Asset Pricing, Investment, and Trading Strategies

A special issue of Economies (ISSN 2227-7099).

Deadline for manuscript submissions: closed (31 March 2021) | Viewed by 30791

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1. Department of Finance, Fintech & Blockchain Research Center, Big Data Research Center, Asia University, Taichung City 41354, Taiwan
2. Department of Medical Research, China Medical University Hospital, Taichung City 40447, Taiwan
3. Department of Economics and Finance, The Hang Seng University of Hong Kong, Hong Kong, China
Interests: behavioral models; mathematical modeling; econometrics; energy economics; equity analysis; investment theory; risk management; behavioral economics; operational research; decision theory; environmental economics; public health; time series analysis; forecasting
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Special Issue Information

Dear Colleagues,

Asset pricing, investment, and trading strategies are very important in finance. They are useful in various situations, for example, to support the decision-making process of choosing investments, determining the asset-specific required rate of return on the investment, pricing derivatives for trading or hedging, getting portfolios from fixed incomes or bonds, stocks, and other assets, evaluating diverse portfolios, determining macroeconomic variables affecting market prices, calculating option prices, incorporating features such as mean reversion and volatility, etc. They can also be applied in financial forecast for assets, portfolios, business projects.

Understanding, modelling, and using various asset pricing models, investment models, and models for different trading strategies is paramount in many different areas of finance and investment, including banking, stocks, bonds, currencies, and related financial derivatives. Different asset pricing models, investment models, and models for different trading strategies also allow to compare the performances of different variables through the analysis of empirical real-world data.

This Special Issue on "Asset Pricing, Investment, and Trading Strategies” will be devoted to advancements in the theoretical development of various asset pricing models, investment models, and models for different trading strategies as well as to their applications.

The Special Issue will encompass innovative theoretical developments, challenging and exciting practical applications, and interesting case studies in the development and analysis of various asset pricing models, investment models, and models for different trading strategies in finance and cognate disciplines.

We invite investigators to contribute original research articles on the theory, practice, and applications of these models across a wide range of disciplines. All submissions must contain original unpublished work not being considered for publication elsewhere.

Prof. Dr. Wing-Keung Wong
Guest Editor

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Published Papers (8 papers)

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Research

26 pages, 3131 KiB  
Article
Do Jumps Matter in Both Equity Market Returns and Integrated Volatility: A Comparison of Asian Developed and Emerging Markets
by Hassan Zada, Arshad Hassan and Wing-Keung Wong
Economies 2021, 9(2), 92; https://doi.org/10.3390/economies9020092 - 16 Jun 2021
Cited by 7 | Viewed by 2509
Abstract
In this paper, we examine whether jumps matter in both equity market returns and integrated volatility. For this purpose, we use the swap variance (SwV) approach to identify monthly jumps and estimated realized volatility in prices for both developed and emerging markets from [...] Read more.
In this paper, we examine whether jumps matter in both equity market returns and integrated volatility. For this purpose, we use the swap variance (SwV) approach to identify monthly jumps and estimated realized volatility in prices for both developed and emerging markets from February 2001 to February 2020. We find that jumps arise in all equity markets; however, emerging markets have more jumps relative to developed markets, and positive jumps are more frequent than negative jumps. In emerging markets, the markets with average volatility earn higher returns during jump periods; however, highly volatile markets earn higher returns during jump periods in developed markets. Furthermore, markets with low continuous returns and high volatility are more adversely affected during periods of negative jumps. The average ratio of jump variations to total variation shows considerable variations due to jumps. Integrated volatility is high during periods of negative jumps, and this pattern is consistent in both developed and emerging markets. Moreover, the peak volatility of stock markets is observed during periods of crises. The implication of this study is useful in the asset pricing model, risk management, and for individual investors and portfolio managers for both developed and emerging markets. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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16 pages, 1984 KiB  
Article
Can Economic Factors Improve Momentum Trading Strategies? The Case of Managed Futures during the COVID-19 Pandemic
by Renata Guobužaitė and Deimantė Teresienė
Economies 2021, 9(2), 86; https://doi.org/10.3390/economies9020086 - 28 May 2021
Cited by 4 | Viewed by 4599
Abstract
Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but [...] Read more.
Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but short-lived impact on financial markets, and therefore gives a unique insight into momentum strategies’ performance during such critical moments of market stress. We offer a new approach to implementing momentum strategies by adding macroeconomic variables to the model. We test a managed futures strategy’s performance with a well-diversified futures portfolio across different asset classes. The research concludes that constructing a portfolio based on academically/economically sound momentum signals with its allocation timing based on broader economic factors significantly improves managed futures strategies and adds significant diversification benefits to the investors’ portfolios. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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22 pages, 2992 KiB  
Article
Liquidity Spill-Overs in Sovereign Bond Market: An Intra-Day Study of Trade Shocks in Calm and Stressful Market Conditions
by Linas Jurksas, Deimante Teresiene and Rasa Kanapickiene
Economies 2021, 9(1), 35; https://doi.org/10.3390/economies9010035 - 11 Mar 2021
Cited by 1 | Viewed by 1949
Abstract
The purpose of this paper is to determine the liquidity spillover effects of trades executed in European sovereign bond markets and to assess the driving factors behind the magnitude of the spill-overs between different markets. The one minute-frequency limit order-book dataset is constructed [...] Read more.
The purpose of this paper is to determine the liquidity spillover effects of trades executed in European sovereign bond markets and to assess the driving factors behind the magnitude of the spill-overs between different markets. The one minute-frequency limit order-book dataset is constructed from mid-2011 until end-2017 for sovereign bonds from the six largest euro area countries. It is used for the event study and panel regression model. The event study results revealed that liquidity spill-over effects of trades exist and vary highly across different order types, direction and size of the trade, the maturity of traded bonds, and various markets. The panel regression model showed that less liquid bonds and bonds whose issuer is closer by distance to the country of the traded bond have more substantial spillover effects and, at the same time, are also more affected by trades executed in another market. These results should be of interest to bond market participants who want to limit the exposure to the liquidity spillover risk in bond markets. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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10 pages, 1610 KiB  
Article
The Optimization of Bayesian Extreme Value: Empirical Evidence for the Agricultural Commodities in the US
by Jittima Singvejsakul, Chukiat Chaiboonsri and Songsak Sriboonchitta
Economies 2021, 9(1), 30; https://doi.org/10.3390/economies9010030 - 05 Mar 2021
Cited by 2 | Viewed by 2118
Abstract
Bayesian extreme value analysis was used to forecast the optimal point in agricultural commodity futures prices in the United States for cocoa, coffee, corn, soybeans and wheat. Data were collected daily between 2000 and 2020. The estimation of extreme value can be empirically [...] Read more.
Bayesian extreme value analysis was used to forecast the optimal point in agricultural commodity futures prices in the United States for cocoa, coffee, corn, soybeans and wheat. Data were collected daily between 2000 and 2020. The estimation of extreme value can be empirically interpreted as representing crises or unusual time series trends, while the extreme optimal point is useful for investors and agriculturists to make decisions and better understand agricultural commodities future prices warning levels. Results from the Non-stationary Extreme Value Analysis (NEVA) software package using Bayesian inference and the Newton-optimal methods provided optimal interval values. These indicated extreme maximum points of future prices to inform investors and agriculturists to sell the contract and product before the commodity prices dropped to the next local minimum values. Thus, agriculturists can use this information as an advanced warming of alarming points of agricultural commodity prices to predict the efficient quantity of their agricultural product to sell, with better ways to manage this risk. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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16 pages, 954 KiB  
Article
Impact of Khartoum Stock Exchange Market Performance on Economic Growth: An Autoregressive Distributed Lag ARDL Bounds Testing Model
by Tomader Elhassan and Bakhita Braima
Economies 2020, 8(4), 86; https://doi.org/10.3390/economies8040086 - 19 Oct 2020
Cited by 6 | Viewed by 3214
Abstract
This study examines the impact of the Khartoum Stock Exchange market performance on economic growth in Sudan from Q1 1995 to Q4 2018. The data were collected from the Central Bank of Sudan (CBS) and Khartoum Stock Exchange (KSE). The autoregressive distributed lag [...] Read more.
This study examines the impact of the Khartoum Stock Exchange market performance on economic growth in Sudan from Q1 1995 to Q4 2018. The data were collected from the Central Bank of Sudan (CBS) and Khartoum Stock Exchange (KSE). The autoregressive distributed lag (ARDL) bounds test was applied to estimate the impact of the Khartoum Stock Exchange market performance on economic growth. The results show that the Khartoum Stock Exchange market performance has a limited impact on economic growth. The results of the ARDL test reveal that the speed of adjustment towards long-run equilibrium after a short-term shock, which confirms the stability of Sudanese economic system through stock market performance, equals 24% only. Although market capitalization has a positive and significant impact on economic growth in the long term, the turnover ratio and stocks traded value showed insignificant negative impacts on economic growth. We recommend that suitable investment policies should be developed by policy makers for the Sudanese economy to allow the Khartoum securities market to attract foreign investors and encourage local investors in order to improve the efficiency and effectiveness of the stock market, thus, leading to a boost in securities exchanges as well as economic growth. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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19 pages, 998 KiB  
Article
Trade-Offs in Competitive Transport Operations
by Usman Akbar, Akash Kumar, Hameed Khan, Muhammad Asif Khan, Khansa Parvaiz and Judit Oláh
Economies 2020, 8(3), 56; https://doi.org/10.3390/economies8030056 - 03 Jul 2020
Cited by 5 | Viewed by 5237
Abstract
One of the goals of developing a transport corridor is to promote socio-economic development by improving connectivity and sustainable transport operations, which largely depends on the operational strategy. Trade-off policies can be important tools for gaining the competitive advantage of road transport corridors, [...] Read more.
One of the goals of developing a transport corridor is to promote socio-economic development by improving connectivity and sustainable transport operations, which largely depends on the operational strategy. Trade-off policies can be important tools for gaining the competitive advantage of road transport corridors, and thus, help facilitate sustainable growth and welfare. This article uses a case-based approach to observe the trade-offs in the first phase of transport infrastructure development, and then, in the second stage, further explores the trade-off variables in the transport operations strategy under the China-Pakistan Economic Corridor (CPEC). The results from the three cases of the parallel route system of the CPEC indicate that trade-off is an easily understandable and applicable method, which can foresee the operational gains or compromises for significant welfare of the regions. The implications of the trade-off are two fold, first is the “importance” of the trade-off, which is related to its impact on operational competitiveness. The other is the “sensitivity” of the trade-off, in terms of the change that will be caused to one variable when changing the other. The trade-off concept can be used for several landlocked transport corridors to achieve a competitive edge in transit trade. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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21 pages, 423 KiB  
Article
State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam
by Tran Thai Ha Nguyen, Massoud Moslehpour, Thi Thuy Van Vo and Wing-Keung Wong
Economies 2020, 8(2), 46; https://doi.org/10.3390/economies8020046 - 03 Jun 2020
Cited by 20 | Viewed by 5751
Abstract
Corporate risk-taking behavior and investment is a crucial factor in order to seek higher profits and a better trading strategy. Competitive advantage and innovation, while maintaining profitability and state ownership, are considered as crucial resources. Furthermore, it is essential to connect the short-term [...] Read more.
Corporate risk-taking behavior and investment is a crucial factor in order to seek higher profits and a better trading strategy. Competitive advantage and innovation, while maintaining profitability and state ownership, are considered as crucial resources. Furthermore, it is essential to connect the short-term and long-term business and investment objectives plus stakeholder’s expectations to corporate sustainability and development. This connection is especially important in the context of transforming economies and getting better trading strategies. This study estimates the relationship between state ownership, profitability, corporate risk-taking behavior, and investment in Vietnam by using Generalized Method of Moments (GMM) methods. Using the data of 501 listed non-financial corporates during the period 2007–2015 from Ho Chi Minh City and Hanoi Stock Exchanges, we find that profitability is determined as a factor to reduce corporate risk-taking acceptance caused by the chances of entrenchment. Meanwhile, the impact of state ownership on the risk appetite of corporate has a non-linear effect. In particular, state ownership reduces corporate risk-taking behavior and investment but yet increases the risk-taking behavior and investment when the state ownership rate exceeds a threshold. One the one hand, this implies that the low level of state ownership not only prevents risk-taking behavior and investment but also results in more severe agency problems, causing unsustainability due to the imbalance of interests among various stakeholders. On the other hand, a dominant role of state ownership concentration causes a boost in corporate risk-taking decision-making in investment and trading strategy, leveraging the connection of significant external resources to deal with uncertain problems. The study contributes to existing theories of corporate governance in the context of a socialist-oriented market. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
12 pages, 2193 KiB  
Article
Time-Varying Risk Aversion and the Profitability of Carry Trades: Evidence from the Cross-Quantilogram
by Riza Demirer, Rangan Gupta, Hossein Hassani and Xu Huang
Economies 2020, 8(1), 18; https://doi.org/10.3390/economies8010018 - 05 Mar 2020
Cited by 3 | Viewed by 4059
Abstract
This paper examines the predictive power of time-varying risk aversion over payoffs to the carry trade strategy via the cross-quantilogram methodology. Our analysis yields significant evidence of directional predictability from risk aversion to daily carry trade returns tracked by the Deutsche Bank G10 [...] Read more.
This paper examines the predictive power of time-varying risk aversion over payoffs to the carry trade strategy via the cross-quantilogram methodology. Our analysis yields significant evidence of directional predictability from risk aversion to daily carry trade returns tracked by the Deutsche Bank G10 Currency Future Harvest Total Return Index. The predictive power of risk aversion is found to be stronger during periods of moderate to high risk aversion and largely concentrated on extreme fluctuations in carry trade returns. While large crashes in carry trade returns are associated with significant rises in investors’ risk aversion, we also found that booms in carry trade returns can be predicted at high quantiles of risk aversion. The results highlight the predictive role of extreme investor sentiment in currency markets and regime specific patterns in carry trade returns that can be captured via quantile-based predictive models. Full article
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
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