• Title/Summary/Keyword: return and risk

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Guaranteed Minimum Accumulated Benefit in Variable Annuities and Jump Risk (변액연금보험의 최저연금적립금보증과 점프리스크)

  • Kwon, Yongjae;Kim, So-Yeun
    • The Journal of the Korea Contents Association
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    • v.20 no.11
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    • pp.281-291
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    • 2020
  • This study used Gauss-Poisson jump diffusion process on standard assets to estimate the statutory reserves of Variable Annuity (VA) guarantees specified in Korean bylaw of insurance supervision and calculated guarantee fees and risks based on the model to see the effect of considering the jumps. Financial assets, except KOSPI 200, have fat-tailed return distributions, which is an indirect evidence of discontinuous jumps. In the case of a domestic stock index and foreign stock indexes(Korean Won), guarantee fees and risks decrease when jumps are considered in models of underlying assets. This is explained by decreases in standard deviations after the jump diffusion is considered. On the other hand, in the case of domestic bond indexes and a foreign bond index(Korean Won), guarantee fees and risks tend to increase when jumps are considered. Results from a foreign stock index(US Dollar) and a foreign bond index(US Dollar) were opposite to those from the same kinds of Korean Won indexes. We conclude that VA guarantee fees and risks may be under or over estimated when jumps are not considered in models of underlying assets.

Gross Profitability Premium in the Korean Stock Market and Its Implication for the Fund Distribution Industry (한국 주식시장에서 총수익성 프리미엄에 관한 분석 및 펀드 유통산업에 주는 시사점)

  • Yoon, Bo-Hyun;Liu, Won-Suk
    • Journal of Distribution Science
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    • v.13 no.9
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    • pp.37-45
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    • 2015
  • Purpose - This paper's aim is to investigate whether or not gross profitability explains the cross-sectional variation of the stock returns in the Korean stock market. Gross profitability is an alternative profitability measure proposed by Novy-Marx in 2013 to predict cross-sectional variation of stock returns in the US. He shows that the gross profitability adds explanatory power to the Fama-French 3 factor model. Interestingly, gross profitability is negatively correlated with the book-to-market ratio. By confirming the gross profitability premium in the Korean stock market, we may provide some implications regarding the well-known value premium. In addition, our empirical results may provide opportunities for the fund distribution industry to promote brand new styles of funds. Research design, data, and methodology - For our empirical analysis, we collect monthly market prices of all the companies listed on the Korea Composite Stock Price Index (KOSPI) of the Korea Exchanges (KRX). Our sample period covers July1994 to December2014. The data from the company financial statementsare provided by the financial information company WISEfn. First, using Fama-Macbeth cross-sectional regression, we investigate the relation between gross profitability and stock return performance. For robustness in analyzing the performance of the gross profitability strategy, we consider value weighted portfolio returns as well as equally weighted portfolio returns. Next, using Fama-French 3 factor models, we examine whether or not the gross profitability strategy generates excess returns when firmsize and the book-to-market ratio are controlled. Finally, we analyze the effect of firm size and the book-to-market ratio on the gross profitability strategy. Results - First, through the Fama-MacBeth cross-sectional regression, we show that gross profitability has almost the same explanatory power as the book-to-market ratio in explaining the cross-sectional variation of the Korean stock market. Second, we find evidence that gross profitability is a statistically significant variable for explaining cross-sectional stock returns when the size and the value effect are controlled. Third, we show that gross profitability, which is positively correlated with stock returns and firm size, is negatively correlated with the book-to-market ratio. From the perspective of portfolio management, our results imply that since the gross profitability strategy is a distinctive growth strategy, value strategies can be improved by hedging with the gross profitability strategy. Conclusions - Our empirical results confirm the existence of a gross profitability premium in the Korean stock market. From the perspective of the fund distribution industry, the gross profitability portfolio is worthy of attention. Since the value strategy portfolio returns are negatively correlated with the gross profitability strategy portfolio returns, by mixing both portfolios, investors could be better off without additional risk. However, the profitable firms are dissimilar from the value firms (high book-to-market ratio firms); therefore, an alternative factor model including gross profitability may help us understand the economic implications of the well-known anomalies such as value premium, momentum, and low volatility. We reserve these topics for future research.

A Study on the Effect of the Corporate Reputation, Perceived Motivation and Perceived Fit of Corporate Social Responsibility on the Recognition of Corporate Legitimacy in Crisis - Based on the Oil Spill Incidence of Samsung Heavy Industries (기업 명성과 기업의 사회적 책임 활동의 동기와 적합성이 위기 시 기업 정당성 인식에 미치는 영향 - 삼성중공업 기름유출 사례를 중심으로)

  • Park, Soo-Jung;Cha, Hee-Won
    • Korean journal of communication and information
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    • v.45
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    • pp.496-532
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    • 2009
  • With the turn of the 21st century, corporate legitimacy is at risk. The society is demanding even greater responsibility to the corporations in return of exercising its enlarged influencing power. As the legitimacy is threatened, entrepreneurial activities have become even more important than ever in order to obtain trust from the public and to be accepted as an ethical enterprise. This study assumes corporate legitimacy as the necessary element in overcoming the crisis. With this respect, it further states what kind of effect the exercise of corporate reputation and social responsibility have on ensuring corporate legitimacy in crisis. To verify the purpose of this study, two research hypotheses and one research question were set. The major research results and the implications are as follows. First, the corporate reputation of Samsung Heavy Industries affects the corporate actional legitimacy in case of crisis. Second, recognition on corporate legitimacy varied in accordance with the public’s perception of the corporate social responsibility. Third, the interaction between corporate reputation and social responsibility plays a role in determining corporate legitimacy. This result denotes that it is necessary to exercise social responsibility and build up corporate reputation in order to obtain corporate legitimacy in crisis.

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An Integrated Model for Predicting Changes in Cryptocurrency Return Based on News Sentiment Analysis and Deep Learning (감성분석을 이용한 뉴스정보와 딥러닝 기반의 암호화폐 수익률 변동 예측을 위한 통합모형)

  • Kim, Eunmi
    • Knowledge Management Research
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    • v.22 no.2
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    • pp.19-32
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    • 2021
  • Bitcoin, a representative cryptocurrency, is receiving a lot of attention around the world, and the price of Bitcoin shows high volatility. High volatility is a risk factor for investors and causes social problems caused by reckless investment. Since the price of Bitcoin responds quickly to changes in the world environment, we propose to predict the price volatility of Bitcoin by utilizing news information that provides a variety of information in real-time. In other words, positive news stimulates investor sentiment and negative news weakens investor sentiment. Therefore, in this study, sentiment information of news and deep learning were applied to predict the change in Bitcoin yield. A single predictive model of logit, artificial neural network, SVM, and LSTM was built, and an integrated model was proposed as a method to improve predictive performance. As a result of comparing the performance of the prediction model built on the historical price information and the prediction model reflecting the sentiment information of the news, it was found that the integrated model based on the sentiment information of the news was the best. This study will be able to prevent reckless investment and provide useful information to investors to make wise investments through a predictive model.

A Study on the Dynamic Correlation between the Korean ETS Market, Energy Market and Stock Market (한국 ETS시장, 에너지시장 및 주식시장 간의 동태적 상관관계에 관한 연구)

  • Guo-Dong Yang;Yin-Hua Li
    • Korea Trade Review
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    • v.48 no.4
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    • pp.189-208
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    • 2023
  • This paper analyzed the dynamic conditional correlation between the Korean ETS market, energy market and stock market. This paper conducted an empirical analysis using daily data of Korea's carbon credit trading price, WTI crude oil futures price, and KOSPI index from February 2, 2015 to December 30, 2021. First, the volatility of the three markets was analyzed using the GARCH model, and then the dynamic conditional correlations between the three markets were studied using the bivariate DCC-GARCH model. The research results are as follows. First, it was found that the Korean ETS market has a higher rate of return and higher investment risk than the stock market. Second, the yield volatility of the Korean ETS market was found to be most affected by external shocks and least affected by the volatility information of the market itself. Third, the correlation between the Korean ETS market and the stock market was stronger than that of the WTI crude oil futures market. This paper analyzed the correlation between the Korean ETS market, energy market, and stock market and confirmed that the level of financialization in the Korean ETS market is quite low.

Analysis of Factors of IRRs and Spread on Korea's BTO Projects (우리나라 민간투자사업의 수익률과 가산금리의 결정요인 분석)

  • Ju, Jae-Hong;Ha, Heon-Gu;Park, Dong-Gyu
    • Journal of Korean Society of Transportation
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    • v.28 no.2
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    • pp.135-150
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    • 2010
  • This paper focuses on finding out which covenants are different among the concession agreements of Korean BTO projects and how these influenced IRR(Internal Rate of Return). That is, to figure out the political and economical determinants of IRR by analyzing the concession agreements which are the basic contract of implementing projects. As IRR is an index of profitability, so spread is an indicator of risk to collect debts. That's the reason why the analysis of spread is included. For the empirical analysis, the data of concession agreements for 75 projects and financial models are used. These 75 concession agreements are contracted from 1995 to 2008. The dependent variables are after tax nominal IRR and the spread of long term interest rates of 75 BTO projects. The independent variables are project's proceeding factors, the feasibility variables, the variables related to financial character and the variables related to covenants or the government's policy. The analysis shows that IRR has been influenced by the equity level of financial investors, the national government managed projects, the projects with minimum revenue guarantee (MRG), etc. And the equity level of financial investors, the national government managed projects and the implementation of supplementary project have an effect on spread also.

Study on Economic and Financial Education for the North Koreans after Unification: from the Perspective of Behavioral Economics (통일 후 북한 주민 대상 경제금융 교육에 관한 연구: 행태경제학 관점을 중심으로)

  • Son, Jeong-Kook;Kim, Young-Min
    • The Journal of the Convergence on Culture Technology
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    • v.7 no.2
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    • pp.239-246
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    • 2021
  • Unification means the change of the economic system from 'Planned Economy' of the North Korea to 'Market Economy' of the South Korea. Therefore, it may cause confusions and difficulties for North Koreans who have been under planned economy for ages. So, we need to take the perspective of behavioral economics for the effective education. First of all, it is about overall finance, which contains the record of financial transactions, effect of inflation, investors' bounded rationality, and choice difficulty of financial products. Second, it is about borrowings, which includes the credit management, interest rate of difference among financial institutions. Third, it is about investment on financial products, which includes the effect of cost on returns, difference between compound interest and simple interest, trade-off between expected return and risk, market and non-market risks, the importance of diversification, and passive & aggressive investments.

An Empirical Analysis on the Relationship Between the Real Estate Policies and the Stock Market -Centering around the Stocks of Construction Industry- (부동산 정책과 주식시장의 연계성에 관한 실증연구 -건설업종 주식을 줌심으로-)

  • Jo, Yong-Dae
    • Korean Journal of Construction Engineering and Management
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    • v.9 no.2
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    • pp.146-158
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    • 2008
  • This paper examines the relationship between the real estate policies of Korean government and the stock market of Korea. It is the purpose of this paper whether the government policies are effective or not when the Korean government release new real estate policies outlining higher taxes and more housing supply as part of its plan to suppress speculation. This paper studies the properties of daily stock returns of the construction sector in Korea securities market when the government announcements of the real estate policies are released. On the demand side, multiple home owners and those purchasing property for speculative purposes are expected to be hit the hardest If the government policies are effective. The empirical results of this paper show that most of the cumulative abnormal returns(CARs) are statistically significant from the year 2002 to the year 2006 except the year 2004.

Economic Assessment for Flood Control Infrastructure under Climate Change : A Case Study of Imjin River Basin (기후변화를 고려한 홍수방재시설물의 경제성분석 : 임진강 유역사례)

  • Kim, Kyeongseok;Oh, Seungik
    • Korean Journal of Construction Engineering and Management
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    • v.18 no.2
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    • pp.81-90
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    • 2017
  • In Imjin River basin, three floods occurred between 1996 and 1999, causing many casualties and economic losses of 900 billion won. In Korea, flood damage is expected to increase in the future due to climate change. This study used the climate scenarios to estimate future flood damage costs and suggested a real options-based economic assessment method. Using proposed method, the flood control infrastructures in Imjin River basin were selected as a case study site to analyze the economic feasibility of the investment. Using RCP (Representative Concentration Pathway) climate scenarios, the future flood damage costs were estimated through simulated rainfall data. This study analyzed the flood reduction benefits through investment in the flood control infrastructures. The volatility of flood damage reduction benefits were estimated assuming that the RCP8.5 and RCP4.5 climate scenarios would be realized in the future. In 2071, the project option value would be determined by applying an extension option to invest in an upgrading that would allow the project to adapt to the flood of the 200-year return period. The results of the option values show that the two investment scenarios are economically feasible and the project under RCP8.5 climate scenario has more flood damage reduction benefits than RCP4.5. This study will help government decision makers to consider the uncertainty of climate change in the economic assessment of flood control infrastructures using real options analysis. We also proposed a method to quantify climate risk factors into economic values by using rainfall data provided by climate scenarios.

Numerical studies on approximate option prices (근사적 옵션 가격의 수치적 비교)

  • Yoon, Jeongyoen;Seung, Jisu;Song, Seongjoo
    • The Korean Journal of Applied Statistics
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    • v.30 no.2
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    • pp.243-257
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    • 2017
  • In this paper, we compare several methods to approximate option prices: Edgeworth expansion, A-type and C-type Gram-Charlier expansions, a method using normal inverse gaussian (NIG) distribution, and an asymptotic method using nonlinear regression. We used two different types of approximation. The first (called the RNM method) approximates the risk neutral probability density function of the log return of the underlying asset and computes the option price. The second (called the OPTIM method) finds the approximate option pricing formula and then estimates parameters to compute the option price. For simulation experiments, we generated underlying asset data from the Heston model and NIG model, a well-known stochastic volatility model and a well-known Levy model, respectively. We also applied the above approximating methods to the KOSPI200 call option price as a real data application. We then found that the OPTIM method shows better performance on average than the RNM method. Among the OPTIM, A-type Gram-Charlier expansion and the asymptotic method that uses nonlinear regression showed relatively better performance; in addition, among RNM, the method of using NIG distribution was relatively better than others.