G11 - Portfolio Choice; Investment DecisionsReturn

Technology stocks like Facebook, Apple, Amazon, Netflix, and Google, collectively referred to as FAANG stocks, are among the most systemically important equities in global markets, attracting international investors due to the extensive use of technology in day-to-day business. However, these stocks are considered risky assets, so building an optimal portfolio requires effective risk management. To address this, this study examines the jump and co-jump behavior of the FAANG stocks over the period 2012–2026. Jumps are identified using a standardized residual approach in which daily returns that deviate from GARCH (1,1), as well as estimated conditional volatility by more than three standard deviations, are classified as jump events, based on Laurent et al.’s (2016) conceptual framework. Co-jump activity is assessed using a co-exceedance threshold rule and logistic regression, which is in line with the larger co-jump literature (Dungey and Hvozdyk, 2011; Bouri et al., 2020). Results highlight the presence of jump and co-jump activity within the FAANG stocks, where Google and Amazon exhibited the highest co-jump connectedness, revealing their vital role in spreading economic shocks across the FAANG network. In contrast, Netflix appeared to be a more peripheral asset with lower co-jump centrality. Jumps occur during macro stress periods, most notably the 2018 US-China trade war, the COVID-19 pandemic in 2020, and the 2022 rate-hike cycle, and are generally negative in direction, indicating asymmetric downside risk. Our findings are directly relevant to global investors, asset managers, and portfolio managers. Policymakers may use these outcomes to construct a stronger framework for improving financial stability and mitigating systemic risk during market stress periods.

This study addresses a critical gap in geopolitical finance by examining the heterogeneous capital market reactions of 370 global defense and aerospace (D&A) firms to the 2022 Russia-Ukraine war. While the impact of geopolitical shocks on financial markets is well-documented, the specific determinants of intra-sectoral returns remain underexplored. Employing an event study methodology, this research quantifies abnormal returns around the invasion date and conducts cross-sectional analyses to test whether these returns are systematically moderated by firms’ home country attributes, including geopolitical alignment (G7 vs. non-G7), economic status, and national defense budget levels. The empirical results reveal a profound and statistically significant divergence: firms domiciled in developed, G7, and high-budget nations experienced large positive abnormal returns, while those in other national contexts suffered significant losses. Critically, the analysis finds no evidence of a firm-size “leadership premium,” as the performance difference between the industry’s largest firms and their smaller counterparts was statistically insignificant. These findings suggest the market’s reaction was a sophisticated assessment of sovereign fiscal capacity, where investors priced in a “geopolitical premium” for firms in nations with a credible ability to fund a military buildup, while penalizing those in fiscally constrained countries for perceived macroeconomic risk. This research contributes to the literature by demonstrating that during a systemic geopolitical crisis, a nation’s macroeconomic and political attributes can dominate firm-specific characteristics in driving asset valuation.

This paper investigates the dependence of the investment behavior of Sovereign Wealth Funds (SWFs) on the Environmental, Social, and Governance (ESG) performance of their underlying investments in public equity holdings during the period of 2007 to 2022 collectively overseeing a substantial 71% of total public equity holding investments by SWFs globally. The unique data set with ESG control variables consist of mainly self-reported Corporate Social Responsibility (CSR) ESG information (ESG rating from Refinitiv/LSEG) and dynamic risk assessed ESG information purely based on external evaluation of the firms (Reputational Risk Indicator from RepRisk). The control variable which monitors the Corporate Social Irresponsibility (CSI) of target companies is novel to previous studies. Our findings suggest that SWFs still consider self-reported CSR information more than public CSI data in their investment decisions. Furthermore, a change in past ESG data of underlying public equity holdings – both CSR and CSI – does not seem to have a significant effect on the investment into underlying public equity holdings. Our conclusions could help to encourage greater ESG integration into SWF investment strategies and promote sustainable investing practices more broadly not limited to liquid assets.

The research focuses on the calibration and measurement of the relationship between the selected behavioural biases and the risk perceptions of Indian retail investors, as well as its ultimate implications on equity investment decisions. Further, it examines the association of the factors to non-financial determinants such as ESG investing consciousness. The research leveraged a structured questionnaire for data collection across 438 samples. EFA for factor-extraction and assessing dimensional validity; CFA for understanding the factor structure, the validity & reliability of the latent variables; and AMOS-based SEM for the establishment of path analysis and structural causal relationships amongst the variables are used for the study. The study confirms the significant impact of risk perception on equity investment decisions and establishes a significant link between the selected biases for the study and the perceived risk. The findings also indicate a statistically significant relationship between ESG consciousness and the risk perception of investors. Further, there is confirmation of a statistically significant negative moderation effect of ESG consciousness on the relationship between the selected biases and investors’ perceived risk, indicating that higher ESG consciousness weakens the positive relationship between investors’ perceived biases and risk perception.

In this paper, we empirically investigate the effect of short selling on market volatility during exogenously-induced uncertainties. Using the Covid-19 pandemic and the onset of the Russian-Ukraine Conflicts periods as event study, we employ the asymmetric EGARCH model. We show high persistence and asymmetric effects of market volatility during the pre-covid outbreak and post-covid outbreak periods. We find evidence that short selling increases market volatility during the pre-covid outbreak period while the period of the Russian-Ukraine conflict is characterized by reduced volatility. We find no evidence of short selling effect on market volatility during the post-covid outbreak period. Our findings provide significant implications for short-selling strategies during crisis periods.

Commercial real estate loans (CREL) are a modern essential business segment and of major relevance to the financial stability of an economy as they interconnect the financial markets and the real economy. Consequently, CREL are of specific interest to regulatory authorities. As far as the author knows, there exists no universal definition of CREL in the global financial industry and the regulatory environment. This has been subject to criticism due to resulting gaps and bias in data generated by regulatory filing. This study contributes to academia and applied sciences by providing the missing link. It develops a comprehensive categorization of CREL on a foundation of 34 sources predominately provided by regulatory authorities in the US and the EU. The categorization is based on a qualitative synthesis of main CREL characteristics of this particular heterogeneous asset class outlined in the detected sources. The objective of this work is to support the development of a common understanding of this investment segment among banks, institutional investors and regulatory authorities in order to allow an accurate and prompt filing.