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on International Finance |
| By: | Agarwal, Isha (University of British Columbia); Chen, Wentong (Cornell University); Prasad, Eswar (Cornell University) |
| Abstract: | We provide the first empirical evidence on how media-driven narratives influence cross-border institutional investment flows. Applying natural language processing techniques to one-and-a-half million newspaper articles, we document substantial cross-country variation in sentiment and risk indices constructed from domestic media narratives about China in 15 countries. These narratives significantly affect portfolio flows, even after controlling for macroeconomic and financial fundamentals. This impact is smaller for investors with greater familiarity or private information about China and larger during periods of heightened uncertainty. Political and environmental narratives are as influential as economic narratives. Investors react more sharply to negative narratives than positive ones. |
| Keywords: | media narratives, cross-border flows, institutional investors, portfolio investment in China, textual analysis, natural language processing |
| JEL: | F30 G11 G15 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17442 |
| By: | Sayyed Faraz Mohseni; Hamid R. Arian; Jean-Fran\c{c}ois B\'egin |
| Abstract: | Portfolio diversification, traditionally measured through asset correlations and volatilitybased metrics, is fundamental to managing financial risk. However, existing diversification metrics often overlook non-numerical relationships between assets that can impact portfolio stability, particularly during market stresses. This paper introduces the lexical ratio (LR), a novel metric that leverages textual data to capture diversification dimensions absent in standard approaches. By treating each asset as a unique document composed of sectorspecific and financial keywords, the LR evaluates portfolio diversification by distributing these terms across assets, incorporating entropy-based insights from information theory. We thoroughly analyze LR's properties, including scale invariance, concavity, and maximality, demonstrating its theoretical robustness and ability to enhance risk-adjusted portfolio returns. Using empirical tests on S&P 500 portfolios, we compare LR's performance to established metrics such as Markowitz's volatility-based measures and diversification ratios. Our tests reveal LR's superiority in optimizing portfolio returns, especially under varied market conditions. Our findings show that LR aligns with conventional metrics and captures unique diversification aspects, suggesting it is a viable tool for portfolio managers. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.06080 |
| By: | Martin Haran; Michael McCord; Olawumi Fadeyi |
| Abstract: | The London office market is a primary destination for international real estate capital and a key global city and financial centre for international real estate investment. However, the increase in global uncertainties in recent years due to political events and economic and inflationary challenges highlights the need for more insights into the behaviour of international real estate capital flows. The purpose of this study is to evaluate the influence of the global and domestic environment on international real estate investment activities within the London office market over the period 20016–2023, concentrating on the separation of the UK from Europe due to the Brexit referendum, which seemingly have influenced investment flow patterns in and out of London. We employ an auto-regressive distributed lag approach using quarterly MSCI cross-border investment transactions within the central London office market for the period 2016-2023. We measure both long-run and short-run co-integrating effects and causality relative to Long-term interest rates, real effective exchange rates, total returns and yields from the London office market, GDP, Stock Market Capitalisation, the VIX index and Global Liquidity. |
| Keywords: | Brexit; Capital Flows into Real Estate; International Property Investment Trends; London Offices |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-257 |