Categories
Private Wealth Management
  • The prevalence of global stock market inefficiencies gives rise to ample opportunities for stock picking

    Source: Chan Fook Leong, CFA
    Date Submitted: 19 Dec 2017
    Views: 882
    Downloads: 0
    Media Release

    The prevalence of global stock market inefficiencies gives rise to ample opportunities for stock picking
     
    • Active management can yield alpha from inefficiencies in global equity markets particularly in the Asia Pacific region and in emerging markets 
    • These opportunities to generate excess risk-adjusted returns are in spite of trading costs 
    • There is a positive relation between transaction costs including the presence of short selling restrictions and alpha
     
    By Chan Fook Leong, CFA, for Asia-Pacific Research Exchange (ARX)
     
    Singapore, November 14. Professor Söhnke M. Bartram from University of Warwick highlighted the prevalence of global stock market inefficiencies over a lunch-time talk to a full house of CFA charter holders in the FTSE Room on the 9th floor of Capital Tower, Singapore.

    When there are deviations from fair value, stock picking can yield alpha. The mispricing in equities is prevalent globally, particularly in the Asia Pacific region and in emerging markets as uncovered by Professor’s Bartram research project using point-in-time accounting data from more than 25,000 stocks from 36 countries over a period of more than two decades.

    He and joint researcher, Mark Grinblatt, showed that the risk-adjusted returns are significantly larger in emerging than developed markets, suggesting that emerging markets are less efficient at incorporating material public information.

    Potential profits are also larger in the Asia Pacific region. Equity markets in Asia Pacific, the region with the largest alpha, experiences 26-50 basis point additional alpha compared to the Americas even after factoring in differences in the state of economic development.  

    In their research, fair value is determined using replicating portfolios instead of the more conventional discounted cash flow model or the structural asset pricing model where assumptions such as terminal growth and discount rates need to be determined. The replicating portfolio method is a simplistic non-discretionary approach as it relies on less assumptions to arrive at the fair value of a stock. Using international accounting data which is readily available to investors, firms with the same accounting metrics should have identical fair values.

    The replicating portfolios assign monthly fair values to more than 25,000 firms from 36 countries from 1993 to 2016. Thereafter, ordinary least square regression methods are employed to determine the most under- and over-priced stocks. Professor Bartram found that mispricing is greater in emerging markets and in the Asia Pacific region.

    The proxy of trading costs in this research are costs typically incurred by institutional investors. The study also shows that constructing a long-short portfolio still yields positive alpha in spite of trading costs from fees, commissions, and market impact. Moreover, simple adaptations of strategies that reduce turnover such as buy-and-hold strategy can improve alpha in emerging markets.

    Transaction costs which include trading and compliance costs also predict potential profitability – there is a positive relation between such costs and alpha even after controlling for variables such as the quality of a country’s information environment, its level of economic and financial development, and its regulatory framework. This implies that a hypothetical country with zero transaction costs will be devoid of alpha.  

    The other determinant of the level of alpha is the presence of short selling restrictions and other characteristics that might curb arbitrage activities. Limiting arbitrage activities impede the process of stocks reverting to fair value which in turn gives rise to mis-priced stocks.

    Stock market inefficiencies leads to presence of higher alpha in emerging markets and the Asia Pacific region compared to other parts of the world. The former two market or region represent the amongst highest transaction costs including the presence of the prohibition of short selling relative to others, and thereby leading to higher alphas waiting to be realized from picking these severely mis-priced stocks. Best of luck.
     
     
    The full research report can be downloaded from the Asia-Pacific Research Exchange (ARX) website (https://www.arx.cfa)
     
     
  • RMBI Newsletter Issue 13 (Financial Crime Risk: Anti-Money Laundering and The Rise of Text Mining in Financial Markets)

    Source: Tsang Chiu Yu, Derek, Wong Ching Ip, Venice, Chiu Hok He, Angus, Li Chin Wa, Chin
    Date Submitted: 26 Jul 2017
    Views: 175
    Downloads: 0
    In the latest issue (Issue 13 – August 2017), it covers the stories of:
     
    Financial Crime Risk : Anti-Money Laundering Practices in Banking
    To understand anti-money laundering, we have to understand what money laundering is. Money Laundering is the process of converting illegal funds into seemingly legitimate assets with the purpose of concealing the ownership or original source of these funds. This makes it difficult for the authorities to trace the origins of the funds. To counter this, the banking sector has established a set of internal regulations and system known as anti-money laundering. These are legal controls taken by financial institutions to investigate suspicious transactions to help prevent money laundering activities within the banking sector.
     
    The Rise of Text Mining in Financial Markets
    The world is awash in data. Financial markets are awash in data. We are generating around 2.5 quintillion (2.5×1018) bytes of information every day, and there is an average of 4,000 brokerage reports a day comprising around 36,000 pages in 53 languages. As market participants try to maximize their competitive edge from the growing mountain of information, the nancial world increasingly feels there is a need to harness the power of big data and it has been shaping the way they acquire, analyze and utilize data. The recent development is the rapid expansion of text mining. Hence, this article will focus on the development of Text Mining technology as well as Text Mining technique.
  • Two insightful reports on Fintech and Distributed Ledger Technology (DLT) by Financial Services Development Council (FSDC)

    Source: Financial Services Development Council (FSDC)
    Date Submitted: 13 Jun 2017
    Views: 1492
    Downloads: 0
    Given most of the FinTech innovations, in particular the DLT, are developed for providing services directly to consumers, FinTech has initially been regarded as disruptive to the established financial institutions. However, a more recent development is that increasingly FinTech innovations are developed by, and in collaboration with, the well established incumbents in the financial sector. There are two very insightful reports on FinTech and DLT published by the FSDC in May 2017; which covers extensively the following areas including cybersecurity, payment and securities settlement, digital ID and KYC utility, WealthTech and InsurTech (including data analytics, automation and artificial intelligence), RegTech as well as Distributed Ledger Technology.  

    Attached are the two links to these two reports by FSDC.  

    http://www.fsdc.org.hk/sites/default/files/FSDC%20Paper_FinTech_E.pdf

    http://www.fsdc.org.hk/sites/default/files/FSDC%20Paper_DLT_E.pdf
     
  • Bangladesh National Budget Review FY'18

    Source: EBLSL Research Team
    Date Submitted: 04 Jun 2017
    Views: 763
    Downloads: 130
    The 46th National Budget of Bangladesh and 11th by Finance Minister AMA Muhith has been proposed on 1st June, 2017. Proposed budget size for FY ’18 is BDT 4002.66 bn which is 18.0% of GDP. This is the largest budget in the history of Bangladesh. Target Revenue is BDT 2879.91 bn caused a deficit amounting to BDT 1122.75 bn which will be financed through domestic sources (BDT 603.52 bn) and External Borrowings (BDT 519.24 bn).
     
  • MySuper: A New Landscape for Default Superannuation Funds

    Source: Warren Chant, Mano Mohankumar, Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 215
    Downloads: 1
    This report examines the Australian superannuation default fund landscape following the introduction of MySuper at the beginning of 2014.
  • Delegation, trust and defaulting in retirement savings: Perspectives from plan executives and members

    Source: Adam Butt, Scott Donald, Doug Foster, Susan Thorp, Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 319
    Downloads: 1
    Australian superannuation fund members are surveyed to gauge motivations behind defaulting, as well as their wants and needs from their pension fund. Comparison is made with findings from interviews of fund executives.
  • Portfolio allocation in an overvalued market

    Source: Asif Khan
    Date Submitted: 22 Sep 2016
    Views: 525
    Downloads: 0
    This is a blog post describing various ways investors can construct portfolios in an environment where low interest rates have lead to high asset prices. It is written from the perspective of an US equity investor although the conclusions apply to all countries.
  • Survey data suggests a blended robo model is best for advising investors

    Source: Dan Daugaard, Senior Lecturer and Director of CFA Institute Partnership Program at Macquarie University Applied Finance Centre
    Date Submitted: 22 Sep 2016
    Views: 472
    Downloads: 0
    A review of industry surveys suggests that a blended business model combining both robo and face-to-face advice would best fit investor needs - both across the range of investor categories as well as flexibly accommodating the evolving demand by investors for different forms of advice through time.
  • The Global Equity Premium Revisited: What Human Rights Imply for Assets' Purchasing Power

    Source: Jedrzej Bialkowski, Ehud I. Ronn
    Date Submitted: 18 Sep 2016
    Views: 17
    Downloads: 0
    In this paper, we argue that past computations equity risk premium did not properly account for the financial implications of political collapse on property/civil/human rights. Accordingly, we show that past calculations overstated the equity risk premium. We provide an estimate of the equity risk premium that is corrected for lack of basic rights, demonstrating the important changes in this estimate over time.
  • SOE Reform Funds Recommendation

    Source:
    Date Submitted: 18 Aug 2016
    Views: 367
    Downloads: 5
    SOE Reform Funds Recommendation
  • Fintech Survey Report PPT 2016

    Source: Alan Lok, CFA
    Date Submitted: 29 Jul 2016
    Views: 834
    Downloads: 113
    Fintech Survey PPT 2016
  • Medical & Healthcare Funds Recommendation

    Source: Shanghai Vstone Asset Management Co. Ltd
    Date Submitted: 22 Jul 2016
    Views: 251
    Downloads: 3
    Medical & Healthcare Funds Recommendation
  • A Review of Activities and Trends in China's Wealth Management and Mutual Fund Industry

    Source: Shanghai Vstone Asset Management Co. Ltd
    Date Submitted: 22 Jul 2016
    Views: 426
    Downloads: 9
    A Review of Activities and Trends in China's Wealth Management and Mutual Fund Industry
  • 授人以鱼不如授人以渔

    Source: Michael A. Ervolini
    Date Submitted: 13 Jul 2016
    Views: 383
    Downloads: 10
    This article appears on CFA Institute Hedge Fund Journal 2016 issue, season 1.
  • 探索全新的私人财富管理框架

    Source: Pranay Gupta, CFA
    Date Submitted: 12 Jul 2016
    Views: 365
    Downloads: 1
    This article appears on CFA Institute Hedge Fund Journal 2016 issue, season 1.
  • Does Selling Theoretical Performance Put Investors First?

    Source: David Allison, CFA, CIPM
    Date Submitted: 04 Jul 2016
    Views: 264
    Downloads: 0
    This is a blog posted on CFA Institute's website on 11 August 2014.
  • What Makes Emerging Market Debt Tick?

    Source: Larry Cao, CFA
    Date Submitted: 29 Jun 2016
    Views: 303
    Downloads: 4
    This is a blog posted on CFA Institute's website on 29 April 2014.
  • Emerging Market Debt: An Overlooked Source of Alpha?

    Source: Larry Cao, CFA
    Date Submitted: 29 Jun 2016
    Views: 400
    Downloads: 2
    This is a blog posted on CFA Institute's website on 28 May 2014.
  • Impact Investing in India: Poised to Grow?

    Source: Heda Bayron
    Date Submitted: 29 Jun 2016
    Views: 2220
    Downloads: 29
    This is a blog posted on CFA Institute's website on 7 July 2014.
  • Reality Check: What Is India’s New Budget Telling Investors?

    Source: Larry Cao, CFA
    Date Submitted: 29 Jun 2016
    Views: 359
    Downloads: 1
    This is a blog posted on CFA Institute's website on 28 July 2014.
  • What’s Wrong with the Asian Wealth Management Industry?

    Source: Heda Bayron
    Date Submitted: 29 Jun 2016
    Views: 384
    Downloads: 1
    This is a blog posted on CFA Institute's website on 4 November 2014.
  • Seven Essential Steps in Portfolio Management

    Source: Larry Cao, CFA
    Date Submitted: 27 Jun 2016
    Views: 590
    Downloads: 0
    This is a blog posted on CFA Institute's website on 12 August 2014.
  • Weekend Reads for Global Investors: What Drove Chinese Stocks Up 128% Last Year?

    Source: Larry Cao, CFA
    Date Submitted: 27 Jun 2016
    Views: 375
    Downloads: 0
    This article appeared on CFA Institute's website on 29 May 2015.
  • Portfolio Evaluation: Benchmarking for Success

    Source: Larry Cao, CFA
    Date Submitted: 24 Jun 2016
    Views: 401
    Downloads: 2
    This is a blog posted on CFA Institute's website on 11 May 2015.
  • An Advance in Portfolio Construction

    Source: Larry Cao, CFA
    Date Submitted: 24 Jun 2016
    Views: 391
    Downloads: 3
    This is a blog posted on CFA Institute's website on 8 March 2016.
  • What Is the Relevant Time Period for Your Investment Portfolio?

    Source: A. Michael Lipper, CFA
    Date Submitted: 17 Jun 2016
    Views: 370
    Downloads: 0
    This is a blog posted on CFA Institute's website on 11 December 2014.
  • Focus for Investment Victory

    Source: A. Michael Lipper, CFA
    Date Submitted: 17 Jun 2016
    Views: 264
    Downloads: 0
    This is a blog posted on CFA Institute's website on 23 February 2015.
  • 解密对冲基金策略配置

    Source: Ted Seides, CFA
    Date Submitted: 07 Jun 2016
    Views: 503
    Downloads: 2
    This article appears on CFA Institute hedge fund journal 2014 issue, season 1. The original article appears on Investment Risk and Performance Feature Articles, July 2012, Vol. 2012, No. 1: 1–5
  • Data Management: building better relationship

    Source:
    Date Submitted: 20 Mar 2016
    Views: 263
    Downloads: 0
    Opinion on proper utilization of data management for commercial banks and how it can build better relationship with clients and further increase a banks business.
  • An Empirical Analysis of Credit Card Delinquency among BPO Employees (Philippines)

    Source: Abelardo Dulay, Abigail Diente, Laline Tabuzo, Alvia Lejano, Wilma Valenzuela
    Date Submitted: 16 Mar 2016
    Views: 410
    Downloads: 8
    An Empirical Analysis of Credit Card Delinquency among BPO Employees (Philippines)
  • HOW YOUNG NEW ZEALANDERS LEARN ABOUT PERSONAL FINANCE: A LONGITUDINAL STUDY - NGAI TAHU SUB-COHORT

    Source: Jeffrey Stangl, Claire Matthews
    Date Submitted: 22 Feb 2016
    Views: 293
    Downloads: 3
    This working paper was published by the Westpac - Massey University Fin-Ed Centre in September 2013.
  • HOW YOUNG NEW ZEALANDERS LEARN ABOUT PERSONAL FINANCE: A LONGITUDINAL STUDY

    Source: Jeffrey Stangl, Claire Matthews
    Date Submitted: 22 Feb 2016
    Views: 292
    Downloads: 1
    This working paper was published by the Westpac - Massey University Fin-Ed Centre in December 2013.
  • Retirement Realities

    Source: Claire Matthews
    Date Submitted: 22 Feb 2016
    Views: 369
    Downloads: 11
    This article has been published in Applied Finance Letters, Volume 2(1), 2013, pp. 22-27.
  • Why Do Financial Literacy Programmes Fail?

    Source: Bart Frijns, Alireza Tourani-Rad, Aaron Gilbert
    Date Submitted: 22 Feb 2016
    Views: 354
    Downloads: 1
    This article has been published in Applied Finance Letters, Volume 2(1), 2013, pp. 18-21.
  • KiwiSaver, Who Is Really Reaping The Benefits?

    Source: Bart Frijns, Alireza Tourani-Rad
    Date Submitted: 22 Feb 2016
    Views: 321
    Downloads: 2
    This article has been published in Applied Finance Letters, Volume 3(2), 2014, pp. 12-15.
  • UNDERSTANDING HOUSING DECISIONS IN THE NEW ZEALAND RESIDENTIAL PROPERTY MARKET

    Source: Susan Flint-Hartle, Jeffrey Stangl
    Date Submitted: 22 Feb 2016
    Views: 434
    Downloads: 7
    This is a working paper published by the WESTPAC - MASSEY UNIVERSITY FIN-ED CENTRE in December 2014.