Overconfidence Mediates How Perception of past Portfolio Returns Affects Investment Behaviors

Investors’ perception of past portfolio returns predicts their investment behavior, but does this relationship mediate by overconfidence? Taking into account different aspects of overconfidence, this paper examines whether overconfidence manifested as illusion of control, miscalibration and better-than-average mediates the association between perception of past portfolio returns and investment behavior. In a survey study with individual and institutional investors from Malaysia, the results indicate that perception of higher past portfolio returns increases investors’ trading, percentage of risky share investment and the number of financial asset holding, through the mediating channel of better-than-average effect. While individual investors are influenced by this overconfidence mechanism, institutional investors are not sensitive. This finding has theoretical implication for overconfidence model, house money effect and naïve reinforcement learning. Practically, the results imply that individual investors should be careful about underlying overconfidence biases as it can lead to inefficient decisions.     

Global Volatility and Forex Returns in East Asia*

During 2001–2010, increases in mature market volatility were associated with declines in forex returns for East Asian economies, consistent with an overall ‘flight to safety’ effect. Estimates from GARCH models suggest that a 10 percentage point increase in mature market equity volatility generated an exchange rate depreciation of up to 3/4 percent. This sensitivity rose during a more tranquil subsample for some countries, reflecting their greater integration with global financial markets. Long‐run forex volatility increased in Asian economies after 2008, reflecting the global reach of the financial crisis in mature markets. Unconditional standard deviations estimated from these models provide operational measures of ‘long‐term’ and ‘excess’ volatility in forex markets.     

中国黄金期货与现货市场的相关性及其套期保值研究

通过构建VAR-DCC-MVGARCH模型,检验2008—2011年中国黄金期货与现货市场的相关性,并分析最小化资产组合风险的最优套期保值率及其绩效,结果表明:黄金市场仅存在着现货收益率对期货收益率的单向影响;收益率的波动间具有高度正相关的时变特征;动态套期保值组合能够有效地规避黄金现货的投资风险。     

Day-of-the-Week Variation and Predicting Stock Returns: Taiwan and Thailand Stock Exchanges

Previously, researchers created a day-of-the-week anomaly in closing stock returns for firms listed on established financial markets. This article explores whether this line of argument is or is not satisfactory and does or does not aid in predicting daily stock returns. The article focuses on the performance of stock returns for two large Asian Stock Market exchanges, Taiwan and Thailand. The purpose is to determine if stock market returns (which include closing prices and dividends) are in part predictable and whether there are explanations for short-term predictability.     

Internet Search Intensity and Its Relation with Trading Activity and Stock Returns*

Using Google search volume as a proxy for investor attention, this paper provides evidence on the role attention plays in financial markets. We first show that abnormal Google search volume (ASVI) helps explain cross‐sectional variations in trading activity, even after controlling for its important determinants. Specifically, ASVI is positively related to trading volume, order imbalance and liquidity. When the relation between stock returns and ASVI is examined, we find a strong positive relation in the month after attention shocks and a reversal over a longer holding period. We further conjecture that the attention effect is more pronounced in stocks with higher limits to arbitrage. For this purpose, we construct a limits‐to‐arbitrage index and show that limits to arbitrage play an important role in explaining the attention effect.     

Managing Returns in E-Business

ABSTRACT

This paper is a discussion of managing returned goods in e-business. After a discussion of literature on reverse logistics management issues it discusses some preliminary findings of a research project undertaken with the Australian e-business organisations. Research findings discussed in this paper indicate that a good return management process supports customer relationship management and enables capturing value by reselling, and redistributing returned products. It also highlights that effectively managing returns in e-business allows recapturing value from products. It is concluded from this research that reverse logistics is an important business process in e-business.     

Asymmetric Relationship between Investors' Sentiment and Stock Returns: Evidence from a Quantile Non‐causality Test

This study investigates the causal relationship between investor sentiment and stock returns in the USA by conducting a quantile Granger non‐causality test. Employing two proxies for investor sentiment – the sentiment index developed by Baker and Wurgler in 2007 and the University of Michigan Consumer Survey, a consumer confidence index – we find that the causal relationship between investor sentiment and stock returns strengthens when a tail quantile interval is considered. This finding implies that the investor sentiment could provide the incremental predictability for the stock returns under the extreme market situation, which cannot be found using a traditional Granger causality test. Interestingly, the findings can be explained by investors' loss aversion and herding behavior.     

Returns to networking in academia

This paper examines effects of academic networks in a Stackelberg differential game between journal editors and authors. Authors choose research papers to maximize satisfaction, while editors determine research quality to maximize journal reputation. Verifying the system for stability, results show that academic networks neither affect the number of publications nor the quality of an author’s papers. Networks only affect the number of an author’s citations. Editors’ preferences for publishing an author because of her network membership seem irrelevant. This happens because editors compete to increase their journal’s reputation by publishing high quality papers. Consequently, there is little room for editorial bias. Further, increased journal competition has the potential to erode the citation gains. The equilibrium research quality is below the maximum possible quality. Increases in publication benefits are shown to leave citations unaffected, increase the number of publications, and decrease research quality. The results generally carry through when publishing markets tend to a monopoly.     

A Dynamic Growth Model with Equity for Guarantee Swap and Asymmetric Information*

We develop an endogenous dynamic growth model in which a financially constrained firm optimizes the entrance timing and financing structure in different information exposure scenes. An innovation financing tool called equity‐for‐guarantee swap is introduced to solve the dilemma of financing constraints. The productivity of the firm is a random variable following a two‐point distribution and its value can be observed in advance by the entrepreneur but not by the insurer. Our main goal is to fix the fair guarantee cost with asymmetry information and examine how the cost differs from the one under the same situation except with symmetric information. We solve a Nash equilibrium of the game between the entrepreneur and the insurer and specify the condition to determine whether a separating equilibrium or pooling one will be achieved. We find that at the separating equilibrium, the high‐profit firm will sacrifice a profit to send a signal for the purpose of separating itself from the low‐profit one by increasing the latter's mimicking cost. The pooling equilibrium occurs when the insurer can not distinguish the firm's type and therefore, the insurer demands the same guarantee cost for all firms.     

基金投资组合风险评价中VaR的应用研究

近年来我国基金业发展迅猛,其所倡导的价值投资理念获得市场的巨大认同。与此同时,社会上对基金投资风险进行评价的需求日益强烈。如何量化基金投资组合的风险,已成为金融机构及投资者共同关注的问题。利用风险度量的VaR方法,对基金投资股票组合的风险进行实证研究,探讨其在组合风险评价中的应用。     

Predicting Stock Market Movements in the United States: The Role of Presidential Approval Ratings*

In this paper we analyze whether presidential approval ratings can predict the S&P 500 returns over the monthly period of July 1941 to April 2018, using a dynamic conditional correlation multivariate generalized autoregressive conditional heteroscedasticity (DCC‐MGARCH) model. Our results show that standard linear Granger causality test fail to detect any evidence of predictability. However, the linear model is found to be misspecified due to structural breaks and nonlinearity, and hence, the result of no causality from presidential approval ratings to stock returns cannot be considered reliable. When we use the DCC‐MGARCH model, which is robust to such misspecifications, in 69% of the sample period, approval ratings in fact do strongly predict the S&P 500 stock return. Moreover, using the DCC‐MGARCH model we find that presidential approval rating is also a strong predictor of the realized volatility of S&P 500. Overall, our results highlight that presidential approval ratings is helpful in predicting stock return and volatility, when one accounts for nonlinearity and regime changes through a robust time‐varying model.     

Returns on ADRs and arbitrage in emerging markets

In this paper we compare the distributions of ADR returns and the returns of the locally traded shares between Chile and Argentina. This comparison is interesting because both countries are emerging economies with a similar free market orientation and the trading hours in both countries virtually coincide with the trading hours in New York. Argentina and Chile differ, however, in two important aspects: During our sample period: (1) The Argentinean market was completely under a fixed-exchange rate system, while Chile maintained a flexible exchange rate regime; and (2) Argentina did not impose any restrictions on foreign investments, while Chile did. We find that the return distributions of the Chilean ADRs are significantly different from the distributions of the returns on the respective underlying Chilean shares. While the mean returns are the same, the return's S.D. are significantly different. In contrast, the hypothesis that the distributions of the returns on the Argentinean ADRs and the returns on their respective underlying shares are the same cannot be rejected. We then use a threshold model to estimate the transaction costs of trading the ADRs and the locally traded shares. We find that the transaction costs that must be added to the returns spread before arbitrage is possible were between 100 and 200 basis points for Chilean ADRs. It was between 66 and 165 basis points for the Argentinean ADRs. The daily return spread reversion caused by arbitrage activities was estimated to be approximately 30% for Chilean ADRs and 40% for Argentinean ADRs. Finally, we cannot reject the hypothesis that low liquidity was a major factor in the cost difference between the two countries.     

信息化组合环境下的企业绩效评价体系研究

现代企业都处在信息化组合环境之中,因而探讨信息化给企业带来的绩效可以转化成信息化组合环境下企业绩效的改善。为此,引入企业绩效评价体系框架,以平衡记分卡为组织评价指标,通过增量公式来计算信息化组合给企业带来的收益,以便企业在评价中发现不足,为企业绩效的改进提供决策支持。     

VAR模型及其在投资组合中的应用

VAR是目前国际上金融风险管理的主流方法之一,本文在对其概念、VAR计算的基本思想和主要特点进行简要介绍、分析的基础上,鉴于VAR已在金融领域中得到了广泛的应用,与投资组合的管理和决策有着密切的联系,重点讨论了基于VAR的投资组合管理,及在VAR约束下的投资组合决策,最后提出了我国在应用VAR所面临的主要问题.     

Assets and Debts in a Consumer Portfolio

Data from the 1977–78 Survey of Consumer Credit provide the opportunity to estimate demand functions for owned housing, home mortgages, car stocks, car debts, and other debts in the context of a portfolio model with both own- and cross-partial adjustments. Consequently, information is gained as to how households adjust their demands for owned housing, mortgage, car stocks, car loans, and other debts in response to disequilibria in their asset and debt portfolio. Married with spouse present, female headed, and black families are studied separately. Income, life-cycle, and family size effects are estimated as well as the speeds of adjustment to various disequilibria.     

Returns and volatility in the Kuala Lumpur crude

This article investigates the determinants of daily returns and volatility in the Kuala Lumpur crude palm oil futures market over the period 1980 to 1994. We find significant evidence of month and open interest effects in returns and also find strong evidence of daily, monthly, yearly, volume and open interest effects in volatility when ARCH/ GARCH models are used to estimate volatility. © 1998 John Wiley & Sons, Inc. Jrl Fut Mark 18:985–999, 1998     

Price-Quality Correlations in the Japanese Market

This study tested the consumer's rule of thumb, price indicates quality, in the Japanese market. The data source was the Monthly Consumers product testing magazine published by the Japanese Consumer Association. Spearman's rho correlations of price and quality ranged from +.87 to −.80, with a mean of −.06. The slightly negative, near zero mean correlation indicated that, on the average, price was a very poor indicator of quality. Among product categories, bicycles had the highest mean correlation, +.54; mean correlations for other product categories exhibited considerable variation. Comparisons of correlations within a product category, such as television sets or microwave ovens, revealed that a significant positive correlation at one point in time was not a reliable guide to the level of price-quality correlation for that product category at later points in time. Comparing results from this study with results from previous studies of Consumer Reports and Consumers Research reveals a smaller percentage of positive correlations and a lower mean correlation for the present study.     

No Arbitrage in Discrete Time Under Portfolio Constraints

In frictionless securities markets, the characterization of the no-arbitrage condition by the existence of equivalent martingale measures in discrete time is known as the fundamental theorem of asset pricing. In the presence of convex constraints on the trading strategies, we extend this theorem under a closedness condition and a nondegeneracy assumption. We then provide connections with the superreplication problem solved in Föllmer and Kramkov (1997).