Kent Centre for Finance

Dr David Morelli from the Kent Business School presented a paper titled ‘ Momentum profits and conditional time-varying systematic risk’ at the 11th International conference in Finance held in Athens 1st – 4th July 2013.

The Athens Institute for Education and Research was established in 1995 as an independent world association of academics and researchers. Its mission is to become a forum where academics and researchers from all over the world could meet and exchange ideas on their research and discuss the future developments of their discipline.

In recent years there has been growing interest over the predictability of future security prices, and the adoption of investment strategies, based upon such predictions, producing abnormal returns. Momentum trading is one such investment strategy based upon the examination of past security prices. The paper presented by Dr David Morelli examined Momentum trading strategies within the UK Stock Market. This paper attempts to determine whether the higher returns found with momentum securities results from higher conditional time-varying systematic risk.

Kent Business School proudly announces that it has been CFA approved program-level participant for MSc Financial Markets and MSc Financial Services in Banking. This is a great achievement from our school, following a similar program level recognition from PRMIA. CFA’s mission is to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.

Finance PhD student Jun Yang working under the supervision of Dr Huamao Wang in the School of Mathematics has been awarded National Distinguished International Students Scholarship by China Scholarship Council. Jun Wang is carrying out research in Bond-Stock Portfolio Optimization under Predictability and Parameter Uncertainty and has gained a scholarship for the duration of his research programme from the China Scholarship Council, affiliated with the Ministry of Education in China.

Dr Nikolaos Voukelatos from Kent Business School presented a working paper on the performance of option trading strategies in the EU at the 5th annual conference of the International Finance and Banking Society at the East Midlands Conference Centre at Nottingham on June 27th.

The conference aimed to to provide a forum for discussion and critical analysis of the major financial and banking issues that are faced by the world today, bringing together leading researchers and experts in the field, from academia, the industry and the world of policy making.

Keynote speakers included Lord May of Oxford (University of Oxford), Martin Brooke (Bank of England) and Alexandros Vardoulakis (European Central Bank and Bank of France).

Previous studies have highlighted the importance of options contracts in hedging various sources of market risk. The paper presented by Nikolaos Voukelatos provided new empirical evidence on the risk premia associated with various parts of the distribution of market returns by using information implied by the prices of index options. In addition, the paper highlighted the significant difference in terms of the willingness of market participants to hedge against different types of risk before and after the recent financial crisis.

Dr Nikolaos Voukelatos from Kent Business School presented a working paper on the performance of option trading strategies in the EU at the 3rd annual conference of the Financial Engineering and Banking Society at the ESCP Europe Paris campus on June 6th.

The conference aimed to to provide a common forum for leading academics, regulators and practitioners to improve understanding of regulation policies and financial systems, with a view of providing public authorities with independent academic expertise and guidelines for actions.

Keynote speakers included Darrell Duffie (Stanford University) and Ike Mathur (Southern Illinois University).

Previous studies have highlighted the importance of options contracts in hedging various sources of market risk. The paper presented by Nikolaos Voukelatos provided new empirical evidence on the risk premia associated with various parts of the distribution of market returns by using information implied by the prices of index options. In addition, the paper highlighted the significant difference in terms of the willingness of market participants to hedge against different types of risk before and after the recent financial crisis.

Dr. Ortenca Kume from Kent Business School presented a paper titled “Impact of Financial Crisis on Capital Structure of UK Firms” at the 20th Annual Conference of Multinational Finance Society (MFS) held in Izmir, Turkey between 30th June and 2nd July 2013.

The conference’s aim was to bring together academic researchers, educators, doctoral students and practitioners from various international institutions to focus on timely financial issues and research findings pertaining to industrialized and developing countries including the recent financial and economic crisis. Keynote speakers included Prof. Suleyman Basak (London Business School, UK) and Prof. Luigi Zingales ( University of Chicago, USA)

Dr. Ortenca Kume presented a paper “Impact of Financial Crisis on Capital Structure of UK Firms”

World economies experienced a major financial and banking crisis during the first decade of 21st century. Our study examines the impact of this financial crisis on capital structure decision of UK industrial firms. Results show that firms first increase their leverage ratios from pre-crisis (2006 and 2007) to crisis (2008 and 2009) years and then decrease it in the post-crisis (2010 and 2011) years. Firms use both debt and equity to manage their capital structure however they rely more heavily on short term debt rather than long term debt during the crisis years. Our results also reveal that firm with lower than industrial average capital structure ratio in the pre-crisis years gradually increase their leverage during crisis and post-crisis years. However, firms withhigher than industrial average capital structure ratios in the pre-crisis years steadily decrease their leverage by improving their equity levels.

Dr Ekaterini Panopoulou from Kent Business School will present a working paper entitled “Hedge fund return predictability; To combine forecasts or combine information?” at the Conference on “Banking, Finance, Money and Institutions: The Post Crisis Era” to be held at the University of Surrey, between the 2nd and 3rd November 2013.

The conference is jointly organised by the Centre for Money, Banking & Institutions (University of Surrey, UK) and the Centre for Research in contemporary Finance (Fordham University, USA). It aims to provide a forum for debate among researchers and policy makers from around the world on the performance of banking and financial markets, financial stability and risk management, and the monetary, regulatory and institutional environment, in light of the recent financial crisis. Keynote Speakers include Anthony Saunders (New York University, USA) and Hans Degryse (University of Leuven, Belgium & Tilburg University, Netherlands).

Dr Ekaterini Panopoulou from Kent Business School will present a working paper entitled “Hedge fund return predictability; To combine forecasts or combine information?”

While the majority of the predictability literature has been devoted to the predictability of traditional asset classes, the literature on the predictability of hedge fund returns is quite scanty. This is rather awkward since hedge funds have attracted much interest not only for their ability to generate relatively high average returns, but also for the large losses that they can incur. We consider various combining methods (CF) ranging from simple averaging schemes to more sophisticated ones, such as discounting forecast errors, cluster combining and principal components combining. Our second approach combines information (CI) by applying the Kitchen Sink, Lasso, Ridge, and Elastic Net regressions, pre-testing and bootstrap aggregating (bagging). Our findings suggest that combining forecasts performs better than combining information. An aggressive portfolio aiming at maximizing expected returns constructed on the basis of simple combining schemes (mean, median, trimmed mean) leads to significant benefits when compared to the naive equally-weighted portfolio and the benchmark HFR fund of hedge funds.

Dr Ekaterini Panopoulou from Kent Business School will present a working paper entitled “Out-of-sample equity premium prediction: a complete subset quantile regression approach” at the 7th MIFN conference to be held at the University of Namur, Belgium between the 23rd and 24th September 2013.

The conference is designed to facilitate high level, high intense discussion and fruitful exchange between researchers both in the domain of international finance and/or econometrics of finance. Plenary speakers include Prof. Charles Goodhart (London School of Economics) and Prof. Peter Schotman (University of Maastricht).

Dr Ekaterini Panopoulou from Kent Business School will present a working paper entitled “Out-of-sample equity premium prediction: a complete subset quantile regression approach”

This paper proposes a quantile regression approach to equity premium forecasting based on complete subset combinations of forecasts. The proposed approach extends the complete subset mean regression framework to a quantile regression setting. This framework enables us to construct robust and accurate equity premium predictions from a set of complete subset quantile forecasts. Finally, we put forward a recursive algorithm that selects, in real time, the best complete subset for each predictive regression quantile. Robust point forecasts of the equity premium are based on the synthesis of these ‘optimal’ complete subset quantile forecasts. The proposed approach delivers statistically and economically significant out-of-sample forecasts relative to both the historical average benchmark and the complete subset mean regression approach.

Catalin Cantia and Tommaso Paletta, PhD students in Finance in their second year working under the supervision of Prof. Radu Tunaru, Dr. Silvia Stanescu and Dr. Nikolaos Voukelatos , have been accepted to the Sixth European Summer School in Financial Mathematics, which is organised in Vienna this year in August.

The European Summer School in Financial Mathematics aims at bringing together the most talented young researchers in the field, looking at the very young who only just started their PhD studies. The Scientific Committee consists of European leaders and representatives of financial mathematics.

The school is attended by students from all over the world, the competition for entry being very high. Well done to Catalin and Tommaso!

Professor in Quantitative Finance Radu Tunaru has been appointed Associate Editor on the board of the Journal of Banking and Finance. He says that this is a very high achievement since this journal is widely regarded as one of the best journals in the field. The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal’s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal’s purpose is to improve communications between, and within, the academic and other research communities and policy makers and operational decision makers at financial institutions – private and public, national and international, and their regulators.