Integrating
Market and Credit Risk in Stochastic Portfolio Optimization
--José
Luiz Barros Fernandes,
José Renato Haas Ornelas and
Marcelo Yoshio Takami
This
paper has two main objectives. The first is to propose a
measure to integrate the market and credit risk. We define
a way to convert credit risk into market risk, and then
define an integrated risk measure. Based on this integrated
measure, an Adjusted Sharpe Index is defined as a metric
to compare various portfolios in the surface frontier in
terms of financial efficiency. Second, several methodologies
of estimating efficient portfolios were evaluated, under
the perspective of a global long-term investor, incorporating
estimation risk and evaluating the effect of credit risk
in the model selection. The results support the use of the
Michaud (1998) resampling methodology as it offers better
results in terms of financial efficiency, allocation stability
and diversification. Using the Michaud approach, the efficient
surface frontier is defined and generated.
©
2008 IUP . All Rights Reserved.
Performance
Evaluation of Indian Commercial Banks in the Prompt Corrective
Action Framework: An Assurance Region Approach
-- Ram
Pratap Sinha
After
the onset of banking sector reform in India, the Reserve
Bank of India initiated a system of Prompt Corrective Action
(PCA) with various trigger points and mandatory and discretionary
responses by the supervising authority on a real time basis.
The PCA framework relies on three major indicators of banking
sector performance: Net Non Performing Asset (NPA), Capital-To-Risk-Weighted
Assets Ratio (CRAR) and Return on Assets (ROA). The present
paper seeks to combine the ratio approach adopted by the
Reserve Bank of India with the Assurance Region based measure
of technical efficiency to find out a composite Data Envelopment
Analysis (DEA) based efficiency indicator of 28 observed
commercial banks for 2002-03 to 2004-05. The results show
that the observed private sector commercial banks have higher
mean technical efficiency score compared to those of the
public sector commercial banks. Out of the 28 observed commercial
banks considered for the study, six were found to be efficient.
A study of the technical efficiency scores across ownership
groups reveal that the observed private sector banks have
higher mean technical efficiency scores compared to their
public sector counterparts. Finally, most of the observed
commercial banks exhibit decreasing returns to scale for
the period under observation.
©
2008 IUP . All Rights Reserved.
Return
and Risk Analysis of Indian Information Technology Sector
Stocks
-- R
Prabahar, J Dhinakaran and Punithavathy Pandian
The
Indian capital market has been witnessing an unprecedented
growth with the back of soaring Sensex and also the magnificent
performance of India Inc. Stock market has become the most
desirable investment option for both the Indian and foreign
investors. Return and risk are inseparable in most of the
investments, and it is important to determine how much risk
is appropriate to attain the required rate of return from
investing in any stock under consideration. In this paper,
an attempt has been made to study the return and risk element
of investing in the shares of Indian Information Technology
Industry. The Information Technology industry stocks constitute
around 14% of Nifty, and play a vital role in the movement
of the market indices. India is now emerging as a major
credible information technology outsourcing center creating
huge opportunities as well as challenges to the investors.
Although the stock markets are positive towards the IT stocks,
they are also affected by the national and international
events. The average daily returns of the six companies studied
in this paper were lower than the daily mean return of the
indices. The volatilities of the stock returns over the
study period were much higher than that of the indices.
The b values of the securities show that except CMC and
Moser Baer, the other four securities were very aggressive.
The unsystematic risks of the IT stocks were much higher
than the systematic risk.
©
2008 IUP . All Rights Reserved.
Impact
of Futures on Spillovers in the UK Stock Market
-- Athanasios Koulakiotis,
Constantinos Katrakilidis, Dionysios Chionis
and Nicholas Papasyriopoulos
This
paper used La Porta et al. (1998) capital market regulatory
classification to analyze the impact of information contained
in various futures contracts on volatility spillovers between
markets. In particular, the paper analyzed the spillover
effects between foreign cross-listings in tougher, similar
and more lax regulatory environments with respect to the
relevant domestic indices (FTSE100) and also with the home
portfolios of cross-listed equities in the UK. It was found
that futures variables had a significant impact on volatility
spillovers between markets.
©
2008. IUP . All Rights Reserved.
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