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Finance and Financial Management
Singapore Management University
- Keyword
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- Stochastic volatility (2)
- Alpha (1)
- Asset Allocation (1)
- Bayesian (1)
- Bond maturity (1)
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- Bootstrap (1)
- Cardan's discriminant (1)
- Corporate diversification (1)
- Currency crashes (1)
- Disclosure regulation (1)
- Emerging markets (1)
- Execution quality (1)
- Factor models (1)
- Financial hedging (1)
- Firm-specific investments (1)
- GARCH (1)
- Generalized normal model (1)
- Hedge Funds (1)
- Hedge fund performance (1)
- Hedge funds (1)
- High frequency data (1)
- Income distribution (1)
- Income polarization (1)
- Information asymmetry (1)
- Integrated variance (1)
- Intertemporal CAPM (1)
- Liquidity risk (1)
- Long range dependence (1)
- Microstructure noise (1)
- Multimodality (1)
Articles 1 - 12 of 12
Full-Text Articles in Business
European Venture Capital Market: Scaling Beyond Current Boundaries, Gerard George, Eva Nathusius
European Venture Capital Market: Scaling Beyond Current Boundaries, Gerard George, Eva Nathusius
Research Collection Lee Kong Chian School Of Business
This study systematically documents the perceptions of LPs, venture capitalists and entrepreneurs and their views of the trends and challenges facing the European venture capital market. The interest from LPs in European venture capital funds was found to be neutral to marginally negative because of historical returns. However, buoyancy in the supply of high quality opportunities at reasonable valuations has the potential to improve this outlook. The findings suggest that European venture capitalists still face structural barriers in the form of heterogeneous consumer preferences, improving but weak exit and fundraising environments, and the scarcity of LPs of significant size. The …
Asymmetries In Stock Returns: Statistical Tests And Economic Evaluation, Yongmiao Hong, Jun Tu, Guofu Zhou
Asymmetries In Stock Returns: Statistical Tests And Economic Evaluation, Yongmiao Hong, Jun Tu, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
We provide a model-free test for asymmetric correlations in which stocks move more often with the market when the market goes down than when it goes up, and also provide such tests for asymmetric betas and covariances. When stocks are sorted by size, book-to-market, and momentum, we find strong evidence of asymmetries for both size and momentum portfolios, but no evidence for book-to-market portfolios. Moreover, we evaluate the economic significance of incorporating asymmetries into investment decisions, and find that they can be of substantial economic importance for an investor with a disappointment aversion (DA) preference as described by Ang, Bekaert, …
Investing In Hedge Funds When Returns Are Predictable, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo
Investing In Hedge Funds When Returns Are Predictable, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
This paper evaluates hedge fund performance through portfolio strategies that incorporate predictability in managerial skills, fund risk loadings, and benchmark returns. Incorporating predictability substantially improves performance for the entire universe of hedge funds as well as various subsets based on investment styles. Such out-performance is strongest during market downturns when the marginal utility of consumption is relatively high. Moreover, the major source of investment profitability is predictability in managerial skills. In particular, long-only strategies that incorporate predictable skills outperform their Fung and Hsieh (2004) benchmarks by over 12 percent per year. The economic value of predictability obtains for various rebalancing …
A New Approach To The Measurement Of Polarization For Grouped Data, Eckart Bomsdorf, Clemens A. Otto
A New Approach To The Measurement Of Polarization For Grouped Data, Eckart Bomsdorf, Clemens A. Otto
Research Collection Lee Kong Chian School Of Business
In this paper we develop a measure of polarization for discrete distributions of non-negative grouped data. The measure takes into account the relative sizes and homogeneities of individual groups as well as the heterogeneities between all pairs of groups. It is based on the assumption that the total polarization within the distribution can be understood as a function of the polarizations between all pairs of groups. The measure allows information on existing groups within a population to be used directly to determine the degree of polarization. Thus the impact of various classifi- cations on the degree of polarization can be …
The Effect Of Financial Hedging On The Incentives For Corporate Diversification: The Role Of Stakeholder Firm-Specific Investments, Sonya Seongyeon Lim, Heli Wang
The Effect Of Financial Hedging On The Incentives For Corporate Diversification: The Role Of Stakeholder Firm-Specific Investments, Sonya Seongyeon Lim, Heli Wang
Research Collection Lee Kong Chian School Of Business
Financial hedging and corporate diversification are often considered substitutive means of risk management, implying that rapid development of financial hedging markets will yield less need for firms to manage risk through costly diversification. Building on a stakeholder-based view of risk management, we show that financial hedging and corporate diversification are more often complementary than substitutive. Financial hedging reduces a firm’s systematic risk, encouraging firm-specific investment by stakeholders. Larger firmspecific investment loads excessive idiosyncratic risk on the stakeholders, increasing the benefits of reducing idiosyncratic risk through diversification. Therefore, financial hedging can increase a firm’s incentives to manage risk through diversification.
Optimal Liquidation Strategies And Their Implications, Christopher Ting, Mitch Warachka, Yonggan Zhao
Optimal Liquidation Strategies And Their Implications, Christopher Ting, Mitch Warachka, Yonggan Zhao
Research Collection Lee Kong Chian School Of Business
This paper studies optimal liquidation when the selling price depends on the rate of liquidation, transaction time, volume, and the asset's intrinsic value. A generic closed-form solution for maximizing the discounted liquidation proceeds is derived. To obtain financial insights, three parametric specifications that proxy for increasingly realistic market conditions are examined. In our framework, maximizing liquidation proceeds and minimizing liquidity costs are equivalent. The optimal strategies imply more rapid liquidations in less liquid markets. We also show that volatility is stochastic when market liquidity is unpredictable.
Do Hedge Funds Deliver Alpha? A Bayesian And Bootstrap Analysis, Robert Kosowski, Narayan Y. Naik, Melvyn Teo
Do Hedge Funds Deliver Alpha? A Bayesian And Bootstrap Analysis, Robert Kosowski, Narayan Y. Naik, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Using a robust bootstrap procedure, we find that top hedge fund performance cannot be explained by luck, and that hedge fund performance persists at annual horizons. Moreover, we show that Bayesian measures, which help overcome the short-sample problem inherent in hedge fund returns, lead to superior performance predictability. Relative to sorting on OLS alphas, sorting on Bayesian alphas yields a 5.5 percent per year increase in the alpha of the spread between the top and bottom hedge fund deciles. Our results are robust, and relevant to investors, as they are neither confined to small funds, nor driven by incubation bias, …
Public Disclosure And Private Decisions: The Case Of Equity Market Execution Quality, Ekkehart Boehmer, Robert Jennings, Li Wei
Public Disclosure And Private Decisions: The Case Of Equity Market Execution Quality, Ekkehart Boehmer, Robert Jennings, Li Wei
Research Collection Lee Kong Chian School Of Business
In 2001, the Securities and Exchange Commission (SEC) required market centers to publish monthly execution-quality reports in an effort to spur competition for order flow between markets. Using samples of stocks trading on several markets, we investigate whether past execution quality affects order-routing decisions and whether the new disclosure requirements influence this relationship. We find that routing decisions are associated with execution quality; markets reporting low execution costs and fast fills subsequently receive more orders. Moreover, the reports themselves appear to provide information that was unavailable previously. Our results are consistent with active competition for order flow that can be …
Realized Daily Variance Of S&P500 Cash Index: A Revaluation Of Stylized Facts, Shirley J. Huang, Qianqiu Liu, Jun Yu
Realized Daily Variance Of S&P500 Cash Index: A Revaluation Of Stylized Facts, Shirley J. Huang, Qianqiu Liu, Jun Yu
Research Collection Lee Kong Chian School Of Business
In this paper, the realized daily variance is obtained from intraday transaction prices of the S&P 500 cash index over the period from January 1993 to December 2004. When constructing realized daily variance, market microstructure noise is taken into account using a technique proposed by Zhang, Mykland, and Ait-Sahalia (2005). The time series properties of realized daily variance are compared with those of variance estimates obtained from parametric GARCH and stochastic volatility models. Unconditional and dynamic properties concerning the realized daily variance are examined, the relationship between realized variance and returns is investigated, and the stylized facts concerning realized daily …
On Stiffness In Affine Asset Pricing Models, Shirley Junying Huang, Jun Yu
On Stiffness In Affine Asset Pricing Models, Shirley Junying Huang, Jun Yu
Research Collection Lee Kong Chian School Of Business
Economic and econometric analysis of continuous-time affine asset pricing models often necessitates solving systems of ordinary differential equations (ODEs) numerically. Explicit RungeûKutta (ERK) methods have been suggested to solve these ODEs both in the theoretical finance literature and in the financial econometrics literature. In this paper we show that under many empirically relevant circumstances the ODEs involve stiffness, a phenomenon which leads to some practical difficulties for numerical methods with a finite region of absolute stability, including the whole class of ERK methods. The difficulties are highlighted in the present paper in the context of pricing zero-coupon bonds as well …
A Cardan’S Discriminant Approach To Predicting Currency Crashes, Benedict Seng Kee Koh, Wai Mun Fong, Fabrice Chan
A Cardan’S Discriminant Approach To Predicting Currency Crashes, Benedict Seng Kee Koh, Wai Mun Fong, Fabrice Chan
Research Collection Lee Kong Chian School Of Business
This paper models large swings in exchange rates by introducing nonlinearity via the generalized normal (GEN) distribution [Lye, J.N., Martin, V.L., 1993. Robust estimation, nonnormalities and generalized exponential distributions. Journal of the American Statistical Association 88, 261-267]. As the distribution allows for bimodality, a switch between modes may give rise to currency crashes. A statistic known as Cardan's discriminant, based on the shape parameters of the GEN, is used to detect bimodality. The Cardan's discriminant is found to reliably predict currency crashes for eight emerging countries and generate relatively low false signals for stable currencies.
Risky Debt-Maturity Choice Under Information Asymmetry, Chunchi Wu, Sheen Liu
Risky Debt-Maturity Choice Under Information Asymmetry, Chunchi Wu, Sheen Liu
Research Collection Lee Kong Chian School Of Business
The traditional equilibrium models of signaling with debt-maturity require transaction costs by firms when raising new capital. In this paper, we propose a new model that has no such requirement. We demonstrate that a separating equilibrium of debt-maturity choice exists under a much more general condition, once accounting for the interactions between borrowers and lenders. The model is able to explain the observed complex financial structure. It is found that callable debt functions much like short-term debt, and serial debt similar to long-term debt. In equilibrium, high-quality firms issue short-term debt, and low-quality firms issue long-term debt.