J. Risk Financial Manag., Volume 13, Issue 12 (December 2020) – 39 articles

Crowdfunding has quickly gained popularity in recent years, providing an additional way for entrepreneurial individuals and organizations (creators) to attract funds for their projects. Scholars have been interested in predicting the success of crowdfunding campaigns, by relating campaign characteristics to the actual success of these campaigns. We take one step back by studying the cognitive processes of the crowd. This paper uses an experimental approach to establish whether participants’ predictions on the success of crowdfunding campaigns based on first impressions are as positive and as accurate as those derived from more thorough analyses. We employ a two-study replication design, in which individuals estimate the success of crowdfunding campaigns in two conditions: with limited time and with unlimited time. The results show that prediction accuracy in both conditions is equal, yet shorter time availability results in assessments that are more negative. We discuss implications for creators and for funders. Full article

The pandemic caused by COVID-19 has changed the mindset of many consumers. They are increasingly aware of the risks of not caring for the planet. Before the pandemic, there was a perceived increase in collective environmental concern and sustainability, but COVID-19 has further accelerated this process and motivated more people to assume this responsibility. Thus, the health crisis could trigger the consumption of organic foods, which are foods produced through environmentally friendly agricultural methods and that have not been artificially altered. It is essential for retailers to know how these consumers of organic foods behave in order to try to modify their strategies. In this context, the objective of this research is to analyze the relationship between attitude, satisfaction, trust, purchase and word-of-mouth (WOM) intentions towards organic products. The results of a survey administered a survey to a sample of 195 consumers show that trust is influenced by satisfaction and attitude. In relation to the behavioural variables, satisfaction is the variable that has the greatest influence on purchase intentions and WOM intentions. In addition, a moderating effect of environmental concern is observed on the proposed relationships. Full article

The paper uses a Walrasian two-period financial market model with informed and uninformed constant absolute risk averse (CARA) rational investors and noise traders. The investors allocate their initial wealth between risky assets and risk-free fiat money. The analysis concentrates on the effects of decreasing value of money, or inflation, on the rational investors’ behavior and the asset market. The main findings are the following: Inflation does not affect the informed investors’ prediction coefficient but makes that of the uninformed investors diminish. Inflation does not affect rational investors’ risk but makes the asset price more sensitive to fundament-based and sentiment-based shocks. Inflation changes the market price of the risky asset rise; while it has no effects on the informed investors’ demand of the risky asset, it does affect the uninformed investors’ demand. Finally, inflation makes the asset market more volatile. Full article

The studies concerning commonality in liquidity on emerging markets in Central and Eastern Europe are scarce and, in particular, they do not utilize the Principal Component Analysis (PCA) to identify latent factors in liquidity. Therefore, the main aim of this research is to assess commonality in liquidity on the Warsaw Stock Exchange (WSE) with the use of the PCA to extract common components of liquidity across a sample of stocks, and from a set of several liquidity proxies. The robustness tests within the whole sample and sub-periods are provided. The PCA results reveal that common latent factors in liquidity estimates exist on the Polish stock market, and three principal components are sufficient to substitute for the seven liquidity proxies utilized in this research. The regressions using these three principal components of liquidity proxies as latent factors in the market model of liquidity indicate no evidence of co-movements in liquidity on the WSE. The results are homogenous for all investigated periods so no reason has been found to reject the research hypothesis that commonality in liquidity does not exist on the Polish stock market. To the best of the authors’ knowledge, no similar research has been conducted for the WSE thus far. Full article

There are two different forms of property tax systems: value-based tax, which is used in most countries of the world, and area-based tax, which is used mainly in Central and Eastern Europe and developing countries in Africa. Area-based property tax provides more stable and predictable budget revenues. It is simpler to administer and scores worse on equity grounds from the perspective of the ability-to-pay principle of taxation. Against this background, Israel’s property tax system, known as Arnona, is complex, spatially diversified, and causes a lack of uniformity that leads to tax distortion. This paper’s primary purpose is to identify the weaknesses of Israeli property tax from 1997 to 2017 and indicate how to improve the property tax system. This paper is based on case studies from four of the most important cities in Israel: Tel Aviv, Jerusalem, Haifa, and Beersheba, which have four different measurement methods for calculating property tax. Unique data were collected from the Israel Central Bureau of Statistics. According to this analysis, it was found that there are substantial differences in property tax between the four cities over the two decades analyzed. The main weakness is the lack of uniformity of the taxation system; the solution is to unify the measurement of real estate area for tax purposes using drone technology. Full article

Crowdfunding improves access to financing, yet cases of crowdfunding’s importance, besides traditional financing, are rare and notably localized. In explaining why global crowdfunding volumes are so heterogeneous, previous academic research has focused mainly on the existence of a legal system that is supportive of crowdfunding, but with conflicting results. We argue that a broader range of institutions must be considered to describe the spread of crowdfunding at its current early stage of development, and provide first empirical evidence on the matter. Using a dataset covering crowdfunding volumes of 122 countries over the years 2015–2016, we confirm that the existence of crowdfunding-specific regulations has a positive association with total crowdfunding volumes per capita. We also find that regulation targeted at a specific type of crowdfunding has an economically stronger association with corresponding transaction volumes. In line with our argument, we find that a significantly broader range of less crowdfunding-specific institutions exhibit strong ties to crowdfunding volumes, with strong e-service culture emerging as an especially robust determinant of all types of crowdfunding volumes. Stronger legal rights, greater financial freedom, and higher democracy levels are also associated with greater total crowdfunding volumes, but exhibit varying relevance across different types of crowdfunding. Full article

When traditional financial institutions faced difficulties in the task of assisting micro, small and medium-sized enterprises (MSMEs) with capital allocations, crowdfunding can upsurge as an innovative and vibrant vehicle that can support and assist the activity of such MSME’s, by financing their activity and instrumenting the process of risk-sharing. Simultaneously with its enormous growth and popularity, crowdfunding is faced by several key challenges, one of biggest such challenges referring to the problem of information asymmetry that can exist between fundraisers and potential backers. Based on the signaling theory, a research taxonomy has been developed for a comparative analysis between China and the UK. This has been accomplished by retrieving secondary data from the following crowdfunding platforms: Dreamore (Chinese platform) and Crowdfunder (UK platform). The objective of the study is to investigate both the effect and the impact that signals (goal setting, project comments and updates) have upon mitigating the problem of information asymmetry, in order to make the project successful. We have thus deployed an Ordinary Least Square (OLS) regression and validated the models through a robustness check. The findings reveal that signals actively mitigate the problem of information asymmetry in both countries, but this varies in the sense that higher goal setting has a more positive/impactful relationship with project success in the UK than it does in China. Project comments are more positively associated with project success in China as compared to the UK, whereas project updates are more negatively related to project success in China as compared to the UK. These findings demonstrate the importance that signals have upon successful crowdfunding activities/campaigns, highlighting the theoretical and practical influence and relevance for potential fundraisers in the two aforementioned economies. Full article

Financial (il-)literacy and its effects have been studied extensively in recent years. The measurement of this concept is, however, tricky and numerous measurement instruments exist. In this paper, we study the connection between these measures empirically. We find that these measures are often only slightly related and that this is a so-far overlooked empirical problem in this field. As a result of our analysis, we suggest the combination of two measures as the best potential alternative to the existing measures. Finally, we analyze the predictive power of this suggested measure for stock investment decisions. Full article

In this paper, we examine the impact that COVID-19 has had on enterprise risk management (ERM). Guided by the origins and philosophy of ERM, we suggest an agenda for future research on ERM in a “post-COVID-19” reality, by addressing its integrated, strategic, and value-enhancing orientation. To guide future research endeavors in ERM, which is still an evolving discipline, we present topics that would benefit from additional research attention within both risk identification and analysis, as well as the strategic dimension of ERM. Full article

Environmental and quality management practices are extremely relevant for a firm’s development and international recognition. However, dealing with the standards required and obtaining an international standards certification involves costs for employee training, procedure documents, and third-party audit fees that must be paid in advance by companies. This paper attempts to analyze the impact of difficulties in accessing external financing on the likelihood of possessing the standards and the certification, for firms based in 64 countries. A crucial aspect in uncovering such a causal effect is the potential endogeneity of financial constraints with respect to international standards certification. I address this issue by adopting a bivariate probit model and a set of firm-level instrumental variables. The empirical results showed that financially constrained firms were less likely to possess the standards required and the associated international certification, and that this impact was more relevant for small and young firms. Full article

Using the Donsker–Prokhorov invariance principle, we extend the Kim–Stoyanov–Rachev–Fabozzi option pricing model to allow for variably-spaced trading instances, an important consideration for short-sellers of options. Applying the Cherny–Shiryaev–Yor invariance principles, we formulate a new binomial path-dependent pricing model for discrete- and continuous-time complete markets where the stock price dynamics depends on the log-return dynamics of a market influencing factor. In the discrete case, we extend the results of this new approach to a financial market with informed traders employing a statistical arbitrage strategy involving trading of forward contracts. Our findings are illustrated with numerical examples employing US financial market data. Our work provides further support for the conclusion that any option pricing model must preserve valuable information on the instantaneous mean log-return, the probability of the stock’s upturn movement (per trading interval), and other market microstructure features. Full article

Despite the fact that growth theories suggest that natural disasters should have an impact on economic growth, parametric empirical studies have provided little to no evidence supporting that prediction. On the other hand, pure nonparametric regression analysis would be an extremely difficult task due to the curse of dimensionality. We therefore re-investigate the impact of natural disasters on economic growth, applying a semiparametric smooth coefficient panel data model that takes into account fixed effects. Our study finds evidence that the coefficient curve of investment is a U-shaped function of the severity of the natural disasters. Thus, for relatively small disasters, marginal returns to investment decrease on the severity of natural disasters. However, after a certain threshold, the coefficient of investment starts increasing as natural disasters become more severe. Full article

We examine the impact of aggregate tax policy uncertainty on firm-level default risk. Due to uncertainties associated with tax policies, firms could have difficulties in determining their optimal debt level and use too much debt to increase their values. This can increase firms’ financial risk and default probabilities. At the same time, tax policy uncertainty may lead some firms to take less risk which could lower their use of debt and in turn lower the probability of default. We find that tax policy uncertainty is positively associated with firms’ expected default probabilities. In terms of economic significance, our findings show an increase of 14.83% in expected default probability, on a relative basis. Our results are robust to controlling for conditions of the economy, conditions of the stock market, financial constraints of firms, and credit quality of firms. Our evidence adds to two strands of research: research on taxation and firms’ risk profiles and the impact of policy uncertainty on firms’ decisions. Full article

The aim of this study is to investigate the effect of educational technologies on the Corporate Social Responsibility (CSR) perception of tourism students and their intention to work in the tourism business industry. By improving education programs with an investment in educational technologies, both universities and firms are believed to benefit from growing CSR initiatives, as well as potential young talents for their future business activities. Four-dimensional (economic, legal, ethical and philanthropic dimensions) model of CSR perception is followed. M-learning and E-learning platforms are compared as moderators to ensure the most effective platform for CSR education among the students. The study is conducted with data which is gathered from a total of 397 students who continue their bachelor and associate degrees in different universities in the Gulf nations. It is found that there is a positive relationship between students’ intention to work in the industry and the sub-dimensions of CSR, namely ethical responsibilities, legal responsibilities, and economical responsibilities. Conversely, philanthropic responsibilities had no effect on working intention. In addition, gender difference had no significant impact on working intention of the students in tourism industry. Moreover, it is revealed that e-learning tools are more effective in CSR education. Full article

The development of financial markets and the low level of financial literacy does not facilitate consumer protection. A significant problem is the lack of information or unclear information regarding financial offers, including consumer credit. Financial protection for consumers can be increased by using systems that support consumers faced with a lack of transparency of consumer credit offers. The theoretical objective of the research is to identify the completeness of information allowing for verifying the annual percentage rate (APR) in the consumer credit offers presented and compared on websites of financial intermediaries and banks as well as the identify of APR calculation methods. After analysis of different credit offers (document analysis), a prototype of the system regarding credit costs measured at the appropriate interest rates (APR and AER) calculated in the correct manner was created. This may facilitate practices for informing consumers about the characteristics of consumer credit and at the same time support the implementation of the concept of responsible lending. The system developed uses a computer to simulate human thinking and to augment it with artificial intelligence. It facilitates the elimination the behavioral biases during the taking of financial decisions, which are the result of a low level of financial literacy. Full article

Amid growing concern over sustainability issues, there is increasing demand to incorporate environmental and social issues into assessments of credit risk, the possibility of loss resulting from a borrower’s failure to meet their financial obligations. In this paper, we sought to identify empirical evidence of a relationship between sustainability measures and credit risk. We contribute to this literature in three main ways: firstly, by using a measure that considers the financial materiality of sustainability issues across different industries; secondly, by using corporate default swap (CDS) spreads as a market-based measure of credit risk; and thirdly, by exploring the context-dependent nature of the relationship. Though the extent differs across industries, our results suggest risk-reducing effects across several corporate sustainability dimensions: climate change; natural resource use; human capital and corporate governance. Furthermore, we found that country sustainability plays a moderating role in the nexus between corporate sustainability and credit risk. Hence, a one-size-fits-all policy may not be suitable in developing the credit-relevant standardization of sustainability factors. Nevertheless, the robustness of corporate governance throughout our findings suggests that corporations should strengthen governance frameworks and procedures prior to embarking on environmental and social objectives to mitigate credit risk. Full article

This study examines the impact of domestic and foreign shocks on the real and financial sector of BRIC countries. For this purpose, we use a structural vector autoregressive (SVAR) model over the extended period of 1997 to 2016. We conclude that domestic policy shocks have a more substantial impact on Brazilian, Indian, and Russian economy than foreign shocks, while foreign shocks have more contribution in the case of China. Interestingly, results show the negative impact of policy shocks on bank credit provided, implying its role in multiplying the impact of shocks on real variables. Surprisingly EPU of USA has a positive impact on stock markets of India and China, implying capital flight phenomenon, where investor transfer investment from risky to safer places. Full article

In this paper, we propose multifactor models for the pan-European Equity Market using a block-bootstrap method and compare the results with those of traditional inferential techniques. The new factors are built from statistical measurements on stock prices—in particular, coefficient of variation, skewness, and kurtosis. Data come from Reuters, correspond to nearly 2000 EU companies, and span from January 2008 to February 2018. Regarding methodology, we propose a non-parametric resampling procedure that accounts for time dependency in order to test the validity of the model and the significance of the parameters involved. We compare our bootstrap-based inferential results with classical proposals (based on F-statistics). Methods under assessment are time-series regression, cross-sectional regression, and the Fama–MacBeth procedure. The main findings indicate that the two factors that better improve the Capital Asset Pricing Model with regard to the adjusted $R^2$ in the time-series regressions are the skewness and the coefficient of variation. For this reason, a model including those two factors together with the market is thoroughly studied. We also observe that our block-bootstrap methodology seems to be more conservative with the null of the GRS test than classical procedures. Full article

Information availability, firm performance, idiosyncratic volatility and bankruptcy-risk vary across the Corporate Life Cycle (CLC) stages. The purpose of this paper is to examine whether CLC stages explain firm’s propensity to engage in both accrual base and real earning management practices in the context of China. Panel data of 3250 non-financial Chinese listed firms spanning from 2009 to 2018 is used to investigate the proposed relationship. CLC stages were captured through Dickinson’s model, while earnings management is measured by employing both techniques, i.e., accruals-base earnings management and real earnings management. The data were analyzed through Panel data fixed-effects and random-effects techniques. Results reveal that, when compared to shakeout phase, managers’ response to use both earnings management practices is significantly higher during introduction and decline phases, and lower during growth and mature stages of CLC. It suggests that introductory and later-staged firms distort their factual financial information from creditors to obtain loans without strict debt covenants. Our results are robust to alternate measures and specifications. The core contribution of this research is to add a fresh perspective to the CLC research by uncovering its imperative role in influencing the earning management behavior of corporate managers. Full article

This paper analyzes high-frequency estimates of good and bad realized volatility of Bitcoin. We show that volatility asymmetry depends on the volatility regime and the forecast horizon. For one-day ahead forecasts, good volatility commands a stronger impact on future volatility than bad volatility on average and in extreme volatility regimes but not across all quantiles and volatility regimes. For 7-day ahead forecasting horizons the asymmetry is similar to that observed in stock markets and becomes stronger with increasing volatility. Compared with stock markets, the persistence and predictability of volatility is low indicating high variations of volatility. Full article

This study uses the hidden Markov model (HMM) to identify different market regimes in the US stock market and proposes an investment strategy that switches factor investment models depending on the current detected regime. We first backtested an array of different factor models over a roughly 10.5 year period from January 2007 to September 2017, then we trained the HMM on S&P 500 ETF historical data to identify market regimes of that period. By analyzing the relationship between factor model returns and different market regimes, we are able to establish the basis of our regime-switching investing model. We then back-tested our model on out-of-sample historical data from September 2017 to April 2020 and found that it both delivers higher absolute returns and performs better than each of the individual factor models according to traditional portfolio benchmarking metrics. Full article

The main aim of this paper was to investigate the impact of bank characteristics on capital structure empirically. The study employed a panel data analysis, Pooled Mean Group (PMG) and Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) estimators were utilized, for the period spans between the years 2008 and 2018. Both the borrowing (leverage) ratio and equity ratio used in the analysis cover short-term deposits and long-term deposits as a fundamental determinant variable on the capital structure. The main findings confirm that the deposit ratio has a positive relationship with the size of the bank. In other words, big banks use more foreign sources than small banks to use the tax shield advantage. At the same time, a percentage increase in bank size and liquidity ratio enhance the bank deposit rate by 0.0068% and 0.479%, respectively, in the long-run, while a percentage change in interest income coverage will reduce the bank deposit rate by 0.004% in the long-run. Meanwhile, the significant causal relationship of growth rate with the bank deposit rate could not be established. In addition, the short-run coefficients of the variables reveal that size, interest coverage, and liquidity have a positive and significant causal relationship with bank deposit rate in the short-run. The findings of the study are in line with the results of capital structure theories, especially the hierarchy theory and balancing theory. Full article

The original contribution of this paper is to empirically document the contagion of the Covid-19 on financial markets. We merge databases from Johns Hopkins Coronavirus Center, Oxford-Man Institute Realized Library, NYU Volatility Lab, and St-Louis Federal Reserve Board. We deploy three types of models throughout our experiments: (i) the Susceptible-Infective-Removed (SIR) that predicts the infections’ peak on 2020-03-27; (ii) volatility (GARCH), correlation (DCC), and risk-management (Value-at-Risk (VaR)) models that relate how bears painted Wall Street red; and, (iii) data-science trees algorithms with forward prunning, mosaic plots, and Pythagorean forests that crunch the data on confirmed, deaths, and recovered Covid-19 cases and then tie them to high-frequency data for 31 stock markets. Full article

We develop a theoretical model based on several theories, mainly pecking order theory and theory of information economics, as well as on theoretical arguments provided by economic sociology and psychology to investigate for the first time the impact of the presence of a foreign board member on capital structure. The sample of study covers 3773 non-financial U.S. firms and includes 23,196 observations over the period from 2010 to 2018. We used pooled OLS, fixed effects, random effects, and the general method of moments (GMM) in order to analyze the impact of foreign directors on capital structure after controlling for a range of factors, including size, year, and industry effects. The results of this empirical analysis support the proposed hypothesis. Of particular note is the finding that the proportion of foreign directors on the board correlates negatively with debt structure. Furthermore, we demonstrate that our findings hold up in the face of all appropriate robustness checks. Our study contributes to the existing literature by including an international dimension of board diversity, specifically the influence of foreign directors on corporate capital structure. We argue that increasing international diversity in the boardroom improves both the quantity and quality of the information exchange between insiders and shareholders, thereby reducing adverse selection costs. Full article

The Polish corporate bond market does not have a history as long as the American one, however, it is characterized by stable annual growth. The growth of the market is related to the growth of its liquidity and is determined by a number of entities, both on the demand and the supply side. The aim of the study was to present the structure of the Catalyst market and bond trading in Poland. The study also discusses the market’s development and identifies the factors that determine this development. Based on reports concerning trading on the Catalyst market, a huge growth was noticed in the 10 years since the market’s establishment. Forecasts indicate that the growth will continue. The outbreak of the SARS-CoV-2 pandemic will cause the market development to be slower than the model’s forecast, although the data for the first nine months of 2020 suggest that the upward trend will be maintained. Moreover, for the market to continue to thrive, a rating must be compulsory for corporate bond issuers. A comparison of the ratings of individual issuers enables investors to analyze the risk and profitability of corporate bonds in an easier way. Full article

Sustainability and corporate social responsibility have today become key assets of many successful businesses and corporations. Despite constantly growing environmental awareness, we are still facing the issue of overconsumption in both the textile and fashion industries. This is mainly due to improper marketing communication of sustainable subjects or a rather low level of consumers’ awareness of sustainability issues. The main objective of the research is, through the opinions of selected authors and their studies, to compare the results of our own research focusing on Generations Y and Z and dealing with marketing communication of sustainable fashion. As part of the above objective, we attempt to propose the general trend in marketing communication of sustainable subjects. In order to reach this objective, we use the method of description and comparison of opinions of various authors, the analysis of the research questionnaire into the impact of marketing communication of sustainable fashion houses on consumers from Generations Y and Z and its comparison with previous research for the last three years. Thanks to the results of the research, we could observe that tools, media or forms of marketing communication of sustainable fashion producers have certainly changed. The research also provides answers to some of our questions in relation to the general interest of consumers in fashion sustainability, price as a decisive factor in the purchase of sustainable goods and the need for proper education in the field of sustainable fashion or any corresponding forms of marketing communication of sustainable subjects. Full article

The study analyzes the impact of macroeconomic, governance and risk factors on foreign direct investment (FDI) intensity with respect to the US market during the period 1960–2019. The study adopted regression methodology. The FDI, macroeconomic and risk data were sourced from the Federal Reserve Economic Data (FRED) database. The governance data were collected from the World Bank Governance Database. The study suggests that infrastructural investments lead to higher FDI. A stronger Euro leads to higher FDI activity in the United States. Research & Development investments is a significant factor which contributes towards enhanced FDI activity. The higher the corporate profitability, the greater the FDI inflows. Exports and imports are significant factors which determine FDI in markets like USA. Inflation has a negative impact on FDI flow regulations, which are aimed to promote private sector development is negatively related to FDI intensity. FDI activity by firms tend to be lower when corruption levels are higher in the country. The higher the governance perception in terms of voice and accountability of citizens, the greater the propensity to attract FDI. The perception of the effectiveness of a government’s commitment towards the quality of public and civil services is directly related to FDI investment. Full article

Today, international tourism is one of the most affected sectors of the economy due to the global COVID-19 pandemic. The main purpose of this article is to analyze current trends and identify prospects for the international tourism development in the context of increasing globalization risks in the world, using the example of Ukraine’s integration into the global tourism industry, as Ukraine is located in the centre of Europe and belongs to a number of countries with developing economies, and has the potential to expand its tourism industry, which may be of interest to the international scientific community in terms of overcoming the bifurcation point of its economic development. Analyzing the tourism industry, as one of the most progressive sectors of the world economy, we used general scientific and special research methods (abstract-logical, statistical, systemic analysis and synthesis, abstract-theoretical, and correlation-regression analysis). The paper analyzes major indexes of international tourism development in the modern globalized world and details the risks emerging during the global COVID-19 pandemic. It examines the global dynamics of tourism flows, where France, Spain, and the USA are unquestionable leaders. The study considers foreign exchange earnings of international tourism and the industry contribution to the gross domestic product of countries being an essential component of national budgets. Based on the study conducted, there were developed reliable forecast models for the tourism industry development in the countries under research. These models will provide an opportunity to generate reliable forecasts, which will allow timely identification of potential threats and making effective decisions to address them. At the same time, the issues of managing information support of economic entities in the field of international tourism need to be further developed in order to reduce risks. Full article

In this paper, the possibility of using fundamental weighting as a tool to intentionally tilt a portfolio toward specific and unobservable risk factors in the illiquid and undeveloped Croatian stock market is explored. Thus far, fundamental-weighting has been shown to be able to outperform the cap-weighted index in such environments but no attempt regarding control for implicit factor exposure of such portfolios has been reported. Therefore, in this study principal component analysis is performed to capture the underlying risk factors of the fundamentally-weighted portfolio in order to optimize the portfolio’s performance by minimizing its volatility. Previous attempts focusing purely on portfolio risk reduction by estimating minimum variance portfolios failed both from an in-sample and out-of-sample perspective. Results in this study are based on 22 in-sample and out-of-sample tests in the period from March 2009 till March 2020. On the in-sample estimation basis, the proposed approach significantly improves the portfolio’s performance and, if restrictions to weights are imposed, it can outperform the cap-weighted benchmark. However, out-of-sample testing yielded poor results both in terms of risk and return. Such results are in contrast to findings for the developed markets but corroborate the claim that a broad investment base is needed for successful risk exposure in the long run. Full article