The impact of international diversification on the efficiency of investment portfolio within the Russian financial market

2021 ◽  
Vol 27 (5) ◽  
pp. 1178-1200
Author(s):  
Sergei A. TIMOFEEV ◽  
Yana N. NAKHIMOVA
Keyword(s):  
Financial Market ◽  
Systems Approach ◽  
Investment Strategy ◽  
Graphical Analysis ◽  
Investment Strategies ◽  
Market Participants ◽  
Bank Deposits ◽  
Market Formation ◽  
Retail Investor ◽  
The Impact

Subject. We address the diversified index investing strategy. Objectives. The focus is on the development of an attractive investment strategy within the risk/return coordinate system, to improve the return of a retail investor in the Russian financial market. Methods. We apply methods of analysis, synthesis, logical research based on the systems approach, statistical methods of data analysis (analysis of time series, correlation analysis), methods of optimal solutions, and the graphical analysis. Results. The paper shows the need to use a diversified strategy in the financial market. We developed an investment strategy providing better investment results at a lesser risk. The offered strategy may be integrated into financial instruments of various financial participants of the Russian financial market. The results of our investment strategy are compared with the results of brokers' strategies and the best assets for investment, i.e. gold, currency, real estate, bank deposits, and inflation. The study analyzes the basic principles of the formation of a diversification index-based strategy, formulates the main requirements for the best diversification within the Russian securities market, and presents a diversified index strategy, which is suitable for all classes of investors. Conclusions. In conditions of the modern Russian financial market formation, the results of investment strategies that market participants can offer to retail investors become a crucial factor, since they determine further directions of investment inflow, expand credit opportunities for companies, and contribute to the formation of an effective, progressive and deep financial market in the country.

Analyzing the Influences of Passive Investment Strategies on Financial Markets via Agent-Based Modeling

2008 ◽  
pp. 224-238 ◽  
Author(s):  
Hiroshi Takahashi ◽  
Satoru Takahashi ◽  
Takao Terano
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Financial Market ◽  
Investment Strategy ◽  
Agent Based Modeling ◽  
Investment Strategies ◽  
Agent Based Model ◽  
Efficient Market ◽  
Agent Based ◽  
Price Fluctuations

This chapter develops an agent-based model to analyze microscopic and macroscopic links between investor behaviors and price fluctuations in a financial market. This analysis focuses on the effects of Passive Investment Strategy in a financial market. From the extensive analyses, we have found that (1) Passive Investment Strategy is valid in a realistic efficient market, however, it could have bad influences such as instability of market and inadequate asset pricing deviations, and (2) under certain assumptions, Passive Investment Strategy and Active Investment Strategy could coexist in a Financial Market.

scholarly journals Dynamic Index Optimal Investment Strategy Based on Stochastic Differential Equations in Financial Market Options

2021 ◽  
Vol 2021 ◽  
pp. 1-9
Author(s):  
Jun Zhang
Keyword(s):  
Differential Equations ◽  
Stochastic Differential Equations ◽  
Financial Market ◽  
Capital Investment ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Insurance Companies ◽  
Investment Efficiency ◽  
Bank Deposits ◽  
Optimal Investment Strategy

With the gradual development and improvement of the financial market, financial derivatives such as futures and options have also become the objects of competition in the financial market. Therefore, how to make the most favorable and optimized investment and consumption when options are included? It has become a problem facing investors. Aiming at the optimal investment problem of investors, this paper studies the calculation of an optimal investment strategy in stochastic differential equations in financial market options on the basis of fuzzy theory. Now, stochastic calculus has become an important branch of stochastic analysis, finance, control, and other fields. The study of introducing stochastic differential equations is mainly to solve the stochastic control problem, which is the principle of the stochastic maximum. In finance, some hedging or pricing problems of contingent rights can eventually be transformed into a series of stochastic differential equations. Based on the historical data of five aspects of bank deposits, bonds, funds, stocks, and real estate of four listed insurance companies, the paper analyzes the optimization strategy of the capital investment of listed insurance companies based on the investment yield of the domestic investment market. According to the final results, the historical proportion of bank deposits of the superior company is 27%, and the optimal proportion given by the model is 25%; the total proportion of funds and stocks is 15%, and the optimal proportion of funds analyzed in the model is 20% and the optimal proportion of stocks is 10%. Therefore, the final results show that the investment efficiency of listed insurance companies can actually increase investment in stocks and funds and reduce the proportion of bank deposits to obtain greater investment returns.

THE IMPACT OF SAVINGS WITHDRAWALS ON A BANKER’S CAPITAL HOLDINGS SUBJECT TO BASEL III ACCORD

2020 ◽  
Vol 15 (02) ◽  
pp. 2050006
Author(s):  
RYLE S. PERERA ◽  
KIMITOSHI SATO
Keyword(s):  
Stock Returns ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Short Selling ◽  
Terminal Condition ◽  
Capital Regulation ◽  
Basel Iii ◽  
Investment Strategies ◽  
The Impact ◽  
Mean Variance

In this paper, we analyze the impact of savings withdrawals on a bank’s capital holdings under Basel III capital regulation. We examine the interplay between savings withdrawals and the investment strategies of a bank, by extending the classical mean–variance paradigm to investigate the bankers optimal investment strategy. We solve this via an optimization problem under a mean–variance paradigm, subject to a quadratic optimization function which incorporates a running penalization cost alongside the terminal condition. By solving the Hamilton–Jacobi–Bellman (HJB) equation, we derive the closed-form expressions for the value function as well as the banker’s optimal investment strategies. Our study provides a novel insight into the way banks allocate their capital holdings by showing that in the presence of savings withdrawals, banks will increase their risk-free asset holdings to hedge against the forthcoming deposit withdrawals whilst facing short-selling constraints. Moreover, we show that if the savings depositors of the bank are more stock-active, an economic expansion will imply a greater reduction in bank savings. As a result, the banker will reduce his/her loan portfolio and will depend on high stock returns with short-selling constraints to conform to Basel III capital regulation.

The Variable Nature of Ownership of Emission Units in the Intersection of Climate Law, Property Law, and the Regulation of Financial Markets

Climate Law ◽  
2021 ◽  
Vol 11 (1) ◽  
pp. 45-75
Author(s):  
Emilie Yliheljo
Keyword(s):  
Financial Market ◽  
Market Regulation ◽  
Carbon Markets ◽  
Financial Market Regulation ◽  
Market Participants ◽  
Proactive Management ◽  
Variable Nature ◽  
Legal Position ◽  
The Impact ◽  
The Eu

Abstract The article analyses the impact of the origins of emission units in transnational climate policy on market participants in the EU ets and the extension of financial-market regulation to the European carbon market. To assess the consequences of the public-private nature of emission units, a broad view of ownership is taken. Ownership is understood as the legal position of the holder of emission units, being an aggregate of elements of private law but also climate law and financial-market regulation. As a consequence, a picture emerges of a legal position variable in the personal, temporal, and spatial dimensions, following policy-design choices and the evolution of regulation of carbon markets. The ownership of emission units reflects the ongoing balancing of the different public-policy goals of the EU ets and differs from economic theories laying the foundations of emission trading. Due to the necessity for a proactive management of the scheme, regulatory intervention and risk have become inherent features of the ownership of the units, and the impact of changes will vary across different market participants.

Worst-Case Investment Strategy with Delay

2018 ◽  
Vol 6 (1) ◽  
pp. 35-57
Author(s):  
Chunxiang A ◽  
Yi Shao
Keyword(s):  
Financial Market ◽  
Normal State ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Model Parameters ◽  
Investment Strategies ◽  
Case Scenario ◽  
Worst Case ◽  
Risky Assets ◽  
Investment Optimization

AbstractThis paper considers a worst-case investment optimization problem with delay for a fund manager who is in a crash-threatened financial market. Driven by existing of capital inflow/outflow related to history performance, we investigate the optimal investment strategies under the worst-case scenario and the stochastic control framework with delay. The financial market is assumed to be either in a normal state (crash-free) or in a crash state. In the normal state the prices of risky assets behave as geometric Brownian motion, and in the crash state the prices of risky assets suddenly drop by a certain relative amount, which induces to a dropping of the total wealth relative to that of crash-free state. We obtain the ordinary differential equations satisfied by the optimal investment strategies and the optimal value functions under the power and exponential utilities, respectively. Finally, a numerical simulation is provided to illustrate the sensitivity of the optimal strategies with respective to the model parameters.

Creating a group of financial ratios to evaluate financial policy of companies

2020 ◽  
Vol 26 (5) ◽  
pp. 1039-1053 ◽  
Author(s):  
K.E. Pivnyk
Keyword(s):  
Policy Implementation ◽  
Financial Market ◽  
Systems Approach ◽  
Financial Ratios ◽  
Financial Policy ◽  
Financial Policies ◽  
Financial Status ◽  
Market Participants ◽  
Investment Option ◽  
Information Basis

Subject. The article considers the analysis of financial ratios as one of important methods to evaluate the financial status of companies. The analysis results serve as a basis for company financial policy assessment. Objectives. The focus is on creating a basic group of financial ratios enabling to measure the effectiveness of financial policy implementation. Methods. The study draws on the correlation analysis, critical review of sources, and the systems approach. Results. I developed a set of financial ratios, which can be used to evaluate the effectiveness of financial policy implemented by companies. Conclusions. Certain financial ratios can serve as an objective information basis for evaluating the effectiveness of financial policies of companies. The findings can be useful for company management to evaluate the financial policy, for investors to choose the best investment option, as well as for financial market participants.

The Use of the Intellectual Activity Results of in the Banking Sphere

2019 ◽  
Vol 7 (4) ◽  
pp. 51-56
Author(s):  
И. Белоусова ◽  
I. Belousova ◽  
А. Дулев ◽  
A. Dulev ◽  
В. Невежин ◽  
...  
Keyword(s):  
Financial Market ◽  
Information Technologies ◽  
Banking Sector ◽  
Graphical Analysis ◽  
Digital Economy ◽  
Intellectual Activity ◽  
Banking Services ◽  
Market Participants ◽  
Banking Institutions ◽  
Modern Technologies

The article discusses issues related to the implementation of innovative and information technologies in the process of functioning of banking institutions. The analysis of the main directions of the using of the modern technologies is outlined; their advantages and main problems arising from the application of innovations in the processes of providing banking services and operations are revealed. The authors explore the possibilities and prospects for the use of intellectual property in the banking sector in the context of increasing competition between financial market participants and the need for Russia’s transition to a digital economy. In preparing the article, methods of analysis, synthesis, deduction and induction, methods of graphical analysis were applied. The methodological basis was the works of domestic economists and specialists in the field of information technology, materials of periodicals, websites and legislation. Based on the study, the main areas of use of the results of intellectual activity in the banking sector were identified. The directions of introduction of innovative financial technologies in the process of providing banking services are indicated, which will allow banks to overcome competition with other participants of the financial market and increase their efficiency, as well as accelerate the transition of Russia to the digital economy.

Chaos and nonlinear forecastability in economics and finance

1994 ◽  
Vol 348 (1688) ◽  
pp. 397-404 ◽  
Keyword(s):  
Time Series ◽  
Financial Markets ◽  
Empirical Evidence ◽  
Financial Market ◽  
Chaotic Dynamics ◽  
Economic Research ◽  
Nonlinear Modelling ◽  
Market Participants ◽  
The Impact ◽  
Market Perspective

Both academic and applied researchers studying financial markets and other economic series have become interested in the topic of chaotic dynamics. The possibility of chaos in financial markets opens important questions for both economic theorists as well as financial market participants. This paper will clarify the empirical evidence for chaos in financial markets and macroeconomic series emphasizing what exactly is known about these time series in terms of forecastability and chaos. We also compare these two concepts from a financial market perspective contrasting the objectives of the practitioner with those of the economic researchers. Finally, we will speculate on the impact of chaos and nonlinear modelling on future economic research.

The impact of politics and economic policy uncertainty on anomaly-based investment strategies

2019 ◽  
Vol 45 (5) ◽  
pp. 654-670
Author(s):  
Cedric Mbanga ◽  
Jeffrey Scott Jones ◽  
Seth A. Hoelscher
Keyword(s):  
Economic Policy ◽  
Hedge Funds ◽  
Investment Strategy ◽  
Portfolio Performance ◽  
Policy Uncertainty ◽  
Investment Strategies ◽  
Party Affiliation ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Impact

Purpose The purpose of this paper is to explore the overlooked relationship between politics and the performance of anomaly-based investment strategies. Design/methodology/approach Monthly long-short portfolios are formed based on relative mispricing scores according to the Stambaugh et al. (2012, 2015) relative mispricing measure. Portfolio performance is examined throughout various presidential terms. The design also introduces economic policy uncertainty (EPU) as a possible explanatory variable for portfolio performance. Findings The analysis reveals that anomaly-based returns are higher under Republican administrations than they are under Democratic administrations. Moreover, the results show that the impact of EPU on the relationship between the political party affiliation of the president and future anomaly-based returns are driven by the election and post-election years. Practical implications The examination of returns on a long-short portfolio may be of particular value to investment companies, such as hedge funds, who regularly employ this type of strategy. Originality/value While the impact of presidential terms on raw equity returns has been well examined, the paper is the first to examine the impact of presidential terms on the return of an anomaly-based investment strategy. EPU is also introduced as an important contributing factor.

scholarly journals Dynamic surplus optimization with performance- and index-linked liabilities

2021 ◽  
Author(s):  
Sascha Desmettre ◽  
Markus Wahl ◽  
Rudi Zagst
Keyword(s):  
Optimal Investment ◽  
Investment Strategy ◽  
Insurance Companies ◽  
Investment Strategies ◽  
Insurance Company ◽  
Expected Return ◽  
Close Link ◽  
Closed Form Solutions ◽  
Risky Investment ◽  
The Impact

AbstractThe increasing importance of liability-driven investment strategies and the shift towards retirement products with lower guarantees and more performance participation provide challenges for the development of portfolio optimization frameworks which cover these aspects. To this end, we establish a general and flexible terminal surplus optimization framework in continuous time, allowing for dynamic investment strategies and stochastic liabilities, which can be linked to the performance of an index or the asset portfolio of the insurance company. Besides optimality results in a fairly general surplus optimization setting, we obtain closed-form solutions for the optimal investment strategy for various specific liability models, which include the cases of index-linked and performance-linked liabilities and liabilities which are completely or only partially hedgeable. We compare the results in numerical examples and study the impact of the performance participation, unhedgeable risk components, different ways of modeling the liabilities and the relative risk aversion parameter. We find that performance- or index-linked liabilities, which provide a close link between the wealth of the insurance company and its liabilities, allow for a higher allocation in the risky investment. On the other hand, unhedgeable risks reduce the allocation in the risky investment. We conclude that, aiming at a high expected return for the policy holder, insurance companies should try to connect the performance of insurance products closely to the wealth and minimize unhedgeable risks.

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