Do Investors Value Cash Flow Stability of Listed Infrastructure Funds?

Bitsch, Florian

doi:10.2139/ssrn.1993172

Cited by 4 publications

(4 citation statements)

References 29 publications

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“…As far back as two decades ago, Sanchez-Robles (1998) pointed out that infrastructure investment has a positive and significant relationship with a country's GDP. It has also been shown that FDII rises during economic downturns (Bitsch, 2012), and this was confirmed during the Asian financial crisis of 1998 as well as in the global financial crisis of 2008. Contrary to the predictions of Ramamurti and Doh (2004), FDII has continued to rise since.…”

Section: Foreign Investment and Political Risk 1fdi And Fdii In Devementioning

confidence: 84%

Foreign Infrastructure Investment in Developing Countries: A Dynamic Panel Data Model of Political Risk Impacts

Jiang

Martek

Hosseini

et al. 2019

Technological and Economic Development of Economy

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Foreign direct investment (FDI) is inhibited by political risk. Developing countries tend to experience higher levels of such risk, yet need foreign capital to generate growth. Moreover, foreign direct investment in infrastructure (FDII) – fundamental to economic growth – is particularly sensitive to political risk; characterized by high capital investment, longer investment periods, while especially exposed to mercurial shifts in government policy. Yet, no comprehensive study has been undertaken that measures the impact of political risk on FDII in developing countries. This paper addresses this lack. Twelve political risk indicators, drawn from the International Country Risk Guide Index, are used to quantify the political risk inherent to 90 developing countries, over the period 2006 to 2015. An Arellano-Bond GMM estimator is developed which measures the dollar value impact of risk on both FDI and FDII. A comparison of results confirms that FDII is generally more sensitive to risk than is FDI, however the influence of risk categories is found to vary significantly. The findings can be expected to inform infrastructure policy-makers and foreign investors alike on the dollar-impact of determinable risk levels on foreign-funded projects, and in so doing better facilitate corrective risk mitigation strategies.

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Section: Foreign Investment and Political Risk 1fdi And Fdii In Devementioning

confidence: 84%

Foreign Infrastructure Investment in Developing Countries: A Dynamic Panel Data Model of Political Risk Impacts

Jiang

Martek

Hosseini

et al. 2019

Technological and Economic Development of Economy

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“…For the utility, transport, and telecom companies, the average betas were 0.50, 0.73, and 1.09, respectively. 2 Bitsch (2012) finds that infrastructure vehicles are priced using a highrisk premium in part because of complex and opaque financial structuring, information asymmetries with managers, and regulatory and political risks.…”

Section: Literature Reviewmentioning

confidence: 99%

Searching for a listed infrastructure asset class using mean–variance spanning

Blanc-Brude¹,

Whittaker²,

Wilde

2017

Financ Mark Portf Manag

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This study examines the portfolio-diversification benefits of listed infrastructure stocks. We employ three different definitions of listed infrastructure and tests of mean-variance spanning. The evidence shows that viewing infrastructure as an asset class is misguided. We employ different schemes of infrastructure asset selection (both traditional asset classes and factor exposures) and discover that they do not provide portfolio-diversification benefits to existing asset allocation choices. We also find that defining and selecting infrastructure investments by business model as opposed to industrial sectors can reveal a very different investment profile, albeit one that improves the mean-variance efficient frontier since the global financial crisis. This study provides new insights into defining and benchmarking infrastructure equity investments in general, as well as into the extent to which public markets can be used to proxy the risk-adjusted performance of privately held infrastructure investments.

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“…In line with Huang (2009), but not in line with Bitsch (2012), who finds a positive relation between cash flow volatility and a fund's value.…”

Section: Significantly Negativementioning

confidence: 82%

“…Results about inflation are ambiguous, but it seems that no general inflation hedge is provided by infrastructure investments. Cash flow volatility is analyzed by Bitsch (2012), who finds more stable cash flow for unlisted infrastructure deals but cannot confirm a premium for such stability.…”

Section: Introductionmentioning

confidence: 97%

Common Risk Factors of Infrastructure Firms

Ammar

Eling

2013

SSRN Journal

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The risk of infrastructure firms is driven by unique factors that cannot be well described by standard asset class factor models. We thus create a seven-factor model based on infrastructure-specific risk exposure, i.e., market risk, cash flow volatility, leverage, investment growth, term risk, default risk, and regulatory risk. We empirically test our model on a large dataset of U.S. infrastructure stocks in different subsectors (utility, telecommunication, and transportation) and over a long period of time (1980 to 2011). The new factor model is able to capture the variation of infrastructure returns better than the Fama/French three-factor or the Carhart four-factor models. Thus, our model helps to better determine the cost of capital of infrastructure firms, something that is increasingly relevant in light of the growing need for privately financed infrastructure projects.

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Do Investors Value Cash Flow Stability of Listed Infrastructure Funds?

Cited by 4 publications

References 29 publications

Foreign Infrastructure Investment in Developing Countries: A Dynamic Panel Data Model of Political Risk Impacts

Foreign Infrastructure Investment in Developing Countries: A Dynamic Panel Data Model of Political Risk Impacts

Searching for a listed infrastructure asset class using mean–variance spanning

Common Risk Factors of Infrastructure Firms

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