ARX Series
New and Notable
Editor's selection
Overview
ARX receives up to 100 new submissions each month: academic papers, industry research, white papers, market analysis and others. Here is a curated selection of new and noteworthy posts from our institutional and individual contributors.
To browse or search ARX's repository of more than 4,000 posts, select "Research" in the upper left-hand corner of the page.
Respecting Three Centuries of Correlation
In this latest Strategist's Corner, Rob Almeida analyzes the historical relationship between stocks and bonds, and why it is crucial in diversification and asset allocation decisions.
24 November 2021 | MFS Investment Management
The COP26 Net Zero Atlas
Our first Net Zero Atlas surveys countries’ latest climate targets and mitigation strategies, and calculates the implied temperature rise (ITR) associated with individual national climate goals.
23 November 2021 | FTSE Russell: Nicolas Lancesseur, Colin Subtil, Camille Cros, Jaakko Kooroshy
Active Mutual Funds: Beware of Smart Beta ETFs!
Smart beta ETFs have gained popularity among investors in recent years. This study provides empirical evidence that a proportion of this fast-paced growth can be attributed to the investor migration from "closet tracker" active mutual funds.
22 November 2021 | Thanh Dat Le
Analyzing Active Fund Managers’ Commitment to ESG: Evidence from the United Nations Principles for Responsible Investment
The UN PRI is the largest global ESG initiative in the asset management industry. Do firms that become PRI signatories make significant changes in their funds to integrate ESG in their investment process?
22 November 2021 | Aaron Yoon, Soohun Kim
Banking Across America: Distance and Branch Use
We use location data from millions of mobile devices to analyze income and racial patterns in bank branch access and use throughout the United States.
22 November 2021 | Alexander Zentefis, Jung Sakong
Corporate Tax Changes and Bank Lending
This paper examines the effect of corporate taxation on the cost of credit. We employ corporate income tax rate changes across the U.S. states as a quasi-natural experiment to examine their implications on the pricing of syndicated loans.
22 November 2021 | Yota Deli, Manthos D. Delis, Panagiotis N. Politsidis
Presidential Economic Approval Rating and the Cross-Section of Stock Return
Stocks with high betas to changes in Presidential Economic Approval Ratings earn low returns as the beta dynamically reveals a firm’s perceived alignment to the incumbent president’s economic policies and investors seem to misprice such an alignment.
22 November 2021 | Zilin Chen, Zhi Da, Dashan Huang, Liyao Wang
The Core, the Periphery, and the Disaster: Corporate-Sovereign Nexus in COVID-19 Times
We show that the COVID-19 pandemic triggered a surge in the elasticity of non-financial corporate to sovereign credit default swaps in core EU countries, characterized by strong fiscal capacity.
22 November 2021 | Ruggero Jappelli, Loriana Pelizzon, Alberto Plazzi
The Real Merger Gains: Correcting for Partial Anticipation
Assuming mergers are unpredictable, previous studies find they create no value for acquirers. This paper proposes a new approach to account for partial anticipation and finds mergers create substantial value for both merging firms.
This paper has been submitted for the Asia Pacific Research Exchange Award at the 2021 New Zealand Finance Meeting.
22 November 2021 | M. Vahid Irani
What Drives Closed-End Fund Discounts? Evidence from COVID-19
Exploiting the COVID-19 outbreak as a negative exogenous shock to individual investor sentiment, I examine the causal effect of sentiment on closed-end fund discounts.
22 November 2021 | Liang Ma
Incorporating ESG into US Equity Benchmarks
To incorporate ESG into a broad US market index, deviation was needed from the risk and return of the underlying benchmark. Find out in this paper how FTSE Russell’s ESG Target Exposure approach can become a substitute for the traditional benchmarks.
16 November 2021 | FTSE Russell: Tony Campos, Carolyn Eagle
WEBINAR: REIT Landscape in Singapore - Sector Analysis
The Singapore Exchange was informally crowned the APAC REIT hub more than a decade ago. How has the REIT landscape in Singapore evolved since then? Post pandemic, which subsectors within the REIT family are set to emerge strongly? How are REITs coping with the rise of ESG awareness particularly in the green building domain?
11 November 2021 | CFA Institute, CFA Society Singapore, SGX | Video: 1 hr 41 min.
Responsible Lending Behavior Metrics and Scores: Outsized Rates
The Yield Book mortgage prepayment model is the golden standard for projecting borrower payment behavior. We have developed the ability to closely predict an expected mortgage rate for a borrower. Read this paper for an overview of our methodology.
16 November 2021 | FTSE Russell: Jake Katz, Joe Corrado, Octavian Ceban, Katie Prideaux, Vlad-Ionut Ene
Applying ESG Factors to Government Bond Indices
What is the best way to apply an ESG investment approach to a global sovereign debt portfolio? Discover in this report how the FTSE ESG WGBI approaches this by applying the factor tilting methodology of the FTSE Global Factor Index series.
15 November 2021 | FTSE Russell: Richard Davies, Lazar Karapandza, Julien Moussavi
Harnessing Multi-Factor Strategies Close to the Core
With the rising adoption of factor indices, the traditional boundaries between passive and active investing are becoming increasingly blurred.
2 November 2021 | S&P Dow Jones Indices
Cross Border Carbon and Potential Carbon Border Taxes
This paper assesses carbon border adjustment issues for investors by exploring the growing trend towards carbon border tax scenarios; the implications for financial investment; and assets’ exposures to the risks and opportunities involved.
15 November 2021 | FTSE Russell: Guillaume Emin, Claire Hugo
Outlook 2022: “Shadow Fed” Tightening / 展望2022：夕惕若厉
Throughout the Covid-19 pandemic, China has been exporting and saving, while the West has been importing and consuming. China’s current account surplus reflects the strength of foreign demand, its growth will slow down as the world reopens.
经常账户盈余达峰将制约股指的升幅。中国的外汇存款是“影子联储”，并且正在收紧。重点关注2021年的“泰坦尼克板块”。定向宽松以防范系统风险。
15 November 2021 | Hao Hong, CFA
Remotely Productive: The Efficacy of Remote Work for Executives
We study the efficacy of remote working arrangements between CEOs and firms. Long-distance CEOs underperform according to operating performance, firm valuation, insider reviews, and announcement returns to CEO departures.
This paper has been submitted for the Asia Pacific Research Exchange Award at the 2021 New Zealand Finance Meeting.
11 November 2021 | Ran Duchin, Denis Sosyura
Chinese Local Governments’ Creditworthiness Improves in 2021
Despite headwinds, the creditworthiness of China's local governments has improved, buoyed by the recovery of the economy and budgetary revenue.
11 November 2021 | Jameson Zuo, Pengyuan International
VIDEO: Using Index Icons to Track Potential Equity Opportunities
How are investors using the S&P 500 and DJIA to measure and assess potential opportunities in U.S. equities? Garrett Glawe and Jason Ye join Michele Barlow to explore how investors are putting these index icons to work in Asia.
13 October 2021 | S&P Dow Jones Indices | Video: 19 min.
HKEX Consultation Paper on SPACs: Response by CFA Institute and CFA Society Hong Kong
CFA Institute and CFA Society Hong Kong respond to the consultation paper on special purpose acquisition companies (SPACs) issued by the Stock Exchange of Hong Kong (HKEX).
4 November 2021 | CFA Institute, CFA Society Hong Kong
CEO Pet Projects
A study of US oil-and-gas companies finds that CEOs prioritize corporate investment projects that increase the value of CEOs’ private assets. Such pet projects are implemented sooner, receive more capital, and are less likely to be dropped.
6 November 2021 | Paul Decaire, Denis Sosyura
Fat and Fatter: Crash Risk and Retail Trading
This research estimates ex-ante crash probabilities for stocks via novel machine learning methodologies. It documents causal evidence that retail participation significantly increases stock crash risk. This effect is stronger for small firms.
1 November 2021 | Qian Yang
Bringing Transparency to an Emerging Asset Class: S&P Cryptocurrency Indices
Because digital assets are an emerging asset class, it is helpful to discuss what cryptocurrencies (also referred to as "coins" in this document) are, how the asset class has grown, and how they are regulated.
15 October 2021 | S&P Dow Jones Indices
China’s Property Market at a "Darkest Moment Before the Dawn"
Chinese property developers are facing increasing refinancing pressure amid continued credit control, tight regulatory oversight and weak sentiment in the offshore capital markets.
26 October 2021 | Simon Lee, Pengyuan International
Returns, Values, and Outcomes: A Counterfactual History
Any analysis of investment policy or strategy must be based on historical data. Even if an analyst wants to extrapolate into the future (which we do not), extrapolations must start with the past.
15 September 2021 | S&P Dow Jones Indices
Spark in Copper Furnace and Flame in Broad Market: Performance Modelling of Copper Futures and Nifty Spot for Intelligent Traders
Copper is a barometer for industrial activities, but can it explain the movement of the broader market? We investigate if a trading strategy be employed to generate alpha in copper, based on price of copper futures on MCX India.
24 October 2021 | Dr. Hem Shweta Rathore, Jainendra Shandilya, CFA, CAIA
WEBINAR: ESG Trends in APAC Markets: Laggards vs. Leaders
Which ESG themes are driving sector improvements? Who are the laggards and leaders in the various markets and what does this rise in ESG Ratings mean to investors? In this webinar we look at positive ESG trends in the APAC region, the most improved high risk ESG sectors, and the opportunities to turn an ESG laggard into a leader
26 October 2021 | CFA Institute, MSCI | Video: 1 hr 2 min.
What Happened to the Index Effect? A Look at Three Decades of S&P 500 Adds
The index effect refers to the excess returns putatively associated with a security being added to, or removed from, a headline index.
15 September 2021 | S&P Dow Jones Indices
WEBINAR: Ethical and Sustainable Business Models in the Banking, Insurance and REIT Industry
Capital market experts discuss whether the ethical business model still holds importance among listed companies in the banking, insurance, and REIT industries. If so, why? And how do we as investors analyze whether top management are fully committed to their ESG and CSR goals?
20 October 2021 | CFA Institute, ACCA | Video: 1 hr 33 min.
Property Bubble, Aging Demographics, and Common Prosperity / 房地产变局，人口老龄化对于共同富裕的意义
China’s aging demographics and slowing investment suggest higher consumption ahead. High asset allocation to property at peak price portends re-allocation to other assets, such as equity. China must adapt its growth model despite near-term costs.
中国面临的真正挑战，是如何在面对短期成本的前提下调整其未来的经济增长模式。人口老龄化和投资放缓意味着未来消费将愈发重要；在房价触顶之际，高比例房地产配置预示着资产配置向诸如股票等其他资产的再调整；城镇化进程放缓意味着城乡再平衡行稳致远，最终迈向共同富裕的康庄大道。
18 October 2021 | Hao Hong, CFA, BOCOM International
Venturers Venture On: Successful Technology Entrepreneurs Are Now Actively Investing in Startups
Successful entrepreneurs in the technology sector are now an important link in Asia’s venture capital ecosystem. Who are these tech titans? What is in their portfolios?
5 October 2021 | Kathleen Ng, Asia Private Equity Review (APER)
Microfinance Industry in Pakistan
2020 has been a challenging year for the microfinance sector. The outbreak of COVID-19 led to increased risk of non-recovery from customers who underwent distressed financial situations due to lockdown and exceptional circumstances.
1 September 2021 | The Pakistan Credit Rating Agency Limited: Saniya Tauseef, Insia Raza
WEBINAR: The Emerging Asia Pacific Capital Markets - Asian Frontier Markets
CFA Institute Research Foundation presents the results of its overview of emerging markets in Asia Pacific. This webinar, the fourth in a series, covers Bangladesh, Cambodia, Mongolia, Sri Lanka, and Vietnam.
5 October 2021 | CFA Institute | Video: 1 hr 35 min.
Limiting Risk Exposure With S&P Risk Control Indices
After the 2008 Global Financial Crisis, institutional investors have responded with aversion to volatility by implementing risk control strategies, which target a stable level of volatility in all market environments.
25 August 2021 | S&P Dow Jones Indices
Benefits and Potentials of Crossover Investing: How Japan's Case Can Benefit the Rest of Asia Pacific
For asset managers in APAC, Mr. Takashi Maruyama, Senior Advisor of FIL Investments (Japan) Limited, shares his expertise on crossover investing by publicly offered investment trusts.
11 August 2021 | Motoharu Tanaka, CFA Society Japan
WEBINAR: T-Shaped Teams - The Roadmap for AI and Big Data Adoption in Investments
Incorporating artificial intelligence and big data techniques in the investment process is critical for the success of the future investment firms and investment professionals alike. And yet, many are struggling to find out where to begin and what to do to prepare themselves for the inevitable change. We discuss how investment organizations build T-shaped teams to connect the investment and technology functions for success.
15 September 2021 | CFA Institute | Video: 1 hr 7 min.
China Beyond Evergrande: Contagion or Containment?
Despite Evergrande's seemingly “too big to fail” scale, we expect Beijing to resolve the debt woes by prioritizing an orderly restructuring of the company, instead of offering direct support.
24 September 2021 | PineBridge Investments: Arthur Lau, Andy Suen, Fan Zhang
WEBINAR: 2021 Mid-Year Outlook - Tackling Tricky Transitions
Emerging markets underperformed in 2020 but as we hit the mid-year mark with vaccination deployment trending higher in APAC and Malaysia, how would this affect the market outlook?
27 July 2021 | CFA Society Malaysia: Faridq Ridzuan, CFA, Deborah Tan, Teng Yue Xiang, CFA, Teoh Kok Lin, CFA | Video: 1 hr 40 min.
Regional Relevancy of S&P 500 & Dow Jones Industrial Average Derivatives
The interconnection of global markets has been the key driver for co-movement of market returns, especially during periods of crisis. This has important consequences in terms of portfolio hedging and risk management.
6 September 2021 | S&P Dow Jones Indices
VIDEO: Priming the NextGen for a Sustainable Future
These leaders share how their organizations adapt and build teams with skillsets that cater to the future. A future that requires resilience while ensuring sustainability from an environmental, social or governance perspective.
28 August 2021 | CFA Society Malaysia | Video: 1 hr 8 min.
Reporting Delays and the Information Content of Off-Market Trades
This paper examines the impact of reporting delays in off-market trades on informed trading and information efficiency. We examine this issue using a natural experiment in FTSE futures contracts provided by the ICE Exchange.
15 September 2021 | Alex Frino, Luca Galati, Dionigi Gerace
Ambiguity, Investor Disagreement, and Expected Stock Returns
This study measures investor disagreement and finds that stocks scoring high outperform those scoring low. The stocks with high investor disagreement values prior to earnings announcements earn higher earnings announcement returns.
This paper has been submitted for the Asia Pacific Research Exchange Award at the 2021 New Zealand Finance Meeting.
15 September 2021 | Lawrence Hsiao
VIDEO: The Battle of Elon Musk vs Masayoshi Son vs Jamie Dimon - The Lure of Entrepreneurship and Venture Capital
An entrepreneur, a venture capitalist, and an employee-entrepreneur-VC analyst share first-hand experience in digital startups, and how the CFA® Program helped them thrive in their careers.
24 August 2021 | CFA Society Malaysia | Video: 59 min.
Do Patent Trolls Cause High-Tech Firms to Delist?
Using a sample of high-tech and patent intensive firms from the U.S. market between 2000 and 2019, we find that the frivolous patent trolling is positively associated with the delisting decision of the defendant firms.
15 September 2021 | Sayla Siddiqui
VIDEO: Evolution of Banking in a Digital Revolution
A deep-dive into digital transformation, potential career opportunities and skillsets required in the future of the banking industry. Learn how a to navigate this changing environment.
26 August 2021 | CFA Society Malaysia | Video: 51 min.
Corporate Acquisitions and Bank Relationships
Using a large dataset of firm-bank and ownership information for 23 European countries over 2008-2015, we study the dynamics of bank relationships after corporate acquisitions and the effects of changing banks on firm performance.
14 September 2021 | Steven Poelhekke, Razvan Vlahu, Vadym Volosovych
VIDEO: Data Science - The Game Changer of the Industries
This forum discussed the strategic aspect of data analytics, real world examples related to governance of data science, and how it is becoming more important for one's career development.
25 August 2021 | CFA Society Malaysia | Video: 58 min.
ETFs Turn 20 in Australia
Since its debut in April 2000, the S&P/ASX Index Series has helped to define the Australian equity market. As Australia’s chief market indicator, it serves as the de facto measure of the value and performance of the nation’s stock market.
31 August 2021 | S&P Dow Jones Indices
WEBINAR: The Case for Asian Fixed Income - Conscious and Intelligent Investing
A panel discussion looking at current opportunities and challenges in Asian fixed income investments from a sustainability and return perspective.
14 September 2021 | CFA Institute, CFA Society Singapore | Video: 59 min.
Competition Network, Distress Propagation, and Stock Returns
We build a competition network that links two industries through their common market leaders. Industries with higher centrality on the competition network have higher expected stock returns because of higher exposure to the cross-industry spillover.
13 September 2021 | Mingming Ao, Winston Wei Dou, Shane A. Johnson, Wei Wu
Scenario Analysis as a Valuable Tool for Analyzing Climate Change Risks / 気候変動リスク対応としてのシナリオ分析
The paper describes what Japanese companies are doing in terms of disclosure in line with the TCFD recommendations, and describes scenario analysis as a valuable tool to evaluate climate change risk, focusing on NGFS.
気候変動に関する情勢の動きが激しく、またその内容も多種多様である。そこで本論では気候変動が年金基金ポートフォリオで保有している企業に対してどのようなリスクと機会をもたらしているかを考える上で、特にシナリオ分析についての整理を試みた。
13 September 2021 | Ryujiro Miki, CFA, Research Institute for Policies on Pension & Aging (RIPPA)
Social Connectedness and Venture Capital Investment
This paper studies the role of social connectedness in venture capital (VC) investment decisions. We find that VC firms are more likely to invest in portfolio companies in regions to which they are more socially connected.
13 September 2021 | My Nguyen, Giang Nguyen, Anh Pham, Man Pham
WEBINAR: Overview of "ESG Integration Framework" for Investment Analysis
CFA Institute partnered with The Securities and Exchange Commission Thailand to conduct a webinar to help enhance the knowledge of ESG investing for local practitioners. The webinar is targeting local intermediaries, with aims to equip them with fundamental understanding and knowledge in providing ESG-related services to investors.
7 September 2021 | CFA Institute, SEC Thailand, CFA Society Thailand | Video: 1 hr 32 min.
The Conglomerate Network
This paper proposes a network model of the economy in which conglomerate firms transmit idiosyncratic shocks from one industry to another. It shows that industry growth rates comove more strongly within closely connected industry pairs.
13 September 2021 | Kenneth Ahern, Lei Kong, and Xinyan Yan
Bitcoin: Jumps, Convenience Yields, and Option Prices
We develop a theoretical jump-diffusion model for pricing bitcoin options admitting both jumps and stochastic convenience yield and use simulations to evaluate parameter estimates.
This paper has been submitted for the Asia Pacific Research Exchange Award at the 2021 New Zealand Finance Meeting.
11 September 2021 | Jimmy E. Hilliard, Julie Thuy Dung Ngo
Global Investment ESG Trends for Hong Kong Companies to Focus On / 香港企業值得關注的全球四大ESG投資趨勢
Asset managers and investee companies are under pressure to deliver more when it comes to ESG, including demands from owners in more ESG mature/sophisticated markets. We present our top four global investment ESG trends that are looming.
3 September 2021 | The Chamber of Hong Kong Listed Companies: Fiona Donnelly, Christian Plath
The Coming Kansayaku's Fightback: The Role of Audit and Supervisory Boards in Japan's Corporate Governance
Kansayaku’s role encompasses management supervision and accounting auditing functions. Its history goes back 130 years. It is important for foreign investors to understand this role in order to avoid negative surprises caused by corporate scandals.
10 September 2021 | Ryujiro Miki, CFA
WEBINAR: The Emerging Asia Pacific Capital Markets - ASEAN
CFA Institute Research Foundation presents the results of its overview of emerging markets in Asia Pacific. This webinar, the third in a series, covers Indonesia, Malaysia and the Philippines.
7 September 2021 | CFA Institute | Video: 1 hr 3 min.
About the Author(s)
Director: Scott Lee
Content manager, Editor: Piotr Zembrowski, CFA
Coordinator: Natalie Yiu