UTS Finance Research Showcase - Autumn 2021
The UTS Finance Department invites you to attend a free lunchtime research event:
UTS Finance Research Showcase: Insider Trading, Green Bonds and Fund Holdings
When: 26 March 2021 (12.15pm-1.00pm)
Click here to register for this free event
Meet three UTS Finance academics who will present their latest finance research in a short and sharp online format (5-minute presentations, followed by a 5-minute industry commentary and a 5-minute audience Q&A). Join us and discuss with our financial experts.
Expert commentary on each research topic will be provided by special industry guest Dr David Walsh, Head of Investments at Realindex Investments.
Research topics include:
- "How much insider trading happens in stock markets?" (Dr Vinay Patel)
- "Green bond performance and risk indicators" (Kylie-Anne Richards, PhD)
- "Inferring Portfolio Holdings" (Dr Hardy Hulley)
Research topics:
Topic 1: "How much insider trading happens in stock markets?" (Dr Vinay Patel)
We estimate that the actual prevalence of illegal insider trading is at least four times greater than the number of prosecutions. Using novel structural estimation methods that explicitly account for the incomplete and non-random detection and hand-collected data of all US prosecuted insider trading cases, we estimate that insider trading occurs in one in five mergers and acquisition events and in one in 20 earnings announcements. Key drivers of the decision to engage in illegal insider trading include stock liquidity, the value of the inside information, and the number of people in possession of the information. Detection and prosecution are more likely when there are abnormal trading patterns and more regulatory resourcing.
Working paper can be downloaded here.
Topic 2: "Green bond performance and risk indicators" (Dr Kylie-Anne Richards)
Green bonds are fixed income securities, but differ to traditional bonds with the ‘use of proceeds’ earmarked for investments in projects that have environmental benefits. There are currently no standards on environmental impact reporting for green bonds, which makes it difficult for investors to determine which green bonds are likely to make the largest contribution towards carbon reduction. This is addressed by construction of a set of indicators from financial and environmental data sets, utilizing advanced statistical methods. The indicators capture information relating to risk, performance and controlling indices. The indices measure different attributes of each specific taxonomy as defined by the Green Bond Principles and are further classified by user perspective: issuer, investor and regulator. This research contributes to the continued development, transparency and increased confidence in the functioning of the green bond market as a core capital provider for transitioning the economy to achieve the Paris Agreement goal of limiting warming to well below 2 degrees Celsius, compared to pre-industrial levels.
Topic 3: Inferring Portfolio Holdings (Dr Hardy Hulley)
The bulk of the literature on mutual funds (and other managed funds) focuses on flows and returns. This is mainly because daily flows and returns are readily observable for mutual funds. In order to understand their investment strategies, we really need to know their daily portfolio holdings. Unfortunately, mutual fund portfolio holdings are only disclosed on a quarterly basis (and are subject to some manipulation). As a result, our visibility of mutual fund portfolios is too limited to understand the dynamics of their strategies. But perhaps the glass is half-full (or only half-empty):
- We do know the daily values of mutual fund portfolios.
- We also know the daily prices of the stocks in their portfolios.
- Finally, we know their quarterly holdings.
This is actually quite a lot—perhaps it enough to infer their portfolio holdings on a monthly or daily basis?
Special Industry Guest: Dr David Walsh (Head of Investments at Realindex Investments)
Dr David Walsh has 21 years’ experience in funds management. Prior to joining Realindex, David held various roles including Chief Investment Officer at RF Capital, Head of Investments at Acadian Asset Management, Managing Director and Senior Portfolio Manager at BGI Australia, as well as Head of Research at SSgA Australia. Before entering the finance industry, David spent 8 years in academia in addition to roles in engineering. He is currently the Chairman of the Salvation Army Eastern Territories Advisory Board. David holds a PhD in Finance, a Post-graduate diploma in Mathematics, and a Bachelors of Electrical Engineering from the University of Western Australia. He also holds a Masters of Business from Curtin University.
