Investment Strategy
Author- Tanmay Damodar Mungekar
Retailer’s investment strategy into the retail market
Zhuo et all (2022) states that this paper explores the interaction between the retailer’s investment strategy and the supplier’s mode of entry into the retail market in a two-echelon supply chain. The retailer invests in upgrading the supplier’s production technology to reduce the production cost. To obtain more retail profits, the supplier chooses to build a direct channel to encroach on the retail market or hold the retailer’s shares. In addition, they analyse the influence of competition intensity and the percentage of the retailer’s shares held by the supplier on the supply chain members optimal decisions.
There are some potential directions for future research. First, the supplier may have more precise knowledge of product quality information. Therefore, future studies could investigate how information asymmetry with respect to product quality shapes the results obtained in this paper. Second, both the supplier and the retailer have sufficient capital in this paper. In practice, many enterprises are subject to a lack of funds. It may be interesting to explore the supply chain players investment strategies with limited operating capital.
Stock Repurchases as a Long-Term Investment Strategy
Abdou & Gupta (2021) concludes that they investigated the repurchase event in two phases: (I) Announcement of the program; and (II) Degree of implementation. They design the complete transaction, whereby the company starts with are purchase announcement in Phase I and implements the program in Phase II. They analyse each stage’s process to evaluate its impact on long-term shareholder value and the consequent possible trading strategies.
Thus, although shareholders that keep their stock following a repurchase announcement gain over the short-term, future corporate actions can significantly affect shareholder wealth in the long-term. Hence, they recommend shareholders continue to monitor companies actions following a repurchase program implementation.
Business Strategy and Labour Investment Efficiency
Habib & Hasan (2021) states that in this study, they explore the association between firm‐level business strategies and labour investment efficiency. Given the considerable direct and indirect labour‐related expenses for manufacturing firms, efficient investment in labour is vital to maintain profitability and competitiveness in the market. They argue that prospector‐type firms are more likely to deviate from optimum investment in labour because of the agency problem (i.e. incentives for ’empire building’) and/ or uncertainty surrounding operational activities, compared to defenders.
Investment Strategies and Returns of University Endowment Funds.
Liaw (2020) says that in this study, the endowment model generated strong returns for large university endowment funds in recent years. Such success has attracted endowments of all sizes to in-crease exposure in alternative assets. During 2002 to 2008, alternative investments comprised 38.23 percent of portfolios for endowments with over $1 billion. During 2009 to 2017, he averaged 58.89 percent. For endowments with less than $1 billion, the allocations also increased significantly. However, the investment performance declined as the allocations to alternative assets increased. The results from the panel data regression did not show positive impacts of alternatives on investment returns.
The research can be extended to use more detailed, refined independent variables. The independent variables used in the regression are the broad classification of equities, fixed income, and alternatives. Within each category, there are different types. For example, equities include various types of equity securities and indexes, domestic, international, and emerging markets. Fixed income covers governments, corporates, domestic, foreign, and others. There are also several asset types in alternatives such as hedge funds, private equity, and venture capital. A more complete empirical study can be performed with those re-fined asset types when those data are available in the future. Another possible extension is to compare the investment strategies and performances of university endowment funds and pension funds. They all have long-term investment horizons and they invest in similar asset classes. However, there are regulatory and pay out/spending differences.
Active Investment Strategies under Tracking Error Constraints.
Maxwell & Vuuren, (2020) states that in this study benchmarks are generally inefficient and any relative performance measure for these benchmarks provides an inaccurate measure of true investor satisfaction. Optimising under such performance measures, in this excess/relative space, results in sub-optimal portfolios and failure to capture the best result for the investor. As it is more difficult to change investor mind-sets than to navigate these restrictions, the latter has been researched extensively.
Systematic Investment Strategies.
Giamouridis (2017) writes that he has identified some key areas for research that could have a high practical impact. His assessment is based not only on interactions with asset managers and investors who pursue systematic investment strategies but also on conversations with discretionary, active (i.e., fundamental/macro) investors who recognize that the growth of assets in systematic investments affects their performance. Professionals with quant training have never been in higher demand—they appeal to all types of investors. So, he would recommend that any young or prospective investment professional thinking about career development seriously consider quant training. The CFA designation provides an outstanding background for this career path. But perhaps that is only the starting point. You should also be able to read and comprehend academic papers. The Financial Analysts Journal is an excellent publication that offers papers full of relevant and useful information for practitioners. There are a number of other places where you can find practical research, such as the CFA Digest and similar publications from investment banks that highlight topical academic research. Finally, and most importantly, you should be able to think how you can tackle your day-to-day tasks and longer-term projects diligently, rigorously, and scientifically.
Foreign Direct Investment Strategies and Firms Capabilities.
Siotis (1999) emphasizes that the paper argues that the presence of geographically bounded spillovers can exercise a powerful influence on FDI decisions. Some of the results presented here stand in contrast to hypotheses typically made in the FDI literature. For instance, it is generally assumed that the MNC possesses some firm-specific advantage and that host country firms are less efficient. In that context, the introduction of spillovers does not alter this presumption, since they are assumed to flow from the MNC to host-country firms only. In this paper, however, the presence of spillovers leads to some unconventional results. It is no longer the case that the MNC is always in a leadership position vis a vis local firms, since technologically backward firms may engage in FDI to benefit from localized externalities.
Investment Strategies of FIIs in the Indian Equity Market.
Sehgal & Tripathi (2009) states that the FIIs play a dominant role in the emerging markets including India. Hence, it is important to analyse their investment behaviour as it has strong implications for security pricing as well as market characteristics such as volatility, liquidity and information efficiency. They specifically examined if FIIs adopt trading strategies such as positive feedback and herding strategies in the Indian environment. They find that FIIs are positive feedback traders at aggregate level when we use monthly returns files. However, they do not get any such evidence when they use daily data. This may probably be due to the fact that FIIs do not react to the market information instantaneously and wait for the return pattern to crystallize. There is a common belief that FIIs investments drive the market and have implications for the policy makers to control their activities. Their results suggest that it is actually the market performance which propels FIIs activity. They find that FIIs exhibits intense herding behaviour at the aggregate level. They also show clustering effect at an individual level which is relatively less. This difference in herding behaviour owe to the fact that individually FIIs also consider stock fundamentals besides mimicking each other’s behaviour. Additionally, FIIs share expectations more at aggregate level than at the individual level.
On the Contrarian Investment Strategy.
Chan (1988) states that in this study, the estimation of the abnormal return to the contrarian investment strategy is sensitive to the model and estimation methods. Using a simple asset-pricing model, the CAPM and an empirical method that is free of the problems caused by risk changes, he finds that the contrarian strategy earns a very small abnormal return, which is probably economically insignificant. If the experiment is interpreted as a test of market overreaction, he finds no strong evidence in support of the hypothesis. Two features about winners and losers in the stock market make the estimation of abnormal returns sensitive to the procedures used. First, the losers betas increase after a period of abnormal loss, and the winners betas decrease after a period of abnormal gain. Betas estimated from the past should not be used. Second, when we evaluate the risk-return relation over an extended period of time that involves updating of portfolios, it is incorrect to base the analysis on the relation between the average return and average beta because both the betas and expected market-risk premium might respond to some common state variables and are thus correlated. The contrarian strategy appears to have an ability to pick riskier losers when the expected market-risk premium is high, probably because losers suffer larger losses at economic downturns than at upturns. An investor who follows the contrarian strategy is likely to find that his or her risk exposure varies inversely with the level of economic activity (and consumption). On average, the investor realizes above-market returns, but that excess return is likely to be a normal compensation for the risk in the investment strategy.
Information Technology Investment Strategies Under Declining Technology Cost.
Demirhan et all (2005) concludes that the declining cost of it over time poses significant challenges to competing firms that depend on IT investments to improve the quality of their products. In this paper, they analysed the impact of a decline in IT cost on firms that enter the market at different times and hence have different cost structures. They showed that a decline in IT cost has different effects on firms depending on whether the market is price-sensitive or quality-sensitive. In a price-sensitive market, a decline in IT cost benefits both firms. Consumers also benefit because they pay a lower price per unit quality with an increasing decline in IT cost. In a quality-sensitive market, a decline in IT cost intensifies the competition between firms. A decline in IT cost always hurts the first entrant, however, the second entrant benefits from a decline in IT cost only when the first entrant assumes a defensive approach and reduces its investment in response to a decline in IT cost.
Conclusion:
In conclusion, the interaction between a retailer’s investment strategy and a supplier’s mode of entry into the retail market can have significant implications for supply chain dynamics. The retailer’s investment in upgrading the supplier’s production technology can lead to cost reductions, influencing the supplier’s decision to either build a direct channel or hold the retailer’s shares to increase profits. Competition intensity and the percentage of retailer shares held by the supplier also play crucial roles in determining optimal decisions. Future research could explore how information asymmetry regarding product quality impacts the results of such strategies, as well as investigate investment strategies in supply chains with limited capital. Additionally, examining the impact of repurchase events on long-term shareholder value and exploring the association between firm-level strategies and labour investment efficiency could provide valuable insights. Furthermore, the success of the endowment model in generating returns for large university endowment funds highlights the growing interest in alternative assets. However, the impact of increasing allocations to alternative assets on investment performance needs further investigation. A more detailed analysis using refined independent variables and a comparison of investment strategies between university endowment funds and pension funds could yield valuable insights for investors. Finally, research on the impact of geographically bounded spillovers on FDI decisions and the trading strategies of FIIs in emerging markets such as India can provide valuable insights for policymakers and market participants. Understanding how the market performance drives FIIs’ activity and the herding behaviour of FIIs can help policymakers formulate effective policies to manage market volatility and ensure market efficiency.
Reference:
Abdou, K., & Gupta, P. (2021). Stock Repurchases as a Long-Term Investment Strategy. Journal of Business & Management, [s. l.], v. 27, n. 1, p. 1–22, 2021. DOI 10.6347/JBM.202103_27(1).0001. Disponível em: https://research.ebsco.com/linkprocessor/plink?id=e46008e7-5499-331a-b648-1e86ce8f7e58.
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