scholarly journals Artificial intelligence model for building investment portfolio optimization mix using historical stock prices data

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sulaimon Olanrewaju Adebiyi ◽  
Oludayo Olatosimi Ogunbiyi ◽  
Bilqis Bolanle Amole
Keyword(s):  
Asset Allocation ◽  
Stock Prices ◽  
Model Building ◽  
Investment Decision ◽  
Optimal Portfolio ◽  
Mathematical Programming Problem ◽  
Investment Portfolio ◽  
Data Set ◽  
Market Prices ◽  
Content Type

Purpose The purpose of this paper is to implement a genetic algorithmic geared toward building an optimized investment portfolio exploring data set from stocks of firms listed on the Nigerian exchange market. To provide a research-driven guide toward portfolio business assessment and implementation for optimal risk-return. Design/methodology/approach The approach was to formulate the portfolio selection problem as a mathematical programming problem to optimize returns of portfolio; calculated by a Sharpe ratio. A genetic algorithm (GA) is then applied to solve the formulated model. The GA lead to an optimized portfolio, suggesting an effective asset allocation to achieve the optimized returns. Findings The approach enables an investor to take a calculated risk in selecting and investing in an investment portfolio best minimizes the risks and maximizes returns. The investor can make a sound investment decision based on expected returns suggested from the optimal portfolio. Research limitations/implications The data used for the GA model building and implementation GA was limited to stock market prices. Thus, portfolio investment that which to combines another capital market instrument was used. Practical implications Investment managers can implement this GA method to solve the usual bottleneck in selecting or determining which stock to advise potential investors to invest in, and also advise on which capital sharing ratio to reduce risk and attain optimal portfolio-mix targeted at achieving an optimal return on investment. Originality/value The value proposition of this paper is due to its exhaustiveness in considering the very important measures in the selection of an optimal portfolio such as risk, liquidity ratio, returns, diversification and asset allocation.

scholarly journals The impact of rating classifications on stock prices of Brazilian companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fernanda Pagin ◽  
Matheus da Costa Gomes ◽  
Rafael Moreira Antônio ◽  
Tabajara Pimenta Júnior ◽  
Luiz Eduardo Gaio
Keyword(s):  
Decision Making ◽  
Asset Allocation ◽  
Stock Prices ◽  
Market Reaction ◽  
Investment Decision ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Market Model ◽  
Content Type ◽  
The Impact

Purpose This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa Balcão, from August 2002 to August 2018, identifying which types of announcement (upgrade, downgrade or the same initial classification) cause variations in prices around the date of disclosure of the rating. Design/methodology/approach The event study methodology was applied to verify the market reaction around the announcement dates in a 21-day event window (−10, +10). The market model was used to calculate the abnormal returns (ARs), and subsequently, the accumulated ARs. Findings The hypotheses tests allowed to verify that the accumulated ARs are different, before and after the three types of rating announcements (upgrades, downgrades and the same classification); in upgrades, the mean of accumulated ARs increases in the days before the event, while in downgrades, this increase occurs after the event. This paper concluded that the rating announcements have an impact on the return of stock of the Brazilian market and that the market reaction occurs most of the time before the event happens, which indicates that the market can anticipate the information contained in the changes in credit ratings. Practical implications The results have considerable implications for portfolio managers, institutional investors and traders. It facilitates investment decision-making in the face of rating classification announcements. Market participants can pay more attention to their investment strategies and asset allocation during periods of risk rating announcements. Additionally, traders can understand the form of investment strategy for superior earnings. Originality/value The importance of the study is related to the fact that the results may explain the causes of specific movements in the Brazilian financial market related to a source of information that may or may not be able to influence the decisions of the financial agents that operate in this market. The justification is centred on the idea that, for investors who somehow react to the announcements, it is relevant to understand the impact of rating classifications on companies, as access to such information allows for more conscious decision-making.

Characteristics analysis of behavioural portfolio theory in the Markowitz portfolio theory framework

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saksham Mittal ◽  
Sujoy Bhattacharya ◽  
Satrajit Mandal
Keyword(s):  
Emerging Markets ◽  
Asset Allocation ◽  
Portfolio Theory ◽  
Optimal Portfolio ◽  
Content Type ◽  
Major Index ◽  
Brics Countries ◽  
Trade Offs ◽  
Characteristics Analysis ◽  
Mean Variance

PurposeIn recent times, behavioural models for asset allocation have been getting more attention due to their probabilistic modelling for scenario consideration. Many investors are thinking about the trade-offs and benefits of using behavioural models over conventional mean-variance models. In this study, the authors compare asset allocations generated by the behavioural portfolio theory (BPT) developed by Shefrin and Statman (2000) against the Markowitz (1952) mean-variance theory (MVT).Design/methodology/approachThe data used have been culled from BRICS countries' major index constituents from 2009 to 2019. The authors consider a single period economy and generate future probable outcomes based on historical data in order to determine BPT optimal portfolios.FindingsThis study shows that a fair number of portfolios satisfy the first entry constraint of the BPT model. BPT optimal portfolio exhibits high risk and higher returns as compared to typical Markowitz optimal portfolio.Originality/valueThe BRICS countries' data were used because the dynamics of the emerging markets are significantly different from the developed markets, and many investors have been considering emerging markets as their new investment avenues.

The connectedness between Sukuk and conventional bond markets and the implications for investors

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aristeidis Samitas ◽  
Spyros Papathanasiou ◽  
Drosos Koutsokostas
Keyword(s):  
Asset Allocation ◽  
Spillover Effects ◽  
Bond Markets ◽  
Data Set ◽  
Content Type ◽  
Vector Autoregressive ◽  
Volatility Spillovers ◽  
Exogenous Shocks ◽  
Time Varying Parameter ◽  
Optimal Hedge

Purpose The purpose of this paper is to examine the connectedness across a variety of Sukuk and conventional bond indices and the implications for optimal asset allocation for the period January 1, 2010–April 30, 2020. Design/methodology/approach The data set consists of five major Sukuk (Dow Jones Sukuk, Thompson Reuters BPA Malaysia Sukuk, Indonesia Government Sukuk, S&P MENA Sukuk and Tadawul Sukuk and Bonds Index) and five conventional bond indexes, one for developed (USA) and four for emerging markets (Malaysia, Indonesia, Africa and Qatar). This study investigates the connectedness and volatility spillover effects across the aforementioned indices, by following the Diebold and Yilmaz (2012) approach, based on the time-varying parameter vector autoregressive (TVP-VAR) model. In addition, this paper provides optimal hedge ratios and portfolio weights for investors. Findings The empirical results show that Sukuk and conventional bond markets are highly integrated and that total connectedness exhibits sensitivity to exogenous shocks. The Dow Jones and the Malaysian Sukuk indices are the primary shock transmitters to other markets. However, the weak volatility spillovers between the Dow Jones and conventional bonds suggest that opportunities for optimal asset allocation may in fact exist. The highest (lowest) hedging effectiveness can be achieved by taking a short position in Malaysian (Qatarian) bonds. Originality/value To the best of the knowledge, this is the largest sample taken into account to investigate the connectedness between Sukuk and conventional bonds.

scholarly journals KiwiSaver fund performance and asset allocation policy

2019 ◽  
Vol 31 (2) ◽  
pp. 232-257
Author(s):  
Huong Dieu Dang
Keyword(s):  
Asset Allocation ◽  
Tracking Error ◽  
Excess Return ◽  
Superior Performance ◽  
Data Set ◽  
Content Type ◽  
Allocation Policy ◽  
Holding Period ◽  
Management Fees ◽  
The Impact

Purpose This paper aims to examine the performance and benchmark asset allocation policy of 70 KiwiSaver funds catergorised as growth, balanced or conservative over the period October 2007-June 2016. The study focuses on the sources for returns variability across time and returns variation among funds. Design/methodology/approach Each fund is benchmarked against a portfolio of eight indices representing eight invested asset classes. Three measures were used to examine the after-fee benchmark-adjusted performance of each fund: excess return, cumulative abnormal return and holding period returns difference. Tracking error and active share were used to capture manager’s benchmark deviation. Findings On average, funds underperform their respective benchmarks, with the mean quarterly excess return (after management fees) of −0.15 per cent (growth), −0.63 per cent (balanced) and −0.83 per cent (conservative). Benchmark returns variability, on average, explains 43-78 per cent of fund’s across-time returns variability, and this is primarily driven by fund’s exposures to global capital markets. Differences in benchmark policies, on average, account for 18.8-39.3 per cent of among-fund returns variation, while differences in fees and security selection may explain the rest. About 61 per cent of balanced and 47 per cent of Growth funds’ managers make selection bets against their benchmarks. There is no consistent evidence that more actively managed funds deliver higher after-fee risk-adjusted performance. Superior performance is often due to randomness. Originality/value This study makes use of a unique data set gathered directly from KiwiSaver managers and captures the long-term strategic asset allocation target which underlines the investment management process in reality. The study represents the first attempt to examine the impact of benchmark asset allocation policy on KiwiSaver fund’s returns variability across time and returns variation among funds.

scholarly journals The impact of country-level and fund-level factors on mutual fund performance in Vietnam

2019 ◽  
Vol 21 (1) ◽  
pp. 42-56
Author(s):  
Hoa Thi Nguyen ◽  
Dung Thi Nguyet Nguyen
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Investment Decision ◽  
Political Stability ◽  
Fund Performance ◽  
Data Set ◽  
Policy Makers ◽  
Content Type ◽  
Country Level ◽  
The Impact

Purpose The purpose of this paper is to examine the determinants of mutual funds’ performance at both a country level and a fund level in Vietnam. Design/methodology/approach The different types of funds with more than three-year operation are selected to remove outliers of the stock market boom from 2015 to 2018. The data set includes 54 mutual funds operating during the period from 2008 until November 2018. Findings The research finds that there is a positive relationship between macroeconomics and mutual funds’ performance. Furthermore, country-level governance such as regulation effectiveness, political stability, economic growth and financial development has a positive correlation with mutual funds’ performance. However, the impact of fund-level factors is diverse with the no significant impact of board size on mutual fund’s performance, while passive funds perform better than active funds in Vietnam. Practical implications The research results suggest that investors should pay attention to the types of funds and operating expense when making an investment decision in mutual funds. There are some recommendations for both government policy-makers and the mutual fund industry that are likely to facilitate the development of this field in Vietnam. Originality/value The research contributes to the understanding of what are the factors that should be considered when investing in mutual funds.

Analysing “Long Data” on Collective Violence in Indonesia

2015 ◽  
Vol 43 (5) ◽  
pp. 613-633
Author(s):  
David A. Meyer ◽  
Arthur Stein
Keyword(s):  
Time Series ◽  
Stock Prices ◽  
Model Building ◽  
Collective Violence ◽  
Temporal Data ◽  
Data Set ◽  
Time Correlations ◽  
Long Time ◽  
Short Time ◽  
Periodic Components

“Long data”, i.e., temporal data disaggregated to short time intervals to form a long time series, is a particularly interesting type of “big data”. Financial data are often available in this form (e.g., many years of daily stock prices), but until recently long data for other social, and even other economic, processes have been rare. Over the last decade, however, long data have begun to be extracted from (digitized) text, and then used to assess or formulate micro-level and macro-level theories. The UN Support Facility for Indonesian Recovery (UNSFIR) collected a long data set of incidents of collective violence in 14 Indonesian provinces during the 14 year period 1990–2003. In this paper we exploit the “length” of the UNSFIR data by applying several time series analysis methods. These reveal some previously unobserved features of collective violence in Indonesia—including periodic components and long time correlations—with important social/political interpretations and consequences for explanatory model building.

scholarly journals German real estate funds: changes in return distributions and portfolio favourability

2014 ◽  
Vol 7 (1) ◽  
pp. 87-111 ◽  
Author(s):  
Michael Stein
Keyword(s):  
Real Estate ◽  
Asset Allocation ◽  
Secondary Market ◽  
Real Estate Investment ◽  
Market Prices ◽  
Content Type ◽  
Savings Banks ◽  
Asset Values ◽  
Return Distributions ◽  
Clear Shift

Purpose – Since 2008, the German open-ended real estate fund (GOEREF) industry has experienced a critical phase of suspensions of redemption of fund shares, announced fund terminations and, eventually, introduction of a new regulation. With assets under the management of over 80 billion, GOEREFs are the dominant indirect real estate investment vehicle in Germany. Thus, it is extremely important to study the effects of this crisis on the risk and return characteristics of the respective funds. The paper aims to discuss these issues. Design/methodology/approach – Both net asset values (NAVs) and potential secondary market prices of the shares of funds with suspended redemptions are used. The resulting total return patterns are analysed on an index basis for fund groups that best represent the most important investor groups for GOEREFs. Findings – Groups that comprised a higher number of funds with suspended redemptions were considerably worse off and less attractive in an asset allocation context than the others given the often much lower secondary market prices. However, changes in return and risk must also be considered in terms of NAVs. The fund group comprising co-operative savings banks' funds was virtually unaffected by the liquidity crisis and continued to deliver stable and non-volatile returns, while the other fund groups exhibited a clear shift in their respective return profiles. Originality/value – This study analyses fund groups that reflect the most important investor groups by using both types of important prices in a comprehensive industry sample. It, thus, provides valuable insights into the changing profiles of the funds and groups and their favourability from an asset allocation perspective.

Life-cycle asset allocation and the peso problem: does ambiguity aversion matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nuno Silva
Keyword(s):  
Life Cycle ◽  
Stock Market ◽  
Asset Allocation ◽  
Stock Prices ◽  
Stock Price ◽  
Ambiguity Aversion ◽  
Content Type ◽  
Portfolio Decisions ◽  
State Of The Economy ◽  
The Impact

PurposeThe study aims to show that ambiguity aversion exerts a non-negligible effect on the investors' decisions, especially due to the possibility of sharp declines in stock prices.Design/methodology/approachThe vast majority of previous studies on life-cycle consumption and asset allocation assume that the equity premium is constant. This study evaluates the impact of rare disasters that shift the stock market to a low return state on investors' consumption and portfolio decisions. The author assumes that investors are averse to ambiguity relative to the current state of the economy and must incur a per period cost to participate in the stock market and solve their optimal consumption and asset allocation problem using dynamic programming.FindingsThe results show that most young investors choose not to invest in stocks because they have low accumulated wealth and the potential return from their stock market investments would not cover the participation costs. Furthermore, ambiguity-averse investors hold considerably fewer stocks throughout their lifetime than ambiguity-neutral ones. The fraction of wealth invested in stocks over the typical consumer's life is hump-shaped: it is low for a young individual, peaks at his early 30s and then decreases until his retirement age.Originality/valueTo the best of the author’s knowledge, this is the first study that assesses the impact of negative stock price jumps on the optimal portfolio of an ambiguity-averse investor.

The effect of comparative advantage of host country’s industry on multinationals’ M&A vs greenfield FDI decisions

2016 ◽  
Vol 20 (3) ◽  
pp. 229-258 ◽  
Author(s):  
Jaeho Lee ◽  
Yong Joon Jang
Keyword(s):  
Comparative Advantage ◽  
Investment Decision ◽  
Heterogeneous Firms ◽  
Entry Mode ◽  
Foreign Market ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Trade Model ◽  
Comparative Advantages

Purpose The purpose of this paper is to argue that comparative advantage of host country’s industry can be one of the significant determinants of the decision on mergers and acquisitions (M&A) or greenfield in foreign direct investment (FDI). Design/methodology/approach The authors extract five-related properties of an industry with comparative advantage in a host nation from Bernard et al.’s (2007) international trade model with heterogeneous firms and attempt to empirically test their roles in a multinational enterprise’s (MNE) M&A or greenfield investment decision, using the inward FDI data set in Korea from 1999 to 2006. Findings The theoretical framework finds that the five properties derived from an industry with comparative advantage in a host country have mixed motives for M&A or greenfield. The empirical results show that selected conventional independent variables generally affect the M&A or greenfield entry mode decision with significance individually and that their impacts become more or less prominent when the authors employ interaction terms combining them with comparative advantages in the industries. Research limitations/implications This implies that MNEs not only consider their own firm-specific advantages or other country-level factors for foreign market entries as the previous research generally found, but also seriously take into account industry-specific factors, especially industry-wide comparative advantages based on heterogeneous productivities of firms. Originality/value This paper reconciles multinationals’ strategic motives under an oligopolistic market with their efficiency gains under a monopolistic competitive market, which are considered as two main factors for cross-border M&A. Furthermore, this paper adds a new firm-level data set into entry mode research.

Stock Market Rumors and Credibility

2019 ◽  
Vol 33 (8) ◽  
pp. 3804-3853
Author(s):  
Daniel Schmidt
Keyword(s):  
Stock Market ◽  
Information Sharing ◽  
Stock Prices ◽  
Information Acquisition ◽  
Investment Horizon ◽  
Data Set ◽  
Market Prices ◽  
Oxford University ◽  
Credible Information ◽  
Published Paper

Abstract Stock prices occasionally move in response to unverified rumors. I propose a cheap talk model in which a rumormonger’s incentives to tell the truth depend on the interaction between her investment horizon and the information acquisition decisions of message-receiving investors. The model’s key prediction is that short investment horizons can facilitate credible information sharing between investors, thereby accelerating the information capitalization into market prices. Analyzing a data set of takeover rumors covered by U.S. newspapers, I find suggestive evidence in support of this prediction. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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