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Abstract:We investigate the relationship between idiosyncratic risk and return among four water exchange traded funds-PowerShares Water Resources Portfolio, Power Shares Global Water, First Trust ISE Water Index Fund, and Guggenheim S&P Global Water Index ETF using the Markov switching model for the period 2007-2015. The generated transition probabilities in this paper show that there is a high and low probability of switching between Regimes 1 and 3, respectively. Moreover, we find that the idiosyncratic risk for most of the exchange traded funds move from low volatility (Regime 2) to very low volatility (Regime 1 and 3). Our study also identify that the beta coefficients are positive and entire values are less than 1. Thus, it seems that water investment has a lower systematic risk and a positive effect on the water exchange traded index funds returns during different regimes.

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This study analyzes the stock returns and volatility of the global water industry in different (full, pre-GFC, GFC and post-GFC) periods. The study estimates ARMA (1, 1)-GARCH (1, 1) and EGARCH (1, 1) models on the World Water index (WOWAX), S-Network Global Water Index (S-Net), S&P Global Water Index (S&P), and MSCI ACWI Water Utilities Index (MSCI ACWI), the Asia, Europe, Latin America and US water markets, Pictet Global Water Fund (Pictet), and KBC Eco Water Fund (KBC Eco) for the period 2004-2014. In this study, the EGARCH (1, 1) model results suggest the existence of persistence of volatility from four water indices, four water markets and two water funds in different periods and asymmetric volatility (leverage) for Asia and US, S-Net and Pictet in full, pre-GFC and GFC periods and for WOWAX in GFC and post-GFC periods. The WOWAX is not highly correlated with water markets and water funds, which suggests that it may provide a possible opportunity for portfolio diversification in different periods.Some important findings of this study are noted as follows. We find that water indices, water markets, and water funds are correlated with each other. However, the results show that WOWAX provides an opportunity of portfolio diversification benefits to investors in different (full, pre-GFC, GFC, and post-GFC) periods which is in line with Jin, Roca, Li, Wong, and Cheung's (2015) results. It is notable that the ARMA (1, 1)-GARCH(1, 1) model results show that the conditional volatility process GARCH (1, 1) has a positive effect on the serial autocorrelation of squared residuals for water indices, water markets and water funds in full, GFC and post-GFC periods. Again, EGARCH (1, 1) model results show the significance of β and γ, suggesting persistence of volatility from four water indices, four water markets, and two water funds in different periods (full, pre-GFC, GFC and post-GFC) and asymmetric volatility (leverage) for S-Net, Asia and US and Pictet in the full, pre-GFC and GFC periods, and WOWAX in the GFC and post-GFC periods.This study has a number of significant contributions to the current literature. Firstly, it is the first study to investigate the relationships between returns and volatility of the water indices, water markets, water funds, and water markets in different (full, pre-GFC, GFC, and post-GFC) periods. Secondly, this study searches for the existence of correlations and dynamic relationships in water indices, water markets and water funds with shareholders' value in the global water industry. Thirdly and importantly, in a qualitative manner, this study addresses the value relevance of markets, which has a profound impact on the water industry in relation to water funds, water indices, and their components.The rest of this paper is organized as follows. Section 2 presents a further institutional background. Section 3 reviews the related literature. Section 4 discusses our research hypothesis. Section 5 outlines the data and methodologies employed in the study. Section 6 analyzes the empirical resul...

Climate change has become an increasing global concern, where more frequent, long lasting and severe weather extremes affect water resources around the world. Freshwater/groundwater resources in Bangladesh are one of the most important aspects of the country, which in future will be significantly affected. Global warming has been affecting the characteristics of drinking water level in many ways. The predicted changing environmental conditions suggest that we should be particularly concerned about the over use of groundwater and its withdrawal. In Bangladesh and nearby countries the effect of climate change has been studied but the nature of relationships between renewable freshwater/groundwater resources, temperature, rainfall and flood affected areas (AA) have not been examined in the manner done in this paper. This article examines the relationships between freshwater/ groundwater level in terms of temperature changes, rainfall levels and flood AA during the period of 1962-2015. The quantile regressions show the three variables affect the fresh water levels with varying levels of significance (1, 5, 7 and 10% for example). This study uniquely examines the results from two modelling tools namely, STATA and EVIEWS; and confirms the similarity of the results. Freshwater/groundwater resources are negatively affected by temperature changes, rainfall levels and positively affected by flood affected area coverage -flood allows stagnant water filtration to groundwater over time. Temperature causes evaporation of stored water and rainfall causes runoff in early stages but in flood conditions the effect is positive and this is shown by the quantile regression results.