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P2P lending is an increasingly prosperous financial market, where lenders can directly bid and invest on the loans posted by borrowers. However, when facing massive loan requests, it is very difficult and also boring for lenders to choose loan portfolios meeting their ideal expectations. Actually, when choosing loans, most lenders pursue the highest profit with the lowest risk as well as satisfying their hobbies. In this paper, we formalize a multi-objective optimization problem to help lenders select loan portfolios. Specifically, the recommending scenario in P2P lending is formulated as a multi-objective optimization problem, where two objective functions are designed for capturing lenders' multiple demands. On this basis, a multi-objective evolutionary algorithm based on return-risk management named MOEA-RRM is then proposed for the multi-objective optimization problem, which can help lenders choose loan portfolios to meet lenders' multiple demands. Furthermore, in MOEA-RRM, a decision space dimensionality reduction strategy and an initialization strategy are proposed to improve the performance of algorithm. Finally, experimental results on a real-world P2P lending data set demonstrate the effectiveness of our proposed MOEA-RRM, i.e., the proposed approach can recommend the loan portfolio with a good trade-off between risk and return as well as satisfying the hobbies of lenders.

To examine the familiar tradeoff between risk and return in financial investments, we use a rolling two-stage stochastic program to compare mean-risk optimization models with time series momentum strategies. In a backtest of allocating investment between a market index and a risk-free asset, we generate scenarios of future return according to a momentum-based stochastic process model. A new hybrid approach, time series momentum strategy controlling downside risk (TSMDR), frequently dominates traditional approaches by generating trading signals according to a modified momentum measure while setting the risky asset position to control the conditional value-at-risk (CVaR) of return. For insight into the outperformance of TSMDR, we decompose each strategy into two aspects, the trading signal and the asset allocation model that determines the risky asset position. We find that 1) weighted moving average can better capture the trend of the stock market than time series momentum computed as past 12-month excess return, 2) mean-risk strategies generally provide better returns whereas risk parity strategies have less investment risk and 3) controlling CVaR limits the investment risk better than controlling variance does.

The informativeness of financial analysts’ stock recommendations to investors has become the subject of much scrutiny and debate. This article investigates the investment value of target price (TP) forecasts under the specific angle of factor investing. It provides directions to quantitative portfolio managers for the integration of signals conveyed by those forecasts in systematic and rule-based investment decisions. Using TP data from 1999 to 2019 in Europe and North America, the author first documents a decline in analyst opinion on the performance of most equity factors and finds that their forecasts are style biased. He shows that a long-only strategy that picks best-ranked stocks according to consensus TP implied expected returns (CTPER) generates substantial alpha within large-cap, low-idiosyncratic-risk, and noncyclical stocks. Embedding the CTPER signal into the momentum factor helps materially improve its risk and return profile. Those findings support the idea of adequately using TP forecasts in the design of top-down multifactor portfolio construction frameworks. Key Findings ▪ Financial analyst opinion on the performance of most equity factors has declined over time. Their TP forecasts are style biased. ▪ Long-only strategies that pick the best-ranked stocks according to CTPER generate substantial alpha within large-cap, low-idiosyncratic-risk, and noncyclical stocks. ▪ Enriching the stock selection criterion of the momentum factor with the CTPER signal improves its risk and return profile.

In managing finances, each aims to be able to generate income for himself. Investment is one of the individual decisions to increase the assets owned by allocating a certain amount of funds, time, and assets that are considered to generate returns. Millennial investors are the government's main target through financial literacy education that the Financial Services Authority has promoted in encouraging an increase in stock investment by the public. However, many factors influence investors to invest, including the environment and the investor's personal experience. The purpose of this study is to analyze the factors that influence the investment decisions of millennial private investors, including financial literacy, perceptions of risk and return, financial technology, family background, and income. The data taken for this study is primary data obtained through online questionnaires to people who are currently investing in the age range of 20-40. The number of samples of this study was 224 respondents through data collection using google form for two months. The research data were analyzed using SPSS 26 software. By using descriptive statistical data, validity and reliability tests, classical assumption tests such as autocorrelation, multicollinearity, heteroscedasticity. The results showed that financial literacy, perceptions of risk and return, financial technology, family background, and income influence millennial investor investment decisions. The implication of this result shows that parents should start to provide basic investment knowledge to teenagers as soon as possible, and the firm can invest more in financial technologies to serve young customers.

This article extends the authors’ research on how environmental, social, and governance (ESG) characteristics have affected equity investing and corporate bonds. Unlike with equities—where MSCI’s previous research shows that MSCI ESG Ratings had positive effects on stocks’ risk and return characteristics—the authors find that a corporate bondholder’s main ESG focus could be mitigating downside risk, rather than capturing upside. They also examine whether ESG added value beyond credit ratings—a significant point of interest for bondholders. In short, ESG complemented credit ratings. ESG ratings had characteristics distinct from credit ratings and delivered additional insights into risk and performance. ESG was in general more financially relevant in high-yield (HY) bonds than in investment-grade (IG) bonds and more relevant in IG bonds with longer, rather than shorter, maturities. Higher-ESG-rated issuers tended to have stronger cash flow metrics, lower levels of ex ante risk, and less-frequent severe incidents than lower-rated-ESG issuers. Key Findings ▪ This article explores the impact of incorporating ESG factors on the risk and performance of corporate-bond portfolios. ▪ The authors found ESG ratings had characteristics distinct from credit ratings and delivered additional insights into risk and performance: Higher-ESG-rated issuers tended to have stronger cash flow metrics, lower levels of ex ante risk, and less-frequent severe incidents than lower-ESG-rated issuers. ▪ The aggregate MSCI ESG Ratings score showed stronger results in terms of reducing risk than the individual E-, S-, and G-pillar scores. Within the three pillars, the S pillar showed the strongest performance in returns, while the E pillar showed the strongest differentiation in terms of risk over the broader universe.

Capital market assumptions (CMAs), which are long-term risk and return forecasts for asset classes, are important pillars of the investment industry. However, applying them reliably in portfolio construction has been (and still is) a challenge in the industry. This article demonstrates that, despite the difficulties, CMAs are useful for building an investment portfolio using a factor approach. Using a small set of macroeconomic factors, the authors detail a methodology for deriving a factor model from CMAs and then use it to show that (1) these factors price the expected returns from CMAs and (2) the mean–variance factor allocations are substantially more stable than the mean–variance asset portfolios. Furthermore, this article outlines a new approach to building an asset portfolio that respects a desired factor allocation. Overall, this article helps reduce the barrier to entry for factor-based portfolio construction by providing a recipe for building factor models and performing factor-based portfolio construction using publicly available CMAs. Key Findings ▪ This article presents a methodology to show that CMA returns can be cross-sectionally priced by a small set of underlying macroeconomic factors, which suggests that the CMA’s risk and return assumptions follow a factor structure. ▪ The mean–variance factor allocations generated by CMAs’ implied factors are intuitive and stable through time under unconstrained mean–variance optimization. ▪ This article presents a new approach to building an asset portfolio that respects a desired or target factor allocation with weights that are practical.

The aim of this study is to comparatively analyze the backtest performances of trading disciplines applied in various portfolio baskets (Bist 30, 50 and 100) for different investment periods (short term – ytd and long term). According to the results of the analysis, it has been determined that in all trading disciplines, the investor has a higher return than the benchmark indicator in a 5-year term, that is, they can earn abnormal returns. Also, the return in the 5-year term is much higher than the 1-year and YTD returns. In the P / E & MA model, the Bist - 50 index in the 5-year period and the Bist - 100 index in the 1-year period provide the maximum return, while according to the P / E model, the Bist-30 and Bist -50 indices provide optimum returns in all maturity options. Based on these findings, it can be expected that if the trading disciplines used in this study are applied in a long term such as 5 years and on the portfolio basket consisting of Bist-30 and Bist-50 industrial stocks, it will maximize returns. In terms of risk and return, in YTD period, the sharpe and treynor ratios of the model portfolio formed in all trading disciplines except M /B trading discipline were lower than in 1 year in the 5-year investment period. This situation arose due to the increased risk of the portfolio as a result of the extended maturity and is in line with our expectations.

Purpose: Indian stock markets are channelizing financial resources for the economic progress of the country. The Indian Financial Services sector is the subset of the stock market which is playing a key role in stock trading. The Indian Financial Services industry is multifaceted and is growing rapidly both in terms of the robust growth of existing firms and the entry of new players playing a stellar role. This surge in growth of the Financial Services sector led many investors to divert their investment towards the financial services segment. To construct an attractive portfolio, the individual investor should perform a risk-return analysis well in advance. This will assist the investor in determining the risk-return relationship in various securities. Given this background, the study is undertaken to evaluate the risk-return patterns of the Indian Financial Services sector securities. Design/Methodology/Approach: The risk and return of sample group of companies belonging to the Indian Financial Services sector are analyzed to arrive at a monthly return by taking the monthly closing price of five financial investment companies belonging to the Standard & Poor’s BSE Finance Index for the period January 2020 to July 2021. To achieve the objectives various statistical tools such as descriptive statistics, correlation, and Beta are adopted. Also, a paired t-test is performed to check the validity of the hypothesis. Findings: The study has brought to light that India Infoline Finance Ltd (IIFL Finance) has provided the highest monthly returns with a high beta value. Further, the tested hypothesis reveals that there exists a significant difference in the monthly returns of the S&P BSE Finance Index and JSW Holdings. Originality/value: The study emphasizes the risk-return analysis of selected stocks of the Indian Financial Services sector. Potential investors will benefit from this equity analysis because it will enable them to make more intelligent and accurate investment decisions. Paper Type: A case study of the Indian Financial Services Industry

A análise do risco e retorno desempenha um importante papel na tomada de decisão de um investimento. O mercado é dinâmico e pode ser alterado por diversos fatores, incluindo crises econômicas. Em 2020 o mundo começou a enfrentar a pandemia da Covid-19 que causou fortes alterações no ambiente econômico. Desta forma, o objetivo do estudo foi avaliar qual efeito que esta crise teve sobre o comportamento do coeficiente beta das ações listadas na bolsa brasileira. Para isso, foi utilizado o teste de Kruskal-Wallis para comparar a média dos coeficientes de 146 companhias abertas entre os anos de 2017 a 2020. Os resultados mostraram que entre os anos de 2017 a 2019 houve estabilidade no coeficiente, contudo, no ano de 2020 houve um aumento significativo do beta, corroborando com a hipótese de que em períodos de crise o risco do mercado acionário tende aumentar. Dentre os setores analisados, apenas comunicações, materiais básicos e saúde não tiveram aumento significativo do risco em 2020. Os resultados mostraram também que em todos os anos estudados existiu diferença entre os trimestres, o que significa que o risco se altera ao longo do ano. Por fim, pode-se concluir também que as empresas enquadradas dentro do Índice de Sustentabilidade Empresarial não apresentaram modificações nas médias do coeficiente beta ao longo do período estudado.

The aim of this study is to verify whether the framing effects of past performance information affect the risk perception of individuals for fixed-income and variable income fund. We assess whether risk perception varies depending on how information is communicated to investors, considering the relevance of possible framing effects arising from how information is presented in investment funds’ prospectuses and reports. This study is aimed at investors (individual and institutional) and fund industry regulators, highlighting the importance of past performance presentation. This article aims to contribute to the area by investigating how investors are influenced by varying perceptions of risk and return on fixed-income and variable-income assets, depending on information presentation format. The approach used is based on a 2x2 factorial quasi-experiment, in which format (within-subject) and time horizon (between-subjects) effects are tested in a sample of 143 respondents. Our results indicate that, for investment in a variable-income fund, a monthly yield presentation format leads to higher perceived risk, and that a framing emphasizing fund value evolution leads to higher perceived returns. As for investment in a fixed-income fund, the framing that emphasizes fund value leads to both higher perceived risk and higher perceived returns. When comparing the results for the two types of investments, the risk perception was higher for variable-income than for fixed income funds. However, perceived returns were higher for fixed income than for variable-income funds due to the framing effect, although realized returns do not corroborate this perception. RESUMO O objetivo deste trabalho foi verificar se efeitos de enquadramento da informação de performance passada afetam a percepção de risco dos indivíduos em fundos de renda fixa e de renda variável. Como lacuna de pesquisa, o artigo visa avaliar se a percepção de risco se altera em função da forma como a informação é repassada ao investidor, sinalizando para a importância da consideração de possíveis efeitos de enquadramento na divulgação de informações nos prospectos e relatórios dos fundos de investimento. Este estudo é direcionado a investidores (individuais e institucionais) e reguladores da indústria de fundos ao destacar a importância da forma na qual a informação de performance é apresentada nos prospectos e relatórios de fundos de investimento. O impacto do artigo na área relaciona-se à investigação de como investidores estão sujeitos a efeitos de mudanças na avaliação de risco e retorno em ativos de renda fixa e variável, a depender de como a informação lhes é apresentada. A abordagem utilizada se baseia em um quase-experimento fatorial 2x2, no qual são testados os efeitos de formato (intra-sujeitos) e de horizonte temporal (entre-sujeitos) em uma amostra de composta por 143 respondentes. Os resultados indicam que, para o investimento em renda variável, a maior percepção de risco foi notada no enquadramento que apresenta a informação de retornos mensais, e o maior retorno esperado no enquadramento com ênfase na evolução do valor da cota. Já para o investimento em renda fixa, tanto a maior percepção de risco quanto o maior retorno esperado ocorrem nos enquadramentos que enfatizam o valor da cota. Na comparação dos resultados dos dois tipos de investimentos, a percepção de risco foi maior para fundos de renda variável do que para fundos de renda fixa. Todavia, a percepção do retorno esperado foi maior para renda fixa do que para o de renda variável em função do efeito de enquadramento, embora o retorno realizado não comprove esta percepção.

In investation, an investor will face two elements related to the capitals or funds which were invested such as return and risk. Both of these elements have a positive correlation. Basically, the greater the returns obtained, the greater the risks it have, indeed the smaller the returns obtained, the smaller the risks it have. The purposes of this study were to find out and to analyze any differences of systematic risks and unsystematic risks of Food and Beverages subsector, Tobacco Manufacturers subsector, Pharmaceuticals subsector, Cosmetics and Household subsector, and Houseware subsector in Consumer Goods Industry sector that were listed in Indonesia Stock Exchange. The study methods used for this study were data analysis and descriptive analysis. The datas used for this study were secondary data such as 34 Consumer Goods Industry sector companies’ stock price in Indonesia Stock Exchange and Jakarta Composite Index from 2012 January 1st until 2012 December 31st. The hypothesis testing was done by using One Way ANOVA test and Independent Samples t-test with a significance level of 5%. One Way ANOVA test result shows that there were no systematic risk differences among Food and Beverages subsector, Tobacco Manufacturers subsector, Pharmaceuticals subsector, Cosmetics and Household subsector, and Houseware subsector in Consumer Goods Industry sector that were listed in Indonesia Stock Exchange. The other One Way ANOVA test shows that there were differences among Food and Beverages subsector, Tobacco Manufacturers subsector, Pharmaceuticals subsector, Cosmetics and Household subsector, and Houseware subsector in Consumer Goods Industry sector that were listed in Indonesia Stock Exchange. These differences then were seen in Post Hoc test and Independent Samples t-test. It has been seen that Food and Beverages subsector has a greater unsystematic risk from those of Tobacco Manufacturers subsector and Cosmetics and Household subsector, and then Houseware subsector has a greater unsystematic risk from those of Cosmetics and Household Subsector.

This paper proposes a new strategy for portfolio selection in the Brazilian equity market with the use of multifractal detrended fluctuation analysis (MF-DFA) as a mechanism to select assets based on their efficiency levels. Empirical analysis uses daily prices to compose minimum variance (MVP) and maximum Sharpe ratio (MSR) long-only portfolios, and also includes their performances during the COVID-19 pandemic. MF-DFA indicated a multifractal nature for asset price returns, generally associated with long-term persistence. The strategy using the most efficient equities resulted in portfolios with lower levels of systematic risk (betas), indicating that the lack of efficiency is related to higher sensitivity to macroeconomic and conjuncture changes. The MVP portfolio produces higher performance than the alternatives in terms of risk and return. Finally, during the COVID-19 pandemic, besides its consistent negative impacts, MVP and MSR portfolios verified lower losses than the IBOVESPA.

P2P lending recommendation (P2PLR) has become an important and popular component of P2P lending platform, which aim to align the right loans with the right investors according to historical interaction. Most of the existing P2PLR models take risk and return as side information into P2PLR to capture the relationship among loans. Although some of them have been proven effective, the following two insights are often neglected. First, risk, the possibility of investors’ loss, is the most important attribute in P2P lending platform, and the implicit capture of risk may lose critical information in the P2PLR scenario. Second, the preference and sensitivity of return on loans is unknown, which is only implicitly reflected in the loans that the investor has invested. These insights motivate us to propose a novel P2PLR model riSk and return Aware Recommendation (STAR), which propagates the influence of risk and return on investor to make the learned investor representations be risk and return aware. Particularly, we specify two STAR methods, named STHCW (riSk and return aware Recommendation with High-order Connectivity with Weight) and STHC (riSk and return aware Recommendation with High-order Connectivity without weight), based on two strategies of embedding and propagation mechanisms, respectively. We conduct extensive experiments on three real-world datasets, demonstrating the effectiveness of our proposed method in recommendation via risk and return. Further analysis reveals that modeling the risk and return awareness is particularly useful for learning the risk and return aware preference of investor.

We apply the Markowitz mean-variance framework to assess risk-return benefits of cryptocurrency-portfolios. Using daily data of the three major cryptocurrencies for the time span 1/1/2019 to 27/04/2021, we relate risk and return of different mean-variance portfolio strategies to Bitcoin, Etherium, Ripple and BIST 30 benchmark. We find that combining cryptocurrencies crowds out BIST 30 index to maximize return and Sharpe ratio while cryptocurrencies are crowded out if the optimization problem is changed to a risk minimization problem rather than a return maximization problem. Furthermore, according to rolling-window approach shift from Bitcoin to Etherium is important.

Hajj fund must be managed effectively with a diligent approach of standard risk management. This study examines the level of risk management The Hajj Fund Management Agency (BPKH) performs in optimizing its investments: fund and fixed asset portfolios. The measurement data was initially and purposively retrieved. It was later run and processed through linear programming for further analyses. The results indicate that Sharia banking deposits and gold are riskless assets. As far as other asset portfolios, investments are placed strictly based on direct and indirect participation according to the government's regulations to avoid the pressures of market volatility. This study serves as a reference for regulators in formulating appropriate strategic asset allocation to applied related optimized management of hajj fund investment.JEL Classification: C44, C51, C58, C61, D81, E22, E47How to Cite:Witjaksono, B., & Hamzah. (2021). Optimum Strategic of Asset Allocation for Indonesian Hajj Fund. Signifikan: Jurnal Ilmu Ekonomi, 10(2), 195-208. https://doi.org/10.15408/sjie.v10i2.20020.

The return and risk of stock investment have a high level of volatility because it depends on fundamental and technical conditions and the influence of micro and macro variables. This study aims to determine the risk and return on investment in insurance companies and analyze the effect of macroeconomic variables on the level of risk and return on investment in insurance companies. The sampling technique used was purposive sampling. Data analysis shows that for three years, Asuransi Jasa Tania Tbk has the highest level of conclusion, which is 22.3%, and Asuransi Harta Aman Pratama Tbk. has the lowest rate of -3.3%. For three years, the value of Gross Domestic Product has increased successively so that this will cause a stock return that is proportional to the level of risk that will be faced. Changes in the inflation rate up and down for three consecutive years have a different effect every year where when the inflation rate decreases, the rate of return on investment will be high. In addition, the interest rate decreased from 4.75% in 2016 to 4.25% in 2017. Then it increased to 6.00% in 2018. The Rupiah exchange rate against the dollar is getting weaker, indicating an increase in the exchange rate. Every year from 2016 to 2018. When the rupiah exchange rate weakens, people will choose to invest in foreign currencies because the value of these foreign currencies can determine the size of the risk of a business.

Purpose - Increasing uncertainty in financial markets has rised risk perception and it has affected stock returns. In this context, the relationship between risk and stock return in the framework Modern Portfolio theory for Turkish football teams traded in financial markets. Design/methodology/approach - The purpose of this paper is to analyze The study consists of two stages. In the first stage, the most suitable GARCH models for the return series were estimated. In the second stage, the estimated GARCH models were used as risk indicators, and the causality relationship between risk and return was tested through the Fourier granger causality test. Return series were calculated by using FENER.IS, TSPOR.IS and GSRAY.IS’s daily closing maket prices. The study covers the periods 04.05.2005-10.03.2021. Findings - The best model for Fenerbahce is ACGARH (1,1,1) model, the best model Galatasaray is EGARCH model and the best model for Trabzonspor is APGARCH (1,1,1). In addition, there is causality relationship from risk to stock return. Discussion - The results obtained from the study indicate that the changes in risk perception can be used as a leading indicator for the stock returns of football teams.

The paper is devoted to the study of risk and return tradeoff in the global equity market as well as particular market groups: developed, emerging and frontier markets. Impact of this tradeoff on international equity portfolio liabilities is explored. The study confirms the hypothesis that there are some specific patterns of risk and return tradeoff during crisis periods and periods of markets regular regime that substantially differ from each other and define global portfolio equity flows and liabilities in a specific way. The paper thus carries out its main objective that implies revealing these patterns with respective qualitative features and quantitative markers, specifying their implications for equity portfolio flows to markets of different types. Risks and returns for different market groups and global market as a whole are calculated for the period between 2002 and 2020 using standard methodology of contemporary portfolio theory and MSCI indices monthly values. The data for international equity portfolio liabilities as well as the share of particular market group in the global market are used as dependent variables. The latter are regressed by calculated risks and returns. Using the model results and some analytical developments, two patterns of risk/return tradeoff are discovered. The pattern attributable to regular market regimes is characterized by positive returns which is 1.51 % in average for the global market, 1.48 % for developed markets and 2.03 % for emerging markets. Risks in regular pattern are relatively small or moderate at the average level of 3.05 for the global market and are all below the median (3.48). Respective risks for developed and emerging markets are 3.02 and 4.54. The Sharpe ratios in regular pattern are positive at the average level of 0.60 for the global market, 0.57 and 0.45 for developed and emerging market groups respectively. The crisis pattern implies negative returns at the mean of -1.04 for the global market, -0.97 for the developed group and -1.35 for the emerging markets. High risks are all above the median and in average compile 5.5 for the global market, 5.47 for the developed markets and 6.68 for the emerging group. Sharpe ratios for this pattern are negative being equal to -0.19 in the mean. The average value is -0.18 for developed markets and it is -0.24 for emerging markets. Specific pattern of 2020 crisis should be settled out. Its main feature that substantially distinguishes it from other crises is the combination of highest risk level and the positive returns at the same time. Elaborated regression model confirms the direct impact of return and indirect impact of risk on global portfolio liabilities. The influence of risk for regular and crisis patterns does not differ substantially while the impact of return is much stronger during periods of increased volatility (respective model parameters are 3793.76 and 447.24). However, the discovered impact is much more reliable in crisis pattern that is supported by much higher determination ratio. Developed markets experience similar effects.

Do equity prices efficiently reflect fundamental information, as the efficient markets hypothesis (EMH) suggests? The author challenges financial academicians’ widely held acceptance of the EMH. In a frictionless environment, information acquisition and trading would be costless, transaction prices would reflect information perfectly, prices would follow random walks, and the EMH would be validated. But markets are not frictionless. Academic research commonly invokes an assumption that informed investors have homogeneous expectations. But, given the enormity and complexity of information sets, investor expectations differ. Taking an intraday, microstructure focus, the author explains that price discovery in a nonfrictionless, divergent-expectations environment is a protracted, dynamic process that accentuates intraday price volatility and introduces return autocorrelations. This counters the EMH. He stresses the importance of instituting a market structure that further enhances the operational, and therefore informational, efficiency of a security market. TOPICS:Security analysis and valuation, portfolio theory, statistical methods, exchanges/markets/clearinghouses Key Findings ▪ Given the enormous size and complexity of information sets, equally informed investors form different expectations of stocks’ risks and returns. Consequently, shares do not have unique fundamental values that can be known by research analysts. Rather, prices must be discovered in a marketplace, and the efficiency with which this task is performed depends on how orders are handled and turned into trades (i.e., market structure matters). ▪ In a frictionless, zero-trading-cost market, security prices depend on two factors: risk and return. In a nonfrictionless market, three factors matter: risk, return, and liquidity. Illiquidity is closely associated with price discovery being a noisy, dynamic process. ▪ High-frequency, intraday data show that intraday price volatility is markedly accentuated and that stock returns are autocorrelated (i.e., share prices do not follow random walks). These properties of intraday price formation are manifestations of price discovery being a noisy process, and they explain why share prices can be informationally inefficient.

The study intends to determine the factors that influence millennial investors’ attitudes and behavioral intention to invest in the stock market in a developing nation. We extended the “Theory of Planned Behavior” (TPB) by including two motivating factors, namely, financial knowledge and parental influence, and one inhibiting factor, hassle, to measure intention of millennial investors in India. The study used cross-sectional and quantitative approaches using a questionnaire-based survey process to collect the responses of 196 millennials. We used PLS-SEM to determine the proposed relationship between constructs. We also created the importance-performance matrix to further refine the results. The study found TPB variables to be most significant in influencing behavioral intention. In addition, parents’ influence was found positively impactful on financial self-efficacy, which leads to high behavioral intention. The study contributes by identifying different elements in order to enhance education and awareness related to financial products, risk and return, and types of investments that can increase millennials’ intention to invest in the long term. TOPICS:Wealth management, emerging markets, quantitative methods, statistical methods, legal/regulatory/public policy Key Findings ▪ Theory of Planned Behavior explains millennial investors’ intention to invest in the stock market. ▪ In a developing country like India, parents’ influence positively impacts investor’s financial self-efficacy and intention to invest. ▪ Financial knowledge enhances the financial attitude and reduces the hassle factor for millennial investors’.

Using a unique dataset of Societes Civiles de Placement Immobilier (SCPIs), the authors provide evidence that the French nonlisted real estate investment funds market exhibits a substantial level of dispersion in risk and return characteristics. The authors find several attributes to have meaningful explanatory power with respect to such differences in risk and performance. They also find that portfolios of nonlisted real estate investment funds exhibit a substantially lower level of volatility than the average fund in the panel and that 15 SCPIs are enough to capture over 90% of these diversification benefits. Taken together, these results suggest that substantial value can be added by selection and allocation decisions, which could form the basis for a welfare-enhancing open architecture multi-management approach to investment in unlisted real estate investment trusts. TOPICS:Real estate, developed markets, portfolio construction, performance measurement Key Findings ▪ Open architecture and multi-management are untapped sources of added value in the French unlisted real estate fund market. ▪ Through suitable selection and diversification decisions, investors in French real estate funds can achieve substantially higher risk-adjusted performance. ▪ These insights can be of potential relevance for other unlisted real estate investment trust markets.

In this paper, we examine the impact of including environmental, social and governance (ESG) criteria in the allocation of equity portfolios. We focus on the risk and return characteristics of the resulting ESG portfolios and investment strategies. Two specific measures are considered to quantify the ESG performance of a company; the ESG rating and the greenhouse gas (GHG) emission intensity. For both measures, we carry out empirical portfolio analyses with assets in either the STOXX Europe 600 or the Russell 1000 index. The ESG rating data analysis does not provide clear-cut evidence for enhanced performance of portfolios with either high or low ESG scores. We moreover illustrate that the choice of rating agency has a significant impact on the performance of the resulting ESG-constrained portfolios. Secondly, we study the impact of GHG emission reductions and increases. We show that emission reductions do not necessarily lead to increased risk or diminished returns, which gives confidence in a smooth transition towards the green economy pursued by the European Green Deal.

In this paper the concept of quantile-based optimal portfolio selection is introduced and a specific portfolio connected to it, the conditional value-of-return (CVoR) portfolio, is proposed. The CVoR is defined as the mean excess return or the conditional value-at-risk (CVaR) of the return distribution. The portfolio selection consists solely of quantile-based risk and return measures. Financial institutions that work in the context of Basel 4 use CVaR as a risk measure. In this regulatory framework sufficient and necessary conditions for optimality of the CVoR portfolio are provided under a general distributional assumption. Moreover, it is shown that the CVoR portfolio is mean-variance efficient when the returns are assumed to follow an elliptically contoured distribution. Under this assumption the closed-form expression for the weights and characteristics of the CVoR portfolio are obtained. Finally, the introduced methods are illustrated in an empirical study based on monthly data of returns on stocks included in the S&P index. It is shown that the new portfolio selection strategy outperforms several alternatives in terms of the final investor wealth.

The present paper aims to compare risk and return characteristics of ESG index with those of conventional benchmark market index: EGX30 for a period from June 2007 to September 2020. We apply GARCH models not only to examine the volatility features of each index but also to investigate effect of exogenous shocks to stock market including global financial crisis in 2008 (GFC), political uncertainty after Egyptian revolution in 2011 (ER2011) and most recently potential effects of covid-19 pandemic. The results reveal that the daily compounded returns of the ESG Index are not statistically different from those of the EGX30 index, however, annualized returns of the ESG Index have been better than the returns of the EGX30 index. Interestingly, the annualized returns of ESG index outperform those of EGX30 index during the exogenous shock periods. Conversely, the ESG returns tend to underperform EGX30 returns during normal time periods, except the pre-Egyptian revolution period. We find that volatility of ESG index returns is more persistent than that of benchmark index, but the returns of benchmark index has larger leverage effect than those of ESG index. The findings have three important practical implications. Firstly, portfolio managers could follow ESG investing to diversify their portfolios and maximize returns. Secondly, firms listed in Egyptian exchange should adopt more environmental, social, governance issues in their policies to maximize firm value. Thirdly, asset pricing models could be extended to include ESG premium factor in explaining cross-sectional returns in the Egyptian exchange.

This study analyzed the return and risk of an investment portfolio, composed only of shares of companies listed in B3 that presented Negative Equity (NE), in the period from 1998 to 2019. Considering the Efficient Market Hypothesis (FAMA, 1970), the rationality of investors, the stock market on the stock exchange, in relation to companies with PLN, theoretically should not be active or provide abnormal positive returns to investors, since, technically, companies would be insolvent. The method used was to build a portfolio for assets that had at least one year of trading on the stock exchange and had NE in this period. The number of shares (assets) was fluctuating, starting with 2 and ending with 44 shares. The results of the Portfolio were compared to a risk-free investment (Interbank Deposit Certificate – CDI) and a similar risk investment (Brasil 50 Index - IBrX50), this as a control portfolio. The results found indicate that it is possible to obtain abnormal positive results, but do not meet the risk and return ratio when compared to a risk-free investment. However, when compared to other risky investments, investing in companies with NE may make sense, since a portfolio with no judgment criteria presents a more attractive risk and return ratio than stock indexes. This study contributes to the literature, as it brings to the academic world the universe of companies with NE, notably concerning the returns that these companies can provide to investors and, also for being an unprecedented study in this approach in Brazil.

PurposeThis study examines whether female directorship on board is related to firm's risk-taking behavior in India.Design/methodology/approachThe study considers the top 500 listed companies in India during the period 2013 to 2018 for the analysis. The paper employs fixed effects as well as a dynamic panel data model to address the bias in the fixed effects model when the lagged risk outcome is included as an explanatory variable.FindingsThe study finds that the presence of female directors on board is unrelated to the firm's risk-outcomes and the risk-adjusted return earned by the shareholders. The results are in line with the tokenism theory of board diversity. Having a higher share of female independent directors is also unrelated to the risk-taking behavior of firms. The findings are in contrast to the critical mass theory and the agency theory of gender diversity. The study does not rule out the possibility of female directors' risk-preferences being similar to those of male directors.Practical implicationsThe findings suggest that regulations related to having independent female directors may not add value for the shareholders in the short run. The business case for such stringent regulations in India on the gender diversity of boards remains unclear.Originality/valueThis is the first study to analyze the relationship between gender diversity of boards and firm-level risk in India. Most of the studies have focused on gender diversity and firm performance in India. However, modern portfolio theory suggests that both risk and return are important as shareholders care about risk-adjusted returns.

The mean–variance model is widely acknowledged as the foundation of portfolio allocation because it provides a framework for analyzing the trade-off between risk and return for gaining diversification benefits. Despite the well-known shortcomings of the model, it is often the starting point for making asset allocation decisions. In this article, the authors briefly review mean–variance optimization and approaches for resolving its limitations by demonstrating backtest results on asset allocation. Feedback from asset managers is also included to explain how optimization methods are applied in practice. TOPICS:Quantitative methods, statistical methods, portfolio construction, performance measurement Key Findings ▪ Mean–variance optimization provides a framework for analyzing risk–return trade-offs when making asset allocation decisions. ▪ Sensitivity of the mean–variance model can be addressed with robust models, and the model generates candidate asset allocations that are informative in practice. ▪ Feedback from asset managers suggests that mean–variance optimization along with simulation and various robust methods are being applied in practice for asset allocation.

The purpose of this study is to the analyze of how far the Ichimoku Kinko Hyo indicator can be used in technical analysis in order to predict the movement of stock prices in the future, to know the accuracy of the indicator in order to make investment decisions in capital markets and to know the risk and return result from the Ichimoku Kinko Hyo indicator after Corporate Action Policy in PT. Smartfren Telecom Tbk stock in 2019. The research methodology of this research is qualitative descriptive method with data source from the Indonesia Stock Exchange. The sampling technique of this research was purposive sampling method with monthly data and the study period is after Corporate Action Policy which is from December 2018 until November 2019. The results of this study show that the stock price movement in FREN stock using Ichimoku Kinko Hyo indicator after Corporate Action Policy in (December 2018 - February 2019), there are 3 (three) signals to buy and 3 (three) signals to sell while in (March - May 2019), there are 3 (three) signals to buy and 2 (two) signals to sell. In (June - August 2019), there are 1 (one) signal to buy and 2 (two) signals to sell. And in (September - November 2019), there are 2 (two) signals to buy and 2 (two) signals to sell. For this level of accuracy generated by using Ichimoku Kinko Hyo indicator accuracy rate equal to 60% (sixty percent) after the Corporate Action Policy in December 2018 until November 2019. While the level of risk and return generated by using Ichimoku Kinko Hyo indicator after Corporate Action Policy gave return of 187.49% (one hundred and eighty seven comma forty nine percent) and the risk of -36.43%.

The primary purpose of investors is maximizing the utility that is characterized by two essential criteria include risk and return. Regarding investors' uncertainty about the future, one of the main ways to reduce risk is to diversify the investment portfolio. In this research, we proposed an index conducted by Euclidean distance for assessing portfolio diversity. Besides, we designed a multi-objective model to select optimal stock portfolios with considering value at risk (VaR), which is one of the critical indicators of unacceptable risk, portfolio Beta as systematic risk, and portfolio variance as unsystematic risk simultaneously. The model presented in this paper aims to maximize diversification while minimizing value at risk and stock risks. Furthermore, maximizing returns are considered as a limitation of this model. Since the proposed model is nonlinear and concerning computational complexity, it is NP-hard; therefore, we utilized the PSO and the GE metaheuristic algorithms that are improved for solving multi-objective problems to solve the model. The results of the model implementation in multiple iterations showed that the average yield of selected portfolios by the model is higher than the desirable condition. The evaluation of stock performance indicators also shows the satisfactory performance of the multi-objective model.

Capital structure choice is vital in corporate financial management due to its effect on both investors' risk and return. Despite the various research that has investigated factors affecting the capital structure of companies, only a few studies have started to examine the capital structure of Shari'ah-compliant companies, especially in the MENA region. Indeed, the screening requirements for which shari'ah-compliant must adhere can affect their capital structure determinants. Hence, under those conditions, this study aims to determine the factors influencing the capital structure of a shari'ah-compliant listed firm in five MENA region countries. The importance of investigating shariah-complaint companies capital structure emanates from the financial constraints on their debt capital structure. Accordingly, this study utilizes static panel data techniques on a sample consisting of Shari'ah-compliant firms over the period 20102018. The findings of this study were consistent with several previous studies as well as the theoretical background of capital structure determinants mainly, the trade-off and the pecking order theory. Our results give insight to managers on what determines their capital structure under shari'ah screening methodologies. However, more insight can be drought from the capital structure of shari'ah-compliant firms by extending the research into industry specifics.

The relationship between risk and return is not symmetric under different circumstances. As the prospect theory describes, the value function which passes through the reference point is steeper for losses than gains (asymmetric risk appetite). But such an asymmetrical risk aversion could be traced in different periods of investment and market boom and bust cycles behind the reference point. Moreover, investors’ asymmetric behavior is different regarding various risks, such as market risk, illiquidity risk, and credit risk. This paper examines the asymmetric investors' reaction to various risks in Tehran Stock Exchange (TSE) both in recession and growth from 2011 through 2016. Evidence reveals that although all three kinds of risks are relevant, especially illiquidity risk, risk factors’ explanation power in the bullish market is less than the bearish one. This indicates that investors tend to show an asymmetric reaction to risk in up and downswing markets. The asymmetric behavior is also predominant due to investors’ weak attention to the market risk in a growing market in opposition to a recessive market condition that turns out to be an important risk consideration. The results of this study can help investors to consider asymmetrical behavior effect when they are making their minds on investment decisions.

There are two primary factors that affect expected returns for companies with high ESG (environmental, social and governance) ratings—investor preferences and risk. Although investor preferences for highly rated ESG companies can lower the cost of capital, the flip side of the coin is lower expected returns for investors. Regarding risk, the jury remains out on whether there is an ESG‐related risk factor. However, to the extent, ESG is a risk factor it also points towards lower expected returns for investments in highly rated companies. Though ESG investing may have social benefits, higher expected returns for investors are not among them.

High return correlations between assets have widely and plausibly been said to detract from active performance. The concept of Breadth supports this view. Buckle, however, reported that these correlations improve active performance. Based on three approaches, we report that Buckle is correct. First, we introduce a model of active investing that includes return correlations between assets. Design formulae give the time averages of active risk and return and other portfolio characteristics. Next, we show that Monte Carlo simulations confirm the conclusions of the model. Finally, we provide the investment intuition behind the conclusions. All else equal, active managers should be more aggressive when return correlations are expected to be high, not low. A related widely held belief is that return forecasts with lower correlations between assets provide better performance. The model also includes these correlations. The same approaches show that this consensus too is incorrect: all else equal, correlations of return forecasts between assets improve performance. The design formulae can be used for operational strategy design aimed at performance improvements. As examples, we use it to exploit differences in predictive power between sectors and to efficiently incorporate Environmental, Social and Governance controls into active security selection.

Finance uses the phrase “risk-adjusted returns” to define what value is, and fiduciaries are legally bound to consider both risk and reward in investment decision-making. This requirement is codified in the Uniform Prudent Investor Act, which states, “The trade-off in all investing between risk and return is identified as the fiduciary’s central consideration.” Yet, the most prominent performance metric in private equity (PE) is the internal rate of return (IRR), an inadequate tool for fiduciary purposes because it includes no concept of risk, which represents fully half of the characteristics that fiduciaries are obligated to evaluate. An astute fund manager can exploit this willingness of PE investors to pay for returns that are not creating positive alpha. The key to understanding how a manager can do this lies in examining the role that financial leverage plays in the returns of PE funds and how such financial leverage affects IRRs. Metrics built on the direct alpha public market equivalent (PME) analysis are appropriate to estimate the risk-adjusted returns generated by PE funds and to fulfill fiduciary duties. TOPICS:Private equity, fundamental equity analysis, performance measurement, equity portfolio management Key Findings • The IRR metric is wholly inadequate to perform the function of a fiduciary because it has no concept of risk, which constitutes fully half of the characteristics that fiduciaries are obligated to evaluate. • An astute fund manager can exploit the willingness of PE investors to pay for returns that are not creating positive alphas. • Metrics built on the direct alpha PME analysis are most appropriate to capture the risk and return characteristics that fiduciaries are legally required to consider.

This study is aimed to identify the factors that influence investment decision making by individual investors in the city of Mataram. Due to the importance of investment decision for individual investor, various factors surely are taken into consideration before deciding into some kind of invesment transaction. Survey is conducted on 100 people from different age groups and professions in the city of Mataram. Most of the respondents choose to invest in asset such as real estate and gold, only a few of them choose market securities as investment. The results of the factor analysis show that there are five factors which affect investment decisions of individual investors in the city Mataram, namely financial literacy, advice and protection, future needs, time duration of investment, and risk and return. Keywords: investment decision, individual investor, financial literacy, advice, future needs,time duration, risk and return

In this article, the authors propose a novel option strategy that is better (in terms of success rate, profitability, risk, and return) than the short straddle option strategy on the Indian stock market index, Nifty. By using the trigonometric ratio tan θ, an angle is formed between the monthly points earned/lost by the short straddle option strategy and the monthly change in the price of the Nifty index. Further, the angle for the next month is forecast by using the technique of the 14-month moving average. After calculating the forecasted angle by the 14-month moving—average technique, the related angle (of forecasted angle) in different quadrants is calculated. The angles of quadrants one and two are considered because short straddle is profitable in quadrants one and two and hence the angles of quadrants three and four have been ignored. By using the total straddle premium of the forecasting month, the upside and downside levels of Nifty of that month were calculated where this forecast angle will form. After finding the upper level and lower level of Nifty, the authors propose a strategy (angled short straddle strategy) that involves the selling of a call and put option. They compare the proposed strategy against the short straddle option strategies based on the success rate, overall profitability, risk, and return in the Indian stock market. The result indicates that the proposed strategy has an 18.06% higher success rate than the short straddle strategy. In terms of overall profitability, the proposed option strategy is more profitable by 57.22% than the short straddle strategy. They also compare the risk and return of both strategies, and their results show that the proposed strategy has lower risk and higher return than the short straddle option strategy; these results were verified by the regression analysis. In the end, the results of the success rate have been verified by the time-series plot of India VIX and realized volatility. Due to the higher success rate and better profitability, the proposed option strategy can be consistently applied by any trader on the Nifty for profit generation. TOPICS:Options, emerging markets, performance measurement, wealth management Key Findings ▪ The angled short straddle option strategy is more successful and profitable than the short straddle option strategy in the Indian stock Index (Nifty). ▪ The Nifty index has less bullish than bearish volatility behavior. ▪ The Nifty index has range-bound properties. ▪ This is the first article where trading results are based on angle tan θ.

In this paper, we propose the new time-varying coefficient GARCH-in-Mean model. The benefit of our model is to allow the risk-return parameter in the mean equation to vary over time. At the end of 2019 to the beginning of 2020, the world witnessed two shocking events: COVID-19 pandemic and 2020 oil price war. So, we decide to use the daily data from December 2, 2019 to May 29, 2020, which cover these two major events. The purpose of this study is to find the dynamic movement between risk and return in four major oil markets: Brent, West Texas Intermediate, Dubai, and Singapore Exchange, during COVID-19 pandemic and 2020 oil price war. For the European oil market, our model found a significant and positive risk-return relationship in Brent during March 26-April 21, 2020. For the North America oil market, our model found a significant positive risk return relationship in West Texas Intermediate (WTI) during March 12-May 8, 2020. For the Middle East oil market, we found a significant and positive risk-return relationship in Dubai during March 12-April 14, 2020. Lastly, for the South East Asia oil market, we found a significant positive risk return relationship in Singapore Exchange (SGX) from March 9-May 29, 2020.

In contrast to the conventional fund management industry with a profit-oriented logic based on risk and return, ethical and faith-based funds should follow the religious principles of their investment-style philosophy. Islamic funds should obey the theological teachings of the primary sources of Islam, the Quran and Sunnah, as stakeholders expect these religious teachings to influence the investment decisions of fund managers. In practice, Islamic fund managers use Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)’s screening criteria, based on secondary sources of Islam, which allow investments that are only partially halal (allowable) to be included in their portfolios. This study finds that a more religious logic in screening practices, although impairing diversification, does not necessarily harm performance. Thus, Islamic investment funds, and the wider ethical fund management industry, should, and could, adopt stricter screening criteria that match their investment mandates and bring more ethical business practices to the industry. Refereed/Peer-reviewed

Is the market portfolio consistent with the investors’ preferences for risk and return in the capital markets? The answer to this question is not so simple: on the one hand, the market portfolio (which is derived from a minimization of a coherent risk measurement) is an efficient portfolio in terms of risk and return and therefore should be consistent with the investor’s preference. On the other hand, since none of the current risk indices are considered to be coherent risk measurements, the market portfolio might not be consistent with the investors’ preference. This research attempts to fill this gap by invoking the Lorenz curve ranking method combined with compatible statistical tests, in order to rank the S&P 500 Index and its components in 2014–2017. We conclude that the S&P 500 Index is not considered to be the market portfolio from the investors’ point of view, but rather seen as another asset. In addition, we conclude that the investors exhibit a decreasing risk aversion behavior in ranking financial assets, which suggests that they are willing to take risks for higher rewards. This methodology presents a unique way to empirically examine the theoretical preference relation of von Neumann and Morgenstern.

The authors propose a framework for analyzing the risk and return impact of environmental, social, and governance (ESG) investing across regional equity markets. By examining the performance of ESG through passive index exposure via the MSCI ESG Leaders methodology, we seek to determine: 1) whether an ESG investment has generated meaningful, statistically significant alpha in the single-index model, 2) if any such alpha does exist, whether it is simply explained by known risk premia, 3) in regions where ESG has empirically added meaningful alpha, which of the three pillars, E, S, or G, has been the main determinant of this alpha, and whether the sensitivity to each of the three pillars has changed over time, and 4) the extent to which any ESG alphas are correlated across regions. TOPICS:ESG investing, portfolio theory, equity portfolio management, behavioral financial, theory, in portfolio management Key Findings • We propose a framework for analyzing the risk and return impact of environmental, social, and governance (ESG) investing across regional equity markets. • Our framework examines empirical ESG returns via MSCI ESG Leaders methodology to determine 1) statistical significance of alpha, 2) degree of exposure to other known risk premia, 3) sensitivity of alpha to E, S, or G pillars, and 4) interaction of regional ESG alphas for global investors. • We conclude through our three-step framework that 1) statistically significant empirical alpha exists in EM and Canada, 2) size and values factors do not explain much of this empirical alpha, 3) historical sensitivity to pillars is largely weighted toward governance, and 4) finally that regional MSCI ESG Leaders alphas are largely uncorrelated despite utilizing a consistent methodology.

This study begins with the assumption that the existence of abnormal circumstances will force investors to take measures to protect their investments in the capital market Recently, the stock index in the Indonesian market has been declining and continued to fall until the end of April 2020 due to the impact of the Covid-19 pandemic In terms of efficient market theory, prospect theory and signaling theory, this study aims to analyze the relationship between risk and return in the Indonesian capital market during the Covid-19 pandemic as a manifestation of investor behavior To test hypotheses, the correlation test, the independent sample t-test and the Cohen test for 629 public firms with 52,836 observable data are used The findings show that for financial sectors and non-financial sectors, the fourth period differs from previous periods when the relationship between systematic risk and stock returns is positive, although only nonfinancial sectors have a significant effect The results show that efficient market theory, prospect theory and signaling theory are consistent with the phenomena around the Covid-19 pandemic in Indonesia In addition, Cohen's test results suggest that government policies in the face of the pandemic are successful in stimulating the market © 2020 LLC CPC Business Perspectives All rights reserved

Russian economy is in dire need of “long” money, the source of which may be the population’s investments in securities market instruments. Bonds seem to be a real alternative to bank deposits and an optimal investment tool from a position of risk and return. Taxation system of investment incomes is one of the key problems hindering the investment activity of the population. Sound tax policy will not only contribute to a change in the investment priorities of Russian citizens but will also lead to the development of financial markets and exchange infrastructure.Changes to the tax system, as well as an assessment of the benefits for the investor and the budget have been proposed in the article.

• Women are increasingly seen as active agents of change, the dynamic promoters of social transformations that can alter lives of both women and men. – Amarty Sen (Renowned Economist from India). The origin of the Indian idea of appropriate female Behaviour is described by Manu in 200 BC: as “by a young girl, by a young woman, or even by an aged one, nothing must be done independent, even in her own house”. Their role typically restricted only for cooking, childcare, laundry, cleaning and the collection of water, fuel and wood. Women are continued to be excluded in social, economic and political domains. In settings where socio cultural norms restrict women’s mobility, their interactions with members of the opposite sex and their ability to attend trainings or receive formal education, women’s access to information, institutions and markets is compromised. Despite this, major changes have occurred in the status of women in India. Today’s women are outpacing men in several areas and have high offices including that of the president, Prime Minister, Chief Ministers and Governors of the states. Surprisingly investing is one such area which still proves gender gap between men and women. However, few studies have been carried out on gender differences in investment behaviour and women investment behaviour, it was evidenced from those studies that women are more risk averse than men. This study is an attempt to understand the psychology of Indian women towards Risk –Return characteristics of various investment avenues. For the purpose of study 480 Women investors have been surveyed and comprehensive view on their perspectives towards risk – return characteristics have been presented in this paper.

PurposeThe study aims to explain the relationship between accounting and finance through measuring the effect of rational working capital management on profitability.Design/methodology/approachEmploying the methodology of semi-structured interviews with sixteen financial managers.FindingsThe findings pointed out the relationship between accounting and finance is complementary, since it supports the accountant by the critical skills and information, like project evaluation, managing the company funding resources and working capital management. These skills put the accountant up to the financial manager stage. The working capital investment and financing policies have the most significant impact on profitability. These policies related to risk and return theory; since the conservative policy will reduce both the risk and return and the aggressive one will have the opposite impact.Originality/valueIt recommends accountants to be in professional stage and increase the profitability of the company to grab both accounting and finance information and skills.

A simple asset pricing model with both endogenous stock market participation and subjective risk can explain the negative cross-country correlation between participation rates and the volatility of excess returns, along with the time-varying participation rates in the data. Belief-driven learning dynamics can explain the interplay between participation rates, subjective risk, and stock price volatility. When agents adaptively learn about the risk and return, my model generates 25% of the excess volatility observed in US stock prices, while also matching key moments. With learning about risk, excess volatility of stock prices is driven by fluctuations in the participation rate that arise because agents’ risk estimates vary with prices. I find that learning about risk is quantitatively more important than learning about returns.