Relative performance of dynamic portfolio insurance strategies: Australian evidence

This paper simulates the performance of synthetic put portfolio insurance and Constant Proportion Portfolio Insurance (CPPI) using Australian data for the period from 1992 to 2000. These strategies are implemented by trading in the index and bills and simulation is conducted across 18 scenarios. We find that while the CPPI dominates in scenarios using daily rebalancing, the synthetic put strategy delivers better outcomes when value based triggers are used. More importantly, although the two per cent market move trigger emerges as the optimal rebalancing choice, overall, neither strategy appears justifiable in terms of achieving downside protection or allowing upside gain.     

ARE PAIRS TRADING PROFITS ROBUST TO TRADING COSTS?

We examine the impact of trading costs on pairs trading profitability in the U.S. equity market, 1963 to 2009. After controlling for commissions, market impact, and short selling fees, pairs trading remains profitable, albeit at much more modest levels. Specifically, we document a risk‐adjusted return of about 30 basis points per month among portfolios of well‐matched pairs that are formed within refined industry groups. Pairs trading exhibits a lower risk and lower return profile than a short‐term reversal strategy that sorts stocks relative to their industry peers. Notably, both these types of contrarian investing are largely unprofitable after 2002.     

Tourism students’ motivational orientations: the case of Vietnam

The availability of skilled labor and institutions of higher education that can contribute to human capacity building are prerequisites for tourism-dependent nations like Vietnam. The exploration of students’ motivations is one way in which the role of institutions of higher education in capacity building and tourism development can be further understood. This research explores students’ motivational orientations related to enrollment in tourism degree programs in Vietnam. Three key categories emerged: enthusiasm for travel and tourism; employment; and contribution to national industry. The findings are linked to the basic psychological needs of self-determination theory, namely autonomy, competence, and relatedness.     

Optimal growth when consumption takes time

This article analyzes a one‐sector growth model where the consumption takes time. When the consumption takes time, the consumption set is compact and we meet satiety. However, we prove that dynamic constraints are binding. This result is crucial to prove that, under well‐known assumptions in macroeconomic dynamic programming, the optimal path is monotonic and always converges to a unique nontrivial steady state as in the case where consumption is timeless.     

Financial distress and bankruptcy prediction: An appropriate model for listed firms in Vietnam

This paper aims to develop a comprehensive model, the first of its kind in Vietnam, for the purpose of predicting financial distress and bankruptcy at Vietnamese listed firms. The period 2003–2016 is used to study the likelihood of financial distress in different scenarios. Various factors are utilized, including (1) accounting factors in the emerging market score model; (2) market factors in the distance-to-default model; and (3) macroeconomic indicators. The area under the receiver operating characteristics (AUC) curve is used to compare the usefulness of various models that predict financial distress and bankruptcy. Empirical findings from this study show that accounting and market factors, together with macroeconomic fundamental factors, both affect financial distress when they are considered in isolation. However, in a comprehensive model, the effects from accounting factors appear to be more significant than those from market-based factors. The default prediction model, which includes accounting factors with macroeconomic indicators, appears to perform much better than the model comprising market-based factors with macroeconomic fundamentals.     

Comparative advantage,demand for external finance,and financial development

This paper analyzes the effect of comparative advantage in international trade on a country's level of financial development. Countries with comparative advantage in financially intensive goods experience a higher demand for external finance, and therefore financial development. By contrast, financial development is lower in countries that primarily export goods which do not rely on external finance. We use disaggregated trade data to develop a measure of a country's external finance need of exports, and demonstrate this effect empirically. In order to overcome the simultaneity problem, we develop a novel instrumentation strategy based on the exogenous geographic determinants of trade patterns.     

Home is Where You Make it? Gender and Ahmet Davutoğlu’s Strategic Vision in the Middle East

The Justice and Development Party’s (AKP) policymakers have aimed to position Turkey as the leader of the Middle East by assessing its soft power since they came to power. Drawing on Strategic Depth of Ahmet Davuto?lu, Prime Minister of Turkey, this article attempts to offer a critical constructivist, postcolonial and feminist analysis of Turkey’s recent foreign policy discourse in the region by showing how the myth of leadership is constitutive, and is constituted by Davuto?lu’s discourses on women/femininities and men/masculinities. The leadership is imagined by localising Enlightenment notions of masculinity through a re-reading of local traditions, namely Ottoman history and Islam. In doing so, Strategic Depth aims to feminise Turkey’s imagery without necessarily putting it out of the masculinity continuum. As such, Turkey mimics the West but differs from it so as to perpetuate a good masculinity over the people of the Middle East. Implicit in such an imagery, the text distinguishes itself from the competing self-perceptions (and masculinities) in the country, namely the Kemalist one. I further argue that this imagery underlies the recent hypermasculinisation of politics within and beyond the country when political elites feel threatened in the face of political crises.     

The causality between FDI and sector-specific production in Turkey: evidence from threshold cointegration with regime shifts

This article considers bidirectional nonlinear cointegration relation between FDI and industrial output in Turkey. The data cover the monthly period 2005:1–2013:10 for the time series of total industrial production, 36 sub-industrial sectors’ production and FDI. Following nonlinear threshold cointegration and VECMs, the article yields that (i) total industrial production and nine sub-industrial productions have positive long-run impact on FDI with significant error corrections, (ii) six sub-industrial productions have short-term influence on FDI, (iii) FDI has long-run positive impulse on total industrial production and nine sub-industrial productions with some significant error corrections and (iv) FDI affects four sub-industrial productions in the short run as well as in the long run. The results of VECMs from (i) also reveal that the all short-term adjustment parameters are found significant and powerful in 10 typical regimes (Regime-1s) and in 5 extreme regimes (Regime-2s). Finally, the outcome of VECMs from (iii) yields that short-term adjustment parameters are found significant and powerful in two typical regimes and in four extreme regimes. Eventually, considering FDI’s positive impact in the short and long run, this article suggests that policymakers promote specifically the FDI inflows to the sectors of intermediate goods, manufacture of beverages, manufacture of rubber and plastic and manufacture of other nonmetallic mineral products.     

Lexicographic choice under variable capacity constraints

In several matching markets, to achieve diversity, agents' priorities are allowed to vary across an institution's available seats, and the institution is let to choose agents in a lexicographic fashion based on a predetermined ordering of the seats, called a (capacity-constrained) lexicographic choice rule. We provide a characterization of lexicographic choice rules and a characterization of deferred acceptance mechanisms that operate based on a lexicographic choice structure under variable capacity constraints. We discuss some implications for the Boston school choice system and show that our analysis can be helpful in applications to select among plausible choice rules.     

Risk Analysis of Pension Fund Investment Choices

We provide a comprehensive and more consistent approach to analyse and compare the risk-return relationships of Australian superannuation investment options for the period January 1990 to December 2016. In estimating the risk profiles of the investment options, we allow for the movement of the asset classes over time by employing a varying coefficient panel estimation technique. We find that while risk increases across different investment options from moderate to aggressive options, using different percentages of identifying a balanced fund does not impact the long-term risk measurement. We equally find that the risk-return relationships of investment options are not sensitive to the modelling framework, except for the crisis analysis, in which the Fama-French five-factor model provides greater sensitivity.