Using a unique dataset of 50 listed companies that meet the majority of the OECD requirements for social impact investments, we construct a social impact finance stock index and investigate how investing in social impact firms can contribute to portfolio risk-return performance. We build portfolios with three different methodologies (naïve, Markowitz mean-variance optimization, GARCH-copula model), and we study the performance in terms of returns, Sharpe ratio, utility, and forecast premium based on a constant relative risk aversion function for investors with different levels of risk aversion. Consistent with the idea that social impact investment can improve portfolio risk-return performance, the results of our macro asset allocation analysis show the importance of a large fraction of investor portfolios’ stake committed to social impact investments.
PurposeThe purpose of this paper is to investigate the influence of the Italian real estate investment trusts (REITs)' governance and regulatory structure on the market prices discount to net asset values (NAV).Design/methodology/approachThe hypothesis is that the overall regulatory design and the rules for prudential vigilance (i.e. governance rights, closed‐end form, leverage constraints, and mandatory listing) influence REITs' share value, both as market price and as NAV). In particular, the analysis focuses on the effects of the recent introduction of a shareholders' meeting in the articles of association of newly established REITs that pursues a better alignment of interests between managers and shareholders.FindingsThe original results show that the NAV discount decreases as long as time to maturity of the fund decreases. Conversely, the NAV discount is negatively affected by share turnover (as a proxy of the liquidity generated by the mandatory listing provision) and leverage. The regulatory provision of a shareholders' meeting appears to have improved the investors' governance capability having a positive impact on the NAV discount. The different sensitivity of market prices and NAVs to the regulatory variables investigated suggests the need to consider this dichotomy when defining or amending the regulatory set ruling REITs' operations and market dynamic.Originality/valueThis paper is the first in the Italian context to specifically consider the effect of the regulatory environment on the NAV discount. In particular, the effect of the regulatory provision of a shareholders' meeting has never been investigated before.
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