This article draws its primary motivation from the steady rise in the participation and involvement of venture capital/private equity (VC/PE) funds in the Indian IPO market over the last couple of decades. The study explores the involvement quality of the VC/PE managers and its impact on the long-run equity and operating performance of Indian firms issuing securities through initial public offerings (IPOs). Using data for 173 IPOs backed by VC/PE funding (out of a total of 625 IPOs) from 2000 to 2016, the authors show that post-issue, both equity market performance and operating performance of these VC/PE-backed IPOs are unimpressive in general. The information asymmetry, mispricing, and “timing the market” do not seem to be reasons for such long-term underperformance. The authors argue that it may be a case of too much money chasing too few winners in the Indian VC/PE-backed IPO market. The study utilizes a unique, hand-collected data set (from IPO prospectuses) on VC/PE firms’ involvement quality. Findings indicate that the duration and the size of the stake that the VC/PE firms hold in the pre-issue period positively affect the post-issue performance of IPOs. These findings lend support to the previously theorized “monitoring” and “certification” role of VC/PE firms. Key Findings ▪ Both long-term market and operating performance of VC/PE-backed IPOs in India from 2000 to 2016 were unimpressive. ▪ The quality of VC/PE involvement has some impact on the post-IPO performance of investee firms. ▪ The VC/PE-backed IPOs are not engaged in timing (hot and cold periods) the market.
{"title":"Impact of Quality of Involvement of VC/PE in IPO Firms: Evidence from India","authors":"S. G. Deb, Pradip Banerjee","doi":"10.3905/JAI.2021.1.138","DOIUrl":"https://doi.org/10.3905/JAI.2021.1.138","url":null,"abstract":"This article draws its primary motivation from the steady rise in the participation and involvement of venture capital/private equity (VC/PE) funds in the Indian IPO market over the last couple of decades. The study explores the involvement quality of the VC/PE managers and its impact on the long-run equity and operating performance of Indian firms issuing securities through initial public offerings (IPOs). Using data for 173 IPOs backed by VC/PE funding (out of a total of 625 IPOs) from 2000 to 2016, the authors show that post-issue, both equity market performance and operating performance of these VC/PE-backed IPOs are unimpressive in general. The information asymmetry, mispricing, and “timing the market” do not seem to be reasons for such long-term underperformance. The authors argue that it may be a case of too much money chasing too few winners in the Indian VC/PE-backed IPO market. The study utilizes a unique, hand-collected data set (from IPO prospectuses) on VC/PE firms’ involvement quality. Findings indicate that the duration and the size of the stake that the VC/PE firms hold in the pre-issue period positively affect the post-issue performance of IPOs. These findings lend support to the previously theorized “monitoring” and “certification” role of VC/PE firms. Key Findings ▪ Both long-term market and operating performance of VC/PE-backed IPOs in India from 2000 to 2016 were unimpressive. ▪ The quality of VC/PE involvement has some impact on the post-IPO performance of investee firms. ▪ The VC/PE-backed IPOs are not engaged in timing (hot and cold periods) the market.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2021-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45331517","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}
Practical Applications In Manager Characteristics and Hedge Fund Returns, Liquidity, and Survival, published in the Fall 2020 issue of The Journal of Alternative Investments, Hyuna Park empirically examines the impact many hedge fund attributes have on fund performance and survival rates. She examines the relationships between manager education variables and hedge fund returns, risk, alpha, size, age, fees, share restrictions, and fund assets’ liquidity. Manager education proxies include graduating from a top university, holding a professional certification, having a PhD, and having a strong alumni network. Whereas previous studies have found that better-educated managers have better returns, they did not control for liquidity. The previous results could be due to an illiquidity premium. Park examines risk-adjusted returns, accounting for liquidity, and finds a relationship between manager education and liquidity of hedge fund shares and the hedge fund’s assets. She also finds certifications and graduating from elite institutions favorably impact the survival rates of hedge funds.
Hyuna Park在《另类投资杂志》(the Journal of Alternative Investments) 2020年秋季刊上发表的《经理特征与对冲基金回报、流动性和生存的实际应用》一文中，实证研究了许多对冲基金属性对基金业绩和存活率的影响。她研究了经理教育变量与对冲基金收益、风险、alpha、规模、年龄、费用、股份限制和基金资产流动性之间的关系。经理人的学历指标包括:毕业于顶尖大学、持有专业证书、拥有博士学位、拥有强大的校友网络。尽管先前的研究发现，受过更好教育的经理人有更好的回报，但他们没有控制流动性。之前的结果可能是由于非流动性溢价。Park研究了考虑流动性的风险调整收益，并发现了经理教育与对冲基金股份和对冲基金资产的流动性之间的关系。她还发现，精英机构的证书和毕业对对冲基金的存活率有积极影响。
{"title":"Practical Applications of Manager Characteristics and Hedge Fund Returns, Liquidity, and Survival","authors":"Hyuna Park","doi":"10.3905/JAI.23.S2.043","DOIUrl":"https://doi.org/10.3905/JAI.23.S2.043","url":null,"abstract":"Practical Applications In Manager Characteristics and Hedge Fund Returns, Liquidity, and Survival, published in the Fall 2020 issue of The Journal of Alternative Investments, Hyuna Park empirically examines the impact many hedge fund attributes have on fund performance and survival rates. She examines the relationships between manager education variables and hedge fund returns, risk, alpha, size, age, fees, share restrictions, and fund assets’ liquidity. Manager education proxies include graduating from a top university, holding a professional certification, having a PhD, and having a strong alumni network. Whereas previous studies have found that better-educated managers have better returns, they did not control for liquidity. The previous results could be due to an illiquidity premium. Park examines risk-adjusted returns, accounting for liquidity, and finds a relationship between manager education and liquidity of hedge fund shares and the hedge fund’s assets. She also finds certifications and graduating from elite institutions favorably impact the survival rates of hedge funds.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2021-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47950609","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}
Practical Applications In Carry and Time-Series Momentum: A Match Made in Heaven, published in the Fall 2020 issue of The Journal of Alternative Investments, authors Marat Molyboga, Junkai Qian, and Chaohua He seek to determine if managers can improve the performance of momentum strategies in the futures markets by combining time-series signals with the sign of the asset’s basis (i.e., the difference between the local spot price and the futures price). Past studies indicate that managers can improve active strategies’ risk-adjusted returns by combining multiple trading signals. Since the basis is a key input for carry trades in the futures markets, it stands to reason that filtering momentum trades on the sign of the basis would improve strategy returns. The authors investigate this hypothesis across commodities, equities, fixed income, and foreign exchange futures markets. They account for transaction costs and examine the impact of early and late business cycle expansions and recessions. Among other interesting results, it turns out that the strategy performs particularly well during recessions.
{"title":"Practical Applications of Carry and Time-Series Momentum: A Match Made in Heaven","authors":"Marat Molyboga, Jun Qian, Chaohua He","doi":"10.3905/JAI.23.S2.042","DOIUrl":"https://doi.org/10.3905/JAI.23.S2.042","url":null,"abstract":"Practical Applications In Carry and Time-Series Momentum: A Match Made in Heaven, published in the Fall 2020 issue of The Journal of Alternative Investments, authors Marat Molyboga, Junkai Qian, and Chaohua He seek to determine if managers can improve the performance of momentum strategies in the futures markets by combining time-series signals with the sign of the asset’s basis (i.e., the difference between the local spot price and the futures price). Past studies indicate that managers can improve active strategies’ risk-adjusted returns by combining multiple trading signals. Since the basis is a key input for carry trades in the futures markets, it stands to reason that filtering momentum trades on the sign of the basis would improve strategy returns. The authors investigate this hypothesis across commodities, equities, fixed income, and foreign exchange futures markets. They account for transaction costs and examine the impact of early and late business cycle expansions and recessions. Among other interesting results, it turns out that the strategy performs particularly well during recessions.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2021-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43324708","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}
Leadership transition in private equity firms is an understudied field, despite the important, albeit controversial, role such firms play in developed economies. The authors analyzed 260 firms in an empirical study, supplemented by qualitative interviews with a small sample of highly experienced LPs and GP founders and leaders who have experienced such transitions firsthand. Their research shows that private equity transitions manifest very differently from those in better studied public corporations. It appears that a) founders and leaders in GPs stay in their positions considerably longer than other sectors, b) are more likely to move on once they are outperforming, and c) if underperforming, their firms are more likely to see an uplift from a transition. In addition, d) transitions are idiosyncratic, internally driven processes with little accepted best practice or governance, e) some frictions frequently characterize these processes, and f) LPs have observed many suboptimal processes and prefer greater transparency. Key Findings ▪ Leadership turnover in private equity is exceptionally low relative to other corporate structures. ▪ Transitions have little accepted best practice or governance and are instead driven by the philosophy of the founder and the context the firm finds itself in. They are typically (especially founder transitions) complex multiyear processes with substantial frictions. ▪ LPs increasingly recognize the importance of well-executed transitions on the value of their investments but are less than impressed, on the whole, by the performance of the industry.
{"title":"When to Go and How to Go? Founder and Leader Transition in Private Equity Firms","authors":"J. Lerner, D. Noble","doi":"10.2139/ssrn.3924331","DOIUrl":"https://doi.org/10.2139/ssrn.3924331","url":null,"abstract":"Leadership transition in private equity firms is an understudied field, despite the important, albeit controversial, role such firms play in developed economies. The authors analyzed 260 firms in an empirical study, supplemented by qualitative interviews with a small sample of highly experienced LPs and GP founders and leaders who have experienced such transitions firsthand. Their research shows that private equity transitions manifest very differently from those in better studied public corporations. It appears that a) founders and leaders in GPs stay in their positions considerably longer than other sectors, b) are more likely to move on once they are outperforming, and c) if underperforming, their firms are more likely to see an uplift from a transition. In addition, d) transitions are idiosyncratic, internally driven processes with little accepted best practice or governance, e) some frictions frequently characterize these processes, and f) LPs have observed many suboptimal processes and prefer greater transparency. Key Findings ▪ Leadership turnover in private equity is exceptionally low relative to other corporate structures. ▪ Transitions have little accepted best practice or governance and are instead driven by the philosophy of the founder and the context the firm finds itself in. They are typically (especially founder transitions) complex multiyear processes with substantial frictions. ▪ LPs increasingly recognize the importance of well-executed transitions on the value of their investments but are less than impressed, on the whole, by the performance of the industry.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2021-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47854561","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 : 2020-12-31DOI: 10.3905/jai.2020.23.3.001
Hossein Kazemi
{"title":"Editor’s Letter","authors":"Hossein Kazemi","doi":"10.3905/jai.2020.23.3.001","DOIUrl":"https://doi.org/10.3905/jai.2020.23.3.001","url":null,"abstract":"","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2020-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48522016","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}
Practical Applications In Investigating the Investment Behaviors in Cryptocurrency from the Fall 2020 issue of The Journal of Alternative Investments, authors Dingli Xi, Timothy Ian O’Brie, and Elnaz Irannezhad (all of the University of Queensland in St. Lucia, Australia) investigate who is likely to invest in cryptocurrency initial coin offerings (ICOs). ICOs constitute an innovative way to raise capital for business startups and other projects—but are also very high-risk propositions for investors. Most ICOs are scams, with only 4% successfully raising money for projects. This massive fraud and the regulatory crackdowns in response to it have made ICO fundraising much more difficult. Those who wish to raise funds via ICOs therefore need better knowledge of their target investor market. The authors surveyed ICO investors to assess who invests in ICOs and what factors encourage or discourage ICO investing. They found ICO investors tend to be male, affluent, better educated, and working in banking or IT—while women, business owners, educators, and stock market investors are less likely to invest in ICOs. Financial professionals can use these and the authors’ other findings to help advise businesses and organizations about how to market their ICOs.
{"title":"Practical Applications of Investigating the Investment Behaviors in Cryptocurrency","authors":"Dingli Xi, Timothy O'Brien, E. Irannezhad","doi":"10.3905/jai.23.s1.038","DOIUrl":"https://doi.org/10.3905/jai.23.s1.038","url":null,"abstract":"Practical Applications In Investigating the Investment Behaviors in Cryptocurrency from the Fall 2020 issue of The Journal of Alternative Investments, authors Dingli Xi, Timothy Ian O’Brie, and Elnaz Irannezhad (all of the University of Queensland in St. Lucia, Australia) investigate who is likely to invest in cryptocurrency initial coin offerings (ICOs). ICOs constitute an innovative way to raise capital for business startups and other projects—but are also very high-risk propositions for investors. Most ICOs are scams, with only 4% successfully raising money for projects. This massive fraud and the regulatory crackdowns in response to it have made ICO fundraising much more difficult. Those who wish to raise funds via ICOs therefore need better knowledge of their target investor market. The authors surveyed ICO investors to assess who invests in ICOs and what factors encourage or discourage ICO investing. They found ICO investors tend to be male, affluent, better educated, and working in banking or IT—while women, business owners, educators, and stock market investors are less likely to invest in ICOs. Financial professionals can use these and the authors’ other findings to help advise businesses and organizations about how to market their ICOs.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42263168","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}
Practical Applications In A Performance Update—Hedge Funds versus Hedged Mutual Funds:An Examination of Equity Long–Short Funds. from the Fall 2020 issue of The Journal of Alternative Investments, authors David F. McCarthy (of D. F. McCarthy LLC in Stockbridge, MA) and Brian M. Wong (an independent consultant in Mamaroneck, NY) extend the research McCarthy began in 2014. At that time, McCarthy studied equity long–short mutual funds and compared them to hedge funds that use long–short strategies. He found that long–short mutual funds offered performance and equity exposures similar to those of hedge funds—but since the available data came from a short time period (January 2008—June 2013), the findings were preliminary. In the current study, McCarthy and Wong update the 2014 study with data through December 2019. They find that long–short funds still offer lower volatility and equity exposures similar to those of hedge funds. However, long–short funds perform slightly worse than hedge funds and much worse than the S&P 500 Index. They also generate negative alpha—and no individual long–short fund generated positive alpha during the study period. This is important information for financial advisors to share with clients who are interested in equity long–short funds.
业绩更新中的实际应用——对冲基金与对冲共同基金:对股票多空基金的考察。David F. McCarthy(马萨诸塞州斯托克布里奇d.f. McCarthy LLC的作者)和Brian M. Wong(纽约州马马罗内克的独立顾问)在《另类投资杂志》(the Journal of Alternative Investments) 2020年秋季刊上对McCarthy于2014年开始的研究进行了扩展。当时，麦卡锡研究了股票多空共同基金，并将它们与使用多空策略的对冲基金进行了比较。他发现，多空共同基金提供的业绩和股票敞口与对冲基金类似，但由于现有数据来自较短的时间段(2008年1月至2013年6月)，因此研究结果只是初步的。在目前的研究中，麦卡锡和黄用截至2019年12月的数据更新了2014年的研究。他们发现，与对冲基金相比，多空基金的波动性和股票敞口仍较低。然而，多空基金的表现略逊于对冲基金，远逊于标准普尔500指数。在研究期间，它们也会产生负alpha，而且没有任何一只多空基金产生正alpha。这是财务顾问与对股票多空基金感兴趣的客户分享的重要信息。
{"title":"Practical Applications of A Performance Update—Hedge Funds versus Hedged Mutual Funds: An Examination of Equity Long—Short Funds","authors":"David McCarthy, Brian M. Wong","doi":"10.3905/jai.23.s1.037","DOIUrl":"https://doi.org/10.3905/jai.23.s1.037","url":null,"abstract":"Practical Applications In A Performance Update—Hedge Funds versus Hedged Mutual Funds:An Examination of Equity Long–Short Funds. from the Fall 2020 issue of The Journal of Alternative Investments, authors David F. McCarthy (of D. F. McCarthy LLC in Stockbridge, MA) and Brian M. Wong (an independent consultant in Mamaroneck, NY) extend the research McCarthy began in 2014. At that time, McCarthy studied equity long–short mutual funds and compared them to hedge funds that use long–short strategies. He found that long–short mutual funds offered performance and equity exposures similar to those of hedge funds—but since the available data came from a short time period (January 2008—June 2013), the findings were preliminary. In the current study, McCarthy and Wong update the 2014 study with data through December 2019. They find that long–short funds still offer lower volatility and equity exposures similar to those of hedge funds. However, long–short funds perform slightly worse than hedge funds and much worse than the S&P 500 Index. They also generate negative alpha—and no individual long–short fund generated positive alpha during the study period. This is important information for financial advisors to share with clients who are interested in equity long–short funds.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44838499","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}
Practical Applications In Value Investing for Commodities from the Fall 2020 issue of The Journal of Alternative Investments, authors Thijs Markwat (of Robeco Asset Management in Rotterdam), Jelmer Quist (of Amsterdam Data Collective), and Casper Zomerdijk (also of Robeco)—all in the Netherlands—investigate whether a value-investing strategy can work with commodities. Traditional value investing involves picking stocks that are undervalued, based on their issuing companies’ price-to-earnings (P/E) ratio, etc. But commodities are not company shares; they are basic goods like metals and fuels. So investors need another way to determine whether commodities are undervalued. The authors tested a strategy based on the theory that commodities with low long-term spot price returns are undervalued. This strategy successfully identified undervalued commodities, but the gains from it were canceled out by carry and momentum factors. So the authors used hedging to eliminate exposures to these factors, and made the portfolio sector-neutral with additional hedging by sector. This greatly improved risk-adjusted returns—increasing the Sharpe ratio to an impressive 0.79.
{"title":"Practical Applications of Value Investing for Commodities","authors":"Thijs D. Markwat, J. Quist, C. Zomerdijk","doi":"10.3905/jai.23.s1.039","DOIUrl":"https://doi.org/10.3905/jai.23.s1.039","url":null,"abstract":"Practical Applications In Value Investing for Commodities from the Fall 2020 issue of The Journal of Alternative Investments, authors Thijs Markwat (of Robeco Asset Management in Rotterdam), Jelmer Quist (of Amsterdam Data Collective), and Casper Zomerdijk (also of Robeco)—all in the Netherlands—investigate whether a value-investing strategy can work with commodities. Traditional value investing involves picking stocks that are undervalued, based on their issuing companies’ price-to-earnings (P/E) ratio, etc. But commodities are not company shares; they are basic goods like metals and fuels. So investors need another way to determine whether commodities are undervalued. The authors tested a strategy based on the theory that commodities with low long-term spot price returns are undervalued. This strategy successfully identified undervalued commodities, but the gains from it were canceled out by carry and momentum factors. So the authors used hedging to eliminate exposures to these factors, and made the portfolio sector-neutral with additional hedging by sector. This greatly improved risk-adjusted returns—increasing the Sharpe ratio to an impressive 0.79.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41960074","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}
Practical Applications In Real Estate Returns, from the Fall 2020 issue of The Journal of Alternative Investments, authors Jack Clark Francis (Baruch College) and Roger G. Ibbotson (Yale University) compare real estate investment returns to those from traditional investments like stocks and bonds. Their key focus is on real estate’s total returns—not just capital gains from rising land prices. The authors find that during the study period (1991–2018), farmland had an annualized total return of 11.4%—outperforming stocks—while residential real estate returned 9.0% and commercial real estate returned 8.5%. Most importantly, they find that rents provide the majority of investment returns from all real estate. They therefore warn investors and financial advisors not to base their investment decisions solely on how much real estate prices go up. However, they say real estate investment risk is hard to gauge because the methods used to track real estate price changes cause artificial smoothing. Real estate’s performance also shows a low correlation with that of stocks and bonds—so financial advisors and institutional investors may wish to consider adding real estate to traditional investment portfolios to help with diversification.
{"title":"Practical Applications of Real Estate Returns","authors":"J. C. Francis, R. Ibbotson","doi":"10.3905/jai.23.s1.040","DOIUrl":"https://doi.org/10.3905/jai.23.s1.040","url":null,"abstract":"Practical Applications In Real Estate Returns, from the Fall 2020 issue of The Journal of Alternative Investments, authors Jack Clark Francis (Baruch College) and Roger G. Ibbotson (Yale University) compare real estate investment returns to those from traditional investments like stocks and bonds. Their key focus is on real estate’s total returns—not just capital gains from rising land prices. The authors find that during the study period (1991–2018), farmland had an annualized total return of 11.4%—outperforming stocks—while residential real estate returned 9.0% and commercial real estate returned 8.5%. Most importantly, they find that rents provide the majority of investment returns from all real estate. They therefore warn investors and financial advisors not to base their investment decisions solely on how much real estate prices go up. However, they say real estate investment risk is hard to gauge because the methods used to track real estate price changes cause artificial smoothing. Real estate’s performance also shows a low correlation with that of stocks and bonds—so financial advisors and institutional investors may wish to consider adding real estate to traditional investment portfolios to help with diversification.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45179078","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}
Practical Applications In Cryptocurrencies as an Asset Class?An Empirical Assessment from the Fall 2020 issue of TheJournal of Alternative Investments, author Daniele Bianchi of Queen Mary University of London explores how cryptocurrencies (for example, Bitcoin) relate to traditional asset classes such as stocks and bonds. Bianchi posits that cryptocurrencies are global investments because they are not tied to any country. He therefore matches the performance and volume of cryptocurrency against that of global stock, bond, and other indexes. He also explores the driving factors behind cryptocurrency market activity. Bianchi finds no significant correlation between the performance of cryptocurrencies and that of traditional assets, except for a slight correlation with commodities, especially precious metals. He also finds no correlation between the volatility of cryptocurrencies and traditional assets. Finally, he finds that cryptocurrency trading volumes are not affected by macroeconomic events; their main driver is past performance—meaning investors trade cryptocurrency based on gut feelings rather than analysis. Like gold, cryptocurrencies can act as a hedge against stock market losses—but they do not have gold’s perceived intrinsic value, since their value is based only on the platforms and projects with which they are associated.
{"title":"Practical Applications of Cryptocurrencies as an Asset Class? An Empirical Assessment","authors":"Daniele Bianchi","doi":"10.3905/jai.23.s1.036","DOIUrl":"https://doi.org/10.3905/jai.23.s1.036","url":null,"abstract":"Practical Applications In Cryptocurrencies as an Asset Class?An Empirical Assessment from the Fall 2020 issue of TheJournal of Alternative Investments, author Daniele Bianchi of Queen Mary University of London explores how cryptocurrencies (for example, Bitcoin) relate to traditional asset classes such as stocks and bonds. Bianchi posits that cryptocurrencies are global investments because they are not tied to any country. He therefore matches the performance and volume of cryptocurrency against that of global stock, bond, and other indexes. He also explores the driving factors behind cryptocurrency market activity. Bianchi finds no significant correlation between the performance of cryptocurrencies and that of traditional assets, except for a slight correlation with commodities, especially precious metals. He also finds no correlation between the volatility of cryptocurrencies and traditional assets. Finally, he finds that cryptocurrency trading volumes are not affected by macroeconomic events; their main driver is past performance—meaning investors trade cryptocurrency based on gut feelings rather than analysis. Like gold, cryptocurrencies can act as a hedge against stock market losses—but they do not have gold’s perceived intrinsic value, since their value is based only on the platforms and projects with which they are associated.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2020-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42869607","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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