Why is timing perverse?

The existence of negative market timing, even for passive portfolios, poses a relevant puzzle when assessing portfolio management. In this paper, we develop a simple theoretical model so as to explain why such perverse market timing might occur and why those stocks with the lowest beta in upward markets exhibit pronounced negative timing. Our explanation is based on the existence of higher correlations of stocks in down markets than in up markets. We find that changes in beta, which drives timing, has four components; however, just two of these, mean covariance shift and covariances dispersion map, serve to explain the asymmetric behavior across stocks. We find that a high percentage of the negative market timing ability identified for mutual funds in the literature could be explained by this bias.     

Trade Receivables Policy of Distressed Firms and Its Effect on the Costs of Financial Distress

This paper studies the trade receivables policy of distressed firms as the trade-off between the firm's willingness to gain sales and the firm's need for cash. We find that firms increase trade receivables when they have profitability problems, but reduce trade receivables when they have cash flow problems. We also find that a firm that significantly cuts its trade receivables when in financial distress will experience an additional drop of at least 13% in sales and stock returns over the previously documented 20% average drop for financially troubled firms. Moreover, the performance decline of a firm in financial distress is significantly higher if the firm cuts trade receivables than if it does not.     

Financial information,green certification,government subsidies and green bond credit spreads–evidence from China

In the context of green bonds playing an increasingly vital role in the green financial market, this study selects 61 green bonds issued in China from 2016 to 2021 as samples to examine the factors influencing green bond credit, including financial information and ratings of issuers, green certification, and government subsidies. First and foremost, based on AHP and entropy method, the financial composite index is constructed to evaluate the issuers’ finance. Additionally, the differences in the cost of green bonds issued by state-owned enterprises (SOEs) and semi-enterprises are explored by adding the property rights variable. Empirical results indicate that the issuer’s rating could significantly affect the credit spread. In addition, the green bond credit spreads of SOEs are more competitive than those of semi-enterprises. When the issuer is a SOE, green bond credit spread has a remarkable negative correlation with finance information. Furthermore, green certification and government grants are not the main factors. Finally, the green bond market, crucial to controlling the green financial system, is presented with specific recommendations for its growth in this study.