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Portfolio Diversification (portfolio + diversification)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	90%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Economics	44%
General & Introductory Finance & Investments	33%

Selected Abstracts

SOCIALLY RESPONSIBLE INVESTING AND PORTFOLIO DIVERSIFICATION

THE JOURNAL OF FINANCIAL RESEARCH, Issue 1 2005
Zakri Y. Bello
Abstract I use a sample of socially responsible stock mutual funds matched to randomly selected conventional funds of similar net assets to investigate differences in characteristics of assets held, portfolio diversification, and variable effects of diversification on investment performance. I find that socially responsible funds do not differ significantly from conventional funds in terms of any of these attributes. Moreover, the effect of diversification on investment performance is not different between the two groups. Both groups underperform the Domini 400 Social Index and S&P 500 during the study period. [source]

Venture Capitalists' Decision to Syndicate

ENTREPRENEURSHIP THEORY AND PRACTICE, Issue 2 2006
Sophie Manigart
Financial theory, access to deal flow, selection, and monitoring skills are used to explain syndication in venture capital firms in six European countries. In contrast with U.S. findings, portfolio management motives are more important for syndication than individual deal management motives. Risk sharing, portfolio diversification, and access to larger deals are more important than selection and monitoring of deals. This holds for later stage and for early stage investors. Value adding is a stronger motive for syndication for early stage investors than for later stage investors, however. Nonlead investors join syndicates for the selection and value-adding skills of the syndicate partners. [source]

Efficiency in pre-merger and post-merger non-bank financial institutions

MANAGERIAL AND DECISION ECONOMICS, Issue 8 2001
Andrew C. WorthingtonArticle first published online: 19 OCT 200
A two-part process is employed to analyse the role of efficiency in merger and acquisition (M&A) activity in Australian credit unions during the period 1993,1997. The measures of efficiency are derived using the non-parametric technique of data envelopment analysis. The first part uses panel data in the probit model to relate pure technical efficiency, along with other managerial, regulatory and financial factors, to the probability of merger activity, either as an acquiring or acquired entity. The results indicate that loan portfolio diversification, management ability, earnings and asset size are a significant influence on the probability of acquisition, though the primary determinant of being acquired is smaller asset size. The second part uses a tobit model adapted to a panel framework to analyse post-merger efficiency. Mergers appear to have improved both pure technical efficiency and scale efficiency in the credit union industry. Copyright © 2001 John Wiley & Sons, Ltd. [source]

Portfolio theory and how parent birds manage investment risk

OIKOS, Issue 10 2009
Scott Forbes
Investment theory is founded on the premise that higher returns are generally associated with greater risk, and that portfolio diversification reduces risk. Here I examine parental investment decisions in birds from this perspective, using data from a model system, a 16-year study of breeding red-winged blackbirds Agelaius phoeniceus. Like many altricial birds, blackbirds structure their brood into core (first-hatched) and marginal (later-hatched) elements that differ in risk profile. I measured risk in two ways: as the coefficient of variation in growth and survival of core and marginal offspring from a given brood structure; and using financial beta derived from the capital asset pricing model of modern portfolio theory. Financial beta correlates changes in asset value with changes in the value of a broader market, defined here as individual reproductive success vs. population reproductive success. Both measures of risk increased with larger core (but not marginal) brood size; and variation in growth and survival was significantly greater during ecologically adverse conditions. Core offspring showed low beta values relative to marginal progeny. The most common brood structures in the population exhibited the highest beta values for both core and marginal offspring: many parent blackbirds embraced rather than avoided risk. But they did so prudently with an investment strategy that resembled a financial instrument, the call option. A call option is a contingent claim on the future value of the asset, and is exercised only if asset value increases beyond a point fixed in advance. Otherwise the option lapses and the investor loses only the initial option price. Parents created high risk marginal progeny that were forfeited during ecological adversity (the option lapses) but raised otherwise (the option called); at the same time parents maintained a constant investment and return in low risk core progeny that varied little with changes in brood size or ecological conditions. [source]

Contagion as a Wealth Effect

THE JOURNAL OF FINANCE, Issue 4 2001
Albert S. Kyle
Financial contagion is described as a wealth effect in a continuous-time model with two risky assets and three types of traders. Noise traders trade randomly in one market. Long-term investors provide liquidity using a linear rule based on fundamentals. Convergence traders with logarithmic utility trade optimally in both markets. Asset price dynamics are endogenously determined (numerically) as functions of endogenous wealth and exogenous noise. When convergence traders lose money, they liquidate positions in both markets. This creates contagion, in that returns become more volatile and more correlated. Contagion reduces benefits from portfolio diversification and raises issues for risk management. [source]

SOCIALLY RESPONSIBLE INVESTING AND PORTFOLIO DIVERSIFICATION

Heterogeneity, Efficiency and Asset Allocation with Endogenous Labor Supply: The Static Case

THE MANCHESTER SCHOOL, Issue 3 2001
Marcelo Bianconi
We study the implications of consumption and labor allocations with ex ante efficiency and possibly ex post inefficiency on international/interregional portfolio diversification. The answers we obtain depend crucially on the market regime relative to unemployment insurance. If there are complete markets for unemployment insurance, changes in asset allocation are small in the presence of ex post inefficiency, but if there are incomplete markets for unemployment insurance, changes in asset allocation can be large. The direction of the asset movement is towards more diversification. [source]

Residual Claims in Co-operatives: Design Issues

ANNALS OF PUBLIC AND COOPERATIVE ECONOMICS, Issue 3 2003
R. Srinivasan
This paper examines issues in the design of a co-operative member's contractual relationship with the other agents (including the remaining members) using organizational economics. The paper assumes that the central defining characteristic of a co-op is the residual claim specification. Agency theory identifies certain inherent problems of the co-op form, the horizon problem, common property problem, and non-transferability. Non-transferability both reduces the incentive to monitor and imposes limits on portfolio diversification. This paper argues that features such as claim incompleteness and non-transferability are not inherent to the co-op but may be transaction-cost economizing. The paper also argues that the pre-emptive payoff feature by which the residual claimants (the co-op members) also become fixed payoff agents can affect the risk of other agents, and is an important determinant of co-op risk. A co-op may have more than one potential residual claim base. Five generic design choices are available for handling possible multiple claim bases: battleground, pre-specified allocation, limited return, alignment, and fixed payoff. The paper uses the design of residual claims in sugar co-ops to show how a co-op can partly overcome some of the problems identified by agency theory. This illustration ties together the issues of claim incompleteness and non-transferability, pre-emptive payoff, and multiple claim bases. [source]

COINTEGRATION OF STOCK MARKETS BETWEEN NEW ZEALAND, AUSTRALIA AND THE G7 ECONOMIES: SEARCHING FOR CO-MOVEMENT UNDER STRUCTURAL CHANGE

AUSTRALIAN ECONOMIC PAPERS, Issue 3 2005
PARESH KUMAR NARAYAN
This paper examines whether the New Zealand equity market is integrated with the equity markets of Australia and the G7 economies by applying both the Johansen (1988) and Gregory and Hansen (1996) approaches to cointegration. The Johansen (1988) test suggests that there is no long-run relationship between the New Zealand stock market and any of the other stock markets considered in the study. The Gregory and Hansen (1996) test finds that the New Zealand and United States stock market is cointegrated, but the New Zealand stock market is not cointegrated with the other stock markets in the study. This suggests that in order to avoid some of the risk through international portfolio diversification there is potential for investors to purchase shares in the New Zealand market and either the Australian market or most of the world's leading equity markets. [source]

Currency substitution, portfolio diversification, and money demand

CANADIAN JOURNAL OF ECONOMICS, Issue 3 2006
Miguel Lebre De Freitas
Abstract We extend the Thomas (1985) dynamic optimizing model of money demand and currency substitution to the case in which the individual has restricted or no access to foreign currency denominated bonds. In this case currency substitution decisions and asset substitution decisions are not separable. The results obtained suggest that the significance of an expected exchange rate depreciation term in the demand for domestic money provides a valid test for the presence of currency substitution. Applying this approach to six Latin-American countries, we find evidence of currency substitution in Colombia, Dominican Republic, and Venezuela, but not in Brazil and Chile. Les auteurs prolongent le modèle d'optimisation dynamique de demande de monnaie et de substitution de devises de Thomas (1985) au cas où l'individu a un accès restreint ou nul aux débentures en devises étrangères. Dans ce cas, les décisions de substitution de devises et de substitution d'actifs ne sont pas séparables. Les résultats obtenus suggèrent que la nature significative d'une variable enregistrant une dépréciation anticipée du taux de change dans l'équation de la demande de monnaie nationale fournit un test valide de la présence de substitution de devises. En appliquant cette approche à six pays d'Amérique latine, on découvre qu'il y a évidence de substitution de devises en Colombie, en République dominicaine, et au Vénézuéla, mais pas au Brésil et au Chili. [source]