Anna Grosman, Simon J. D. Schillebeeckx, Rashik Parmar, Jakob Haesler
We investigate the role firms play in dealing with data protection. We draw parallels between the ethical challenges regarding data capabilities and other social issues that over time have instigated the evolution of corporate responsibilities. Our contention is that we can learn from the history of social issues in management and corporate social responsibility to clarify under which conditions new issues become the prerogative of firm social responsibility. Our review suggests that issues evolve into responsibilities if the value creation potential underlying the issue is significant (condition) and if specific pivotal events (trigger) heighten attention from policy makers and civil society. We examine under which conditions organizations assume new responsibilities to either create value from data or attenuate the risk of value destruction.
{"title":"Data (and) Responsibility","authors":"Anna Grosman, Simon J. D. Schillebeeckx, Rashik Parmar, Jakob Haesler","doi":"10.2139/ssrn.3784910","DOIUrl":"https://doi.org/10.2139/ssrn.3784910","url":null,"abstract":"We investigate the role firms play in dealing with data protection. We draw parallels between the ethical challenges regarding data capabilities and other social issues that over time have instigated the evolution of corporate responsibilities. Our contention is that we can learn from the history of social issues in management and corporate social responsibility to clarify under which conditions new issues become the prerogative of firm social responsibility. Our review suggests that issues evolve into responsibilities if the value creation potential underlying the issue is significant (condition) and if specific pivotal events (trigger) heighten attention from policy makers and civil society. We examine under which conditions organizations assume new responsibilities to either create value from data or attenuate the risk of value destruction.","PeriodicalId":377322,"journal":{"name":"Investments eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129213782","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}
Frank O. Kwabi, Chandra Thapa, K. Paudyal, Emmanuel Adegbite
Economic reasoning suggests that financial globalization that encourages optimal international portfolio investments should improve investor protection standards (IPS) of a country. In practice, however, investors manifest varying degrees of suboptimal international portfolio allocations. Using a panel dataset covering 44 countries spanning over 15 years we examine whether suboptimal equity portfolio allocation in part is associated with the cross-country variations in IPS. Consistent with economic reasoning we find robust indications that international portfolio allocation may play an important role in the development of IPS. More specifically, the quality of IPS improves with higher degrees of optimal international equity portfolio allocation of domestic and foreign investors.
{"title":"Biases in International Portfolio Allocation and Investor Protection Standards","authors":"Frank O. Kwabi, Chandra Thapa, K. Paudyal, Emmanuel Adegbite","doi":"10.2139/ssrn.3507419","DOIUrl":"https://doi.org/10.2139/ssrn.3507419","url":null,"abstract":"Economic reasoning suggests that financial globalization that encourages optimal international portfolio investments should improve investor protection standards (IPS) of a country. In practice, however, investors manifest varying degrees of suboptimal international portfolio allocations. Using a panel dataset covering 44 countries spanning over 15 years we examine whether suboptimal equity portfolio allocation in part is associated with the cross-country variations in IPS. Consistent with economic reasoning we find robust indications that international portfolio allocation may play an important role in the development of IPS. More specifically, the quality of IPS improves with higher degrees of optimal international equity portfolio allocation of domestic and foreign investors.","PeriodicalId":377322,"journal":{"name":"Investments eJournal","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114895581","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}
Beyond the single period Modern Portfolio Theory (Markowitz, 1955), the seminal work by Robert C. Merton (1969) solved elegantly a multi-period (finite time horizon) continuous portfolio optimization problem under the random walk market assumption. Due to the mathematical challenges, there has been little further theoretical breakthrough in nearly half century. Instead, popular financial planning and investment practice such as time diversification and target-date/glide-path based funds, deviate from the Merton/Samuelson’s teachings of long term static allocation. From a more realistic view of capital market and financial planning economics, what is the right asset allocation policy for lifetime investments and consumption? In this study, I replace the simplified stock market assumption in the classical Merton model with a Markov chain Bull/Bear market regime switching formulation (Wonham, 1965). The bull or bear market probability is calculated based on the price history of a broad market index such as the S&P 500 Composite. To maximize the total utility of discounted consumptions and bequest wealth value at the end of lifetime planning horizon, I derive a quantitative portfolio selection rule. It turns out that dynamic weight to risky asset is approximated solely as a quadratic function of the conditional bull market probability. From a market timing perspective, the active probabilistic rule has both trend following and mean reversion mechanisms at different stages of the anticipated market cycle. For practical purposes, I demonstrate the analytical approach in two sets of back-tests under different investment/consumption preferences. First, for a pure investor with zero consumption requirements, the objective reduces to maximizing terminal wealth. I found the optimal dynamic investment leverage or exposure to a risky stock market index depends not only on investor risk preference and the index’s average attributes of market return premium and volatility, but also the “strength” of the bull/bear market cycles, and the point-in-time market regime probability itself. Second, random walk or bull/bear market characteristics assume no impact on how an investor values the utility of his/her bequest wealth relative to lifetime consumption. In this case, the probabilistic portfolio selection is shown to out-perform easily in total utilities either the buy-and-hold static allocation or a typical linearly de-risking target-date glide path. By integrating the cyclical capital market view into a multi-period portfolio optimization framework, the current probabilistic formulation is ground breaking, despite the need for further refinement and analysis. With a fast changing landscape in global markets, the current approach of market cycle based dynamic allocation and active management is particularly important. It has the potential to seriously impact the theory and practice of investment management and financial planning, for the long term.
在单周期现代投资组合理论(Markowitz, 1955)之外，Robert C. Merton(1969)的开创性工作优雅地解决了随机游走市场假设下的多周期(有限时间范围)连续投资组合优化问题。由于数学上的挑战，近半个世纪以来几乎没有进一步的理论突破。相反，流行的财务规划和投资实践，如时间多样化和基于目标日期/滑动路径的基金，偏离了默顿/萨缪尔森关于长期静态配置的教导。从更现实的资本市场和财务规划经济学的角度来看，终身投资和消费的正确资产配置政策是什么?在本研究中，我用马尔科夫链牛市/熊市制度转换公式(Wonham, 1965)取代了经典默顿模型中简化的股票市场假设。牛市或熊市的概率是根据一个广泛的市场指数，如标准普尔500综合指数的价格历史来计算的。为了最大限度地利用贴现消费和遗赠财富价值的总效用，我推导了一个量化的投资组合选择规则。结果表明，风险资产的动态权重仅近似为条件牛市概率的二次函数。从市场择时角度看，主动概率法则在预期市场周期的不同阶段既有趋势追随机制，也有均值回归机制。出于实际目的，我在不同投资/消费偏好下的两组回测中演示了分析方法。首先，对于零消费要求的纯投资者，目标降低为终端财富最大化。我发现最优的动态投资杠杆或风险敞口不仅取决于投资者的风险偏好和指数的市场回报溢价和波动率的平均属性，还取决于牛市/熊市周期的“强度”，以及市场机制的时间点概率本身。其次，随机游走或牛市/熊市特征假设对投资者如何评估其遗产财富相对于终生消费的效用没有影响。在这种情况下，概率投资组合选择在总效用中表现得很好，无论是买入并持有的静态配置还是典型的线性降低风险的目标日期下滑路径。通过将周期性资本市场的观点整合到一个多时期的投资组合优化框架中，尽管需要进一步的细化和分析，但目前的概率公式是开创性的。随着全球市场格局的快速变化，当前基于市场周期的动态配置和主动管理方法尤为重要。从长远来看，它有可能严重影响投资管理和财务规划的理论和实践。
{"title":"Lifetime Active Portfolio Selection for Investments and Consumption – A Bull Bear Market Cycle Based Probabilistic Approach","authors":"Z. George Yang","doi":"10.2139/ssrn.3168599","DOIUrl":"https://doi.org/10.2139/ssrn.3168599","url":null,"abstract":"Beyond the single period Modern Portfolio Theory (Markowitz, 1955), the seminal work by Robert C. Merton (1969) solved elegantly a multi-period (finite time horizon) continuous portfolio optimization problem under the random walk market assumption. Due to the mathematical challenges, there has been little further theoretical breakthrough in nearly half century. Instead, popular financial planning and investment practice such as time diversification and target-date/glide-path based funds, deviate from the Merton/Samuelson’s teachings of long term static allocation. From a more realistic view of capital market and financial planning economics, what is the right asset allocation policy for lifetime investments and consumption? In this study, I replace the simplified stock market assumption in the classical Merton model with a Markov chain Bull/Bear market regime switching formulation (Wonham, 1965). The bull or bear market probability is calculated based on the price history of a broad market index such as the S&P 500 Composite. To maximize the total utility of discounted consumptions and bequest wealth value at the end of lifetime planning horizon, I derive a quantitative portfolio selection rule. It turns out that dynamic weight to risky asset is approximated solely as a quadratic function of the conditional bull market probability. From a market timing perspective, the active probabilistic rule has both trend following and mean reversion mechanisms at different stages of the anticipated market cycle. For practical purposes, I demonstrate the analytical approach in two sets of back-tests under different investment/consumption preferences. First, for a pure investor with zero consumption requirements, the objective reduces to maximizing terminal wealth. I found the optimal dynamic investment leverage or exposure to a risky stock market index depends not only on investor risk preference and the index’s average attributes of market return premium and volatility, but also the “strength” of the bull/bear market cycles, and the point-in-time market regime probability itself. Second, random walk or bull/bear market characteristics assume no impact on how an investor values the utility of his/her bequest wealth relative to lifetime consumption. In this case, the probabilistic portfolio selection is shown to out-perform easily in total utilities either the buy-and-hold static allocation or a typical linearly de-risking target-date glide path. By integrating the cyclical capital market view into a multi-period portfolio optimization framework, the current probabilistic formulation is ground breaking, despite the need for further refinement and analysis. With a fast changing landscape in global markets, the current approach of market cycle based dynamic allocation and active management is particularly important. It has the potential to seriously impact the theory and practice of investment management and financial planning, for the long term.","PeriodicalId":377322,"journal":{"name":"Investments eJournal","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-02-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121711236","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}
This paper argues that no good reasons have been put forward for why all the costs of investment management, both visible and hidden, should not ultimately be fully disclosed. They are after all genuine costs borne by the investor. Furthermore, recent studies have shown that hidden costs are at least as high as visible costs, if not much higher. Full transparency could be introduced in stages.
{"title":"On the Disclosure of the Costs of Investment Management","authors":"D. Blake","doi":"10.2139/ssrn.3612994","DOIUrl":"https://doi.org/10.2139/ssrn.3612994","url":null,"abstract":"This paper argues that no good reasons have been put forward for why all the costs of investment management, both visible and hidden, should not ultimately be fully disclosed. They are after all genuine costs borne by the investor. Furthermore, recent studies have shown that hidden costs are at least as high as visible costs, if not much higher. Full transparency could be introduced in stages.","PeriodicalId":377322,"journal":{"name":"Investments eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126982044","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}
Risk and return go together. For a higher return, one has to take a higher risk. Risk cannot be avoided but definitely can be minimized through diversification. Mutual funds do risk diversification by investing in various companies. But still, they have to face risk when the markets are highly volatile. Investor’s perception towards risk and return is continuously changing. To diversify the risk, the investors choose the best fund to get more return. Investors use various evaluation measures like Sharpe, Treynor, and Jensen measures, for selecting the best fund to minimize the risk and maximize the return. Is all evaluation measure giving the same proposal to the investor? To know this, Research is focusing the Comparative study on various portfolio evaluation measures with respect to equity growth mutual funds.
{"title":"A Comparative Study on Portfolio Evaluation Measures with Respect to Equity Growth Mutual Funds","authors":"Nagendra Marisetty","doi":"10.2139/ssrn.3774294","DOIUrl":"https://doi.org/10.2139/ssrn.3774294","url":null,"abstract":"Risk and return go together. For a higher return, one has to take a higher risk. Risk cannot be avoided but definitely can be minimized through diversification. Mutual funds do risk diversification by investing in various companies. But still, they have to face risk when the markets are highly volatile. Investor’s perception towards risk and return is continuously changing. To diversify the risk, the investors choose the best fund to get more return. Investors use various evaluation measures like Sharpe, Treynor, and Jensen measures, for selecting the best fund to minimize the risk and maximize the return. Is all evaluation measure giving the same proposal to the investor? To know this, Research is focusing the Comparative study on various portfolio evaluation measures with respect to equity growth mutual funds.","PeriodicalId":377322,"journal":{"name":"Investments eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122397152","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}
In a field experiment using Mint, a personal financial management application operating in the United States and Canada, we investigate mechanisms to reduce overdraft fees. A sample of users identified via an AI algorithm developed by Mint as having a propensity for overdraft were sent alert notices to test the efficacy of the different framings in reducing the number of overdraft fees. We employ parametric identifications, as well as time-to-event semi-parametric analysis to learn that sending a reminder proved effective in and of itself, and the impact was significantly enhanced by simplifying the message. A negative framing of the simplified version elicited greater engagement and had stronger impact than a positive framing. Significant effects were obtained predominantly among the population with medium to high annual incomes. We relate our findings to the literature on limited attention and the ostrich phenomenon. Our work also contributes to the literatures on fintech, artificial intelligence, and human interaction.
{"title":"Using AI and Behavioral Finance to Cope with Limited Attention and Reduce Overdraft Fees","authors":"Dan Ben-David, Ido Mintz, Orly Sade","doi":"10.2139/ssrn.3422198","DOIUrl":"https://doi.org/10.2139/ssrn.3422198","url":null,"abstract":"In a field experiment using Mint, a personal financial management application operating in the United States and Canada, we investigate mechanisms to reduce overdraft fees. A sample of users identified via an AI algorithm developed by Mint as having a propensity for overdraft were sent alert notices to test the efficacy of the different framings in reducing the number of overdraft fees. We employ parametric identifications, as well as time-to-event semi-parametric analysis to learn that sending a reminder proved effective in and of itself, and the impact was significantly enhanced by simplifying the message. A negative framing of the simplified version elicited greater engagement and had stronger impact than a positive framing. Significant effects were obtained predominantly among the population with medium to high annual incomes. We relate our findings to the literature on limited attention and the ostrich phenomenon. Our work also contributes to the literatures on fintech, artificial intelligence, and human interaction.","PeriodicalId":377322,"journal":{"name":"Investments eJournal","volume":"1996 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125572928","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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