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Article
Publication date: 25 May 2021

Manuel Lobato, Javier Rodríguez and Herminio Romero

This study examines the risk-adjusted performance of socially responsible exchange traded funds (SR ETFs) in comparison to conventional ETFs.

1590

Abstract

Purpose

This study examines the risk-adjusted performance of socially responsible exchange traded funds (SR ETFs) in comparison to conventional ETFs.

Design/methodology/approach

The main empirical result is based on a risk-adjusted performance metric that does not rely on a linear framework. It measures the difference between the returns of an ETF and the returns of a volatility-match and efficient portfolio. In addition, performance is measured using alpha based on single and multifactor formulations.

Findings

Results show that the performance of SRI ETFs is not different from the performance of conventional ETFs.

Originality/value

Given the results of the study, socially aware investors can choose to invest in SRI ETFs without sacrificing performance.

Details

The Journal of Risk Finance, vol. 22 no. 1
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 6 May 2020

Manuel Lobato, Javier Rodriguez and Herminio Romero

Patents and patent citations provide a solid signal to investors about a firm’s innovation agenda. This signal can be even more useful for investors demanding securities from…

217

Abstract

Purpose

Patents and patent citations provide a solid signal to investors about a firm’s innovation agenda. This signal can be even more useful for investors demanding securities from foreign firms, given the asymmetric information and adverse selection risk they face. This study aims to examine the patenting activities in the USA performed by non-US companies that trade as American Depositary Receipts (ADRs) in US stock markets.

Design/methodology/approach

The authors examine the effect on the trading volume of a sample of ADRs following the publication of their first patent in the USA.

Findings

The results show that the publication of a first patent has no effect on the liquidity of these ADRs when compared with same-country ADRs without patents.

Originality/value

This study enriches the literature on the relation between innovation, information and the stock market.

Details

European Business Review, vol. 32 no. 4
Type: Research Article
ISSN: 0955-534X

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Article
Publication date: 13 October 2020

Carlos Colón De Armas, Javier Rodriguez and Herminio Romero

This study examines the influence of the presidential elections on the behaviour of US investors according to the trading activity of two of the most popular investment vehicles…

220

Abstract

Purpose

This study examines the influence of the presidential elections on the behaviour of US investors according to the trading activity of two of the most popular investment vehicles: exchange-traded funds and close-ended funds.

Design/methodology/approach

Based on the fact that investors in these two investment vehicles differ by, at least, two demographic factors that influence investment decisions, age and labour status, inferences are made about the degree of interest and the amount of trading activity that presidential elections provoke.

Findings

The evidence demonstrates that, during the last four US presidential elections, exchange-traded funds' investors trade significantly more than close-ended funds' investors during several event windows centred on the day of an election in which a republican candidate is elected. Close-ended funds' investors are more active during the election of a democratic candidate, although the statistical evidence in that regard is weak. Thus, it appears reasonable to conclude that younger investors who are gainfully employed are induced to trade by a presidential election in which a republican candidate prevails. Apparently, a democratic victory does not provoke the same behaviour.

Originality/value

Although the relation between politics and economics is not an unexplored topic, it is not clear whether the presidential elections themselves constitute an event that triggers the trading behaviour of investors.

Details

Journal of Economic and Administrative Sciences, vol. 37 no. 4
Type: Research Article
ISSN: 2054-6238

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Article
Publication date: 9 October 2017

Carlos Colón-De-Armas, Javier Rodriguez and Herminio Romero

The purpose of this paper is to examine the shifts in investor sentiment around the last seven US presidential elections (1988 through 2012).

738

Abstract

Purpose

The purpose of this paper is to examine the shifts in investor sentiment around the last seven US presidential elections (1988 through 2012).

Design/methodology/approach

Investor sentiment is measured by changes in closed-end funds discounts, and the results are corroborated with three robustness tests, including an alternate measure of investor sentiment obtained from the survey conducted by the American Association of Individual Investors.

Findings

Closed­end funds discounts are significantly diminished from two weeks before a US presidential election to a week before the election, and persist until the week after the election, suggesting an increase in investors’ optimism during that period, particularly when a Democrat is elected president. More than the particular party prevailing, however, investors appear to be more interested in avoiding the entrenchment of power since the results suggest that they become optimistic when a change in the ruling party takes place, but become pessimistic when there is power continuity in the White House. The increase in investor optimism that is observed around the time of US presidential elections is not replicated during non-election years, which seems to corroborate that the elections are indeed driving the results.

Originality/value

This paper is the first to formally examine the relation between investor sentiment and US presidential elections using closed-end funds discounts as the measure for sentiment.

Details

Review of Behavioral Finance, vol. 9 no. 3
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 26 September 2023

Manuel Lobato, Javier Rodríguez and Herminio Romero-Perez

This study aims to examine the herding behavior of socially responsible exchange traded funds (SR ETFs) in comparison to conventional ETFs during the COVID-19 pandemic.

182

Abstract

Purpose

This study aims to examine the herding behavior of socially responsible exchange traded funds (SR ETFs) in comparison to conventional ETFs during the COVID-19 pandemic.

Design/methodology/approach

To test for herding behavior, the authors use the cross-sectional absolute deviation and a quadratic market model.

Findings

During the pandemic, investments in socially responsible financial products grew rapidly. And investors in the popular SR ETFs herd during this special period, while holders of conventional ETFs did not.

Practical implications

Investors in socially responsible investments must do their own research and make their own financial decisions, rather than follow the crowd, especially during extreme events like the COVID-19 pandemic.

Originality/value

The evidence shows that, during the pandemic, socially responsible ETFs behaved in line with theoretical predictions of herding, that is, herding is more significant during extreme market conditions.

Details

Review of Behavioral Finance, vol. 16 no. 3
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 24 October 2023

Manuel Lobato, Mario Jordi Maura, Javier Rodriguez and Herminio Romero-Perez

This study aims to examine investor attention by exploring the trading behavior of investors in US-based exchange traded funds (ETFs) of countries active in the Federation…

113

Abstract

Purpose

This study aims to examine investor attention by exploring the trading behavior of investors in US-based exchange traded funds (ETFs) of countries active in the Federation Internationale de Football Association (FIFA) World Cups.

Design/methodology/approach

The present study employs event study methodology to measure abnormal returns and excess trading volume of country-specific ETFs during six FIFA World Cups. The sample of ETFs includes 19 participating countries.

Findings

Consistent with investor behavior that might be explained by attention effect, the study finds that country-specific ETFs from participating countries do indeed behave differently during FIFA World Cups events. The authors find significant evidence of abnormal trading volume and, albeit weaker, abnormal returns during cups.

Originality/value

This study contributes to the literature on investor behavior, linking investor attention with salient sports events.

Details

American Journal of Business, vol. 39 no. 1
Type: Research Article
ISSN: 1935-519X

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Article
Publication date: 20 August 2021

Mario Jordi Maura-Pérez and Herminio Romero-Perez

This study aims to analyze the factors related to the failure of 535 Federal Deposit Insurance Corporation (FDIC)-Insured United States banks in conjunction with the 2008…

165

Abstract

Purpose

This study aims to analyze the factors related to the failure of 535 Federal Deposit Insurance Corporation (FDIC)-Insured United States banks in conjunction with the 2008 financial crisis.

Design/methodology/approach

The research consists of an analysis of the following three five-year partitions: pre-crisis (2002–2006), crisis (2007–2011) and post-crisis (2012–2016). The main hypothesis is that the factors explaining bank failures vary by period. Using logistic regression analysis, the authors identify the desirable models by period based on three model selection strategies.

Findings

Liquidity and non-risk-based capital ratios are important explanatory factors in all three periods. As the authors can see from the results, when comparing the full period (2002–2016) and the three five-year period partitions (2002–2006, 2007–2011 and 2012–2016), the ratios change from period to period, but they measure the same financial areas of concern in different contexts as follows: liquidity, leverage/risk exposure and capital adequacy. Risk-based capital ratios are not effective predictors of bank failures.

Originality/value

Recent academic studies have analyzed bank failures during periods that cover the years before, during and after the crisis, but most of these studies discuss bank failures in the forecasting context only. This study includes an analysis of failure determinants during pre-crisis, crisis and post-crisis subperiods based on the FDIC monitoring system of bank failures and identifies what ratios are more relevant during each period and how they change from period to period.

Details

Journal of Financial Regulation and Compliance, vol. 30 no. 1
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 6 June 2016

Javier Rodríguez and Herminio Romero

This paper aims to study the market timing skill of USA-based foreign open-end mutual funds in their geographical focus market.

345

Abstract

Purpose

This paper aims to study the market timing skill of USA-based foreign open-end mutual funds in their geographical focus market.

Design/methodology/approach

The authors use daily fund data and two multi-factor extensions of the Treynor-Mazuy (1966) and Henriksson-Merton (1981) timing models to measure US-based foreign funds’ market timing skill during 1999 to 2010. In particular, the authors study fund managers’ skill to time their geographical focus market.

Findings

The authors report that, in general, foreign funds do not accurately time their geographical focus market. However, during January 2008 to December 2010, the sub period that includes the 2008 global financial crisis, most foreign funds in this sample not only focused on their domestic market, the USA, but also demonstrated statistically significant, good timing skill.

Originality/value

Although US-based foreign funds’ market-timing skill is not an unexplored topic, this study is the first to consider these funds’ skill to time their geographical focus market, a skill that has been studied in the context of hedge funds.

Details

Studies in Economics and Finance, vol. 33 no. 2
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 14 November 2016

Javier Rodriguez and Herminio Romero

The purpose of this paper is to contrast market risk exposure and diversification of single-listed American depository receipts (“ADRs”) with those of dual-listed ADRs from the…

334

Abstract

Purpose

The purpose of this paper is to contrast market risk exposure and diversification of single-listed American depository receipts (“ADRs”) with those of dual-listed ADRs from the same geographical region during 2004-2012.

Design/methodology/approach

The study uses orthogonal returns in two-factor models to infer exposure to the US and ADRs’ home markets.

Findings

The authors found that both ADR types provide no diversification and are significantly exposed to US market risk. The authors also found that portfolios of both single- and dual-listed ADRs behave significantly differently than their home markets.

Originality/value

Only several academic papers discuss single-listed ADRs, and to the best of the knowledge, this study is the first to assess their diversification value.

Details

Managerial Finance, vol. 42 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 April 2014

Javier Rodríguez and Herminio Romero

The purpose of this paper is to examine the risk-adjusted performance of US-based global real estate mutual funds (GREMFs) with emphasis on their ability to manage their domestic…

471

Abstract

Purpose

The purpose of this paper is to examine the risk-adjusted performance of US-based global real estate mutual funds (GREMFs) with emphasis on their ability to manage their domestic and foreign portfolios exposures.

Design/methodology/approach

The paper applies common econometric measures of portfolio performance and implements a non-traditional methodology called attribution returns to measure forecasting ability. In this setting the paper compares the actual monthly fund return to what would have been earned by the set of indices that best reflects the fund's investment strategy during the previous month. Performance and forecasting ability is examined during two different time periods: 2001-2005 and 2006-2010.

Findings

It is found that global real estate fund managers outperform the market and show good forecasting ability during the 2001-2005 time period. Good forecasting ability translates to positive risk-adjusted performance, as attribution returns are positively correlated with α.

Originality/value

Despite the significant growth in the number of US-based GREMFs and the ample coverage these funds receive in the popular press, few studies are solely devoted to the examination of these funds. In this study the paper empirically examines the ability of fund managers to successfully forecast country/regional political and economic conditions as well as fluctuations in currency exchanges rates brought about by the changes they made to their portfolios’ domestic and foreign exposures.

Details

International Journal of Managerial Finance, vol. 10 no. 2
Type: Research Article
ISSN: 1743-9132

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