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 Estimating large Markowitz portfolios’ spanning set

Date : Mardi | 2022-12-06 à 12h30
Lieu : Salle des thèses

Rosnel Sessinou (HEC Montréal)

Estimating large Markowitz portfolios implies estimating high-dimensional moments of stock returns,whose large number increases estimation errors. Thus, managing such large portfolios can be burdensomeas their transaction costs increase with estimation errors. Nevertheless, researchers have recently providedempirical evidence of the sparsity of the mean-variance efficient frontier of the U.S. stock market. Thisresult pleads for applying the canonical parsimony principle in the estimation of Markowitz portfolios.However, there is no formal statistical test in the literature of the null hypothesis of sparse stock marketmean-variance efficient frontier. The existing feasible test statistics require constructing non-overlappingsub-portfolios. Nonetheless, we show that this pre-processing step introduces an aggregation bias andleads to misleading conclusions. The objective of this paper is to propose a desegregate test. First, wepresent a general framework for valid portfolio and model selection in high dimensions, using momentconditions with type I error control. We introduce a significance test for high-dimensional linear statisticsbased on subseries methods and a robust p-value aggregation method. Finally, we illustrate the relevanceof the new framework on simulated and real data.

 

Tunnelling and Related Party Transactions: Evidence from Political Turnover and State-owned Enterprises in China 

Date : Mardi | 2022-12-06 à 12h30
Lieu : Salle des thèses

Sandy Suardy (University of Wollongong)

This paper examines whether a government can play an important role in determining a firm’s related party transactions associated with tunnelling. Through the lens of political turnover in 31 Chinese provinces for 2000-2018, we show that political turnover is negatively associated with state-owned enterprises’ (SOEs’) related party transactions (RPTs) but has no impact on non-SOEs’. Political turnover engenders uncertainty to SOEs, which curtail tunnelling-related RPTs. We identify two channels – corruption and policy-induced RPTs – leading political turnover to reduce RPTs. Corruption RPTs fall more significantly in highly corrupt provinces and before the 2012 anti-corruption campaign. Policy RPTs of SOEs with delisting risk and in high public debt provinces decrease considerably. Financially constrained firms, older officials and within-province appointments diminish the impact of political turnover on RPTs. On average, the fall in RPTs starts a year before a political turnover and ends a year after.