International Asset Allocation with Regime Shifts

The aim of this article is to clarify the apparent confusion in the literature about the impact of a revenue sharing arrangement on the competitive balance in a sports league. A crucial factor in the discussion seems to be the impact of the absolute rather than the relative quality of the teams on the clubs' revenues. The analysis shows that revenue sharing improves the competitive balance under both the profit- and the utility-maximizing hypotheses.

Revenue sharing and competitive balance in professional team sports

Environmental, social and governance (ESG) investing is a large and influential industry. Its activities could be illuminated, appraised and improved by academic research. Unfortunately, research to date has focused on measuring return performance. A wider range of topics is necessary before research can properly inform investors, companies and regulators. This paper contributes to the challenge by systematically exploring the literature to reveal a richer array of topics: the heterogeneous nature of ESG investing, its costs and motivations, and its management literature origins. In addition to these established topics, five emerging themes are identified: the human element, climate change, fund flows, fixed income and the rise of non-Western players.

Emerging new themes in environmental, social and governance investing: a systematic literature review

The growing importance of SRI in the investment arena has resulted in considerable academic interest in the performance of socially responsible equity mutual funds. Remarkably, no attempts have been made to evaluate the performance of mutual funds that invest in socially responsible fixed-income securities. This study fills that gap by measuring the performance of socially responsible bond and balanced funds relative to matched samples of conventional funds, over the period 1987–2003. Using multi-index performance evaluation models, we show that the average SRI bond fund performed similar to conventional funds, while the average SRI balanced fund outperformed its conventional peers by more than 1.3% per year. The expenses charged by SRI funds, match those charged by conventional funds and, evidently, do not cause SRI funds to underperform.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1468-5957.2008.02119.x

Socially Responsible Fixed-Income Funds

We study whether and how a country's environmental, social, and governance (ESG) performance relates to its sovereign borrowing costs in international capital markets. We hypothesize that good ESG performance plays an economic role: It signals a country's commitment to sustainability and long-term orientation and is a buffer against negative shocks, leading to lower sovereign bond yield spreads. Using a sample of 20 OECD countries over the period 1996–2012, we show that countries with good ESG performance are associated with lower default risk and lower sovereign bond yield spreads. Moreover, we show that the social and governance dimensions have a significant negative association with sovereign bond yield spreads, whereas the environmental dimension does not.

/pdf/sovereign-bond-yield-spreads-and-sustainability-an-empirical-submgknlik.pdf

Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries

While the literature on Socially Responsible Investment (SRI) is mainly focused on the stock market, little attention has been paid to SRI in sovereign bonds. This paper investigates the effect of taking into account socially responsible indicators for countries, the Vigeo Sustainability Ratings (VSR), on the efficient frontier formed with the sovereign bonds of twenty developed countries. It shows that it is possible to increase the portfolios’ VSR rating without significantly harming the risk/return relationship. The analysis then focuses on specific ratings relating to a) the environment, b) social concerns, and c) public governance. The results suggest that socially responsible portfolios of sovereign bonds can be built without a significant diversification cost.

Sovereign Bonds and Socially Responsible Investment

In theory, investors choosing to invest only in socially responsible entities restrict their investment universe and should thus be penalized in a mean-variance framework. When computed, this penalty is usually viewed as valid for all socially responsible investors. This paper shows however that the additional cost for responsible investing depends essentially on the investors’ risk aversion. Social ratings are introduced in mean-variance optimization through linear constraints to explore the implications of considering a social responsibility (SR) threshold in the traditional Markowitz (1952) portfolio selection setting. We consider optimal portfolios both with and without a risk-free asset. The SR-efficient frontier may take four different forms depending on the level of the SR threshold: a) identical to the non-SR frontier (i.e. no cost), b) only the left portion is penalized (i.e. a cost for high-risk-aversion investors only), c) only the right portion is penalized (i.e. a cost for low-risk aversion investors only) and d) the whole frontier is penalized (i.e. a positive cost for all the investors). By precisely delineating under which circumstances SRI is costly, those results help elucidate the apparent contradiction found in the literature about whether or not SRI harms diversification.

/pdf/social-responsibility-and-mean-variance-portfolio-selection-2cjjs4rl2o.pdf

Social responsibility and mean-variance portfolio selection

Empirical evidence shows that fundamental models have produced disappointing results over the 
past 20 years while carry trade strategies have performed superbly. But the real picture is much 
more complex. In fact, the track records of both strategies have varied considerably. This article 
shows that they have actually alternated between periods of profitability and underperformance. It 
also shows that when carry trade strategies perform well, fundamental strategies do poorly, and vice versa. Crises appear to play a significant role in the alternation of investment styles on currency markets. In contrast to carry trades, fundamental strategies perform remarkably well in crises. A portfolio that rotates between these two types of strategies, based on a risk aversion indicator such as implied equity volatility, would substantially outperform a pure carry trade strategy and would be robust to crises.

/pdf/the-revenge-of-purchasing-power-parity-on-carry-trades-1dx05c8wiy.pdf

The Revenge of Purchasing Power Parity on Carry Trades during Crises

The relative age effect (rae) refers to the performance-related advantage of being born early in a cohort In education economics, the rae shows that children born early in the year obtain better results than their peers This is also true in sports education in which children are grouped by age during their training period The main explanation of rae is the cutoff dates in youth sport Because the cut-off date never changes, it is particularly difficult in education economics to identify the causal effect of the cut-off date on rae On the other hand, sports and in particular soccer provides cases where the cut-off date in youth school changed : The French Football Association changed the cut-off date from during the 1995-1996 season We show (1) the rae is caused by a change in the cut-off date ; (2) the rae still exists for older players (3) football players born in the fourth quarter have a physical superiority measured by the body mass index (bmi)
 Codes JEL : L83 ; C90

The Relative Age Effect

Avec la tres forte hausse des droits de retransmission televisee des matchs et la liberalisation du marche des transferts au niveau europeen, le modele economique des clubs de football professionnel a enormement change au cours de ces vingt dernieres annees. Ceci a notamment induit une tres forte hausse des salaires et des indemnites de transfert. Des inegalites tres marquees entre clubs, mais aussi entre championnats nationaux, en ont ainsi resulte. Notre article presente les differentes pistes de regulation pour les instances dirigeantes afin de remedier a ces problemes.

Football européen et régulation : une question de gouvernance des instances dirigeantes

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