Finance and Financial Management Commons^™

Modeling The Conditional Heteroscedasticity And Leverage Effect In The Chinese Stock Markets, Zhihui Yin, Albert Tsui, Zhaoyong Zhang

Research outputs 2011

The Chinese stock market has experienced an astonishing growth and unprecedented development since its inception in the early 1990s, emerged to be the world's second-largest by market value by the end of 2009. The Chinese stock market is also one of the most volatile markets, which has been called by many observers a “casino”. In the recent years there are several far-reaching events that have reshaped the Chinese stock markets. The most notable events include the “dot-com bubble” in 2000, China’s non-tradable shares reform in 2005 and the global financial crisis in 2008. It is noted that the “dot-com bubble” …

A Participatory Teaching Strategy Developing A Timeline Of The Global Financial Crisis, Margaret J. Giles

Research outputs 2011

The rapid pace of change of ideas and events in economics places pressure on teachers of university economics to stay abreast of developments in their field and to reflect these developments appropriately in their classes. The Global Financial Crisis (GFC) was an excellent example of this phenomenon with a great deal of material written on this subject over a relatively short space of time. Under certain circumstances, one way of coping with such developments may be for teachers and students to acquire emerging knowledge and information jointly rather than sequentially. This paper describes a teaching strategy where students constructed a …

Innovative Transition Matrix Techniques For Measuring Extreme Risk: An Australian And U.S. Comparison, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh

Research outputs 2011

Comparing Australia and the U.S. both prior to and during the Global Financial Crisis (GFC), using a dataset which includes more than six hundred companies, this paper modifies traditional transition matrix credit risk modelling to address two important issues. Firstly, extreme credit risk can have a devastating impact on financial institutions, economies and markets as highlighted by the GFC. It is therefore essential that extreme credit risk is accurately measured and understood. Transition matrix methodology, which measur es the probability of a borrower transitioning from one credit rating to another, is traditionally used to m easure Value at Risk (VaR), …

Measuring Real Capital Adequacy In Extreme Economic Conditions: An Examination Of Swiss Banking Sector, David E. Allen, Robert Powell

Research outputs 2011

The global financial crisis (GFC) has placed the creditworthiness of banks under intense scrutiny. In particular, capital adequacy has been called into question. Current capital requirements make no allowance for capital erosion caused by movements in the market value of assets. This paper examines default probabilities of Swiss banks under extreme conditions using structural modeling techniques. Conditional Value at Risk (CVaR) and Conditional Probability of Default (CPD) techniques are used to measure capital erosion. Significant increase in Probability of Default (PD) is found during the GFC period. The market asset value based approach indicates a much higher PD than external …

East Asian Financial Crisis Revisited: What Does A Copula Tell?, Pei Fei, Albert Tsui, Zhaoyong Zhang

Research outputs 2011

We construct a regime-switching model of copulas to capture observed asymmetric dependence in daily changes of exchange rates in five selected East Asian economies during the 1997 financial crisis era. In particular, we investigate the effects of the financial crisis on asymmetric dependence in exchange rates returns and assess the asymmetric relationships between five currencies, including the Singapore Dollar, Japanese Yen, South Korea Won, Thailand Baht and Indonesia Rupiah. Various time-varying copula models will also be applied to examine the possible structural breaks. The results confirm significant changes at the dependence level, tail behaviour and asymmetry structures between returns of …

Assessing The Dynamic Relationship Between Small And Large Cap Stock Prices, K. Ho, B. Ernst, Zhaoyong Zhang

Research outputs 2011

The historical long-run return on small capitalization stocks has unquestionably outperformed large capitalization stocks since 1926. The phenomenon of small capitalization stocks having higher risk- adjusted returns compared with large capitalization stocks is an equity market anomaly first discovered in 1981. Since then, many academics and investors have strongly argued that “size is dead”. This paper argues that far from being dead, the phenomenon of size effect appears alive and well and it could be exploited effectively over long-term investment horizons. To analyze this phenomenon, we focus specifically on the dynamics of small cap and large cap prices. We test …

Credit Risk Measurement Methodologies, David Allen, Robert Powell

Research outputs 2011

The significant problems experienced by banks during the Global Financial Crisis have highlighted the critical importance of measuring and providing for credit risk. This paper will examine four popular methods used in the measurement of credit risk and provide an analysis of the relative shortcomings and advantages of each method. The study includes external ratings approaches, financial statement analysis models, the Merton / KMV structural model, and the transition based models of CreditMetrics and CreditPortfolioView. Each model assesses different cr iteria, and an understanding of the merits and disadvantages of the various models can assist banks and other credit modellers …

Peas In A Pod: Canadian And Australian Banks Before And During A Global Financial Crisis, David Allen, Ray Boffey, Robert Powell

Research outputs 2011

In the aftermath of the Global Financial Crisis (GFC), the Canadian and Australian banking systems have been singled out by some commentators as having performed better than many other banking systems, particularly those in Europe, America and the United Kingdom. Banks in both Canada and Australia, for instance, have continued to report enviable earnings, sound capital levels, and high credit ratings both before and during the GFC. The G-20 and the European Union have tried to identify the features of the Canadian and Australian financial systems which have underpinned this success in order to use them in shaping a revised …

Evaluating Economic Relationships Of Stapled And Traditional Australian Reits, Jaime Yong, David Allen, Lee Lim

Research outputs 2011

The number of Australian Real Estate Investment Trusts (AREITs) trading as stapled securities has grown significantly in the past ten years. Though this type of trust structure improves the income growth to investors, stapled AREITs are riskier relative to traditional AREITs that act primarily as holding companies of property assets. Academic literature on REIT characteristics has found that these assets have become less integrated with bonds and more with stocks. An increasingly mature AREIT market implies that prices of these assets have become more integrated with values of the underlying direct property investments. This study employs quarterly prices over 30 …

Modeling The Conditional Volatility Asymmetry Of Business Cycles In Four Oecd Countries: A Multivariate Garch Approach, K Ho, A Tsui, Zhaoyong Zhang

Research outputs 2011

There are many studies on the business cycle indicators in the past decades, but mostly focusing on the asymmetric and non-linear features of business cycles incorporated into the conditional mean equation rather than the conditional variance formulation. Recently, the hypothesis of volatility asymmetry in business cycle indicators has been re-examined by, for instance, Ho and Tsui (2003 and 2004) using univariate asymmetric power ARCH (APARCH) and EGARCH models. However, the main drawback of univariate GARCH analysis is that it fails to capture the co-movement of macroeconomic variables. These co-movement relationships are important issues emphasised by the business cycle researchers, yet …

Modeling Information Linkages In The Stock And Options Markets, K Ho, L Zheng, Zhaoyong Zhang

Research outputs 2011

When markets are assumed to be complete, option trading should not contain new information for market participants, as options derive their prices from the underlying stocks. However, if markets are incomplete, then this unidirectional relationship may not be true, because informed traders may prefer to trade options instead of the underlying stocks for several reasons: one, option trading involves lower transaction costs and higher financial leverage; and two, investors who have private information about stock price volatility can only make their bet on volatility in the option market. Compared with the research on the relationship between options trading activity and …

Modeling Exchange Rate Exposure In The Japanese Industrial Sectors, P. Jayasinghe, A Tsui, Zhaoyong Zhang

Research outputs 2011

In recent years the volatility of exchange rate exposure and its associated risk have become a hot issue in international financial management. It is often assumed that a firm’s future operating cash flows is proxied by its market value, and the exposure coe fficient would be able to ef ficiently measure the impact of exchange rate changes on a firm’s return and its se nsitivity to the changes. Recen tly, some studies begin to investigate whether exchange rate exposure is asymmetric between currency appreciations and depreciations. By far most existing studies on exchange rate exposure assume that the variances of …

Leadership Development In Financial Institutions In South Dakota: A Slow Growth State, Stan Wayne Vinson

Antioch University Dissertations & Theses

This dissertation asks the question, “What are the challenges of developing a leadership program in community banks in South Dakota, a slow growth environment?” The research looks at the intersection of leadership development, transformational leadership, and context—against a backdrop of community banking, corporate social responsibility, and demographic trends in South Dakota. The objective of the study is to provide theoretical and practical understanding of leadership development activities in South Dakota community banks. Using quantitative methods, seven hypotheses were created and tested using insights gained from reviewed literature and informational interviews that framed the study. The hypotheses were built looking to …

The Myth Of Endless Accumulation: A Feminist Inquiry Into Globalization, Growth, And Social Change, Martha Freymann Miser

Antioch University Dissertations & Theses

This theoretical dissertation examines the concept of growth and its core assumption—that the continual accumulation of wealth is both socially wise and ecologically sustainable. The study challenges and offers alternatives to the myth of endless accumulation, suggesting new directions for leadership and social change. The central question posed in this inquiry: Can we craft a more ethical form of capitalism? To answer this question, the study examines conventional and critical globalization studies; feminist scholarship on standpoint, political economy, and power; and the Enlightenment notions of progress and modernism, drawing on a number of works, including Aristotle on the three intelligences, …

Using Implementation Intentions Prompts To Enhance Influenza Vaccination Rates, Katherine L. Milkman, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We evaluate the results of a field experiment designed to measure the effect of prompts to form implementation intentions on realized behavioral outcomes. The outcome of interest is influenza vaccination receipt at free on-site clinics offered by a large firm to its employees. All employees eligible for study participation received reminder mailings that listed the times and locations of the relevant vaccination clinics. Mailings to employees randomly assigned to the treatment conditions additionally included a prompt to write down either (1) the date the employee planned to be vaccinated or (2) the date and time the employee planned to be …

Markowitz Meets Talmud: A Combination Of Sophisticated And Naive Diversification Strategies, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

The modern portfolio theory pioneered by Markowitz (1952) is widely used in practice and extensively taught to MBAs. However, the estimated Markowitz portfolio rule and most of its extensions not only underperform the naive 1/N rule (that invests equally across N assets) in simulations, but also lose money on a risk-adjusted basis in many real data sets. In this paper, we propose an optimal combination of the naive 1/N rule with one of the four sophisticated strategies—the Markowitz rule, the Jorion (1986) rule, the MacKinlay and Pástor (2000) rule, and the Kan and Zhou (2007) rule—as a way to improve …

Socially Responsible Investing: A Comparative Analysis For The Bluegrass Community Foundation, Andrew Hedrick

MPA/MPP/MPFM Capstone Projects

In the fall of 2010 the Blue Grass Community Foundation began considering whether an updated investment strategy that included Socially Responsible Investing would be advantageous and in line with the mission of the organization. The question was raised whether this type of investing meant that the return on investment from securities currently held in the Foundation’s portfolio had to be sacrificed in order to incorporate this type of investment philosophy into the existing criteria used to invest the organization’s assets.

This paper examines literature relevant to the topic and conducts an analysis of a sample of mutual funds currently available …

U.S. State Employee Pension Systems: An Investigation Into The Causes Of Unfunded Liabilities, Chuck Truesdell

MPA/MPP/MPFM Capstone Projects

Defined benefit retirement plans for state employees have come under fire, both financially and politically, following recent market volatility and subsequent losses in pension investments. Asset losses matched with liabilities that are set years in advance translate to pressures on state policymakers and plan administrators to either find ways to improve the finances of these pension systems or transition to defined contribution plans that put the financial risk on individual employees rather than the state government. Because most states are legally and contractually obligated to pay retiree benefits regardless of the pension system’s financial condition — even to the point …

Would Price Limits Have Made Any Difference To The 'Flash Crash' On May 6, 2010, Wing Bernard Lee, Shih-Fen Cheng, Annie Koh

Research Collection School Of Computing and Information Systems

On May 6, 2010, the U.S. equity markets experienced a brief but highly unusual drop in prices across a number of stocks and indices. The Dow Jones Industrial Average (see Figure 1) fell by approximately 9% in a matter of minutes, and several stocks were traded down sharply before recovering a short time later. The authors contend that the events of May 6, 2010 exhibit patterns consistent with the type of "flash crash" observed in their earlier study (2010). This paper describes the results of nine different simulations created by using a large-scale computer model to reconstruct the critical elements …

The Impact Of Transaction Duration, Volume And Direction On Price Dynamics And Volatility, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitchell Warachka

Research Collection School Of Economics

We explore the role of trade volume, trade direction, and the duration between trades in explaining price dynamics and volatility using an Asymmetric Autoregressive Conditional Duration model applied to intraday transactions data. Our results suggest that volume, direction and duration are important determinants of price dynamics, while duration is also an important determinant of volatility. However, the impact of volume and direction on volatility is marginal after controlling for duration, and the impact of volume on volatility appears to be confined to periods of infrequent trading.