Technical Analysis as a Method of Risk Management

While the academic world is still discussing if charting works or if it is more or less something like "Voodoo finance", the practical orientated world has been using technical analysis for decades. One argument of practitioners is, that technical analysis is useful to "disciplinate" the trader and consequently is a method of risk reduction. We discuss this argument theoretically and empirically and show, that it is not always right. --

Safety first portfolio choice based on financial and sustainability returns

This paper lays the mathematical foundations of the notion of an investment's sustainability return and investigates three different models of portfolio selection with probabilistic constraints for safety first investors caring about the financial and the sustainability consequences of their investments. The discussion of these chance-constrained programming problems for stochastic and deterministic sustainability returns includes theoretical results especially on the existence of a unique solution under certain conditions, an illustrating example, and a computational time analysis. Furthermore, we conclude that a simple convex combination of financial and sustainability returns - yielding a new univariate decision variable - is not sufficiently general.Finance; Socially Responsible Investing; Sustainability Value; Safety First Investor

On the use of the terminal-value approach in risk-value models

We extend risk-value models for valuing streams of risky cash flows by establishing the well-known concept of terminal value in this context. For a constant growth assumption we are able to derive upper and lower bounds for the terminal value in the case of a translation-invariant and in the case of a position-invariant risk measure. For both cases we also obtain an exact formula under a special growth assumption for the future cash flows. Furthermore, we provide results on the applicability of the general findings for the case that the log-return of the risky investment follows a Brownian motion

The pricing of green bonds: external reviews and the shades of green

We investigate the asset pricing implications of the greenness of bonds. To estimate a green-pricing effect, we determine the ‘green bond premium’ as the difference between the yields of matched conventional and green-labeled bonds. On a cross-sectional average, green bonds experience a statistically significant positive premium. This premium increases with external greenness evaluations, i.e., investors accept premiums of up to 5 basis points for bonds with a substantial environmental agenda. This external validation effect, which is strongest for bonds that are rated dark-green, may offset not incurring information costs, as this effect decreases with increasing age of bonds

The social and environmental drivers of corporate credit ratings: international evidence

We provide evidence of the exogenous impact of environmental and social performance components on credit ratings in North America, Europe, and Asia. In particular, the product innovation dimension is clearly identified as being the dominating driver of credit ratings within the environmental performance in every subsample region. In the social performance dimension, the extent of diversity is a main driver for firms in North America and Europe, but due to cultural reasons, not in Asia. Our results show that the risk mitigation view holds for all significant corporate social or environmental performance variables, but the magnitude of impact differs regionally