G11 - Portfolio Choice; Investment DecisionsNávrat zpět

This study constructs two eight-asset green-energy portfolios, featuring stocks from the U.S. and Europe, to assess which portfolio delivers superior risk-adjusted performance. The analysis utilizes advanced performance metrics, the Stutzer and Omega ratios, with the traditional Sharpe ratio serving as a benchmark. Portfolios are evaluated across both pre-crisis and crisis periods. The results reveal differences in the structures of the Sharpe and Stutzer portfolios, underscoring the Stutzer ratio's ability to improve portfolio performance. Additionally, the Omega portfolio enhances the analysis by allowing the selection of varying thresholds, offering greater adaptability to align with diverse investor preferences. When comparing the U.S. and European portfolios, the U.S. portfolio consistently demonstrates better risk-adjusted performance. This advantage stems from factors such as favorable market dynamics, supportive government policies, greater access to capital, advanced technological innovation, and effective corporate strategies.

This study investigates the impact of terrorism on financial markets, focusing specifically on Turkey's sovereign Credit Default Swap (CDS) premiums from 2011 to 2017 - period characterized by frequent and diverse terrorist activities. Employing an EGARCH model with dummy variables for various terrorist groups, we analyze immediate and short-term market reactions across different event windows. Our findings reveal significant volatility in CDS premiums following terrorist incidents, with market responses varying depending on the terrorist group perpetrating the incident. This study enhances the understanding of capital market reactions on terrorist events through CDS instruments, highlighting their role in assessing sovereign credit and country risk.

Non-fungible tokens are transferable rights to digital assets such as artwork, videos, in-game items, collectibles or music. Non-fungible tokens relate only to a specific unique item and carry information about the owner. The non-fungible token market has received widespread attention and has grown enormously since the beginning of 2021. Despite significant growth in the market, there needs to be more surveys, especially in the context of the Czech Republic. This article, therefore, aims to evaluate the level of awareness of non-fungible tokens in the Czech Republic. The paper presents the basics of the non-fungible token market, its potential and uncertainty, and the interdisciplinary nature of non-fungible token research. First, the characteristics of non-fungible tokens are described based on a literature review. The methodological part outlines an empirical analysis based on a quantitative survey in which 103 respondents in the Czech Republic took part. Based on the research results, it was found out that in the Czech Republic, there is low level of awareness of non-fungible tokens and also low level of trust in digital assets in general. In conclusion, it is possible to say that this article provides an overall understanding of the phenomenon of non-fungible tokens in the Czech Republic.

This paper examines the validity of the risk-return trade-off for a sample of Czech banks over the period 2002-2022 by analysing the relationship between the bank risk and risk-adjusted returns. I find evidence of a significant negative association between the regulatory risk measure and risk-adjusted returns, indicating that the risk-return trade-off does not hold. Specifically, a 100 bps increase in the risk is associated with about a 7 bps decrease in the return on risk-adjusted assets (RORWA) and an 11 bps decrease in the risk-adjusted net interest margin (rNIM) in the short run. The long-run effect is about double for RORWA and almost triple for rNIM. I also find evidence that during the period of low interest rates, the effect for RORWA was about a half smaller, albeit still negative. On the contrary, when non-regulatory measures of risk or risk-adjusted profitability are used, the risk-return trade-off seems to hold.

The study explores a relationship between divergence in ESG scores (measurements of a company's performance in environmental, social and governance issues) and excess stock returns on the European equity market. The sample consists of 851 European stocks in the period from January 2015 to May 2022. It is concluded that, despite previous findings on the US stock market, a similar effect is not observed for equities in Europe. Even though the stock portfolios with the most and the least divergent ESG scores bear excess returns, the effect disappears when it is adjusted for Fama-French factors. The effect is not relevant for any specific industry, nor does it depend on the level of ESG awareness of the issuer's country. Deeper exploration of the nature of ESG score divergence, specifically by decomposition of the individual elements of ESG scores, could further contribute to the understanding of the relationship between the quality of non-financial disclosures and stock performance.

This paper deals with the effects of distribution stress and macroeconomic factors on the composition of life insurance investment portfolios on the Central European market. Using a wide array of variables and the VAR model as our main method, we have found that a strong majority of insurers react to external shocks, induced by high levels of contract turnover or positive changes in macro-variables such as GDP and inflation, by strengthening bond components of their portfolio. The exception is connected to interest rates (two-week repo), which presumably have a negative effect on bond investments. Other components such as shares, funds and cash positions have been affected in a diverse way, yet to a minor extent. This implies that insurers tend to react to external stressors by beefing up the conservative part of their investments, potentially leading to an underperformance of managed assets. As such, our results point to conceivable regulatory implications, which would prevent those secondary negative detriments of life distribution growth (i.e., reselling), which are to be expected on the surveyed market.

This paper explores the dependence of emerging European stock markets (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Turkey and Ukraine) on global risk factors (changes in gold prices, US implied volatility index and oil prices) based on daily data from 6 January 2004 to 31 December 2013. We employ a quantile regression model to analyse how the global factors affect stock returns under different market circumstances, such as bearish (lower quantiles), normal (intermediate quantile) and bullish (higher quantiles) times. Empirical results reveal that the response of stock markets is heterogeneous; larger equity markets, such as Poland, Russia and Turkey, are highly sensitive to the global factors while Bulgaria is the least sensitive. Overall, the dependence on gold and oil prices is positive while the dependence on US stock market uncertainty is negative. Additionally, in most of the cases, the dependence intensifies during bear market conditions, in which stock prices fall.

Profitability of a trading system based on the momentum-like effects of asset price jumps was tested on four currency markets (EUR/USD, GBP/USD, USD/CHF and USD/JPY) and three futures markets (Light Crude Oil, E-Mini S&P 500 and VIX), on 7 frequencies (1-minute to 1-day), over a period of more than 20 years. The proposed trading system entered long and short trades in the direction of asset price jumps and held the positions for a fixed horizon, optimized on the in-sample period. The system achieved statistically significant out-sample profits for the USD/CHF, EUR/USD and GBP/USD exchange rates, especially on the 15-minute, 30-minute and 1-hour frequencies, with expected returns of up to 20-30% p.a., including transaction costs. On the 1-day frequency, on the USD/JPY and on the three analysed futures markets, only insignificant profits or losses were achieved. On the 1-minute frequency, the system ended with a loss for all of the assets.

This paper investigates the impact of behavioural attention on the households' foreign currency savings as a response to the external macroeconomic shocks. The information that the households acquire via different communication channels is expected to influence their decisions regarding their savings' allocation into different currencies. This study has applied the fundamental macroeconomic models by including individuals' attention to the specific risks and search interest in specific keywords on Google in order to assess the impact of acquired information and its communication channel on the households' foreign currency savings. We employed a two-level mixed effects model including macroeconomic fundamentals and individuals' attention to the information determinants. We solved a problem of a long list of potential explanatory variables (keywords) by employing the Bayesian Model Averaging. This study assumes that households are more sensitive to the macroeconomic shocks (factors) if they search simultaneously for infor-mation on Google about these factors or specific related risks. The results emphasize the role behavioural attention during financial turmoil and economic downturn periods, especially in the environment of very low interest rates.

The second order stochastic dominance (SSD) has become exceedingly popular in recent years,
due to its ability to determine the dominance of one asset over another for all risk-averse investors
without a strict requirement in asset distribution. In this study, 33 OECD country indexes and their
enriched set of assets, which consists of some combinations of these indexes, are investigated
and compared between 2007 and 2015 by utilizing pairwise SSD comparisons, with different data
frequencies, such as daily, weekly, monthly and quarterly. This paper contributes to the literature
in three points: Firstly, a serious portion of the best performing OECD countries has the lowest GDP
(PPP) per capita level. Secondly, the SSD efficient set depends on data frequency. Thirdly, when
the data frequency is lowered, the difference between two SSD pairwise efficiency tests decreases.

The article shows properties of risk-based portfolios in the German stock market. Those systematic strategies use different approaches to weight stocks in portfolios. We present theoretical and empirical characteristics of five risk-based equity investments: the equal-weighted, minimum variance, maximum diversification and risk parity (equal risk budgeting and equal risk contribution) portfolios. Risk-based portfolios outperformed the market-cap weighted CDAX index with a lower level of risk in the period 2002–2015. Their excess returns relative to the CDAX index can be explained with Scherer’s five-factor model; with Fama-French and low-risk anomaly factors. R2s of different strategies range from 77% to 92%.

The text demonstrates out-of-sample performances of minimum variance portfolios in the German stock market in the period 2002-2015. Because of two huge drawdowns on equity markets in the period 2000-2010, scholars and professionals have tried to find an alternative to the market-cap weighted investing; potentially the minimum variance investing approach. The paper presents the construction of minimum variance portfolios, the description of their compositions and empirical risk-return characteristics under various holding periods. As anticipated, minimum variance portfolios have lower risk vis-à-vis the CDAX index, but they have also higher returns. Finally, minimum variance portfolios have better risk-adjusted performance figures in comparison with equal-weighted alternatives.

Risk management for banking products can be challenging in general, but is even more risky in a global, low interest rate environment. This paper deals with the risk management of savings accounts, a bank product defined as a non-maturing account with embedded option that bears a relatively attractive rate of return. We focus on the interest rate risk of savings accounts. By constructing the replicating portfolio and simulating market rates and client rates, we show that under the severest scenario, some banks in the Czech Republic might face a significant capital shortage in next two years if market rates start to increase dramatically from recent low levels. We conclude that savings accounts are riskier liabilities than current accounts and term deposits for banks. Moreover, we propose imposing stricter regulation and supervision on these bank products since they might increase systemic risk of the Czech banking sector in coming years.

The aim of this paper is to examine the interaction patterns between equity and real estate returns in 8 emerging economies from Central and Southeastern Europe. For that purpose we apply the TAR model entailing two regimes and endogenously determined threshold, delay parameter, and lag length. The results suggest that in all the countries, the interaction between equity and real estate returns is subject to regime switching in at least one direction. Equity returns in general seem to be much more sensitive to real estate returns changes, while the reaction of real estate returns to changes in equity returns is not always present and it is much more subdued and delayed. In the majority of the countries, the value of the threshold is large and negative suggesting that equity returns (real estate returns) react differently to large negative changes of real estate returns (equity returns) when compared to changes of different magnitudes and alternative signs. Equity returns react more strongly to large negative changes of the real estate returns than to small negative or positive real estate returns changes, while the reaction of the real estate returns to the equity returns changes varies across countries, making neither regime more prevalent.

This paper extends the debate over the benefits of active management by investigating its impact on price efficiency using data from available ETFs traded on the US market. After accounting for various tests in terms of price efficiency, we find that active management matters to the efficiency improvement. One practical implication of this study is that more active management element might be considered by fund managers in designing and managing their ETFs so as to reflect all available information into fund prices.

Assuming a non-satiable risk-averse investor, the standard approach to portfolio selection suggests discarding of all inefficient investment in terms of mean return and its standard deviation ratio within its first step. However, in literature we can find many alternative dispersion and risk measures that can help us to identify the most suitable investment opportunity. In this work two new dispersion measures, fulfilling the condition that ""more is better than less"" are proposed. Moreover, their distinct characteristics are analysed and empirically compared. In particular, starting from the definition of dispersion measures, we discuss the property of consistency with respect to additive shifts and we examine two dispersion measures that satisfy this property. Finally, we empirically compare the proposed dispersion measures with the standard deviation and the conditional value at risk on the US stock market. Moreover, within the empirical example the so called ""alarm"" is incorporated in order to predict potential fails of the market.

The article aims at verifying the occurrence of performance persistence phenomenon among equity funds in the Czech Republic. The study uses the most popular measures of return mentioned in financial academic publications. Moreover, a relatively long time horizon, lasting from the beginning of 2000 to the end of 2010 was taken into consideration. The non-parametric methods utilized in the study were traditional contingency tables combined with a new approach discussed in the literature on the subject and related to the estimation of stochastic kernel. The obtained results have revealed the existence of weak and limited performance persistence within the total time horizon and in several sub-periods. The significance of the phenomenon depended on the applied measure of return. Furthermore, performance dependence in successive periods was related to the market situation. In general, the character of the occurrence of performance persistence may be connected with the size and the level of development of the Czech investment fund industry.

This paper investigates multiscale interdependence between the stock markets of Germany, Austria, France, and the United Kingdom. Wavelet energy additive decomposition was analyzed to investigate which scales capture the most energy (volatility), whereas a wavelet cross-correlation estimator was used to analyze comovement and lead/lag relationship between stock markets' return dynamics on a scale-by-scale basis. The main findings of the paper are as follows. First, major financial market crises had a significant impact on return volatility of investigated stock markets. Among them, the global financial crisis of 2007-2008 had the greatest and the most durable impact. Second, the lowest scale (associated with stock markets' return dynamics over a 2-4 days horizon) and the second lowest scale (associated with stock markets' return dynamics over 4-8 days horizon) MODWT (maximal overlap discrete wavelet transform) decompositions of stock markets' returns captured the greatest share (together about 70-80%) of indices' returns volatility. Third, comovement between stock market returns is a scale-dependent phenomenon. Fourth, a strong comovement between stock market returns of Germany, France, and the United Kingdom exists at all scales, while the Austrian stock market is less correlated with the three biggest stock markets in Europe. Fifth, the dynamics of stock market returns seems to be well time-synchronized at daily (raw returns) and the lowest scale (scale ) return decomposition as most of the return innovations are transmitted between stock markets intraday. Sixth, at the highest investigated scale (associated with stock markets' return dynamics over a 64-128 days horizon), significant leads and lags between dynamics of stock markets' returns were detected. The time-synchronization of the stock markets' return dynamics for investments of 64 to 128 days horizon is less perfect than for investments of shorter investment horizons.

This study examines the extent to which fund characteristics contributes to explaining fund returns differentiated by managers' stock picking and market timing abilities. The findings show that funds characterized by high exposures to broad market movements have good timing returns but show poor selectivity performance, suggesting the presence of activity specialization among fund managers. It is shown that large funds enhance managers' timing returns, reflecting the efficiencies of large funds in responding to market-wide movements. However, as the size of the fund gets larger, managers find it more challenging to identify worthwhile investments and hence results in poor selectivity performance.

The portfolio theory and the basic ideas of Markowitz can be applied to currency investments as well as to classical asset classes as shares or bonds. The question whether currency investments can be treated as efficient asset classes is not finally answered in theory and practice. This article applies a modified historical simulation approach to shares, bonds and currencies. The questions according to the efficiency of currency investments are answered empirically from a euro-investor's point of view. The empirical analysis leads to the result that currency investments are not efficient in general. Some specific cases exist. The used data lead to the result that the Czech koruna seems to be an efficient asset class and leveraging a euro portfolio by other currencies is useful as well. But it has to be doubted if these effects will remain in the future.

The paper studies the compliance of the CZK - EUR exchange rate with the uncovered parity of returns on assets denominated in the two named currencies. A comparison with the same property for the euro-dollar rate is made. An uncovered total return parity (UTRP) formula is derived from the equilibrium in a portfolio optimization model with liquidity constraints. It is shown that the uncovered parity of total returns, and not of short-term money market rates, is a natural outcome of stochastic equilibrium asset pricing models that generalize the International Consumption-based Capital Asset Pricing Model. Accordingly, the traditional uncovered interest rate parity should be replaced by UTRP in empirical analysis. UTRP tests for the CZK/EUR and the USD/EMU currency pairs are conducted using yields of long-term government bond yields. UTRP typically holds, although the time horizons and measures of exchange rate movements, for which it becomes visible, may vary.