“COVID-19 and Investors? Trading Behavior: Evidence from the New Zealand Equity Market
Finn West Wilkinson (PwC), Marinela Finta (SKBI), Olena Onishchenko (University of Otago) | April 2025 |
This paper examines the retail and institutional investors’ trading behavior during the COVID-19 pandemic in New Zealand. Using transaction-level data, it compares how retail and institutional investors trade over the government announcements, lockdown, and reopening periods. Retail and institutional trading intensifies around government announcements, which facilitates attenuating illiquidity during the lockdown. Nevertheless, while retail trading is substantially more prominent during the lockdown than over the control and reopening periods, institutional investors do not trade significantly more per se or on announcements during the lockdown but trade less during the reopening. Their trading also relates to contemporaneous returns, and their effects differ across certain sub-periods and on government announcements. Our findings suggest that while the announcements and emotions drive the retail investors’ trading, institutions may trade more on firms’ fundamentals.
Quantum Machine Learning for Credit Scoring
Nikolaos Schetakis (ALMA Sistemi Srl) , Davit Aghamalyan (A*STAR) , Michael Boguslavsky (Tradeteq), Agieszka Rees (Tradeteq), Marc Rakotomalala (SKBI), Paul Robert Griffin (SMU) | Published in the Special Issue of Quantum Computing Algorithms and Quantum Computing Simulators), May 2024 |
This study investigates the integration of quantum circuits with classical neural networks for enhancing credit scoring for small- and medium-sized enterprises (SMEs). We introduce a hybrid quantum–classical model, focusing on the synergy between quantum and classical rather than comparing the performance of separate quantum and classical models. Our model incorporates a quantum layer into a traditional neural network, achieving notable reductions in training time. We apply this innovative framework to a binary classification task with a proprietary real-world classical credit default dataset for SMEs in Singapore. The results indicate that our hybrid model achieves efficient training, requiring significantly fewer epochs (350) compared to its classical counterpart (3500) for a similar predictive accuracy. However, we observed a decrease in performance when expanding the model beyond 12 qubits or when adding additional quantum classifier blocks. This paper also considers practical challenges faced when deploying such models on quantum simulators and actual quantum computers. Overall, our quantum–classical hybrid model for credit scoring reveals its potential in industry, despite encountering certain scalability limitations and practical challenges.
Local institutional investors and corporate monitoring: Evidence from cross-listed Korean stocks in the US market
Changhwan Choi (University of International Business and Economics), Chune Young Chung (Chung-Ang University), Jun Myung Song (SKBI) | Published in Emerging Markets Finance and Trade, Volume 60, 2024 - Issue 3, pp. 456–477 |
Using Korean firms that are cross-listed in the US market, this paper investigates whether there are standalone effects of geographic and market proximity of institutional investors on monitoring performance. We find that Korean institutional ownership is negatively associated with earnings management while the US institutional ownership has no impact on earnings management. This suggests that there is the geographic proximity advantage over the market proximity advantage in the emerging markets. Furthermore, we also show that the impact of geographic proximity is stronger for firms with high informational opacity.
Female CEOs and Investment Efficiency in the Vietnamese Market
Jun Myung Song (SKBI), Chune Young Chung (Chung-Ang University)| Published in Finance Research Letters, Volume 58, Part A, December 2023, 104362 |
This paper proposes female CEOs’ overconfidence and risky behaviour stem from gender stereotype threats. With two subsamples in Vietnam—firms in the Northern and Southern regions–we empirically show that female CEOs in the North, where there is less gender stereotype, tend to overinvest relative to male CEOs. However, in the South, they are indifferent. Additional analysis reinforces the main finding that female CEOs from the North tend to take more risks even when dealing with market volatility and uncertainty (e.g., the COVID-19 pandemic). Such risky behaviours of female CEOs in the North do not deteriorate firm value but instead, possibly improve firm performance.
Physical Frictions and Digital Banking Adoption
Hyun-Soo Choi (KAIST), Roger Loh (SMU) | Published in Management Science, November 2023 |
A behavioural literature suggests that minor frictions can elicit desirable behaviour without obvious coercion. Using closures of ATMs in a densely populated city as an instrument for small frictions to physical banking access, we find that customers affected by ATM closures increase their usage of the bank’s digital platform. Other spillover effects of this adoption of financial technology include increases in point-of-sale (POS) transactions, electronic funds transfers, automatic bill payments and savings, and a reduction in cash usage. Our results show that minor frictions can help overcome the status-quo bias and facilitate significant behaviour change.
Is anti-herding always a smart choice? Evidence from mutual funds
John Byong-Tek Lee (University of Auckland), Jun Ma (University of Auckland), Dimitris Margaritis (University of Auckland), Wanyi Yang (SKBI) | Published in International Review of Financial Analysis, Volume 90, November 2023, 102824 |
Recent empirical studies document a negative relation between herding behaviour and the skill of mutual fund managers. We explore this relationship further by focusing on fund managers' contrarian buy and sell behaviour against the market. Our study reveals an asymmetry in the performance of mutual funds with contrarian buy behaviour and contrarian sell behaviour. The contrarian-buy behaviour reflects skill by positively predicting the cross-section of next period's mutual fund returns, while the contrarian-sell behaviour reflects a lack of skill associated with a negative prediction. These findings are robust to various risk-adjusted performance measures. Contrarian-buy funds outperform momentum-buy funds by 3% per year, while contrarian-sell funds underperform momentum-sell peers by about 4%. These findings are robust across different sizes and styles of mutual funds. Further analysis indicates that the asymmetric effect is reversed during recessions and disappears when market sentiment is high. We also study how mutual fund characteristics relate to contrarian buy and sell practices. We find that mutual funds with larger size, higher flow, lower tracking error, and no manager ownership are more likely to buy against the crowd but sell with the crowd.
E-DSGE model with endogenous capital utilization rate
Ying Tung Chan (Beijing Normal University), Maria Teresa Punzi (SKBI) | Journal of Cleaner Production, Volume 414, 15 August 2023, 137640 |
Environmental policy research has increased due to stricter policies aligned with climate goals. However, to achieve the goal of net-zero emissions, the adoption of even stronger policies and increased carbon taxes is necessary, with transition risk becoming a major concern for companies. Even though governments worldwide have been employing a range of methods such as carbon tax, cap-and-trade, and intensity targets to mitigate the impact of climate change, a pivotal debate around determining the optimal policy that reduces emissions without harming the economy continues. Our paper delves into the environmental policy assessment emphasizing the role of endogenous capital utilization rates, which have hitherto been largely disregarded in literature. We study how endogenous capital utilization rate affects the transmission mechanism of economic shocks and the optimal environmental policy choice. To evaluate the quantitative impact of the transmission mechanism, we introduce distinct features to the E-DSGE framework, including endogenous capital utilization, time-varying depreciation of capital, and environment quality shocks. We find that the complementarity between energy and capital leads to an amplification effect of the conventional transmission mechanism. Our model with these ingredients ranks any carbon tax below 25% as the best policy in terms of welfare improvement.
The Importance of Financial Literacy: Evidence from Singapore
Dave Fernandez (SKBI), Alessia Sconti (GFLEC) | Published in Journal of Financial Literacy and Wellbeing, Volume 1, Issue 2, July 2023, pp. 225 - 243 |
In this paper, we examine financial literacy in Singapore. Using data from the SKBI-GFLEC Sustainable Investment Survey, we find that approximately 40% of Singaporeans are financially literate. We also find that financial literacy is low among specific groups such as women, less educated, and not employed people. We explore further financial literacy by examining it across race/ethnicity and ESG literacy. Our data reveals that Chinese are more financially literate compared to Malays and Indians who instead chose the do-not-know option more frequently than the others. Also, we find that those with higher ESG knowledge are also more financially literate compared to those who are ESG illiterate. Finally, our results show that financial literacy positively correlates with active financial behaviour such as choosing how the money is invested, which may affect investments’ return and, consequently, their wealth and financial well-being in the long run.
Three little words? The impact of social security terminology on knowledge and claiming intentions
Francisco Perez-Arce (University of Southern California), Lila Rabinovich (University of Southern California), Joanne Yoong (SKBI), Laith Alattar (Social Security Administration) | Published in Journal of Pension Economics & Finance, First View, February 2023, Pages 1–20 |
We study the impact of changing the existing terminology to describe the rules governing Social Security retirement benefits. We provided respondents from a nationally representative online panel with information pertinent to the decision of when to claim Social Security retirement benefits. The content of the information treatments was identical for all respondents, but some were randomly given an alternative set of terms to refer to the key claiming ages (the experimental treatment group), while others were given the current terms (the control group). Despite the minimal nature of the change, there were significant differences in outcomes. Those in the treatment group spent less time reading the information, but their understanding of the Social Security program improved more than the control group. In addition, the treatment delayed retirement claiming intentions by an average of about two and a half months and increased the recommended claiming age to vignette characters by a similar magnitude. The effects were particularly strong for those with low levels of financial literacy. The relative gains in knowledge persisted several months after the treatment.
Responsible Hedge Funds
Hao Liang (SMU), Lin Sun (Fudan University), Melvyn Teo (SMU) | Published in Review of Finance, Volume 26, Issue 6, November 2022, Pages 1585–1633 |
Hedge funds that endorse the United Nations Principles for Responsible Investment (PRI) underperform other hedge funds after adjusting for risk but attract greater investor flows, accumulate more assets, and harvest greater fee revenues. Consistent with an agency explanation, the underperformance is driven by PRI signatories with low environmental, social, and governance (ESG) exposures and is greater for hedge funds with poor incentive alignment. To address endogeneity, we exploit regulatory reforms that enhance stewardship and show that the ESG exposure and relative performance of signatory funds improve post reforms. Our findings suggest that some hedge funds endorse responsible investment to pander to investor preferences.
Commodity Return Predictability: Evidence from Implied Variance, Skewness and their Risk Premia
Marinela Adriana Finta (SKBI) and José Renato Haas Ornelas (Banco Central do Brasil) | Apr 2022 |
This paper investigates the role of realized and implied moments and their risk premia (variance and skewness) for commodities’ future returns. We estimate these moments from high frequency and commodity futures option data that results in forward-looking measures. Risk premia are computed as the difference between implied and realized moments. We highlight, from a cross-sectional and time-series perspective, the strong positive relation between commodity returns and implied skewness. Moreover, we emphasize the high performance of skewness risk premium. Additionally, we show that their portfolios exhibit the best risk-return tradeoff. Most of our results are robust to other factors such as the momentum and roll yield.
Decentralizing Money: Bitcoin Prices and Blockchain Security
Emiliano Pagnotta (SMU) | Published in The Review of Financial Studies, Volume 35, Issue 2, Feb 2022, Pages 866–907 |
This paper studies the equilibrium determination of bitcoin prices and its blockchain security. Complementarities between users and miners lead to multiple equilibria: the same blockchain technology is consistent with different price-security levels. Bitcoin’s design embeds price volatility amplification of demand shocks and is prone to exhibit seemingly irrational price jumps. The results clarify when bitcoin demand strengthens against conventional currencies.
Japanese Monetary Policy and Its Impact on Stock Market Implied Volatility During Pleasant and Unpleasant Weather
Marinela Adriana Finta (SKBI) | Published in Pacific-Basin Finance Journal, Volume 67, Jun 2021|
We investigate the effect of Japan's Monetary Policy Meeting releases on the intraday dynamics of the Nikkei Stock Average Volatility Index and its futures during pleasant and unpleasant weather. We show that at the time of a monetary policy release when the temperature is pleasant, there is a significant decline in Japanese equities' implied volatility and futures, which lasts for about 10 min and 5 min, respectively. This decline is longer and exhibits a greater variation when releases occur during cold days. Finally, we emphasize the achievable economic profits and losses, given the reaction of Nikkei VI futures to the Japanese monetary policy releases during pleasant and unpleasant weather days, respectively. In particular, taking a short position at the start of the trading day on pleasant days and closing this position at the end of the trading day generates an average annual return of 5.6%.
Risk Premium Spillovers among Stock Markets: Evidence from Higher-Order Moments
Marinela Adriana Finta (SKBI) and Sofiane Aboura (University of Paris XIII) | Published in Journal of Financial Markets, Volume 49, Jun 2020 |
We investigate the volatility and skewness risk premium spillovers among the U.S., U.K., German, and Japanese stock markets. We define risk premia as the difference between risk-neutral and realized moments. Our findings highlight that during periods of stress, cross-market and cross-moment spillovers increase and that these increases are mirrored by a decrease in within-market effects. We document strong bidirectional spillovers between volatility and skewness risk premia and emphasize the prominent role played by the volatility risk premium. Finally, we show that several announcements drive the time-varying risk premium spillovers.
The Global Sustainability Footprint of Sovereign Wealth Funds
Hao Liang (SMU LKCSB) and Luc Renneboog (Tilburg University) | Published in Oxford Review of Economic Policy, Volume 36, Issue 2, Summer 2020, Pages 380–426 |
With the emergence of sovereign wealth funds (SWFs) around the world managing equity of over $8 trillion, their impact on the corporate landscape and social welfare is being scrutinized. This study investigates whether and how SWFs incorporate environmental, social, and governance (ESG) considerations in their investment decisions in publicly listed corporations, as well as the subsequent evolution of target firms’ ESG performance. We find that SWF funds do consider the level of past ESG performance as well as recent ESG score improvement when taking ownership stakes in listed companies. These results are driven by the SWF funds that do have an explicit or implicit ESG policy and are most transparent, and by SWF originating from developed countries and countries with civil law origins. In relation to engagement, we find by means of two natural experiments with exogenous shocks (the Deepwater Horizon catastrophe and Volkwagen diesel scandal) that the ESG scores do not change significantly more for firms in which SWFs have ownership stakes. This potentially suggests that SWFs in general do not actively steer their target firms towards higher levels of ESG.
