OPTIMAL PORTFOLIO MANAGEMENT WITH FIXED TRANSACTION COSTS

We study optimal portfolio management policies for an investor who must pay a transaction cost equal to a fixed Traction of his portfolio value each time he trades. We focus on the infinite horizon objective function of maximizing the asymptotic growth rate, so me optimal policies we derive approximate those of an investor with logarithmic utility at a distant horizon. When investment opportunities are modeled as m correlated geometric Brownian motion stocks and a riskless bond, we show that the optimal policy reduces to solving a single stopping time problem. When there is a single risky stock, we give a system of equations whose solution determines the optima! rule. We use numerical methods to solve for the optima! policy when there are two risky stocks. We study several specific examples and observe the general qualitative result that, even with very low transaction cost levels, the optimal policy entails very infrequent trading.     

从价规制与从量规制孰优孰劣？--基于可再生能源产业上网价格政策与配额制的比较研究

上网价格政策（ FIT）与配额制（ RPS）是可再生能源电力产业中最常见的两种规制方法。本文分别在两种规制手段下构建了一个两阶段的寡头博弈模型，并给出均衡解，再运用数值模拟的方法对两种规制手段效果进行比较。结果表明：在提高可再生能源产量（装机容量）以及激励基于成本节约的R＆D投入方面，上网价格政策要优于配额制；而在降低碳排放量以及提高消费者剩余方面，配额制规制手段要更胜一筹。但两种方式的社会总福利大小无法进行衡量，这取决于负外部性的大小。     

Volatility spillover and hedging effectiveness among China and emerging Asian Islamic equity indexes

We study the volatility spillover between China and Asian Islamic stock markets. We use a sample of six Islamic MSCI indices from the Asian region, namely China, India, Malaysia, Indonesia, Korea and Thailand obtained from MSCI (Morgan Stanley Capital International). In this paper we analyze the importance of considering spillover effects between emerging Asian Islamic indexes based on the Bivariate VARMA-BEKK-AGARCH model of McAleer et al. (2009), which includes spillover and asymmetric effects. We compute after the effectiveness of portfolio diversification based on the conditional volatility of returns series. Results show a significant positive and negative return spillover from China to selected Asian Islamic stock market and bidirectional volatility spillovers between China, Korea and Thailand Islamic market showing evidence of short-term predictability on Islamic Chinese stock market movements. However there is no short term volatility persistence in India, Indonesia and Malaysia. GARCH results show no persistence in volatility spillover effect in long term from Chinese to Indian, Indonesian and Korean Islamic stock market. Our findings are beneficial for international portfolio diversification for policy makers and investors since the results of portfolio management and hedging effectiveness ratio are different to previous studies.     

中国开放式基金表现的动态能力研究

本文以中信指数与中信债券指数的加权超额收益率为市场基准 ,以GDP增长率和消费物价指数的增长率以及广义货币供给增长率为条件变量 ,构建了证券投资基金表现的条件评价模型 ,对中国开放式证券投资基金的选股能力和市场时机把握能力进行了测度。计量方法上采用混合数据模型的回归方法以提高回归结果的有效性。研究结论为 :中国开放式基金不但具有一定的选股能力 ,而且具有良好的市场时机把握能力 ;条件模型的解释能力高于无条件模型。     

Diversification potential of Asian frontier,BRIC emerging and major developed stock markets: A wavelet-based value at risk approach

This study examines the portfolio risk and the co-movements between each of the BRIC emerging and South Asian frontier stock markets and each of the major developed stock markets (U.S., UK and Japan), using the wavelet squared coherence approach as well as the wavelet-based Value at Risk (VaR) method. The results show that the co-movements and diversification benefits between these markets vary over time and across frequencies. Additionally, the co-movements are intensified in the wake of the recent global financial crisis (GFC) and the Eurozone sovereign debt crisis (ESDC). More precisely, the wavelet-based VaR ratio indicates that including a BRIC or a South Asian (particularly Pakistan and Sri Lanka at both the short- and long-term) stock market in a portfolio of the developed stock markets reduces the resulting portfolio's VaR. Specifically, adding China in the medium term to this portfolio reduces risk in the pre- and during both the GFC and ESDC periods. By assigning optimal weights to the different market assets in the portfolio formulation, the analysis thus has implications for international investors.     

Turnover and return in global stock markets

I study how growth affects liquidity of global stock exchanges and how liquidity determines cross-sectional returns on those stock exchange index portfolios. I measure portfolio liquidity by turnover ratio computed as value of shares traded over the market capitalization. I obtain data from FIBV, an association of global stock exchanges. In a multiple regression model for turnover ratio, I find age, size, type of exchange, competition for order flow, and growth rate to be significant determinants of portfolio liquidity; however, exchange- and time-specific effects are more appropriate for modeling portfolio liquidity. The time effects yield to three distinct regimes, while the exchange-specific effects are surrogates for the legal systems, English common law, and Civil laws of the countries. I estimate the parameters of a multiple regression model in a two-stage GLS framework in which index return is a function of turnover. The GLS method is preferable since a turnover ratio may have a non-stationary, random component. The significant determinants of index return are turnover and volatility, although some of the volatility effect may be a spillover from a January effect. Investors expect higher return from high turnover markets. However, the positive turnover expected return relation is true only in emerging markets; in developed markets expected return is a function of volatility. This result confirms existing empirical evidence that high turnover stock portfolios generate superior returns and further the sources and pricing of risk in emerging and developed markets are different.     

PORTFOLIO OPTIMIZATION WITH JUMPS AND UNOBSERVABLE INTENSITY PROCESS

We consider a financial market with one bond and one stock. The dynamics of the stock price process allow jumps which occur according to a Markov-modulated Poisson process. We assume that there is an investor who is only able to observe the stock price process and not the driving Markov chain. The investor's aim is to maximize the expected utility of terminal wealth. Using a classical result from filter theory it is possible to reduce this problem with partial observation to one with complete observation. With the help of a generalized Hamilton–Jacobi–Bellman equation where we replace the derivative by Clarke's generalized gradient, we identify an optimal portfolio strategy. Finally, we discuss some special cases of this model and prove several properties of the optimal portfolio strategy. In particular, we derive bounds and discuss the influence of uncertainty on the optimal portfolio strategy.     

The investment nature of income trusts and their role in diversified portfolios

We examine the investment characteristics of income trusts to explore their role within a portfolio as well as to clarify the on‐going political debate surrounding income trusts. Results show that income trusts exhibited risk‐adjusted performance that far outperformed equities and bonds during our sample period. We adopt a multifactor return generating process for ex‐post income trust returns to quantify the degree to which they are influenced by bond‐ and stock‐related effects. The relationship between trust returns and bond returns is very weak, whereas the relationship between trust returns and stock returns is quite strong. We conclude that while income trusts appear indistinct from equities as an asset class, they significantly expand the efficient set. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

OPTIMAL PORTFOLIO, CONSUMPTION-LEISURE AND RETIREMENT CHOICE PROBLEM WITH CES UTILITY

We study optimal portfolio, consumption-leisure and retirement choice of an infinitely lived economic agent whose instantaneous preference is characterized by a constant elasticity of substitution (CES) function of consumption and leisure. We integrate in one model the optimal consumption-leisure-work choice, the optimal portfolio selection, and the optimal stopping problem in which the agent chooses her retirement time. The economic agent derives utility from both consumption and leisure, and is able to adjust her supply of labor flexibly above a certain minimum work-hour, and also has a retirement option. We solve the problem analytically by considering a variational inequality arising from the dual functions of the optimal stopping problem. The optimal retirement time is characterized as the first time when her wealth exceeds a certain critical level. We provide the critical wealth level for retirement and characterize the optimal consumption-leisure and portfolio policies before and after retirement in closed forms. We also derive properties of the optimal policies. In particular, we show that consumption in general jumps around retirement.     

New empirical evidence on CEE's stock markets integration

The main aim of the study was to explore the integration of CEE’s stock markets (Central, South-East and Baltic) with those of the developed ones (Germany, USA and the UK). Using daily data from 20 October 2000 up to 20 October 2016, the static analysis indicates a long-run cointegration relationship between CEE markets and all three counterparts considered. The dynamic analysis indicates several short-run episodes of cointegration, which are influenced by nondomestic factors. When comparing among the counterparts, one can highlight that the US stock market is less integrated with emerging markets, which could be considered for portfolio diversification. Furthermore, the contagion effect is not rejected, given that the dynamic pairwise correlations are likely to be affected by herding behaviour and significant break dates.     

Consumption and Portfolio Policies With Incomplete Markets and Short-Sale Constraints: the Finite-Dimensional Case1

We use a martingale approach to study optimal intertemporal consumption and portfolio policies in a general discrete-time, discrete-state-space securities market with dynamically incomplete markets and short-sale constraints. We characterize the set of feasible consumption bundles as the budget-feasible set defined by constraints formed using the extreme points of the closure of the set of Arrow-Debreu state prices consistent with no arbitrage, and then establish a relationship between the original problem and a dual minimization problem.     

The pecking order of cross-border investment

Is there a pecking order of cross-border investment in that countries become financially integrated through some types of investment rather than others? Using a novel database of bilateral capital stocks for all types of investment - FDI, portfolio equity securities, debt securities as well as loans - for a broad set of 77 countries, we show that such a pecking order indeed exists. The paper focuses on two key determinants of this pecking order: information frictions and the quality of host country institutions. Overall, we find that in particular FDI, and to some extent also loans, are substantially more sensitive to information frictions than investment in portfolio equity and debt securities. We also show that the share as well as the size of FDI that a country receive are largely insensitive to institutional factors in host countries, while portfolio investment is by far the most sensitive to the quality of institutions. This provides new evidence in favor of some hypotheses but contradicts others put forward in the literature on trade in financial assets.     

China’s Macroeconomic Imbalances: Causes and Consequences

In recent years, China has experienced two forms of extreme macroeconomic imbalance: an expenditure imbalance in the sense of very high investment and very low consumption, giving rise to rapid capital accumulation; and an imbalance between expenditure and production, producing external imbalance, i.e. a huge surplus on the current account of the balance of payments. Both imbalances imply a low rate of time discount by both government and society: consumption in the present is forgone in favour of consumption in the future. The paper examines how these imbalances came about and goes on to consider whether they can be sustained and how they might be redressed. There is no evidence that the rapid capital accumulation has reduced the rate of profit on capital and thus the incentive to invest. However, persistent external imbalance poses a threat to investment if it generates excess liquidity and asset bubbles. The current account surplus rose remarkably in the years 2004–07. This was associated with exogenous increases in competiveness and in saving, both attributable to the economic reform policies. On current policies, the surplus is likely to rise again once the world economy recovers from its recession. This poses three sorts of problems, each of which is examined in turn: difficulties for macroeconomic stabilisation policies; risk of capital loss on the foreign exchange holdings; and the threat of retaliation by China’s trading partners. A combination of internal and external policies will be required to redress the imbalance.     

我国对外贸易顺差相对规模的测度与分析：1994-2004

运用贸易顺差／进出口比率以及贸易顺差／国内生产总值比率两个指标对1994-2004年我国的贸易顺差相对规模进行的测度和分析表明，我国相对贸易顺差指标运行在较低水平并且出现显著的下降趋势。我国相对贸易顺差的变动与进出口总额的变动及国内生产总值的变动显著背离。国外对我国贸易保护主义的指责没有事实根据，对我国采取贸易保护主义措施也只能加大对我国的双边贸易逆差。     

Government Quality Determinants of Stock Market Performance in African Countries

How do government policies and institutions affect stock market performance? As stock markets grow broader and deeper in African countries, the question becomes more critical. Government quality dynamics of corruption control, government effectiveness, political stability or no violence, voice and accountability, regulation quality and rule of law are instrumented with income levels, religious dominations, press freedom degrees, and legal origins to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The results demonstrate a significant positive association between stock market performance measures and the quality of government institutions. These findings suggest countries with better developed government institutions would favor stock markets with higher market capitalization, better turnover ratios, higher value in shares traded and greater number of listed companies.     

Consumption and Portfolio Selection with Labor Income: A Continuous Time Approach

This paper studies the consumption and portfolio selection problem of an agent who is liquidity constrained and has uninsurable income risk. The paper investigates how the optimal consumption and asset allocation policies deviate from the case where the financial market is perfect, i.e., the case where there are no liquidity constraints and uninsurable income risk. In particular, the paper shows that, for a given level of financial wealth and labor income, optimal consumption is smaller and the optimal level of risk taking is lower in the case where the agent is liquidity constrained and has uninsurable income risk than in the case where the financial market is perfect. The paper also discusses how the agent assesses the value of lifetime labor income and relates this evaluation to optimal consumption and asset allocation policies.     

BUILDING CARS TO CUSTOMER ORDER — WHAT DOES IT MEAN FOR INBOUND LOGISTICS OPERATIONS?

The automotive industry is undergoing a strategic transition. Cost pressure from rising stock levels in the market and increasing incentives needed to sell these vehicles are forcing vehicle manufacturers to rethink their prevalent “stock‐push” approach, building vehicles against a forecast and selling from stock, in favor of a stock‐less “build‐to‐order” order fulfillment strategy. More responsive order fulfillment at the vehicle manufacturer level however will not only require flexible and responsive component supply, but will also have wide ramifications for the logistics operations. Based on three case studies of major inbound logistics operations, this exploratory study assesses their ability to support such a build‐to‐order approach, as well as the potential implications of such transition. The paper concludes with a set of general strategies for how these implications could be mitigated.     

沪深300股指期货期现套利的可行性研究——基于统计套利模型的实证

从期现套利的基本思路出发,论证利用股指期货进行期现套利的可行性。实证表明,采用沪深300股指期货仿真交易的数据,并选择沪深300指数中权重排名前10的一篮子股票组合作为现货组合,运用基于误差修正模型(ECM)的统计套利技术,可以实现股指期货的无风险套利。     

A Martingale Characterization of Consumption Choices and Hedging Costs with Margin Requirements

This paper examines optimal consumption and investment choices and the cost of hedging contingent claims in the presence of margin requirements or, more generally, of nonlinear wealth dynamics and constraints on the portfolio policies. Existence of optimal policies is established using martingale and duality techniques under general assumptions on the securities' price process and the investor's preferences. As an illustration, explicit solutions are provided for an agent with ‘logarithmic’ utility. A PDE characterization of the cost of hedging a nonnegative path‐independent European contingent claim is also provided.