scholarly journals How Underlying Dimensions of Political Risk Affect Excess Return in Emerging and Developed Markets

2019 ◽  
Vol 18 (1) ◽  
pp. 80-105
Author(s):  
Ida Q. Nesset ◽  
Ingrid Bøgeberg ◽  
Frode Kjærland ◽  
Lars H. Molden
Keyword(s):  
Risk Premium ◽  
World Economy ◽  
Risk Index ◽  
Political Risk ◽  
Principal Component ◽  
Jel Classification ◽  
Correction Model ◽  
Developed Markets ◽  
Distinct Dimension ◽  
Global Investors

Political risk is expected to increase due to emerging markets’ increasing influence on the world economy. We identify legal, tension, conflict and policy as underlying dimensions through principal component analysis by using a disaggregated political risk index. Using a two-way error correction model, ethnic and religious tension is identified as a new and distinct dimension of political risk. Consequently, global investors are likely to benefit from understanding which dimension implies a reward. Investors in particular should direct their attention towards tension, which seems to command a risk premium regardless of both market and time. JEL Classification: C33, F30, F50, G15

Political risk distribution of Chinese outward foreign direct investment

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Qiuyu GaoYan
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Risk Index ◽  
Political Risk ◽  
Principal Component ◽  
Government Support ◽  
Outward Foreign Direct Investment ◽  
Content Type ◽  
Risk Distribution

PurposeThe purpose of this paper is to contribute to a better understanding on relations between Chinese Outward Foreign Direct Investment (OFDI) and host country political risk. To contribute to a better understanding of whether traditional wisdom on foreign direct investment (FDI) is sufficient to explain the internationalization of Chinese multinational enterprises, the author collected 15 proxy variables from the PRS Group and Heritage Foundation and applied principal component analysis (PCA) to construct a new political risk index (PRI) that measures multiple facets of political risk for 139 countries.Design/methodology/approachUsing this new PRI as a criterion, the author investigated changes in the political risk distribution (PRD) of Chinese outward FDI (OFDI) regarding investment destinations, large projects, annual investment outflows and sectorial distributions from 2006–2017.FindingsThe author found that the vast majority of Chinese OFDI during this period is concentrated in moderate- and low-risk countries, even at the sectorial level. This paper also shows that the continuing reform of Chinese OFDI policy and strong government support have led to an unprecedented increase in Chinese OFDI, while the PRD of Chinese OFDI has maintained a gradual decline over the past decade.Originality/valueThis research provides a new measurement that covers multiple facets of political risk.

scholarly journals Political Risk Distribution of Chinese Outward Direct Investment — an Empirical Study from 2006 to 2017

2019 ◽  
Vol 9 (4) ◽  
pp. 126-135
Author(s):  
G. Qiuyu
Keyword(s):  
Direct Investment ◽  
Risk Index ◽  
Political Risk ◽  
Principal Component ◽  
Outward Fdi ◽  
Heritage Foundation ◽  
Political Risks ◽  
Multiple Dimensions ◽  
Resource Group ◽  
Pca Method

The purpose of this paper is driven by the author’s desire to contribute to the ongoing debate as to whether the internationalisation of Chinese Transnational corporations (TNCs) in foreign direct investment is due to conventional logic. The author selected 15 indirect variables from the data of the ‘Coordination and Resource Group’ (CRG) and the ‘International Heritage Foundation’ and applied the principal component analysis (PCA) method to develop a new Political Risk Index (PRI). It could assess the multiple dimensions of political risks for 139 countries. Using this index as a fundamental criterion, the author investigated the changes in Chinese Outward FDI in terms of directions and volumes of investments, annual investment flows and their distribution by sectors of the economy from 2006 to 2017. As a result of the study, the author found that the vast majority of Chinese Outward FDI during this period was concentrated in countries with medium and low levels of political risks.

Effects of the political risk on Bitcoin return and volatility: evidence from the 2016 US presidential election

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hechem Ajmi ◽  
Nadia Arfaoui
Keyword(s):  
Presidential Election ◽  
Positive Impact ◽  
Risk Index ◽  
Political Risk ◽  
Principal Component ◽  
Google Trends ◽  
The Political ◽  
Content Type ◽  
Political Situation ◽  
Us Presidential Election

Purpose This paper aims to investigate the effect of the political risk on Bitcoin return and volatility during the 2016 US pre-election and post-election periods. Design/methodology/approach A daily composite political risk index is calculated by using the principal component analysis and Google Trends. A quantile regression approach is adopted to assess the effect of the political risk index on Bitcoin return and volatility for both periods subject to market conditions. Findings Findings reveal that the political risk index tends to increase when moving from the pre-election period to the post-election one. This is mostly attributed to the new challenges faced by the new elected government. During the pre-election period, the quantiles regression shows that the political risk index negatively affects Bitcoin return when the market is bearish, whereas a positive impact on volatility is found in bearish and bullish markets. When the political situation becomes severer during the post-election period, the quantiles plots show that the increase of the political risk index leads to a significant increase of Bitcoin return, whereas Bitcoin volatility remains relatively stable. This means that Bitcoin can be adopted as a hedging tool when the political situation becomes severer. Originality/value Comparing to the existed studies in the field, this paper considers Google trends as a main source to assess the daily composite political risk index during the 2016 US presidential election.

scholarly journals On the Estimation of Cost of Equity using Industrial CAPM Approach

2020 ◽  
pp. 84-94
Author(s):  
Hassan Raza ◽  
Aijaz Mustafa Hashmi ◽  
Abdul Rasheed
Keyword(s):  
Family Environment ◽  
Risk Premium ◽  
Mutual Fund ◽  
Business Environment ◽  
Agency Cost ◽  
Risk Premiums ◽  
Fund Managers ◽  
Global Investors ◽  
Relationship Of ◽  
Industry Risk

This paper is an attempt to empirically investigate the industrial risk premium and realized return relationship by extending hybrid CAPM of Bodnar, Dumas, and Marston (2004). The inclusion of the industry risk premium offers more sophisticated results. Fama and Macbeth (1973) methodology are applied to test this relationship. The results indicate that there is a positive and significant relationship of the industry risk premium for Pakistan, India, and Brazil, whereas, it is insignificant for China, Russia, and South Africa. It is also seen that other risk premiums are insignificant for the said countries if industry risk premium is considered. The results also indicate that industry risk premium is only significant for those countries where the firms are mostly operated through the family business environment like Pakistan, India, and Brazil. This may lead to conclude that the industry risk premium can be used as the agency cost of minatory shareholders and controlling shareholders. This study provides an insight for the global investors, FPI holders, local and global mutual fund managers, to incorporate this industry risk premium into the existing CAPM framework especially for the countries where the business is managed as a family environment.

scholarly journals Safe-Haven Assets, Financial Crises, and Macroeconomic Variables: Evidence from the Last Two Decades (2000–2018)

2020 ◽  
Vol 13 (3) ◽  
pp. 40
Author(s):  
Marco Tronzano
Keyword(s):  
Risk Premium ◽  
Financial Crises ◽  
Asset Returns ◽  
Policy Uncertainty ◽  
Safe Haven ◽  
Macroeconomic Variables ◽  
Equity Risk ◽  
Global Investors ◽  
The Impact ◽  
Portfolio Shifts

This paper focuses on three “safe haven” assets (gold, oil, and the Swiss Franc) and examines the impact of recent financial crises and some macroeconomic variables on their return co-movements during the last two decades. All financial crises produced significant increases in conditional correlations between these asset returns, thus revealing consistent portfolio shifts from more traditional towards safer financial instruments during turbulent periods. The world equity risk premium stands out as the most relevant macroeconomic variable affecting return co-movements, while economic policy uncertainty indicators also exerted significant effects. Overall, this evidence points out that gold, oil, and the Swiss currency played an important role in global investors’ portfolio allocation choices, and that these assets preserved their essential “safe haven” properties during the period examined.

scholarly journals Penggunaan Metode Orthogonal GARCH untuk Meramalkan Matriks Kovarians Return Indeks Harga Saham Sektoral Di Bursa Efek Indonesia

2019 ◽  
Vol 12 (2) ◽  
pp. 30
Author(s):  
Robiyanto Robiyanto
Keyword(s):  
Risk Factor ◽  
Value At Risk ◽  
Stock Price ◽  
Stock Exchange ◽  
Principal Component ◽  
Jel Classification ◽  
Stock Index ◽  
Price Indices ◽  
Exchange Value ◽  
Autoregressive Conditional Heteroscedasticity

ABSTRACT   This study conducted a risk communality assessment on sectoral stock price indices in Indonesia Stock Exchange by using Orthogonal Generalized Autoregressive Conditional Heteroscedasticity (Orthogonal GARCH) method. Data used in this research is daily closing of sectoral stock price indices at Indonesia Stock Exchange which consisting of 10 sectoral price indices. Research period are during January 4, 2011 until July 17, 2017. Of 10 sectoral stock price indices which studied apparently there are two principal component influencing its conditional variance. The result of this research is that stock index of agriculture and mining sector have the same risk factor, while other sectoral stock price indices have the same risk factor. These findings imply that investment managers must differentiate risk factors for agricultural and mining sectors from other sectors.   Keywords : Orthogonal GARCH; Indonesia Stock Exchange; Value-at-Risk (VaR); Sectoral stock price indices; Covariance matrix   JEL Classification : C58; G11.  

scholarly journals Heavy Metals Distribution, Sources, and Ecological Risk Assessment in Huixian Wetland, South China

Water ◽  
2020 ◽  
Vol 12 (2) ◽  
pp. 431
Author(s):  
Liangliang Huang ◽  
Saeed Rad ◽  
Li Xu ◽  
Liangying Gui ◽  
Xiaohong Song ◽  
...  
Keyword(s):  
Heavy Metals ◽  
Risk Assessment ◽  
Ecological Risk ◽  
South China ◽  
Ecological Risk Assessment ◽  
Risk Index ◽  
Pollution Index ◽  
Principal Component ◽  
Potential Ecological Risk ◽  
Anthropogenic Sources

This research has focused on the source identification, concentration, and ecological risk assessment of eight heavy metals in the largest karst wetland (Huixian) of south China. Numerous samples from superficial soil and sediment within ten representative landuse types were collected and examined, and the results were analyzed using multiple methods. Single pollution index (Pi) results were underpinned by the Geoaccumulation index (Igeo) method, in which Cd was observed as the priority pollutant with the highest contamination degree in this area. As for the most polluted landuse type, via applying Nemerow’s synthetical contamination index (PN) and Potential ecological risk index (RI), the river and rape field posed the highest ecological risks, while moderate for the rest. To quantify the drivers of the contaminants, a principal component analysis (PCA) was carried out and weathering of the watershed’s parent carbonate rocks was found to be the main possible origin, followed by anthropogenic sources induced by agricultural fertilizer. Considering the impacts of these potentially toxic elements on public health, the results of this study are essential to take preventive actions for environmental protection and sustainable development in the region.

Risk under "One Country and Two Systems": Evidence from Class A, B and H Shares of Chinese Listed Companies

2003 ◽  
Vol 06 (02) ◽  
pp. 179-197 ◽  
Author(s):  
Yimin Zhang ◽  
Ronald Zhao
Keyword(s):  
Hong Kong ◽  
Risk Premium ◽  
Political Risk ◽  
Listed Companies ◽  
Interest Rate Risk ◽  
The Political ◽  
Class A ◽  
Rate Risk ◽  
Chinese Listed Companies ◽  
Two Systems

Chinese listed companies issue Class A, B and H shares to Chinese, foreign and Hong Kong investors, respectively. Entitled to exactly the same rights and obligations, the three classes of shares are, however, traded at significantly different prices. The valuation differential is attributable to the different responses to the country-specific risk related to the emerging Chinese stock market by the three categories of investors. The country risk of China can be decomposed into political risk, exchange rate risk, interest rate risk and market risk. Empirical tests provide strong evidence to support the decomposition model. Compared with Chinese investors of A-shares, foreign investors would require a higher rate of return for B-shares to adjust for the political risk of China, reflecting a differential in the risk premium required on the world capital market. In comparison, the Hong Kong investors, who have greater tolerance of the political risk involved in H-shares as a result of the increasing integration between the Hong Kong and Chinese markets under "one country and two systems", are willing to pay a higher price for H-shares relative to B-shares.

WEIGHTED QUASI-ARITHMETIC MEANS AND A RISK INDEX FOR STOCHASTIC ENVIRONMENTS

2011 ◽  
Vol 19 (supp01) ◽  
pp. 1-16 ◽  
Author(s):  
YUJI YOSHIDA
Keyword(s):  
Probability Density ◽  
Risk Premium ◽  
Risk Index ◽  
Utility Functions ◽  
Probability Density Functions ◽  
Density Functions ◽  
Arithmetic Means ◽  
Stochastic Environments ◽  
Order Stochastic Dominance ◽  
Conditional Expectations

In this paper, the weighted quasi-arithmetic means are discussed from the viewpoint of utility functions and downward risks in economics. Representing the weighting functions by probability density functions and the conditional expectations, an index for downward risks in stochastic environments is derived. This paper discusses the relation among the index, the first-order stochastic dominance and the risk premium in economics, and further it investigates the relation between the index and value-at-risks which are known as another estimation for downward risks in finance. Finally, this paper shows a lot of examples of the weighted quasi-arithmetic mean and the aggregated mean ratio for various typical utility functions with various typical utility functions and probability density functions.

scholarly journals Ecological risk and source analysis of soil heavy metals pollution in the river irrigation area from Baoji, China

PLoS ONE ◽  
2021 ◽  
Vol 16 (8) ◽  
pp. e0253294
Author(s):  
Jun Zhang ◽  
Yu Gao ◽  
Ningning Yang ◽  
Enhua Dai ◽  
Minghang Yang ◽  
...  
Keyword(s):  
Ecological Risk ◽  
Human Activities ◽  
Risk Index ◽  
Principal Component ◽  
Research Area ◽  
Source Analysis ◽  
Pollution Level ◽  
Land Use Patterns ◽  
Irrigation Area ◽  
Distribution Features

Due to various human activities, soil quality under different land use patterns is deteriorating all over the world. This deterioration is very complex in the river irrigation area and is caused by multi-point and non-point source pollution and seasonal variation. Therefore, the characteristics and sources of soil metal pollution in river irrigation area of Baoji city were analyzed. The contents of 8 metals were given by ICP-MS, in the soil samples. Statistical methods, geo-accumulation index (Igeo) and potential ecological risk index (RI) were conducted to evaluate the spatial distribution features, sources and ecological risks of metal contamination from the study area soil. Principal component analysis and cluster analysis were used to analyze the pollution sources of metal. The analysis showed that Cd is the most polluted, and human activities represented a great impact on the contents of Zn, Ni, Cu and Cd in soil, Cd post moderate-strong pollution and strong risk, Cd has a maximum Igeo value of 3.17. All rivers were at risk of moderate pollution levels in study. Among them, some rivers had even reached strong pollution level. Pollution caused by human activities was the most significant pollution source of metal in the research area soil.

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