Systematic risk and international diversification: An empirical perspective

This paper reports findings from a study that systematically evaluated the nature of the relationship between internationalization and systematic risk. In addition to previous conceptualizations, this study also examined whether the number of foreign countries and segments a firm operates in constitute a part of the information used by market participants to assess a firm's risk exposure. We find that international diversification is significantly and positively associated with systematic risk and that diversification augments systematic risk. Our findings have implications on the stability of foreign expansion and business decisions by managers on the appropriate level of overseas commitment.     

Motivations for public equity offers: An international perspective

This paper examines the motivations for public equity offers, using a sample of 17,226 initial public offerings and 13,142 seasoned equity offerings from 38 countries between 1990 and 2003. We estimate the uses of funds raised in both initial and seasoned offerings. Firms appear to spend incremental dollars on both R&D and capital expenditures, consistent with the investment financing explanation of equity issues. However, consistent with the mispricing explanation, high market to book firms tend to save more cash and offer a higher fraction of secondary shares in SEOs than low market to book firms.     

Valuation, optimal asset allocation and retirement incentives of pension plans

We provide a framework in which we link the valuation and assetallocation policies of defined benefits plans with the lifetimemarginal productivity schedule of the worker and the pensionplan formula. In turn, we examine the retirement policies thatare implied by the primitives of the model and the value ofpension obligations. Our model provides an explicit valuationformula for a stylized defined benefits plan. The optimal assetallocation policies consist of the replicating portfolio independentof the pension liabilities. We show that the worker with retirewhen the ratio of pension benefits to current wages reachesa critical value which depends on the parameters of the pensionplan and the discount rate. Using numerical techniques we analyzethe feedback effect of retirement policies on the valuationof plans and on the asset allocation decisions.     

Property shares, appraisals and the stock market: An international perspective

A severe problem facing both real estate researchers and investors is the lack of reliable real estate returns data. Property shares, the shares of companies which invest in property and manage a portfolio of real estate, have been proposed as indicators of real estate performance. Property shares exist in many countries, are publicly traded, and their returns are not inherently biased. For three countries, we investigate the relationships with common stock and appraisal-based returns which property share returns exhibit. Our results indicate that property shares are closely related to the stock markets on which they trade, thereby confirming previous findings for the United States. However, property share returns also predict appraisal-based indices.     

Would emerging market pension funds benefit from international diversification: investigating wealth accumulations for pension participants

In recent years, investment portfolio selection is growing in importance for many emerging market pension funds, as pension reforms replace traditional pay-as-you-go systems with advanced funding systems. Various investment regulations are applied to the funded pensions, particularly in the form of portfolio limits for equities and international assets. With a bootstrap simulation approach, this paper attempts to quantify the impacts on retirement benefits of restricting international assets from the investment portfolios of emerging market pension funds. We find that, on average, over half of the pension portfolios of emerging market countries should be in international assets in order to maximize the expected utility of moderate and conservative pension fund participants. More generally, international assets can play a significant role in the investment portfolios for workers with risk aversion varying from aggressive to conservative. With few exceptions, the entire probability distribution of wealth accumulations at retirement could be shifted higher with the inclusion of international assets.     

Benefits of international diversification with investment constraints: An over-time perspective

This paper investigates the benefits and asset allocation of the optimal international diversification for the U.S.A. investor while considering various portfolio constraints. Although the global financial market is becoming more integrated, the findings suggest that adding lower and upper weighting bounds reduces, but does not completely eliminate, the potential economic value of international investment. The addition of investment constraints makes asset allocation more feasible and decreases the volatility in portfolio return. The time-variation in the optimal asset allocation implies that fund managers should rebalance international portfolios dynamically. The out-of-sample test suggests that the Markowitz model with constraints realizes trivial improvement in mean-variance efficiency but still demonstrates significant reduction in risk.     

A cross-country analysis of corporate carbon performance: An international investment perspective

In this study, we examine corporate carbon performance globally from the perspective of country-level dispersion. The average carbon performance of listed companies in the non-OECD countries increases more after the Paris Agreement than that of listed companies in the OECD countries. However, under an increasing trend of average country-level carbon performance, the dispersion of corporate carbon performance is reduced more in the OECD countries vis-à-vis the non-OECD countries. In addition, international equity ownership is negatively associated with the dispersion of country-level corporate carbon performance in the post-Paris Agreement period. This finding supports our conjecture that sophisticated foreign investors from developed countries exert a significant positive influence on the carbon management efficiency of domestic firms in developing countries.     

Share prices and pension funding: An empirical test of the joint effect of pension insurance and the pension tax shield

This article examines the joint significance of the tax benefits of pension funding and the value of government sponsored pension insurance in determining the efficacy of corporate pension funding. When the pension tax shield benefits are dominant, additional funding may enhance shareholder wealth. However, additional funding is observed to have negative effects on equity prices when the value of pension insurance is dominant relative to the value of the pension tax shield. When neither the tax or insurance effects are dominant, marginal adjustments in pension funding apparently will not alter corporate share prices.     

Portfolio choice in retirement: Health risk and the demand for annuities,housing, and risky assets

In a life-cycle model, a retiree faces stochastic health depreciation and chooses consumption, health expenditure, and the allocation of wealth between bonds, stocks, and housing. The model explains key facts about asset allocation and health expenditure across health status and age. The portfolio share in stocks is low overall and is positively related to health, especially for younger retirees. The portfolio share in housing is negatively related to health for younger retirees and falls significantly in age. Finally, out-of-pocket health expenditure as a share of income is negatively related to health and rises in age.     

International banks as leaders or followers of international business : An historical perspective

International banking and international trade have been partners since the beginning of world trade and world finance. Indeed, the distinction between international trade and international finance as two separate functions and institutions is relatively recent. Banks and business firms are two parts of a world network. Therefore there is no easy answer to the question as to whether banks follow or lead international business. It is probable that where banks are aggressive in building world networks, and industries focus on single projects, banks lead and industry follows. But under the opposite conditions, the roles will reverse. There is no way to determine which of the two processes is dominant.     

城镇居民基本养老保险基金的财政支出与退休年龄的敏感性分析

自1950年以来,中国法定退休年龄与最优退休年龄短期内存在不同步的现象,致使法定退休年龄远低于最优退休年龄。所建模型揭示出人口死亡概率与最优退休年龄的动态经济规律。通过对城镇职工的年龄预测及对其赡养率和缴费率的敏感性分析,认为解决目前财政压力的关键是适当降低养老金替代率和逐步提高退休年龄。     

Female labor force participation: an international perspective.

This article gives an international perspective in regard to female participation in the labor force. In most countries women contribute less than men toward the value of recorded production. Social environment, statistical inconsistencies and methods of recording labor all contribute to this inequity. In Britain for instance, women caring for the household duties are in some studies considered to be part of the labor force and in other studies they are not. Further, internationally, women often find themselves in casual, temporary, or seasonal work that goes unrecorded. Defining what "labor force participation" constitutes is a key starting point to any survey. At what age is one considered employable? What constitutes a person "actively seeking" employment? Economists often try to explain labor force participation rate by age, sex, race and income groups and use this information to cite trends. The income-leisure model theorizes that choice of work or non-work by women is based primarily upon wages for work vs. wages for non-work. This theory sees non-labor income exerting a negative influence. Empirical evidence, however, suggests that women will choose work if wages are good regardless of any non-work benefits. Because most men are permanently in the labor force, estimates of labor reserves and projections of supply focus mostly on women. International generalizations are often misleading since trends vary widely among countries. During the last 20 years the global female participation rate has remained almost constant, but this is misleading. The percentage of working women in industrial countries increased 10%; developing countries showed a decrease of 7%. Female rates are often tied closely to shifts in the overall economy, (e.g., a transition from an agricultural to an industrial economy often sees a drop in female labor because subsistence jobs are lost). Of course the ability of women to bear children and the social expectations regarding child care often play a role. It is common in western industrialized countries to see drops in female participation during childbearing years. Countries with the lowest female participation rates are those with strong religious views about women in society, (e.g., Catholic and Muslim countries).     

The shortage of safe assets in the US investment portfolio: Some international evidence

This paper develops a Bayesian Global VAR (GVAR) model to track the international transmission dynamics of two stylized shocks, namely a supply and demand shock to US-based safe assets. Our main findings can be summarized as follows. First, we find that (positive) supply-sided shocks lead to pronounced increases in economic activity which spills over to foreign countries. The impact of supply-sided shocks can also be seen for other quantities of interest, most notably equity prices and exchange rates in Europe. Second, a demand-sided shock leads to an appreciation of the US dollar and generally lower yields on US securities, forcing investors to shift their portfolios towards foreign fixed income securities. This yields sizable positive effects on US output, equity prices and a general decrease in financial market volatility.     

The relationship between international trade and capital flow: A network perspective

The relationship between international trade and capital flow has been extensively discussed. Using bilateral data from 2001 to 2016, we construct international trade and capital flow networks, defined as a weighted graph in which nodes are countries and edges represent trade and capital flow linkages. Centrality is employed as the main variable in this study to represent the importance of a country in the networks. To gain further insight into the network characteristics, we adopt a turning-parameter centrality to combine both the original degree and strength measurements within the weighted network. Moreover, we develop a new indicator called “partner quality centrality” to identify the quality of neighbors. Within the panel cointegration framework, we argue that a positive long-run equilibrium exists between the trade and capital flow networks as constructed. In addition, we employ a panel causality test to investigate the short-run dynamics, indicating that the international capital flow network has predictive power on the trade network from the short-run perspective but not vice versa.     

Non-informative rational expectations equilibria when assets are nominal: An example

When assets are nominal, non-informative rational expectations equilibria exist.