Crises, Contagion, and the Closed-End Country Fund Puzzle
  • 1 0000000404811396 Monetary Fund

This paper analyzes the behavior of closed-end country fund discounts, including evidence from the Mexican and East Asian crises. It finds that the ratio of fund prices to their fundamental value increases dramatically during a crisis, an anomaly that we denote the “closed-end country fund puzzle.” Our results show that the puzzle relates directly to the fact that international investors are less (more) sensitive to changes in local (global) market conditions than domestic investors. This asymmetry implies that foreign participation in local markets can help dampen the effect of a crisis in asset prices in the originating country, at the cost of amplifying contagion to noncrisis countries. [JEL G1, E3]

The efficient market hypothesis states that assets ought to sell for their fundamental values. The fundamental value of a closed-end fund is the market value of its portfolio, the Net Asset Value (NAV). Hence, in theory, the price of closed-end funds should converge to the NAV. It is a well-documented fact, however, that closed-end funds trade at significant discounts or premiums. One of the prevalent explanations for this puzzle argues that, as the scope for arbitrage is limited due to capital account restrictions and transaction costs, the lack of convergence of fund prices to their fundamental value simply reflects the fact that investors in the local (NAV) and foreign (fund) markets differ.1

In this paper, we review the main stylized facts on closed-end country funds in light of an updated data set that includes the Asian crisis period. This allows us to provide a comprehensive characterization of the determination of discounts in crisis periods, study the dynamics of discounts in the aftermath of the Tequila crisis, and compare their behavior during both crises. We present evidence that indicates that investors’ behavior indeed differs for both assets. By accepting this premise, the evolution of fund discounts can be used to shed light on the differential response of domestic and international investors to episodes of financial distress.

We find that the particular pattern displayed by Mexican funds during the 1994 crisis is common to other recent crisis episodes: the price to NAV ratio increases sharply during the initial phases of financial distress. We present evidence that this striking regularity, which we denote as the “closed-end country fund puzzle,” can be attributed to the fact that, in general, international investors are less sensitive to changes in local market conditions than domestic investors (but they are more sensitive to changes in global market conditions). We show that, while the Asian crisis led to significant contagion across all emerging markets, channeled to a large extent through the behavior of international investors, the response from local investors differed. In Asia stock prices declined by more than fund prices (increasing fund premiums), but in Latin America stocks reflected the impact only partially, and hence Latin American fund discounts widened. Hence, substantial declines in local markets in crisis periods exert a less than proportional effect on fund prices, accounting for the sharp decrease in fund discounts. Conversely, a decline in international markets as a result of crises abroad affects fund prices relatively more than local share prices, widening the discount. Moreover, we find that this asymmetric response tends to be highly persistent and hence cannot be explained as a consequence of temporary information asymmetries.

The first policy implication that can be drawn from these results is that less responsive foreign investors may play a stabilizing role in a crisis country, while the opposite is true in contagion countries, where foreign investors are likely to amplify the negative cross effects from crisis economies. A second implication can be derived, according to whether we interpret the asymmetric response as an indication of foreign underreaction or local overreaction. In the first case, and assuming that local investors possess privileged information about local conditions, an increase in the discount may be understood as a signal of the deterioration of local fundamentals.

Instead, we tend to favor the view that crisis premiums reflect local overreaction in the presence of market segmentation. On the one hand, the excessive exposure of local investors to domestic market risk may make them more sensitive to changes in domestic fundamentals. On the other hand, the liquidity crunch that usually follows the unraveling of a financial crisis is likely to have a greater impact on investors in the host country, forcing them to liquidate their local positions at prices below their fundamental value. Therefore, countries that restrict foreign portfolio investment by preventing liquid international investors from operating in the local market may exacerbate the short-term impact of a financial crisis on asset values. Conversely, the presence of internationally diversified foreign investors may amplify contagion in otherwise healthy economies.

I. Definitions, Facts, and Puzzles

The Closed-End Fund Puzzle

Country funds are investment companies whose shares trade on organized stock exchanges and that hold and manage portfolios concentrating in the equity markets of particular foreign “host” countries. Among country funds, closed-end country funds (hereafter “country funds”) are special funds that issue a fixed number of shares domestically, and thus ownership of the fund’s shares after the initial public offering (IPO) can only be gained through the secondary market. Each fund provides two distinct market-determined prices: the country fund’s share price quoted on the market where it trades and its NAV determined by the prices of the underlying shares traded in the “host” market.

Throughout the 1980s and 1990s, country funds experienced an impressive growth: in December 1984, only four country funds were listed on American stock exchanges, compared to more than 60 in 1998, in addition to more than 40 regional funds specializing in the equity markets of Asia, Europe, Latin America, or Africa. Over the same period, London and Hong Kong also emerged as important centers for country fund trading.

Country funds are popular among U.S.-based investors because they allow participation in foreign markets by providing a managed diversified portfolio at a low transaction cost and without the need to use foreign exchange for settlement purposes. They also avoid testing the liquidity of the normally thin host market by avoiding the redemption of shares. In fact, country funds were the original vehicle for foreign investment in emerging markets. For example, until the late 1980s the closed-end Mexico Fund was the only instrument available for U.S. investors to invest in the Mexican market. Similarly, the Korea Fund partially opened the Korean market to foreign investors in 1984, long before the process of capital market liberalization was initiated in 1991.

From the point of view of the host country, country funds can help promote the efficiency of pricing in the emerging capital market, and can enhance capital mobilization by local firms and reduce the cost of capital. Diwan, Errunza, and Senbet (1993a, 1993b) examine these issues both theoretically and empirically and show that these results hold despite the small size of the country fund compared with the market capitalization of the host market.

According to Stulz (1981), if capital markets were integrated internationally, assets of equal risk located in different countries would yield equal expected returns in some common currency. Hence, prices of country funds should converge to the net asset value of the component assets if both were traded in an integrated market, and no premiums/discounts should be observed in the long run. However, it is a distinguishing feature of country funds that fund share prices generally deviate from their portfolio value or NAV and, as a result, the returns on fund shares may differ from those on the portfolio in which the fund invests. These premiums and discounts can be of significant size (for example, the Thai Fund traded at a premium of 160 percent in February 1998), and vary over time (the same fund traded at a discount of 20 percent in November 1994).

The significant discount that characterizes U.S. closed-end funds is what Lee, Shleifer, and Thaler (1991) denote as the “closed-end fund puzzle.” Indeed, they present empirical evidence demonstrating that (1) U.S. closed-end funds start at a premium of about 10 percent; (2) after some time this premium turns into a discount; (3) the discount fluctuates widely over time; and (4) discounts shrink when funds are terminated through either liquidation or open-ending. Empirical studies on closed-end country funds, including Hardouvelis, La Porta, and Wizman (1993) and Bodurtha, Kim, and Lee (1995), have found that these funds largely follow the same pattern as U.S. closed-end funds. In particular, they found that, after controlling for restrictions to capital flows, closed-end country funds carry a significant discount on average.

Explanations for the Puzzle

The closed-end fund puzzle has generated an important amount of literature that tries to explain the size and time variation of fund discounts. Two main explanations have been put forward. The first one refers to the existence of market frictions and segmentation, while the second emphasizes the presence of nonrational agents and the role of market sentiment.

Market Frictions and Segmentation

The first line of explanation includes issues related to agency costs (if, for example, future portfolio performance is expected to be below average), differential tax treatment, barriers to cross-border capital flows, and the impossibility of perfect arbitrage (see Levy-Yeyati and Ubide, 1998, for a detailed discussion).2

If any or all of these barriers were actually in place, then the resulting market segmentation would imply that the price of a U.S.-based country fund is determined by the diversification needs of U.S. investors, whereas the valuation of the fund’s NAV is determined by the diversification needs of investors in the host country (see Diwan, Errunza and Senbet, 1993a, for more information). In other words, the pricing of both assets will differ inasmuch as investors in either market use different benchmark portfolios to measure systematic risk.3

The Noise-Trader Hypothesis

The competing literature considers the mechanism of public trading as the main source of discounts. De Long and others (1990) emphasize the role of noise traders, irrational investors who interact in the market with fully rational investors and whose unpredictable beliefs create a risk in the pricing of assets that deters rational arbitrageurs from aggressively betting against them. They assume that variations in the demand from noise traders are caused by shifts in “sentiment” or “misperceptions” of the fundamental value of assets.4 Lee, Shleifer, and Thaler (1991) argue, using a sample of U.S. equity closed-end funds, that the behavior of these funds is consistent with individual investors’ systematic and persistent swings in sentiment, reflected in “common” changes of mood, and can be explained by the noise traders in De Long and others (1990). In this context, discounts are likely to arise because noise traders add excess volatility to the market and make it riskier to invest in the fund than to hold the underlying portfolio. Hence, the discount would reflect the differential risk and would vary over time along with the stochastic changes in the mood of noise traders. Hardouvelis, La Porta, and Wizman (1993) claim that the noise-traded hypothesis is likely to be a more adequate explanation for country fund discounts than for domestic closed-end fund discounts because country fund discounts would clearly reflect differences in sentiment between U.S. and host country investors, while different types of U.S. investors may be difficult to associate with particular types of assets. The implicit assumption of this approach is that the share of noise traders in the fund market is larger than in the host market.

The noise-trader hypothesis has further implications. Since the same sentiment drives discounts on all funds, there should be a common component in the evolution of the discounts of all funds traded in the same market. And since this sentiment is specific to the noise trader, it should affect other assets in the noise trader’s portfolio. In the context of U.S. closed-end funds, Lee, Shleifer, and Thaler (1991) present evidence that sustains these claims and conclude that the discounts on closed-end funds are a sentiment index.5

Hardouvelis, La Porta, and Wizman (1993) and Bodurtha, Kim, and Lee (1995) test the noise-trader hypothesis for country funds and provide evidence suggesting that the mean reverting sentiment is an important component of the price of country funds and that there is a common component of sentiment across funds accounting for a significant fraction of the variance in country fund discounts. The authors of both studies also provide another important piece of evidence: country fund prices are sticky, that is, they do not respond as much as NAVs to movements in host stock markets, but they are oversensitive to movements in world and domestic (U.S.) returns. Finally, Bodurtha, Kim, and Lee (1995) argue in favor of the noise-trader hypothesis against the market segmentation view by showing that (1) discounts behave similarly across countries after controlling for different restrictions to capital flows; (2) discounts are stationary, with a gradual long-run adjustment of the price toward the NAV; and (3) fund prices overreact to important news and underreact to unimportant news.

Crisis, Contagion, and the “Closed-End Country Fund Puzzle”

All of the explanations listed above are based on analysis of country fund behavior in periods of relative tranquility.6 However, the Mexican devaluation in December 1994 and the subsequent Tequila crisis added a new aspect to the picture. After the devaluation of the Mexican peso, country funds that invested in Mexico and other Latin American economies that were trading normally at a discount developed large premiums that were sustained for as long as four months, introducing what we refer to in this paper as the “closed-end country fund puzzle” (see Figures 1, 2, and 3).7 How can this be explained by the theories advanced thus far?

Figure 1.
Figure 1.

Latin America: Evolution of Discounts

Citation: IMF Staff Papers 2000, 002; 10.5089/9781451974584.024.A003

Source: Bloomberg.
Figure 2.
Figure 2.

Asia: Evolution of Discounts

Source: Bloomberg.
Figure 3.
Figure 3.

Europe: Evolution of Discounts

Source: Bloomberg.

As Kramer and Smith (1995) suggest, the noise-trader hypothesis encounters two fatal difficulties in explaining the Mexican episode: first, it would imply that U.S. investors became relatively optimistic after the devaluation about Mexican stocks; second, for this hypothesis to be true, swings in sentiment would then be common to all funds. After the Mexican devaluation, however, only Mexico and a few Latin American country funds experienced these swings. Hence, sentiment changes were not systematic, but rather country-specific, contradicting the standard noise-trader argument.

Kramer and Smith (1995) advance an alternative explanation for this behavior based on loss aversion by American investors. Borrowing from the model by Benarzti and Thaler (1995), Kramer and Smith argue that movements in the NAV should be followed by asymmetric effects in discounts, with upswings showing smaller changes in prices relative to NAV than downswings. In particular, loss averse shareholders should be reluctant to sell on downswings to avoid realizing losses. Hence, in the Mexican case, American shareholders would have been unwilling to sell after the decline in NAVs that followed the devaluation of the peso, hoping for a market turnaround, thus giving rise to large premiums.8

Frankel and Schmukler (1996) argue that the developments following the Mexican crisis were consistent with swings in market sentiment, provided that local investors turned pessimistic earlier than U.S. investors. Their argument relies on the assumption that Mexican investors had access to privileged information about the local market, and thus were the first ones to foresee the crisis. Relatively uninformed American investors lagged behind, inducing an increase in the premium.

Several aspects of this explanation are difficult to reconcile with the recent evidence. First, temporary information asymmetries like the ones assumed in Frankel and Schmukler (1996) cannot account for long-lasting premiums. In particular, it is difficult to understand why U.S. investors remained uninformed of the seriousness of the Mexican crisis until as late as March 1995, when the Mexican Fund still posted a premium of more than 20 percent. Second, both the standard market sentiment and the asymmetric information hypotheses imply that discounts are stationary, that is, the premium during the crisis period would eventually revert to a discount of the same order prevalent before the crisis.9 Already in mid-1995, however, the Mexican Fund traded at a discount significantly larger than its precrisis average, reaching values above -20 percent by the end of 1997.10

But while there is no evidence of significant changes in the degree of market segmentation (e.g., regulatory restrictions or transaction costs) that could explain the behavior of country fund discounts during crisis periods, persistent shifts in relative asset valuation as those indicated by the empirical evidence presented here are still consistent with the market segmentation hypothesis. There are two components to the valuation of assets: expected cash flow projections and an appropriate (stochastic) discount factor. While a downward shift in the cash flow projections would affect valuations of local as well as international investors by a similar proportion, leaving relative valuations unaffected, crisis premiums could be explained if a crisis also involves differential changes in discount factors by local and international investors.11 The underlying reasons for these changes, however, have to account for the fact that discounts tend to move in the opposite direction in markets suffering from contagion, as was the case of Latin American countries in the aftermath of the Asian crisis. This will become clear in the next section, where we revisit some of the ideas discussed above in light of the empirical evidence from recent years.

II. Empirical Evidence

In this section we focus on the behavior of country funds in periods of crisis. We distinguish three types of emerging markets, according to their situation during the Asian crisis: (1) crisis markets (the group Asia I, comprising Indonesia, Korea, and Thailand); (2) near-crisis markets, which are subject to contagion from a crisis in a neighboring country (the group Asia II, which includes Malaysia, the Philippines, and Singapore); and (3) noncrisis markets (the Latin American group: Argentina, Brazil, Chile, and Mexico). For countries in the first group, the deterioration of local market conditions is apparent and should be part of the information set of both local and foreign investors.12 The second group of Asian countries have fundamental links with crisis countries, and thus are likely to suffer negative spillovers. Contagion in these cases is expected and may be consistent with the evolution of fundamentals (fundamental contagion). Finally, fundamentals in Latin American countries (and in general, non-Asian emerging markets) are less affected by the collapse of Asian economies, and contagion, if there is any, is likely to respond to non-fundamental factors and, in particular, to swings in investor sentiment toward emerging markets as a whole. In addition, in some cases we use as a benchmark a fourth group of European countries (including Germany, Ireland, Italy, Spain, and the United Kingdom). As will be shown below, the behavior of country fund prices vis-à-vis the price of the underlying stock varies substantially across each of these groups. Finally, in some cases, we divide the sample period (2/1994–4/1998) into two subsamples, corresponding broadly to the Tequila (2/1994–7/1996) and the Asian (8/1996–4/1998) crises.13

The Data

The full sample used in our empirical analysis comprise 24 single-country funds traded on the New York Stock Exchange. Table 1 lists the names and IPO of the funds in our sample. The data cover weekly prices, NAVs, and discounts for the period February 1994 to April 1998 and were obtained from the Bloomberg database. Prices and NAVs are generally reported on a Friday. The funds compute the NAVs by translating the local currency price of the assets of the portfolio at the local market close into U.S. dollars. This currency conversion, however, is not uniform, because some funds use the market exchange rate at closing in the local market while others use the afternoon rate in New York. Moreover, since foreign markets close at different hours prior to the close in New York, prices and NAVs are only approximately synchronous.

Table 1.

Sample of Country Funds

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Source: Bloomberg.

As of April 1997.

First Glance at the Main Statistics

Table 2 presents summary statistics on fund discounts for the entire sample (throughout the paper, discounts are computed as the ratio of fund prices to NAVs). Several results stand out. First, country funds trade at an average discount of -5.7 percent, and this discount varies importantly over time and across countries. The average standard deviation is 9 percent, from a low of 3 percent for Germany to a high of 30 percent for Thailand. The values for Thailand, however, range from -22 percent to 155 percent. Third, discounts are very persistent, with first-order autocorrelation coefficients of about 0.9. Finally, the behavior across regions shows important idiosyncrasies. On the one hand, Organization for Economic Cooperation and Development (OECD) countries trade on average at a larger discount, and some of them have never traded at a premium (Germany, Ireland, Spain, and the United Kingdom). These countries also display the lowest volatility, with an average standard deviation of 5 percent. On the other hand, Asian countries have traded on average at a premium. This reflects in part the behavior of some of these funds during the recent crisis.14 To control for this fact, in Table 3 we present the same statistics for the Tequila crisis and the Asian crisis subsamples.

Table 2.

Discounts: Summary Statistics—Whole Sample, 2/1994 to 4/1998a

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Source: Bloomberg.Note: Newey-West Standard Errors in parentheses.

Sample period notation is month/year.

Table 3.

Discounts: Summary Statistic—Subsamples

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Source: Bloomberg.Note: Newey-West Standard Errors in parentdeses.

Sample period notation is month/year.

During the Tequila crisis, Latin American funds traded on average at a small discount of less than -4 percent, with Mexico reaching a maximum premium of 43 percent, while in the Asian crisis subsample, the average discount for the region was -17.4. Asian funds showed the opposite behavior. While they traded at an average discount of close to -2 percent during the earlier period, the average discount turned into an average premium of 8.5 percent during the Asian crisis, with maximums of more than 100 percent for Indonesia and Thailand.15 Hence, the evidence confirms an important stylized fact: regardless of its behavior in periods of tranquility, fund discounts in countries directly affected by a major financial crisis decrease dramatically and even turn to premiums for long periods of time.

Levy-Yeyati and Ubide (1998) report also the main statistics for the first differences of prices and NAVs. Consistent with standard findings in the literature, they show that returns on prices are more volatile than returns on NAVs over the entire sample and that returns on prices are negatively autocorrelated.

Are Crisis Premiums an Indication of Causality?

As mentioned in the introduction, country fund discounts have been used to support the hypothesis that local investors initiated the downward spiral in stock market prices during the Mexican crisis, based on evidence suggesting that NAVs may have started to decline earlier than fund prices. Before testing this hypothesis in the context of the Asian crisis, we revisit the evidence from the Mexican crisis in light of what has been discussed so far in the paper. More precisely, we look at the movement of the price and the NAV of the Mexican Fund vis-à-vis the behavior of the Mexican stock market index through a window that covers five weeks before and after the crisis, and we then proceed to compute Granger causality tests between prices, NAVs, and other relevant variables.16 As Figure 4 shows, there seems to be little indication of an anticipating behavior from local investors: in the two weeks leading up to the devaluation, all three variables, expressed in dollars, fluctuated erratically up to the devaluation week, to decline pari passu with the exchange rate thereafter.17 Thus, the decline in NAVs could be accounted for entirely by the decline in dollar values brought about by the December 20 devaluation. This impression is confirmed by the results of two versions of Granger causality tests: a standard pairwise test, and a test controlling for past changes in all the explanatory variables using the following equation:

where P represents returns on fund shares; STR, the local stock market index; ER, changes in the exchange rate; and DIS, the fund discount. X stands alternative for the variables P, NAV, and STR.18 Thus, if, as we expect, crisis-driven changes are channeled primarily through the local stock market, causality should run directly from STR, rather than NAVs, to fund prices. More important, by including exchange rate movements we test the hypothesis that movements in the local stock market anticipated the devaluation.

Figure 4.
Figure 4.

The Mexican Fund (MFX)

Source: Bloomberg.

A rapid inspection of the results, presented in Table 4, suggests that the behavior of fund and stock prices responded to a large extent to movements in the exchange rate, contradicting the hypothesis of local anticipation; and this response was channeled through the local stock market before reflecting completely in both fund prices and NAVs.

Table 4.

The Mexican Fund During the Tequila Crisis: Causality Tests

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Note: * means significant at the 1 percent level, ** at the 5 percent level, and *** at the 10 percent level.

In principle, the last point is consistent with the claim in Frankel and Schmukler (1996) that local investors reacted earlier than foreigners, as changes in the stock market index seemed to have preceded changes in fund prices. But this link between causality and the evolution of discounts does not carry on to the Asian crisis, as we show next.

We conducted two versions of the causality test using data from the Asian crisis period. We ran pairwise Granger causality tests of fund prices, NAVs, local stock market indices, and the Morgan Stanley Capital Index (MSCI), to proxy for a global common component driving contagion through the international financial markets.19 In addition, to test for the existence of a regional component, for the Asian II and the Latin American subsamples we estimated the following SUR model:

for I = 1, 2, where, as before, X represents, in turn, variables P, NAV, and STR; while CFIW is a country fund price index.20 Finally, for each individual crisis country (Asia I sample), we ran the following regression:

The results are summarized in Tables 5 and 6 (only statistically significant results are shown). Contrary to what appears to have been the case in Mexico in December 1994, in Asian II countries changes in fund prices seem to have led the behavior of the local stock market. Thus, causation runs from fund prices to NAVs, and from them to STR. In addition, there appears to be a significant contagion factor, channeled through the international markets and reflected in the impact from MSCI on fund prices. This evidence seems to support the view that Asian crises were induced to a large extent by the spillover from crises in neighboring countries, a chain reaction ignited by the devaluation of the Thai baht.21

Table 5.

Causality During the Asian Crisis

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Note: * means significant at the 1 percent level, ** at the 5 percent level, and *** at the 10 percent level.X=α+Σi2β1,iPtI+Σi2β2,iNAVtI+Σi2β3,iSTRtI+Σi2β4,iMSCItI+Σi2β5,iCFIWtI+β6DISt1
Table 6.

Pairwise Granger Causality Test

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Negative coefficient.

In contrast, causality in most Latin American countries, and for the region as a whole, goes from world markets to local stock indices and NAVs, and from there to fund prices, suggesting that contagion may have been initiated by local investors as a response to developments in Asia. Finally, Asian I countries do not exhibit any significant pattern of causality.22

In short, in Asian countries, independent of the direction of propagation, crises were associated with the buildup of substantial premiums, but in Latin American countries, where the order of causality resembled the one found in the Mexican case, country fund discounts deepened as a result of the Asian crisis. Hence, we conclude that the closed-end country fund puzzle is not related to when fund prices react relative to local shares, but rather to how.

Are Discounts Stationary?

If funds are to be ultimately liquidated, discounts should be stationary in the long run. But several factors can affect discounts’ behavior in the short run so as to make them nonstationary. For example, under the segmented markets hypothesis, changes in cross-border investment restrictions can break the stationarity of certain discounts. Furthermore, highly persistent changes in the perception of risk of the different agents who operate in both markets can also justify the rejection of stationarity over a limited sample.23

Because of the short time span of our sample, we rely on panel integration techniques to infer the long-run properties of discounts. Im, Pesaran, and Shin (1997) propose a t-statistics (t-IPS) to test for the null hypothesis of a unit root in a panel. Their tests are based on the average of the standard ADF t-statistic obtained from individual tests and does not require any homogeneity restriction. The finite common moments are obtained by Monte Carlo methods and are tabulated in Im, Pesaran, and Shin (1997). The general expression of the test, for a panel spanning T years and N cross-section units, is:

where tT¯=Σi=nNtiT and tiT are statistics computed on each cross-section unit.

The results for each region and subsample appear in Table 7. The evidence is mixed, although it reveals that regions that have gone through, or suffered contagion from, a major financial crisis show evidence of nonstationarity.24

Table 7.

Unit Root Tests

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Note: Five percent critical value: -1.69.

This lack of stationarity of fund discounts is at odds with the standard interpretation of “investor sentiment.” More important, it contradicts the view that crisis premiums are the result of temporary information asymmetries. Investors may display a significant degree of hysteresis, however, as changes in investor sentiment may be highly persistent or even subject to permanent revisions. For example, changes in the perception by foreign investors of the risk associated with Latin American stocks as a result of the Tequila crisis may still need a long time of stability to reverse themselves.25

Are Fund Returns Too Volatile?

Several researchers, including Pontiff (1996) and Hardouvelis, La Porta, and Wizman (1993), have found that the unconditional variance of the median fund return is significantly larger than the variance of returns on its NAV. For example, Pontiff (1996) computes the log-variance ratio of U.S. fund returns over returns on NAVs. This ratio should be zero if both variances are similar. Pontiff reports that the volatility of fund returns is 73 percent greater than the variance of the fund’s underlying assets. Hardouvelis, La Porta, and Wizman conduct the same exercise for closed-end country funds and find the mean log-variance ratio to be 1.17, for a sample of 35 funds during the period 1986–93, which implies that country fund returns are about three times as volatile as NAV returns. This result supports the noise-trader hypothesis: country funds command a discount due to the excess volatility that results from the behavior of small investors. From this argument, it follows that crisis premiums may be explained by an increase on the relative volatility of the underlying asset returns.

We repeated this exercise for our sample, and found a mean value of the log-variance ratio of 0.2, significantly lower than in Hardouvelis, La Porta, and Wizman (1993). Moreover, the distribution across regions is not uniform: the ratio for Asia is 0.07, not significantly different from zero, whereas Latin America has a ratio of 0.14, and the OECD has a ratio of 0.31. Within the regions, countries such as Indonesia, Korea, Malaysia, Mexico, Thailand, and Turkey have ratios that are zero or even negative.

Data on the entire sample may mask interesting dynamics that illuminate the behavior of funds during crisis periods. Estimates of excess volatility for the Tequila crisis and Asian crisis subsamples reveal the different regional behavior: the log-variance ratio is lower for crisis countries (Latin America in the first period; Asia in the second) and higher in contagion countries (Asia in the first period; Latin America in the second). In other words, local market volatility seems to increase relative to fund market volatility in the wake of financial crises. The last column of Table 8 shows the correlation between the log-variance ratio and the discount for the whole sample period (see also Figure 5). As expected, the correlation is negative, as riskier assets are penalized in the form of larger discounts.26

Table 8.

Log-Variance Ratio

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Figure 5.
Figure 5.
Figure 5.

Excess Volatility and Discounts

Source: Bloomberg.

Next, we compute the correlation of the changes in discounts with changes in NAVs and fund prices.27 If discount variability is driven primarily by changes in NAVs, we should observe a large negative correlation between them. Conversely, if changes in discounts are largely explained by variations in fund prices, the correlation coefficient between them will be positive and higher than that between discounts and NAVs. The results in Table 9 show that, in general, prices are more closely correlated with discounts than NAVs, supporting the noise-trader hypothesis. The correlation with NAVs, however, increases sharply in absolute value for crisis countries, dominating the correlation between discounts and prices.

Table 9.

Correlations of Changes in Discounts with Changes in Prices and NAVs

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Therefore, this evidence suggests that the emergence of large premiums during a crisis is associated with a temporary decline in the excess volatility of fund prices, as well as an increase in the importance of changes in NAVs as an explanatory factor of variations in discounts.

Is There a Common Component Across Country Fund Discounts?

The noise-trader hypothesis suggests a common systematic source of risk as the main reason behind the behavior of discounts across funds. As was mentioned in the previous section, this implies that discounts originate in the behavior of a particular type of investor and that it affects all assets in his portfolio similarly, suggesting the existence of an important common component in discounts across countries.

The most immediate way of analyzing commonalities is to compute correlations across fund discounts. Levy-Yeyati and Ubide (1998) report the correlation matrix of discounts in first differences. Their results show positive intra-region correlations and zero or negative inter-region correlations. This seems to indicate the presence of common regional components in the behavior of discounts, rather than a global common factor as found in previous studies.

We explore this issue further by estimating a parametric version of the “single index” model of Sargent and Sims (1977) as developed by Stock and Watson (1988). The estimation of an unobserved components model is a more sophisticated technology than simple correlations to capture the presence of common components across economic time series. The empirical model is as follows:

Zt = ρzZt-1 + εt,

Ut = ρuUt-1 + μt.

Each discount is assumed to move contemporaneously with an unobserved scalar time series variable, Zt, common to all funds, and a component Ui t that comprises idiosyncratic elements plus measurement errors; both components are assumed to be stochastic. The unobserved component Zt enters the model only contemporaneously, whereas the idiosyncratic component follows a first-order autoregressive process. Yt is the vector containing all the discounts and εt and μt are white noise errors. The main identifying assumption expresses the core notion that all the commonalities in the discounts arise from a single source, Zt. This is achieved by assuming that Zt and Ut are mutually uncorrelated at all leads and lags.

The estimation is performed by first casting the model into a state space form and then extracting the unobserved component with the Kalman filter by maximum likelihood. Given the suspected lack of stationarity but also lack of cointegration among the variables, the model is estimated in differences. We first tried to extract the common component of the 24 funds over the whole period, but it was impossible to obtain convergence in the optimization process. The failure to find a common component casts doubt on the existence of a common investor sentiment driving the behavior of all country fund discounts. To test for regional sentiment, we estimated the common component model for Europe (or EU, which comprises Germany, Ireland, Italy, Portugal, Spain, and the United Kingdom), Latin America and the Caribbean (or LAC, which includes Argentina, Brazil, and Mexico), Asia II (Malaysia, Philippines, and Singapore) and other Emerging Markets (or EM, which comprises Israel, South Africa, and Turkey).28 Given the suspected change in investor confidence toward emerging markets after the Tequila crisis, we estimate the model for the whole sample and for the two subsamples, the Tequila and Asian crises. In all the cases, the estimation was performed in first differences, and then the series in levels was reconstructed by taking as a starting point the average value of the series included in the group. Several points stood out. First, all groups had significant common components, although for Asia II and EM the common component was significant only for the Asian crisis period. This common component explains on average about 20 percent of the variance of the discounts, and ranges from 35 percent for LAC during the Asian crisis to 10 percent for Asia II, also during the Asian crisis. Second, the common components displayed a high degree of persistence: first order autocorrelations ranged from 0.89 to 0.97, showing a persistence considerably greater than that estimated for the idiosyncratic (country-specific) components. Third, and more important, as Figure 6 shows, an important declining trend in the LAC component contrasts with the upward trend in the Asian component during the period corresponding to the Asian crisis. Note also that the common component captures the important peak of the Asian crisis, as well as the effect of major events and announcements.

Figure 6.
Figure 6.

Discounts: Common Component

Source: Bloomberg.Notes: LAC comprises Argentina, Brazil, and Mexico; Asia II comprises Malaysia, the Philippines, and Singapore; and EU comprises Germany, Ireland, Italy, Portugal, Spain, and the United Kingdom.

Even in the presence of a common market sentiment driving the evolution of fund prices, the test of common component on discounts would fail if fund prices moved differently vis-à-vis local markets for countries in different groups.29 To determine whether market sentiment is region-specific or whether the common component of discounts captures similarities in the local response, we repeat the estimation of the model substituting fund prices for discounts, for the Asian crisis period. As Figure 7 shows, the Asian crisis manifests itself with different intensity across groups, being as expected strongest in Asia I and weakest in Latin America. However, this time the common component displayed a similar pattern across regions, showing a flat trend during the precrisis period, and a decline from July 1997 on.30 This similarity, and the fact that the three components are highly correlated with each other, is confirmed by the existence of a weaker, but still significant, common component across groups.

Figure 7.
Figure 7.

Prices: Common Component

Source: Bloomberg.Notes: LAC comprises Argentina, Brazil, and Mexico; Asia I comprises Indonesia, Korea, and Thailand; and Asia II comprises Malaysia, the Philippines, and Singapore.
Figure 8.
Figure 8.

Prices: Common Component Whole Sample

Source: Bloomberg.

These results have three important implications. First, there is indeed evidence that the behavior of country fund prices is driven, in part, by investor sentiment. Second, this sentiment discriminates to some extent between emerging markets in different regions. Third, a comparison of common components in prices and in discounts strongly suggests that the different patterns displayed by discounts in crisis and non-crisis countries can only be explained by differences in the relative behavior of fund and stock prices or, alternatively, of foreign and local investors. This hypothesis is explored in the following section.

III. The “Stickiness” of Country Fund Prices

One aspect of the behavior of country funds reported in the existing literature is that fund prices tend to underreact to local factors and to overreact to external (global) factors. Although no convincing theoretical explanation has been proposed, this empirical regularity by itself could help explain why funds build up premiums during stock market crashes in crisis countries. Indeed, one could think of a simple reduced-form characterization of the behavior of fund prices and NAVs in the following way:

where L and X are local and external factors, and,

Thus, a collapse in the local stock market, through its effect on L, would affect NAVs more strongly than fund prices. If changes in external conditions are comparatively minor, the price to NAV ratio would increase. Alternatively, if country specific fundamentals are in good shape, a foreign crisis would influence prices relatively more, deepening the fund discount.31

From equations (6) and (7), it follows that changes in world market conditions would primarily affect fund prices, whereas changes in local markets would be reflected relatively more in NAVs. More precisely, a crisis abroad that propagates through the international markets inducing a decline in the world market index would lead to an increase in discounts in noncrisis country funds, as fund prices fall more than local stocks. Conversely, a local crisis would depress local share prices relatively more. Therefore, we should be able to observe a positive correlation between the world market index and country fund discounts and a negative correlation between discounts and the local stock index.32 A regression of changes in fund discounts on changes in STR and MSCI, and lagged discounts, confirms this prediction. Table 10 presents the coefficients and associated t-values. Variations in the world market index always maintain a significant negative correlation with fund discounts, as fund prices react stronger to external factors than local stocks. However, the coefficient corresponding to the local market is always negative and significant, except for the period of the Mexican crisis.

Table 10.

Discounts as a Function of Local and External Factors

article image
Note: t-statistics in parentheses. * means significant at the 1 percent level, ** at the 5 percent level, and *** at the 10 percent level.DISt = α + β1STRt + β2MSCIt + β3DISt-1

Further support for the stickiness hypothesis is provided by examining the behavior of country fund prices and NAVs vis-à-vis local and external factors. To do so, we first regress country fund premiums on changes in NAVs and a measure of foreign investor sentiment (MSCI). As mentioned earlier, a broad definition of market sentiment can allow for some degree of discrimination across countries, as suggested by the evidence on common components discussed before. More precisely, in the context of the Asian crisis, foreign investors may have become relatively more pessimistic with respect to neighboring Asian countries than to emerging markets as a whole.33 Hence, we conducted the same test including both MSCI and the NAV of the Korea Fund.34 We estimated the equation using seemingly unrelated regression estimation (SURE) with different constant terms and similar coefficients across countries, for the Asian I, Asian II, and Latin American subsamples, and for a European subsample (Germany, Italy, Spain, and the United Kingdom) that we use as control group.35

As Tables 11 and 12 show, the results for the whole sample confirm previous evidence presented in the literature indicating that fund prices respond significantly to changes in world market conditions, after controlling for changes in the local market, as reflected by the large and highly significant coefficient on MSCI. Some interesting differences are uncovered by dividing the sample. First, the fraction of fund prices accounted for by variations in NAVs is substantially larger in the European group than in emerging markets (Table 11). Conversely, the influence of the world market index is substantially stronger in these countries, revealing the impact of foreign factors, and in particular, the extent of the contagion from crisis countries (Table 12). This effect is not evenly distributed across countries. While European funds are the least affected by foreign factors, in Latin America funds were influenced both by developments in world markets in general, and in Asian markets in particular. Finally, the impact of Asian regional factors on Asian markets was, as expected, more important.36

Table 11.

The Stickiness of Country Fund Prices

article image
Note: t-statistics in parentheses. * means significant at the 1 percent level; ** at the 5 percent level, and *** at the 10 percent level.P=α+Σi2β1,iNAVtI+β2DISt1
Table 12.

Determinants of Country Fund Prices

article image
Note: t-statistics in parentheses. * means significant at the 1 percent level, ** at the 5 percent level, and *** at the 10 percent level.DISt = α + β1DISt-1 + β2NAVt + β3MSCIt + β3KORNAVt

To examine this in more detail, we regress changes in both prices and NAVs on local market conditions, proxied by local currency stock market returns, STR; changes in the exchange rate, ER; returns on a world market indicator, MSCI; and the lagged discount.37 The results, presented in Table 13, confirm that country fund prices can be explained more by world market conditions and less by local factors than their NAVs, as indicated by lower STR coefficients and higher MSCI coefficients in the price equations.38 As expected, a lower sensitivity to external factors is usually accompanied by a higher one to local factors.

Table 13.

Differential Effect of Local and External Factors

article image
Note: t-statistics in parentheses. * means significant at the 1 percent level, ** at the 5 percent level, and *** at the 10 percent level.Xt = α + β1NAVt + β2MSCIt + β3DISt-1 + β4Ert-1


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Brittney Griner sends a letter to Joe Biden.

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Brittney Griner, a 31 year old WNBA star with gold medals was detained in Russia for more than four months with the claim that she was carrying vape canisters containing cannabis oil before embarking on her journey to the U.S. from Moscow in Russia. She was arrested on the 17th of February, 2022 before the start of the Russian war with Ukraine.

With this claim, the Phoenix Mercury Centre faces a drug transportation charge that has a maximum 10 years sentence if convicted of the case.

Brittney Griner’s written letter sent by her representatives to the White House was received on monday, 4th of July and here is the content of the letter.

Griner’s detainment in Russia is now viewed as a plot by the Russian government to threaten the U.S. and as a negotiating ploy by Russia due the tension and friction between the two.

National Security Council Spokeswoman Adrienne Watson believes the Russian Federation is wrongfully detaining Brittney. She goes on to say that Biden has been clear about the need to see all U.S. nationals abroad held hostage or wrongfully detained abroad released. The U.S. government is working aggressively using every means possible to bring her home to her family.

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Complacency: how it prevents you from growing

Who I am
Joe Dispenza

Complacency: how it prevents you from growing

Complacency can give us peace at certain times, but it can also transform us into people at the mercy of the wind: without the will or aspiration to control the surrounding environment. We present the consequences of this habit.

Last update: July 29, 2022

In a world that pushes us to constantly improve, being at peace with ourselves is one of the strongest pillars of our well-being. However, this pillar is not immune to the attack of some erosive agents, such as extreme or systematic conformism. Similar levels dcomplacency can slow us down and condemn us to unhappiness.

First of all, we are not obligated to improve in any area or make changes that we do not want. Personal development is just that, personal. Just because the partner loves sports doesn't mean we should do it too; if a friend is very attentive to the diet, he does not mean that we have to imitate him.

Each person is different and is more motivated or inclined to work on certain aspects. Not all of them have to coincide, nor does every moment go well. However, if there is an aspect of your life that causes discomfort that you want to improve, complacency can prevent us from achieving it.

In its positive sense, complacency helps us feel better about ourselves.

What is complacency?

Complacency is defined as the feeling of satisfaction with one's way of being or acting. We are satisfied with our person and what we do; we feel that we are already where we should be and that we are doing what we should be doing. It is about acceptance and the ability to be at peace with one's reality.

In light of this, complacency has a bright and positive side, since it allows us to accept what happens and that we cannot change.

It is evident that there is a part of our life that we cannot change and fight it wears us out. In this way, being satisfied with one's stature or one's innate temperament (unchanging aspects) can save us a lot of suffering.

Turns out also useful for those people who tend to be very demanding and rigid. Those who feel they have to give more and more, who are never up to par, who need to improve. In these cases, learning to appreciate your worth, recognize your merits, and accept the here and now is very healthy. Similarly, however, excessive complacency is counterproductive in several ways.

Excessive complacency: an obstacle to moving forward

The dark side of complacency leads us to ignore our responsibilities. Those responsibilities we have towards ourselves, that is to take care of ourselves, grow and take charge of our life.

Accusation and victimization

If we feel satisfied with who we are and what we do, but are still dissatisfied with our life, we have no choice but to blame an outside agent.

We therefore place the responsibility on our parents, bosses, friends or partners. We become convinced that they are the cause of our frustration and unhappiness, because they don't behave as they should.

In this self-delusion, the person feels that he has already done everything he can and that if something goes wrong it is no longer his business. But it is the lack of self-criticism that prevents change. Ultimately, everyone is responsible for their own life.

Excessive indulgence

Complacency also leads to being overly self-indulgent and forgiving oneself for multiple transgressions. For example, if I set myself the goal of starting training on Monday, but it's Thursday and I haven't started yet, I create a horrible precedent: I can't trust myself.

Complacency hides behind short-term comfort and reinforcement. When I don't feel like training, I am convinced that there is nothing wrong, that I already lead a fairly healthy life or that I deserve to rest.

However, when this attitude is repeated day after day, it impedes my progress; a progress that I have set for myself and that I want to achieve, but for which I am not committed.

Impaired self-esteem

Overly self-complacent people tend to praise themselves and brag about every little achievement, neglecting the possibilities for improvement. This is what happens to parents who overly reward and praise their children: their words are empty.

Self-esteem is built on the basis of facts, the challenges overcome, the objectives set and achieved, the successes achieved. When you accept everything, you find excuses and you are not honest with yourself, it is easy to feel less capable and more unmotivated.

The aspect of complacency is that it prevents you from moving forward and in a way causes self-deception.

Being cleverly pleased

Complacency cannot be said to be negative. To some extent (and especially for some people), in fact, it is extremely positive. However, it is important to find a balance along with self-criticism and self-demand.

If we are too conformist, permissive and self-indulgent, we run the risk of being trapped in unsatisfactory realities. Remember: accept what you cannot change, but work on what you can and want to change.

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If you live for roughly 28,835 days – how would that time be divided?

How many days would be spent sleeping? How much time would be spent commuting? Just how long would you spend watching TV?

Well someone’s decided to answer those questions using jelly beans and it’s altogether something else…


Telemedicine Doesn’t Pay (yet)

By jasonP

Telemedicine technology not only brings efficiencies and cost savings to existing medical services, but also expands the reach of medical services into areas where there were none. Examples include off-shore oil rigs, and prisons; limited-access locales, which make medical care difficult and expensive.

As reported in the New York Times, a company called NuPhysica is offering telemedicine services to off-shore oil-rig workers.

With video conferencing and remote monitoring devices, a doctor onshore can assess a patient and recommend a care-plan to an on-site paramedic, or decide that the patient should be transported to an onshore facility.

California is spearheading a new plan to utilize telemedicine in its prisons, where a doctor can see inmates face-to-face via video conferencing. The savings in inmate-transport and security details could be $1.2 billion per year.

The barrier to these services reaching the mass-market, general public is insurance reimbursement. Most insurance companies are not yet structured to compensate care-providers for practicing telemedicine. A family doctor could potentially help more patients in a day with telemedicine, saving patients time and money, but he may not get paid for any of it.

Fortunately, things are starting to change.

Information Week reports on a recent study, in which two-thirds of hospital administrators surveyed said that their facilities now use telemedicine, and 87% of them are satisfied with the results. Some insurance companies are now rolling out limited trial-runs of telemedicine systems. It is likely that as these trials are conducted, the benefits to both costs and patient care will be self-evident. Only then will the insurance industry start to embrace telemedicine in the mass-market.


 Lawyer Monthly - June 2022 – Page 41

Lawyer Monthly - June 2022

41 JUN 2022 | WWW.LAWYER-MONTHLY.COM HOW TO PROTECT THE JUDICIARY FROM POLITICAL INTERFERENCE accused of shattering lives. In Poland and Hungary, the ruling parties have attempted to remove unfavoured judges and install their loyalists. In my home country, Turkey, the judiciary has been widely criticised for becoming an instrument in political cases and for hindering dissent with thousands of prosecutions for slandering the president. Similar stories are frequently reported. The World Justice Project Rule of Law Index recently highlighted that amid attacks from interventionist politicians and populist media, portraying themselves as champions of “the people” against privileged elites, the rule of law around the world is weakening. Analysing the Issue As the judiciary is the most vital institution to ensure the survival of a democratic society, it must be continuously protected and nurtured. Judges must be treated appropriately, and it must be ensured that they in turn fulfil their duties efficiently. They must serve society with a top-quality judicial service that is proportionate to the importance of their role as well as the great powers and exceptional privileges provided to them. Judges are supposed to rule impartially and independently, free from prejudices and outside influence – particularly from politicians. When their rulings are perceived to be politically driven, the judiciary is attacked, with attackers claiming in essence that the judges would rather rule against the will and interests of the society than protect the public. Given that judges are selected and appointed by politicians for their political lenience, is it not natural for their rulings to be or perceived to be politically motivated? When politicians appoint judges, how can the public be sure that the judiciary is independent? Can the public in the US, for example, be expected to be fully satisfied with the ruling of a Republican-majority Supreme Court? A further difficulty here is that human beings are intrinsically political and cannot be representatives in the judicial councils. It is obvious that any political involvement in the judiciary will inevitably lead the judiciary to be politicised. Consequently, the question is: How do we deal with his paradox? Why do the public complain about the political lenience of the judiciary while politicians are mandated to keep the judiciary on a leash? Finding the Root Cause Public trust in the judiciary is generally higher in better-functioning societies, whereas in societies with less sophisticated and robust civic institutions there are often more complaints about judges. Lower quality of service and accountability leads to the lessening of the public trust in the judiciary and judges. It is obvious that the public are either confused about or have lost trust in their judiciaries. It is the accountability of the judges that is the main factor which distinguishes judiciaries as being better or worse service providers. It is only natural for the judiciary to be scrutinised, and the combination of free speech and a free press can result expected to be apolitical in all things, with judges being no different. In addition to politicians’ involvement in the appointment of the judges, there is also a tendency in nations all around the world to allow politicians to interfere with the judiciary. In France, the executive branch is involved in the judicial council (the CSM); in the UK, the Lord Chancellor appoints judges on recommendations by the JAC, and the Venice Commission considers it acceptable for the executive branch to have It is obvious that any political involvement in the judiciary will inevitably lead the judiciary to be politicised.

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Second hand copy condition great (looks unread)

Henry Loving is a 'lifter', hired to extract information from his victims. He is very, very good at it.

His next target is a Washington, D.C. detective, whose family are immediately put under government protection. The man assigned to their case is protection officer Corte: uncompromising, relentlessly devoted to protecting those in his care and a brilliant game strategist.

As tension increases inside the family, the situation escalates into a deadly contest between the hunter and his prey. As the lifter closes in, Corte must decide whether to protect his charges, or use them as bait in the name of personal revenge...

'The twists and turns from devilish Deaver will have you burning the midnight oil, then using it to set fire to the candle you'll be burning at both ends until you finish this.' Sun

Publisher: Hodder & Stoughton
ISBN: 9781444704464
Number of pages: 528
Weight: 363 g
Dimensions: 197 x 130 x 35 mm

Edge by Jeffery Deaver

SKU: 9781444704464


ESG investing: everything you need to know to get started

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ESG is certainly a new concept to a lot of Australians, in fact, in Perpetual’s recent What Do You Care About? Survey, only 4%1 of all respondents were familiar with ESG investing. There are also certain intensities in which you can pursue ESG strategies, so we’ll take you through what is known as the ‘ESG spectrum’ so you can understand which one you may want to pursue. Also, another thing to be privy to when contemplating ESG investments are discrepancies in how these ESG products are rated or labelled. The most similar parallels we can make are health ratings on foods which are designed to determine the nutritional quality of packaged foods and aimed to help consumers make healthier choices. However, there were examples of food items that scored well on this scale as they had low trans-fat levels, but they were also high in sugar, so how you perceive its overall ‘healthiness’ depends on your personal views towards sugar. We’ll delve into this a little further into the article.

So very quickly, what is ESG investing?

ESG investing is an investing style that makes investment related decisions that accounts for some sort of measurable social, environmental or governance consideration, along with a financial return. There are a wide range of approaches an investor can consider.

The ESG spectrum

There are varying intensities of ESG investing, table 1, below sets out to differentiate them. Investors should choose the appropriate ESG investing style based on what they want to achieve for their investments. For example, a person who prioritises the social impact of their investment over a financial return may choose an ‘impact investing’ style, which actively seeks to deliver positive social and environmental impact but may sacrifice some financial returns in order to achieve this goal. On the other hand, a person who wants to achieve a good financial return on their investment and wants to protect their investment return from potential ESG risks may choose ‘ESG integration’ or ‘Negative screening’ styles. These investment styles’ overarching objective is to deliver a certain financial return and avoid investments that may have material ESG risks.

ESG Table

Once you’ve got your head around what type of ESG investing you’d like to partake in, it’s also important to understand how these funds are labelled or scored.

ESG Labelling

In the ESG world, more and more companies are labelling funds as ESG or ‘green’ when in fact they may not be. Why?

  1. Younger generations are viewing their investment dollars as an extension of their personal values. A TF Ameritrade survey revealed that 19% of ESG investors consider human rights as the most important factor in their decision making.2
  2. Non-financial performance is often a leading indicator for a company’s long-term success.3
  3. A TD Ameritrade survey indicated that 67% of ESG investors care more about advancing social and environmental causes than a financial return.4
  4. 38% of survey respondents in the Responsible InvestmentBenchmark Report (2020) said the top driver of growth in their responsible investment funds was ‘institutional investor demand’ increasing from 24% in 2018.
  5. Finally, research has shown that ESG funds are performing at par, or out-performing non-ESG funds.5

Which means it’s more and more appealing for companies to label their funds as ESG ones. Unfortunately, investors relying on pure ESG product scores or more importantly, labels are at risk of being misled about the true sustainability of the product’s underlying investments.

So what should you look out for?

Basically, funds that may score well on a pure ESG basis do not necessarily score well based on sustainability measures that consider the specific industries and activities that companies within that fund may be exposed to. Daniel Nelson, Perpetual’s Senior Research Analyst goes on to say that “the more traditional ESG approaches tend to be more about processes and less about consequences or outcomes”.

How companies score on ESG can vary wildly depending on which body is awarding the rating. Such that regulators are starting to seriously investigate how they might set more rigorous standards to stamp out the potential for ‘greenwashing’. Greenwashing is the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound. Pretty much, funds are deceiving consumers into believing that a company’s products are environmentally friendly, or more so than reality and they’re capitalising on the growing demand for ESG investment options.

Steven Maijoor, chair of the European Securities and Market Authority has said “personally, I believe that, where ESG ratings are used for investment purposes, [accredited] rating agencies should be regulated and supervised appropriately by public sector authorities”. He added that consumers are not able to “effectively compare investments which are marketed as sustainable, thus contributing to the risk of greenwashing”.

Scores given by different bodies can be all over the shop. For example, researchers at the Massachusetts Institute of Technology found that when different rating bodies rank the same company across a range of ESG factors, their scores only line up approximately 60% of the time. And that discrepancy is exactly what is confusing investors.

Take Tesla as an example; one rating agency (JUST Capital) placed them in the bottom 10% but another (MSCI) graded them with an “A”. It’s very easy to see why investors are left scratching their heads. Although there is a party who think these different scales and ratings are in fact a good thing, as they argue it may help investors make better informed decisions. (Personally, that just sounds like a lot of homework).

Another issue with these scores and ratings is the underlying data, which can wildly differ (for example very different metrics used between companies) and/or be of varying quality. In a dream-world you’d see consistent sustainability data in Company’s Annual Reports that could be verified and audited, in an attempt to level the playing field.

And without tighter regulations, Company’s will continue to report on issues they deem important and/or perform well for, and they’ll likely omit issues they might not be keen to share. At the end of the day, there needs to be more transparency and consistency so investors can make better informed decisions.

1. Lembit, G., (2020) ‘What do you care about: The personal edition’, Perpetual Client Insights and Analytics, released 13 August 2020

Knowledge is Power
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This information has been prepared by PTCo. It contains general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, who can provide you with the relevant Financial Services Guide, whether the information is suitable for your circumstances. The tax information contained in this document is not tax advice and should not be relied on as such. This information, including any assumptions and conclusions, is not intended to be a comprehensive statement of relevant practice or law that is often complex and can change. To the extent permitted by law, no liability is accepted for any loss or damage because of any reliance on this information.


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How many calories should i eat while on steroids

While there are many 17-aa steroids Dbol as it is most commonly known is one of the more liver toxic on the market and caution should be appliedby the user to ensure their well-being. You are always advised to make sure that the user complies with proper dosages for the steroid as it is difficult in any case, how to lose weight while on anabolic steroids. As a beginner it is advised to take a small amount of steroid daily rather than a larger amount to ensure safety and to promote a natural state of metabolism, how to use collagen peptides for weight loss. For beginners to consider using as an alternative to cortisone is recommended, since the user will be able to increase their levels. As well it can be considered an alternate to the popular anti-inflammatory, ibuprofen. With that said, it must be noted that there is a very high incidence of seizures, how to lose weight while on steroids for cancer. To avoid such a risk take the caution to take a small amount of daily dose of this steroid only once a day, how to lose weight while on prednisone. It is a good idea to use a prescription form of the steroid as the most common side effects of the steroid are gastrointestinal disturbance (stomach cramp), skin irritation and hair loss, calories steroids eat on how should many while i. Analgesic effects are possible because Dbol is an anabolic steroid containing the hydroxyl group (which is known for its strong anaesthetic effects). It has been suggested that when Dbol is taken at the recommended dosages by the user it might improve their sex drive and stamina but the effects usually last around 30 minutes and there is always a risk of side effects. As with many steroids, Dbol contains a number of known dangers; it is always best to check with your physician to ensure that you are taking the right doses of anabolic steroids, as they can help to prevent some of the known side effects associated with them, how to lose weight while on prednisone. It should be noted that people with a family history of drug abuse can have a higher chance of experiencing a serious side effect that can be worsened by prolonged use and in this case use of this steroid, how to lose weight when on prednisone. Some studies have suggested that more aggressive steroids, such as triiodothyronine, might also increase a person's risk of prostate cancer by increasing prostatitis (inflammation or swelling of the prostate). Other risks include the use of this steroid for a long period in high doses, how to use collagen peptides for weight loss. With that being said, as long as the user is not severely obese and does not have kidney problems, the risks are minimal, how many calories should i eat while on steroids. It should be noted that long-term dosages of Dbol can have very negative side effects such as infertility and liver damage, how to lose weight when on steroids.

This is the first anabolic drug when it comes to facilitating rapid recovery after surgery or recurrent infections and is just as effective to gain strength without weight gainas it is to gain muscle size. We have found that when given every 3 days, the product delivers 10 grams of muscle mass, with no weight gain. While this product may be the only one you will see, rest assured that our muscle builder product is an effective solution to gain and maintain muscle gains as well as enhance aerobic fitness. When combined with the rest of our workout solutions (both our muscle builder and aerobic, both of which will work at the same time), this is ideal to take on the course of a long weekend or any other event in which a runner or bodybuilder has a lot of fast moving muscles. It also takes the edge off of an event that could become uncomfortable and may not have an immediate payoff after completing a certain workout. — to lose weight in a healthy manner, you should cut 500 to 1,000 calories a day by eating less and exercising more. Anything more than that may. Running for 25 minutes every day and following a healthy diet is an efficient strategy for losing belly fat fast. A diet that is low in calories, fats,. Vegans and vegetarians can lose weight by choosing fruits, vegetables, whole grains and plant proteins. Nut lovers may do well shedding pounds. It's natural for anyone trying to lose weight to want to lose it very quickly. But people who lose weight gradually and steadily. It is the fastest way to burn calories and lose fat. Studies suggest that you should exercise 55 minutes, 5 days a week for fitness and health. Choose fibrous proteins instead of fatty ones. Protein is important for organ function and building muscle. Eat more fruits and vegetables. Eat more whole grains and cut simple carbs Your calorie budget: how to determine how many calories you should be eating to maintain or lose weight. First determine how much weight you would like. A weight management tool for adult dogs. This tool was designed to aid the veterinary health care team in making nutritional assessments and recommendations. — get the nutrition lowdown on all your meals and everything in between. Find out the calories, carbs, fat, fiber, and more in over 37000. Fats, protein, and carbohydrates are the three major sources of dietary calories. When the calories you consume match the amount of energy you need to power. Daily calorie requirement for age and lifestyle calculator displays the amount of calories needed daily for different age groups from childhood to old age. Your body needs calories for energy. But eating too many calories — and not burning enough of them off through activity — can lead to weight gain Related Article:

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"Hair doesn't make the woman, but good hair definitely helps."  ~  Unknown

Your hair keeps a "natural record" of your health and can provide important information about your digestion, absorption, stress tolerance, thyroid function, and heavy metal toxicity.  Supporting your health on the inside through natural means will enhance your beauty on the outside.

Why is my hair falling out?

Dunno.  Hair loss is not typically a symptom of  external issues but internal ones.  These issues can stem from your stress response, hormone imbalances, and thyroid dysfunction. Also, the food you eat plays a big part in the overall health of your hair.

Is there more I can do for dry, brittle hair besides fewer shampoos and extra conditioning?

Yes!  If your hair structure has changed, you should test your hormones and thyroid to ensure your levels are within optimal ranges.  Also, nutrient deficiencies can make your hair brittle and more prone to breakage.

Can my hair reveal things about my overall health?

Yes!  As your hair grows, it provides a feedback on what is going on internally.  Your body will push out heavy metals and excess minerals through your hair and reveal what vital minerals you are missing too!

Hoping to get your hair situation under control?

Testing and natural supplement support can help!  Click below to learn more!


Water inflow limitation

The technology is based on creating and installing an isolation screen in required intervals of the productive horizon by means of magnetic field. Unlike other methods of isolation and water inflow limitation, the proposed technology provides the possibility of selective interval treatment.

This technology is also practicable to ensure the cement integrity when the use of packer proves to be ineffective. Pumping down the cement slurry containing mixtures of polymers and magnetic substances increases the strength of the isolation screen in the required intervals.

This technology is implemented using the standard field equipment by running a special magnetic field generator into the well. Technology is highly efficient due to the use of standard equipment and low chemicals consumption.

In order to create watertight screens in the productive reservoir, cement slurry with added magnetic substances is used. Under the influence of magnetic fields generated inside the wells strong isolation structures are formed in the reservoir that shut off water bearing intervals/zones. This technology is successfully applied in the oilfields of Turkmenistan.

Ограничение водопритоков/ изоляция водоносных интервалов, пластов


How To Increase Your Sexual Drive Without Dealing With The Emotional Fears That Can Make You Lose Control

You just have to understand that your sexual excitement is your brain’s way of protecting you from harmful emotions and thoughts. They try to fight off the excitement by shutting down the brain that creates it. This causes pain and tension, so that when the feelings go away, they come back in greater intensity and greater strength. When you discover how strong your emotions can be, you’ll realize that if you’re not willing to confront them, you’ll never be able to control them.  So let your passion be your guide.

This is a post written for a workshop that Amy and I co-organized for people who have lost their sexual drive, as well as their ability to have intimate, healthy, and fun relationships. In this workshop, we are taking a different approach than I normally give these. As a result, the tone of the writing may not be as clear and easy to understand for some readers.   In addition, some of the things that may seem very obvious to some may not be as obvious to others. ____________________________ In recent years, some people have felt a great fear of falling in love with another person, and this fear causes them to suffer from a variety of physical and psychological problems. A new study published in the journal  Archives of Sexuality  finds that this fear can actually cause a person to suffer mental illness and even suicide, so why has it been around for so long?

In the study, researchers tested the effects of what is known as ‘the fear of being in love’ by asking an adult male population to watch a brief film on a television for 30 minutes, afterwards.  Each person then took a questionnaire designed to measure their level of fear of losing their love.

As you can see from the above diagrams of the subjects, only the people with low fears of the loss of their love reported high levels of happiness as well as higher levels of physical health, which indicates that the fear itself was not at all associated with physical or mental health and in fact caused an inverse correlation. In this new study, the results of this experiment suggest that a strong fear of losing love can actually cause you to suffer from mental illnesses and even suicide. The fear of losing something that is so important in your life can actually cause you to feel depressed or even suicidal.

We have all seen this effect before; someone we care about shows depression and emotional instability, and we take on the role of ‘the therapist’, trying to help them recover emotionally from the difficult times they go through. The fact is, we can also do the opposite, which is to help someone feel better.

I was one of the therapists in this study, and when I was presenting this findings, I had a lot of patients tell me that what I was telling them was ‘untrue’. That they were ‘too clingy’ and even ‘too clingy’ with someone, and that they weren’t giving them enough space.

The truth is, what they weren’t taking into account was that this study only tested for attachment and that people’s attachment to the partners they were with was a completely separate issue. People who say that they don’t want a ‘clinger’ but are actually scared of being ‘too clingy’ are actually scared of their relationship and therefore, more concerned with the idea of losing their ‘clinginess’ than their partner’s love. Even if they do fear losing their partner’s love, the fear may be misplaced, and may also be causing them mental illness instead.

When you allow love and attachment to co-exist, it becomes a lot easier to deal with feelings as ‘love’ rather than feelings as ‘crave’. In a recent study published in  Psychological Reports  on the effects of attachment, the researchers found that when attachment and the love of the partner were found in the same study, the participants felt less pain and were more able feel their emotions.  A recent study that was published in  Personality and Individual Differences  found that people who had higher attachment and love levels were less attracted to potential partners who were low in love and attachment levels. This is just another aspect of attachment, and it doesn’t mean that you can’t also fall in love with someone, but only that their relationship with you will depend on whether or not your attachment and love levels are balanced.


Asteroid 44597, Thoreau, was discovered on August 6, 1999 by Jana Ticha and Milos Tichy at Klet Observatory near Ceske Budejovice, Czech Republic. It has a period of 3 years, 141 days.

It was named for American philosopher, writer and naturalist Henry David Thoreau (1817-1862), best known for his memoir Walden.

Henry David Thoreau

The meaning of asteroid Thoreau seems to be: liberalism, self-reliance, civil disobedience, resistance.

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3.2.5 Conditional Constructs

The syntax of the if command is:

if test-commands; then
[elif more-test-commands; then
[else alternate-consequents;]

The test-commands list is executed, and if its return status is zero, the consequent-commands list is executed. If test-commands returns a non-zero status, each elif list is executed in turn, and if its exit status is zero, the corresponding more-consequents is executed and the command completes. If `else alternate-consequents' is present, and the final command in the final if or elif clause has a non-zero exit status, then alternate-consequents is executed. The return status is the exit status of the last command executed, or zero if no condition tested true.

The syntax of the case command is:

case will selectively execute the command-list corresponding to the first pattern that matches word. The `|' is used to separate multiple patterns, and the `)' operator terminates a pattern list. A list of patterns and an associated command-list is known as a clause. Each clause must be terminated with `;;'. The word undergoes tilde expansion, parameter expansion, command substitution, arithmetic expansion, and quote removal before matching is attempted. Each pattern undergoes tilde expansion, parameter expansion, command substitution, and arithmetic expansion.

echo -n "Enter the name of an animal: "
echo -n "The $ANIMAL has "
case $ANIMAL in
  man | kangaroo ) echo -n "two";;
echo " legs."

select fname in *;
	echo you picked $fname \($REPLY\)

(( expression ))

The arithmetic expression is evaluated according to the rules described below (see section 6.5 Shell Arithmetic). If the value of the expression is non-zero, the return status is 0; otherwise the return status is 1. This is exactly equivalent to
let "expression"
See section 4.2 Bash Builtin Commands, for a full description of the let builtin.

[[ expression ]]

Return a status of 0 or 1 depending on the evaluation of the conditional expression expression. Expressions are composed of the primaries described below in 6.4 Bash Conditional Expressions. Word splitting and filename expansion are not performed on the words between the `[[' and `]]'; tilde expansion, parameter and variable expansion, arithmetic expansion, command substitution, process substitution, and quote removal are performed.

When the `==' and `!=' operators are used, the string to the right of the operator is considered a pattern and matched according to the rules described below in Pattern Matching. The return value is 0 if the string matches or does not match the pattern, respectively, and 1 otherwise. Any part of the pattern may be quoted to force it to be matched as a string.

Expressions may be combined using the following operators, listed in decreasing order of precedence:

( expression )
Returns the value of expression. This may be used to override the normal precedence of operators.

! expression
True if expression is false.

expression1 && expression2
True if both expression1 and expression2 are true.

expression1 || expression2
True if either expression1 or expression2 is true.

This document was generated on May 3, 2002 using texi2html