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Significance of infrastructure investments in emerging markets to institutional investors.
Full text linkDoctoral Degree. University of KwaZulu-Natal, Durban.The worldwide financial crisis of 2007/8 and the subsequent economic slump led to significant funding and solvency challenges for institutional investors as their financial positions were adversely affected. The former institutional investors’ investment ‘safe haven’, being real property/estate, was one of the catalysts for the 2007/8 crisis as the real estate market experienced substantial losses. These experiences altered institutional investors’ perceptions towards their traditional asset and portfolio allocation strategies. In an attempt to avoid poor returns and excessive volatility from real estate, bonds and money market instruments, institutional investors are now in a new drive to diversify and supplement their core assets. As a result, institutional (and individual) investors are on the hunt for better yields, diversified portfolios, and inflation hedged returns so that they can meet their long term inflation-indexed liabilities and remain afloat.
Infrastructure sector investments, given their theoretical narratives and attractive investment characteristics qualify to be the new investment niche and appropriate for long term institutional investors. This claim to the attractiveness of infrastructure investments can be rejected or shelved if empirical analysis of infrastructure investment features yields contrary results as the attractive risk-return profile of infrastructure investments might be ‘illusory’. The illusion is amplified by the differences in infrastructure investments in developing and developed markets. This thesis evaluated the economic or financial intrinsic infrastructure investment features to ascertain if institutional investors (in their hunt for new investment avenues), can derive value from the same in emerging markets where the infrastructure gap is high and the infrastructure market still developing. Academic studies on infrastructure investments in emerging and developed markets are scant. The few available academic studies applied very basic statistical measures on the subject matter. The present study adopted, portfolio optimization approach, risk-adjusted return measures, linear and non-linear autoregressive distributed lag (ARDL) models, panel ARDL as well as EGARCH and GJR-GARCH models to achieve the set objectives. As such, the study makes notable contributions to the body of knowledge by applying appropriate econometric models using emerging nations as a case. The results indicated that unlisted or private infrastructure securities can amplify portfolio returns and dampen portfolio risk. The significance of infrastructure investment to institutional investors is thus limited to enhancing portfolio returns and reducing portfolio risk. The results showed that listed or exchange traded infrastructure’s risk-return profile is similar to that of real property and general emerging equity market returns in emerging markets. Private and listed infrastructure exhibited different stochastic and distributional features implying that they can play a complementary role in a portfolio. This implies that investors can hold listed and private infrastructure in the same portfolio without sacrificing portfolio performance.
Listed infrastructure exhibited remote inflation hedging ability on short term basis. All other assets are poor inflation hedges in emerging markets implying that investors must consider other assets which can hedge inflation risk. All the assets under consideration exhibited significant volatility clustering, volatility persistence and leverage effects. GJR-GARCH specification under GED proved to be the optimal volatility model for all assets under study. This implies that corporates in the infrastructure sector (as well as real property and general equity) in developing economies should be prepared to absorb an additional risk premium as lenders are exposed to significant volatility persistence. On the same note, investors should also come up with other sources of liquidity as volatility persistence will increase the cost of providing liquidity in emerging markets. Investors are recommended to allocate a significant part of their capital to unlisted infrastructure so that they can enhance their portfolio performance and reduce portfolio diversifiable risk. In order to hedge inflation risk, investors are recommended to look beyond infrastructure, real property and the general equity market in emerging markets. Policy makers in emerging companies are recommended to design contracts and concessions which link returns from long term infrastructure returns to inflation rate. On the same note, regulators in emerging financial markets are recommended to come up with policies which dampen the volatility of asset prices which in turn restore investor confidence, thereby attracting long term capital. Investors are encouraged to consider leverage effects when computing their value-at-risk figures and when making investing decisions. Researchers are encouraged to unbundle the infrastructure sector, and emerging markets ‘groups’ when making future studies. On the same note, as data become available and the economic environment changes, inflation hedging capabilities of the assets covered in this study can be evaluated on a longer term basis in different inflation environments
Do Banks Steer Economic Growth in Emerging Markets? Empirical Evidence from Zimbabwe
Full text linkTests of the finance-growth nexus to date have not been conclusive on the nature & direction of the relationship between economic growth and financial sector development. A number of studies on the role played by banks in economic development have shown considerable variation across countries. In this paper we empirically examine the causal and nature of relationship between financial sector development and economic growth in Zimbabwe for the period 1980 to 2006; using time series analysis namely Granger Causality tests in a Vector Autoregressive (VAR) framework. All variables were tested for stationarity using the Augmented Dickey–Fuller (ADF) Test and became stationary in levels, 1st difference and 2nd difference. A general uni-directional relationship was found to exist running from banking sector development to economic growth in Zimbabwe hence the supply-leading hypothesis is supported. The study recommends that policy makers should come up with policies that steer continuous growth of the banking sector. In this regard the government could reduce its borrowings from the domestic money market, promote a savings culture by encouraging banks to increase their deposit rates (through moral suasion) and attract more deposits for onward lending to the private sector and improve the country’s low credit risk rating to lure foreign investors. Keywords: Banks, Economic Growth, Unit root Tests, Granger Causality, VA
Stock Market Development and Economic Growth: An Empirical Analysis of Zimbabwe (1989-2014)
Full text linkThe relationship between stock market development and economic growth varies across nations and regions. This relationship is of significance to regulatory authorities, investors and portfolio managers in their operations aimed at enhancing the welfare of the citizens and clients at large. The purpose of this study is to examine the relationship between these two variables in Zimbabwe for the period 1989 to 2014. The paper employed the Vector Error Correction Model approach after establishing the order of integration (unit root tests) and cointegration between variables. All the variables were found to be stationary at 1% level after first differencing using the Phillips-Peron tests. The long run relationship was negative, whereas the short run coefficients were insignificant. Though contrary to financial theory, the results, to a large extent, testify to what happened during the period. Based on these findings, the Zimbabwe Stock Exchange and Securities and Exchanges Commission are urged to come up with alternative products to lure new listings from the small to medium enterprises. It is also recommended that all the stakeholders focus beyond the Zimbabwe Stock Exchange to promote economic growth as the firms seem to raise funds from other sources
Examining the relationship between savings and deposit rates
Full text linkUsing the VECM approach, the study analysed the link between savings rates in Zimbabwe and deposit rates and other macroeconomic variables for the period 1983 to 2006. The study established a long run relationship exists between the savings and deposit rates. The speed of adjustments toward long run equilibrium was found to be 83% per annum which is a swift adjustment. It was also established that shocks to savings rates in Zimbabwe explained much of the variances even up to ten years. This implies that savings rates are less exogenous, though inflation rates and deposit rates are the independent variables which explain variability in savings rates. It is against these findings that the Zimbabwean monetary authorities vary the savings rates directly to influence the volume of capital saved as all other independent variables influence savings rates after more than 5 years.peer-reviewe
Basel III LCR Requirement and Banks’ Deposit Funding: Empirical Evidence from Emerging Markets
No full textIn December 2010, the Basel Committee on Baking Supervision introduced the liquidity coverage ratio (LCR) standard for banking institutions in response to disturbances that rocked banks during the 2007/08 global financial crisis. The rule is aimed at enhancing banks’ resilience to short term liquidity shocks as it requires banks to hold ample stock of high grade securities. This study attempts to evaluate the impact of the LCR specification on the funding structures of banks in emerging markets by answering the question "Did Basel III LCR requirement induced banks in emerging market economies to increase deposit funding more than they would otherwise do?" The study found that the LCR charge has been effective in persuading banks in emerging markets to garner more stable retail deposits. This response may engender banking sector stability if competition for retail deposits is properly regulated
Inflation and infrastructure sector returns in emerging markets: Panel ARDL approach
No full textThis study evaluated the relationship between inflation and infrastructure sector stock returns in emerging markets in the long and short run. It employed a panel autoregressive distributed lag (PARDL) model applying the mean group (MG), pooled mean group (PMG) and dynamic fixed effects (DFE) estimators after preliminary cross-sectional dependence and stationarity tests. The results from the three estimators were insignificant in both the short and long run, illustrating the inability of infrastructure sector returns in emerging markets to hedge inflation. Similar results were obtained when the inflation-hedging capacity of real estate and general listed equity was assessed. This suggests the existence of significant beta risk in emerging stock markets. The results imply that investors interested in hedging inflation in emerging markets should go beyond individual asset classes and embrace the portfolio optimization concept to reduce inflation risk. Given the heterogenic nature of the infrastructure sector, a deeper analysis that focuses on infrastructure sector sub-categories might be fruitful as the pricing power is heterogeneous across these sub-sectors
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
Variations on the Author
Full text link“Variations on the Author” discusses two of Eduardo Coutinho’s recent films (Um Dia na Vida, from 2010, and Últimas Conversas, posthumously released in 2015) and their contribution to the general question of documentary authorship. The director’s filmography is characterized by a consistent yet self-effacing form of authorial self-inscription: Coutinho often features as an interviewer that rather than express opinions propels discourses; an interviewer that is good at listening. This mode of self-inscription characterizes him as an author who is not expressive but who is nonetheless markedly present on the screen. In Um Dia na Vida, however, Coutinho is completely absent form the image, while Últimas Conversas, on the contrary, includes a confessional prologue that moves the director from the margins to the center of his films. This article examines the ways in which these works stand out in the filmography of a director who offers new insights into the notion of cinematic authorship
Appropriate Similarity Measures for Author Cocitation Analysis
Full text linkWe provide a number of new insights into the methodological discussion about author cocitation analysis. We first argue that the use of the Pearson correlation for measuring the similarity between authors’ cocitation profiles is not very satisfactory. We then discuss what kind of similarity measures may be used as an alternative to the Pearson correlation. We consider three similarity measures in particular. One is the well-known cosine. The other two similarity measures have not been used before in the bibliometric literature. Finally, we show by means of an example that our findings have a high practical relevance.information science;Pearson correlation;cosine;similarity measure;author cocitation analysis
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