Journal Article10.2139/SSRN.1328045
Is Sovereign Wealth Fund Investment Destabilizing
TL;DR: In this paper, the authors investigate whether accusations by the popular press regarding the potential destabilizing force of sovereign wealth fund (SWF) investment have merit and find that SWF investments are associated with a reduction in the compensation of risk over the five-year term examined.
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Abstract: We investigate whether accusations by the popular press regarding the potential destabilizing force of sovereign wealth fund (SWF) investment have merit. SWF investments are associated with a reduction in the compensation of risk over the five-year term examined. Firm volatility decomposition suggests that it is mainly idiosyncratic risk that drives these impacts. Granger causality results suggest that SWFs are poorly informed in their investments (compared to the market) or they have nonfinancial motivations. There is no evidence that the media coverage precedes the poor performance. These findings suggest that SWF investment could be potentially destabilizing.
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Citations
The Investment Strategies of Sovereign Wealth Funds
TL;DR: This article examined the direct private equity investment strategies across sovereign wealth funds and their relationship to the funds' organizational structures, and found that SWFs seem to engage in a form of trend-chasing, since they are more likely to invest at home when domestic equity prices are higher, and invest abroad when foreign prices were higher.
Friends or foes? Target selection decisions of sovereign wealth funds and their consequences
Jason D. Kotter,Ugur Lel +1 more
TL;DR: In this article, the authors examined investment strategies of sovereign wealth funds and their effect on target firm valuation, and how both of these are related to SWF transparency, and found that SWFs prefer large and poorly performing firms facing financial difficulties.
114
Sovereign wealth fund investment and the return-to-risk performance of target firms
TL;DR: This article investigated the relationship between sovereign wealth fund (SWF) investment and the return-to-risk performance of target firms and found that target firm raw returns decline following SWF investment.
111
Do Sovereign Wealth Funds Herd in Equity Markets
TL;DR: In this article, the authors examine the investment behaviour of sovereign wealth funds focusing in particular on their attitude towards herding across industries in equity markets, where herding is defined as a "game of herding".
23
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