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Articles 31 - 60 of 151
Full-Text Articles in Business
Investor Sentiment And Paradigm Shifts In Equity Premium Forecasting, Liya Chu, Kai Li, Tony Xue-Zhong He, Jun Tu
Investor Sentiment And Paradigm Shifts In Equity Premium Forecasting, Liya Chu, Kai Li, Tony Xue-Zhong He, Jun Tu
Research Collection Lee Kong Chian School Of Business
This study investigates the impact of investor sentiment on excess equity return forecasting. A high (low) investor sentiment may weaken the connection between fundamental economic (behavioral-based non-fundamental) predictors and market returns. We find that although fundamental variables can be strong predictors when sentiment is low, they tend to lose their predictive power when investor sentiment is high. Non-fundamental predictors perform well during high-sentiment periods while their predictive ability deteriorates when investor sentiment is low. These paradigm shifts in equity return forecasting provide a key to understanding and resolving the lack of predictive power for both fundamental and non-fundamental variables debated …
Financial Intermediaries And Contagion In Market Efficiency: The Case Of Etfs, Claire Yurong Hong, Frank Weikai Li, Avanidhar Subrahmanyam
Financial Intermediaries And Contagion In Market Efficiency: The Case Of Etfs, Claire Yurong Hong, Frank Weikai Li, Avanidhar Subrahmanyam
Research Collection Lee Kong Chian School Of Business
Capital constraints of financial intermediaries can affect liquidity provision. We investigate whether these constraints spillover and consequently cause contagion in the degree of market efficiency across assets managed by a common intermediary. Specifically, we provide evidence of strong comovement in pricing gaps between ETFs and their constituents for ETFs served by the same lead market maker (LMM). The effects are stronger for ETFs that are more illiquid and volatile, when the underlying constituents of the ETFs are more costly to arbitrage, and for LMMs with more constrained capital. Using extreme disruptions in debt markets during COVID-19 as an experiment, we …
How Do Firms Respond To Reduced Private Equity Buyout Activity?, Yi-Hsin Lo
How Do Firms Respond To Reduced Private Equity Buyout Activity?, Yi-Hsin Lo
Research Collection Lee Kong Chian School Of Business
This paper presents new evidence on the economic role of private equity buyouts by exploiting the staggered adoption of the constructive fraud provision by U.S. state courts. The law unintentionally shifts the credit default risk borne by existing unsecured creditors of the buyout target to the selling shareholders and lenders in the form of ex-post litigation risk, thereby discouraging buyout activity. Using a difference-in-differences framework, I find that firms raise less capital, reduce payouts and investments, and form alliances with employees. Firms also avoid positive NPV projects that carry too much risk. These findings are consistent with managers enjoying a …
Short Selling Etfs, Frank Weikai Li, Qifei Zhu
Short Selling Etfs, Frank Weikai Li, Qifei Zhu
Research Collection Lee Kong Chian School Of Business
We provide novel evidence that arbitrageurs use exchange-traded funds (ETFs) as an avenue to circumvent short-sale constraints at the stock level. Using a large sample of U.S. equity ETF holdings, we document that shorting activity on ETFs rises with the difficulty of shorting underlying stocks. Stocks heavily shorted via their holding ETFs underperform those that are lightly shorted. The return predictability of ETF shorting is distinct from stock-level shorting measures and is concentrated among stocks that face severe arbitrage constraints. These findings suggest that ETFs allow arbitrageurs to target overpriced stocks that are otherwise difficult to short.
Transitioning To A Circular Economy: A Systematic Review Of Its Drivers And Barriers, Jovan Tan, Fabien Jianwei Tan, Seeram Ramakrishna
Transitioning To A Circular Economy: A Systematic Review Of Its Drivers And Barriers, Jovan Tan, Fabien Jianwei Tan, Seeram Ramakrishna
Research Collection Lee Kong Chian School Of Business
Advancing societal's progress to achieve circularity is imperative as our linear (take, make, waste) economic model is highly unsustainable. It depletes our natural resources and substantially contributes to pollution and global greenhouse gas emissions. Our continued participation in the linear economy will also expose businesses to volatile resource prices and supply disruptions resulting from the scarcity of critical materials and geopolitical factors. Hence, there are compelling reasons for businesses to transit and participate in the circular economy. However, anecdotal evidence suggests limited practical implementations. Therefore, this systematic review aims to determine the most significant drivers and barriers that influence business …
Investing In Low-Trust Countries: On The Role Of Social Trust In The Global Mutual Fund Industry, Massimo Massa, Chengwei Wang, Hong Zhang, Jian Zhang
Investing In Low-Trust Countries: On The Role Of Social Trust In The Global Mutual Fund Industry, Massimo Massa, Chengwei Wang, Hong Zhang, Jian Zhang
Research Collection Lee Kong Chian School Of Business
We hypothesize that social trust, in mitigating contracting incompleteness, may have an important effect on the activeness and effectiveness of delegated portfolio management. Using a complete sample of worldwide open-end mutual funds, we find that trust is positively associated with the activeness of funds and that trust-related active share delivers superior performance (e.g., approximately 2% per year for cross-border investments). Moreover, "trust in the market" and "trust in managers" play important yet different roles for different types of cross-border delegated portfolio management. Our results suggest that trust acts as a fundamental building block for delegated portfolio management.
Climate Change And Sustainability In Asean Countries, David K. Ding, Sarah E. Beh
Climate Change And Sustainability In Asean Countries, David K. Ding, Sarah E. Beh
Research Collection Lee Kong Chian School Of Business
The ASEAN region is one of the most susceptible regions to climate change, with three of its countries—Myanmar, the Philippines, and Thailand—among those that have suffered the greatest fatalities and economic losses because of climate-related disasters. This paper reveals that the ASEAN’s environmental performance is sorely lagging other regions despite evidence of its cohesive and comprehensive efforts to mitigate emissions and build up adaptive capacity to climate-related disasters. Within the ASEAN, there exist gaps in environmental performance between each country. This suggests that increased cooperation between individual ASEAN countries is pertinent for the region to collectively combat climate change. In …
Harnessing Digitalization For Sustainable Economic Development: Insights For Asia, John Beirne, David Fernandez
Harnessing Digitalization For Sustainable Economic Development: Insights For Asia, John Beirne, David Fernandez
Research Collection Lee Kong Chian School Of Business
Digitalization has helped to transform economies by enhancing competitiveness and productivity across a wide range of sectors. The use of big data and the rise of online platforms have accelerated this process over the past decade. In addition, the adoption of digital solutions in the face of social distancing and lockdown measures introduced due to the coronavirus disease 2019 (COVID-19) pandemic has been integral to the economic recovery process. The shift to a digitalized economy has also reduced barriers to market entry for firms, lowered inequality, and led to a promotion of social and economic inclusion. Advances in digital technology …
Stock Return Prediction Using Financial News: A Unified Sequence Model Based On Hierarchical Attention And Long-Short Term Memory Networks, Haoling Chen, Peng Liu
Stock Return Prediction Using Financial News: A Unified Sequence Model Based On Hierarchical Attention And Long-Short Term Memory Networks, Haoling Chen, Peng Liu
Research Collection Lee Kong Chian School Of Business
Stock return prediction has been a hot topic in both research and industry given its potential for large financial gain. The return signal, apart from its inherent volatility and complexity, is often accompanied by a multitude of noises, such as other stocks’ performance, macroeconomic factors and financial news, etc. To better characterize these factors, we propose a new model that consists of two levels of sequence: an NLP-based module to capture the sequential nature of words and sentences in the financial news, and a time-series-based module to exploit the sequential nature of adjacent observations in the stock price. In this …
Socially Responsible Corporate Customers, Rui Dai, Hao Liang, Lilian Ng
Socially Responsible Corporate Customers, Rui Dai, Hao Liang, Lilian Ng
Research Collection Lee Kong Chian School Of Business
Corporate customers are an important stakeholder in global supply chains. We employ several unique international databases to test whether socially responsible corporate customers can infuse similar socially responsible business behavior in suppliers. Our findings suggest a unilateral effect on corporate social responsibility (CSR) only from customers to suppliers, an evidence further supported by exogenous variation in customers’ close-call CSR proposals and by product scandals. Customers exert influence on suppliers’ CSR through positive assortative matching and their decision-making process. Enhanced collaborative CSR efforts help improve operational efficiency and firm valuation of both customers and suppliers but increase only the customers’ future …
Volatility Timing Under Low-Volatility Strategy, Poh Ling Neo, Chyng Wen Tee
Volatility Timing Under Low-Volatility Strategy, Poh Ling Neo, Chyng Wen Tee
Research Collection Lee Kong Chian School Of Business
The authors show that the slope of the volatility decile portfolio’s return profile contains valuable information that can be used to time volatility under different market conditions in the United States. During good (bad) market conditions, the high- (low-) volatility portfolio produces the highest return. The authors proceed to devise a volatility timing strategy based on statistical tests on the slope of the volatility decile portfolio’s return profile. Volatility timing is achieved by being aggressive during strong growth periods and conservative during market downturns. Superior performance is obtained, with an additional return of 4.1% observed in the volatility timing strategy, …
Algorithmic Transparency, Jian Sun
Algorithmic Transparency, Jian Sun
Research Collection Lee Kong Chian School Of Business
I study the optimal algorithmic disclosure in a lending market where lenders use a predictive algorithm to mitigate adverse selection. The predictive algorithm is unobservable to borrowers and uses a manipulable borrower feature as input. A regulator maximizes market efficiency by disclosing information about the statistical properties of variables embedded in the predictive algorithm to borrowers. Under the optimal disclosure policy, the posterior belief consists of two disjoint regions in which the borrower feature is more relevant and less relevant in predicting borrower quality, respectively. The optimal disclosure policy differentiates posterior lending market equilibria by the equilibrium data manipulation levels. …
Air Pollution, Behavioral Bias, And The Disposition Effect In China, Jennifer (Jie) Li, Massimo Massa, Hong Zhang, Jian Zhang
Air Pollution, Behavioral Bias, And The Disposition Effect In China, Jennifer (Jie) Li, Massimo Massa, Hong Zhang, Jian Zhang
Research Collection Lee Kong Chian School Of Business
Inspired by the recent health science findings that air pollution affects mental health and cognition, we examine whether air pollution can intensify the cognitive bias observed in the financial markets. Based on a proprietary data set obtained from a large Chinese mutual fund family consisting of complete trading information for more than 773,198 ac-counts in 247 cities, we find that air pollution significantly increases investors' disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissi-pation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a …
Towards Better Data Augmentation Using Wasserstein Distance In Variational Auto-Encoder, Zichuan Chen, Peng Liu
Towards Better Data Augmentation Using Wasserstein Distance In Variational Auto-Encoder, Zichuan Chen, Peng Liu
Research Collection Lee Kong Chian School Of Business
VAE, or variational auto-encoder, compresses data into latent attributes, and generates new data of different varieties. VAE based on KL divergence has been considered as an effective technique for data augmentation. In this paper, we propose the use of Wasserstein distance as a measure of distributional similarity for the latent attributes, and show its superior theoretical lower bound (ELBO) compared with that of KL divergence under mild conditions. Using multiple experiments, we demonstrate that the new loss function exhibits better convergence property and generates artificial images that could better aid the image classification tasks.
Media Connection And Return Comovement, Zilin Chen, Li Guo, Jun Tu, Jun Tu
Media Connection And Return Comovement, Zilin Chen, Li Guo, Jun Tu, Jun Tu
Research Collection Lee Kong Chian School Of Business
Media news may cover multiple firms in one article, which establishes a media connection across firms. We propose a media connection strength (MCS) measure between two given firms, which is defined as the number of news articles co-mentioning these two firms. We show that the MCS measure can significantly explain and forecast return comovement of media-connected firm-pairs. Further analyses show that our results are robust to various alternative explanations. We argue that the MCS measure can capture comprehensive and complex correlated fundamental information among media-connected firms and hence may provide a new mechanism for return comovement beyond the existing rational- …
Monetary Policy Surprises, Stock Returns, And Financial And Liquidity Constraints, In An Exchange Rate Monetary Policy System, John M. Sequeira
Monetary Policy Surprises, Stock Returns, And Financial And Liquidity Constraints, In An Exchange Rate Monetary Policy System, John M. Sequeira
Research Collection Lee Kong Chian School Of Business
This study examines the impact of monetary policy surprises on the stock price behaviour of a small developed economy, whose monetary policy is based on the exchange rate. We find that monetary policy surprises associated with all contractionary policy levers and a neutral policy lever, have a consistently significant and negative impact on stock returns. In comparison, only monetary policy surprises associated with a downward re-centering policy lever, has a significantly positive effect on stock returns. Using a recalibrated classification system, we also find that monetary policy surprises differ across sectors of the economy. Our results show how monetary policy …
Something In The Air: Does Air Pollution Affect Fund Managers’ Carbon Divestment?, Thanh Huynh, Frank Weikai Li, Ying Xia Xia
Something In The Air: Does Air Pollution Affect Fund Managers’ Carbon Divestment?, Thanh Huynh, Frank Weikai Li, Ying Xia Xia
Research Collection Lee Kong Chian School Of Business
We examine whether fund managers overestimate carbon risk when they are exposed to local air pollution. We find that air pollution causes managers to underweight stocks of high-emission firms. The effects are stronger for less salient scopes of carbon emissions, among managers located in pro-environmental states, and among those likely to be surprised by air pollution—consistent with the idea that managers revise their beliefs about climate-transition risk following their exposure to air pollution. Carbon-intensive stocks sold by managers who are exposed to air pollution subsequently outperform stocks that they buy, suggesting that such underweighting is costly to fund investors.
A Unified Market Model For Swaptions And Constant Maturity Swaps, Chyng Wen Tee, Jeroen Kerkhof
A Unified Market Model For Swaptions And Constant Maturity Swaps, Chyng Wen Tee, Jeroen Kerkhof
Research Collection Lee Kong Chian School Of Business
Internal-rate-of-return (IRR) settled swaptions are the main interest rate volatility instruments in the European interest rate markets. Industry practice is to use an approximation formula to price IRR swaptions based on Black model, which is not arbitrage-free. We formulate a unified market model to incorporate both swaptions and constant maturity swaps (CMS) pricing under a single, self-consistent framework. We demonstrate that the model is able to calibrate to market quotes well, and is also able to efficiently price both IRR-settled and swap-settled swaptions, along with CMS products. We use the model to illustrate the difference in implied volatilities for IRR-settled …
Information Avoidance And Medical Screening: A Field Experiment In China, Yufeng Li, Juanjuan Meng, Changcheng Song, Kai Zheng
Information Avoidance And Medical Screening: A Field Experiment In China, Yufeng Li, Juanjuan Meng, Changcheng Song, Kai Zheng
Research Collection Lee Kong Chian School Of Business
Will individuals, especially high-risk individuals, avoid a disease test because of information avoidance? We conduct a field experiment to investigate this issue. We vary the price of a diabetes test (price experiment) and offer both a diabetes test and a cancer test (disease experiment) after eliciting participants’ subjective beliefs about their disease risk. We find evidence that, first, some people avoid the test even when there is neither a monetary nor a transaction cost, and second, both low- and high-risk individuals select out of the test as the price increases. We explain our findings using three classes of models of …
Japanese Monetary Policy And Its Impact On Stock Market Implied Volatility During Pleasant And Unpleasant Weather, Marinela Adriana Finta
Japanese Monetary Policy And Its Impact On Stock Market Implied Volatility During Pleasant And Unpleasant Weather, Marinela Adriana Finta
Research Collection Lee Kong Chian School Of Business
We investigate the effect of Japan's Monetary Policy Meeting releases on the intraday dynamics of the Nikkei Stock Average Volatility Index and its futures during pleasant and unpleasant weather. We show that at the time of a monetary policy release when the temperature is pleasant, there is a significant decline in Japanese equities' implied volatility and futures, which lasts for about 10 min and 5 min, respectively. This decline is longer and exhibits a greater variation when releases occur during cold days. Finally, we emphasize the achievable economic profits and losses, given the reaction of Nikkei VI futures to the …
Earnings Momentum Meets Short-Term Return Reversal, Zhaobo Zhu, Licheng Sun, Jun Tu, Jun Tu
Earnings Momentum Meets Short-Term Return Reversal, Zhaobo Zhu, Licheng Sun, Jun Tu, Jun Tu
Research Collection Lee Kong Chian School Of Business
This paper evaluates the effectiveness of a joint strategy that exploits fundamental-based momentum and return-based reversal anomalies. This joint strategy is motivated by two considerations. First, reversal can serve as a natural hedge to momentum. Second, both fundamental and price-related information can contribute to stock return predictability. Consequently, we propose a new joint strategy that synthesises both earnings momentum and short-term reversal. We find that this joint strategy generates considerable economic gains and outperforms the sum of profits from two individual anomalies. Moreover, the proposed strategy appears to be quite robust, generating stable and persistent profits across different market conditions.
Japanese Monetary Policy And Its Impact On Stock Market Implied Volatility During Pleasant And Unpleasant Weather, Marinela Adriana Finta
Japanese Monetary Policy And Its Impact On Stock Market Implied Volatility During Pleasant And Unpleasant Weather, Marinela Adriana Finta
Research Collection Lee Kong Chian School Of Business
We investigate the effect of Japan’s Monetary Policy Meeting releases on the intraday dynamics of the Nikkei Stock Average Volatility Index and its futures during pleasant and unpleasant weather. We show that at the time of a monetary policy release when the temperature is pleasant, there is a significant decline in Japanese equities’ implied volatility and futures, which lasts for about 10 minutes and 5 minutes, respectively. This decline is longer and exhibits a greater variation when releases occur during cold days. Finally, we emphasize the achievable economic profits and losses, given the reaction of Nikkei VI futures to the …
Trust And Retirement Preparedness: Evidence From Singapore, Benedict S. K. Koh, Olivia S. Mitchell, Joelle H. Fong
Trust And Retirement Preparedness: Evidence From Singapore, Benedict S. K. Koh, Olivia S. Mitchell, Joelle H. Fong
Research Collection Lee Kong Chian School Of Business
Trust is an essential component of any financial system, and distrust can undermine savings and economic growth. Our study draws on the Singapore Life Panel to assess how trust ties to older respondents’ (1) pension plan participation and withdrawals; (2) life, health, and long-term care insurance holdings; and (3) stock market engagement. We show that the widely-used ‘trust in people’ question is uncorrelated with household behaviours related to retirement preparedness. Instead, trust in private and public financial representatives is positively associated with pension savings, investments, and insurance holdings. Financial literacy also plays an important and consistent role in retirement decision-making.
The Economics Of Hedge Fund Startups: Theory And Empirical Evidence, Charles Cao, Grant Farnsworth, Hong Zhang
The Economics Of Hedge Fund Startups: Theory And Empirical Evidence, Charles Cao, Grant Farnsworth, Hong Zhang
Research Collection Lee Kong Chian School Of Business
This paper examines how market frictions influence the managerial incentives and organizational structure of new hedge funds. We develop a stylized model in which new managers search for accredited investors and have stronger incentives to acquire managerial skill when encountering low investor demand. Fund families endogenously arise to mitigate frictions and weaken the performance incentives of affiliated new funds. Empirically, based on a TASS-HFR-BarclayHedge merged database, we find that ex ante identified cold inceptions facing low investor demand outperform existing hedge funds and hot inceptions facing high demand and that cold stand-alone inceptions outperform all types of family-affiliated inceptions.
Trading Regularity And Fund Performance: Evidence In Uncertain Markets, Lin Tong, Zhe Zhang
Trading Regularity And Fund Performance: Evidence In Uncertain Markets, Lin Tong, Zhe Zhang
Research Collection Lee Kong Chian School Of Business
High trading regularity funds outperform low trading regularity funds more during periods of low market returns and greater market and economic uncertainty. Their trading also has strong return predictability on stock returns during periods of greater uncertainty. They trade more around news events, and their news related trading predicts stock return stronger during periods of greater uncertainty. They also profit from liquidity provision in highly uncertain market environment. Overall our evidence suggests that high trading regularity funds trade more frequently during periods of high uncertainty when information production and processing skill is more valuable and when the demand for liquidity …
Macroeconomic Stabilization In The Digital Age, John Beirne, David Fernandez
Macroeconomic Stabilization In The Digital Age, John Beirne, David Fernandez
Research Collection Lee Kong Chian School Of Business
Macroeconomic Stabilization in the Digital Age provides insights into factors affecting the macroeconomic management of the economy in the digital age. Policy makers need to be aware of the increasing prominence of the digital economy and digital finance and seek to better understand how continued digitalization will affect policies aimed at managing the economy. For emerging market economies (EMEs), macroeconomic policy challenges have been exacerbated by the digital finance revolution in the aftermath of the global financial crisis and the coronavirus disease (COVID-19) pandemic, when many EMEs experienced large and volatile capital flows. Policy makers must also navigate through fluctuating …
Can Retail Investors Learn From Insiders?, Ekkehart Boehmer, Bo Sang, Zhe Zhang
Can Retail Investors Learn From Insiders?, Ekkehart Boehmer, Bo Sang, Zhe Zhang
Research Collection Lee Kong Chian School Of Business
This paper examines the trading patterns of retail investors following insider trading and the corresponding price impact. Retail investors follow the opportunistic purchases by insiders, but not their routine purchases. Neither investor attention nor common information such as earnings announcements or analysts forecast re- visions explains the results. They keep following insider purchases in subsequent four quarters. Moreover, for stocks with opportunistic insider purchases, those that retail investors bought yield higher cumulative abnormal returns than those that retail investors sold. The effect is mostly driven by the information compo- nent of the retail trades, rather than liquidity provision or temporary …
Financial Knowledge And Portfolio Complexity In Singapore, Benedict S. K. Koh, Olivia S. Mitchell, Susann Rohwedder
Financial Knowledge And Portfolio Complexity In Singapore, Benedict S. K. Koh, Olivia S. Mitchell, Susann Rohwedder
Research Collection Lee Kong Chian School Of Business
Financial literacy in Singapore has not been analyzed in much detail, despite the fact that this is one of the world’s most rapidly aging nations. Using the Singapore Life Panel®, we explore older Singaporeans’ levels of financial knowledge and compare them to those observed in the United States. We assess portfolio complexity for these older households, to examine how financial literacy is related to outcomes of interest. We show that older Singaporeans’ levels of financial literacy are comparable overall to those in the United States, even though older Singaporeans score slightly lower on some dimensions (knowledge of interest and inflation), …
Do Short Sellers Use Textual Information? Evidence From Annual Reports, Hung Wan Kot, Frank Weikai Li, Ming Liu, K.C. John Wei
Do Short Sellers Use Textual Information? Evidence From Annual Reports, Hung Wan Kot, Frank Weikai Li, Ming Liu, K.C. John Wei
Research Collection Lee Kong Chian School Of Business
We examine short-sellers’ use of textual information in annual reports for shorting activities. We find that more uncertainty and negative words in annual reports are associated with greater abnormal shorting volume. Short selling motivated by textual information negatively predicts stock price reaction around the filing date of 10-K reports. We further provide some evidence that textual information used by short-sellers are related to revisions of analysts’ earnings forecasts, changes in firm fundamentals, and increasing crash risk subsequently. Our results suggest that textual information in annual reports forms an important part of short-sellers’ information advantage.
Do Women Receive Worse Financial Advice?, Utpal Bhattacharya, Amit Kumar, Sujata Visaria, Jing Zhao
Do Women Receive Worse Financial Advice?, Utpal Bhattacharya, Amit Kumar, Sujata Visaria, Jing Zhao
Research Collection Lee Kong Chian School Of Business
We arranged for trained undercover men and women to pose as potential clients and visit all 65 local financial advisory firms in Hong Kong. At financial planning firms, but not at securities firms, women were more likely than men to receive advice to buy only individual or only local securities. Women clients who signaled that they were highly confident, highly risk tolerant or had a domestic outlook, were especially likely to receive this suboptimal advice. Our theoretical model explains these patterns as the result of statistical discrimination interacting with advisors’ incentives. Taste-based discrimination is unlikely to explain the results.