scholarly journals Who Knocks on the Door of Portfolio Performance Heaven: Sinner or Saint Investors?

Mathematics ◽  
2020 ◽  
Vol 8 (11) ◽  
pp. 1951
Author(s):  
José Luis Miralles-Quirós ◽  
María Mar Miralles-Quirós
Keyword(s):  
Financial Markets ◽  
Transaction Costs ◽  
Factor Model ◽  
Five Factor Model ◽  
Investment Strategy ◽  
Portfolio Performance ◽  
Socially Responsible ◽  
Long Time

To sin, or not to sin: that has been the question for many people for a long time, and nowadays that question has moved to the financial markets. The existence of studies that show that investing in vice sectors such as the alcohol, tobacco, and gambling industries, collectively known as the “triumvirate of Sin”, is profitable has created some uncertainty for investors who wonder whether or not to be socially responsible. We show that by implementing an investment strategy based on the Fama–French five-factor model, “saint” investors obtain better portfolio performance, even when transaction costs are taken into consideration, and therefore they are the ones chosen to knock on the door of portfolio performance heaven.

scholarly journals Sustainable Development Goals and Investment Strategies: The Profitability of Using Five-Factor Fama-French Alphas

2020 ◽  
Vol 12 (5) ◽  
pp. 1842 ◽  
Author(s):  
José Luis Miralles-Quirós ◽  
María Mar Miralles-Quirós ◽  
José Manuel Nogueira
Keyword(s):  
Sustainable Development ◽  
Sustainable Development Goals ◽  
Factor Model ◽  
Five Factor Model ◽  
Well Being ◽  
Good Health ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Responsible Investment ◽  
Development Goals

This study focuses on assets related to Sustainable Development Goals (SDGs), which are the most recent aspect of the Socially Responsible Investment framework and have caught the attention of investors due to their investment opportunities as well as the global challenges that can be achieved. The profitability of developing an investment strategy is shown based on the value of the alphas obtained from the estimation of the Fama-French five-factor model when compared to an equally weighted portfolio, even when transaction costs are taken into consideration. In addition, it is proven that investors should focus their investments on two main SDGs: Good health and well-being (Goal 3) and Industry, innovation and infrastructure (Goal 9).

scholarly journals Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

2021 ◽  
Vol 13 (16) ◽  
pp. 9388
Author(s):  
Julian Amon ◽  
Margarethe Rammerstorfer ◽  
Karl Weinmayer
Keyword(s):  
Financial Performance ◽  
Portfolio Management ◽  
Asset Allocation ◽  
Factor Model ◽  
Five Factor Model ◽  
Strong Support ◽  
Socially Responsible ◽  
A Value ◽  
Significant Difference ◽  
The Impact

In this article, we investigate the notion of doing well while doing good from the perspective of passive portfolio strategies. We analyze a number of asset allocation strategies based on ESG-weighting and compare their financial and ESG performance for the US and Europe. We find no significant difference in the financial performance but superior ESG performance of ESG-based strategies. It can be concluded that, compared to a naive strategy, socially responsible investors are willing to pay a small premium for the impact of the portfolio via transaction costs when rebalancing the portfolio according to their preferences for social responsibility. In addition, when comparing the ESG-based strategies to a value-weighted strategy, we observe no significant difference in ESG performance but a high degree of significance in the superior financial performance of the ESG-based strategy. We also analyze the strategies with regards to the factor loadings given by the Fama–French five-factor model and a sixth factor denoted GMB (Good minus Bad) and find significant differences across the regions and strategies. Overall, the results show strong support of ESG-based strategies being preferred by socially responsible investors but also suggest that such strategies might be preferred by conventional investors looking for a passively managed alternative compared to a value-weighted index. Furthermore, it seems that such a strategy might be a more adequate benchmark for active SRI funds.

Who is King in Factor Zoo? Case of the Chinese Stock Market

2020 ◽  
Vol 14 (2) ◽  
pp. 77-102
Author(s):  
Simon M. S. So
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Stock Returns ◽  
Factor Model ◽  
Five Factor Model ◽  
Investment Strategy ◽  
Capital Asset Pricing ◽  
Chinese Stock Market ◽  
Fama And French ◽  
Three Factor

This paper aimed to evaluate and compare individual performances and contributions of seven well-known factors, selected from four widely cited asset pricing models: (1) the capital asset pricing model of Sharpe (1964), (2) the three-factor model of Fama and French (1993) the augmented four-factor model of Carhart (1997), (3) the five-factor model of Fama and French (2015), and (4) the illiquidity model of Amihud, et al. (2015) in capturing the time-series variation of stock returns and absorbing the 12 prominent anomalies. The anomalies were constructed by forming long-short portfolios, and regressions were run to examine their monthly returns from 2000 to 2019. We found that there is no definite and absolute “king” in the factor zoo in the Chinese stock market, and size is the relative “king” that can absorb the maximum number of anomalies. Evidence also indicates that the three-factor model of Fama and French may still play an important role in pricing assets in the Chinese stock market. The results can provide investors with a reliable risk factor and help investors form an effective investment strategy. This paper contributes to asset pricing literature in the Chinese market.G1

scholarly journals Is there any effect of ESG scores on portfolio performance? Evidence from Europe and Turkey

2020 ◽  
Vol 4 (2) ◽  
pp. 129-143
Author(s):  
Emre Zehir ◽  
Aslı Aybars
Keyword(s):  
Factor Model ◽  
Efficient Market Hypothesis ◽  
Capital Asset Pricing ◽  
Portfolio Performance ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Asset Pricing Model ◽  
Market Index ◽  
Three Factor

PurposeThe purpose of this paper is to examine the performance of portfolios that are constructed based on environmental, social and governance (ESG) scores and consist of stocks located in Europe and Turkey.Design/methodology/approachIn order to form the portfolios, firstly all stocks are ranked in a descending way based on ESG-based (ESG, environmental, social and governance) scores, separately. Then, 10% of stocks with the highest scores are included in the “Top” portfolio and 10% of stocks with the lowest scores are included in “Bottom” portfolio and totally performance of eight portfolios are investigated. Finally, capital asset pricing model (CAPM) and Fama-French three-factor model are employed as performance measurement benchmarks.FindingsResults obtained from CAPM regression show that using ESG-based scores two portfolios underperform the market index. The results of the three-factor model provide that performances of Bottom ESG and Bottom GOV portfolios outperform the market excess return by 0.57% and 0.53%. The overall findings of this paper indicate that there is no relationship between socially responsible investment (SRI) and portfolio performance. These findings are in line with the efficient market hypothesis which indicates all information is reflected in prices.Originality/valueThe aim of the study is to provide insight on the question of “whether SRI has any effect on the portfolio performance”. As far as the literature review is concerned it is seen that this study provide additional insight by utilizing a longer time span together with data from numerous markets.

scholarly journals Social Responsible Investments and Performance

2018 ◽  
Vol 10 (1) ◽  
pp. 10 ◽  
Author(s):  
Giuseppe Risalvato ◽  
Claudio Venezia ◽  
Federica Maggio
Keyword(s):  
Financial Markets ◽  
Corporate Responsibility ◽  
Investment Strategy ◽  
Socially Responsible ◽  
Ethical Finance ◽  
Socially Responsible Investments ◽  
Sustainable Finance ◽  
And Performance ◽  
Selection Of ◽  
Better Than

This research paper shows the growing power of the practices of sustainable finance in the financial markets. The socially responsible investments (SRI), defined as a strategy to select issuers on the basis of both ESG Corporate Responsibility that financial factors, are rising a growing amount of capital. In fact, between 2012 and 2015 the SRI global asset increased of 61%, amounting to 21.4 billion of dollars. The proliferation of ethical indices in the various financial centers of the world is related to a significant growth of assets managed according to an investment strategy that rewards socially responsible companies. After the financial crisis of 2007, ethical or sustainable indices have generally performed better than traditional indices, which they are derived through a selection of stocks that are subject to strict requirements, the author show the performance of ethical finance compared with those of the traditional sector.

Is there persistence among non-professionals? Evidence from the Chicago Mercantile Exchange Group Trading Challenges

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omid Sabbaghi ◽  
Min Xu
Keyword(s):  
Financial Markets ◽  
Factor Model ◽  
Five Factor Model ◽  
Statistical Significance ◽  
Performance Persistence ◽  
Excess Returns ◽  
Data Set ◽  
Content Type ◽  
Chicago Mercantile Exchange ◽  
Fama And French

PurposeThe study systematically investigates persistence in performance for simulated trading among non-professional traders in the futures market.Design/methodology/approachIn this study, the authors employ a novel data set from the Chicago Mercantile Exchange (CME) Group's Trading Challenges for years 2014 through 2018 and expand upon the empirical methodology of Malkiel (1995) through improved interval estimations in testing for persistence in performance. The authors implement Fama-MacBeth style regressions to understand the degree of persistence in performance and the extent to which non-professionals extrapolate from prior returns. They adjust returns for risk through the Fama and French (2015) five-factor model in understanding whether the sample of non-professionals is able to produce excess returns after expenses and whether there is evidence of excess gross to cover expenses.FindingsThe empirical analysis suggests strong evidence for performance persistence among non-professionals participating in the Preliminary Rounds. In the Championship Rounds, the authors find that the persistence effect becomes stronger in economic and statistical significance after accounting for expenses. The results suggest that competition and transaction costs help to distinguish between winners and losers. When conducting Fama-MacBeth style regressions, the authors present evidence that strongly supports the persistence effect and over-extrapolation. While the results of the multi-factor model analysis suggest that, after adjusting for risk, most teams are experiencing negative excess returns prior to expenses, the authors also uncover evidence of teams earning returns sufficient to cover their expenses.Originality/valueThe authors bridge the gap between the literature on performance persistence and the emerging literature on non-professionals in the financial markets. Data from the CME Group’s Trading Challenge provide a rich source in studying the beliefs of non-professionals, and this study is helpful for understanding how beliefs, operationalized in simulated trades, perform over short time horizons, thereby providing insights into the behavioral dynamics of the financial markets. The results provide new empirical evidence for performance persistence among non-professionals.

Social Desirability in Personality Inventories

2014 ◽  
Vol 35 (3) ◽  
pp. 144-157 ◽  
Author(s):  
Martin Bäckström ◽  
Fredrik Björklund
Keyword(s):  
Social Desirability ◽  
Big Five ◽  
Work Performance ◽  
Factor Model ◽  
Five Factor Model ◽  
Peer Ratings ◽  
Personality Inventories ◽  
Model Study ◽  
The Difference ◽  
New Variables

The difference between evaluatively loaded and evaluatively neutralized five-factor inventory items was used to create new variables, one for each factor in the five-factor model. Study 1 showed that these variables can be represented in terms of a general evaluative factor which is related to social desirability measures and indicated that the factor may equally well be represented as separate from the Big Five as superordinate to them. Study 2 revealed an evaluative factor in self-ratings and peer ratings of the Big Five, but the evaluative factor in self-reports did not correlate with such a factor in ratings by peers. In Study 3 the evaluative factor contributed above the Big Five in predicting work performance, indicating a substance component. The results are discussed in relation to measurement issues and self-serving biases.

Construction and Validation of a Short Adjectives Checklist to Measure Big Five (SACBIF)

1996 ◽  
Vol 12 (1) ◽  
pp. 33-42 ◽  
Author(s):  
Marco Perugini ◽  
Luigi Leone
Keyword(s):  
Construct Validity ◽  
Psychometric Properties ◽  
Big Five ◽  
Factor Model ◽  
Five Factor Model ◽  
Selection Procedure ◽  
Factorial Structure ◽  
Personality Dimensions

The aim of this contribution is to present a new short adjective-based measure of the Five Factor Model (FFM) of personality, the Short Adjectives Checklist of BIg Five (SACBIF). We present the various steps of the construction and the validation of this instrument. First, 50 adjectives were selected with a selection procedure, the “Lining Up Technique” (LUT), specifically used to identify the best factorial markers of the FFM. Then, the factorial structure and the psychometric properties of the SACBIF were investigated. Finally, the SACBIF factorial structure was correlated with some main measures of the FFM to establish its construct validity and with some other personality dimensions to investigate how well these dimensions could be represented in the SACBIF factorial space.

Factorial Invariance of Child Self-Report Across English and Spanish Language Groups in a Hispanic Population Utilizing the PedsQL™ 4.0 Generic Core Scales

2010 ◽  
Vol 26 (3) ◽  
pp. 194-202 ◽  
Author(s):  
Daniel A. Newman ◽  
Christine A. Limbers ◽  
James W. Varni
Keyword(s):  
Health Care Services ◽  
Factor Model ◽  
Five Factor Model ◽  
Well Being ◽  
Factorial Invariance ◽  
Spanish Language ◽  
Self Report ◽  
Hispanic Population ◽  
Language Groups ◽  
Related Quality

The measurement of health-related quality of life (HRQOL) in children has witnessed significant international growth over the past decade in an effort to improve pediatric health and well-being, and to determine the value of health-care services. In order to compare international HRQOL research findings across language groups, it is important to demonstrate factorial invariance, i.e., that the items have an equivalent meaning across the language groups studied. This study examined the factorial invariance of child self-reported HRQOL across English- and Spanish-language groups in a Hispanic population of 2,899 children ages 8–18 utilizing the 23-item PedsQL™ 4.0 Generic Core Scales. Multigroup confirmatory factor analysis (CFA) was performed specifying a five-factor model across language groups. The findings support an equivalent 5-factor structure across English- and Spanish-language groups. Based on these data, it can be concluded that children across the two languages studied interpreted the instrument in a similar manner. The multigroup CFA statistical methods utilized in the present study have important implications for cross-cultural assessment research in children in which different language groups are compared.

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