Pub Date : 2024-05-17DOI: 10.11648/j.jim.20241302.11
Bugaje Yusuf, James Okpe, Musa Muhammad
In order to better understand the moderating impacts of financial performance, this article looks at the relationship between ownership structure and firm performance of Nigerian listed commercial banks. Data on ownership structure and yearly financial reports at the firm level from 2013 to 2022 are used in the empirical analysis. Panel regression analysis methods. Block share ownership and foreign share ownership were employed in this study as independent variables, while ROA was used as a leveraged moderating effect to quantify business performance. Descriptive research and correlational research design are thus employed in this study as suitable research designs. The results indicate that around 47% of all shareholders have shares held by shareholders who possess at least 5% of the company, which is a proxy for block ownership of common shares across commercial banks in Nigeria. The foreign share ownership mean is 22.65%, with a standard deviation of 3.93%, a minimum value of 0%, and a maximum value of 1%, respectively. This indicates a sharp decline in foreign investment as a result of the unpredictability of the market and the high level of insecurity that permeates the nation. The return on assets of the commercial banks that are quoted is positively and significantly impacted by foreign ownership; a rise of one unit in the variable results in a 4.0% return on assets. At the 1% significant level, leverage mediated the association between the dependent and independent variables (FSO*LEV and BSO*LEV). The study suggested using a non-linear model to explore the hypothesis that a firm's performance could affect its ownership structure and to estimate the impact of block ownership on firms' performance.
{"title":"A Moderating Effect of Financial Performance in a Relationship Between Ownership Structure and Firm Performance of Listed Commercial Banks in Nigeria","authors":"Bugaje Yusuf, James Okpe, Musa Muhammad","doi":"10.11648/j.jim.20241302.11","DOIUrl":"https://doi.org/10.11648/j.jim.20241302.11","url":null,"abstract":"In order to better understand the moderating impacts of financial performance, this article looks at the relationship between ownership structure and firm performance of Nigerian listed commercial banks. Data on ownership structure and yearly financial reports at the firm level from 2013 to 2022 are used in the empirical analysis. Panel regression analysis methods. Block share ownership and foreign share ownership were employed in this study as independent variables, while ROA was used as a leveraged moderating effect to quantify business performance. Descriptive research and correlational research design are thus employed in this study as suitable research designs. The results indicate that around 47% of all shareholders have shares held by shareholders who possess at least 5% of the company, which is a proxy for block ownership of common shares across commercial banks in Nigeria. The foreign share ownership mean is 22.65%, with a standard deviation of 3.93%, a minimum value of 0%, and a maximum value of 1%, respectively. This indicates a sharp decline in foreign investment as a result of the unpredictability of the market and the high level of insecurity that permeates the nation. The return on assets of the commercial banks that are quoted is positively and significantly impacted by foreign ownership; a rise of one unit in the variable results in a 4.0% return on assets. At the 1% significant level, leverage mediated the association between the dependent and independent variables (FSO*LEV and BSO*LEV). The study suggested using a non-linear model to explore the hypothesis that a firm's performance could affect its ownership structure and to estimate the impact of block ownership on firms' performance.\u0000","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"111 22","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-05-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141126767","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-05-10DOI: 10.11648/j.jim.20241301.12
Arzo Ahmed, Rupali Sultana, Mohammad Rahman, M. Islam
Providing antenatal care (ANC) to expectant mothers is the primary method of reducing maternal morbidity and death. The objectives of ANC are to monitor and preserve the health and safety of both the mother and the fetus, identify any pregnancy issues and take appropriate action, address the concerns of the mother, get her ready for delivery, and encourage mothers to adopt healthy habits. The goal of this research is to investigate the determinants associated with Bangladeshi women's ANC. Data were obtained from the BDHS for the 2017–18 year, and 4,920 married women of reproductive age (15–49 years) were selected as participants from 18,895 married women. The data was analyzed using multinomial logistic regression as well as descriptive and inferential statistical methods. The main outcome of this study found that 48.4% of respondents received 4 or more ANC visits. The ANC contacts were correlated with factors such as media exposure, division, maternal age, women's education, husband's education, and wealth index. The primary educated women were 0.312 times (p<0.002) less likely to receive 4 or more ANC, compared to higher educated women, and women who don’t access to media, 0.464 times (p<0.000) less likely to engage in 4 or more ANC visits compared to media access. The results of this investigation demonstrate a substantial correlation between media exposure and ANC visits, as well as a noteworthy rise in appropriate ANC visits among expectant mothers with increased media exposure.
{"title":"Effect of Media Exposure and Related Factors on Antenatal Care Visits Among Pregnant Women in Bangladesh: A Study Based on BDHS 2017-18 Data","authors":"Arzo Ahmed, Rupali Sultana, Mohammad Rahman, M. Islam","doi":"10.11648/j.jim.20241301.12","DOIUrl":"https://doi.org/10.11648/j.jim.20241301.12","url":null,"abstract":"Providing antenatal care (ANC) to expectant mothers is the primary method of reducing maternal morbidity and death. The objectives of ANC are to monitor and preserve the health and safety of both the mother and the fetus, identify any pregnancy issues and take appropriate action, address the concerns of the mother, get her ready for delivery, and encourage mothers to adopt healthy habits. The goal of this research is to investigate the determinants associated with Bangladeshi women's ANC. Data were obtained from the BDHS for the 2017–18 year, and 4,920 married women of reproductive age (15–49 years) were selected as participants from 18,895 married women. The data was analyzed using multinomial logistic regression as well as descriptive and inferential statistical methods. The main outcome of this study found that 48.4% of respondents received 4 or more ANC visits. The ANC contacts were correlated with factors such as media exposure, division, maternal age, women's education, husband's education, and wealth index. The primary educated women were 0.312 times (p<0.002) less likely to receive 4 or more ANC, compared to higher educated women, and women who don’t access to media, 0.464 times (p<0.000) less likely to engage in 4 or more ANC visits compared to media access. The results of this investigation demonstrate a substantial correlation between media exposure and ANC visits, as well as a noteworthy rise in appropriate ANC visits among expectant mothers with increased media exposure.\u0000","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":" 47","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140993619","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-02-21DOI: 10.11648/j.jim.20241301.11
Amel Belanes, Khouloud Said
This study explores the main determinants of institutional ownership in the MENA region. Using a large sample of 262 listed companies across MENA countries, this study focuses on company and country characteristics that might explain institutional behavior. We attempt to answer the following questions: First, what are the main categories of institutional investors operating in MENA countries? Secondly, what factors drive institutional ownership? Results reveal a weak presence of institutional investors in the MENA region. Unlike foreign and passive investors, domestic and active institutional investors dominate the companies’ ownership. Such findings raise serious issues about how to attract foreign institutional investors. Results also suggest that value stocks appeal to institutional investors, whatever their origin (foreign or domestic) and kind (active or passive). Institutional investors look for large, profitable, and liquid companies that pay high dividends. They prefer investing in highly indebted companies as they consider debt an efficient mechanism to mitigate agency problems. Corporate governance and information disclosure are also crucial determinants of institutional ownership. However, foreign-domestic and active-passive institutional investors have different investment preferences. Our study would contribute to a better understanding of ownership endogeneity within an emerging context. Results would help professionals, managers, and policymakers to adopt appropriate reforms to offer an appealing business climate and attract a large base of institutional investors, not only foreign and active investors.
{"title":"Determinants of Institutional Ownership in the MENA Region","authors":"Amel Belanes, Khouloud Said","doi":"10.11648/j.jim.20241301.11","DOIUrl":"https://doi.org/10.11648/j.jim.20241301.11","url":null,"abstract":"This study explores the main determinants of institutional ownership in the MENA region. Using a large sample of 262 listed companies across MENA countries, this study focuses on company and country characteristics that might explain institutional behavior. We attempt to answer the following questions: First, what are the main categories of institutional investors operating in MENA countries? Secondly, what factors drive institutional ownership? Results reveal a weak presence of institutional investors in the MENA region. Unlike foreign and passive investors, domestic and active institutional investors dominate the companies’ ownership. Such findings raise serious issues about how to attract foreign institutional investors. Results also suggest that value stocks appeal to institutional investors, whatever their origin (foreign or domestic) and kind (active or passive). Institutional investors look for large, profitable, and liquid companies that pay high dividends. They prefer investing in highly indebted companies as they consider debt an efficient mechanism to mitigate agency problems. Corporate governance and information disclosure are also crucial determinants of institutional ownership. However, foreign-domestic and active-passive institutional investors have different investment preferences. Our study would contribute to a better understanding of ownership endogeneity within an emerging context. Results would help professionals, managers, and policymakers to adopt appropriate reforms to offer an appealing business climate and attract a large base of institutional investors, not only foreign and active investors.","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"44 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140443939","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-14DOI: 10.11648/j.jim.20231203.13
Yomna Gamal El-Din El-Gohr, Hatem Mohammed Fathy Idrees, Ahmed Esmail Awaad
{"title":"The Role of Management Science in Solving Some of the Problems of Industrial Establishments Specialized in the Furniture Industry in Damietta (A Case Study)","authors":"Yomna Gamal El-Din El-Gohr, Hatem Mohammed Fathy Idrees, Ahmed Esmail Awaad","doi":"10.11648/j.jim.20231203.13","DOIUrl":"https://doi.org/10.11648/j.jim.20231203.13","url":null,"abstract":"","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"13 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139319366","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-03-21DOI: 10.11648/j.jim.20231201.11
Gediyon Bekele
: Although many studies on linkage between monetary policy and inflation have been done in both developing and advanced countries, Notably Ethiopia has not featured in the cross-country studies that have included some of the Sub-Saharan African countries. Similar studies in Ethiopia haven not been conducted by including all necessary variables. Therefore, the study is to empirically investigate the effects of monetary policy on inflation in the case of Ethiopia. The study covers the annual data from 1988 to 2021 using time series ARDL co-integration regression analysis. The consumer price index is used as a proxy of inflation. The empirical results suggest that money supply, the openness of trade and the real effective exchange rate exerts a positive and statistically significant effect on inflation, in the long run, and real gross domestic product and real lending rate have a negative and statistically significant effect on inflation in the long run. The estimate of the speed of adjustment coefficient found in this study indicates that about 21.4 per cent of the variation in the inflation from its equilibrium level is corrected within a year. Based on the findings of the empirical analysis, the study recommends that Spends the money to the economy should not exceed the country's production of goods and services. Government should implement major changes to ensure that more of the money in circulation is in the productive sector.
{"title":"Effects of Monetary Policy on Inflation in Ethiopia: Using ARDL Co-Integration Approach","authors":"Gediyon Bekele","doi":"10.11648/j.jim.20231201.11","DOIUrl":"https://doi.org/10.11648/j.jim.20231201.11","url":null,"abstract":": Although many studies on linkage between monetary policy and inflation have been done in both developing and advanced countries, Notably Ethiopia has not featured in the cross-country studies that have included some of the Sub-Saharan African countries. Similar studies in Ethiopia haven not been conducted by including all necessary variables. Therefore, the study is to empirically investigate the effects of monetary policy on inflation in the case of Ethiopia. The study covers the annual data from 1988 to 2021 using time series ARDL co-integration regression analysis. The consumer price index is used as a proxy of inflation. The empirical results suggest that money supply, the openness of trade and the real effective exchange rate exerts a positive and statistically significant effect on inflation, in the long run, and real gross domestic product and real lending rate have a negative and statistically significant effect on inflation in the long run. The estimate of the speed of adjustment coefficient found in this study indicates that about 21.4 per cent of the variation in the inflation from its equilibrium level is corrected within a year. Based on the findings of the empirical analysis, the study recommends that Spends the money to the economy should not exceed the country's production of goods and services. Government should implement major changes to ensure that more of the money in circulation is in the productive sector.","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129812381","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-06DOI: 10.11648/j.jim.20221104.11
Jindan Li, Liangcan Liu
: At present, emerging science and technology such as big data and cloud computing have a huge impact on the business mode of enterprises, making the model and business logic of the whole economic market have changed unprecedentedly, and therefore the development environment of enterprises is also changing. In the process of integration with the real economy, the digital economy has shown great ability to transform and promote traditional industries, forming new driving forces for economic development. In order to seize the "new commanding heights" and development opportunities in the era of digital economy, many countries, including China, have put forward from the national strategic level to vigorously promote the digitalization of the real firm. In this context, the level of digitization of firm and the various institutional management within enterprises have very important significance to the governance mode, management mode, operation and decision-making mechanism of enterprises. Based on the current situation of enterprise digital transformation, this paper selects A-share listed companies in manufacturing industry as samples, adopts fixed effect model to discuss the influence of enterprise digitalization degree on enterprise performance, and provides reference value for enterprise digital transformation. The results show that the degree of digitalization has a positive impact on enterprise performance; R&d investment and human capital play an intermediary role between enterprise digital transformation and enterprise performance.
{"title":"The Influence of Digitalization Degree on Enterprise Performance in the Era of Big Data","authors":"Jindan Li, Liangcan Liu","doi":"10.11648/j.jim.20221104.11","DOIUrl":"https://doi.org/10.11648/j.jim.20221104.11","url":null,"abstract":": At present, emerging science and technology such as big data and cloud computing have a huge impact on the business mode of enterprises, making the model and business logic of the whole economic market have changed unprecedentedly, and therefore the development environment of enterprises is also changing. In the process of integration with the real economy, the digital economy has shown great ability to transform and promote traditional industries, forming new driving forces for economic development. In order to seize the \"new commanding heights\" and development opportunities in the era of digital economy, many countries, including China, have put forward from the national strategic level to vigorously promote the digitalization of the real firm. In this context, the level of digitization of firm and the various institutional management within enterprises have very important significance to the governance mode, management mode, operation and decision-making mechanism of enterprises. Based on the current situation of enterprise digital transformation, this paper selects A-share listed companies in manufacturing industry as samples, adopts fixed effect model to discuss the influence of enterprise digitalization degree on enterprise performance, and provides reference value for enterprise digital transformation. The results show that the degree of digitalization has a positive impact on enterprise performance; R&d investment and human capital play an intermediary role between enterprise digital transformation and enterprise performance.","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114234704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-01-10DOI: 10.11648/j.jim.20221103.11
Iyad Snunu
{"title":"Patterns of Self-Employment in Israel and the European Union: Findings from the Field","authors":"Iyad Snunu","doi":"10.11648/j.jim.20221103.11","DOIUrl":"https://doi.org/10.11648/j.jim.20221103.11","url":null,"abstract":"","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121228816","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-12DOI: 10.11648/J.JIM.20211004.13
Stella Korir, Patrick Kibati, J. Tanui
Access to affordable and decent housing remains a dream to many households, especially in developing nations. In Kenya, the housing need has been identified as one of the most agent area that needs attention. In fact, the government has put affordable housing as one of the big four agenda for the Nation. This study examined the relationship between cost of financing and affordability of housing in Nakuru East and Nakuru West Sub-Counties. Data was collected from 384 households sampled from the 11 wards in the two sub-counties. Stratified random sampling was used to ensure adequate representation of every ward in the sample. Data was collected through self-administered structured questionnaires and interviews. A pilot test was conducted prior to the actual study, incorporating reliability and validly tests. The study achieved a response rate of more than 87%. Findings from analysis revealed that cost of finance is significant determinant of affordability of housing. The study recommends that the government and other stakeholders in the housing sector should consider subsidizing cost of building materials, land, and cost of professional services, mortgage facilities as well as water and electricity. The government can partner with financial institutions as well as private investment organizations to offer more affordable housing solutions to the general public.
{"title":"Cost of Financing on Affordability of Housing in Nakuru East and Nakuru West Sub-counties, Nakuru County, Kenya","authors":"Stella Korir, Patrick Kibati, J. Tanui","doi":"10.11648/J.JIM.20211004.13","DOIUrl":"https://doi.org/10.11648/J.JIM.20211004.13","url":null,"abstract":"Access to affordable and decent housing remains a dream to many households, especially in developing nations. In Kenya, the housing need has been identified as one of the most agent area that needs attention. In fact, the government has put affordable housing as one of the big four agenda for the Nation. This study examined the relationship between cost of financing and affordability of housing in Nakuru East and Nakuru West Sub-Counties. Data was collected from 384 households sampled from the 11 wards in the two sub-counties. Stratified random sampling was used to ensure adequate representation of every ward in the sample. Data was collected through self-administered structured questionnaires and interviews. A pilot test was conducted prior to the actual study, incorporating reliability and validly tests. The study achieved a response rate of more than 87%. Findings from analysis revealed that cost of finance is significant determinant of affordability of housing. The study recommends that the government and other stakeholders in the housing sector should consider subsidizing cost of building materials, land, and cost of professional services, mortgage facilities as well as water and electricity. The government can partner with financial institutions as well as private investment organizations to offer more affordable housing solutions to the general public.","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127200832","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-07-15DOI: 10.11648/J.JIM.20211003.11
Sabeeha Naseer, M. Jan
Globalization is a complex phenomenon that has many national or international implications, as well as various impacts on the national economy and the world economy in general. The process of national economic globalization is clearly influenced by economic performance, foreign trade, financial development and its ability to attract foreign investment. Foreign capital has played a key role in the development of such a state in Pakistan. The current study used the time series data and the data range form 1981-2017. The variables are Globalization, foreign direct investment and trade. study applied ADF unit root test for stationary of these variables. First the unit root test applies at the level the variables are not stationary then apply at first difference so study applied ADF unit root test for stationary. The result shows that all variables are stationary at first difference. However, all variables are not stationary at level. the application of Johansen co-integration test appropriate applied for the purpose of association between variables. Finally, the study applied Vector Error Correction Model (VECM) for the purpose of long run analysis of the study. Johansen co-integration test concluded that globalization have positive impact on FDI and Trade. (VECM) model shows that the Globalization, FDI and Trade have long run relationship.
{"title":"Globalization, FDI and Trade in Case Study of Pakistan: An Empirical Analysis","authors":"Sabeeha Naseer, M. Jan","doi":"10.11648/J.JIM.20211003.11","DOIUrl":"https://doi.org/10.11648/J.JIM.20211003.11","url":null,"abstract":"Globalization is a complex phenomenon that has many national or international implications, as well as various impacts on the national economy and the world economy in general. The process of national economic globalization is clearly influenced by economic performance, foreign trade, financial development and its ability to attract foreign investment. Foreign capital has played a key role in the development of such a state in Pakistan. The current study used the time series data and the data range form 1981-2017. The variables are Globalization, foreign direct investment and trade. study applied ADF unit root test for stationary of these variables. First the unit root test applies at the level the variables are not stationary then apply at first difference so study applied ADF unit root test for stationary. The result shows that all variables are stationary at first difference. However, all variables are not stationary at level. the application of Johansen co-integration test appropriate applied for the purpose of association between variables. Finally, the study applied Vector Error Correction Model (VECM) for the purpose of long run analysis of the study. Johansen co-integration test concluded that globalization have positive impact on FDI and Trade. (VECM) model shows that the Globalization, FDI and Trade have long run relationship.","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132606494","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-07-13DOI: 10.11648/J.JIM.20211002.12
Jeffrey Ludwig
The invention of portfolio insurance as a strategy for limiting portfolio losses was introduced in the early 1980s and gained spectacular popularity throughout the decade, attracting between $60 billion to $90 billion from institutional money managers. The method provided downside protection against a long equity position by synthetically replicating a long put option using equity futures during an era when exchange-traded equity options were not sufficiently liquid. Unfortunately, the strategy came to a catastrophic end on the “Black Monday” of October 19, 1987, when the president of the New York Stock Exchange shut down the nascent technology used by index arbitrage program trading groups. This caused significant mispricings between futures and cash markets, making the required synthetic put option replication trading impossible. The portfolio insurance strategy was declared a complete failure and never has since regained widespread popularity. Three decades later, modern markets now fully embrace program trading, and the likelihood that program trading would be shut down for any reason ever again seems impossible. This paper examines how portfolio insurance would have performed during the 1991 to 2020 time period, during which 3 major stock market crashes occurred and program trading was never shut down. The paper concludes that portfolio insurance received unjust blame for the 1987 crash and its abandonment since then has been irrational and unfortunate for those seeking long equity exposure with a cost-efficient strategy for limiting portfolio losses.
{"title":"Unfairly Defiled: A Long Term Perspective on Portfolio Insurance as a Strategy for Limiting Portfolio Losses","authors":"Jeffrey Ludwig","doi":"10.11648/J.JIM.20211002.12","DOIUrl":"https://doi.org/10.11648/J.JIM.20211002.12","url":null,"abstract":"The invention of portfolio insurance as a strategy for limiting portfolio losses was introduced in the early 1980s and gained spectacular popularity throughout the decade, attracting between $60 billion to $90 billion from institutional money managers. The method provided downside protection against a long equity position by synthetically replicating a long put option using equity futures during an era when exchange-traded equity options were not sufficiently liquid. Unfortunately, the strategy came to a catastrophic end on the “Black Monday” of October 19, 1987, when the president of the New York Stock Exchange shut down the nascent technology used by index arbitrage program trading groups. This caused significant mispricings between futures and cash markets, making the required synthetic put option replication trading impossible. The portfolio insurance strategy was declared a complete failure and never has since regained widespread popularity. Three decades later, modern markets now fully embrace program trading, and the likelihood that program trading would be shut down for any reason ever again seems impossible. This paper examines how portfolio insurance would have performed during the 1991 to 2020 time period, during which 3 major stock market crashes occurred and program trading was never shut down. The paper concludes that portfolio insurance received unjust blame for the 1987 crash and its abandonment since then has been irrational and unfortunate for those seeking long equity exposure with a cost-efficient strategy for limiting portfolio losses.","PeriodicalId":116369,"journal":{"name":"Journal of Investment and Management","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127627952","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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