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- cointegration. (1)
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Articles 1 - 30 of 61
Full-Text Articles in Business
Special Purpose Acquisition Companies
Special Purpose Acquisition Companies
Fordham Business Student Research Journal
Special purpose acquisition companies (SPACs) are blank-check companies that raise funds from investors through a public offering of shares and warrants (known as a Unit IPO) for the purpose of buying a private firm. SPACs have no assets or business plan and their only intent is to acquire an operational business. Because of limited data (SPACs have only gained popularity in the past decade), there has been very little research into the nature of firms that are targeted for SPAC acquisitions, with most research focusing on short-term performance statistics. A SPAC transaction effectively takes an existing private business and makes …
Do Shareholders Penalize Bank Boards And Management For The Financial Crisis?
Do Shareholders Penalize Bank Boards And Management For The Financial Crisis?
Fordham Business Student Research Journal
The 2007-2008 financial crisis was a pervasive shock that profoundly impacted the financial services industry. Often described as the worst economic crisis since the Great Depression, this event provides a unique opportunity to examine the consequences experienced by members of boards of directors and top management at bank holding companies for what shareholders may perceive as failures in oversight and excessive risk-taking. This study examines whether shareholders penalized top management at banks and provides some new evidence of the crisis’s impact on management careers. Using the 36 largest American bank holding corporations by assets as a sample, we examine director …
Underwriting Syndicates In Bric Countries: Determinants Of Syndicate Size And Member Selection
Underwriting Syndicates In Bric Countries: Determinants Of Syndicate Size And Member Selection
Fordham Business Student Research Journal
The process of startup firms raising capital through equity markets by issuing shares to the public is a strong sign of financial growth and innovation. Going public requires the issuing firm to share information with potential investors and requires financial institutions to underwrite the effort, typically through a syndicate. The underwriting syndicate is a coalition of competing banks that serve as intermediaries between the firm and the investors. In emerging nations, this process is compounded by the differences in the maturity of the financial markets and the economic environment. The growth and significance of capital markets in the BRIC (Brazil, …
Bric Ipos: How Do Capital Market And Economic Activities In Emerging Markets Relate?
Bric Ipos: How Do Capital Market And Economic Activities In Emerging Markets Relate?
Fordham Business Student Research Journal
Since the beginning of the millennium, the acronym BRIC has captivated the world and become synonymous with an extraordinary economic growth story that has defined the first decade of the 21st century. Along with newfound prosperity, entrepreneurs in the BRIC countries (Brazil, Russia, India and China) have been opening themselves up to further growth opportunities for investors all over the world through equity financing by issuing IPOs. This paper primarily attempts to explore the relationship between the capital market activities of the BRIC countries and their corresponding economic indicators. In the past decade, IPO activity has witnessed a rapid increase …
Fund-Management Gender Composition: The Impact On Risk And Performance Of Mutual Funds And Hedge Funds, Angela Luongo
Fund-Management Gender Composition: The Impact On Risk And Performance Of Mutual Funds And Hedge Funds, Angela Luongo
Fordham Business Student Research Journal
This paper examines gender differences in fund managers’ risk tolerance and performance. We explore these differences in both the universe of U.S. mutual funds and hedge funds using risk and performance metrics that cover one-year, three-year, and five-year horizons. We find that funds managed by women outperform those managed by men with less risky portfolios. The outperformance persists after adjusting for risk. Overall, the results indicate that female fund managers are severely underrepresented despite their quality performance. A workgroup comprised more equally of male and female managers is likely to lead to greater stability in the financial markets due to …
Corporate Governance Ratings In Emerging Markets: Implications For Market Valuation, Internal Firm-Performance, Dividend Payouts And Policy, Edward Baker, Ben Godridge, Aron Gottesman, Matthew Morey
Corporate Governance Ratings In Emerging Markets: Implications For Market Valuation, Internal Firm-Performance, Dividend Payouts And Policy, Edward Baker, Ben Godridge, Aron Gottesman, Matthew Morey
CRIF Seminar series
This paper utilizes a new data set from AllianceBernstein that, unlike other corporate governance data, has country-level and monthly-updated firm-level governance ratings for 22 emerging markets countries for almost a five year period. With these data we examine the relationship of firm-level and country-level corporate governance on firm valuation, dividend payout, internal firm performance and other issues. We find a number of interesting results that have implications for corporations, investors and policymakers. First, we find there is a positive and significant relation between firm-level and country-level corporate governance ratings and market valuation. Second, we find this relation between governance and …
Searching For Balassa Samuelson In Post-War Data, Lein Lein Chen, Seungmook Choi, John Devereux
Searching For Balassa Samuelson In Post-War Data, Lein Lein Chen, Seungmook Choi, John Devereux
CRIF Working Paper series
The Balassa Samuelson effect is a central result in trade theory. It is also fundamental to our understanding of what occurs during economic growth. As it turns out, the positive relationship between real income and the price level predicted by Balassa Samuelson occurs only after 1970. Why does Balassa Samuelson hold for recent years but not earlier? We provide an empirical explanation for this puzzle. Our point of departure is the observation that measurement error in comparative GDP data biases standard tests against finding a Balassa Samuelson effect. Allowing for measurement error, we find that Balassa Samuelson is present in …
A Comparison Between Tests For Changes In The Adjustment Coefficients In Cointegrated Systems, Marco R. Barassi, Guglielmo Maria Caporale, Stephen G. Hall
A Comparison Between Tests For Changes In The Adjustment Coefficients In Cointegrated Systems, Marco R. Barassi, Guglielmo Maria Caporale, Stephen G. Hall
CRIF Seminar series
In this paper we examine several approaches to detecting changes in the adjustment coefficients in cointegrated VARs. We adopt recursive and rolling techniques as mis-specification tests for the detection of non-constancy and the estimation of the breakpoints. We find that inspection of the recursive eigenvalues is not useful to detect a break in the adjustment coefficients, whilst recursive estimation of the coefficients can only indicate non-constancy, but not the exact breakpoint. Rolling estimation is found to perform better in detecting non-constancy in the parameters and their true value after the breakpoint. However, it only detects a region where the break …
Irving Fisher, Expectational Errors And The Uip Puzzle, Rachel Campbell, Kees Koedijk, James R. Lothian, Ronald Mahieu
Irving Fisher, Expectational Errors And The Uip Puzzle, Rachel Campbell, Kees Koedijk, James R. Lothian, Ronald Mahieu
CRIF Seminar series
In this paper, we first review Irving Fisher’s seminal work on UIP and on the closely related equation linking interest rates and inflation. Like Fisher, we find that the failures of UIP are tied in with individual episodes in which errors surrounding exchange-rate expectations have been persistent but in the end transitory. We find considerable commonality in deviations from UIP and PPP suggesting that both of these deviations are driven by a common factor. Using a dynamic latent factor model we find further that deviations from UIP are almost completely due to forecasting errors in exchange rates – a result …
Adjusting To The Euro, Gabriel Fagan, Vitor Gaspar
Adjusting To The Euro, Gabriel Fagan, Vitor Gaspar
CRIF Seminar series
In this paper we argue that, for a group of converging economies of the European Union, participation in the euro area has been associated with easier access to financing by domestic economic agents. Easier access to financing was a significant impulse leading to a sharp increase in households' expenditures and a corresponding fall in the savings ratio. Increased expenditure was associated with current account deficits, a sharp fall in the net foreign asset position and an increase in the households' indebtedness. At the same time there was a sizeable increase in the real exchange rate. In this paper, we show …
Have Absolute Price Levels Converged For Developed Economies? The Evidence Since 1870, Lein-Lein Chen, Seungmook Choi, John Devereux
Have Absolute Price Levels Converged For Developed Economies? The Evidence Since 1870, Lein-Lein Chen, Seungmook Choi, John Devereux
CRIF Working Paper series
We compare price level and income convergence since 1870 for eleven developed economies using implicit price deflators derived from the GDP data of Maddison (1995, 2001 and 2003). We find that “sigma” and “beta” convergence for prices occurs later and to a lesser extent than income. Price levels converge after 1950 while income convergence begins in the 1880’s. We find no evidence for stochastic convergence or for “club” price convergence. JEL codes F3, F4.
Interest Rate Linkages And Capital Market Integration: Evidence From The Americas, Bharat Bhalla, Anand Shetty
Interest Rate Linkages And Capital Market Integration: Evidence From The Americas, Bharat Bhalla, Anand Shetty
CRIF Seminar series
In this paper, we study the long-run co-movement among the real interest rates of the U.S., Canada, and a select group of Latin American countries to assess the extent of financial market integration between these countries during a period of high capital mobility. The findings of the study support a long-run relationship between the short-term U.S. real interest rate and those of the Latin American countries, while it fails to support such a relationship between the U.S. and Canadian real interest rates.
Fiscal And Current Account Balances In A Model With Sticky Prices And Distortionary Taxes, G.C. Lim, Paul D. Mcnelis
Fiscal And Current Account Balances In A Model With Sticky Prices And Distortionary Taxes, G.C. Lim, Paul D. Mcnelis
CRIF Working Paper series
This paper examines the interaction of fiscal and current account balances in open economies subject to monopolistic competition with sticky price-setting behavior, adjustment costs for investment, and distortionary labor income taxes. We find that the elasticity of exports with respect to the real exchange rate influences the correlation between the balances. In particular, in simulations with recurring shocks to productivity, we find that the balances are positively correlated for a range of export elasticities. However, for simulations with recurring real government expenditure shocks, we find that the balances are positively correlated under high export elasticity but negatively correlated under low …
Information Risk In The International Currency Markets: Evidence From The Violation Of Uirp, Bill B. Francis, Kimberly Gleason, Delroy M. Hunter, Charles A. Malgwi
Information Risk In The International Currency Markets: Evidence From The Violation Of Uirp, Bill B. Francis, Kimberly Gleason, Delroy M. Hunter, Charles A. Malgwi
CRIF Seminar series
Drawing on the theoretical and empirical evidence that private information risk is priced in the expected returns of equities, we hypothesize that information risk premium is an important component of the risk premium that leads to the violation of uncovered interest rate parity (UIRP). Using an asset pricing model in which the risk factors are a world currency factor, a world equity factor, and a world private information factor, we find that UIRP is violated for 28 single currencies plus the euro and that violation is due to the existence of a significant time-varying risk premium. The component of the …
Why Do Banks Promise To Pay Par On Demand?, Gerald P. Dwyer, Jr., Margarita Samartín
Why Do Banks Promise To Pay Par On Demand?, Gerald P. Dwyer, Jr., Margarita Samartín
CRIF Seminar series
We survey the theories on why banks promise to pay par on demand and examine evidence on the conditions under which banks have promised to pay the par value of deposits and banknotes on demand when holding only fractional reserves. The theoretical literature can be broadly divided into four strands: liquidity provision; asymmetric information; regulatory restrictions and a medium of exchange. One strand of the literature argues that banks offer to pay par on demand in order to provide liquidity insurance services to consumers who are uncertain about their future time preferences and who have investment opportunities inconsistent with some …
Can The Policy Trilemma Be Exposited In The Mundell-Fleming Framework?, Russell S. Boyer
Can The Policy Trilemma Be Exposited In The Mundell-Fleming Framework?, Russell S. Boyer
CRIF Seminar series
There is a general recognition that there are deficiencies in the Mundell-Fleming model. Nonetheless, Rose [2000] has stated that Mundell was the first to exposit the Policy Trilemma, which identifies an intrinsic incompatibility among: high capital mobility, fixed exchange rates, and monetary autonomy. We look for the source of Rose’s claim. All of Mundell’s formal modeling after 1964 assumes that capital mobility is zero, so we look to earlier work for verification. The paper in Kyklos states clearly that in comparing equilibrium positions, the impotence of monetary policy is independent of the degree of capital mobility. Two further claims deriving …
Renminbi Revaluation, Euro Appreciation And Chinese Markets: What Can We Learn From Data?, Paul D. Mcnelis, Salih N. Neftçi
Renminbi Revaluation, Euro Appreciation And Chinese Markets: What Can We Learn From Data?, Paul D. Mcnelis, Salih N. Neftçi
CRIF Working Paper series
This paper examines financial market data to assess the likelihood of renminbi revaluation and its implications for Chinese share price increases, given the continuing appreciation of the Euro against the U.S. dollar. We find that the 3-month non-deliverable forward premia are key series linking these variables. The forward premia predict series A share-price changes, while Euro/US dollar exchange rates in turn predict foreward-premia. Bayesian models outperform standard linear models for forecasting performance.
Purchasing Power Parity And Heterogeneous Mean Reversion, Kees G. Koedijk, Ben Tims, Mathijs A. Van Dijk
Purchasing Power Parity And Heterogeneous Mean Reversion, Kees G. Koedijk, Ben Tims, Mathijs A. Van Dijk
CRIF Seminar series
This paper analyzes the properties of multivariate tests of purchasing power parity (PPP) that fail to take heterogeneity in the speed of mean reversion across real exchange rates into account. We compare the performance of homogeneous and heterogeneous unit root testing methodologies. The recent literature has successfully contested several severe restrictions on the structure of the model, but the assumption of homogeneous mean reversion is still widely used and its consequences are virtually unexplored. Using Monte Carlo simulation, we uncover important adverse properties of the methodology that relies on homogeneous estimation and testing. More specifically, power functions are low and …
Accounting For Us Regional Real Exchange Rates, Lein Lein Chen, Seungmook Choi, John Devereux
Accounting For Us Regional Real Exchange Rates, Lein Lein Chen, Seungmook Choi, John Devereux
CRIF Seminar series
We examine the relationship between the relative price of nontradables and real exchange rate movements for fixed exchange rate regimes. We have two findings. First we show that purchasing power parity holds strongly for tradables across US regions. As a result, nontradables play a central role in regional real exchange rate movements. Using BLS regional data, we find that changes in the relative price of nontradables explain up to eighty percent of regional real exchange changes over medium and long run horizons. Second, we show that nontradables can account for a large portion of real exchange rates changes internationally with …
Real Exchange Rate And Current Account Dynamics With Sticky Prices And Distortionary Taxes, Guay C. Lim, Paul D. Mcnelis
Real Exchange Rate And Current Account Dynamics With Sticky Prices And Distortionary Taxes, Guay C. Lim, Paul D. Mcnelis
CRIF Seminar series
This paper examines the interaction of real exchange rates and currenct account movmements in open economices subject to monopolistic competition with sticky price-setting behavior and distoriontary taxes. We find that the correlations between fiscal balances and the current account depend on the elasticity of net exports with respect to the real exchange rate. Under highly elastic export demand, the welfare e¤ects may be greater or lower than under export demand with a low elasticity.
The Use Of Loan Loss Provisions For Earnings, Capital Management And Signalling By Australian Banks, Asokan Anandarajan, Iftekhar Hasan, Cornelia Mccarthy
The Use Of Loan Loss Provisions For Earnings, Capital Management And Signalling By Australian Banks, Asokan Anandarajan, Iftekhar Hasan, Cornelia Mccarthy
CRIF Working Paper series
This research is motivated by the fact that there is a paucity of research on the earnings management practices of banks in Australia. Research on the practices of North American, European and Asian banks provided conflicting evidence. In this study, we examine whether Australian banks engage in earnings, capital management and signalling, and, if so, the extent to which loan loss provisions (LLPs) are used for this purpose. Our results indicate that banks in Australia use loan loss provisions to manage earnings. Further, listed commercial banks engage more aggressively in earnings management using LLPs than other banks. We also find …
Uncovered Interest-Rate Parity Over The Past Two Centuries, James R. Lothian, Liuren Wu
Uncovered Interest-Rate Parity Over The Past Two Centuries, James R. Lothian, Liuren Wu
CRIF Working Paper series
We study the validity of uncovered interest-rate parity (UIP) by constructing ultra long time series that span two centuries. The forward-premium regressions yield positive slope estimates over the whole sample period and become negative only when the sample is dominated by the period of 1980s. We also find that large interest-rate differentials have significantly stronger forecasting powers for currency movements than small interest-rate differentials. Furthermore, when we regress domestic currency returns on foreign bonds against returns on domestic bonds as an alternative test for UIP, the null hypotheses of zero intercept and unit slope cannot be rejected in most cases. …
Institutions, Capital Flows And Financial Integration, James R. Lothian
Institutions, Capital Flows And Financial Integration, James R. Lothian
CRIF Working Paper series
The central focus of this paper is on capital flows from developed to less developed countries and in particular on the question of why such flows are not much larger. I first outline the theoretical arguments with regard to such flows and then go on to review the historical evidence on international financial integration more generally. I then turn to the related literature on economic development, which over the past decade has shifted its emphasis from technology and capital accumulation per se to the underlying institutional factors that affect investment. I present evidence that such factors also affect to rich-to-poor …
Institutions, Capital Flows And Financial Integration, James R. Lothian
Institutions, Capital Flows And Financial Integration, James R. Lothian
CRIF Seminar series
The central focus of this paper is on capital flows from developed to less developed countries and in particular on the question of why such flows are not much larger. I first outline the theoretical arguments with regard to such flows and then go on to review the historical evidence on international financial integration more generally. I then turn to the related literature on economic development, which over the past decade has shifted its emphasis from technology and capital accumulation per se to the underlying institutional factors that affect investment. I present evidence that such factors also affect to rich-to-poor …
The Role Of Exchange Rates In The Intertemporal Risk-Return Relation In International Economies, Turan G. Bali, Liuren Wu
The Role Of Exchange Rates In The Intertemporal Risk-Return Relation In International Economies, Turan G. Bali, Liuren Wu
CRIF Seminar series
This paper investigates the role of currency denomination in the the intertemporal risk-return relation among G7 countries. Similar to the findings of previous studies, our estimation also shows that the financial markets of the G7 countries are integrated. We obtain significant pricing coefficient estimates on the global index, but insignificant estimates on country-specific risks. Different from the literature, however, we find that the intertemporal risk-return relation differ significantly under different currency denominations. The slope coefficient estimate is the largest at around seven when the returns are denominated in Japanese yen, smallest at around three to four when the returns are …
The Role Of Earnings And Book Values In Pricing Stocks: Evidence From Turkey, Asokan Anandarajan, Iftekhar Hasan, Ihsan Isik, Cornelia Mccarthy
The Role Of Earnings And Book Values In Pricing Stocks: Evidence From Turkey, Asokan Anandarajan, Iftekhar Hasan, Ihsan Isik, Cornelia Mccarthy
CRIF Working Paper series
In this study, we examine factors associated with equity valuation in a newly emerging market, Turkey. In the United States and other developed countries, research indicates that both earnings and book value are important predictors of equity valuation. In Turkey, earnings appears to have information content but earnings, by itself, appears to be declining in importance over time. Book value adjusted for inflation has a stronger association with equity values. In the inflationary and risky environment of Turkey, where future value of earnings is quite uncertain, investors may be paying less attention to earnings and more attention to book values. …
On The Observational Equivalence Of Devaluation And Monetary Policy, Russell S. Boyer
On The Observational Equivalence Of Devaluation And Monetary Policy, Russell S. Boyer
CRIF Seminar series
Devaluation has been viewed as being quite different from monetary policy (Caves, Cooper, Ethier, Frankel, Frenkel, Harberger, Johnson, Jones, Kenen, McCallum, Mussa, Salvatore, Tsiang) or even just the opposite of it in terms of its effects on real variables (Berglas, Dornbusch, Mundell). This paper yields to the temptation that Allen and Kenen set out: to follow one’s intuition and come to the clear conclusion that these two policy initiatives are very similar. It does this by specifying the conditions under which the two are identical in the small-country setting with a general degree of management of the exchange rate. The …
Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting, Martin D. Evans, Richard K. Lyons
Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting, Martin D. Evans, Richard K. Lyons
CRIF Seminar series
This paper compares the true, ex-ante forecasting performance of a micro-based model against both a standard macro model and a random walk. In contrast to existing literature, which is focused on longer horizon forecasting, we examine forecasting over horizons from one day to one month (the one-month horizon being where micro and macro analysis begin to overlap). Over our 3-year forecasting sample, we find that the micro-based model consistently out-performs both the random walk and the macro model. Micro-based forecasts account for almost 16 per cent of the sample variance in monthly spot rate changes. These results provide a level …
Real Exchange Rates Over The Past Two Centuries: How Important Is The Harrod-Balassa-Samuelson Effect?, James R. Lothian, Mark P. Taylor
Real Exchange Rates Over The Past Two Centuries: How Important Is The Harrod-Balassa-Samuelson Effect?, James R. Lothian, Mark P. Taylor
CRIF Working Paper series
Using data for 1820-2001 for the US, the UK and France, we test for the presence of real effects on the equilibrium real exchange rate (the Harrod-Balassa-Samuelson, HBS effect) in an explicitly nonlinear framework and allowing for shifts in real exchange rate volatility. A statistically significant HBS effect for sterling-dollar captures its long-run trend and explains some 40% of its variation. For both real exchange rates there is significant evidence of nonlinear mean reversion towards long-run equilibrium and downwards shifts in volatility corresponding closely to the classical gold standard and Bretton Woods periods.
Is Australasia, North And Southeast Asia Becoming A Yen Block?, Colm Kearney, Cal Muckley
Is Australasia, North And Southeast Asia Becoming A Yen Block?, Colm Kearney, Cal Muckley
CRIF Seminar series
We use up to 24 years of weekly data on 11 bilateral yen exchange rates to examine the evidence of an emerging yen bloc in Australasia, North and Southeast Asia. The logarithmic first differences of these exchange rates are modelled in response to variations in their US dollar, German marc, and UK pound counterparts using a general-to-specific dynamic Newey-West estimation strategy. We find strong evidence contrary to the notion of a de facto yen bloc. Each 1 percent rise in the US dollar (German marc, UK pound) effective exchange rate causes a mean 1.27 (1.8, 0.18) percent appreciation in the …