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「2019 風險管理與保險國際研討會 - 第六屆東亞風險與保險會議」由逢甲
大學金融學院及風險管理與保險學系聯合主辦，學術研討會於 1 月 5 日在本校第
八國際會議廳召開，開幕儀式首先由本校李秉乾校長致詞，接著分別由日本早稻
田大學大塚忠義教授、韓國世宗大學 Soon-Jae Lee 教授、本校財務工程與精算學
士學位學程呂瑞秋主任致詞。之後為感謝本次研討會之贊助者-喬美國際網路公
司與喬安網路平台公司的簡永松董事長，由本校金融學院陳森松院長致贈禮品予
簡董事長，並邀請簡董事長致詞，為本次研討會正式拉開序幕。與會者還包括日
本的同志社女子大學、明治大學、東京理科大學、東京經濟大學、大阪產業大學、
京都產業大學；韓國的東亞大學、東西大學、韓國保險研究機構(KIRI) ；美國的
天普大學；香港的香港中文大學；台灣的國立高雄科技大學、國立臺中科技大學、
淡江大學等各地學者，以及本校風險管理與保險學系曾鹿鳴主任、財務金融學系
劉炳麟主任、金融碩士在職學位學程與金融博士學位學程林昆立主任等多位師生，
共計有 100 餘人。 東亞風險與保險會議於開幕後在第八國際會議廳進行，每位論文發表者都有
45 分鐘的發表時間(20 分鐘報告時間、10 分鐘為討論時間、15 分鐘問答時間)。此場研討會中共發表以下 6 篇論文：「An Economic Analysis of Joint Products under Demand Uncertainty」、「Private Health Insurance Operation and Cooperation Model」、「Effects of Price Increases on Smoking Behavior of Smokers and Non-Smokers」、「Adverse Selection in the Private Surgery and Hospitalization Health Insurance、「An Ambiguity Measure under EUUP and Its Application to a Portfolio Problem」、「Multi-population Mortality Modeling: When the Data is Too Much and Not Enough」。 風險管理與保險國際研討會在同時間於商 804A 召開，每位論文發表者有 30分鐘的時間(20 分鐘發表時間、5 分鐘討論時間、5 分鐘的問答時間)。此場研討
會中共發表 7 篇論文：「The Affordable Care Act and Medical Malpractice Insurance Industry: A Generalized Synthetic Control Method」、「Consumer Benefit and Design of Long-Term Care Annuity Product」、「A preliminary study of long-short strategies formulated by size, value, momentum or contrarian effects and by the income measures
of operating profitability and gross profitability in the Taiwan stock market」、「Insurance Development and Economic Growth: Evidence from Asian Advanced and Emerging Countries」、「Corporate Governance and the Stock performance」、「Currency Risk Hedging for US Stock Investment from Taiwan Perspective」、「An Analysis of the Return and Risk of Self-Annuitization and Dollar-Cost Averaging」。 在此次的研討會中，每場討論都有一位主持人，在東亞風險與保險會議的場
次是採用發表者與主持討論者為不同國家的組合，藉由不同國家背景下的多元觀
點，激發出更多不同的想法。而在風險管理與保險國際研討會的場次討論是由各
界菁英齊聚一堂集思廣益，對研究結果交換意見，最後，本次研討會在下午 5 時
圓滿閉幕。
▲研討會開幕式實況
▲本校李秉乾校長(左圖)與韓國世宗大學 Soon-Jae Lee 教授(右圖)致詞實況
▲本校金融學院陳森松院長(左)致贈禮品予
喬美國際網路公司與喬安網路平台公司簡永松董事長(右)
▲全體參與人員合照留念
▲研討會論文發表實況
1
2019 Risk Management and Insurance Conference and
The 6th East Asia Risk Management and Insurance Workshop
Feng Chia University, Taiwan
General Information:
Date:
January 4, 2019 (Friday) (Welcome dinner)
January 5, 2019 (Saturday) (Workshop day)
January 6 and 7 (Sunday and Monday) (Field trip days)
Workshop Venue:
No. 100, Wenhwa Rd., Seatwen, Feng Chia University, Taichung, Taiwan
(Webpage: http://en.fcu.edu.tw/wSite/mp?mp=3)
Workshop Rooms:
1. East Asia RMI Workshop: The 8th International Conference room (on the 8 th
floor of Business Building)
2. FCU RMI Workshop: 804A room (on the 8 th floor of Business Building)
(Also See Campus Map in: http://www.clc.fcu.edu.tw/index.php?id=1)
Organizers:
Tadayoshi Otsuka (Waseda University) (Japan)
Don (DongHan) Chang (Konkuk University) (Korea)
Richard Lu (Feng Chia University) (Taiwan)
Welcome Dinner:
6:00pm at Insky hotel (No. 18, Fuxing North Rd., Taichung) on Friday, January 4.
(Hosted by the dean of College of Finance, Pr. Sen-Sung Chen)
Registration Desk Opening time: from 9:30am to 9:50am, January 5.
Workshop opening: At 9:50am at the 8th International Conference room
Close Up Dinner:
6:00pm at Insky hotel (No. 18, Fuxing North Rd., Taichung) on Saturday, January
5. (Hosted by the dean of College of Finance, Pr. Sen-Sung Chen)
Field Trip:
Two-day field trip to Sun Moon Lake at your own expense. Please register before
December 15. Gather and Start at the East Gate of FCU at 9:30am January 6.
2
Workshop Day (January 5) information:
Welcome Speech (10 am at the 8th International Conference room):
Dr. Bing-Jean Lee, President of FCU
Mr. Yung-Sung Chien, Chairman of Shacom
Photo Time (10:20 am at the 8th International Conference room)
East Asia RMI Workshop Program: (at the 8th International Conference room)
Each presentation: 45 min. (Presentation: 20 min. Discussant: 10 min. Q&A: 15
min.)
o Section 1 (moderator: Lu-Ming Tseng (Feng Chia University)):
o 10:30: Presentation 1
o Title: An Economic Analysis of Joint Products under Demand
Uncertainty
o Presenters: Mahito Okura (Doshisha Women's College of
Liberal Arts)
o Discussant: DaeHwan Kim (Dong-A University)
o 11:15: Presentation 2
o Title: Private Health Insurance Operation and Cooperation
Model
o Presenter: SungHee Chung (Korea Insurance Research
Institute)
o Discussant: Yusuke Osaki (Waseda University)
o 12:00: Lunch
o Section 2 (moderator: Noriyoshi Yanase (Tokyo University of Science)):
o 13:30: Presentation 3
o Title: Effects of Price Increases on Smoking Behavior of
Smokers and Non-Smokers
o Presenter: DaeHwan Kim (Dong-A University)
o Discussant: Yoichiro Fujii (Osaka Sangyo University)
o 14:15: Presentation 4
o Title: Adverse Selection in the Private Surgery and
Hospitalization Health Insurance
o Presenter: Chia-Ling Ho (Tamkang University)
3
o Discussant: SungHee Chung (Korea Insurance Research
Institute)
o 15:00 Coffee break
o Section 3 (moderator: Soon-Jae Lee (Sejong University, Seoul, Korea)):
o 15:30: Presentation 5
o Title: An Ambiguity Measure under EUUP and Its Application
to a Portfolio Problem
o Presenter: Hideki Iwaki (Kyoto Sangyo University)
o Discussant: Jason J. H. Yeh (The Chinese University of Hong
Kong)
o 16:15: Presentation 6
o Title: Multi-population Mortality Modeling: When the Data is
Too Much and Not Enough
o Presenter: Ko-Lun Kung (Feng Chia University)
o Discussant: Yin-Yee Loeng (Feng Chia University)
o
o 17:00: Workshop closing, general meeting (for discussing next
workshop and other topics)
o 18:00: Dinner at Insky Hotel
4
An Economic Analysis of Joint Products under Demand
Uncertainty+
Mahito Okura
Department of Social System Studies, Faculty of Contemporary Social Studies,
Doshisha Women’s College of Liberal Arts
Kodo, Kyotanabe, Kyoto, 610-0395, Japan
Abstract:
The purpose of this study is to analyze the market under demand uncertainty when
two firms compete with two joint products which are indivisible multiple goods, such
as petroleum products. We investigate the situations in which no, either, or both firms
have either no demand information, or have demand information in one or both
markets, and examine how the differences in information structures affect the
equilibrium expected profit of each firm.
Keywords:
Joint products, Demand uncertainty, Information
5
Private Health Insurance Operation and Cooperation Model
SungHee Chung
Korea Insurance Research Institute
1.National Health Expenditure
2.Classification
3.Role and Market
4.GDP & Medical Expenditure
5.Cost Structure
6.Product Operation
7.Rating Structure
8.Medical Cost Management
9.Policy Goal, Objective & Instrument
6
Effects of Price Increases on Smoking Behavior of Smokers and
Non-Smokers
DaeHwan Kim
Associate Professor in the Department of Economics at Dong-A University, Korea
Abstract
Smoking increases not only medical costs by causing serious illness, but also
adversely affects economic growth in the sense that it could reduce productivity. In an
effort to ease the higher smoking rate in Korea compared to other OECD countries’
average smoking rate, the Korean government has raised cigarette prices by 80
percent from 2,500 won to 4,500 won since 2015. In 2004, it raised the prices from
2,000 won to 2,500 won, but the magnitude of price increases was not that high and
there was not enough data to study the effects of cigarette price hikes.
In this study, I analyzed the effect of cigarette price increases on smoking
behavior by using the Korea Health Panel (KHP) data from 2011 to 2016. The
empirical analysis showed that a rise in cigarette prices has lowered the smoking rate
and the daily cigarette consumption for both men and women. If the sample was
restricted to smokers only, the increase in cigarette prices reduced men's cigarette
consumption, but failed to incentivize smoking cessation. On the other hand, if the
sample of non-smokers only was analyzed, the increase in cigarette prices prevented
both men and women from smoking and even reduced the amount of cigarette
consumption even though they started smoking. Thus, the decline in smoking rates
after a rise in cigarette prices has resulted from the non-smokers not starting to smoke,
rather than the existing smokers.
Keywords: cigarette price, smoking rate, cigarette consumption, smoking cessation,
smoking prevention
7
Adverse Selection in the Private Surgery and Hospitalization Health
Insurance
Chia-Ling Ho1
Gene C. Lai2
Abstract
This study investigates adverse selection using private surgery and hospitalization
health insurance policies in Taiwan as a sample. We find that a significant and
positive relation between coverage and occurrence of claim and frequency of claim,
indicating insureds with high-coverage are more likely to have high occurrence of
claim and frequencies of claim. Our evidence also shows that insureds with
high-coverage are more likely to have higher claim payments (number of days of
hospitalization) than insureds with lower-coverage. In other words, adverse selection
exists. We also find the requirement of physical examination can help to alleviate the
severity of adverse selection. The evidence of interaction effects between physical
examination and highcoverage shows that insureds with high-coverage who go
through physical examinations have less claim payments than those who do not go
through physical examination. This evidence indicates that physical examination can
mitigate adverse selection.
1 Department of Risk Management and Insurance, Tamkang University, 151
Ying-Chuan Rd., Tamsui, New Taipei City 251, Taiwan, Tel: 886-2-26215656
ext.2865, [email protected] 2 Belk College of Business, James J. Harris Chair/Scholar of Risk Management and
Insurance of the Department of Finance, University of North Carolina at Charlotte,
Charlotte, NC, 28223, Tel: +1-704- 687-7013, Fax: +1-704-687-1412, [email protected]
8
An Ambiguity Measure under EUUP and Its Application to a
Portfolio Problem.
Hideki Iwaki1
1Faculty of Business Administration, Kyoto Sangyo University
December 9, 2018
Abstract
Ordering alternatives by their degree of ambiguity is crucial in decisionmaking under
Knightian uncertainty. This paper derives a measure of ambiguity which quantifies
the degree of ambiguity under expected utility with uncertain probability (EUUP) by
Izhakian (2017a). Since EUUP can completely distinguish tastes from beliefs and risk
from ambiguity, the ambiguity measure is independent of risk and tastes. With the
measure, the degree of ambiguity can be measured by the volatility of uncertain
probabilities just as the degree of risk can be measured by the volatility of outcomes.
Although Izhakian (2017b) also derives an ambiguity measure based on the volatility
of uncertain probabilities, ours is more flexible and it discriminates between
ambiguity in favorable outcomes and it in unfavorable ones. Based on the measure,
we also discuss effects of ambiguity on financial investments through comparative
statics.
Keywords: Ambiguity measurement, Knightian uncertainty, EUUP, Portfolio
selection.
9
Multi-population Mortality Modeling: When the Data is Too Much
and Not Enough
Richard D. MacMinn, Ko-Lun Kung, Weiyu Kuo, Chenghsien Tsai3
November 12, 2018
Abstract
We apply the framework of the approximate factor model to tackling the issues
of large dimensions, conditional cross-section heteroskedasticity, conditional
time-series heteroskedasticity, and conditional correlations among idiosyncratic errors
that emerge when modeling multi-population mortality rates. The empirical tests on
45 individual populations show that incorporating these heteroskedasticities and
correlations into estimations improves insample _ttings. We demonstrate such
incorporations lead to superior in-sample _tting to well-known single- and
multi-population models using _ve-population mortality data. They result in
consistent outperformance in out-of-sample forecasting as well.
3 Corresponding author: [email protected]; tel & fax: +886-2-29369647. The author is grateful to the Ministry
of Science and Technology (project number: 102-2410-H-004-027-MY3 and 105-2410-H-004 -070 -MY3) and the
Risk and Insurance Research Center for their _nancial support as well as to the California State University,
Northridge (CSUN) and the California State University, Fullerton (CSUF) for the kind supports during the visit
of the author. A major portion of the research was completed while the author was visiting CSUN and CSUF.
10
FCU RMI Workshop Program: (at Room 804A)
Each presentation: 30 min. (Presentation: 20 min. Discussant: 5 min. Q&A: 5
min.)
o Section 1 (moderator: Chu Shiu Li (National Kaohsiung University of Science
and Technology)):
o 10:30: Presentation 1
o Title: The Affordable Care Act and Medical Malpractice
Insurance Industry: A Generalized Synthetic Control Method
o Presenters: Jingshu Luo (Temple University)
o Discussant: Chu Shiu Li (National Kaohsiung University of
Science and Technology)
o 11:00: Presentation 2
o Title: Consumer Benefit and Design of Long-Term Care
Annuity Product
o Presenter: Yen-Chih Chen (Feng Chia University)
o Discussant: Karen C. Su (National Taichung University of
Science and Technology)
o 12:00: Lunch
o Section 2 (moderator: Nathan Liu (Feng Chia University)):
o 13:30: Presentation 3
o Title: A preliminary study of long-short strategies formulated
by size, value, momentum or contrarian effects and by the
income measures of operating profitability and gross
profitability in the Taiwan stock market
o Presenter: Jai-Jen Wang (Feng Chia University)
o Discussant: Nathan Liu (Feng Chia University)
o 14:00: Presentation 4
o Title: Insurance Development and Economic Growth: Evidence
from Asian Advanced and Emerging Countries
o Presenter: Hung-Yu Cheng (Feng Chia University)
o Discussant: Vincent Chang (Feng Chia University)
o 14:30: Presentation 5
o Title: Corporate Governance and the Stock performance
o Presenter: Chen-Chen Yang (Feng Chia University)
o Discussant: Jai-Jen Wang (Feng Chia University)
11
o 15:00 Coffee break
o Section 3 (moderator: Wei-Feng Hung (Feng Chia University)):
o 15:30: Presentation 6
o Title: Currency Risk Hedging for US Stock Investment from
Taiwan Perspective
o Presenter: Chien-Hsing Chou (Feng Chia University)
o Discussant: Wei-Feng Hung (Feng Chia University)
o 16:00: Presentation 7
o Title: An Analysis of the Return and Risk of Self-Annuitization
and Dollar-Cost Averaging
o Presenter: Meng-Sung Hsieh (Feng Chia University)
o Discussant: Yen-Chih Chen (Feng Chia University)
18:00: Dinner at Insky Hotel
12
The Affordable Care Act and Medical Malpractice Insurance
Industry: A Generalized Synthetic Control Method
Jingshu Luo
Temple University
Abstract
This paper studies the impact of Medicaid expansion from the Affordable Care Act
(ACA) on the medical malpractice insurance industry under the background of tort
reforms. Medicaid expansion increases millions of new insureds to the healthcare system
while the physician supply is roughly the same. The sudden increase in the demand for
healthcare service might place pressure on medical practitioners and increase the medical
malpractice risk. Using the generalized synthetic control method, this paper shows that
states adopting Medicaid expansion experience higher economic loss ratios and economic
loss incurred than without expansion. Unobservable common trends such as the
underwriting cycle cannot explain the results. In addition, this paper shows that although
tort reforms, especially caps on noneconomic damages, have reduced medical malpractice
losses in the reformed states significantly, they did not offset the impact of Medicaid
expansion.
Key Words: The Affordable Care Act, Tort Reforms, Medical Malpractice Insurance,
The Generalized Synthetic Control Method
13
Consumer Benefit and Design of Long-Term Care Annuity Product
Yen-Chih Chen
Assistant Professor,The Bachelor’s Degree Program in Financial Engineering and
Actuarial Science, College of Finance, Feng Chia University, Taiwan
Jennifer L. Wang
Professor, Department of Risk Management and Insurance
National Chengchi University, Taiwan
Ming-hua Hsieh
Associate Professor, Department of Risk Management and InsuranceNational
Chengchi University, Taiwan
Abstract
This paper discuss the product design of Long-term care annuity (LCA), which provides
comprehensive protection for the longevity risk. With the effect of lowering adverse
selection cost, LCA products can provide a cheaper retirement product with higher
coverage. In this paper, we explore the consumer benefits and lowering adverse
selection cost effect under different product designs of LCA. LCA products can attract
both annuity and long-term care insurance policyholders because policyholders in the
annuities market with relative high risk are with relative low risk in the long-term care
insurance market. To estimate the benefits of LCA product design, we generate three
health state models of transition probability matrices: good health, average health and
poor health under continuous-time Markov process assumption. Our results show that a
good design of LCA can provide cheaper longevity risk protection with higher coverage
than traditional insurance products and thus create a win-win situation for both consumers
and insurers.
Keywords: Long-term Care Insurance, Annuity, Product Design, Long-term Care
Annuity
14
A preliminary study of long-short strategies formulated by size, value,
momentum or contrarian effects and by the income measures of
operating profitability and gross profitability in the Taiwan stock
market
Richard Lu4
Jai-Jen Wang5
Abstract
Cross-sectional characteristics of stocks such as market value, market-to-book ratio,
and accumulated past return can be applied to formulate equity portfolios, which
relate to the well-known size, value, and momentum or contrarian strategies in
literature. Alternatively, income measures in financial statements drive investors in
stock markets to buy or sell in an intuitive way. This study applies these types of
information in the formation period to formulate long-short strategies and investigates
their return and risk profiles in the holding period afterward. According to the
empirical results in the Taiwan market during 2008/1~2018/6 given different lengths
of holding period and different equity segments, strategies filtered by the income
measure of gross profitability outperform the counterparts filtered by the operating
profitability. Moreover, while the momentum or contrarian effect is not, the size and
value effects are helpful to improve the performance of long-short strategies filtered
by the gross profitability only in the double filtered setting.
4 Corresponding author, Department of Risk Management andInsurance, FengChia
University, No. 100 Wenhwa Rd., Situn, Taichung, Taiwan 40724. Tel.:
+886-04-24517250x4132, Fax: +886-04-424512176, e-mail:[email protected]. 5 Department of Finance, FengChia University, No. 100 Wenhwa Rd., Situn,
Taichung, Taiwan 40724. Tel.: +886-04-24517250x4162, Fax: +886-04-24513796,
e-mail:[email protected].
15
Insurance Development and Economic Growth: Evidence from Asian
Advanced and Emerging Countries
Gengnan Chiang6, Hung-yu Cheng7
Abstract
The purpose of this study is to explore the correlation between insurance
development and economic growth among advanced and emerging countries in Asia. The
proportion of gross premium to the gross domestic product (known as insurance
penetration) and the insurance premium per capita (known as insurance density) indicate
the country’s level of development of insurance.
To verify the relationship between insurance development and economic growth, we
analyze a set of data related to 11 Asian countries from 1990 to 2017. These Asian
countries comprise of advanced and emerging countries. We adopt panel least squares
regression as the research method to analyze the relationship between the insurance
indicators and real GDP per capita (proxy variable of economic growth). The obtained
results are compared with those from other markets.
Primary evidences deriving from empirical analyses are shown as follows:
When insurance density is used as the insurance development measurement indicator, life
insurance is positively correlated with the economic growth of advanced countries,
emerging countries and the overall sample countries. Chen et al. (2012), Dhiab and
Tunisia (2015), Din et al. (2017b), Han et al. (2010) and Sibindi (2014) also have the
same results. Non-life insurance exhibits positive correlation with the economic growth of
advanced countries, emerging countries and the overall sample countries in Asia. Dhiab
and Tunisia (2015), Din et al. (2017b) and Han et al. (2010) also have the same results.
When insurance penetration is used as the insurance development measurement
indicator, life insurance positively affects the economic growth of emerging countries and
6 Gengnan Chiang
Associate Professor, Dept. of Finance
No. 100, Wenhwa Rd., Seatwen, Taichung, Taiwan 40724, R.O.C.
Phone:+886-4-24517250
Email:[email protected] 7 Hung-yu Cheng (oral)
Ph.D. Candidate, Ph.D. Program of Finance, Feng Chia University, Taichung, Taiwan.
No. 100, Wenhwa Rd., Seatwen, Taichung, Taiwan 40724, R.O.C.
Phone:+886-4-24517250
Email: [email protected]
16
the overall sample countries in Asia. The result is similar to the positive effect of life
insurance penetration on economic growth in the studies conducted by Alhassan and
Fiador (2014), Arena (2008), Beck et al. (2003), Ouédraogo et al. (2016) and Webb et al.
(2002). Non-life insurance exhibits positive effect on economic growth of advanced
countries, emerging countries and the overall sample countries in Asia. The result is
similar to the positive effect of life insurance penetration on economic growth in the
studies conducted by Haiss and Sümegi (2008), Kjosevski (2011) and Zouhaier (2014).
In summation, the relationship between insurance and economic growth is intricate.
To clarify this intricate relationship, the present study uses macroeconomic variables,
such as GDP deflator (annual %), gross fixed capital formation (% of GDP), market
capitalization of listed domestic companies (% of GDP), stocks total traded value (% of
GDP), exports and imports of goods and services (% of GDP), inflation GDP deflator
(annual %), central government total debt value (% of GDP) and unemployment total
value (% of total labor force) as control variables to strengthen the reliability of evidence
in this study. Although, the literature exploring the relationship between insurance and
economic growth is rare in Area. The evidence of this study makes up for the lack of
literature in this area.
Keywords: Asia, Economic growth, Life insurance, Non-life insurance, Insurance
Penetration, Insurance Density.
17
Corporate Governance and the Stock performance
Richard Lu
Associate Professor, Department of Risk Management and Insurance, Feng Chia
University, E-mail: [email protected] , TEL: (886) 424517250 ext.4132, Address:
No.100, Wenhwa Rd., Xitun Dist., Taichung City 407, Taiwan
Chen-Chen Yang
Doctoral student, Ph.D. Program in Finance, Feng Chia University,
E-mail:[email protected], TEL: (886)930190690, Address: 7F., No.537,
Xuecheng Rd., Shulin Dist., New Taipei City 238, Taiwan
Abstract
This paper analyzes how corporate governance affects corporate performance by
evaluating the performance of Taiwan Stock Exchange (TWSE) Corporate
Governance 100 Index (CG100) and Taipei Exchange Corporate Governance Index
(TPCGI). For the performance evaluation, TWSE Taiwan 50 Index (T50) and Taipei
Exchange 50 index (TPEx50) are used as the benchmark portfolios, respectively.
There are 864 daily return observations, from June 16, 2015 to December 14, 2018,
for the analysis. The results show that CG100 and TPCGI have higher mean return
and lower volatility than those of their benchmark portfolios. By the Sharpe ratio and
the economic performance measure, CG100 and TPCGI outperform their benchmarks.
Thus, corporate governance has positive impacts on the corporate performance from a
portfolio perspective.
Keywords: Corporate Governance, Corporate Governance Index, Corporate
performance
18
Currency Risk Hedging for US Stock Investment from Taiwan Perspective
Richard Lu
Associate Professor, Department of Risk Management and Insurance, Feng Chia
University, E-mail: [email protected] , TEL: (886) 424517250 ext.4132, Address:
No.100, Wenhwa Rd., Xitun Dist., Taichung City 407, Taiwan
Chien-Hsing Chou
Doctoral student, Ph.D. Program in Finance, Feng Chia University, E-mail:
[email protected] , Address: No.100, Wenhwa Rd., Xitun Dist., Taichung
City 407, Taiwan
Abstract
This paper studies the proxy hedging for US stock investment from Taiwan
investors’ perspective. To hedge the US currency risk, we use the US dollar, the
Japanese yen, the Australia dollar, the Euro, and the Swiss franc. The
minimum-variance model and the minimum-riskiness model are used for finding out
the optimal proxy hedging demand for currencies. The full sample period studied are
from May 1999 to Oct 2018.The study is also conducted on two subperiods, the
first-half and second-half periods. Both models suggest not to hedge the currency risk
during the full period, and the second subperiod. This is against some people’s
intuition particularly when the US dollar depreciates against Taiwan most of the time
in the second subperiod. In the proxy hedging demand for other currencies, we find
that, under the minimum-variance model, long positions are held for Japanese yen and
Swiss franc, and short positions for the Australia dollar and the Euro. However, under
the minimum-riskiness model, the excess mean return of the currency plays an
important role in hedging the US currency risk. Thus, it creates quite a different proxy
hedging demand for those currencies.
19
An Analysis of the Return and Risk of Self-Annuitizationand Dollar-Cost
Averaging
Richard Lu
Associate Professor, Department of Risk Management and Insurance, Feng Chia
University, E-mail: [email protected] , TEL: (886) 424517250 ext.4132, Address:
No.100, Wenhwa Rd., Xitun Dist., Taichung City 407, Taiwan
Meng-Sung Hsieh
Doctoral student, Ph.D. Program in Finance, Feng Chia University, E-mail:
[email protected], Address: No.100, Wenhwa Rd., Xitun Dist., Taichung
City 407, Taiwan
Abstract
The return and risk of Dollar-Cost Averaging (DCA) and Self-Annuitization (SA)
investments are compared with the underlying in this paper. The underlying return which
is assumed to normally distribute isgenerated by Monte Carlo simulations under four
market scenarios across several investment horizons. Because the multiple cash flows of
DCA and SA, the annual internal rate of return is used to measure the DCA and SA
returns. The results show that the mean return of DCAis slightly higher than the
underlying, while the SA is lower, particularly under short investment horizons. They
produce higher return volatility and riskiness than the underlying. The SA has the highest
negative skewness and kurtosis, followed by the DCA. Furthermore, by usingthe
economic performance measure,which can consider the high moments of distribution, the
underlying is the best, and the SA is the worst. This evidence become even more clear
and convincing as the investment horizon increases.
