Breaking Bad: an Investment in Cannabis (download)
Finance Research Letters, 2020, 33: 101201.
This paper investigates the risk and return features of an investment in the cannabis industry. It further describes the current state of the market for cannabis and critically examines its potential future development. Findings show that a portfolio of cannabis stocks displays high volatilities and returns, but also low correlations and beta coefficients with regard to overall stock markets, other sin industries or cryptocurrencies. This makes it an interesting addition to financial portfolios.
The Price of International Equity ETFs: The Role of Relative Liquidity (download)
with Christina Atanasova, Journal of International Financial Markets, Institutions and Money, 2020, 65: 101190.
We examine the effect of the relative liquidity of international equity exchange-traded funds (ETFs) and their constituent portfolios on the price difference between the fund’s market prices and its net asset values. We use data for a sample of 584 international equity ETFs listed in the U.S. over the period January 2012 to December 2017 and find that higher liquidity is associated with a lower absolute value of the ETF premium/discount. We document a positive relationship between liquidity and the price convergence of the ETFs and their underlying shares. The effect of liquidity on convergence is stronger for ETFs with high holding costs.
When Rationality meets Passion: On the Financial Performance of Collectibles (download)
with Philippe Masset, Journal of Alternative Investments, 2018, 21(2): 66-83.
This article examines prior evidence and proposes an empirical study of the performance of passion investments in comparison with financial and real assets over the past 20 years. Over this period, classic cars and fine wines (but not visual art) display better returns than U.S. equity, fixed income, and real estate. Volatilities are, overall, low but increase once returns are adjusted for the inherent illiquidity on collectible markets. In a CAPM framework, only classic cars yield significant risk-adjusted returns with an annualized alpha of 5%. At the same time, correlations and systematic risk are low for all collectibles. This diversification benefit is confirmed by a 7% portfolio risk reduction following the inclusion of collectibles in a traditional financial portfolio. The authors further document that the inherent segmentation of collectible classes extends the benefits of cross-asset to intra-asset class diversification. Finally, they find that collectibles have performed slightly less well since the Global Financial Crisis.
Finance Research Letters, 2020, 33: 101201.
This paper investigates the risk and return features of an investment in the cannabis industry. It further describes the current state of the market for cannabis and critically examines its potential future development. Findings show that a portfolio of cannabis stocks displays high volatilities and returns, but also low correlations and beta coefficients with regard to overall stock markets, other sin industries or cryptocurrencies. This makes it an interesting addition to financial portfolios.
The Price of International Equity ETFs: The Role of Relative Liquidity (download)
with Christina Atanasova, Journal of International Financial Markets, Institutions and Money, 2020, 65: 101190.
We examine the effect of the relative liquidity of international equity exchange-traded funds (ETFs) and their constituent portfolios on the price difference between the fund’s market prices and its net asset values. We use data for a sample of 584 international equity ETFs listed in the U.S. over the period January 2012 to December 2017 and find that higher liquidity is associated with a lower absolute value of the ETF premium/discount. We document a positive relationship between liquidity and the price convergence of the ETFs and their underlying shares. The effect of liquidity on convergence is stronger for ETFs with high holding costs.
When Rationality meets Passion: On the Financial Performance of Collectibles (download)
with Philippe Masset, Journal of Alternative Investments, 2018, 21(2): 66-83.
This article examines prior evidence and proposes an empirical study of the performance of passion investments in comparison with financial and real assets over the past 20 years. Over this period, classic cars and fine wines (but not visual art) display better returns than U.S. equity, fixed income, and real estate. Volatilities are, overall, low but increase once returns are adjusted for the inherent illiquidity on collectible markets. In a CAPM framework, only classic cars yield significant risk-adjusted returns with an annualized alpha of 5%. At the same time, correlations and systematic risk are low for all collectibles. This diversification benefit is confirmed by a 7% portfolio risk reduction following the inclusion of collectibles in a traditional financial portfolio. The authors further document that the inherent segmentation of collectible classes extends the benefits of cross-asset to intra-asset class diversification. Finally, they find that collectibles have performed slightly less well since the Global Financial Crisis.
