Portfolio underdiversification is one of the most costly losses accumulated over a household’s life cycle. We provide new evidence on the impact of financial inclusion services on households’ portfolio choice and investment efficiency using 2015, 2017, and 2019 survey data for Chinese households. We hypothesize that higher financial inclusion penetration encourages households to participate in the financial market, leading to better portfolio diversification and investment efficiency. The results of the baseline model are consistent with our proposed hypothesis that higher accessibility to financial inclusion encourages households to invest in risky assets and increases investment efficiency. We further estimate a dynamic double machine learning model to quantitatively investigate the non-linear causal effects and track the dynamic change of those effects over time. We observe that the marginal effect increases over time, and those effects are more pronounced among low-asset, less-educated households and those located in non-rural areas, except for investment efficiency for high-asset households.

Whether responsible investing reduces portfolio risk remains open to discussion. We study the relationship between ESG performance and downside risk at fund level in the Chinese equity mutual fund market. We find that fund ESG performance is positively associated with fund downside risk during the period between July 2018 and March 2021, and that the positive relationship weakens during the COVID-19 pandemic. We propose three channels through which fund ESG performance could affect fund downside risk: (i) the firm channel in which the risk-mitigation effect of portfolio firms’ good ESG practices could be manifested at fund level, (ii) the diversification channel in which the portfolio concentration of high ESG-rated funds could amplify fund downside risk, and (iii) the flow channel in which fund ESG performance may attract greater investor flows that could reduce fund downside risk. We show evidence that the observed time-varying relationship between fund ESG performance and downside risk is driven by the relative force of the three channels.

Using unique survey data from the China Household Finance Survey, we estimate the extent of “narrow framing”, which is a widely documented behavioral bias, among Chinese households, using their portfolio choices. Conditional on stock market participation, we find that most Chinese households exhibit significant narrow framing. Based on the obtained estimates, we show that narrow framing positively predicts the extent of under diversification. Most importantly, we argue that narrow framing is an irreplaceable of understanding households’ portfolio choices, even after considering measurement error and a wide set of indicators of diversification

This research explores the effects of adding bitcoin to an optimal portfolio (naïve, long-only, unconstrained and semi-constrained) of by relying on mean-CVaR approach in Chinese market. Then backtesting to compare the performance of portfolios with and without bitcoin for each scenario is performed. Results show significant but weak correlations between various asset classes and bitcoin, implying a more mature financial profile of bitcoin in China compared to that in the west. Backtesting results show that the effect of adding bitcoin to optimal portfolios is not consistent over the entire out-of-sample period. The naïve and the long-only strategy improved the risk reward ratio up until the late 2013 price-crash with no significant advantages thereafter. Shorting strategies on the other hand, with or without leverage, fail to produce more efficient portfolios when bitcoin is added, and this is consistent over the entire out-of-sample period. The results also show that semi-annual rebalancing amplifies the advantages of adding bitcoin to most portfolios except for the semi-constrained portfolio, although the weights analysis show significant shifts in weights which might not represent a feasible strategy in realistic scenarios.

This research explores the effects of adding bitcoin to an optimal portfolio (naïve, long-only, unconstrained and semi-constrained) of by relying on mean-CVaR approach in Chinese market. Then backtesting to compare the performance of portfolios with and without bitcoin for each scenario is performed. Results show significant but weak correlations between various asset classes and bitcoin, implying a more mature financial profile of bitcoin in China compared to that in the west. Backtesting results show that the effect of adding bitcoin to optimal portfolios is not consistent over the entire out-of-sample period. The naïve and the long-only strategy improved the risk reward ratio up until the late 2013 price-crash with no significant advantages thereafter. Shorting strategies on the other hand, with or without leverage, fail to produce more efficient portfolios when bitcoin is added, and this is consistent over the entire out-of-sample period. The results also show that semi-annual rebalancing amplifies the advantages of adding bitcoin to most portfolios except for the semi-constrained portfolio, although the weights analysis show significant shifts in weights which might not represent a feasible strategy in realistic scenarios.

This paper constructs a new data set of repeated sales of artworks and estimates an annual index of art prices for the period 1875-2000. Contrary to earlier studies, we find art outperforms fixed income securities as an investment, though it significantly under-performs stocks in the US. Art is also found to have lower volatility and lower correlation with other assets, making it more attractive for portfolio diversification than discovered in earlier research.There is strong evidence of underperformance of masterpieces, meaning expensive paintings tend to under-perform the art market index. The evidence is mixed on whether the "law of one price" holds in the New York auction market.