IF 2.2

Risks Pub Date : 2024-05-14 DOI: 10.3390/risks12050081

Antoine B. Awad, Robert Gharios, Bashar Abu Khalaf, Lena A. Seissian

{"title":"Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region","authors":"Antoine B. Awad, Robert Gharios, Bashar Abu Khalaf, Lena A. Seissian","doi":"10.3390/risks12050081","DOIUrl":"https://doi.org/10.3390/risks12050081","url":null,"abstract":"This study examined the relationship between the board characteristics and stock performance of commercial banks. Our analysis is based on a sample of 65 banks across 10 MENA countries and their quantitative data extracted between 2013 and 2022. This research employed pooled OLS, and fixed and random effect regression to confirm the association between board size, board independence, number of board meetings, and CEO duality with stock performance measured by the bank’s share price and market-to-book ratio. Further, several control variables were utilized such as the bank’s capital adequacy, profitability, and size. The empirical findings reveal that board independence positively affects the bank stock performance while the board size shows a negative relationship. This suggests that banks with fewer board members and high independence levels have their shares outperforming others. However, we found that having frequent board meetings per year and separate roles for the CEO and chairman have no impact on bank stock performance. Moreover, the findings indicate that the bank’s capital adequacy, size, and profitability have a positive effect on the stock performance. To test the robustness of our analysis, we implemented a one-limit Tobit model, which enables lower-bound censoring, and obtained similar findings thus confirming our hypotheses. From a practical perspective, our findings highlight the importance of the board size and the directors’ independence to MENA regulators and policymakers in an effort to implement an effective corporate governance system. Specifically, MENA banks are advised to decrease the number of board members, and this should reduce the number of annual board meetings which, in turn, should maximize performance.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"43 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-05-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140934732","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Non-Differentiable Loss Function Optimization and Interaction Effect Discovery in Insurance Pricing Using the Genetic Algorithm 利用遗传算法优化保险定价中的无差异损失函数并发现交互效应

IF 2.2

Risks Pub Date : 2024-05-14 DOI: 10.3390/risks12050079

Robin Van Oirbeek, Félix Vandervorst, Thomas Bury, Gireg Willame, Christopher Grumiau, Tim Verdonck

{"title":"Non-Differentiable Loss Function Optimization and Interaction Effect Discovery in Insurance Pricing Using the Genetic Algorithm","authors":"Robin Van Oirbeek, Félix Vandervorst, Thomas Bury, Gireg Willame, Christopher Grumiau, Tim Verdonck","doi":"10.3390/risks12050079","DOIUrl":"https://doi.org/10.3390/risks12050079","url":null,"abstract":"Insurance pricing is the process of determining the premiums that policyholders pay in exchange for insurance coverage. In order to estimate premiums, actuaries use statistical based methods, assessing various factors such as the probability of certain events occurring (like accidents or damages), where the Generalized Linear Models (GLMs) are the industry standard method. Traditional GLM approaches face limitations due to non-differentiable loss functions and expansive variable spaces, including both main and interaction terms. In this study, we address the challenge of selecting relevant variables for GLMs used in non-life insurance pricing both for frequency or severity analyses, amidst an increasing volume of data and variables. We propose a novel application of the Genetic Algorithm (GA) to efficiently identify pertinent main and interaction effects in GLMs, even in scenarios with a high variable count and diverse loss functions. Our approach uniquely aligns GLM predictions with those of black box machine learning models, enhancing their interpretability and reliability. Using a publicly available non-life motor data set, we demonstrate the GA’s effectiveness by comparing its selected GLM with a Gradient Boosted Machine (GBM) model. The results show a strong consistency between the main and interaction terms identified by GA for the GLM and those revealed in the GBM analysis, highlighting the potential of our method to refine and improve pricing models in the insurance sector.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"52 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-05-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140934808","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Exploring Entropy-Based Portfolio Strategies: Empirical Analysis and Cryptocurrency Impact 探索基于熵的投资组合策略：经验分析和加密货币的影响

IF 2.2

Risks Pub Date : 2024-05-11 DOI: 10.3390/risks12050078

Nicolò Giunta, Giuseppe Orlando, Alessandra Carleo, Jacopo Maria Ricci

{"title":"Exploring Entropy-Based Portfolio Strategies: Empirical Analysis and Cryptocurrency Impact","authors":"Nicolò Giunta, Giuseppe Orlando, Alessandra Carleo, Jacopo Maria Ricci","doi":"10.3390/risks12050078","DOIUrl":"https://doi.org/10.3390/risks12050078","url":null,"abstract":"This study addresses market concentration among major corporations, highlighting the utility of relative entropy for understanding diversification strategies. It introduces entropic value at risk (EVaR) as a coherent risk measure, which is an upper bound to the conditional value at risk (CVaR), and explores its generalization, relativistic value at risk (RLVaR), rooted in Kaniadakis entropy. Through extensive empirical analysis on both developed (i.e., S&P 500 and Euro Stoxx 50) and developing markets (i.e., BIST 100 and Bovespa), the study evaluates entropy-based criteria in portfolio selection, investigates model behavior across different market types, and assesses the impact of cryptocurrency introduction on portfolio performance and diversification. The key finding indicates that entropy measures effectively identify optimal portfolios, particularly in scenarios of heightened risk and increased concentration, crucial for mitigating negative net performances during low returns or high turnover. Bitcoin is primarily used for diversification and performance enhancement in the BIST 100 index, while its allocation in other markets remains minimal or non-existent, confirming the extreme concentration observed in stock markets dominated by a few leading stocks.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"26 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140934806","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Uncertainty Reduction in Operational Risk Management Process 减少操作风险管理过程中的不确定性

IF 2.2

Risks Pub Date : 2024-05-11 DOI: 10.3390/risks12050077

Guy Burstein, Inon Zuckerman

引用次数: 0

Test of Volatile Behaviors with the Asymmetric Stochastic Volatility Model: An Implementation on Nasdaq-100 用非对称随机波动模型测试波动行为：纳斯达克 100 指数的实施

IF 2.2

Risks Pub Date : 2024-05-03 DOI: 10.3390/risks12050076

Elchin Suleymanov, Magsud Gubadli, Ulvi Yagubov

{"title":"Test of Volatile Behaviors with the Asymmetric Stochastic Volatility Model: An Implementation on Nasdaq-100","authors":"Elchin Suleymanov, Magsud Gubadli, Ulvi Yagubov","doi":"10.3390/risks12050076","DOIUrl":"https://doi.org/10.3390/risks12050076","url":null,"abstract":"The present study aimed to investigate the presence of asymmetric stochastic volatility and leverage effects within the Nasdaq-100 index. This index is widely regarded as an important indicator for investors. We focused on the nine leading stocks within the index, which are highly popular and hold significant weight in the investment world. These stocks are Netflix, PayPal, Google, Intel, Microsoft, Amazon, Tesla, Apple, and Meta. The study covered the period between 3 January 2017 and 30 January 2023, and we employed the EViews and WinBUGS applications to conduct the analysis. We began by calculating the logarithmic difference to obtain the return series. We then performed a sample test with 100,000 iterations, excluding the first 10,000 samples to eliminate the initial bias of the coefficients. This left us with 90,000 samples for analysis. Using the results of the asymmetric stochastic volatility model, we evaluated both the Nasdaq-100 index as a whole and the volatility persistence, predictability, and correlation levels of individual stocks. This allowed us to evaluate the ability of individual stocks to represent the characteristics of the Nasdaq-100 index. Our findings revealed a dense clustering of volatility, both for the Nasdaq-100 index and the nine individual stocks. We observed that this volatility is continuous but has a predictable impact on variability. Moreover, apart from Intel, all the stocks in the model exhibited both leverage effects and the presence of asymmetric relationships, as did the Nasdaq-100 index. Overall, our results show that the characteristics of stocks in the model are like the volatility characteristic of the Nasdaq-100 index and can represent it.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"94 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-05-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140830942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Analyzing the Influence of Risk Models and Investor Risk-Aversion Disparity on Portfolio Selection in Community Solar Projects: A Comparative Case Study 分析社区太阳能项目风险模型和投资者风险规避差异对投资组合选择的影响：案例比较研究

IF 2.2

Risks Pub Date : 2024-04-30 DOI: 10.3390/risks12050075

Mahmoud Shakouri, Chukwuma Nnaji, Saeed Banihashemi, Khoung Le Nguyen

{"title":"Analyzing the Influence of Risk Models and Investor Risk-Aversion Disparity on Portfolio Selection in Community Solar Projects: A Comparative Case Study","authors":"Mahmoud Shakouri, Chukwuma Nnaji, Saeed Banihashemi, Khoung Le Nguyen","doi":"10.3390/risks12050075","DOIUrl":"https://doi.org/10.3390/risks12050075","url":null,"abstract":"This study examines the impact of risk models and investors’ risk aversion on the selection of community solar portfolios. Various risk models to account for the volatility in the electrical power output of community solar, namely variance (Var), SemiVariance (SemiVar), mean absolute deviation (MAD), and conditional value at risk (CVaR), were considered. A statistical model based on modern portfolio theory was employed to simulate investors’ risk aversion in the context of community solar portfolio selection. The results of this study showed that the choice of risk model that aligns with investors’ risk-aversion level plays a key role in realizing more return and safeguarding against volatility in power generation. In particular, the findings of this research revealed that the CVaR model provides higher returns at the cost of greater volatility in power generation compared to other risk models. In contrast, the MAD model offered a better tradeoff between risk and return, which can appeal more to risk-averse investors. Based on the simulation results, a new approach was proposed for optimizing the portfolio selection process for investors with divergent risk-aversion levels by averaging the utility functions of investors and identifying the most probable outcome.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"13 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140830814","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

The Impact of Firm Risk and the COVID-19 Crisis on Working Capital Management Strategies: Evidence from a Market Affected by Economic Uncertainty 公司风险和 COVID-19 危机对营运资本管理策略的影响：来自受经济不确定性影响的市场的证据

IF 2.2

Risks Pub Date : 2024-04-22 DOI: 10.3390/risks12040072

Hossein Tarighi, Grzegorz Zimon, Mohammad Javad Sheikh, Mohammad Sayrani

{"title":"The Impact of Firm Risk and the COVID-19 Crisis on Working Capital Management Strategies: Evidence from a Market Affected by Economic Uncertainty","authors":"Hossein Tarighi, Grzegorz Zimon, Mohammad Javad Sheikh, Mohammad Sayrani","doi":"10.3390/risks12040072","DOIUrl":"https://doi.org/10.3390/risks12040072","url":null,"abstract":"The present study aims to investigate the impact of the COVID-19 crisis and firm risk on working capital management policies among manufacturing firms listed on the Tehran Stock Exchange (TSE). The study sample consists of 1200 observations and 200 companies listed on the TSE over a six-year period from 2016 to 2021; furthermore, the statistical method used to test the hypotheses is ordinary least squares (OLS). The results show that the COVID-19 pandemic has led managers to increase current assets to total assets ratio (CATAR), current ratio (CR), quick ratio (QR), net working capital (NWC), cash to current assets (CTCA) ratio, while it has caused a decrease in operational cycle (OC), days account receivables (DAR), and current liabilities to total assets ratio (CLTAR). Furthermore, we find that the higher the company’s risk, the more managers are motivated to embrace the working capital investment policy, net working capital, cash to current assets ratio, and cash conversion efficiency (CCE). In general, our findings indicate that during times of crisis, Iranian companies tend to adopt conservative working capital policies to ensure sufficient liquidity to respond appropriately to unforeseen events. In this study, the theory of liquidity preference aligns with the observed behavior of firms in response to the COVID-19 crisis and firm risk, where the emphasis on liquidity and short-term financial stability becomes paramount.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"40 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-04-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140636896","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Determining Safe Withdrawal Rates for Post-Retirement via a Ruin-Theory Approach 通过毁灭理论方法确定退休后的安全提取率

IF 2.2

Risks Pub Date : 2024-04-19 DOI: 10.3390/risks12040070

Diba Daraei, Kristina Sendova

{"title":"Determining Safe Withdrawal Rates for Post-Retirement via a Ruin-Theory Approach","authors":"Diba Daraei, Kristina Sendova","doi":"10.3390/risks12040070","DOIUrl":"https://doi.org/10.3390/risks12040070","url":null,"abstract":"To ensure a comfortable post-retirement life and the ability to cover living expenses, it is of utmost importance for individuals to have a clear understanding of how long their pre-retirement savings will last. In this research, we employ a ruin-theory approach to model the inflows and the outflows of retirees’ portfolios. We track all transactions within the portfolios of retired clients sourced by a registered investment provider to Canada’s Financial Wellness Lab at Western University. By utilizing an advanced ruin model, we calculate the mean and the median time it takes for savings to be exhausted, the probabilities of exhaustion of funds within the retirees’ expected remaining lifetime while accounting for the observed withdrawal rates, and the deficit at ruin if a retiree has used up all of their savings. We also account for gender as well as for the risk tolerance of retired clients using a K-Means clustering algorithm. This allows us to compare the financial outcomes for female and male retirees and to enhance some findings in the literature. In the final phase of our study, we compare the results obtained by our methodology to the 4% rule which is a widely used approach for post-retirement spending. Our results show that most retirees can withdraw safely more than they currently do (around 2.5%). A withdrawal rate of about 4.5% is proved to be safe, but it might not provide sufficient income for most retirees since it yields approximately CAD 20,000 per year for male retirees in the highest risk tolerance group who withdraw about 4.5% annually.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"24 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140630729","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Effect of Capital Structure on the Financial Performance of Ethiopian Commercial Banks 资本结构对埃塞俄比亚商业银行财务业绩的影响

IF 2.2

Risks Pub Date : 2024-04-18 DOI: 10.3390/risks12040069

Seid Muhammed, Goshu Desalegn, Prihoda Emese

{"title":"Effect of Capital Structure on the Financial Performance of Ethiopian Commercial Banks","authors":"Seid Muhammed, Goshu Desalegn, Prihoda Emese","doi":"10.3390/risks12040069","DOIUrl":"https://doi.org/10.3390/risks12040069","url":null,"abstract":"This study aimed to examine the effects of capital structure on the financial performance of Ethiopian commercial banks. The dependent variable, financial performance, is measured by Return on Assets (ROA), while factors such as loan-to-deposit ratio (LDR), asset-to-total equity ratio (ATER), total deposit-to-total asset ratio (TDTAR), capital adequacy ratio (CAD), and asset growth ratio (GA) were used as proxy independent variables to gauge capital structure. Using a quantitative approach and an explanatory research design, this study analyzes 6 years of audited financial reports from 14 commercial banks in Ethiopia. This investigation employs a random effect regression model and Stata 14 software package to explore the relationships among these variables. The result revealed that both the loan-to-deposit ratio and the total deposit-to-total asset ratio have a positive and significant impact on financial performance, while the asset growth ratio showed a negative effect. Based on these findings, this study recommends that bank authorities concentrate on bolstering their deposit base, managing asset growth efficiently, maintaining adequate capital levels, and optimizing leverage levels to improve financial performance and ensure long-term sustainability in the banking sector. Additionally, this research is anticipated to inform policymakers about regulatory frameworks for banks and assist banking managers in formulating effective capital financing strategies within the Ethiopian commercial banking sector, thus enriching the existing literature on the relationship between capital structure and financial performance.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"77 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140627214","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Optimising Portfolio Risk by Involving Crypto Assets in a Volatile Macroeconomic Environment 在动荡的宏观经济环境中通过加密资产优化投资组合风险

IF 2.2

Risks Pub Date : 2024-04-17 DOI: 10.3390/risks12040068

Attila Bányai, Tibor Tatay, Gergő Thalmeiner, László Pataki

{"title":"Optimising Portfolio Risk by Involving Crypto Assets in a Volatile Macroeconomic Environment","authors":"Attila Bányai, Tibor Tatay, Gergő Thalmeiner, László Pataki","doi":"10.3390/risks12040068","DOIUrl":"https://doi.org/10.3390/risks12040068","url":null,"abstract":"Portfolio diversification is an accepted principle of risk management. When constructing an efficient portfolio, there are a number of asset classes to choose from. Financial innovation is expanding the range of instruments. In addition to traditional commodities and securities, other instruments have been added. These include cryptocurrencies. In our study, we seek to answer the question of what proportion of cryptocurrencies should be included alongside traditional instruments to optimise portfolio risk. We use VaR risk measures to optimise the process. Diversification opportunities are evaluated under normal return distributions, thick-tailed distributions, and asymmetric distributions. To answer our research questions, we have created a quantitative model in which we analysed the VaR of different portfolios, including crypto-diversified assets, using Monte Carlo simulations. The study database includes exchange rate data for two consecutive years. When selecting the periods under examination, it was important to compare favourable and less favourable periods from a macroeconomic point of view so that the study results can be interpreted as a stress test in addition to observing the diversification effect. The first period under examination is from 1 September 2020 to 31 August 2021, and the second from 1 September 2021 to 31 August 2022. Our research results ultimately confirm that including cryptoassets can reduce the risk of an investment portfolio. The two time periods examined in the simulation produced very different results. An analysis of the second period suggests that Bitcoin’s diversification ability has become significant in the unfolding market situation due to the Russian-Ukrainian war.","PeriodicalId":21282,"journal":{"name":"Risks","volume":"36 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2024-04-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140627836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

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