J. Risk Financial Manag., Volume 14, Issue 4 (April 2021) – 47 articles

The problem of the structural failures is inextricably linked with the construction industry. A structural failure can be defined as the unintentional, violent destruction of a building object or its part, as well as structural elements of scaffolding, forming elements, sheet piling and excavation linings. Structural failures always entail financial and environmental losses that cause a big problem for companies. The analysis of the structural failures allows to indicate the causes that led to them, but also to introduce actions to help avoid them or decrease their appearance in the future. From the point of view of sustainability risk, human life, corporate responsibility, but also possible financial penalties, it is a very important element of the business process management in an enterprise. In the paper the structural failures occurring in Poland in 2015–2019 were analyzed based on data from the General Office of Building Control (GUNB). They are divided into two categories: caused by random factors and resulting from human error. Failures caused by human error were divided into those related to construction, used material and building operation (exploitation). The structural failures occurring during construction works, e.g., construction, renovation, demolition works, as well as in existing facilities, e.g., during the use of the facility but also in facilities excluded from use, were analyzed. Then, the individual causes of the structural failures were analyzed in terms of repeatability in each category. The risk priority number was calculated for the causes in the group “random events” and nine causes related to “human error”. Actions aimed at reducing the risk of future failures were proposed. The results of the analysis provide conclusions that constitute input data for the improvement of both the processes themselves and the procedures for design, construction and exploitation, or methods and frequency of inspections. Full article

This study examines the safe-haven and hedging roles of gold against thirteen Asian stock markets during the COVID-19 outbreak. During the COVID-19 sub-period, gold is shown to be a strong hedge (diversifier) for the majority (minority) of Asian stock markets; it exhibits the property of a strong safe-haven in China, Indonesia, Singapore, and Vietnam, and a weak safe-haven in Pakistan and Thailand. The optimal weights of all stock-gold portfolios are lower during the COVID-19 sub-period than the pre COVID-19 sub-period, suggesting that portfolio investors should increase their investment in gold during the COVID-19 sub-period. The hedging effectiveness for most Asian stock markets is higher during the COVID-19 sub-period. Further analyses show that the hedge portfolio returns in many cases are mostly driven by gold implied volatility and inflation expectations in both sub-periods. Our findings have useful implications for market participants holding investments in Asian stocks during stressful periods. Full article

The aim of our paper is to examine whether the support of innovative work behavior by management is positively related to business performance and at the same time, whether this relationship is mediated by the teamwork climate and cognitive diversity of teams. Cognitive diversity is defined as differences in knowledge and perspective, which arise from professional diversity and account for its positive effects. A teamwork climate represents staff perceptions of collaboration between personnel. Business performance is defined by the level of sales. Our sample consisted of 211 managers of companies operating in Slovakia, and data collection took place in the form of a questionnaire. The main tool for examining the mechanism of operation of the investigated relationships is mediation using regression analysis and the Sobel test to determine the significance of the indirect effect of mediation variables. The findings point to a significant direct relationship between the innovative work behavior of company employees and business performance. The intensity of this relationship can be partly influenced by promoting cognitive diversity, especially in the area of knowledge and ways of thinking. The significant role of a teamwork climate was not demonstrated in the examined model. Full article

Risk and financial cost management are becoming increasingly important in the oil industry, especially in companies that have mature oil fields as assets. In such cases, risk and cost analysis are crucial to their existence. The paper analyzes the risks and costs through the modification of geological probability of success (POS) and obtaining the cost correction coefficient when planning capital investments in injection wells. Mature oil field “B” in the northern part of the Republic of Croatia was analyzed. For field “B”, these values were calculated: 0.8577 for probability of success for workovers, 0.4824 for modified POS for reservoir flooding, and 1.30 for cost correction coefficient for workovers. Full article

At present, companies should definitely be able to adapt to their environment. It entails being able to successfully predict and eliminate flaws and undesirable steps which may result in negative consequences. It can only be executed by careful consideration of three basic enterprise’s components which comprise the following: material resources, financial resources and human resources. An effective corporate coordination and human resource management is a cornerstone of the enterprise’s success while these components are of the same importance to this success. To this end, the aim of this manuscript is to design innovative recruitment procedures when using age management approach for a specific transport company; in particular, its human resource management is taken into consideration. In the initial parts of the manuscript, an analysis of quantitative and qualitative data is performed, wherein introduction into the addressed subject, relevant literature review, as well as description of utilized data and methods within the conducted research are elaborated. Consequently, in a case study section, the Work Ability Index (WAI) method is used to focus on the chosen group of employees in order to profoundly investigate their work abilities. The very examination of employees’ life cycle encompasses multiple age categories and measures a decrease in their work ability level. As for the ensuing (final) parts of the manuscript, a thorough evaluation of results obtained, appropriate discussion and, last but not least, conclusion section are compiled, in which the most imperative findings of the performed investigation are comprehensively summarized. Following the above, the purpose of this study is to compile a novel methodological procedure in terms of using the principles of age management in human resource management; specifically, in an opted transport company, and thus helping towards more effective and sustainable corporate recruitment strategy. Full article

Risk measures are commonly used to prepare for a prospective occurrence of an adverse event. If we are concerned with discrete risk phenomena such as counts of natural disasters, counts of infections by a serious disease, or counts of certain economic events, then the required risk forecasts are to be computed for an underlying count process. In practice, however, the discrete nature of count data is sometimes ignored and risk forecasts are calculated based on Gaussian time series models. But even if methods from count time series analysis are used in an adequate manner, the performance of risk forecasting is affected by estimation uncertainty as well as certain discreteness phenomena. To get a thorough overview of the aforementioned issues in risk forecasting of count processes, a comprehensive simulation study was done considering a broad variety of risk measures and count time series models. It becomes clear that Gaussian approximate risk forecasts substantially distort risk assessment and, thus, should be avoided. In order to account for the apparent estimation uncertainty in risk forecasting, we use bootstrap approaches for count time series. The relevance and the application of the proposed approaches are illustrated by real data examples about counts of storm surges and counts of financial transactions. Full article

Cancellation of the events offered by cultural institutions was caused by the restrictions introduced by the government and, at a critical moment, a national lockdown. The COVID-19 pandemic forced cultural institutions to adapt to the new reality. The aim of this article was to present the impact of the pandemic on the activities of cultural institutions, as well as to identify and systematize the activities of such institutions during the pandemic. The following classification, dividing the activities into three groups, has been proposed: virtualization of existing activities, expansion of activities with additional initiatives, and implementation of corporate social responsibility (CSR) initiatives. The greatest challenge was the virtualization of the existing activities and finding new customer markets. The pandemic has contributed to a significant deterioration in the financial situation of cultural institutions because of the reduced income. Long-term effects on cultural institutions may be difficult to predict and losses may be difficult to rebuild. Full article

This paper describes the development of a chatbot as a cognitive user interface for portfolio optimization. The financial portfolio optimization chatbot is proposed to provide an easy-to-use interface for portfolio optimization, including a wide range of investment objectives and flexibility to include a variety of constraints representing investment preferences when compared to existing online automated portfolio advisory services. Additionally, the use of a chatbot interface allows investors lacking a background in quantitative finance and optimization to utilize optimization services. The chatbot is capable of extracting investment preferences from natural text inputs, handling these inputs with a backend financial optimization solver, analyzing the results, and communicating the characteristics of the optimized portfolio back to the user. The architecture and design of the chatbot are presented, along with an implementation using the IBM Cloud, SS&C Algorithmics Portfolio Optimizer, and Slack as an example of this approach. The design and implementation using cloud applications provides scalability, potential performance improvements, and could inspire future applications for financial optimization services. Full article

Call centers play a significant role in the operational dynamics of different types of businesses. This is especially the case because a call center agent’s demeanor can impair or engender customer satisfaction, which has ramifications for business patronage. Unfortunately, the pressures associated with the role of the call center agent have made staff attrition a norm in the industry. While this does not augur well for the call center or the organizations that they serve, the role of possible antecedents in the equation of staff attrition in South African call centers remains largely unexplored. Using a structural equation modeling approach, this study examined the interconnections between customer orientation, knowledge management, job satisfaction, and employees’ intention to quit. Additionally, the mediating influence of job satisfaction on the association between customer orientation and knowledge management of the intention to quit is examined. This study found significant relationships between knowledge management, customer orientation, and job satisfaction and the dependent variable (intention to quit). In addition, this study establishes that the extent to which job satisfaction may mediate the influence on the intention to quit hinges on the organizational element considered. Two factors limit the extent to which the findings from this study can be generalized. First, this study focused on the call center setting in South Africa. Second, convenience sampling was used in this study. This study points to critical operational practices that call center managers can embrace toward enhancing job satisfaction and reducing intention to quit propensity. Using structural equation analysis, we contend that call centers in the South African setting would effectively address staff attrition if appropriate organizational practices are endorsed toward ensuring employee job satisfaction. Full article

This study explores the contrasting impacts of the COVID-19 pandemic on various industries in Australia. Considering all daily announced information, we analyzed the diverse impacts of COVID-19 on the sectoral stock returns from 26 January to 20 July 2020. Sixteen out of twenty examined stock indices negatively react to the daily rise in COVID-19 confirmed cases. Several actions from the Australian government to control the pandemic are relatively ineffective in boosting the overall financial market; however, some positive interactions are captured in five sectors of industrials, health care, metals and mining, materials, and resources. The result shows that all industries that benefited from government financial assistance are either shielded or less severely affected by the pandemic. While sectors that did not directly receive financial remedies relatively showed no enhancement in their overall performance. Having achieved short-term success in helping the economy, the government recorded an all-time high deficit since 2004 that might eventually lead to adverse effects on the overall economy. The Australian equity market is found to be rationally distinct to the crude oil price risk, while positive correlations between AUD/USD rate and real estate-related sectors are reported. Full article

This paper examines relative stock market performance following the onset of the coronavirus pandemic for a sample of 80 stock markets. Weekly data on coronavirus cases and deaths are employed alongside Oxford indices on each nation’s stringency and government support intensity. The results are broken down both by month and by geographical region. The full sample results show that increased coronavirus cases exert the expected overall effect of worsening relative stock market performance, but with little consistent impact of rising deaths. There is some evidence of significantly negative stock market effects arising from lockdowns as reflected in the Oxford stringency index. There are also positive reactions to government support in March and December in the overall sample—combined with some additional pervasive effects seen in mid-2020 in Latin America. Full article

A lot of previous research studied the relationship between audit committee quality and the financial performance of conventional banks before and during the subprime crisis, whereas some other investigations analyzed the same association in the framework of Islamic banks. However, no study has compared these two correlations either before, during, or after the subprime crisis. Several reasons explain the differences, such as the audit committee quality of each bank type, the evaluation method of the financial performance, the research peculiarities, the methodology, the data, and the interpretation. This research aims to compare the impacts of the audit committees’ quality on the financial performance of Islamic and conventional banks between 2010 and 2019. The financial performance measures and audit committees’ determinants of the conventional and Islamic banks concerned 112 banks of each type. The collected data covered four continents: America, Asia, Africa, and Europe. Impacts were compared by using the Generalized Least Squares analysis. The results showed that the audit committee reduced the profitability of two bank types. Moreover, it harmed the conventional banks’ efficiency but reported an unclear effect within Islamic banks. Even so, we noticed that the audit committee had a positive impact on the conventional banks’ liquidity, while the same effect was apparently ambiguous for the Islamic banks’ liquidity. For solvency, the audit committee positively influenced conventional banks while it affected that of Islamic banks. Full article

In this study, we investigated the impact of the first wave of the COVID-19 pandemic on various sectors of the Australian stock market. Market capitalization and equally weighted indices were formed for eleven Australian sectors to examine the influence of the pandemic on them. First, we examined the financial contagion between the Chinese stock market and Australian sector indices through the dynamic conditional correlation fractionally integrated generalized autoregressive conditional heteroskedasticity (DCC-FIGARCH) model. We found high time-varying correlations between the Chinese stock market and most of the Australian sector indices, with the financial, health care, information technology, and utility sectors displaying a decrease in co-movements during the pandemic. The Modified Iterative Cumulative Sum of Squares (MICSS) analysis results indicated the presence of structural breaks in the volatilities of most of the sector indices around the end of February 2020, but consumer staples, industry, information technology and real estate indices did not display any break. Markov regime-switching regression analysis depicted that the pandemic has mainly affected three sectors: consumer staples, industry, and real estate. When we considered the firm size, we found that smaller companies in the energy sector exhibited gradual deterioration, whereas small firms in the consumer staples sector experienced the largest positive impact from the pandemic. Full article

Acknowledging the role of different forms of entrepreneurship to continued economic prosper-ity and the role of institutional dimensions on entrepreneurship, this paper investigates if and to what extent a selected number of institutional dimensions influence students’ intentions to ei-ther start a company or take over an existing one. Based on a Global University Entrepreneurial Spirit Students’ Survey (GUESS) dataset and international country-level databases, evidence shows that both entrepreneurship options are hampered by corruption and limited business freedom while promoted through favourable labour regulations and trade freedom. Property rights, fiscal freedom, government spending, monetary freedom, and investment freedom only affect start-ups, while financial freedom adversely affects both options. The study provides new insight into the impact of institutional dimensions on different types of entrepreneurship. Thus, in contrast to extant research in this area, it goes beyond the typical focus on start-ups. Evidence also suggests that male students prefer starting a new company, while female students seem to prefer a takeover. This improved understanding could help in not only designing more targeted entrepreneurship and entrepreneurial financing policies but also in improving entrepreneurship education. Full article

Recycling of products has a great impact on contemporary sustainable business strategies. In this study, a sustainable recycling process in a production-inventory model for an imperfect production system with a fixed ratio of recyclable defective products is introduced. The piecewise constant demand rates of the non-defective items are considered under production run-time, production off-time with positive stock, and production off-time with shortages under varying conditions. Based on the production process, two cases are studied using this model. The first case does not consider recycling processes, while the second case picks up all defective items before sending these items to recycling during the production off-time; the recycled items are added to the main inventory. The aim of this study is to minimize the total cost and identify the optimal order quantity. The manufacturing process with the recycling process provides a better result compared to without recycling in the first case. Some theoretical derivations are developed to enunciate the objective function using the classical optimization technique. To validate the proposed study, sensitivity analysis is performed, and numerical examples are given. Finally, some managerial insights and the scope of future research are provided. Full article

Complex models have received significant interest in recent years and are being increasingly used to explain the stochastic phenomenon with upward and downward fluctuation such as the stock market. Different from existing semi-variance methods in traditional integer dimension construction for two variables, this paper proposes a simplified multi-factorized fractional dimension derivation with the exact Excel tool algorithm involving the fractional center moment extension to covariance, which is a complex parameter average that is a multi-factorized extension to Pearson covariance. By examining the peaks and troughs of gold price averages, the proposed algorithm provides more insight into revealing underlying stock market trends to see who is the financial market leader during good economic times. The calculation results demonstrate that the complex covariance is able to distinguish subtle differences among stock market performances and gold prices for the same field that the two variable covariance may overlook. We take London, Tokyo, Shanghai, Toronto, and Nasdaq as the representative examples. Full article

We estimate the impact of macroeconomic risk factors on shipping stock returns, using a quantile regression (QR) model. We regress the excess return of a portfolio for the container, dry bulk, chemical/gas, oil tanker, and diversified shipping sectors on the world market portfolio excess return, volatility index, and changes in the oil price, exchange rate, and interest rate. The sensitivities of stock returns to the risk factors differ across quantiles and shipping segments and are found to be significant for the volatility index, world market portfolio return, exchange rate, and changes in long-term interest rate with variation over quantiles. This provides evidence of asymmetric and heterogeneous dependence between stock returns and certain macroeconomic risk variables. The results of the study also suggest that standard OLS regression is inadequate to uncover the risk-return relation. Full article

Blockchain is one of the primary digital technologies utilised in the finance industry with huge future potential. This study conducts a systematic literature review of a final sample of 407 prior literature from an initial set of 1979 records for the sample period of 2013–2020 with regard to blockchain adoption in banking. This review is further supplemented by a machine learning based textual analysis that identifies key themes, trends, divergences and gaps between academic and practitioner led industry literature. Moreover, the study highlights present, future use cases, adoption barriers and misconceptions of blockchains in banking, especially given COVID-19. Furthermore, this study identifies behavioural, social, economic, regulatory and managerial implications of blockchain based banking. In addition, our study identifies the cross-industry potential of blockchains via banking, thus, linking much disconnected prior literature. Finally, we develop a blockchain adoption framework and an adoption life cycle for banking. This study would be of interest to academics, bankers, regulators, investors, auditors and other stakeholders in financial markets. Full article

The paper aims to investigate the effects of the COVID-19 pandemic on working capital management policies among Polish small and medium-sized enterprises operating in Group Purchasing Organizations (GPOs). The results show that the firms adopted a moderate–conservative strategy for their working capital management. Moreover, the evidence confirms that the COVID-19 pandemic crisis did not change Working Capital Management (WCM) strategies significantly. The companies that have high financial security as a result of the high ratio of Liquidity, Quick, and cash conversion cycle (CCC) have tried to attract more new customers in the market by increasing the due date of accounts receivable so they can improve their sales performance, and also reduce the liabilities turnover to be able to work with more suppliers in the market. Moreover, among the various WCM strategies, the companies with a higher CCC ratio, along with those whose bulk of current assets consisted of accounts receivable and short-term investments, managed to have higher sales returns. Finally, our outcomes indicate that the firms operating in large cities have lower sales returns, meaning even Polish small and medium-sized enterprises’ ability within GPOs with the aid of the central unit can also get high return on sales (ROS) results. Full article

Although it is well established that acquisition-based dynamic capabilities have important consequences for merger and acquisition (M&A) processes, direct evidence on how real option applications can measure a dynamic capability-based synergy in open innovation-type M&A deals has been scarce. This study draws from seminal research on real options theory to explore some of these benefits and limits to value a synergy in one recent highly strategic acquisition. To strengthen the identification of causal effects, the paper develops the proposition that justifies the role of dynamic capabilities as antecedents of the success of open innovation-type M&A deals in the ICT industry and demonstrates real options’ application to measure M&A synergies. To test the internal and external validity of the proposition, the explorative case study on Samsung’s acquisition of Harman International Industries was analyzed and interpreted. This study contributes important empirical evidence to bear on the literature on open innovation theory, dynamic capabilities framework, and real options theory. Full article

Departing from previous studies, which have mostly focused on Western countries, our work investigates the determinants of the corporate environment, social and governance (ESG) reporting among Asian firms. Examining Asian public listed firms from 2005 to 2017, our cross-sectional model results indicate that firm characteristics (economic performance, profitability, leverage and size) are found to disclose additional ESG information. The outcome is consistent with the legitimacy theory, which posits that firms provide higher ESG reporting to legitimize and justify the firm’s continuous existence. The findings are important for firms, stakeholders and policymakers. While firms may formulate ways to improve ESG reporting to compete in the international market, the stakeholders may pressure firms to disclose more information on ESG and policymakers to designalegal framework on ESG that suits firms in Asia. Full article

This paper investigates the role of institutional investors in the improvement of corporate governance for the companies in which they invest (investee companies) using evidence about the attributes of boards of directors across 15 countries. Furthermore, this paper examines the extent to which the activism of institutional investors is determined by the institutional environment, to include various economic conditions (pre-crisis, crisis and post-crisis), legal systems and ownership structures. Drawing from the agency theory and institutional theory, the results show that foreign institutional investors are the main promoters of board governance structures across the globe. This study also provides evidence that institutional investors promote the independence of a board and its audit and compensation sub-committees (but excluding its nomination committee). The study also demonstrates that institutional investors reduce board entrenchment, though it presents no evidence that institutional investors reduce board busyness. The results also suggest that institutional investors behave differently when operating within different economic conditions (pre-crisis, crisis and post-crisis), legal systems and ownership structures. This paper contributes to the growing literature on shareholder activism and comparative corporate governance mechanisms. The findings suggest that the activism of institutional investors is contingent on the institutional settings, to include economic conditions, legal systems and ownership structures. Full article

What incentives do managers face that might give rise to inefficient investments in leases? If managers make inefficient investments in leases, what economic consequences arise for those managers and their firms? We develop a model of expected investments in leased assets and use the residuals from the model as proxies for inefficient investments. We find that, in contrast to investments in capital expenditures, leasing appears to be a mechanism through which managers can seemingly over-invest, even among firms with high quality financial reporting and negative free cash flows. Examining economic consequences, we predict and find that unexpected investments in leased assets trigger increasing future sales growth but declining future earnings growth for as long as three years ahead. We also find a negative relation with contemporaneous stock returns, suggesting investors view unexpected investments in leases as value destructive. Finally, despite negative returns consequences, we find that unexpected investments in leases are associated with higher CEO compensation driven primarily by future sales growth. Our study suggests that compensation contracts that reward growth may give managers’ incentives to drive sales growth with larger-than-expected investments in leased assets, which lead to slower future earnings growth and negative share price consequences for investors. Our results should inform managers and board members, investors, and researchers interested in investment efficiency, corporate governance, and leases. Full article

Brand is considered a valuable asset that a business wants to create and maintain growth throughout its business cycle. This paper examines the impact of corporate brand equity on employees’ opportunistic behavior. The paper uses quantitative research methods, through linear SEM (Structural Equation Modelling) analysis of structural model with a scale of 609 samples of employees of enterprises in Vietnam. The research results show that corporate brand equity has a negative impact on employees’ opportunistic behavior. In the relationship between these two factors, trust and emotional engagement act as intermediate factors. Additionally, the research demonstrates that trust has a positive effect on all three components of employee engagement, including emotional engagement, computational engagement, and standards-based engagement. On that basis, the research suggests a number of recommendations to minimize the opportunistic behavior of employees in the enterprise. The findings of this study have shown the importance and impact of brand equity on employee opportunistic behavior. These are meaningful contributions in both theory and practice to help businesses gain deeper insight into brand equity and the need to pay attention to building and developing durable brand equity for businesses. At the same time, it is an important basis for the next research projects. Full article

The study identifies the impact of the changes in human mobility due to the announcement of the state of emergency to cope with the COVID-19 pandemic on the Tokyo gasoline, diesel, and kerosene markets. Indices reflecting the movements in the visits to transit stations and workplaces were used to capture the changes in human mobility from February 2020 to February 2021. The linear and nonlinear ARDL (NARDL) models were applied to investigate the relationship between the changes in human mobility indices and fuel prices. Although only the kerosene price received an impact from the human mobility changes in the linear ARDL model, the NARDL model revealed that when human mobility was increasing, the fuel price was affected positively and the negative shocks in the mobility had an adverse influence on the fuel price. The results of the study imply the importance of providing subsidies when a state of emergency reduces fuel demands due to the decline in human mobility and negatively affects the fuel retail industry. Full article

After the outbreak of COVID-19, schools heavily depend on e-learning technologies and tools to shift from in-person class to online. This review article analyzes the changes of technology evolution and technology adoption of e-learning in pre- and post-COVID-19 based on the Technology System Evaluation Theory (TSET) and technology adoption of e-learning based on the Unified Theory of Acceptance and Use of Technology (UTAUT). We intend to explore the interaction of technology evolution and technology adoption in the different focus of e-learning technology in the two stages and the particularity and heterogeneity of the UTAUT model. The results indicate that (1) The moderating results of technology evolution are proposed and evaluated under the UTAUT model before the COVID-19 outbreak. Studies after the COVID-19 pandemic paid more attention to technology efficiency rather than effectiveness; (2) Research on e-learning focuses on the infrastructure to reach more users after the outbreak of COVID-19 because e-learning is the only way to continue education; (3) COVID-19 fear moderates the relationship between the external factors and the behavior intention of e-learning users. The lack of financial support on technology evolution will directly weaken the implementation of new technology. Social Isolation offers more opportunities for students to engage in e-learning. Meanwhile, it slows down the implementation of e-learning because of out-to-date hardware and software. This article offers an enhanced understanding of the interaction of technology evolution and technology adoption under unexpected environments and provides practical insights into how to promote new technology in a way that users will accept and use easily. This study can be tested and extended by empirical research in the future. Full article

We use point processes to analyze market order arrivals on the intraday market for hourly electricity deliveries in Germany in the second quarter of 2015. As we distinguish between buys and sells, we work in a multivariate setting. We model the arrivals with a Hawkes process whose baseline intensity comprises either only an exponentially increasing component or a constant in addition to the exponentially increasing component, and whose excitation decays exponentially. Our goodness-of-fit tests indicate that the models where the intensity of each market order type is excited at least by events of the same type are the most promising ones. Based on the Akaike information criterion, the model without a constant in the baseline intensity and only self-excitation is selected in almost 50% of the cases on both market sides. The typical jump size of intensities in case of the arrival of a market order of the same type is quite large, yet rather short lived. Diurnal patterns in the parameters of the baseline intensity and the branching ratio of self-excitation are observable. Contemporaneous relationships between different parameters such as the jump size and decay rate of self and cross-excitation are found. Full article

Virtual currency represents a specific technological innovation on financial markets. Bitcoin and other cryptocurrencies are popular alternatives to traditional cash and investment. We indicate a research gap in the literature review. We find out that current research focused rarely on portfolio diversification using bibliographic analysis in VOSviewer. We think that portfolio diversification is extremely important on the crypto market for most investors because virtual currencies are very risky compared to traditional assets. The primary aim is to construct an optimal portfolio consisting of several cryptocurrencies without traditional assets using a modern theory portfolio. The total sample consists of 16 virtual currencies from 1 October 2017 to 13 January 2020. We mainly obtain historical data on the daily close price of cryptocurrencies from Yahoo Finance. The results show that the optimal portfolio using Markowitz approach consists of Cardano, Binance Coin, and Bitcoin. In addition, virtual currencies are moderately Correlated, with the exception of Tether based on correlation analysis. The high correlation is dangerous for cryptocurrency in portfolio diversification. However, Tether is an atypical virtual currency compared to other cryptocurrencies. Full article

The COVID-19 pandemic and induced economic and social constraints have significantly impacted the confidence of both consumers and businesses. Despite that, comprehensive studies of the impact of the COVID-19 pandemic on the consumer and business sentiment are still lacking. Thus, in our research we aim to identify consumer and business confidence indicators’ reaction to the spread of the COVID-19 pandemic in the Eurozone, the United States, and China. For this purpose, we used the method of correlation–regression analysis. We chose the consumer-confidence index, manufacturing purchasing manager’s index, and services purchasing manager’s index as dependent variables; and the number of confirmed cases of COVID-19, the number of deaths caused by COVID-19, and the mortality rate of COVID-19 infections as independent variables. The results showed a relatively rapid and robust effect of COVID-19 in the short period, but longer-term results depended on the region and were not so unambiguous: in the case of the Eurozone, the spread of COVID-19 pandemic did not affect the consumer-confidence index (CCI) or, in the cases of the United States and China, affected this index negatively; the purchasing managers’ index (PMI) in the services sector was significantly negatively affected by the mortality risk of COVID-19 infection; and the impact on the purchasing managers’ index (PMI) in the manufacturing industry appeared to be mixed. Full article

Expected utility theory (EUT) is currently the standard framework which formally defines rational decision-making under risky conditions. EUT uses a theoretical device called von Neumann–Morgenstern utility function, where concepts of function and random variable are employed in their pre-set-theoretic senses. Any von Neumann–Morgenstern utility function thus derived is claimed to transform a non-degenerate random variable into its certainty equivalent. However, there can be no certainty equivalent for a non-degenerate random variable by the set-theoretic definition of a random variable, whilst the continuity axiom of EUT implies the existence of such a certainty equivalent. This paper also demonstrates that rational behaviour under utility theory is incompatible with scarcity of resources, making behaviour consistent with EUT irrational and justifying persistent external inconsistencies of EUT. A brief description of a new paradigm which can resolve the problems of the standard paradigm is presented. These include resolutions of such anomalies as instant endowment effect, asymmetric valuation of gains and losses, intransitivity of preferences, profit puzzle as well as the St. Petersburg paradox. Full article