Search

This paper examines the performance of real estate firms that issue seasoned equity with the stated purpose of investing in private market assets. Prior literature documents that (i) firms, in gene...

Purpose The purpose of this paper is to present the results of a study on investor behavior in exchange-traded fund (ETF) markets. The standard feedback trading model of Sentana and Wadhwani (1992) is used in a sample of 18 ETFs contracts in Brazil, China, South Africa, Korea, Mexico and India, as well as three ETFs contracts in the US market. Design/methodology/approach The sample includes data on daily closing prices and net asset values (NAVs) for three ETFs from each of the emerging markets of Brazil, China, Mexico, Korea and India, as well as on three ETFs from the US market. The authors used the earliest start date available in the Thomson Reuters database pertaining to all of the ETFs, and all series ended on May 5, 2017, and applied the well-established Santana and Wadhwani (1992) seminal model to evaluate evidence of feedback trading in the sample. Findings The empirical analysis suggests that there is evidence of feedback trading in emerging markets such as Brazil, Korea, Mexico and India, while there is no such evidence for the US market. The results are consistent with the view that developed markets investors are prone to pursue fundamental-driven investment strategies, while emerging markets investors appear to have informational guided behavior. Research limitations/implications Emerging markets still make up a very small part of the global ETF market, led by the USA. Nevertheless, it is extremely important that studies of this nature be gradually expanded as these markets grow, in order to verify how emerging markets compare to their developed counterparts in terms of the efficiency of information sharing and rationalization of its operations. Practical implications Emerging markets policy makers could benefit from these findings by stimulating new mechanisms that could minimize informational asymmetry and the persistence of so-called noise traders, a phenomenon observed recently in studies regarding ETF markets (Brown, Davies and Ringgenberg, 2018). Originality/value The behavior of investors was investigated by analyzing a sample of 18 ETFs from the emerging markets of Brazil, China, South Africa, Korea, India and Mexico, as well as three ETFs from the US market. Despite of being investigated separately both emerging (Charteris et al., 2014) and developed markets (Chau et al., 2011), the innovation consists in comparing those markets in a single study, pursuing to explain potential reasons for the differences observed between developed and emerging markets.

Academicians and investigators all over the world examine the effects of various macroeconomic variables on security markets, but studies on the repercussions for portfolios are not prominent. This study attempts to address this aspect by performing an exploratory, longitudinal study on 41 mutual funds (belonging to two categories, energy funds and gold funds). Using three-year daily net asset values (NAVs) of these funds and daily values of nine selected macroeconomic variables, the study analyzes the data using time-series nonstationary methods to explore the impact of macroeconomic variables on the chosen funds. The macroeconomic variables were found to affect both fund types, but in different ways. Investment in energy funds changed whenever there was a change in money supply. A positive effect was seen on gold fund NAVs with a change in interest rates. The major impact came from own-fund information when excited by shocks of one standard deviation. The study establishes causality between various mutual funds and the chosen macroeconomic variables. This study accentuates the interrelationship between the macro-economy and the stock market and stresses the need for investors as well as fund managers to understand the global scenario in order to make profitable deals. This insight could also help in developing better fund schemes. TOPICS:Mutual funds/passive investing/indexing, emerging, commodities, portfolio construction

PurposeThe purpose of this paper is to investigate the role of selected macroeconomic variables in influencing the movement of net asset value (NAV) of the Islamic unit trust funds (UTFs) in Malaysia. In efforts to arrive at more enriching findings, the UTFs are further categorised into equity, bond, balanced, fixed, mixed, money market and feeder funds.Design/methodology/approachThe study adopts the vector autoregression framework (Johansen and Juselius (1990), cointegration test and vector error correction model to analyse the relationship between the macroeconomic variables and the NAVs of the various type of funds.FindingsThe study shows that there is a significant long-run equilibrium relationship between the macroeconomic variables and the NAV of all Islamic UTFs in Malaysia. Despite of this, the findings show that different funds have different responses to the movements of the macroeconomic variables.Practical implicationsThe results of the study are of significant importance to the various stakeholders in the Islamic UTF industry. Investors benefit in terms of getting the inputs on their investment decisions as to whether to buy, hold or sell fund units within their investment portfolio in the long run, along with building their optimal portfolio diversification investment strategy, especially in reallocating their assets distribution between the various types of funds in the UTFs industry. For the policy-makers, the findings of the study may assist them in evaluating the suitability of the existing economic policies as to whether they positively or negatively contribute to the development of the Islamic UTFs.Originality/valueThis paper fulfils the need to understand how unit-holders can strategise and diversify their portfolio investments in the Malaysian Islamic UTFs industry based on detailed understanding and knowledge derived from rational and scientific inputs.

Since the rapid growth of the popularity of ETFs, the potential substitution between innovative financial products, exchange-traded funds (ETFs), and traditional investment funds (open-end and closed-end funds) is recognized as one of the most-discussed issues in the financial industry. This is the first study to empirically verify and compare the diffusion and substitution of ETFs using monthly data on their assets in two selected countries. The main aim of this paper is to provide in-depth insights into the development of innovative financial products available in two Asian economies: Japan and South Korea. The empirical study uses monthly total net assets data for 2004–2017. Our methodological framework combines models of innovation diffusion and technological substitution. The results reported in the study show that in both countries the diffusion of ETFs has occurred. The rate of diffusion and the phase of growth reached differed – in Japan the ETF market was in the early exponential growth stage, whereas in South Korea it was closer to achieving the expected maximum saturation. The results of the substitution analysis between the largest category of the innovative funds – equity ETFs and equity open-end funds clearly demonstrate that the process of “switching” from equity open-end funds into ETFs may be easily traced in both countries. Substitution processes were, however, gradual and reversals of the trajectories were noticed.

When an asset-pricing model is claimed to explain a cross-section of portfolio returns, it should do so both within one asset class and across different asset classes. This note illustrates that this is not always the case by testing the explanatory power of the CAPM and the Asness, Moskowitz and Pedensen (2013) model for momentum and value portfolios in different asset markets. Apparently, on one hand, the CAPM is almost as good as the AMP model in explaining momentum and value returns across asset classes, but on the other hand, the AMP model is almost as bad as the CAPM in explaining momentum and value returns within one asset class, namely US equities. Therefore, applying an asset-pricing model to a single cross-section of returns may generate misleading results.

This paper examines the risk premium of value stocks within a global investment strategy framework. We test whether absolute or relative mispricing is better suited to capturing the global value premium by using fair value-based net asset values (NAVs) as our proxies for fundamental value. We find that investing in the most underpriced stocks relative to the average ratio of price to fundamental value in a country is the key to achieving superior risk-adjusted returns. The annualized excess return of the global value portfolio sorted according to relative mispricing is 10.0%, and remains significant after controlling for common risk factors. (C) 2017 Published by Elsevier B.V.

This study aims to examine and explain the effect of Market to Book Value of Equity, Ratio of Depreciation to Firm Value, and Ratio of capital expenditure to book value of assets simultaneously to company performance are proxied by return on investment (ROI). In addition, this study also aims to determine the most dominant influence. The sample used in this study are 8 companies of Textile and Garment Sub-sector which go public in Indonesia Stock Exchange and got a total of 40 pooling data for period 2010-2014. This study uses the method of financial ratio analysis, descriptive statistical analysis, and inferential statistical analysis. The result of the study shows that the contribution of Market to Book Value of Equity, Ratio of Depreciation to Firm Value, and Ratio of capital expenditure to book value of assets simultaneously to company performance are proxied by return on investment (ROI) equal to 42.2%. Estimation results can be seen that the variable that has the largest standardization coefficient is the variable Market to Book Value of Equity. Thus, Market to Book Value of Equity has the most dominant influence on return on investment (ROI).

Empirical literature on value and growth style investing finds value style investing to be a favorable long-term investment strategy. But the value premium, as explained by Basu [1977] and Fama and French [1992], has been subject to important criticism. For example, Peters [1991], Estrada [2005], and Penman and Reggiani [2013a] argued that value and growth investment strategies should not be viewed as mutually exclusive. Their contention further earns credibility when academics fail to explain the value premium in value stocks. In this article, the authors argue that the value premium puzzle is a result of the lack of a valid asset pricing model. They show that that the key problem that lies behind the value premium puzzle is related to standard risk measures and thus related to the discount rate. They further show that investment style biases can be avoided by estimating a fair value that not only considers economic size metrics, but also controls for individual stocks’ heterogeneous risk and reward characteristics independent from market price. The authors introduce fair value indexation , designed to avoid systematic biases not just in capitalization-weighted indexes but also in traditional style and fundamentally weighted indexes, while delivering improved long-term risk adjusted returns of very similar liquidity and capacity as capitalization-weighted equity market indexes.

This study analyzes whether fair value estimates of fund net asset values (NAVs) produced by private equity managers are accurate and unbiased predictors of future discounted cash flows (DCFs). We exploit the fact that private equity funds have finite lives to compare reported NAVs to DCFs based on realized cash flows for 384 Venture Capital (VC) funds and 195 Buyout funds spanning 1988–2016. Findings reveal that Buyout funds' NAVs display little systematic bias, but VC funds' NAVs are relatively aggressively biased compared to Buyout funds, especially since 2000. Accuracy is worse in the first half of the sample period even though NAV estimates generally are more conservative. Overall, the results reveal significant differences in the association between NAVs and DCFs for Buyout versus VC funds, which is particularly important for private equity fund investors in their consideration of the relevance and reliability of NAV estimates provided by fund managers.

In this paper, we examine the impact of asset growth rates on the future stock performance of 308 publicly traded real estate investment trusts (REITs). We observe that fast growing REITs tend to underperform slow growing REITs. However, we find evidence that the growth effect is significantly less negative for REITs selling at a premium to NAV. On the asset investment side, the negative asset growth effect is associated with growth in non-core assets. This is consistent with the notion that firms that grow outside of their competency areas are penalized by the market. On the asset financing side, we find that growth activities funded by taking on more unsecured debt are associated with negative stock performance over the next 12 months. In addition, we only observe the asset growth effect in the sub-sample of REITs that engages in equity issuance over the next 12 months. The combined evidence suggests that contemporaneous equity dilution, which has not been considered in previous studies, may provide a simple explanation for the underperformance of fast growing firms.

The prices of exchange-traded funds (ETFs) can deviate significantly from their net asset values (NAVs), in spite of the arbitrage mechanism that allows authorized participants to create and redeem shares for the underlying portfolios. The deviations, typically within a band of about 200 bps, are larger in funds holding international or illiquid securities. To control for stale pricing of the underlying assets, I introduce a novel approach that uses the cross section of prices on a group of similar ETFs. The average pricing band remains economically significant at about 100 bps, with even larger mispricings in some asset classes. Active trading strategies exploiting such inefficiencies produce substantial abnormal returns before transaction costs, providing further proof of short-term mean reversion in ETF prices.

We develop an analytical solution to the dynamic multi-period portfolio choice problem of an investor with risky liabilities and time varying investment opportunities. We use the model to compare the asset allocation of investors who take liabilities into account, assuming time varying returns and a multi-period setting with the asset allocation of myopic ALM investors. In the absence of regulatory constraints on asset allocation weights, there are significant gains to investors who have access to a dynamic asset allocation model with liabilities. The gains are smaller under the typical funding ratio constraints faced by pension funds.

Exchange-traded commodities (ETCs) open the commodity markets to both private and institutional investors. This paper is the first to examine the pricing efficiency and potential determinants of price deviations of this new class of derivatives based on daily data of 237 ETCs traded on the German market from 2006 to 2012. Given the unique size of the sample, we employ the premium/discount analysis, quadratic and linear pricing methods, as well as regression models. We find that the ETCs incur, on average, price deviations in their daily trading and are more likely to trade at a premium from their net asset values than at a discount. In addition, we examine the influence of certain factors such as management fees, commodity sectors, issuers, spread, assets under management, investment strategies, replication and collateralization methods on quadratic and linear price deviations.

The are two kinds of stock mutual fund, namely company and collective investment contract of stock mutual fund. Three aspects must be considered by investor in selecting stock mutualfund, (1) how much rate of return, (2) is rate of risk and (3) is performance or professionality of porlfolio management of stock mutual fund. To analyze the performance of stock mutual fund, especially collective investment contract of stock mutual fund in Indonesia, is the objective of this study. Based on theoretical and empirical review, it is able to design hypothesis. Data collections in this study covering IHSG, BI rate and Net Asset Value (NAV) of stock mutual funds. Alfa Jensen's model was used to evaluate the performance of collective investment contract of stock mutual fund. The finding of this study shows that only two of six of stock mutual fund which are observed as sample, have outperform toward market performance and the others are underperfoms condition.

The distributions of market capitalization across stocks listed in the NASDAQ and Shanghai stock exchanges have power law tails. The power law exponents associated with these distributions fluctuate around one, but show a substantial decline during the dot-com bubble in 1997–2000 and the Shanghai bubble in 2007. In this paper, we show that the observed decline in the power law exponents is closely related to the deviation of the market values of stocks from their fundamental values. Specifically, we regress market capitalization of individual stocks on financial variables, such as sales, profits, and asset sizes, using the entire sample period (1990–2015) to identify variables with substantial contributions to fluctuations in fundamentals. Based on the regression results for stocks listed in the NASDAQ, we argue that the fundamental value of a company is well captured by the value of its net asset; therefore, a price-to-book ratio (PBR, P/B Ratio) is a good measure of the deviation from fundamentals. We show that the PBR distribution across stocks listed in the NASDAQ has a much heavier upper tail in 1997 than in the other years, suggesting that stock prices deviate from fundamentals for a limited number of stocks constituting the tail part of the PBR distribution. However, we fail to obtain a similar result for Shanghai stocks.

We develop a model for valuing U.S. real estate investment trusts (REITs) that considers the tax liability impounded in REITs’ property portfolios. This liability is a function of the portfolio’s accumulated depreciation and is driven by different tax rates applied to individual components of the total gain from property sales. These two components are the capital gain resulting from the sale of property at a price higher than its cost and the gain due to the recapture of depreciation taken during the use of the property. Our measure of value is the REIT’s net asset liquidation value (NALV). The metric of REIT value currently used by analysts is a REIT’s net asset value (NAV), but a REIT’s NAV will always be greater than the NALV and therefore overestimate market value, all else equal. Finally, using observed market prices for REITs, we provide evidence that NALVs give superior estimates of REIT market prices than do NAVs.

Mutual funds have emerged as the most dynamic segment of the Indian financial system. With its potential to provide higher return by investment in diversified securities, mutual funds emerge as one...

The instability of money market mutual funds, a relatively new form of financial intermediary that connects short term debt issuers with funders that want daily liquidity, became manifest in the financial crisis of 2007-2009. The bankruptcy of Lehman Brothers, a major issuer of money market debt, led one large fund to “break the buck” (that is, violate the $1 net asset valuation convention) and triggered a run on other funds that was staunched only by major interventions from the US Treasury and the Federal Reserve. One common reform proposal has been to substitute “floating NAV” for “fixed NAV,” on the view that MMF run risk was strongly affected by the potential to arbitrage between the “true” value of MMF assets and the $1 fixed NAV. It turns out that European MMFs are issued in two forms, “stable NAV” and “accumulating NAV,” which offer a reasonable proxy for the distinction between fixed and floating NAV. Thus the comparative run rate of these two MMF types during “Lehman week” offers a natural experiment of the effect of NAV “fixedness.” We find that the stable/accumulating distinction explains none of the cross-sectional variation in the run rate among these funds. Instead, two other variables are explanatory: yield in the period immediately prior to Lehman week, which we take as a proxy for the fund’s portfolio risk, and whether the fund’s sponsor is an investment bank, which we take as proxy for sponsor capacity to support the fund. We then argue that these findings indicate that other stability-enhancing reforms are necessary.

This paper examines short- and long-term behavior of the price-to net asset value ratio in six Asian public real estate markets. We find mean-reverting behavior of the ratio and spillover effects, where each of the examined public real estate markets correlates with other markets. Additionally, the unexpected shock correlating with the price-to-net asset value ratio in one market has a positive or negative correlation with the ratios of other markets. Our results offer fresh insights to portfolio managers, policymakers, and academic researchers into the regional and country market dynamics of public real estate valuation and cross-country interaction from the long-term and short-term perspectives.

Purpose – The purpose of this paper is to propose a novel theory of the equilibrium liquidity premia of private equity funds and explore its asset-pricing implications. Design/methodology/approach – The theory assumes that investors are exposed to the risk of facing surprise liquidity shocks, which upon arrival force them to liquidate their positions on the secondary private equity markets at some stochastic discount to the fund’s current net asset value. Assuming a competitive market where fund managers capture all rents from managing the funds and investors just break even on their positions, liquidity premia are defined as the risk-adjusted excess returns that fund managers must generate to compensate investors for the costs of illiquidity. The model is calibrated to data of buyout funds and is illustrated by using numerical simulations. Findings – The model analysis generates a rich set of novel implications. These concern how fund characteristics affect liquidity premia, the role of the investors’ propensities of liquidity shocks in determining liquidity premia and the impact of market conditions and cycles on liquidity premia. Originality/value – This is the first paper that derives liquidity premia of private equity funds in an equilibrium setting in which investors are exposed to the risk of facing surprise liquidity shocks.

An exchange-traded fund (ETF) is a financial asset that tracks a chosen index and trades continuously throughout the day. The price differential between the market price and net asset value (NAV) of the ETF creates risk-free arbitrage opportunities. This article captures the pricing efficiency and price discovery process using autoregressive analysis model and a vector error correction model (VECM). The study concludes that the Indian ETF market displays a lack of price efficiency. Except for two ETFs, the NAV of the ETF has been the lead indicator for ETFs.

This paper investigates the short-run relationship between closed-end fund prices and their net asset values. In particular, we document three systematic differences between the short-run pricing behaviors for stock and bonds funds. For equity funds, we show that returns processes for both prices and asset values have characteristics of a random walk, while bond funds returns are more predictable. Similarly, multivariate GARCH analysis establishes the existence of stronger news and volatility spillover effects between the fund price and the net asset value for bond funds than for stock funds. Finally, we find significantly weaker dynamic conditional correlations between the fund price and its fundamental value for bond funds after the Lehman Brothers failure, whereas no such evidence is found for stock funds. To explain these findings, we propose a mechanism based on bond market illiquidity.

Purpose – The purpose of this paper is to examine the performance and diversification value of water-related funds. As pollution, climate change and accelerated population growth threaten water resources worldwide, such resources have become a sought-after asset. For most investors, it is impractical to physically hold water as part of a portfolio; therefore, an open question is how to better gain exposure to this asset. The authors propose a look at water-related mutual funds, an issue not found addressed in the literature. In addition to the investment potential of these funds, investors might be drawn to them as part of a more comprehensive socially responsible agenda. Design/methodology/approach – In the present study, the authors identify and measure the risk-adjusted performance and diversification value of open-end funds dedicated to investments in water-related securities. Jensen’s alpha is used to measure risk-adjusted performance, whereas diversification value is examined by implementing a methodology widely used in the mutual fund literature. Findings – Consistent with previous studies on the performance of ethical or socially responsible mutual funds, the authors found that their sample of water-related mutual funds neither outperform nor underperform two benchmarks. However, the authors also found that they offer potential diversification gains for international mutual funds’ portfolios. Research limitations/implications – Open-end water-related mutual funds have only been recently created, and currently, very few funds are available to investors. These facts limit the sample size and the length of the return series examined. Originality/value – The authors have not found a paper that examines the performance and diversification value of water-related mutual funds. These funds present themselves as a practical way for individual investors to gain exposure to the commodity of water.

Value/growth and size investment strategies involve the creation of equity portfolios on the bases, respectively, of intrinsic value relative to market value and market capitalisation. The propositions that a portfolio of high relative intrinsic value shares anomalously outperforms a low intrinsic value portfolio (in other words, there is a value premium) and a portfolio of low market capitalisation shares outperforms big company shares (a size effect) have attracted a great deal of academic and professional attention in recent decades. This paper examines the value premium and the size effect in the context of the South African equity market for the period July 2006 to June 2012, which includes the global financial crisis and its continuing economic aftermath. Two specific issues are investigated: firstly, whether the value premium and size effect exist in this market and this time frame, and secondly, whether the evidence in this context provides any support for a rational investor explanation for the o...

In this study, we examine the release of analysts’ net asset value estimates of firms and ask whether they transmit new information to security markets. We find that net asset value estimates do contain new information as measured both by abnormal returns and by abnormal share turnover. Our findings remain significant after controlling for concurrent analyst FFO forecasts, buy/sell recommendations, and price targets. Consistent with efficient information transmission, the information is absorbed quickly and permanently by market participants. Analysts of most companies seldom release definite net asset value estimates. The exception is real estate investment trusts (REITs), whose analysts regularly issue estimates of net asset values (NAV) based on the value of their underlying real estate portfolio. We are the first to our knowledge to examine whether analyst estimates of REIT NAVs transmit new information to securities markets.

Some existing studies use one kind of forecasting variables and Fama-MacBeth Regression to predict stock returns and find very modest predictability. To get better predictability, Adaboost integration algorithm, which is a classic machine learning algorithm and can use multiple kinds of forecasting variables, is introduced to predict yearly stock returns of all the firms of A-Share market from 2011 to 2015. The predictability is considerably improved. The average yearly out-of-sample error rate from 2013 to 2015 is 22%. The average yearly out-of-sample error rate from 2011 to 2015 is 27%. By analyzing data of the five years we find phenomena as following. First, the most important forecasting variable is different in each year when the market index shows different trend. Second, industry category plays very important role in every year. Meanwhile, other important forecasting variables of the five years include trade volume, full shares and tradable shares, Price Book Ratio and net asset per share, which represent market, size, valuation and fundamental respectively.

Background: Inadequate retirement savings is an international challenge. Additionally, individuals are not cognisant of how asset allocation choices ultimately impact retirement savings. Life cycle and balanced funds are popular asset allocation strategies to save towards retirement. However, recent research is questioning the efficacy of life cycle funds that switch to lower risk asset classes as retirement approaches. Aim: The purpose of this study is to compare the performance of life cycle funds with balanced funds to determine whether either dominates the other. The study compares balanced and life cycle funds with similar starting asset allocations as well as those where the starting asset allocations differ. Setting: The study has a South African focus and constructs funds using historical data for the main local asset classes; that is, equity, fixed income and cash, as well as a proxy for foreign equity covering the period 1986–2013. Method: The study makes use of Monte Carlo simulations and bootstrap with replacement, and compares the simulated outcomes using stochastic dominance as decision-making criteria. Results: The results indicate that life cycle funds fail to dominate balanced funds by first-order or almost stochastic dominance when funds have a similar starting asset allocation. It is noteworthy that there are instances where the opposite is true, that is, balanced funds dominate life cycle funds. These results highlight that while the life cycle funds provide more downside protection, they significantly suppress the upside potential compared to balanced funds. When the starting asset allocations of the balanced and life cycle funds differ, the stochastic dominance results are inconsistent as to the efficacy of the life cycle fund strategies considered. Conclusion: The study shows that whether one fund is likely to dominate the other is strongly dependent on the underlying asset allocation strategies of the funds. Additionally, the length of the glide path and the risk and return characteristics of the investable universe are also likely to influence the findings.

The paper uses disaggregated data on asset holdings and liabilities to estimate a general equilibrium model where each institution determines the diversification and size of the asset and liability sides of its balance-sheet. The model endogenously generates two types of financial networks: (i) a network of institutions when two institutions share common asset or liability holdings or when an institution holds an asset that is the liability of another. In both cases demand/supply decisions by one institution affect the value of other institutions' holdings/liabilities, (ii) a network of financial instruments implied by the distribution of assets and liabilities within and across institutions. A change in the price of one asset induces change in demand/supply for all other assets, thus generating price comovement. The general equilibrium analysis predicts the propagation of real, financial and regulatory shocks as well as the change in the network caused by the shock.

The purpose of this paper is to study the effects of air pollution, especially the haze, on the stock returns of steel mills. This study collects data from air quality index, variables represent characteristic of the eleven steel mills in China and the stock returns ratio from the stock market etc. SPSS19.0 is utilized to conduct a descriptive analysis of the correlation between the principal air pollution(including PM\(_{2.5}\), PM\(_{10}\)), the variables represent charactering(monetary funds, net assets, liabilities, operating margin, financial leverage, and total asset growth) of the elven steel mills in China and the stock returns ratio from the stock market etc. Hence, through the research on the air pollution index, analysis of the listed company’s earnings and stock price, and by using the linear regression analysis method, research shows that the serious air pollution have a negative impact on the profitability of iron and steel enterprises through the emotion and expectations of investors. It is imperative for people to tackle air pollution urgently.

Objective. This paper focuses on UK leveraged Exchange Traded Funds (ETFs) and examines their ability to meet their daily targets, the impact of volatility on targets’ achievement, and their pricing efficiency.Methodology. Standard regression analysis is used to evaluate performance, tracking efficiency and persistence in tracking failures, and the relationship between tracking efficiency and market volatility. Moreover, the pricing efficiency is examined along with the persistence in premium and the influence of market factors on premium.Findings. Results reveal that ETFs achieve their targets but occasionally tracking error can be significant. Furthermore, increases in market volatility relate to higher and lower tracking errors for bull and bear ETFs respectively. Moreover, average premiums testify a sufficient fit between trading prices and net asset values whereas the premiums are eliminated sharply. Moreover, the pricing efficiency of bear ETFs is positively associated with benchmark returns. The opposite is the case for bull ETFs. Finally, the pricing deviations are positively related to benchmarks’ volatility.Limitations. A possible limitation is that our sample includes just nine bear and sixteen bull ETFs even though more than 90 leveraged ETFs are traded on the UK market and our results may not be indicative of the entire UK leveraged ETF market. However, we had to use a small sample of ETFs because the trading activity of the rest ETFs has been very poor and, consequently, our analysis could have been biased by a thin trading effect. Originality/Value. This is the first study to examine the UK market of leveraged ETFs.

Este estudio evalúa empíricamente la eficiencia en la valoración de varios ETFs latinoamericanos, expresada en desviaciones de sus precios de mercado frente a los valores liquidativos subyacentes. Se cuantifican tales ineficiencias y se implementa una estrategia de negociación verificada por regresiones basadas en el CAPM y el Modelo Fama-French. Los resultados discrepan con la Hipótesis de los Mercados Eficientes y son mejor explicados por aspectos de las finanzas comportamentales. Finalmente, se examina cómo las desviaciones influyen sobre la decisión de creación o redención de ETFs, mediante un análisis de regresión logística. Los resultados evidencian que los participantes autorizados reaccionan ante las ineficiencias realizando transacciones en el mercado primario. This study empirically evaluates the pricing efficiency of several Latin American Exchange Traded Funds (ETFs) regarding deviations of ETF prices from their underlying net asset values (NAVs). A measure of these inefficiencies is made by implementing a trading strategy and running CAPM and Fama-French regressions to determine the excess return of the trading. Results do not conform to the Efficient Market Hypothesis, but rather support aspects of behavioral finance. Finally, it is addressed how these inefficiencies influence the decision for ETF share creation and redemption via logit regression analyses. Results highlight that ETF authorized partners react to inefficiencies by trading within the ETF primary market. © 2016, Pontificia Universidad Javeriana. All rights reserved.

Mutual funds are excellent medium for investors to invest, who do not have much know-how about financial markets. Investors generally take fund's historical performance and their funds rating as harbinger for its performance prediction. This myopic selection and prediction criterion sometimes lead to wrong funds allocation and hence poor portfolio performance. Performance prediction depends upon number of internal factors like GDP growth, inflation, business sentiments and external factors too like fed rates, political stability, world growth, currency fluctuations, etc., which are very difficult to predict precisely. However, in past, there had been many studies in India as well as abroad which tried to predict the performance by using various statistical techniques. This review paper covers such studies and various techniques used to check the fund's performance. Through this survey it is observed that performance analysis of mutual funds needs an extensive in-depth analysis of various factors and further study can be done to improve the predictability and volatility of mutual fund performance. In end, this paper gives a brief literature review of mutual funds' performance prediction models used domestically and internationally.

Emerging market exchange-traded funds (ETFs) are the subject of the current article. In particular, a sample of 40 iShares listed in the United States and exposed to several emerging stock markets in the Americas, Europe, Asia, and South Africa is employed to study several issues surrounding the trading behavior of emerging market ETFs. The issues examined concern the behavior of their return and volatility during trading and nontrading hours; their performance relative to market performance; the correlation of emerging ETF returns with the stock market of the United States; their tracking error and the persistence in tracking error; the pricing inefficiencies in terms of deviations between the trading prices and net asset values of ETFs; the persistence in these inefficiencies, which may or may not be arbitrageable; the reaction implications for the pricing of ETFs due to the existence of these inefficiencies; and finally, the determinants of ETFs’ trading activity. The results are comprehensive and indicative of the trading behavior of U.S. ETFs invested in emerging market indexes covering the Americas, Europe, Asia, and South Africa.

Given the exponential growth in exchange-traded fund (ETF) trading, ETFs have become a significant factor in the volatility generating process of their largest component stocks. A simple model of trading is developed for securities that are included in ETFs, and empirical support is provided for the model hypotheses. Volatility spillovers from ETFs to their largest component stocks are economically significant. These spillovers are increasing in liquidity, the proportion of each stock held by the fund, deviations from net asset value, ETF flow of funds and ETF market capitalization. The results are consistent with a positive volume–volatility relation and trading-based explanations of volatility, and are generally stronger for smaller stocks.

The purpose of this research is to find out the concept and benefit of regulation of no par value shares in Indonesian Capital Market. The legal issue of this research is the philosophical meaning of no par value shares as stipulated in Article 31 subsection (2) of Company Law 2007. Ontologically, regulation of no par value shares is one of alternatives to solve the crisis of capital market. Etiologically, the regulation will give the value of benefits in term of providing easiness to perform corporate action, simplification of accounting, no distinction between issued shares and outstanding shares, the shares price is not determined by the nominal price but the market price, it remains to be traded, the company may still do a rights issue to obtain fresh funds even during crisis and they can use mandatory and optional system.Keywords: regulation, no par value shares, capital market.

We propose a solution to the closed-end fund puzzle in financial markets without a free lunch with vanishing risk. Our results are consistent with both the time-series and the cross-sectional aspect of the closed-end fund puzzle. It turns out that a closed-end fund cannot exist if the fund manager is supposed to receive a fee although he is not able to find mispriced assets in the market. By contrast, a premium can typically be observed at the initial public offering because the fund manager has access to information that enables him to create a dominant strategy. As soon as this weak arbitrage opportunity evaporates, a premium can no longer occur. The reason why a premium quickly turns into a discount might be that the fund manager stops applying a superior trading strategy at some point in time. Another possibility is that abnormal profits are transient in a competitive financial market. In any case, when the fund manager is no longer willing or able to maintain a superior strategy, the fund must trade at a discount in order to compensate for his management fee.

This paper examines share price of the companies listed on the WIG-20 and their fair value between 2005 and 2015. Data from 2005 to 2015 were collected from the Stooq.pl (Polish portal of shares). Two hypotheses are tested: (1) value of the shares based on the market price; (2) value of the shares as the fair value of shares.

Exchange traded funds (ETFs) are one of the most innovative financial products introduced on exchanges. ETFs in India, investors need D-MAT account and many Indian investors do not have these accounts and therefore do not consider ETFs. ETFs have been limited to broad indexes when compare other countries markets. In USA 75% ETFs are affect the total turnover of U.S stock Exchange but in India only the 25% of ETFs are affect the total turnover of Indian Stock market. Indian stock market regulators only can regulate the way of trading ETFs and Create awareness about riskless ETFs trading to Indian traders. I. Introduction An ETF refers to a diversified basket of securities that is traded in real time like an individual stock on an exchange.Unlike regular open-ended mutual funds, ETFs can be bought and sold throughout the trading day like any other stock.An ETF is similar to an index fund, but the ETFs can invest in either all of the securities or a representative sample of the securities included in the index. Exchange-traded funds first came into existence in the USA in 1993. Importantly, the ETFs offer a one-stop exposure to a diversifi ed basket of securities that can be traded in real time like an individual stock. MEANING : EXCHANGE TRADED FUND(Etfs) A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does. By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order. Etfs: EVOLUTION AND RECENT TRENDS The first ETF in India, the "NIFTY BEES (Nifty Benchmark Exchange Traded Scheme) based on Nifty 50 was launched inDecember 2001 by Benchmark Mutual Fund. It is bought and sold like any other stock on NSE and has all characteristicsof an index fund. As of March 2013, there were 35 ETFs listed on NSE. The ETF based on Sensex is SPICE (SensexPrudential ICICI Exchange Traded Fund) which was launched by -Prudential ICICI. Growth in Gold ETFs have seen a rising trend as shown in Following Figure however other ETFs have seen a decline in activity from 2007 to 2011.

This article studies the persistence of bond exchange-traded fund (ETF) premiums and discounts. Following a day of high or low premiums or discounts over net asset value (NAV), ETFs tend to maintain a premium or discount for up to 30 days. Premiums and discounts also predict distinct patterns of returns after daily closing. Overnight returns are negative following a high premium, while ETFs with large discounts are followed by positive overnight returns. The large discount ETFs have substantially higher returns than high premium ETFs over the subsequent thirty days. We find that traditional liquidity measures, along with prior deviations from NAV, are significant in explaining a fund’s premiums/discounts. Finally, we examine a long–short portfolio strategy to exploit the observed deviations from NAV and find it generates an alpha of 0.96% per month or about 11.5% per year.

The paper investigates the extent of the impact from changes in asset price and risk on corporate investment behaviors as well as the real economy. The results support the unidirectional causality effects from asset price fluctuations on the macro-level. By applying quarterly data of Chinese listed companies, we further find the existence of balance sheet effect on the firm-level, which suggests that the changes in asset prices and risk affect the net asset value, and consequently influence corporate investment decisions. More importantly, the balance sheet effect appears to be much more significant after the implementation of new fair value accounting standards in 2007. The impact on the real economy from asset price risk is found to be more prominent as well.

This study contributes to research on value investing in Brazil, analyzing the Brazilian funds that adopt this philosophy. The goal is to identify some of the factors that influence the decisions of value investing managers to maintain an asset in their portfolios. The results point out that the variables that influence portfolio managers to maintain a stock in their assets under management are greater stability in earnings per share, high ROA (Return on Assets), high gross margin, company size, and liquidity of the shares.Este estudio contribuye a la investigación sobre inversión de valor en Brasil, analizando los fondos que adoptan esta filosofía. El objetivo es identificar algunos de los factores que influyen en las decisiones de los gerentes de inversiones de valor para conservar un activo en sus carteras. Los resultados evidencian que las variables que influyen en los gestores de carteras para conservar una acción de los activos que gestionan son la mayor estabilidad en las ganancias por acción, el alto rendimiento de los activos (ROA, por sus siglas en inglés), el margen bruto elevado, el tamaño de la empresa y la liquidez de las acciones. Este estudio contribuye a la investigación sobre inversión de valor en Brasil, analizando los fondos que adoptan esta filosofía. El objetivo es identificar algunos de los factores que influyen en las decisiones de los gerentes de inversiones de valor para conservar un activo en sus carteras. Los resultados evidencian que las variables que influyen en los gestores de carteras para conservar una acción de los activos que gestionan son la mayor estabilidad en las ganancias por acción, el alto rendimiento de los activos (ROA, por sus siglas en inglés), el margen bruto elevado, el tamaño de la empresa y la liquidez de las acciones

We find that the aggregate asset allocation decisions of US mutual fund investors depend on economic conditions. Both anticipated economic downturns and periods of turmoil lead investors to direct flow away from risky equity funds and towards lower-risk money market funds. These patterns are markedly stronger for investors in low cost and low turnover funds relative to investors in high cost and high turnover funds, consistent with sophisticated investors being more sensitive to changing conditions. Benchmarked against a buy-and-hold strategy, these asset allocation strategies reduce risk without degrading the risk-return trade-off. Our evidence suggests that individual investors, often dismissed as noise traders, collectively react to economic signals in a sensible manner when determining asset allocations.

Using the data on stocks listed on Bombay Stock Exchange (BSE) for the period spanning from 1996 to 2010, the present study intends to examine the relevance of stock selection based on net current asset value rule of Benjamin Graham in Indian capital market. This valuation metric is aimed at buying the securities whose prices are lesser than the net current assets of the company. The returns derived from the stocks meeting the criterion are analysed using one sample t-test, capital asset pricing model (CAPM). The results revealed that the portfolio selected on the basis of this criterion provided significantly positive mean market adjusted returns in maximum number of years when the holding period of the portfolio is extended from 12 months to 24 months. The significant abnormal returns derived through CAPM model, however, cannot be considered conclusive due to lesser explanatory power of the model. Nevertheless, the portfolio showed lesser volatility than the market portfolio, thereby implying that the f...

We consider an insurer with purely domestic business whose liabilities towards its policy holders have long durations. The relative shortage of domestic government bonds with long maturities makes the insurer’s net asset value sensitive to fluctuations in the zero rates used for liability valuation. Therefore, in order to increase the duration of the insurer’s assets, it is common practice for insurers to take a position as the fixed-rate receiver in an interest-rate swap. We assume that this is not possible in the domestic currency but in a foreign currency supporting a larger market of interest-rate swaps. Monthly data over 16 years are used as the basis for investigating the risks to the future net asset value of the insurer from using foreign-currency interest-rate swaps as a proxy for domestic ones in asset–liability management. We find that although a suitable position in swaps may reduce the standard deviation of the future net asset value it may significantly increase the exposure to tail risk that has a substantial effect on the estimation of the solvency capital requirements.

In this paper we study the intraday price formation process of country Exchange Traded Funds (ETFs). We identify specific parts of the US trading day during which Net Asset Values (NAVs), currency rates, premiums and discounts, and the S&P 500 index have special effects on ETF prices, and characterize a special intraday and overnight updating structure between these variables and country ETF prices. Our findings suggest a structural difference between synchronized and non-synchronized trading hours. While during synchronized trading hours ETF prices are mostly driven by their NAV returns, during non-synchronized trading hours the S&P 500 index has a dominant effect. This effect also exceeds the one that the S&P 500 index has on the underlying foreign indices and suggests an overreaction to US market returns when foreign markets are closed.