The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments

Bortolotti, Bernardo; Fotak, Veljko; Megginson, William L.

doi:10.2139/ssrn.2322745

Cited by 36 publications

(107 citation statements)

References 42 publications

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“…4 This action is inconsistent with the passive investor hypothesis (Bortolotti et al, 2015). Liu and Zhang, (2011) find that there is a significant and positive domestic market response to CNSSF portfolio holding information.…”

Section: Paper 1: Overview and Motivationmentioning

confidence: 98%

“…On one hand, the CNSSF meets the most important criteria of a government-backed investor proposed by Bortolotti et al (2015). Even though 40 percent of the CNSSF assets are invested in risky assets, Bortolotti et al (2015) assume the CNSSF is a pension fund and excludes it from the sovereign wealth funds (SWFs) list. However, the CNSSF does not recognise any liabilities to beneficiaries, leading Knill et al (2012) to treat the CNSSF as a SWF.…”

Section: General Background and Motivation For Studying The Cnssfmentioning

confidence: 99%

“…8 It is rare to see research on the impact of political constraints on investment decisions. In this paper we compare the trading motives of the CNSSF, who operate in a political environment (Bortolotti et al, 2015) with other types of managed funds with different constraints.…”

Section: Paper 1: Contributionmentioning

confidence: 99%

“…Further, contrasting the existing literature, that tests if state-sponsored investors can earn abnormal returns (see, Knill et al, 2012;Kotter and Lel, 2011;Bortolotti et al, 2015), we offer new analysis that explores if a state sponsored investor can play a 'last resort' role in the stock markets, analogous to role that central banks play in banking systems. We also check the relation between liquidity provision behavior and information quality.…”

Section: Paper 1: Contributionmentioning

confidence: 99%

“…In addition, domestic government-backed investors have more impact on firm values than foreign investors (Bortolotti et al, 2015). The CNSSF's portfolio allocations reflect its political connections (Li et al, 2015).…”

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confidence: 99%

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Three essays on the financial analysis of the political actions of the Chinese National Social Security Fund

Li¹

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In this thesis, using a finance lens, we investigate various aspects of political actions of the Chinese National Social Security Fund (CNSSF). The thesis comprises three empirical papers. In the first essay, we analyze the trading behavior of the CNSSF that operates in a highly political environment. We show that the CNSSF adopts a rebalancing strategy that maintains both portfolio liquidity and growth opportunities. Further, we find direct and indirect evidence that the CNSSF actively intervenes in the stock market by providing liquidity to mutual funds in distress. This liquidity provision can be primarily explained by public information quality. Most notably, CNSSF can profit by assisting distressed mutual funds, especially if such liquidity provision relates to private information. In addition, this bailout-like behavior is not speculative and can positively improve the performance of the distressed mutual funds.In essay 2, we propose a new measure of the policy information advantage available to the CNSSF. Specifically, we assess the impact of this policy-linked "information advantage" on stock performance. Our results show that in the short run, there is a positive and significant information advantage-stock performance linkage.Moreover, our findings support the view that CNSSF promotes the absorption of inside information into prices. In contrast, in the long run, the policy information advantage of the CNSSF negatively decreases the firm operation performance. Finally, we document that there is an information network spillover of the information advantage across the Chinese mutual fund industry, which also affects mutual fund performance.In the third essay, we propose a smooth non-parametric estimation to explore the safety-first portfolio optimization problem. As an empirical application, we simulate optimal portfolios and display return-risk characteristics using the CNSSF strategic stocks. We obtain a non-parametric estimation calculation formula for loss (truncated) probability using the kernel estimator of the portfolio returns' cumulative distribution function, and embed it into two types of safety-first portfolio selection models. We numerically and empirically test our non-parametric method to demonstrate its accuracy and efficiency. Cross-validation results show that our non-parametric kernel estimation method outperforms the empirical distribution method.

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Section: Paper 1: Overview and Motivationmentioning

confidence: 98%

Section: General Background and Motivation For Studying The Cnssfmentioning

confidence: 99%

Section: Paper 1: Contributionmentioning

confidence: 99%

Section: Paper 1: Contributionmentioning

confidence: 99%

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Three essays on the financial analysis of the political actions of the Chinese National Social Security Fund

Li¹

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Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

Megginson¹,

Fotak²

2016

A Collection of Reviews on Savings and Wealth Accumulation

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The impact of governmental COVID‐19 measures on manufacturers' stock market valuations: The role of labor intensity and operational slack

Chen

Jia

et al. 2022

J of Ops Management

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This study investigates the impact of the Chinese government's Level I emergency response policy on manufacturers' stock market values. We empirically examine the roles of human resource dependence (labor intensity) and operational slack within the context of supply chain resilience. Through an event study of 1357 Chinese manufacturing companies, we find that the government's emergency response policy triggered statistically significant positive abnormal returns for manufacturers. However, we also find that there exists a negative impact on abnormal returns for manufacturers that are labor‐intensive, giving rise to arguments based in resource dependence theory. In addition, the results indicate the positive role played by operational slack (e.g., financial and inventory slack) in helping manufacturers maintain operations and business continuity, effectively mitigating risks and adding to the manufacturers' resilience. With these findings, we contribute to operations and supply chain management by calling attention to the importance of human resource redundancy while at the same time identifying financial slack and inventory as supply chain resilience strategies that were able to mitigate pandemic‐related risks.

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The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments

Cited by 36 publications

References 42 publications

Three essays on the financial analysis of the political actions of the Chinese National Social Security Fund

Three essays on the financial analysis of the political actions of the Chinese National Social Security Fund

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

The impact of governmental COVID‐19 measures on manufacturers' stock market valuations: The role of labor intensity and operational slack

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