scholarly journals Factor Investment: Evaluating Persistence Effect for Investment Performance and Sustainability Exposure

2021 ◽  
Vol 13 (6) ◽  
pp. 143
Author(s):  
Xiaoshuang Yang

This research includes two separate studies. The first study is devoted to evaluating the persistence effect by analyzing performances of portfolios ranked based on previous performances under various factor models. The result shows that the shorter the holding period, the stronger the predictability and that the Multi-factor model has the highest explaining power for the excess return regarding the underlying factors. The second study is devoted to exploring how sustainable investing influences alpha by introducing a new sustainable factor to reflect the premium due to exposure to sin industries. The study result shows that there is no significant alpha associated with sustainable investing and that there is no significant return differential between funds that have high/low exposure to the sustainable factor.

2019 ◽  
Vol 1 (1) ◽  
pp. 16-20
Author(s):  
Delvira Mahmud

The researcher intends to test the four carhart factor model of stock excess return in companies incorporated in Kompas 100 for the 2014-2016 period. Regression analysis was performed on four carhart factor models, namely market returns, firm size, book to market, and momentum towards excess return. The results of this study indicate that in the partial hypothesis testing market return, firm size, and book to market equty variables significantly influence the excess return, while the momentum variable does not significantly influence the magnitude of excess return.Keywords: Four factors, market returns, firm size, book to market equity, momentum, excess stock returns


2020 ◽  
pp. 67-73
Author(s):  
N.D. YUsubov ◽  
G.M. Abbasova

The accuracy of two-tool machining on automatic lathes is analyzed. Full-factor models of distortions and scattering fields of the performed dimensions, taking into account the flexibility of the technological system on six degrees of freedom, i. e. angular displacements in the technological system, were used in the research. Possibilities of design and control of two-tool adjustment are considered. Keywords turning processing, cutting mode, two-tool setup, full-factor model, accuracy, angular displacement, control, calculation [email protected]


2021 ◽  
Vol 14 (3) ◽  
pp. 96
Author(s):  
Nina Ryan ◽  
Xinfeng Ruan ◽  
Jin E. Zhang ◽  
Jing A. Zhang

In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model has more explanatory power than the FF three-factor model. The value factor remains important after the inclusion of profitability and investment factors. Operating profitability performs better than cash and return-on-equity (ROE) profitability as a proxy for the profitability factor in FF factor modeling. The value factor and operating profitability have the biggest marginal contribution to a maximum squared Sharpe ratio for the five-factor model factors, highlighting the value factor (HML) non-redundancy in describing stock returns in Vietnam.


2020 ◽  
Vol 46 (Supplement_1) ◽  
pp. S179-S179
Author(s):  
Mei San Ang ◽  
Gurpreet Rekhi ◽  
Jimmy Lee

Abstract Background The conceptualization of negative symptoms has been refined in the past decades. Two-factor model comprising Motivation and Pleasure (MAP) and Emotional Expressivity (EE), five-factor model representing five domains of negative symptoms and second-order five-factor model incorporating the two-factor and five-factor models (Anhedonia, Asociality and Avolition regressed on MAP; Blunted Affect and Alogia regressed on EE) have been suggested as latent structure of negative symptoms. In most studies, the item “Lack of Normal Distress” in the Brief Negative Symptom Scale (BNSS) did not fit well in factor models. Nevertheless, the reported correlation and item-total correlation of Distress with other negative symptom domains and BNSS items were not negligible. Emotion deficit was also discussed as a part of negative symptoms conceptualization. As a single item may not be sufficient to represent an underlying construct that is potentially abstract and complex, the Schedule for the Deficit Syndrome (SDS) which comprises “Diminished Emotional Range” that is conceptually relevant to the BNSS Distress was employed. The study aimed to reexamine the conceptualization of negative symptoms by examining the model fit of several models when BNSS Distress and SDS Emotion (EMO) were included in the models using confirmatory factor analyses (CFA). Methods Two-hundred and seventy-four schizophrenia outpatients aged 21–65 were assessed on the BNSS and SDS. In the two-factor models, Restricted Affect, Diminished Emotional Range and Poverty of Speech in SDS and all items in BNSS Blunted Affect and Alogia subscales were regressed on EE, Curbing of Interests, Diminished Sense of Purpose and Diminished Social Drive in SDS and all items in BNSS Anhedonia, Asociality and Avolition subscales were regressed on MAP, without EMO, or with EMO regressed on either EE or MAP. Five-factor models and second-order five-factor models were examined, with or without EMO. Lastly, a six-factor model with EMO manifested by the sixth factor and second-order six-factor models in which EMO was regressed on either EE or MAP were tested. Root mean square error of approximation (RMSEA) <0.08, comparative fit index (CFI) >0.95, the Tucker-Lewis Index (TLI) >0.95, and weighted root-mean-square residual (WRMR) <1.0 indicate good model fit. CFAs were conducted using Mplus version 7.4. Results The two-factor models did not yield adequate fit indices. Five-factor model and second-order five-factor model without EMO had good model fit; five-factor model: RMSEA=0.056 (0.044–0.068), CFI=0.996, TFI=0.995, WRMR=0.718; second-order five-factor model: RMSEA=0.049 (0.036–0.061), CFI=0.997, TFI=0.996, WRMR=0.758. When EMO was included as indicator in one of the factors in the five-factor models, only the model in which EMO was regressed on Alogia yielded adequate fit. Similarly, in the second-order five-factor models, adequate fit indices were observed only when EMO was regressed on Alogia and Blunted Affect. The six-factor model fitted the data well, RMSEA=0.053 (0.042–0.064), CFI=0.996, TFI=0.995, WRMR=0.711. Second-order six-factor model with EMO regressed on EE yielded better model fit than MAP, RMSEA=0.050 (0.039–0.061), CFI=0.996, TFI=0.995, WRMR=0.849. Discussion In line with previous studies, five-factor and second-order five-factor models without EMO fitted the data well. When EMO was included, a six-factor model and a second-order six-factor model in which the sixth factor was regressed on EE showed good model fit. Emotion, motivation and behavior are intertwined. Our results showed that diminished emotion may also be one of the components of negative symptoms, which had higher association with EE than MAP.


Symmetry ◽  
2020 ◽  
Vol 12 (2) ◽  
pp. 295 ◽  
Author(s):  
Francisco Jareño ◽  
María de la O González ◽  
Laura Munera

This paper studies in depth the sensitivity of Spanish companies’ returns to changes in several risk factors between January 2000 and December 2018 using the quantile regression approach. Concretely, this research applies extensions of the Fama and French three- and five-factor models (1993 and 2015), according to González and Jareño (2019), adding relevant explanatory factors, such as nominal interest rates, the Carhart (1997) risk factor for momentum and for momentum reversal and the Pastor and Stambaugh (2003) traded liquidity factor. Additionally, for robustness, this paper splits the entire sample period into three sub-sample periods (pre-crisis, crisis and post-crisis) to analyse the results according to the economic cycle. The main conclusions of this paper are fourfold: First, these two models have the greatest explanatory power in the extreme quantiles of the return distribution (0.1 and 0.9) and more specifically in the lowest quantile 0.1. Second, the second model, based on the Fama and French five-factor model, shows the highest explanatory power not only in the full period but also in the three sub-periods. Third, the bank BBVA is the company that shows the highest sensitivity to changes in the explanatory factors in most periods because its adjusted R2 is the highest. Fourth, the stage of the economy with the highest explanatory power is the crisis subperiod. Thus, the final conclusion of this paper is that the second model explains best variations in Spanish companies’ returns in crisis stages and low quantiles.


2020 ◽  
Vol 12 (22) ◽  
pp. 9721
Author(s):  
Ana Belén Alonso-Conde ◽  
Javier Rojo-Suárez

Using stock return data for the Japanese equity market, for the period from July 1983 to June 2018, we analyze the effect of major nuclear disasters worldwide on Japanese discount rates. For that purpose, we compare the performance of the capital asset pricing model (CAPM) conditional on the event of nuclear disasters with that of the classic CAPM and the Fama–French three- and five-factor models. In order to control for nuclear disasters, we use an instrument that allows us to parameterize the linear stochastic discount factor of the conditional CAPM and transform the classic CAPM into a three-factor model. In this regard, the use of nuclear disasters as an explanatory variable for the cross-sectional behavior of stock returns is a novel contribution of this research. Our results suggest that nuclear disasters account for a large fraction of the variation of stock returns, allowing the CAPM to perform similarly to the Fama–French three- and five-factor models. Furthermore, our results show that, in general, nuclear disasters are positively related to the expected returns of a large number of assets under study. Our results have important implications for the task of estimating the cost of equity and constitute a step forward in understanding the relationship between equity risk premiums and nuclear disasters.


2020 ◽  
Vol 13 (2) ◽  
pp. 205979912091834
Author(s):  
Jennifer Koran ◽  
Fathima Jaffari

Social science researchers now routinely use confirmatory factor models in scale development and validation studies. Methodologists have known for some time that the results of fitting a confirmatory factor model can be unduly influenced by one or a few cases in the data. However, there has been little development and use of case diagnostics for identifying influential cases with confirmatory factor models. A few case deletion statistics have been proposed to identify influential cases in confirmatory factor models. However, these statistics have not been systematically evaluated or compared for their accuracy. This study evaluated the accuracy of three case deletion statistics found in the R package influence.SEM. The accuracy of the case deletion statistics was also compared to Mahalanobis distance, which is commonly used to screen for unusual cases in multivariate applications. A statistical simulation was used to compare the accuracy of the statistics in identifying target cases generated from a model in which variables were uncorrelated. The results showed that Likelihood distance and generalized Cook’s distance detected the target cases more effectively than the Chi-square difference statistic. The accuracy of the Likelihood distance and generalized Cook’s distance statistics was unaffected by model misspecification. The results of this study suggest that Likelihood distance and generalized Cook’s distance are more accurate under more varied conditions in identifying target cases in confirmatory factor models.


Econometrics ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 40
Author(s):  
Eric Hillebrand ◽  
Huiyu Huang ◽  
Tae-Hwy Lee ◽  
Canlin Li

In forecasting a variable (forecast target) using many predictors, a factor model with principal components (PC) is often used. When the predictors are the yield curve (a set of many yields), the Nelson–Siegel (NS) factor model is used in place of the PC factors. These PC or NS factors are combining information (CI) in the predictors (yields). However, these CI factors are not “supervised” for a specific forecast target in that they are constructed by using only the predictors but not using a particular forecast target. In order to “supervise” factors for a forecast target, we follow Chan et al. (1999) and Stock and Watson (2004) to compute PC or NS factors of many forecasts (not of the predictors), with each of the many forecasts being computed using one predictor at a time. These PC or NS factors of forecasts are combining forecasts (CF). The CF factors are supervised for a specific forecast target. We demonstrate the advantage of the supervised CF factor models over the unsupervised CI factor models via simple numerical examples and Monte Carlo simulation. In out-of-sample forecasting of monthly US output growth and inflation, it is found that the CF factor models outperform the CI factor models especially at longer forecast horizons.


2019 ◽  
Vol 31 (2) ◽  
pp. 232-257
Author(s):  
Huong Dieu Dang

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.


2016 ◽  
Vol 54 (6) ◽  
pp. 727-748 ◽  
Author(s):  
Lihua Xu ◽  
Zane Wubbena ◽  
Trae Stewart

Purpose The purpose of this paper is to investigate the factor structure and the measurement invariance of the Multifactor Leadership Questionnaire (MLQ) across gender of K-12 school principals (n=6,317) in the USA. Design/methodology/approach Nine first-order factor models and four second-order factor models were tested using confirmatory factor analysis. Findings The results suggested that the nine-factor model provided the best fit for the data. Further examination revealed that most constructs lacked convergent validity and discriminant validity. Second-order factor models were tested and the hierarchical model with two higher order factors (i.e. transformational and transactional leadership) was deemed the best fit and it was then tested for measurement invariance between females and males. The measurement model was found to be invariant across gender. Findings suggested that female school principals demonstrated significantly greater transformational leadership behaviour, while male school principals demonstrated significantly greater transactional leadership behaviour. Originality/value This study addressed construct and factor issues previously associated with the MLQ in the measurement of transformational and transactional leadership among a variety of organizations. By using a sample of K-12 school principals across gender, this study has provided support that may ameliorate contextual doubts of transformational leadership behaviour when examining the relational aspects needed to improve schools.


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