CAPM with Sentiment

We analyse the relationship between large cap returns and sentiment indexes, using a Capital Asset Pricing Model (CAPM ) framework. We try to provide a better explanation of asset prices and their deviations from standard theories by means of sentiment indicators, assuming the latter being measures of the very inclination to speculate. Therefore, when sentiment is high, investor demand for speculative investment is high; conversely when it is low, investor demand for speculative investments is low. Unlike other studies, based on proxies, we use the European Sentiment Indicator and its constituents, based on direct surveys, to assess business and consumer confidence

Mean-variance investing with factor tilting

Factor analysis proposes an alternative approach to standard portfolio theory: the latter is optimisation based, while the former is estimation based. Also, in standard portfolio theory, returns are only explained by the portfolio volatility factor, while factor analysis proposes a multiplicity of factors, which the managers can choose from to tilt their portfolios. In attempting to reconcile these alternative worlds, we propose a penalised utility function, incorporating both the Markowitzian risk-return trade-off and the manager's preferences towards factors, and discriminating among losses and gains relative to a reference asset. The penalisation affects the optimisation process, favouring the selection of portfolios with less variance and more tilted towards the chosen risk factors. Penalty levels set by the manager generalise the traditional notion of risk aversion. We test our model by building an investment portfolio based on a combination of asset classes and selected investing factors, focussed on the eurozone. To identify the optimal portfolio, we adopt a set of three metaheuristic optimisation algorithms: the fitness function stochastic maximization using genetic algorithms, differential evolution algorithm for global optimisation, and the particle swarm optimisation, and dynamically choose the best solution. In this way, we can improve the Markowitzian optimisation by tilting the asset allocation with managers' expectations and desired exposures towards designated factors

ESG scores - Is it the new way to build a European portfolio?

The study makes a comparison between the performance of equity portfolios characterized by high ESG score stocks and portfolios with low ESG score stocks. In particular, we analyze three ESG scores: MSCI ESG Rating, Sustainalytics scores and S&P DJI/Robeco ESG Scores, by examining the European stock market in two periods: medium/long term (five years) and short-term (one year). First of all, we associate each component of the index in relation to its MSCI ESG Rating, Sustainalytics score and S&P DJI/Robeco ESG Scores. We build two portfolios: ● first quartile portfolio 1Q (according to MSCI; Sustainalytics; and S&P DJI/Robeco ESG Scores), including securities of companies with the highest ESG score, based on ESG best-in-class screening strategy. ● fourth quartile portfolio 4Q (according to MSCI; Sustainalytics; and S&P DJI/Robeco ESG Scores), including securities of companies with the lowest ESG scores. We aim to answer the following questions: a) do portfolios with higher ESG scores stocks lead to better performances than those including stocks with low ESG scores? b), Are there some sectors that drive the performance within the sector breakdown? Results show a divergence between the composition of the first quartile, whereas there is more homogeneity in the fourth quartil

The Impact of the Financial and the Health Crisis on Listed Hotel Stocks

Travel and tourism represent one of the largest industries in the world as far as percentages of GDP and occupation are concerned, consequently, asset managers could be interested to select listed hotel stocks in their portfolios. The hotel industry has shown some difficulties not only in periods of financial, but also during the health crisis (Covid-19), when global and local restrictions on travel and tourism had a negative effect on the hotel sector. This study aims to analyze how listed hotel stocks could improve their contribution to portfolio diversification in different stages of the market. First, we use a constraint mean-variance approach to analyze the effect of diversification, and then we study the difference in the performance of the hotel sector by using the Risk-Adjusted Performance (RAP) measure. We analyze three sample periods: a) the whole sample (01/2000-09/2021); b) the Financial Crisis sample (06/2007-06/2012) and c) the COVID sample (02/2021-09/2021). Our findings contribute to a good understanding of financial patterns in the hotel industry as an asset class at different stages and support our hypothesis of its possible positive contribution in terms of diversification and performanc

Traditional and Alternative Risk: An Application to Hedge Fund Returns

We analyse the evolution of the hedge fund industry and try to assess whether this alternative investment class makes sense over the traditional one. We are concerned with the impact of the crisis. Common sense tells us that that during phases of market euphoria, possibly due to over-optimism, investors may be attracted by potentially high returns promised by the leveraged structures and the aggressive investment policies of this class of funds. When the downturns hit, managerial opacity heightened by lack of regulations, scarce liquidity and level of risks (supposedly) higher than market portfolio can trigger severe losses in investors' portfolios. Thereupon, we tested empirically whether bear markets have a stronger impact on performances of these funds when compared with traditional investment classes and, dealing in terms of relative performances and losses, our results do not always comply with the common wisdom. Instrumental to this we introduce a specific metric for assessing hedge fund performance, comprising both the relative the advantage and risk of the alternative investment over the traditional one

Cholesterol-loaded nanoparticles ameliorate synaptic and cognitive function in Huntington's disease mice

Brain cholesterol biosynthesis and cholesterol levels are reduced in mouse models of Huntington's disease (HD), suggesting that locally synthesized, newly formed cholesterol is less available to neurons. This may be detrimental for neuronal function, especially given that locally synthesized cholesterol is implicated in synapse integrity and remodeling. Here, we used biodegradable and biocompatible polymeric nanoparticles (NPs) modified with glycopeptides (g7) and loaded with cholesterol (g7-NPs-Chol), which per se is not blood-brain barrier (BBB) permeable, to obtain high-rate cholesterol delivery into the brain after intraperitoneal injection in HD mice. We report that g7-NPs, in contrast to unmodified NPs, efficiently crossed the BBB and localized in glial and neuronal cells in different brain regions. We also found that repeated systemic delivery of g7-NPs-Chol rescued synaptic and cognitive dysfunction and partially improved global activity in HD mice. These results demonstrate that cholesterol supplementation to the HD brain reverses functional alterations associated with HD and highlight the potential of this new drug-administration route to the diseased brain