS indices. Design/methodology/approach Based on the iTraxx Europe CDS index covering European firms and the CDX North America CDS index covering US firms, as well as on individual CDS transactions involving the reference entities constituting these two benchmark indices, we investigate the excess liquidity premia in spreads of the single-name CDS contracts over the spreads of the iTraxx and CDX indices over 2007-2017. Findings First, single-name CDS excess liquidity premia depend on CDS contract maturity. Second, the long-run average spread of a benchmark index may stay as low as three-fourths of the respective long-run average of the mean of the single-name CDS spreads, meaning that the excess liquidity premium may be as high as one-fourth of the firm-specific CDS spread. Third, the term structure of the excess liquidity differs between the Europe and North America geographies. Fourth, on average, the excess liquidity premia in the single-name CDS spreads over the respective CDS indices diminish with increasing maturities of CDS contracts. Originality/value No previous research addresses differences between the liquidity component in a benchmark CDS index spreads and the mean spread averaged across the constituents of the index. Our work fills this gap.

scholarly journals Non Gaussian returns and pension funds asset allocation

2016 ◽  
Vol 15 (4) ◽  
pp. 416-444 ◽  
Author(s):  
Stéphane Hamayon ◽  
Florence Legros ◽  
Yannick Pradat
Keyword(s):  
Stock Returns ◽  
Value At Risk ◽  
Mean Reversion ◽  
Pension Funds ◽  
Statistical Characteristics ◽  
Stock Market Returns ◽  
Content Type ◽  
Time Horizons ◽  
Long Run ◽  
Non Gaussian

Purpose The authors aim to demonstrate the importance of taking into account “mean reversion” in asset prices and show that this type of modeling leads to a high share of equities in pension funds’ asset allocations. Design/methodology/approach First, the authors will study the long-run statistical characteristics of selected financial assets during the 1895-2011 period. Such an analysis corroborates the fact that, for long holding periods, equities exhibit lower risk than other asset classes. Moreover, they will provide empirical evidence that stock market returns are negatively skewed in the short term and show that this negative skewness vanishes over longer time horizons. Both these characteristics favor the use of a semi-parametric methodology. Findings This empirical study led to two major findings. First, the authors noticed that the distribution of stock returns is negatively skewed over short time horizons. Second, they observed that the fat-tailed shape of the returns distribution disappears for time periods longer than five years. Finally, they demonstrated that stock returns exhibit “mean-reversion”. Consequently, the optimization program should not only take into account the non-Gaussian nature of returns in the short run but also incorporate the speed at which volatility “mean reverts” to its long-run mean. Originality/value To simulate portfolio allocation, the authors used a Cornish–Fisher Value-at-Risk criterion with the advantage of providing an allocation that is independent of the saver’s preferences parameters. A backtesting analysis including a calculation of replacement rates shows a clear dominance of the “non-Gaussian” strategy because the retirement outcomes under such a strategy would be positively affected.

Mitigation strategies to fight the COVID-19 pandemic—present, future and beyond

2020 ◽  
Vol 34 (6) ◽  
pp. 547-562
Author(s):  
Ahmed Zainul Abideen ◽  
Fazeeda Binti Mohamad ◽  
Mohd Rohaizat Hassan
Keyword(s):  
Keyword Search ◽  
Meta Analysis ◽  
Point Of View ◽  
Mitigation Strategies ◽  
Current Crisis ◽  
Content Type ◽  
Long Run ◽  
Short And Long Term ◽  
Novel Coronavirus ◽  
Transmission Capability

PurposeThe latest novel coronavirus disease 2019 (COVID-19) pandemic continues to have a significant social and financial impact globally. It is very essential to study, categorize and systematize published research on mitigation strategies adopted during previous pandemic scenario that could provide an insight into improving the current crisis. The goal of this paper is to systematize and identify gaps in previous research and suggest potential recommendations as a conceptual framework from a strategic point of view.Design/methodology/approachA systematic review of Scopus and Web of Science (WoS) core collection databases was performed based on strict keyword search selections followed by a bibliometric meta-analysis of the final dataset.FindingsThis study indicated that the traditional mitigation techniques adopted during past pandemics are in place but are not capable of managing the transmission capability and virulence of COVID-19. There is a greater need for rethinking and re-engineering short and long-term approaches to prevent, control and contain the current pandemic situation.Practical implicationsIntegrating various mitigation approaches shall assist in flattening the pandemic curve and help in the long run.Originality/valueArticles, conference proceedings, books, book chapters and other references from two extensive databases (Scopus and WoS) were purposively considered for this study. The search was confined to the selected keywords outlined in the methodology section of this paper.

An evaluation of risk factors impacting construction cash flow forecast

2008 ◽  
Vol 13 (1) ◽  
pp. 5-17 ◽  
Author(s):  
Henry A. Odeyinka ◽  
John Lowe ◽  
Ammar Kaka
Keyword(s):  
Risk Factors ◽  
Cash Flow ◽  
Significant Risk ◽  
Point Of View ◽  
Content Type ◽  
Extent Of Occurrence ◽  
Construction Contractor ◽  
Cash Flow Forecasting ◽  
Cash Flow Forecast ◽  
Flow Forecast

PurposeThe purpose of this paper is to identify and assess the extent of occurrence and impact of risk factors responsible for the variation between the forecast and actual construction cash flow.Design/methodology/approachThe study was conducted through a structured questionnaire administered to UK contracting organizations. Adopting a project‐by‐project approach, respondents were asked to provide opinions on the extent of occurrence of some identified risk factors and their impacts on cash flow forecast. Respondents were split into three groups of small, medium and large contracting firms based on their annual turnover so as to be able to investigate statistical differences of opinions between the groups. Statistical analyses were carried out using mean response analysis and univariate analysis of variance (ANOVA) in order to determine significant risk factors and also to investigate differences of opinions between respondents' groupings.FindingsThe research identified 11 significant risk factors out of 26 research risk variables. These significant risk variables can be grouped under three generic factors of “changes in the design or specification”, “project complexity” and “natural inhibition”. The significant risk variables are those ranking high in “extent of occurrence” and with critical impacts on cash flow forecast. The research further showed that there is no statistically significant difference in the opinions of different categories of contractors regarding the extent of risk occurrence and impacts on cash flow forecast.Research limitations/implicationsThe research showed that the order of extent of risk occurrence is different from the order of impact in case of occurrence. This suggests that further work needs to be done to measure the impact more objectively on a ratio scale so as to provide an avenue for a more quantitative measure of risk impacts on cash flow forecast. This objective is the next focus of this study.Practical implicationsBased on the finding, it is evident that the knowledge of the identified significant risk factors provides invaluable information to the construction contractor as regards what risk variables to focus attention on in cash flow forecasting.Originality/valueThe paper makes an original contribution of exploring the extent of risk occurrence and its impact on construction cash flow forecast from an objective point of view rather that the usual subjective point of view. The epistemic nature of the investigation makes the finding of practical value to the construction contractor in cash flow forecasting.

scholarly journals Use of copula functions for the reliability of series systems

2015 ◽  
Vol 32 (6) ◽  
pp. 617-634 ◽  
Author(s):  
Jorge Alberto Achcar ◽  
Fernando Antonio Moala
Keyword(s):  
Simulated Data ◽  
Reliability Function ◽  
Good Alternative ◽  
Bivariate Distribution ◽  
Parametric Models ◽  
Dependence Structure ◽  
Series System ◽  
Copula Functions ◽  
Content Type ◽  
Series Systems

Purpose – The purpose of this paper is to provide a new method to estimate the reliability of series system by using copula functions. This problem is of great interest in industrial and engineering applications. Design/methodology/approach – The authors introduce copula functions and consider a Bayesian analysis for the proposed models with application to the simulated data. Findings – The use of copula functions for modeling the bivariate distribution could be a good alternative to estimate the reliability of a two components series system. From the results of this study, the authors observe that they get accurate Bayesian inferences for the reliability function considering large samples sizes. The Bayesian parametric models proposed also allow the assessment of system reliability for multicomponent systems simultaneously. Originality/value – Usually, the studies of systems reliability engineering assume independence among the component lifetimes. In the approach the authors consider a dependence structure. Using standard classical inference methods based on asymptotical normality of the maximum likelihood estimators for the parameters the authors could have great computational difficulties and possibly, not accurate inference results, which there is not found in the approach.

Operating within the boundaries of legislation, accountability and personal agendas

2019 ◽  
Vol 27 (3) ◽  
pp. 346-365
Author(s):  
Sotirios Karatzimas ◽  
Carles Griful Miquela
Keyword(s):  
Local Governments ◽  
Choice Theory ◽  
Point Of View ◽  
Financial Sustainability ◽  
Online Questionnaire ◽  
Content Type ◽  
The Public ◽  
Long Run ◽  
The Impact

Purpose The purpose of this paper is to examine and compare the views of mayors and comptrollers of Catalan municipalities on aspects related to the Spanish legislation on financial sustainability – its usefulness and necessity of maintaining, its impact on citizens’ welfare and alternative proposals. The setting is rather interesting as strict rules are imposed by a legislation criticized of mimicking European Commission policies, on well-performing municipalities, in light of the recent “independency” conflict. Design/methodology/approach The study uses insights from the public choice theory and the concept of accountability to draw a framework that could explain the perceptions of mayors and comptrollers. The views of the two groups are captured with the use of an online questionnaire. Findings The results indicate that while the application of strict rules has borne fruit, this trend is not sustainable in the long run and a careful reconsideration is required. Accordingly, both groups express concerns on citizens’ future welfare. It moreover appears that in this particular setting, mayors’ and comptrollers’ sense of accountability toward citizens exceed their personal interests. Originality/value This study provides empirical evidence on the impact of strict budget stability and sustainability rules on the long-term financial sustainability of local governments from the point of view of mayors and municipality comptrollers who are called to implement them.

Risks of water and wastewater PPP projects: an investors’ perspective

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omid Amiri ◽  
Amir Ayazi ◽  
Mahmoud Rahimi ◽  
Garshasb Khazaeni
Keyword(s):  
Risk Factors ◽  
Public Sector ◽  
Risk Score ◽  
Fault Tree Analysis ◽  
Risk Identification ◽  
Point Of View ◽  
Financial Resources ◽  
Constructive Approach ◽  
Content Type ◽  
Water And Wastewater

Purpose Water and wastewater (WW) projects are gaining attention in Iran because of shortages of water resources. However, these projects are lengthy and they are accompanied by numerous risks, such as lack of sufficient financial resources. Public–private partnerships (PPPs) are taken into account as a constructive approach to deal with the problem of insufficient government funds and they are increasingly being implemented to construct the required infrastructures in different countries. Although WW projects in PPPs can reduce the government’s debt, investors are still uncertain about this approach. Hence, this study aims to identify and evaluate the risk of all parties involved in WW-PPP projects, from the viewpoint of investor. Design/methodology/approach First, the risk factors which are involved in WW projects are identified by interviewing experts and reviewing the literature by means of fault tree analysis (FTA) tool. Second, the probability and effects of the risky factors which are related to specific event are evaluated and analyzed by hybridization of interval fuzzy Type-2 sets (IT2FS) and risk score formulation. Finally, some solutions are proposed to deal with the most challenging risks. Findings Six gate events, namely, risks which are related to investors such as investor’s consultant-related risks, risky conditions from engineering, procurement, and construction (EPC) contractors’ point of view, risk factors which public sector takes into account, public sector’s consultant-related risks which public sector’s consultant consider challenging and external factors were defined according to the literature. From FTA tool and by interviewing the experts, 94 basic events were identified. Finally, from hybridization of IT2FSs and risk score formulation, top five risks are determined as “Difficulty of injecting financial resources into the project,” “Fluctuation in inflation rate,” “Poor decision-making process” in public sector, “Difficulty of importing the equipment which are required for the project (such as pumps, grain catchers, garbage collectors, etc.) from other countries” and “Impact of risky conditions in other projects on operation of PPP project.” Originality/value In the absence of a constructive approach for risk identification and a reliable model for evaluating the identified risks in PPP projects, this research project is one of the first research studies which used FTA for identifying risks and hybridization of IT2FSs and risk score formulation for evaluating the risks.

A dynamic simulator for the ergonomics evaluation of powered torque tools for human assembly

2017 ◽  
Vol 37 (1) ◽  
pp. 1-12 ◽  
Author(s):  
Haluk Ay ◽  
Anthony Luscher ◽  
Carolyn Sommerich
Keyword(s):  
Risk Factors ◽  
Joint Torque ◽  
Human Hand ◽  
Model Parameters ◽  
Test Rig ◽  
Musculoskeletal Discomfort ◽  
Data Set ◽  
Content Type ◽  
Working Posture ◽  
Displacement Measurements

Purpose The purpose of this study is to design and develop a testing device to simulate interaction between human hand–arm dynamics, right-angle (RA) computer-controlled power torque tools and joint-tightening task-related variables. Design/methodology/approach The testing rig can simulate a variety of tools, tasks and operator conditions. The device includes custom data-acquisition electronics and graphical user interface-based software. The simulation of the human hand–arm dynamics is based on the rig’s four-bar mechanism-based design and mechanical components that provide adjustable stiffness (via pneumatic cylinder) and mass (via plates) and non-adjustable damping. The stiffness and mass values used are based on an experimentally validated hand–arm model that includes a database of model parameters. This database is with respect to gender and working posture, corresponding to experienced tool operators from a prior study. Findings The rig measures tool handle force and displacement responses simultaneously. Peak force and displacement coefficients of determination (R2) between rig estimations and human testing measurements were 0.98 and 0.85, respectively, for the same set of tools, tasks and operator conditions. The rig also provides predicted tool operator acceptability ratings, using a data set from a prior study of discomfort in experienced operators during torque tool use. Research limitations/implications Deviations from linearity may influence handle force and displacement measurements. Stiction (Coulomb friction) in the overall rig, as well as in the air cylinder piston, is neglected. The rig’s mechanical damping is not adjustable, despite the fact that human hand–arm damping varies with respect to gender and working posture. Deviations from these assumptions may affect the correlation of the handle force and displacement measurements with those of human testing for the same tool, task and operator conditions. Practical implications This test rig will allow the rapid assessment of the ergonomic performance of DC torque tools, saving considerable time in lineside applications and reducing the risk of worker injury. DC torque tools are an extremely effective way of increasing production rate and improving torque accuracy. Being a complex dynamic system, however, the performance of DC torque tools varies in each application. Changes in worker mass, damping and stiffness, as well as joint stiffness and tool program, make each application unique. This test rig models all of these factors and allows quick assessment. Social implications The use of this tool test rig will help to identify and understand risk factors that contribute to musculoskeletal disorders (MSDs) associated with the use of torque tools. Tool operators are subjected to large impulsive handle reaction forces, as joint torque builds up while tightening a fastener. Repeated exposure to such forces is associated with muscle soreness, fatigue and physical stress which are also risk factors for upper extremity injuries (MSDs; e.g. tendinosis, myofascial pain). Eccentric exercise exertions are known to cause damage to muscle tissue in untrained individuals and affect subsequent performance. Originality/value The rig provides a novel means for quantitative, repeatable dynamic evaluation of RA powered torque tools and objective selection of tightening programs. Compared to current static tool assessment methods, dynamic testing provides a more realistic tool assessment relative to the tool operator’s experience. This may lead to improvements in tool or controller design and reduction in associated musculoskeletal discomfort in operators.

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