an academic and professional review Is Rating

n° 132
September-October 2014
ISSN 2101-9304
150 euros
revue-banque.fr
an academic and professional review
ARTICLES
4
Is Rating Associated with Better Retail Funds’
Performance in Changing Market Conditions?
Richard LOUTH, Corpus Christi College, University of Cambridge
Stephen SATCHELL, Trinity College, University of Cambridge, The University of Sydney
Warapong WONGWACHARA, TMB Analytics, TMB Bank PLC
26 E stimation Risk versus Optimality Risk: An Ex-Ante Efficiency Analysis of Alternative Equity Portfolio Diversification Strategies
Lionel MARTELLINI, EDHEC Business School, EDHEC-Risk Institute, ERI Scientific Beta
Vincent MILHAU, EDHEC-Risk Institute
Andrea TARELLI, Bocconi University, Milan
43 The Trading Performance of Individual Investors
Camille MAGRON, LaRGE Research Center, EM Strasbourg Business School, University of Strasbourg
53 Cash Holdings, Working Capital and Firm Value:
Evidence from France
Ruta AUTUKAITE, EDHEC Nice
Éric MOLAY, Université de Nice Sophia-Antipolis
In partnership with
Association française de finance
BANKERS, MARKETS
INVESTORS
An academic and professional review
The Challenges of Managing
and Regulating Pensions:
The French System in a European Perspective
DATE:
October 24th, 2014
8.30 AM – 9.00 AM Coffee and welcome of participants
9.15 AM – 10.15 AM
SESSION 1
The French pension system and the new European
regulatory framework for pension provisions
10.15 AM – 11.15 AM
SESSION 2
ow European countries are reforming their
H
pension system? Designing new retirement
products and adequate regulation
11:45 AM – 12:45 PM
SESSION 3
Managing assets for long run pensions under
regulatory constraints
2.00 PM – 3.00 PM
SESSION 4
Opportunities and risks in illiquid / alternative
asset classes
3.00 PM – 4.00 PM
SESSION 5
Longevity risk and management
4:30 PM- 5:30 PM SESSION 6
Reporting and communicating to beneficiaries
5.30 PM Closing address
5.45 PM – 6.30 PM Cocktail
LO CATIO N:
Auditorium of SCOR, Paris
O BJECTIV E
This pension workshop will investigate new issues about pension management in
France under the new European directives (EIOPA).
Pension Funds and retirement institutions are facing new risks and challenges
related to the rapid increase in life expectancy, the financial crises and the lack
of trust in financial institutions. Many European countries underwent important
reforms of their pension system, increasing the retirement age, creating reserve
funds, introducing supplementary funded schemes or relaxing the guarantees
provided to beneficiaries.
Moreover, the regulation of pension providing institutions is evolving. Solvency
II regulatory framework has been finalized and will be applied in January 2016 for
all European insurance companies. A similar framework is currently discussed for
occupational retirement provisions by EIOPA.
If the application of solvency rules for European pension providers has been postponed, EIOPA has recently set new objectives (March 2014):
– Fostering long term investment (in line with OECD/G20);
– Communicating risk to beneficiaries.
The objective of this workshop will be to understand the implications of new European regulation for French pension providers (insurance companies, caisses de
retraite, mutuelles, etc.) and the particular challenges the French pension industry will have to face.
SP E A K ERS
The workshop will include the participation of Pablo Antolin (head of Private
Pension Unit at OECD), Karine Berger (member of the French Parliament),
Jean-François Boulier (managing director, Aviva Investors Europe), Jean-Michel
Charpin (member of the French Pension Council), Hans Fahlin (CIO of AP2 in
Sweden), Elsa Fornero (professor at Turin University, former minister of labor in
Italy), Theo Nijman (professor at Tilburg University), Justin Wray (head of Policy
Unit, EIOPA).
TA RG ETED A U D IENC E
Representatives of pension funds, retirement institutions, large companies, insurance and asset management companies, academics, pension fund administration and public sector officials, trade unionists, members of international organizations, regulators.
INF O RMATIO N & REG ISTRATIO N
[email protected]
www.revue-banque.fr/challenges-managing-and-regulating-pensions-french
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Editorial board
Francis Candylaftis, BNPP Investment Partners
Bernard Dumas, INSEAD
Thierry Foucault, HEC
René Karsenti, ICMA
Denis Kessler, Scor
André Levy-Lang, Paris Dauphine University
Bertrand de Mazières, EIB
Theo Nijman, Tilburg University
Tom Steenkamp, Robeco
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Paris Dauphine University,
Université Libre de Bruxelles
Founding editor: Jean-François Boulier, Aviva
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School
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Nicole El Karoui, École Polytechnique
Antoine Frachot, GENES, ENSAE
Edith Ginglinger, Paris Dauphine University
Christian Gourieroux, CREST,
Toronto University
Ulrich Hege, HEC Georges Hübner, HEC Management School,
University of Liège
Monique Jeanblanc, Evry University
Lionel Martellini, Edhec
Kim Oosterlinck, ULB Patrice Poncet, Essec
Sébastien Pouget, TSE
Flavio Pressacco, Udine University
François Quittard-Pinon, EM Lyon
Michael Rockinger, HEC Lausanne
Ronnie Sadka, Boston College
Stephen Schaefer, LBS
Ariane Szafarz, ULB
Nizar Touzi, École Polytechnique Bas Werker, Tilburg University
bankers, markets & investors n° 132 september-october 2014
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Abstracts
■■Is Rating Associated with Better
■■The Trading Performance
Retail Funds’ Performance
in Changing Market Conditions? 4
Richard LOUTH, Corpus Christi College, University of Cambridge,
Stephen SATCHELL, Trinity College, University of Cambridge, The University of Sydney,
and Warapong WONGWACHARA, TMB Analytics, TMB Bank PLC
This paper investigates the impact of ratings on the performance of retail
funds from four non-overlapping equity fund universes – Europe excluding UK, UK Growth, USA, and Global – over the period between 30th
September 2003 and 31th December 2009. The main difference between
our study and previous research is that our analysis was conducted on
qualitative, not quantitative, ratings. We employ a range of techniques
in order to capture the potentially diverse nature of the linkages between
rating and performance, including long-run returns, return persistence,
and volatility: Cross-sectional; historical; and dynamic (model-based). A
particular attention is paid to the susceptibility of fund performance in
times of changing market conditions, i.e. bull and bear markets. Overall,
we find evidence that rated funds outperform their not rated counterparts,
especially in bear markets.
JEL Codes: C24; G22 .
Keywords: Fund Ratings; Retail Funds; Performance Persistence; Regime Switching.
■■Estimation Risk versus Optimality Risk:
An Ex-Ante Efficiency Analysis
of Alternative Equity Portfolio
Diversification Strategies
26
Lionel MARTELLINI, EDHEC Business School, EDHEC-Risk Institute, ERI Scientific Beta,
Vincent MILHAU, EDHEC-Risk Institute, and Andrea TARELLI, Bocconi University, Milan
Implementing portfolio optimization techniques is a challenging task
because of the presence of estimation risk in expected return and covariance parameters. This paper provides an empirical analysis of the tradeoff between estimation risk, which is the risk of imperfectly estimating the
parameters required for optimization, and optimality risk, which is the risk
of selecting a weighting scheme that is a priori inferior to the maximum
Sharpe ratio (MSR) portfolio but requires fewer parameter estimates, and
as such is less impacted by the presence of estimation risk. We first show
that if parameters were perfectly known, all weighting schemes would
involve a substantial loss of efficiency with respect to the MSR portfolio.
We also find that the risk parity portfolio involves the lowest efficiency
loss amongst all analyzed weighting schemes. The introduction of estimation risk does not alter the domination of the MSR portfolio if the true
underlying asset pricing model is known to the investor. In the presence of
model risk, on the other hand, the MSR portfolio does no longer achieve
the highest ex-ante Sharpe ratio, and is dominated by a number of alternative strategies, including the risk parity weighting scheme, as well as
the inverse volatility and the inverse variance weighting schemes, which
prove attractive when small samples are used.
of Individual Investors
43
Camille MAGRON, LaRGE Research Center, EM Strasbourg Business School, University of
Strasbourg, France
Based on more than 7 million transactions, we examine the financial performance of 56,723 French individual investors between 1999 and 2006.
We show that French investors exhibit negative risk-adjusted returns on
their portfolios and would be better off applying a buy and hold strategy.
Most skilled investors, from whom we could expect noticeable results, do
not perform better. Shortfalls can be explained by investors’ poor stock
selection abilities. Indeed, the stocks they buy underperform the stocks
they sell. This observation is robust for various market trends.
JEL Codes: G11.
Keywords: Individual Investors; Portfolio Performance; Trading Profitability;
Sophistication.
■■Cash Holdings, Working Capital
and Firm Value: Evidence from France 53
Ruta AUTUKAITE, EDHEC Nice, and Éric MOLAY, Université de Nice Sophia-Antipolis
The importance of short-term financial decisions to a company’s value
is considered in this paper by testing whether an extra euro invested in
cash or in net working capital is valued at less than one euro. By running
panel data regressions, the presented evidence proves that shareholders undervalue cash holdings and net working capital. The results of
this paper alert management not to underestimate the importance of
cash holdings and working capital management; moreover, the results
encourage investors to follow a company’s actions in this area to maximise their returns on investment.
JEL Codes: G30.
Keywords: Cash Holdings, Profitability ; Stock Return ; Working Capital.
JEL Codes: G11.
Keywords: Alternative Equity Indexation; Efficient Portfolio; Parameter Uncertainty.
bankers, markets & investors n° 132 september-october 2014
3
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the impact of Ownership structure and control
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the impact of the 2008 short sale Ban
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Société ..............................................................................................................................................................................
efficiency of the saudi Banking sector:
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Financial News and Volatility of Underlying
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Nom ....................................................................................... Prénom ............................................................................
F O c Us ON
56
the evidence On Privatization around the World
Edith GInGLInGER, Université Paris-Dauphine
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