The adverse selection component of exchange traded funds

The aim of our paper is to examine whether Exchange Traded Funds (ETFs) diversify away the private information of informed traders. We apply the spread decomposition models of Glosten and Harris (1998) and Madhavan, Richardson and Roomans (1997) to a sample of ETFs and their control securities. Our results indicate that ETFs have significantly lower adverse selection costs than their control securities. This suggests that private information is diversified away for these securities. Our results therefore offer one explanation for the rapid growth in the ETF market.

Exchange-traded funds and information asymmetry

This thesis focuses on three main questions. The first uses ExchangeTraded Funds (ETFs) to evaluate estimated adverse selection costs obtained spread decomposition models. The second compares the Probability of Informed Trading (PIN) in Exchange-Traded Funds to control securities. The third examines the intra-day ETF trading patterns. These spread decomposition models evaluated are Glosten and Harris (1988); George, Kaul, and Nimalendran (1991); Lin, Sanger, and Booth (1995); Madhavan, Richardson, and Roomans (1997); Huang and Stoll (1997). Using the characteristics of ETFs it is shown that only the Glosten and Harris (1988) and Madhavan, et al (1997) models provide theoretically consistent results. When the PIN measure is employed ETFs are shown to have greater PINs than control securities. The investigation of the intra-day trading patterns shows that return volatility and trading volume have a U-shaped intra-day pattern. A study of trading systems shows that ETFs on the American Stock Exchange (AMEX) have a U-shaped intra-day pattern of bid-ask spreads, while ETFs on NASDAQ do not. Specifically, ETFs on NASDAQ have higher bid-ask spreads at the market opening, then the lowest bid-ask spread in the middle of the day. At the close of the market, the bid-ask spread of ETFs on NASDAQ slightly elevated when compared to mid-day.

Intraday trading patterns in London listed exchange traded funds

In this paper we examine the intraday trading patterns of Exchange Traded Funds (ETFs) listed on the London Stock Exchange. ETFs have been shown to be characterised by much lower bid–ask spread costs and by lower levels of information asymmetry than individual securities. One possible explanation for intraday trading patterns is that concentration of trading arises at the start of the trading day because informed traders have private information that quickly diminishes in value as trading progresses. Since ETFs have lower trading costs and lower levels of information asymmetry we would expect these securities to display less pronounced intraday patterns than individual securities. We fail to find that ETFs are characterised by concentrated trading bouts during the day and therefore find support for the argument that information asymmetry is the cause of intraday volume patterns in stock markets. We find that ETF bid–ask spreads and volatility are elevated at the open but not at the close. This lends support to the “accumulation of information” explanation that sees high spreads and volatility at the open as a consequence of information accumulating during a market closure and impacting on the market when it next opens.

On the comparative performance of socially responsible and Islamic mutual funds

This is the first study to provide comprehensive analyses of the relative performance of both socially responsible investment (SRI) and Islamic mutual funds. The analysis proceeds in two stages. In the first, the performance of the two categories of funds is measured using partial frontier methods. In the second stage, we use quantile regression techniques.By combining two variants of the Free Disposal Hull (FDH) methods (order-m and order-?) in the first stage of analysis and quantile regression in the second stage, we provide detailed analyses of the impact of different covariates across methods and across different quantiles. In spite of the differences in the screening criteria and portfolio management of both types of funds, variation in the performance is only found for some of the quantiles of the conditional distribution of mutual fund performance. We established that for the most inefficient funds the superior performance of SRI funds is significant. In contrast, for the best mutual funds this evidence vanished and even Islamic funds perform better than SRI.These results show the benefits of performing the analysis using quantile regression.

Structural funds and the knowledge-based economy:a regional case-study (1999-2009)

The research presented in this thesis investigates the nature of the relationship between the development of the Knowledge-Based Economy (KBE) and Structural Funds (SF) in European regions. A particular focus is placed on the West Midlands (UK) and Silesia (Poland). The time-frame taken into account in this research is the years 1999 to 2009. This is methodologically addressed by firstly establishing a new way of calculating the General Index of the KBE for all of the EU regions; secondly, applying a number of statistical methods to measure the influence of the Funds on the changes in the regional KBE over time; and finally, by conducting a series of semi-structured stakeholder interviews in the two key case study regions: the West Midlands and Silesia. The three main findings of the thesis are: first, over the examined time-frame, the values of the KBE General Index increased in over 66% of the EU regions; furthermore, the number of the “new” EU regions in which the KBE increased over time is far higher than in the “old” EU. Second, any impact of Structural Funds on the regional KBE occurs only in the minority of the European regions and any form of functional dependency between the two can be observed only in 30% of the regions. Third, although the pattern of development of the regional KBE and the correlation coefficients differ in the cases of Silesia and the West Midlands, the analysis of variance carried out yields identical results for both regions. Furthermore, the qualitative analysis’ results show similarities in the approach towards the Structural Funds in the two key case-study regions.

On the comparative performance of socially responsible and Islamic mutual funds

This is the first study to provide comprehensive analyses of the relative performance of both socially responsible investment (SRI) and Islamic mutual funds. The analysis proceeds in two stages. In the first, the performance of the two categories of funds is measured using partial frontier methods. In the second stage, we use quantile regression techniques. By combining two variants of the Free Disposal Hull (FDH) methods (order- m and order- α) in the first stage of analysis and quantile regression in the second stage, we provide detailed analyses of the impact of different covariates across methods and across different quantiles. In spite of the differences in the screening criteria and portfolio management of both types of funds, variation in the performance is only found for some of the quantiles of the conditional distribution of mutual fund performance. We established that for the most inefficient funds the superior performance of SRI funds is significant. In contrast, for the best mutual funds this evidence vanished and even Islamic funds perform better than SRI. These results show the benefits of performing the analysis using quantile regression. © 2013 Elsevier B.V.

Do ethics imply persistence? The case of Islamic and socially responsible funds

We analyse the performance persistence of Islamic and Socially Responsible Investment (SRI) mutual funds. We adopt a multi-stage strategy in which, in the first stage, partial frontiers’ approaches are considered to measure the performance of the different funds in the sample. In the second stage, the results yielded by the partial frontiers are plugged into different investment strategies based on a recursive estimation methodology whose persistence performance is evaluated in the third stage of the analysis. Results indicate that, for both types of funds, performance persistence actually exists, but only for the worst and, most notably, best funds. This result is robust not only across methods (and different choices of tuning parameters within each method) but also across both SRI and Islamic funds—although in the case of the latter persistence was stronger for the best funds. The persistence of SRI and Islamic funds represents an important result for investors and the market, since it provides information on both which funds to invest in and which funds to avoid. Last but not least, the use of the aforementioned techniques in the context of mutual funds could also be of interest for the non-conclusive literature.

Neural network DEA for measuring the efficiency of mutual funds

Efficiency in the mutual fund (MF), is one of the issues that has attracted many investors in countries with advanced financial market for many years. Due to the need for frequent study of MF's efficiency in short-term periods, investors need a method that not only has high accuracy, but also high speed. Data envelopment analysis (DEA) is proven to be one of the most widely used methods in the measurement of the efficiency and productivity of decision making units (DMUs). DEA for a large dataset with many inputs/outputs would require huge computer resources in terms of memory and CPU time. This paper uses neural network back-ropagation DEA in measurement of mutual funds efficiency and shows the requirements, in the proposed method, for computer memory and CPU time are far less than that needed by conventional DEA methods and can therefore be a useful tool in measuring the efficiency of a large set of MFs. Copyright © 2014 Inderscience Enterprises Ltd.

Out of credit: Evaluating the impact of the EU structural funds on Hungarian small business growth and access to finance

Totaling EUR 29 billion, Hungary is in the midst of implementing its largest economic development program in its young democratic history. At the center of the European Union led development program is an effort to revitalize and reequip Hungary’s languishing small and medium sized enterprises (SME), long the country's heart of employment. This paper examines the efficiency and impact of two Structural Fund's instruments to enhance SME development – ECOP 2.1.1 and JEREMIE. A survey of 1275 SME and interviews with dozens of top policy-makers paint a flawed development program in dire need of reform. Despite this, empirical analysis suggests JEREMIE funds may have dampened the effects of the financial crisis and are crucial for the continued liquidity of SME, who have been particularly hit hard by the world financial crisis.

Magánnyugdíj-járadékok közötti választás (Choice amongst Hungarian pension funds' annuities )

Ebben a cikkben a magánnyugdíj-járadékok közötti választást vizsgálom. Arra vagyok kíváncsi, hogy a racionális döntéshozó hogyan választ a lehetséges járadékokból. A döntéshozó a várható hasznosságátmaximalizálja. A cikkben megvizsgálom azt az esetet is, ha a döntéshozó számára fontos, hogy gondoskodjék az utódairól, és megvizsgálom a házaspárok optimális döntését is. Felhívom a figyelmet, hogy a nemek közötti differenciálás tilalmának az lehet a következménye, hogy a döntéshozók olyan járadékokat választanak, amely a szolgáltatónak összességében veszteséget okoz. Bemutatom, hogy a halasztott járadékkal kombinált ütemezett pénzkivonás a vizsgált környezetben nem rosszabb, mint a többi lehet}oség, a döntéshozó viszont ebben az esetben a befektetési lehet}oségeket maga választhatja meg. _____________ This paper investigates the decision-maker's choice amongst the pension fund's life annuities in Hungary. Hungarian pension funds have not started providing annuities yet, and the environment requires further regulation. The most significant problems is that the annuity providers must not differentiate between sexes. Pension fund members can choose among different types of life annuities (e.g. they can choose guarantee period or joint life annutity), and the member's choice may cause loss to the annuity provider in general. Since differentation between sexes is not allowed member's opportunities may shrink (e.g. they can not choose guarantee period or joint life annuity).

Efficiency of Effectiveness? The Hungarian Practice of Using the EU Funds

Efficiency or effectiveness? It not just the matter of definition. Experts and researchers have to make a difference between the qualitative and quantitative approach. The efficiency of EU subsidies means the ratio of the committed and disposable amount of EU subsidies can be measured, which was used and paid out within the given timeframe and along the legal regulations. The effectiveness of EU subsidies needs a much more complicated and complex approach than efficiency. The effectiveness of usage on a project level can be measured by the ‘added value’ of the project; and on the programme level by the added GDP growth or employment rate. The following research essentially analyses the project level or micro-effectiveness, however, it discusses the results of some macro-analyses as well (qualitative approach).

EU-funds efficiency and the first National Development Plan in Hungary 2004-2006

The author highlights the importance of the difference between the efficiency and effectiveness of using the EU-subsidies. If Hungary cannot use the financial means of the EU efficiently and effectively, then the goal of cohesion and convergence to the level of the old, developed countries of the EU, will be much more difficult and slower. The efficiency of the EU-subsidies involves a quantitative approach, where the ratio of the obliged and disposable amount of EU-subsidies can be measured. The effectiveness of EU-subsidies, on the other hand, requires a much more complicated and complex approach, than the efficiency. The effectiveness of the usage on a project level can be measured by the “added value” of the project; on program level it can be measured by the added GDP growth or employment. The article presents the results of research carried out in the Research Group of Professor Tibor Palánkai at Corvinus University of Budapest, Hungary.

EU-s források a vállalkozások tőkeellátottságának javítására - A JEREMIE Kockázati Tőkeprogram (EU funds to improve the capitalization of the companies – JEREMIE Venture Capital Program)

A hazai kis- és középvállalkozások (kkv-k) tőkeellátottságának javítása meghatározó szerepet játszik fejlődésük előmozdításában. Jelen tanulmány az Új Széchenyi Terv (ÚSZT) keretében a vállalkozások rendelkezésére álló pénzügyi eszközök közül a kockázati tőke működését mutatja be. A fejlődésük növekedési ciklusában járó cégek mellett a korai életszakaszukban járó, innovatív tevékenységet folytató, gyors növekedésre képes, de forráshiányos vállalkozások finanszírozásában nyújthat segítséget Magyarországon a 2010-ben elindult JEREMIE Kockázati Tőkeprogram. Az állami és a privát tulajdonban levő piaci szereplők hazánkban újnak mondható együttműködése révén megvalósuló program a magyar kockázatitőke-piac kínálati oldalának bővítését szolgálja, abban az alsó (döntően az 1-1,5 millió EUR/tranzakció alatti) szegmensben, ahol a tisztán piaci alapon működő befektetők korlátozottabb szerepvállalása figyelhető meg, és így a piacon hiány jelentkezik. Az EU-s támogatások ezen új típusú felhasználási formája színesíti és kibővíti a vállalkozások számára elérhető pénzügyi eszközök körét és volumenét, fokozottabb mértékben érvényesül a piaci szemlélet, hiszen verseny van a forrásokért, és verseny van a források kihelyezését végző pénzügyi közvetítő szervezetek között is, mindezek mellett további magánforrások bevonását biztosítja, ösztönzőleg hat a cégek működésére, és a visszaforgó rendszer biztosítja a fenntarthatóságot, a források későbbi újbóli felhasználását is. _______ To improve the capitalization of the domestic small and medium-sized enterprises (SMEs) has a decisive role in promoting development. This study presents the operation of venture capital from the available business financial instruments of the New Széchenyi Plan. In Hungary the JEREMIE Venture Capital Program, which launched in 2010, can help in financing of the rapidly growth, innovative, early life stage companies besides the development cycle of growth companies. This program with new cooperation between the stateowned and private companies enlarge the supply-side of the Hungarian venture capital market, at that the bottom (mostly in the 1 to 1.5 million EUR / transaction below) segment, where can be observed the limited role of the purely market-based investors, and thus there is a shortage in the market. These new type application form of the EU supports enriches and expands the scope and volume of the available financial instruments for the enterprises, the market orientation prevails more broadly, because there is a competition for resources and there is a competition between the resources allocation financial intermediaries,in addition ensures further private resources.