EU-China Cross-Border Investments Project

Context and vision:

Over the last decades there has been a substantial increase of both Chinese foreign direct investment (greenfield, M&A) and portfolio investments in Europe, and of European investments in China. These trends in EU-China cross-border investments pose several fundamental and applied financial research challenges which we aim to address within this project.

Applied research:

The objective of this project is to attract funding to build a joint capacity of collecting and diffusing data on the evolution of the EU-China cross-border investments (both aggregate and at the more granular levels of sector and country), and of the drivers of investments (performance, risk, policy, exchange rates). Besides providing an easily accessible interface to the relevant data, the aim is also to publish on a regular basis the applied research results. These white papers will need to discuss the evolution in monitored statistics as well as present-day interview-based case studies of EU-China cross-border investment decisions. As such, this strand of applied research will contribute to the creation of a more fact-based image of the impact of Chinese investments in Europe and of European investments in China.

Fundamental research:

In terms of fundamental research, the EU-China cross-border investment project aims to develop statistical methodologies and mathematical models to improve the EU-China cross-border investment decision-making from both an individual investor’s perspective, the institutional investor’s perspective as well as the macro perspective. The approach needs to take into account the differences in utility functions (i.e. the objective functions considered) between European and Chinese investors, the specifications of available data, the types of investment and the differences in the economic and financial market structures. Models will need to take into account and explain the sources of non-normality and non-linear time series and cross-sectional dependence. Based on these models, the project aims to propose a framework to optimise the financial decisions and evaluate the quality of the decisions.

PhD Topics

BACES CSC PhD Topic 1: Chinese Portfolio Investment in Europe and European Portfolio Investment in China

BACES CSC PhD Topic 2: Chinese Foreign Direct Investment in Europe and European Foreign Direct Investments in China

BACES CSC PhD Topic 3: Optimal Product Design Towards a More Stable Economy

BACES CSC PhD Topic 4: Design, Pricing and Hedging of Financial Products for Volatility Risk

BACES CSC PhD Topic 5: Equilibrium in the Financial Markets

BACES CSC PhD Topic 6: Robust Risk Measures

BACES CSC PhD Topic 7: Optimal Portfolio Selection under Ambiguity

BACES CSC PhD Topic 8: Optimal Design in the Insurance Market

Activities

Summer 2018: The BACES team on cross-border investments has actively participated in summer schools and workshops on investing and entrepreneurial activity at the SWUFE Global Academy, the Sichuan University Immersion Program and the ninth Sichuan University Student Entrepreneurship Practice Project. During these exchanges, the BACES team discussed both the theory and practice of the behavioural aspects, the modelling approaches and the entrepreneurial challenges for EU cross-border investments.

18 October 2017: Prestigious NSCF funding for The project “Estimating Higher Order Co-moments with High Dimensionality and Its Application in Portfolio Selection” in which Prof. Wanbo Lu (SWUFE) and Prof. Kris Boudt (VUB) collaborate to develop methodology to improve financial decision making under non-normality. Thanks to the National Science Foundation of China, the Chinese Scholarship Council and EU-China exchange programs like Lotus, the finance department at VUB is very pleased to welcome regularly PhD students from the BACES partners. Kris Boudt will be visiting Sichuan University in April and July 2018.