MULTI-FACTOR MODELS FOR INVESTMENT PREMIUMS VALUATION: DISCOURSE ANALYSIS AND ITS PLACE IN THE PARADIGM OF INTERNATIONAL PORTFOLIO INVESTING

The paper dwells on multi-factor models of individual securities and investment portfolios expected returns and investment premiums valuation. Main stages of these models appearance and development are discovered. Theory and practice realized that single-index models were not relevant in terms of estimating expected returns, since at least several basic factors affected premiums substantially. Notwithstanding the basic principle of compensating risk beared by respective return remained unchanged two new models – intertemporal CAPM and international CAPM were underlying dynamic development of multi-factor models. The latter along with market risk factor considered other premium components like those resulting from exchange rate risks for different currencies. Components of scientific discourse in this field are identified, position of models under question in contemporary theory of international portfolio investing is defined. Multi-factor models expanded and enhanced portfolio paradigm of international investing, particularly its specific concept of expected returns valuation. Unlike some other paradigm components this concept is proved to be positive theoretically and well applicable in practice. Factors of international models of investment premiums valuation origin are specified. More precise emphasize is made on international multi-factor CAPM and APT models. More cross functional nature of arbitrage pricing model compared to CAPM is justified. Gnoseological status of Fama and French multi-factor model is specified. Its affiliation with both existing paradigms of international investing – value investing and portfolio paradigm is argued. This in turn determines its unique position in existing knowledge in the field. Technically and methodologically it was developed on the ground of traditional CAPM model – it implies existing risk factor, specific sensitivity ratio to the existing risk factor and respective investment premium. This justifies the model affiliation with traditional and dominating portfolio paradigm of international investing. On the other hand, in its current version the model completely corresponds with value paradigm principles. Intrinsic, internal value of securities is defined, the valuation is subjective, traditional fundamental analysis ratios like book-to-market value index are used. The model thus establishes particular connection between two paradigms of international portfolio investing.

Can a Foreigner Own Land in Nigeria? The Supreme Court Decision in Gerhard Huebner v Aeronautical Industrial Engineering and Project Management Company Limited

In a landmark decision on 17 April 2017, the Supreme Court of Nigeria held that foreigners cannot legally and validly own land in Nigeria. This decision is of significant interest for the international investing community. The decision is a curious one and deserves close scrutiny. It was based on the court's interpretation that the Land Use Act provides that all lands in Nigeria are to be held in trust by the governor of each state for the use and benefit of all Nigerians. This note posits that the Supreme Court decision was completely erroneous and that, contrary to that decision, the correct position of the law is that foreigners can lawfully and validly own land in Nigeria provided that they are not enemy aliens.

EXPLORING DIVERSIFICATION BENEFITS IN ASIAN EQUITY MARKETS

This paper examines the benefits of international diversification from the perspective of local investors in 15 Asian markets whose initial portfolio holdings consist of assets from the respective domestic markets. We employ the step-down approach of the mean–variance spanning test to examine the statistical significance of regional and global diversification benefits. The analysis is conducted using three portfolio groups based on relative strength ranking technique. The empirical evidence suggests greater benefits from regional diversification compared to global diversification, in most instances. For Asian economies with restrictions on international investing, these findings suggest a further liberalization of their markets.

SAFETY FIRST INVESTMENT PORTFOLIOS OPTIMIZATION: ALTERNATIVE VIEW ON PORTFOLIO PARADIGM OF INTERNATIONAL INVESTING ORIGIN

Gnoseological framework of contemporary paradigm of international portfolio investing origin and development is explored. It is revealed and justified that the results of Markowitz and Roy seminal fundamental research are very similar and they both have paradigm constituent meaning. The paper proves that unlike the widely spread attitude to Markowitz as to the portfolio paradigm founder its appearance is bound up with seminal research of both scholars. Their papers were published simultaneously and independently. It is evidenced that although both approaches are highly identical in terms of such points as portfolio risk identification, efficient hyperbola generation etc. Roy foresaw the paradigm development direction much farther passing Markowitz ahead as to some crucial moments. Amon them are the derivation of efficient frontier equation, risk adjusted return maximization (similar to future Sharpe Ratio maximization), optimization resulting in one rather than a set of portfolios. Moreover, Roy optimization is not biparametric but a multiparametric approach. Safety first approaches to international portfolio optimization are explored and their comparative analysis is carried out. These approaches include Roy criteria, Telser criteria and Kataoka criteria. It is proved that the safety first approach underlies the portfolio paradigm of international investing on the one hand. On the other hand, it gave birth to the widely spread VaR concept development that was heavily utilized not only in the field of international investment management but in international banking as well. It is revealed that unlike the biparametric character of portfolio theory safety first criteria imply multiparametric optimization though both approaches represent the single paradigm.

Strategic risk management for enhanced corporate governance

The purpose of this research is to develop and apply risk management procedures to enhance corporate governance, using examples of Chinese company investments. Strategy and risk should be considered together by management and boards of directors as they need to know what risks are embedded in potential or approved strategies. Strategy and risk are linked and may be viewed as two sides of the same coin. One of the fastest ways to massive value destruction is to undertake a strategy without a thorough consideration of the related risks. Well-known financial fraud prediction models and ratios are applied to an ongoing, possible fraudulent Chinese company. They generated numerous red flags for possible fraudulent financial reporting, using one and two standard deviation measurements for risk assessment. This paper finds potential international equity and debt investment destruction of $12.9 billion for this one company and $34.5 billion when this company’s investment losses are combined with three other ongoing possible Chinese fraud companies. In summary, a risk management approach for enhanced corporate governance is developed and applied to the strategy of international investing. A case study is used to demonstrate both a macro-economic risk assessment of an investment target country and a micro-economic risk assessment of an investment target company, using fraud models and ratios