25 research outputs found
Pension Funds under Investments Constraints: An Assessment of the Opportunity Cost to the Greek Social Security System
In this paper we study the opportunity loss of the Greek social security system in terms of risk and return, caused by the inflexible investment constraints under which Greek pension funds operated in the period 1958-2000. Using data on pension fund reserves as well as on money and capital market yields, we evaluate retrospectively the risks and returns of a more pro-investment fund reserve management by analyzing an indicative number of investment scenarios in local and international money and capital markets. In order to estimate local currency yields for international investment, we generate for the entire period – covering both a fixed and a partially floating exchange rates regime – a corresponding series of exchange rate variations based on the official rate fluctuations and inflation differentials. Our results suggest that in the 43-year period, there has been a significant opportunity loss in the system both in risk and returns: first, by excluding Greek bank deposits and Greek capital market securities that would have propped returns up at acceptable levels of risk and, second, by not allowing for some degree of international diversification that would have kept overall downside risk down. This opportunity loss could have alleviated, to some extent, the current imbalance of the system, had some of the restrictive investment rules been relaxed.pension funds; financial investment
The Determinants of GNMA Prepayments: A Pool-by-Pool Analysis
This study examines GNMA prepayment determinants as a function of interest-rate factors and the pure aging effect. While we find both interest-rate and age factors to be important, these relationships are not constant across different pools. This suggests that prepayment forecasts need to be made on a pool-by-pool basis. The study also documents a lagged relationship between changing interest rates and prepayment experience, suggesting that the prepayment decision date is made many months before the prepayment recording date.
International evidence on the determinants of domestic sovereign debt bank holdings
Funding: British Academy/SAMS Small Research Grant (SG140376).In this paper, we examine the determinants of bank holdings of domestic sovereign debt with a panel dataset of 295 banks in 35 countries between 2002 and 2013. The findings indicate that the structure of bank ownership (domestic, foreign, or government ownership), the quality of governance, and the level of financial development of the countries in which banks operate all determine the level of home bias. Specifically, we find that domestic banks tend to hold more domestic sovereign debt relative to their foreign counterparts. We also provide evidence that home bias is even stronger when the domestic bank is controlled by its government. Moreover, home bias increases when government bonds are more risky, home governments are less effective, and when banking systems are less financially developed. Overall, we find that banks’ home bias in holding sovereign debt is an international phenomenon that is determined by both bank- and country-specific factors.Publisher PDFPeer reviewe
Pension Funds under Investments Constraints: An Assessment of the Opportunity Cost to the Greek Social Security System
In this paper we study the opportunity loss of the Greek social security system in
terms of risk and return, caused by the inflexible investment constraints under which
Greek pension funds operated in the period 1958-2000. Using data on pension fund
reserves as well as on money and capital market yields, we evaluate retrospectively
the risks and returns of a more pro-investment fund reserve management by analyzing
an indicative number of investment scenarios in local and international money and
capital markets. In order to estimate local currency yields for international investment,
we generate for the entire period – covering both a fixed and a partially floating
exchange rates regime – a corresponding series of exchange rate variations based on
the official rate fluctuations and inflation differentials. Our results suggest that in the
43-year period, there has been a significant opportunity loss in the system both in risk
and returns: first, by excluding Greek bank deposits and Greek capital market
securities that would have propped returns up at acceptable levels of risk and, second,
by not allowing for some degree of international diversification that would have kept
overall downside risk down. This opportunity loss could have alleviated, to some
extent, the current imbalance of the system, had some of the restrictive investment
rules been relaxed
The Cadbury code reforms and corporate performance.
This paper investigates the impact of adopting the Cadbury Committee's Code of Best Practices on the corporate performance of UK firms. The findings show improved corporate performance by companies which adopted the Code. Regarding the specific recommendations of the Code, splitting the positions of the Chairman of the Board and CEO does not result in improved corporate performance. The establishment of an internal audit and/or remuneration committee is positively associated with corporate performance, while the presence of a key executive director in such committees is negatively associated with corporate performance. There is a negative relation between corporate performance and the proportion of non-executive directors, but a positive relation between corporate performance and the square of the proportion of non-executive directors
The performance of German fixed-income ETFs in the presence of the debt crisis
The German government bonds attract fixed income investors as a safe heaven
seeking refuge from the downgraded debt of other Eurozone countries. We exploit
this tendency to diagnose the performance behavior of German fixed income
Exchange Traded Funds (hereafter ETFs) in line to investment opportunities facing
bond investors. In a sample of 38 German bond ETFs during the period from their
inception to the end of 2010, we find: 1) ETFs fail to deliver any positive excess return
with respect to the market return and this persist on a quarterly basis, 2) ETFs are
associated with negative alphas, 3) a small size and a momentum effect on bond ETF
returns, and 4) a statistically significant tracking error of 0.06% which is persistent
on a quarterly basis. Overall, our results provide the first empirical evidence on how
German bond ETFs behave with respect to the benchmarks and imply that fixed
income investors using German bond ETFs should apply allocation strategies to
benefit from the size and momentum effects foundLos bonos del Estado alemán atraen inversores en renta fija como si fueran un cielo
seguro en el que se busca refugio de la degradada deuda pública de otros paÃses de la
eurozona. Se aprovecha esta tendencia para diagnosticar el rendimiento de los fondos
cotizados de renta fija alemana en lÃnea con las oportunidades de inversión de los inversores
en bonos. A partir de una muestra de 38 fondos cotizados de bonos alemanes
durante el periodo comprendido entre su constitución y diciembre de 2010, se encuentra
que: 1) los mencionados fondos no proporcionan un rendimiento superior al del
mercado, lo que persiste en una base trimestral; están asociados con alfas negativos,
3) tamaño pequeño y efecto momentum, y 4) un tracking error, estadÃsticamente significativo,
del 0,06%, persistente en una base trimestral. En general, los resultados que
se obtienen constituyen la primera evidencia empÃrica sobre el comportamiento de los
fondos cotizados de bonos alemanes en relación a los benchmarks o referencias,
obteniéndose que los inversores en renta fija que negocian con ellos deberÃan utilizar
estrategias de asignación para beneficiarse los efectos tamaño y momentum encontrados
en esta investigación
Investor sentiment and the Closed-end Fund Puzzle: Out-of-Sample Evidence
In this paper we examine the proposition that small investor sentiment, measured by the change in the discount/premium on closed-end funds, is an important factor in stock returns. We conduct an out-of-sample test of the investor sentiment hypothesis in a market environment that is more likely to be prone to investor sentiment than the USA. We fail to provide supporting evidence for the claim of Lee et al.(1991)thatinvestorsentimentaffectstheriskofcommon stocks.Consistentwith Elton et al. (1998), who show that investor sentiment does not enter the return generating process, our tests do not detect investor sentiment in a capital market that is more susceptible to small investor sentiment. Our results provide additional support against the claim that investor sentiment represents an independent and systematic asset pricing risk
International evidence on the determinants of domestic sovereign debt bank holdings
In this paper, we examine the determinants of bank holdings of domestic sovereign debt with a panel dataset of 295 banks in 35 countries between 2002 and 2013. The findings indicate that the structure of bank ownership (domestic, foreign, or government ownership), the quality of governance, and the level of financial development of the countries in which banks operate all determine the level of home bias. Specifically, we find that domestic banks tend to hold more domestic sovereign debt relative to their foreign counterparts. We also provide evidence that home bias is even stronger when the domestic bank is controlled by its government. Moreover, home bias increases when government bonds are more risky, home governments are less effective, and when banking systems are less financially developed. Overall, we find that banks’ home bias in holding sovereign debt is an international phenomenon that is determined by both bank- and country-specific factors