To continue our pursuit of ESG investing, in this research, we zoom in on the corporate governance dimension. Quality can be viewed as a culture of compliance, transparency, integrity in business practices and good stewardship towards shareholders and other stakeholders. We search for these traits in financial statements and accounting choices. We investigate how a firm's fundamentals and accounting practices impact future stock returns and adverse corporate events (e.g., bankruptcy, late filing, regulatory investigation, and lawsuit).
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ESG investing has enjoyed unprecedented growth in recent years. In the US alone, there are currently over $12 trillion of ESG-integrated AUM, representing a 40% growth from 2016. We are launching a new research series called ESG Investment Strategy, with the goal of educating managers on how to best embrace ESG principles into their investment process.
Global equities struggled amid growing fears about the coronavirus outbreak in January. Within equities, defensive style factors such as low beta, price momentum, short-term growth recorded considerable gains; while book-to-market, illiquidity, and size (small) plummeted.
While China’s coronavirus (i.e., 2019-nCoV) outbreak continues to dominate the mainstream and social media, the US equity market shrugged off virus concerns and started to focus on earnings. Asian equity market continues to be weak. Investors are anxiously waiting for the opening of China’s A shares market (currently expected to be Monday, February 3).
The rapid development of the China’s coronavirus outbreak, reminiscent of the SARS fallout in Asia in 2003, is causing significant volatilities across the global financial markets. In this month’s JQES, we list a few academic research papers that examine the implications of the SARS case, which could guide investors to understand the current outbreak.
China’s coronavirus (i.e., 2019-nCoV) outbreak has sent rippling effects to the global financial markets. The virus is highly contagious and can transmit from human to human. The current overall fatality rate is estimated to be close to 3%, but still subject to significant uncertainty. So far, confirmed infected cases have been found in a number of countries and regions (e.g., US, Canada, France, Australia, Singapore, South Korea, Japan, Taiwan, Hong Kong), albeit the vast majority of patients are still within China. While China’s domestic equity market remains closed, the offshore FTSE China A50 index futures and Chinese Yuan have plunged. Global equity markets and commodities have retreated, while safe-haven assets have rallied.
As the 2020 US presidential election is approaching, a great deal of attention has been placed regarding who will win the Democratic nomination and who will eventually become the next president. According to the latest real-money betting market (PredictIt) and the polls, former Vice President Joe Biden and Senator Bernie Sanders are leading the Democratic contest.
CHEERS (which stands for China Holiday Effect Excess Return Strategy) is tradeable basket for investors to capitalize on the Chinese New Year seasonal anomaly. The Chinese New Year seasonal anomaly refers to the tendency of the China A market to rally during the Chinese New Year season, when investors are more likely to embrace risk. To capitalize on this effect, we build a disciplined and tradeable stock selection strategy called CHEERS. Last year, our recommended CHEERS portfolio returned approximately 24%, beating the MSCI China A Onshore Index by 6%. This performance was captured over a five-week period around the time of Chinese New Year. We recommend opening the trade on Friday, January 17thand closing the trade on Friday, February 21st.
Year of the Rat – something worth Cheering for. The Chinese New Year is arguably the most important holiday in China and widely celebrated in many other Asian countries. It is not only a joyful occasion to spend time with family and friends, but also offers interesting investment opportunities. In this month’s Portfolio Compass, we revisit our CHEERS (China Holiday Effect Excess Return Strategy) trade and investable strategy (introduced last year) to help investors capitalize on the Chinese New Year seasonal effect.
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