Risks

Sandoval Álamos, Eduardo Enrique;Molina Mac-Kay, Claudio René;Taipe Aquino, Erwin Octavio

doi: 10.3390/risks13010001pmid: N/A

This study measured the individual and conjoint effects of Argentina’s primaries and first- and second-voting presidential election results, as well as their post-election comparative effects, on the stock market performance of its most relevant economic sectors. Within four different estimation methods, the state-space specification outperformed the rest. The findings suggest that investors can under/overreact compared to post-election sectors performance, the public services sector being the exception. Therefore, those investors who anticipated the election results by liquidating positions in companies in the materials sector and investing more in companies in the energy and other industrial sectors achieved a superior performance.

Laporšek, Suzana;Švagan, Barbara;Stubelj, Mojca;Stubelj, Igor

doi: 10.3390/risks13010002pmid: N/A

The paper examines the key determinants of European banks’ profitability by analyzing the return on assets (ROA), return on equity (ROE), net interest margin (NIM), and the risk-adjusted measures of profitability, RAROAA and RAROAE, across 34 European countries during the period from 2013 to 2018—a time characterized by economic recovery and significant regulatory reforms, including the implementation of Basel III standards. Using the Generalized Method of Moments (GMM) approach and data of 3076 European banks, the research addresses the complex interplay between internal (bank-specific) factors and external factors, including macroeconomic and industry-specific factors. The results show that profitability is positively associated with a higher capital adequacy, liquidity risk, and income diversification, but not for risk-adjusted profitability ratios. Credit risk, management efficiency, and excessive size have a negative effect on all studied profitability measures. Macroeconomic conditions, in particular, GDP growth and inflation, also have a significant impact on profitability. The findings offer valuable insights for policymakers, regulators, and financial institutions aiming to enhance profitability while maintaining the stability of the European banking sector.

Tweneboah, Osei K.;Ohene-Obeng, Kwesi A.;Mariani, Maria C.

doi: 10.3390/risks13010003pmid: N/A

This study delves into the dynamics of the Ghana Stock Exchange Composite Index (GSE-CI) over the period from 2011 to 2022, a symbolic emerging market index that presents unique challenges and opportunities for financial analysis. We characterize the GSE-CI using advanced analytical tools such as the Hurst exponent and R/S analysis to uncover its fractal properties and complex dynamics. The paper then advances to predictive modeling, employing an innovative approach with four variations of Stochastic Volatility (SV) models: SV with linear regressors, SV with Student’s t errors, SV with leverage effects, and a hybrid model combining Student’s t errors with leverage. Each model offers a unique perspective on forecasting the behavior of the GSE-CI, with the SV model incorporating Student’s t errors emerging as the most effective, as evidenced by the lowest Root Mean Square Error (RMSE) in our comparative evaluation. The integration of these models highlights their robustness in capturing the intricate volatility patterns of the GSE-CI, making a compelling case for their applicability to similar financial markets in other emerging economies. This research also paves the way for future investigations into other market indices and assets within and beyond the borders of emerging markets.

Zhang, Fan;Chen, Ping;Wu, Xueyuan

doi: 10.3390/risks13010004pmid: N/A

This paper introduces a tontine-like annuity fund designed to provide lifelong income to its participants. Initially, each member contributes a lump-sum payment into a trust fund as a joining premium. Participants then receive benefits over time, based on their survival. As members pass away, their share of payouts is redistributed among the survivors, resulting in increased payouts for those remaining. Differing from traditional tontines, which assume a uniform mortality risk, this fund accommodates participants of various ages and allows new members to join during its operation. To accommodate these features, the authors utilize age-structured models (ASMs) to determine fair premiums for new entrants and to analyze the dynamics of benefit distribution. The core objective of this paper is to develop a pension model using ASMs, recognizing its significant potential for adaptation and expansion. The primary mathematical approach employed is the Maximum Principle from optimal control theory, which helps in deriving explicit solutions for the optimal subsidy strategy. Through numerical examples and detailed illustrations, the paper demonstrates that participants who remain in the cohort longer receive greater subsidies. Additionally, the study finds that adverse shocks lead to a smaller population and thus fewer subsidies. Conversely, starting with a larger initial cohort population tends to increase the overall population, resulting in more subsidies. However, higher costs associated with subsidies lead to their reduction. Our analysis reveals the complex interplay of factors influencing the sustainability and effectiveness of the proposed annuity model.

Tortia, Ermanno C.

doi: 10.3390/risks13010005pmid: N/A

This paper analyzes the possibility of creating worker cooperatives in which members are paid not through wages but through dividends calculated on the organization’s residual income, as stipulated by the economic theory of the labor-managed firm. It is shown how dividends paid to members can be linked to the value of their financial participation in the capital of the cooperative. In the presence of a financial market, cooperative shares would be issued and allocated to both members and non-member outside investors, thus addressing the problem of the under-capitalization of worker cooperatives. It is hypothesized that the strong financial incentives of this type of capital structure, together with involvement in the democratic governance of the cooperative, peer pressure, and other horizontal monitoring mechanisms, would support members’ intrinsic motivation to work and help overcome the problem of free-riding in the labor process. Flexible economic and financial structure in the absence of fixed wages would promote job stability, as already observed in existing worker cooperatives.