Sustainability has become a pressing global issue due to environmental and social challenges caused by human activity which has led to a rise in sustainable investing, including ESG investing. Research on financial performance and sustainable investing have not only showed mixed results, but they are also generally conducted in greater markets such as the US, Europe, and Asia-pacific markets. Currently, there is a lack of research on performance of sustainable investment strategies in the Nordic Region. The purpose of this paper is to examine the performance of portfolios constructed with an ESG investment strategy, which involves creating two portfolios consisting of top and bottom ESG scored companies. The portfolios are measured against each other and a market index benchmark, in the context of various theories, including the efficient market hypothesis, adaptive market hypothesis, shareholder theory, and stakeholder theory. The theoretical framework includes asset-pricing models and portfolio theory. A quantitative study with a deductive approach is utilized to construct the portfolios, focusing on mid-cap companies in the Nordics with data collected from Refinitiv Eikon’s database. The portfolio construction process yields financial metrics such as returns, volatility, and risk-adjusted returns. To test for outperformance in returns, the unpaired t-test is utilized. The Carhart four-factor model is also used to explain variations in returns related to risk factors and investigate the presence of positive and significant abnormal returns. The results demonstrate that the bottom ESG portfolio exhibits superior portfolio characteristics compared to the top ESG portfolio and the index benchmark, including annual returns and risk-adjusted returns. Furthermore, this study identifies significant positive abnormal returns when using the Carhart four-factor model, and evidence of outperformance in mean cumulative returns for the bottom ESG portfolio relative to the top ESG portfolio and index benchmark. On the other hand, the performance of the top ESG portfolio and index benchmark is inconclusive, with mixed results across different performance metrics and years. Although the top ESG portfolio outperforms in two out of three years in terms of annual returns, volatility, and risk-adjusted returns, no evidence of positive abnormal returns is found. Meanwhile, the index benchmark demonstrates evidence of outperformance in terms of cumulative returns. Overall, the findings suggest that the bottom ESG investment strategy is more effective in generating superior performance, while the mixed results of the top ESG portfolio make it difficult to draw definitive conclusions about its performance characteristics.

A growing number of studies have been conducted in the sphere of portfolio analysis concerning different approaches for analyzing stocks and outperforming the market. Pioneers in the sphere of portfolio theory like William Sharpe and Harry Markowitz have developed strategies and ratios for portfolio analysis that could generate positive risk-adjusted returns. Thus, this paper will solicit a number of these strategies to endeavor and generate a return that is higher than the market index while considering the expenses that come with buying and selling stocks (transaction costs). Therefore, the purpose of this study is to assess how active investing measures up to passive investing in the sphere of the Swedish stock market. The roadmap to achieve the desired goals set by the authors is to create numerous portfolios on a weekly basis with securities present in the Swedish OMX30 index using the Maximum Sharpe, Maximum M2, Minimum Variance, and Equally Weighted optimizations. Then the significance of the transaction costs will be tested and a comparison with the market index will be made. The results suggest that in the realm of the Swedish stock market, investing in dynamically optimized portfolios based on the maximization of Sharpe Ratio and M2 will generate higher returns in comparison to passively investing in the market index, and the significance of transaction costs varies upon the amount of capital invested in the portfolios.

I och med ökad takt av klimatförändringar, global fattigdom och stigande havsnivåer har intresset och vikten av att investera hållbart ökat markant den senaste tiden, både för de stora och små investerarna. Den snabba tillväxten av hållbara investeringar har lett till problem som falsk marknadsföring, greenwashing, olika typer av miljö- och ESG-hets samt uppenbarat en avsaknad av standardiserade regelverk för sådana typer av investeringar. Detta är ett problem som privata investerare, stora investerare och andra investeringsorganisationer och institut uppmärksammar världen över. Den tidigare forskning tyder på att, trots att det finns verktyg som främjar hållbara bolag och kriterier för att sålla bort ohållbara bolag, verktygen varierar i kvalitet och omfattning. Det är därför svårt att säkerställa att hållbara investeringarna är genomgående hållbara. Forskningen tyder även på att Impact Investing aktörerna är för outforskade och att det krävs forskning som kartlägger hur aktörerna arbetar idag med kriterier och processen, och om de stämmer överens med definitioner av begreppet som tydligt avskiljer dem från andra hållbara investeringar såsom ESG-fonder. Syftet med studien var att undersöka investeringsprocessen och hållbarhetskriterierna som Impact investerare samt ESG-fondförvaltare implementerar för deras investeringar. Detta undersöktes genom intervjuer med aktörer från både investeringsgrupperna på den svenska marknaden. Detta för att kunna klargöra hur Impact Investing utvecklar hållbara investeringar. Det vi kan konstatera är att de till stor del använder likande processer men på olika sätt och med olika reglering. Impact investerarna lämnar inget utrymme för negativ hållbarhetspåverkan och vidtar resursintensiva processer för att säkerställa mätbarheten och den positiva påverkan på hållbarhet för varje investeringarna. Studiens resultat visar på att Impact investerarnas processer och kriterier är klart mer omfattande, och ställer högre krav på mätbarhet samt påvisad hållbarhetspåverkan, än ESG-fondförvaltarnas processer och kriterier.  Däremot saknar Impact Investing i dagsläget mycket av den övergripande regleringen och möjliggörande system för att kunna styra om det stora kapitalet inom finansvärlden. Det finns ett behov av ytterligare reglering samt systemutveckling för Impact Investings fortsatta tillväxt och legitimitet som en investeringsmetod som kan redovisa mätbar positiv påverkan på hållbarhet. Resultaten visar på att det finns ett behov av båda investeringsformer, och att de uppfyller olika funktion, därmed är det även viktigt att tydligt urskilja investeringsformerna för att minska tidigare nämnda greenwashing, något som vi gjort i denna studie. Bland annat visar studiens resultat på att ESG-fonder är mer lättillgängliga för privatinvesterare än Impact Investing, åtminstone för majoriteten av de investerare denna studie undersökt. Men även att ESG-fonderna i denna studie fungerar mer som en traditionell fond som följer vissa hållbarhetskriterier, medan Impact investerarna i denna studie är mer nischad och riktar sig till en specifik typ av bolag som kan generera mätbar positiv påverkan på prioriterade samhällsproblem.  Slutligen kan vi konstatera att studiens resultat tyder på att de Impact investerare som undersökts arbetar med Impact Investing på ett sätt som tydligt utvecklar hållbara investeringar mot att likna finansiell redovisning. Investeringar utifrån Impact Investing börjar likna finansiell redovisning i att de blir alltmer mätbara, och avkastning vad gäller hållbarhet mäts även i större utsträckning. Denna utveckling sker genom processer som enskilda aktörer antar, men även regleringar och ramverk som olika organisationer ämnar införa som standard.

Thesis (MScEng (Industrial Engineering))--University of Stellenbosch, 2010. / ENGLISH ABSTRACT: Several studies have shown that abnormal returns can be generated simply by buying past winning stocks and selling past losing stocks. Being able to predict future price behaviour by past price movements represents a direct challenge to the Efficient Market Hypothesis, a centrepiece of contemporary finance. Fund managers have attempted to exploit this effect, but reliable footage of the performance of such funds is very limited. Several academic studies have documented the presence of the momentum effect across different markets and between different periods. These studies employ trading rules that might be helpful to establish whether the momentum effect is present in a market or not, but have limited practical value as they ignore several practical constraints. The number of shares in the portfolios formed by academic studies is often impractical. Some studies (e.g. Conrad & Kaul, 1998) require holding a certain percentage of every share in the selection universe, resulting in an extremely large number of shares in the portfolios. Others create portfolios with as little as three shares (e.g. Rey & Schmid, 2005) resulting in portfolios that are insufficiently diversified. All academic studies implicitly require extremely high portfolio turnover rates that could cause transaction costs to dissipate momentum profits and lead the returns of such strategies to be taxed at an investor’s income tax rate rather than her capital gains tax rate. Depending on the tax jurisdiction within which the investor resides these tax ramifications could represent a tax difference of more than 10 percent, an amount that is unlikely to be recovered by any investment strategy. Critics of studies documenting positive alpha argue that momentum returns may be due to statistical biases such as data mining or due to risk factors not effectively captured by the standard CAPM. The empirical tests conducted in this study were therefore carefully designed to avoid every factor that could compromise the results and hinder a meaningful interpretation of the results. For example, small-caps were excluded to avoid the small firm effect from influencing the results and the tests were conducted on two different samples to avoid data mining from being a possible driver. Previous momentum studies generally used long/short strategies. It was found, however, that momentum strategies generally picked short positions in volatile and illiquid stocks, making it difficult to effectively estimate the transaction costs involved with holding such positions. For this reason it was chosen to test a long-only strategy. Three different strategies were tested on a sample of JSE mid-and large-caps on a replicated S&P500 index between January 2000 and September 2009. All strategies yielded positive abnormal returns and the null hypothesis that feasible momentum strategies cannot generate statistically significant abnormal returns could be rejected at the 5 percent level of significance for all three strategies on the JSE sample. However, further analysis showed that the momentum profits were far more pronounced in “up” markets than in “down” markets, leaving macroeconomic risk as a possible explanation for the vast returns generated by the strategy. There was ample evidence for the January anomaly being a possible driver behind the momentum returns derived from the S&P500 sample. / AFRIKAANSE OPSOMMING: Verskillende studies het gewys dat abnormale winste geskep kan word deur eenvoudig voormalige wenner aandele te koop en voormalige verloorder aandele te verkoop. Die moontlikheid om toekomstige prysgedrag te voorspel deur na prysbewegings uit die verlede te kyk is ‘n direkte uitdaging teen die “Efficient Market Hypothesis”, wat ’n kernstuk van hedendaagse finansies is. Fondsbestuurders het gepoog om hierdie effek te benut, maar akademiese ondersteuning vir die gedrag van sulke fondse is uiters beperk. Verskeie akademiese studies het die teenwoordigheid van die momentum effek in verskillende markte en oor verskillende periodes uitgewys. Hierdie akademiese studies benut handelsreëls wat gebruik kan word om te bepaal of die momentum effek wel in die mark teenwordig is al dan nie, maar is van beperkte waarde aangesien hulle verskeie praktiese beperkings ignoreer. Sommige studies (Conrad & Kaul, 1998) vereis dat 'n sekere persentasie van elke aandeel in die seleksie-universum gehou moet word, wat in oormatige groot aantal aandele in die portefeulle tot gevolg het. Ander skep portefeuljes met so min as drie aandele (Rey & Schmid, 2005), wat resulteer in onvoldoende gediversifiseerde portefeuljes. Die hooftekortkoming van alle akademiese studies is dat hulle portefeulleomsetverhoudings van hoër as 100% vereis wat daartoe sal lei dat winste uit sulke strategieë teen die belegger se inkomstebelastingskoers belas sal word in plaas van haar kapitaalaanwinskoers. Afhangende van die belastingsjurisdiksie waaronder die belegger val, kan hierdie belastingseffek meer as 10% beloop, wat nie maklik deur enige belegginsstrategie herwin kan word nie. Kritici van studies wat abnormale winste dokumenteer beweer dat sulke winste ‘n gevolg kan wees van statistiese bevooroordeling soos die myn van data, of as gevolg van risikofaktore wat nie effektief deur die standaard CAPM bepaal word nie. Die empiriese toetse is dus sorgvuldig ontwerp om enige faktor uit te skakel wat die resultate van hierdie studie sal kan bevraagteken en ‘n betekenisvolle interpretasie van die resultate kan verhinder. Die toetse sluit byvoorbeeld sogenaamde “small-caps” uit om die klein firma effek uit te skakel, en die toetse is verder op twee verskillende monsters uitgevoer om myn van data as ‘n moontlke dryfveer vir die resultate uit te skakel. Normaalweg toets akademiese studies lang/ kort nulkostestrategieë. Dit is gevind dat momentum strategieë oor die algemeen kort posisies kies in vlugtige en nie-likiede aandele, wat dit moeilik maak om die geassosieerde transaksiekoste effektief te bepaal. Daar is dus besluit om ’n “lang-alleenlik” strategie te toets. Drie verskillende strategieë is getoets op ‘n steekproef van JSE “mid-caps” en “large-caps” en op ‘n gerepliseerde S&P500 index tussen Januarie 2000 en September 2009. Alle strategieë het positiewe abnormale winste opgelewer, en die nul hipotese dat momentum strategieë geen statisties beduidende abnormale winste kan oplewer kon op die 5% vlak van beduidendheid vir al drie strategieë van die JSE monster verwerp word. Verdere analiese het wel getoon dat momentumwinste baie meer opvallend vertoon het in opwaartse markte as in afwaartse markte, wat tot die gevolgtrekking kan lei dat makro-ekonomiese risiko ‘n moontlike verklaring kan wees. Daar was genoegsaam bewyse vir die Januarie effek as ‘n moontlike dryfveer agter die momentum-winste in die S&P500 monster.

Master of Arts / Department of Economics / William F. Blankenau / The aim of this paper is to provide an analysis of the consumption, investing, and savings data across racial minority categories within the United States. This paper examines the three biggest minority racial categories within the United States. These three racial categories include Blacks, Asians, and Hispanics. Consumption patterns across minority groups are examined in Chapter 2. These patterns give insights into the annual purchasing decisions of Blacks, Asians, and Hispanics. Many of the choices in budget allocation to specific categories have consequences and implications that are explained at the end of this chapter. Chapter 3 focuses on savings characteristics of minority populations in the United States. 401k plans, IRAs, and other retirement plans are examined for different savings behaviors and rates across minority groups. This paper examines the savings attitudes and survey responses of participants to get a feel of the overall savings climate across racial groups. Chapter 4 examines the investment behaviors and attitudes of different minorities. The financial risk tolerance and portfolio composition of different minority groups are examined to gain insights into the large wealth gap between Whites and minorities in the United States. In addition, this paper examines the hypothesized reasons for the differences between racial categories in consumption, investing, and saving choices. In Chapter 5, I explore the different theories and assumptions presented in the literature on these topics in order to give the reader insight into why racial groups might make different consumption, investment, and savings decisions even when controlling for socioeconomic variables. The final chapter explains the consequences of consumption, investment, and savings decisions for the individual, the community, and the United States.

Master Thesis intends to introduce Value Investing as an alternative invetment philospohy. Topic of the text also includes a discussion about inefficiencies in the current investment industry. Lastly, Dow Jones 30 analysis is performed.

Corporate Social Responsibility (CSR) is a new topic in finance which can be viewed from two different perspectives: that of the business (CSR), and that of the individual investor (Socially Responsible Investing, SRI). The evidence from this study suggested that in the short-term, there were no significant price effects on the SRI stocks around the announcement dates of the SRI constituent lists. In contrast, the returns of SRI portfolios over the sample period seemed to be superior to those of conventional firms. The regression analysis found that generally the SRI coefficients were insignificant; however using one of the models during the fifteen year period, it was found that SRI constituents attained a ROE that was 11.18% higher than conventional peers as well as a ROA that was 1.824% lower than conventional firms. When the period was restricted to 2004-2009 it was found that social performance was positively (and sometimes significantly) correlated with ROE.

The purpose of this paper is to explore the information content in a trading, confirm the relationship between information-trading probability (PIN) and asset returns, and apply PIN to construct an investing strategy on a point of uninformed trader¡¦s view. I develop a decision marking model about trading decision between under order-driven market which is combined on the decision tree of the concept of D. Easley et al. (1997) and Merton (1976) jump diffusion model for modifying the PIN model to apply to order-driven market. As a result, the daily PIN were positive relatively with return, and the investing strategy which was based my model could make profit significantly in the sample period at TWSE in 2003, this investing strategy can earn profit in down and up market condition both. This result supports that hedging against information asymmetric risk is potential.

Yee Cheng Loon’s dissertation abstract Model uncertainty exists in the mutual fund literature. Researchers employ a variety of models to estimate risk-adjusted return, suggesting a lack of consensus as to which model is correct. Model uncertainty makes it difficult to draw clear inference about mutual fund performance persistence. We explicitly account for model uncertainty by using Bayesian model averaging techniques to estimate a fund’s risk-adjusted return. Our approach produces the Bayesian model averaged (BMA) alpha, which is a weighted combination of alphas from individual models. Using BMA alphas, we find evidence of performance persistence in a large sample of US equity, bond and balanced mutual funds. Funds with high BMA alphas subsequently generate higher risk-adjusted returns than funds with low BMA alphas, and the magnitude of outperformance is economically and statistically significant. We also find that mutual fund investors respond to the information content of BMA alphas. High BMA alpha funds receive subsequent cash inflows while low BMA alpha funds experience subsequent cash outflows.

Lietuvos pensijų fondų formavimo bei jų veiklos vertinimas užsienio šalių kontekste yra svarbus analizuojant Lietuvos pensijų sistemos reformą. Darbo objektu buvo pasirinktas – pensijų fondas, kuris sklandžiai įgyvendinant pensijų reformą turi tapti svarbiu socialinio draudimo elementu. Magistrinio darbo tikslas buvo vertinti pensijų fondų formavimą ir pensijų fondų veiklą Lietuvoje ir užsienio šalyse. Nors daugiausia dėmesio buvo skirta Lietuvai, bet Lietuvos pensijų fondų formavimas bei veikimas visame darbe buvo siejamas ir lyginamas su užsienio šalių patirtimi. Magistrinis darbas patvirtina, kad pensijų fondai yra galimybė gauti didesnes pensijines pajamas. Svarbus žodis prieš tai buvusiame sakinyje yra „galimybė“, nes nei vienas pensijų fondas negarantuoja sėkmingos investicijos. Tačiau žinant demografines tendencijas (senstanti visuomenė) ir pasaulio šalių pensijų fondų veiklos rezultatus, pensijų fondai yra optimalus problemos sprendimas. Magistrinio darbo rezultatai rodo, kad pensijų fondų formavimą gali skatinti skirtingos priežastys, bet jų finansavimas yra panašus – pensijų fondai gauna fiksuotą darbuotojo pajamų dalį. Gerai diversifikuotas pensijų fondų portfelis ir investavimo išmanymas sudaro prielaidas gauti norimą investicinį prieaugį, kuris suteikia galimybę gauti didesnes pajamas senatvėje. / Evaluation of Lithuanian pension funds‘ formation and operating in context of foreign countries is important for analysing reform of Lithuanian pension system. Chosen object of the paper is pension fund, which will become important part of social insurance, if pension reform is fulfilled smoothly. The purpose of this paper was to evaluate formation and operating of pension funds in Lithuania and foreign countries. Though biggest attention was brought to Lithuania, but formation and operating of Lithuanian pension funds was associated and compared with experience of foreign countries. Master paper confirmed that pension funds are possibility to get bigger pension incomes. Important word in previous sentence is ’possibility’, as no pension fund guaranties successful investment. However demographical tendencies and operating results of other countries, pension funds are optimal solution to mentioned problems. Results of master paper show that formation of pension funs may be influenced by different causes, but financing of them is similar – pension funds get fixed portion from employees’ salary. Well-diversified pension fund portfolio and good investment skills is strong background to get desirable investment return, which will give opportunity to get bigger incomes after retirement.