Investment Strategies of Sovereign Wealth Funds and Its Implementation
Author: Dominik Ouschan
Publisher:
Published: 2010
Total Pages:
ISBN-13:
DOWNLOAD EBOOKEspecially during the Financial Crisis, sovereign wealth funds have attracted a lot of attention. This paper gives an overview of the investor class "sovereign wealth fund" and shows that it is not a new phenomenon. In academic research the short term market reaction of sovereign wealth fund investments, usually defined as a period of approximately 60 days around the announcement date, has been examined and a positive reaction has been found. The present article examines whether the set of sovereign wealth funds could and should be broken down into subcategories to determine results which reflect the characteristics and objectives better than the homogeneous class does. For this purpose, sovereign wealth funds are classified by their objective into four categories and an event study consisting of a data sample of 119 equity transactions is constructed to test if the short term reactions and long term effects differ for the classes. The final indicator for the deviation is defined to be the cumulative average abnormal returns over the examined time horizon. The analysis shows that the complete sample results deviate from the subsamples'. Furthermore, always at least one of the fund classes has a statistically different mean for the results of the short term and of the long term analysis indicating that sovereign wealth funds can be distinguished by their objective and a classification for further research is worth considering.