The blended approach to real estate allocations: performance implications of combining an exposure to German Spezialfonds with Global Listed Real Estate Securities

This paper seeks to increase the understanding of the performance implications for investors who choose to combine an unlisted real estate portfolio (in this case German Spezialfonds) with a (global) listed real estate element. We call this a “blended” approach to real estate allocations. For the avoidance of doubt, in this paper we are dealing purely with real estate equity (listed and unlisted) allocations, and do not incorporate real estate debt (listed or unlisted) or direct property into the process. A previous paper (Moss and Farrelly 2014) showed the benefits of the blended approach as it applied to UK Defined Contribution Pension Schemes. The catalyst for this paper has been the recent attention focused on German pension fund allocations, which have a relatively low (real estate) equity content, and a high bond content. We have used the MSCI Spezialfonds Index as a proxy for domestic German institutional real estate allocations, and the EPRA Global Developed Index as a proxy for a global listed real estate allocation. We also examine whether a rules based trading strategy, in this case Trend Following, can improve the risk adjusted returns above those of a simple buy and hold strategy for our sample period 2004-2015. Our findings are that by blending a 30% global listed portfolio with a 70% allocation (as opposed to a typical 100% weighting) to Spezialfonds, the real estate allocation returns increase from 2.88% p.a. to 5.42% pa. Volatility increases, but only to 6.53%., but there is a noticeable impact on maximum drawdown which increases to 19.4%. By using a Trend Following strategy raw returns are improved from 2.88% to 6.94% p.a. , The Sharpe Ratio increases from 1.05 to 1.49 and the Maximum Drawdown ratio is now only 1.83% compared to 19.4% using a buy and hold strategy . Finally, adding this (9%) real estate allocation to a mixed asset portfolio allocation typical for German pension funds there is an improvement in both the raw return (from 7.66% to 8.28%) and the Sharpe Ratio (from 0.91 to 0.98).

CO2 credit or energy credit in emission trading?

Emission trading is a good concept and approach to tackle global warming. However, what “currency” or “credit” should be used in the trading has remained a debatable topic. This paper proposed an “Energy Credit” concept as an alternative to the “CO₂ credit” that is currently in place. From the thermodynamic point of view, the global warming problem is an “energy balance” problem. The energy credit concept is thought to be more thermodynamically correct and tackles the core of the global warming problem more directly. The Energy credit concept proposed can be defined as: the credit to offset the extra energy trapped/absorbed in the earth (and its atmosphere) due to the extra anthropogenic emission (or other activities) by a country or company. A couple of examples are given in the paper to demonstrate the concept of the Energy credit and its advantages over the CO₂ credit concept.

The role of trading partner relationships in determining innovation performance: an empirical examination

This paper examines the respective roles of trading partner relationships and innovation management practices in predicting product and process related innovation performance. The empirical data were drawn from 194 Australian managers. Data analysis using structural equation modelling indicates that supplier relationships and customer relationships have less impact on product and process innovation performance than do knowledge and creativity management. However, the results also indicate that trading partner relationships have a strong and positive association with innovation management practices, meaning that organisations commonly implement both in a synchronous manner.

Ecommerce strategy in a multi-sector trading environment - quandaries for SMEs

For nearly a decade the potential benefits of Business-to-Business electronic commerce for business efficiency and competitiveness have been vigorously promoted by business, industry groups and governments. The belief underpinning policy is that from a small initial step, eCommerce will become a central part of their business strategies. This paper considers the use of B-2-B electronic transactions by SME suppliers who trade with buyer companies across diverse industry sectors in Australia. We investigate the links between their business strategies and their views of electronic trading. A survey of 240 crosssector suppliers nationwide found little evidence that electronic trading was integrated with their overall business strategy. We suggest an approach to the understanding of cross-sector electronic trading strategies that emphasises the complex, inter-connected but fragmented trading milieu rather than describing the balance between drivers and barriers that operate for the individual firm.

Knowledge creation in export trading

In this research, we investigate how knowledge in the export trading industry is created. Prior research focuses on general businesses in local market environment. This research specifically focuses on export trading with overseas market needs. These needs require attention to different types of control and requirements beyond that of a local market. In this paper, Nonaka et al.'s theory of organizational knowledge creation is explored. We specifically examine the processes of knowledge creation through four modes of knowledge conversion. Empirical investigations in export trading organizations are conducted. We examine how export firms obtain new knowledge for innovations based on collective knowledge being used in export trading. The findings indicate that the knowledge management processes in export firms allow for the creation of new knowledge. The collective knowledge (from groups and individuals) forms a basis for innovations and competitive intelligence. This collective knowledge also creates foresight, insight and hindsight in the export trading context.

Estimating the increasing cost of commercial buildings in Australia due to greenhouse emissions trading

The ratification of the Kyoto Protocol by most industrial nations will result in an international greenhouse emissions trading market by or before 2008. Calculating the quantity of embodied energy in commercial buildings has therefore taken on added significance because it is in the creation of energy that most greenhouse gas that causes global warming is released. For energy efficient commercial buildings in Australia, the embodied energy can typically represent between 10 and 20 years of operational energy. When greenhouse emissions trading is introduced in Australia the cost of energy will rise significantly, particularly electricity which relies primarily on burning fossil fuels for generation. This will affect not only the operating energy costs of buildings (light, power & heating/cooling) but also the cost of building materials and construction. Early estimates of the potential cost of future greenhouse emission permits in Australia vary between $IO/tonne to $180Itonne. This cost would be imposed primarily on the producers of energy and passed on by them to consumers via higher energy costs. For a typical commercial building this could lead to an increase in the total procurement cost of buildings of up to 20% due to the energy embodied during the construction or refurbishment of the building. To assist in evaluating these potential cost increases McKean & Park, Sinclair Knight Merz and Deakin University have developed a web-based Carbon Cost Calculator for commercial buildings.

Trading activities and cross-sectional variation in stock expected return : evidence from Kuala Lumpur stock exchange

Trading activity has been considered as one of the possible factor that explains the cross-sectional variation in stock returns. In this study I use trading volume as a possible measure to proxy for liquidity as part of the trading activity. Monthly observations were used over a period 1995 to 2005 to examine the liquidity effect on stock expected returns. Based on findings it is appeared that level of liquidity does matter in explaining the expected stock returns in Malaysian capital market. While Fama-french factors also provide important explanation for stock returns. But none of the second moment variables proxying liquidity appeared to be statistically significant. However, momentum effect apprearently explain ing the cross-sectional variation in stock returns. 

Modelling regulatory change V's volume of trading effects in HSIF and HSI volatility

In an earlier paper, we adopted a bi-variate BEKK–GARCH framework and employed a systematic approach to examine structural breaks in the Hang Seng Index and Index Futures market volatility. Switching dummy variables were included and tested in the variance equations to check for any structural changes in the autoregressive volatility structure due to the events that have taken place in the Hong Kong market surrounding the Asian markets crisis. In this paper, we include measures of daily trading volume from both markets in the estimation. Likelihood ratio tests indicate the switching dummy variables become insignificant and the GARCH effects diminish but remain significant. There is some evidence that the Sequential Arrival of Information Model (SIM) provides a platform to explain these market induced effects when volume of trade is accounted for.

Engagement and learning through social software in finance : the trading room experience

The introduction of a social software blog space called “The Trading Room” in an undergraduate Finance unit for an assessment task generated a great deal of activity to support student learning. A subsequent evaluation of this pilot demonstrated that students perceived high value in the opportunity it provided for them to reaffirm theories, obtain individualized feedback and benchmark their work against others. Whilst assessment is generally seen as both the carrot and the stick of learning, and certification; students in the study reported that they would still participate in reading and posting to the “Trading Room” blog even if there was no assessment requirement! Additionally they did not see any value in the environment as a purely social space, reporting that they saw it primarily as a professional educational community. It would appear that just as there are different communities in the real world social space, there are also different types of communities in the online space. Context, structure and activity design, perhaps are the most important facets of online interaction for learning.