Pub Date : 2023-09-12DOI: 10.1080/10293523.2023.2245246
Oluwatomisin J. Oyewole, Ismail O. Fasanya, Mamdouh Abdulaziz Saleh Al-Faryan
ABSTRACT This paper examines the spillovers across BRICS currency markets during the Russia–Ukraine war. We observe that the connectedness across the BRICS currency markets is stronger during than before the war and the average-based connectedness framework shows a moderate level of connectedness across the BRICS currencies. However, using a quantile approach, the level of connectedness across the currencies is much higher at both tails of the conditional distribution. Overall, the result shows that war in Ukraine affect the connectedness among the BRICS currency markets and are stronger during extreme positive and negative events such as the war, indicating that the application of the average-based framework of connectedness to BRICS currencies is inadequate and restrictive.
{"title":"Quantile dependencies across BRICS currency markets in time of crisis: Analysis of the Russia–Ukraine war","authors":"Oluwatomisin J. Oyewole, Ismail O. Fasanya, Mamdouh Abdulaziz Saleh Al-Faryan","doi":"10.1080/10293523.2023.2245246","DOIUrl":"https://doi.org/10.1080/10293523.2023.2245246","url":null,"abstract":"ABSTRACT This paper examines the spillovers across BRICS currency markets during the Russia–Ukraine war. We observe that the connectedness across the BRICS currency markets is stronger during than before the war and the average-based connectedness framework shows a moderate level of connectedness across the BRICS currencies. However, using a quantile approach, the level of connectedness across the currencies is much higher at both tails of the conditional distribution. Overall, the result shows that war in Ukraine affect the connectedness among the BRICS currency markets and are stronger during extreme positive and negative events such as the war, indicating that the application of the average-based framework of connectedness to BRICS currencies is inadequate and restrictive.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"852 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135878586","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-11DOI: 10.1080/10293523.2023.2240562
Huifu Nong
The connectedness of stock markets is inevitable because of the rapid increases in global financialisation, financial liberalisation, and integration of national economies. This study therefore increases the number of stock markets included in the LASSO-VAR model to separately estimate the connectedness of the daily-frequency market returns and volatility of a sample comprising 50 selected stock markets between 2011 and 2021. We observe that the total connectedness index changes substantially over time, exhibiting the highest change during market turbulences, i.e., the beginning of COVID-19. We also show that the transmission of shocks originates from most European markets and then impacting Asian–Pacific markets, although their intensities exhibit significant time variations. Finally, we find that macroeconomic news and uncertainties are drivers of total connectedness, while directional total connectedness is mainly driven by global rather than domestic factors.
{"title":"Return and volatility connectedness across stock markets: A global perspective","authors":"Huifu Nong","doi":"10.1080/10293523.2023.2240562","DOIUrl":"https://doi.org/10.1080/10293523.2023.2240562","url":null,"abstract":"The connectedness of stock markets is inevitable because of the rapid increases in global financialisation, financial liberalisation, and integration of national economies. This study therefore increases the number of stock markets included in the LASSO-VAR model to separately estimate the connectedness of the daily-frequency market returns and volatility of a sample comprising 50 selected stock markets between 2011 and 2021. We observe that the total connectedness index changes substantially over time, exhibiting the highest change during market turbulences, i.e., the beginning of COVID-19. We also show that the transmission of shocks originates from most European markets and then impacting Asian–Pacific markets, although their intensities exhibit significant time variations. Finally, we find that macroeconomic news and uncertainties are drivers of total connectedness, while directional total connectedness is mainly driven by global rather than domestic factors.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135981639","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-04DOI: 10.1080/10293523.2023.2240563
Sanveer Hariparsad, E. Maré
ABSTRACT This paper studies a long butterfly strategy (which is immune to parallel curve shifts but exposed to non-parallel curve shifts) on the South African interest rate swap curve. Ten swap butterfly risk factors are identified using monthly South African swap data from 2001–2022. The top ranked butterfly strategies displayed strong and persistent outperformance over the bottom ranked strategies for each factor, resulting in improved risk-adjusted and absolute returns especially during positive and steep twists, and bull and bear flattening curve scenarios. Trade costs can be significant, so having a pragmatic rebalancing strategy with efficient market makers that limit trade costs to 1bps of spread make these swap butterfly risk factors an effective and successful portable alpha strategy.
{"title":"Examining swap butterfly risk premia in South Africa","authors":"Sanveer Hariparsad, E. Maré","doi":"10.1080/10293523.2023.2240563","DOIUrl":"https://doi.org/10.1080/10293523.2023.2240563","url":null,"abstract":"ABSTRACT This paper studies a long butterfly strategy (which is immune to parallel curve shifts but exposed to non-parallel curve shifts) on the South African interest rate swap curve. Ten swap butterfly risk factors are identified using monthly South African swap data from 2001–2022. The top ranked butterfly strategies displayed strong and persistent outperformance over the bottom ranked strategies for each factor, resulting in improved risk-adjusted and absolute returns especially during positive and steep twists, and bull and bear flattening curve scenarios. Trade costs can be significant, so having a pragmatic rebalancing strategy with efficient market makers that limit trade costs to 1bps of spread make these swap butterfly risk factors an effective and successful portable alpha strategy.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":" ","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46822464","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-04DOI: 10.1080/10293523.2023.2246244
Young C. Joo, Sung Y. Park
ABSTRACT Covariance matrix estimation is of great importance in formulating a portfolio. The sample covariance matrix, the most frequently used estimator, is well known to be unstable due to the estimation error, when the sample size is small. A shrinkage approach is one of the popular methods for estimating a stable covariance matrix. This study compares and evaluates performance of the three different shrinkage type covariance matrix estimators for the optimal portfolio selection strategy. To evaluate the performance of the covariance matrix estimators, we consider both the in- and out-of-sample value at risk, conditional value at risk, Sharpe-ratio, adjusted Sharpe-ratio, and a beta of the portfolio selection strategies. Empirical results show that a portfolio using shrinkage covariance matrix estimator with the identity matrix or constant correlation matrix as the shrinkage target tends to have a lower risk. We also find that the random matrix approach has a relatively high out-of-sample return and Sharpe-ratio under the small sample size cases.
{"title":"Which shrinkage is better? Portfolio selection with a cleaned random matrix","authors":"Young C. Joo, Sung Y. Park","doi":"10.1080/10293523.2023.2246244","DOIUrl":"https://doi.org/10.1080/10293523.2023.2246244","url":null,"abstract":"ABSTRACT Covariance matrix estimation is of great importance in formulating a portfolio. The sample covariance matrix, the most frequently used estimator, is well known to be unstable due to the estimation error, when the sample size is small. A shrinkage approach is one of the popular methods for estimating a stable covariance matrix. This study compares and evaluates performance of the three different shrinkage type covariance matrix estimators for the optimal portfolio selection strategy. To evaluate the performance of the covariance matrix estimators, we consider both the in- and out-of-sample value at risk, conditional value at risk, Sharpe-ratio, adjusted Sharpe-ratio, and a beta of the portfolio selection strategies. Empirical results show that a portfolio using shrinkage covariance matrix estimator with the identity matrix or constant correlation matrix as the shrinkage target tends to have a lower risk. We also find that the random matrix approach has a relatively high out-of-sample return and Sharpe-ratio under the small sample size cases.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":" ","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46623609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-12DOI: 10.1080/10293523.2023.2240560
Dirk Johan van Vuuren, Michael Ward, Chris Muller
Listed companies can acquire capital through a rights issue where existing shareholders have a preference in buying additional shares at a discounted rate, in proportion to their existing holding. ...
上市公司可以通过配股获得资本，现有股东可以优先按照现有持股比例以折扣率购买额外股份. ...
{"title":"Equity issuance and share price performance on the Johannesburg Stock Exchange","authors":"Dirk Johan van Vuuren, Michael Ward, Chris Muller","doi":"10.1080/10293523.2023.2240560","DOIUrl":"https://doi.org/10.1080/10293523.2023.2240560","url":null,"abstract":"Listed companies can acquire capital through a rights issue where existing shareholders have a preference in buying additional shares at a discounted rate, in proportion to their existing holding. ...","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"1 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138536604","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-09DOI: 10.1080/10293523.2023.2230750
Emlyn Flint
ABSTRACT In 2022, the South African Pensions Fund Act was changed to allow funds to allocate up to 45% of their portfolio to offshore investments. This is a material change to fund regulations and naturally prompts the question: what is the optimal offshore allocation? In this research, we implement two allocation frameworks commonly used in practice and show that such a question has no universally optimal answer and that any solution will be determined principally by five investment factors, with the most important of these being an investor’s return objectives or risk limits, and the investor’s ability to hedge currency risk. Based on these factors, we suggest practical guidelines to aid in setting strategic offshore allocation policies.
{"title":"What is the optimal offshore allocation for South African investors?","authors":"Emlyn Flint","doi":"10.1080/10293523.2023.2230750","DOIUrl":"https://doi.org/10.1080/10293523.2023.2230750","url":null,"abstract":"ABSTRACT In 2022, the South African Pensions Fund Act was changed to allow funds to allocate up to 45% of their portfolio to offshore investments. This is a material change to fund regulations and naturally prompts the question: what is the optimal offshore allocation? In this research, we implement two allocation frameworks commonly used in practice and show that such a question has no universally optimal answer and that any solution will be determined principally by five investment factors, with the most important of these being an investor’s return objectives or risk limits, and the investor’s ability to hedge currency risk. Based on these factors, we suggest practical guidelines to aid in setting strategic offshore allocation policies.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":" ","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49442587","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-19DOI: 10.1080/10293523.2023.2223436
Elizabeth-Ann van der Westhuizen, Leon M. Brümmer, C. V. van Schalkwyk
{"title":"The impact of news on South African sovereign bond yields","authors":"Elizabeth-Ann van der Westhuizen, Leon M. Brümmer, C. V. van Schalkwyk","doi":"10.1080/10293523.2023.2223436","DOIUrl":"https://doi.org/10.1080/10293523.2023.2223436","url":null,"abstract":"","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":" ","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45053154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-17DOI: 10.1080/10293523.2023.2230656
Peter Vaz da Fonseca, M. Jucá, João Paulo da Torre Vieito
{"title":"The influence of crises on the financial position of multinationals in emerging markets","authors":"Peter Vaz da Fonseca, M. Jucá, João Paulo da Torre Vieito","doi":"10.1080/10293523.2023.2230656","DOIUrl":"https://doi.org/10.1080/10293523.2023.2230656","url":null,"abstract":"","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":" ","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43301846","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-28DOI: 10.1080/10293523.2023.2218124
Rui Cheng, Hyeongjun Kim, Doojin Ryu
{"title":"ESG performance and firm value in the Chinese market","authors":"Rui Cheng, Hyeongjun Kim, Doojin Ryu","doi":"10.1080/10293523.2023.2218124","DOIUrl":"https://doi.org/10.1080/10293523.2023.2218124","url":null,"abstract":"","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":" ","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47652399","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-03DOI: 10.1080/10293523.2023.2208904
R. Ou
ABSTRACT Despite the presence of arbitrage mechanisms, large premiums (or discounts) for Asia Pacific country ETFs in the US market could still exist in the short run due to the time gap between trading hours of the US and Asia Pacific markets. The price of a country ETF is not solely determined by net asset value but is also affected by information released during US trading hours. In this study, I examine six Asia Pacific country ETFs from 2006 to 2020, using linear regression as well as tree-based ensemble methods to predict the next-day return of the net asset value by analysing information from country ETFs and the S&P 500 Index. The results indicate that the trading hours of local markets significantly influence the predictive power of country ETFs and the S&P 500 Index. The findings suggest that the returns of these ETFs do not necessarily overreact to the US market but instead reflect short-term expectations of the performance of underlying indices. Furthermore, I extend the model to analyse overnight and daytime returns and identify the price correction that occurs during daytime trading hours.
{"title":"Price discovery or overreaction? A study on the reaction of Asia Pacific country ETFs to the US stock market","authors":"R. Ou","doi":"10.1080/10293523.2023.2208904","DOIUrl":"https://doi.org/10.1080/10293523.2023.2208904","url":null,"abstract":"ABSTRACT Despite the presence of arbitrage mechanisms, large premiums (or discounts) for Asia Pacific country ETFs in the US market could still exist in the short run due to the time gap between trading hours of the US and Asia Pacific markets. The price of a country ETF is not solely determined by net asset value but is also affected by information released during US trading hours. In this study, I examine six Asia Pacific country ETFs from 2006 to 2020, using linear regression as well as tree-based ensemble methods to predict the next-day return of the net asset value by analysing information from country ETFs and the S&P 500 Index. The results indicate that the trading hours of local markets significantly influence the predictive power of country ETFs and the S&P 500 Index. The findings suggest that the returns of these ETFs do not necessarily overreact to the US market but instead reflect short-term expectations of the performance of underlying indices. Furthermore, I extend the model to analyse overnight and daytime returns and identify the price correction that occurs during daytime trading hours.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"1 1","pages":""},"PeriodicalIF":0.9,"publicationDate":"2023-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43292668","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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