infonet-economy

Many have pointed to excessive risk-taking by the CEOs of financial firms as a contributor to the recent worldwide economic crisis. The same observers often blame questionable corporate governance structures and compensation practices for that risk-taking. But is this perception correct? And what is the relationship between CEO incentives and risk-taking outside of the financial industry, where the government guarantees provided by deposit insurance could have distorted incentives?

In an attempt to answer these questions, the authors analyze the relationship between CEO incentives and corporate risk-taking by 101 U.S. REITs during the period 2003 to 2007. Their main finding is that corporate risk-taking, as measured by the growth rate in corporate debt (the only measure of risk that is completely under the control of the CEO), is inversely related to CEO stock ownership-that is, the larger the CEO's equity ownership stake, the slower the growth in debt financing and financial risk-taking. At the same time, the authors find that financial risk-taking is positively related to large cash bonuses for the CEOs and to situations in which the CEO is also chairman of the board of directors. Finally, the authors also report that CEOs who are relatively new to the job grow more slowly and borrow less, suggesting that boards of directors can temporarily contain risky expansion plans by the CEO. These results provide support for those corporate governance reformers who wish to cut cash bonus payments for CEOs in favor of long-term stock ownership

Purpose - The purpose of this paper is to examine the sources of direct real estate portfolio returns and their relative performance against Investment Property Databank (IPD) benchmark returns. Active property management consists of the concepts of property transaction execution and operational management, which can be classified as the main drivers of excess return sources.

Design/methodology/approach - Using a sample of three different portfolios managed by two institutional investors, the paper is able to estimate the relevant factors of active property management on annual excess returns for commercial and residential property sectors via a panel regression technique.

Findings - Empirical evidence shows that property-specific effects exhibit significant sources of excess returns, but property management cannot be identified as their main driver. Furthermore, the sources of excess returns do not differ significantly across sectors; when controlled for property age and size, it is found that their influence is rather limited.

Practical implications - Information about the drivers of excess returns and their variations among property types may lead to superior investment decisions during portfolio rebalancing, and thus promote more efficient capital allocation. Information about return factors, i.e. about property and operational management, can substantially improve property selection and market timing in the asset allocation process. Hence, investors basing their property investment strategies on the impact of selected return factors could enhance the risk-adjusted performance of their property portfolios.

Originality/value - This paper aims to contribute to the existing literature by identifying and quantifying the excess return sources of a given property portfolio over a predefined benchmark. Due to the lack of property-related data, there is only limited research on the sources of direct property returns, such as property characteristics or active property management. The authors explore three main questions in this paper. First, they examine sources of excess returns over a benchmark index for several property sectors. Second, they analyze whether the drivers of excess returns vary significantly across these sectors. Third, they determine to what extent excess property returns are influenced by the "economic age" and "rentable area" of a building

Der Beitrag beschäftigt sich mit der Frage, ob Hedge Funds bezüglich Rendite, Risiko und Korrelationsstruktur tatsächlich eine gute Ergänzung zu traditionellen Anlagen darstellen. Hierzu wird zunächst die Performance von Hedge Funds sowohl mit herkömmlichen als auch mit alternativen, den Verteilungseigenschaften von Hedge Funds angepassten Kennzahlen evaluiert, um darauf aufbauend ihren Mehrwert im Rahmen der Asset Allocation zu ermitteln. Entgegen bisheriger Studien wird dabei bewusst die Sichtweise eines Investors eingenommen, der eine in Euro denominierte bzw. ungehedgte Strategie verfolgt.

Unternehmensneugründungen und Innovationen leisten einen wesentlichen Beitrag zum technischen Fortschritt und damit zu einem erhöhten wirtschaftlichen Wachstum einer Volkswirtschaft. Venture-Capital-Gesellschaften spielen in diesem Zusammenhang eine zentrale Rolle, indem sie in privat gehaltene Unternehmen investieren und so langfristig haftendes Eigenkapital zur Verfügung stellen. Der Prozess der Venture-Capital-Finanzierung läuft dabei in sich wiederkehrenden Phasen ab, welcher die Kapital- und Beteiligungsakquisition, die Beteiligungsauswahl und -verhandlung sowie die Investitions- und Desinvestitionsphase umfasst. Der VC-Prozess als Zyklus an sich fordert profitable Exitmöglichkeiten für den VC-Geber, d.h. einen ausgereiften VC-Markt.

Im Vordergrund des Beitrags stehen die empirische Identifikation sowie die Bestimmung der Länge signifikanter zyklischer Verläufe in US-amerikanischen Venture-Capital-Investitionen. Sowohl bei der Schätzung eines ARIMA-Modells im Zeitbereich als auch bei der Anwendung der Spektralanalyse im Frequenzbereich konnten kurzfristige Schwankungen zwischen zwei und drei Quartalen festgestellt werden, die mit der von Gehrig und Stenbacka (2004) identifizierten Zyklenlänge für die Screening-Phase übereinstimmen. Der zweite, mithilfe der Spektralanalyse gewonnene Zyklus, dauert 7,69 Quartale an. Dieses Ergebnis entspricht den theoretischen Erkenntnissen über die Dauer eines vollständigen Investitionsprozesses. Damit konnte nachgewiesen werden, dass es sich beim Venture-Capital-Markt der USA um einen vollständig ausgereiften Markt mit zyklischen Eigenschaften handelt. Anhand dieser Resultate ist zu erwarten, dass im Anschluss an die aktuelle Konsolidierungsphase ein Aufwärtstrend folgen wird. Im Rahmen einer disaggregierten Betrachtung der Venture-Capital-Investitionen für einzelne Branchen konnten die Ergebnisse nur teilweise bestätigt werden.

Dynamic economies require high levels of innovative activity that contribute to the technical progress, and lead to increasing economic growth, such as start-ups and product innovations. In this context, venture capital companies play a central role in supplying new firms with badly needed equity capital. Venture capitalists also assist firms with their portfolios by providing them with strategic and organizational advice, and also in terms of human resources, facilitating their position to support the well directed development of these high-growth companies. As such, they reduce the problem of equity capital deficit, especially in Germany, and create new jobs promoting the growth of employment. In addition, using Neuer Markt or NASDAQ as an example, the listing at the stock exchange has offered venture capitalists an important exit channel, which in turn boosts the formation of venture capital companies. The collapse of these markets, which exhibit a decisive possibility of disinvestment for young technology ventures, causes a collapse of the venture capital industry across industrialized countries.

Yield curve dynamics are usually analyzed in terms of the unobservable components-level, slope, and curvature. The factor-augmented vector autoregression (FAVAR) framework applied in this article has become increasingly popular for forecasting interest rates. To link these two strands of research, the authors operate in the space of latent yield and latent macroeconomic factors to analyze the relationship between the term structure of interest rates and the macroeconomic aggregates. They predict the yield curve dynamics by directly forecasting the unobservable yield curve factors. They use the FAVAR methodology to encompass a data-rich environment and to identify dynamic responses of the yield curve to the macroeconomic variables. The empirical results suggest that parsimonious FAVAR models with a few latent macroeconomic factors and a reduced lag order show superior short-horizon forecast performance over simple VAR systems and univariate autoregressions.

This paper proposes a novel approach to portfolio revision. The current literature
on portfolio optimization uses a somewhat naïve approach, where portfolio weights are always completely revised after a predefined fixed period. However, one shortcoming of this procedure is that it ignores parameter uncertainty in the estimated portfolio weights, as well as the biasedness of the in-sample portfolio mean and variance as estimates of the expected portfolio return and out-of-sample variance. To rectify this problem, we propose a Jackknife procedure to determine the optimal revision intensity, i.e. the percent of wealth that should be shifted to the new, in-sample optimal portfolio. We find that our approach leads to highly stable portfolio
allocations over time, and can significantly reduce the turnover of several well
established portfolio strategies. Moreover, the observed turnover reductions lead
to statistically and economically significant performance gains in the presence of
transaction costs.