信用债券市场流动性与投资者异质性研究

流动性是信用债券市场投资者和监管者高度关注的问题。从债权终止风险的视角出发,本文分析了投资者在投资期限习惯和信用品质偏好上的差异而产生的债券估值差异。可以发现,在配置型和交易型投资者并存的信用债券市场上,流动性水平与投资者异质性有关。提高配置型投资者比例、提高两类投资者间的异质性、降低同类投资者间的异质性能改善市场流动性。因此,培育合理的投资者结构对促进信用债券市场流动性建设具有重要意义。     

Computing optimal rebalance frequency for log-optimal portfolios in linear time

The pure form of log-optimal investment strategies are often considered to be impractical due to the inherent need for continuous rebalancing. It is however possible to improve investor log utility by adopting a discrete-time periodic rebalancing strategy. Under the assumptions of geometric Brownian motion for assets and approximate log-normality for a sum of log-normal random variables, we find that the optimum rebalance frequency is a piecewise continuous function of investment horizon. One can construct this rebalance strategy function, called the optimal rebalance frequency function, up to a specified investment horizon given a limited trajectory of the expected log of portfolio growth when the initial portfolio is never rebalanced. We develop the analytical framework to compute the optimal rebalance strategy in linear time, a significant improvement from the previously proposed search-based quadratic time algorithm.     

Moments of multivariate regime switching with application to risk-return trade-off

We use a Fourier transform to derive multivariate conditional and unconditional moments of multi-horizon returns under a regime-switching model. These moments are applied to examine the relevance of risk horizon and regimes for buy-and-hold investors. We analyze the impact of time-varying expected returns and risk (variance and covariance) on portfolio allocations' “term structure”—portfolio allocations as a function of the investment horizon. Using monthly observations on S&P composite index and 10-year Government Bond, we find that the term structure of the optimal allocations depends on market conditions measured by the probability of being in bull state. At short horizons and when this probability is low, buy-and-hold investors decrease their holdings of risky assets. We also find that the conditional optimal portfolio performs quite well at short and intermediate horizons and less at long horizons.     

Learning, Asset-Pricing Tests, and Market Efficiency

This paper studies the asset-pricing implications of parameter uncertainty. We show that, when investors must learn about expected cash flows, empirical tests can find patterns in the data that differ from those perceived by rational investors. Returns might appear predictable to an econometrician, or appear to deviate from the Capital Asset Pricing Model, but investors can neither perceive nor exploit this predictability. Returns may also appear excessively volatile even though prices react efficiently to cash-flow news. We conclude that parameter uncertainty can be important for characterizing and testing market efficiency.     

Targeting market neutrality

Neutralizing portfolios from overall market risk is an important part of investment management, particularly for hedge funds. In this paper we show an economically significant improvement in the accuracy of targeting market neutrality for equity portfolios. Key features of the approach are the relatively short forecast horizon of one week and forecasting with realized beta estimators computed using high quality, error corrected, intraday returns. We also find that too long and too short estimation windows result in poor beta forecasts and that the optimal length of estimation window depends on the frequency of return observations.     

Buy-and-hold mean-variance portfolios with a random exit strategy

We show how buy-and-hold investors can move from horizon uncertainty to profit opportunity. The analysis is conducted under a risk-averse framework rather than the standard Markowitz formulation in the case of i.i.d. asset processes. We make this practical achievement by considering a threshold stopping rule as the strategy to determine when to exit the market. The resulting investment horizon is random and can be correlated with the market. Under this setting, we first provide an analytical approximation to optimal weights, and then identify a class of reference variables associated with the stopping rule that leads to ex-ante improvements in portfolio allocation, vis-a-vis the fixed exit time alternative. The latter conclusion is based on a generalization of the Sharpe ratio, adjusted for horizon uncertainty. The obtained investment suggestion is simple and can be implemented empirically.     

Does the investment horizon of institutional investors matter for stock liquidity?

This paper examines the role of the investment horizon of institutional investors on stock liquidity of firms. We show that an increase in long-term institutional ownership is negatively associated with firm liquidity, while an increase in short-term ownership is positively related to a firm's stock liquidity. We identify the ownership-liquidity relationship by examining two major channels: the trading activity channel and the informational friction channel. Long-term investors reduce stock liquidity through low frequency trading and access to value-enhancing and private information, which induces adverse selection bias. In contrast, short-term investors improve liquidity through trading activity and competition with other investors, which lowers transaction costs. Our findings further suggest that the effects of an increase in long-term (short-term) institutional investors on liquidity weaken (strengthen) when a firm has more publicly available information. Finally, we show that the positive impact of an increase in long-term ownership on valuation is more pronounced for firms with higher liquidity and the valuation effect is persistent.     

On Diversification Given Asymmetry in Returns

Complete diversification is the rational investment strategy for a risk averse individual in a homogeneous securities market who considers only the first two moments of return. Observed behavior of market participants, however, demonstrates that the majority of individual investors hold imperfectly diversified portfolios. The purpose of the present study is to examine one potential cause for this behavior which does not rely on imperfection in the capital market. Specifically, we show that given the existence of, and investor preference for, positive skewness, a rational investor may hold an optimal limited number of homogeneous risk assets.     

Variable Selection for Portfolio Choice

We study asset allocation when the conditional moments of returns are partly predictable. Rather than first model the return distribution and subsequently characterize the portfolio choice, we determine directly the dependence of the optimal portfolio weights on the predictive variables. We combine the predictors into a single index that best captures time variations in investment opportunities. This index helps investors determine which economic variables they should track and, more importantly, in what combination. We consider investors with both expected utility (mean variance and CRRA) and nonexpected utility (ambiguity aversion and prospect theory) objectives and characterize their market timing, horizon effects, and hedging demands.     

Optimal Gradual Annuitization: Quantifying the Costs of Switching to Annuities

We compute the optimal dynamic annuitization and asset allocation policy for a retiree with Epstein–Zin preferences, uncertain investment horizon, potential bequest motives, and pre‐existing pension income. In our setting the retiree can decide each year how much he consumes and how much he invests in stocks, bonds, and life annuities, while the prior literature mostly considered restricted so‐called deterministic or stochastic switching strategies. We show that postponing the annuity purchase is no longer optimal in the gradual annuitization (GA) case since investors are able to attain the optimal mix between liquid assets (stocks and bonds) and illiquid life annuities each year. In order to assess potential utility losses, we benchmark various restricted annuitization strategies against the unrestricted GA strategy.     

Information manipulation and rational investment booms and busts

A model of endogenous investment booms and busts with rational agents is presented where outside investors are uncertain about both industry (aggregate) and firm-specific capital productivity, and insiders manipulate information through strategic productivity disclosures. For intermediate and high levels of agency conflict, there are aggregate investment distortions along the equilibrium path, investment dynamics are history-dependent, and depict patterns of persistent investment booms or investment busts even though investors design optimal incentive contracts based on Bayes-rational beliefs. Moreover, the aggregate uncertainty may not be resolved in the limit, as the number of firms and disclosures gets arbitrarily large.     

The Role of the Investment Horizon in Optimal Portfolio Sequencing (An Intuitive Demonstration in Discrete Time)

This paper examines the role played by the investor's investment horizon in the choice of optimal portfolios. A complete discrete-time, multiperiod, portfolio model is presented with a choice criterion that is consistent with the traditional utility approach but which is more amenable to a multiperiod environment. It is shown that investors should choose progressively less risky single-period portfolios as their investment horizons grow shorter, even if they do not become more risk averse. This result holds both in the presence and in the absence of a riskless asset. The results are consistent with empirical evidence and the financial planning practice of moving investors into progressively less risky portfolios as they grow older.     

Investors’ Fear and Herding Behavior: Evidence from the Taiwan Stock Market

This article analyzes the influence of investors’ fear on their investment behavior in the Taiwan stock market. This study used the volatility index (VIX) as a barometer of investors’ fear. Our results show that herding behavior increases with the VIX; that is, herding behavior is encouraged by an increase in investors’ fear. Moreover, our results demonstrate that investors react more quickly to bad news than to good news when their fear increases, supporting the hypothesis of the presence of an asymmetric reaction to news. However, investors react more quickly to good news when their fear decreases, indicating an inverse asymmetric reaction. In addition, our empirical results reveal that herding behavior tends to exist on days with a large trading volume.     

Country and currency diversification of bond investments: do they really make sense for Swiss investors?

The inclusion of hedged or unhedged foreign currency bonds within a strategic asset allocation is a crucial decision which should be analyzed carefully. The goal of this paper is to provide a contribution to this analysis by focusing particularly on the time horizon of the investment. Results are analyzed from the perspective of a Swiss investor. We find that over the last 21 years, investing in bonds denominated in Swiss Francs has been clearly less efficient in terms of risk-adjusted returns than investing in a hedged global bond portfolio. For short-term investors, we find robust evidence against the hypothesis of investing in unhedged foreign currency bonds. The picture changes dramatically, however, when we consider an investment horizon of 6 years and the normal case of balanced portfolios including also equities and domestic bonds. In this case, the optimal strategy for the period we analyzed would have been to hedge only the exposure to US dollar bonds.      

News release and the role of different types of investors

We examine how investors react to positive and negative news in the Chinese stock market. We show that positive news is followed by a reversal in stock price, while negative news reports are accompanied by a drift. Using a unique account-level dataset, we find that institutional investors' attention bias contributes to the market's absorption process for different types of news, which is different from the conclusion that the phenomenon is driven by retail investors in the U.S. market. We explain the differences between the two markets as the short-sale constraints induce the attention bias of institutional investors in China. Individual investors are not able to correctly judge the content of news reports, and act as a liquidity provider. We highlight the market regulation plays an important role in the process of investors analyzing information.     

Welfare effects of information and rationality in portfolio decisions under parameter uncertainty

We analyse and quantify, in a financial market with parameter uncertainty and for a Constant Relative Risk Aversion investor, the utility effects of two different boundedly rational (i.e. sub-optimal) investment strategies (namely, myopic and unconditional strategies) and compare them with each other and with the utility effect of full information. We show that effects are mainly caused by full information and predictability, being the effect of learning marginal. We also investigate the saver's decision regarding whether to manage her/his portfolio personally (DIY investor) or hire, against the payment of a management fee, a professional investor and find that delegation is mainly motivated by the belief that professional advisors are, depending on investment horizon and risk aversion, either better informed (‘insiders’) or more capable of gathering and processing information, rather than possessing the ability to learn from financial data. In particular, for very short investment horizons, delegation is primarily, if not exclusively, motivated by the beliefs that professional investors are better informed.     

Time Diversification: Empirical Tests

This paper investigates the relationship between the performance of equity and the length of the investment horizon used by investors. We examine optimal portfolio time diversification and two definitions of ex ante time diversification. Using almost two centuries of US and UK data we find some support for the hypothesis that equity represents a significantly better investment over long investment horizons than over short investment horizons. Where this result holds, the likely explanation is mean-aversion in fixed-income asset returns. However, these results are sensitive to changes in investor risk preference, changes in utility function specification, changes in the sample period used, changes in investor constraints, and the definition of time diversification adopted. They also differ between the US and UK markets.     

Consumption in incomplete markets

We develop a method to find approximate solutions, and their accuracy, to consumption–investment problems with isoelastic preferences and infinite horizon, in incomplete markets where state variables follow a multivariate diffusion. We construct upper and lower contractions; these are fictitious complete markets in which state variables are fully hedgeable, but their dynamics is distorted. Such contractions yield pointwise upper and lower bounds for both the value function and the optimal consumption of the original incomplete market, and their optimal policies are explicit in typical models. Approximate consumption–investment policies coincide with the optimal one if the market is complete or utility is logarithmic.     

Financial Globalization,Governance, and the Evolution of the Home Bias

We merge portfolio theories of home bias with corporate finance theories of insider ownership to create the optimal corporate ownership theory of the home bias. The theory has two components: (1) foreign portfolio investors exhibit a large home bias against countries with poor governance because their investment is limited by high optimal ownership by insiders (the “direct effect” of poor governance) and domestic monitoring shareholders (the “indirect effect”) in response to the governance and (2) foreign direct investors from “good governance” countries have a comparative advantage as insider monitors in “poor governance” countries, so that the relative importance of foreign direct investment is negatively related to the quality of governance. Using both country‐level data on U.S. investors' foreign investment allocations and Korean firm‐level data, we find empirical evidence supporting our optimal corporate ownership theory of the home bias.     

Investors' Reactions to Management Earnings Guidance: The Joint Effect of Investment Position, News Valence, and Guidance Form

We report the results of an experiment that shows that investors' earnings- and investment-related judgments are jointly influenced by their investment position (long versus short), the news valence of guidance issued by management, and the amount of ambiguity in the guidance. Prior research indicates that guidance form (point versus range) has no effect on investors' earnings estimates made in reaction to management guidance. We extend this research by showing that guidance form matters, conditional on investment position and news valence. Similarly, prior research indicates that investors who hold long (short) positions in a stock are more optimistic (pessimistic) about the company's prospects. We extend this research by showing that the effect of investment position documented in prior studies is conditional on news valence and guidance form. We contribute to prior literature on the effects of investment position and guidance form by delineating boundary conditions for each of these effects.