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Articles 1 - 30 of 1082
Full-Text Articles in Business
Green Transition And Financial Stability: The Role Of Green Monetary And Macroprudential Policies And Vouchers, Ying Tung Chan, Maria Teresa Punzi, Hong Zhao
Green Transition And Financial Stability: The Role Of Green Monetary And Macroprudential Policies And Vouchers, Ying Tung Chan, Maria Teresa Punzi, Hong Zhao
Sim Kee Boon Institute for Financial Economics
This paper analyzes a mix of alternative policies in supporting the green transition and the phase-out of fossil fuels, without compromising financial stability. An environmental dynamic stochastic general equilibrium (E-DSGE) model with two sectors (green and brown) and endogenous default is developed to assess potential climate-induced financial stability threats that can be mainly generated through physical and transition risks mechanism. Those risks are evaluated through a compound capital depreciation shock and a carbon tax shock. The paper offers several findings. First of all, a too stringent carbon tax would increase the medium-term default rate in both sectors, harming financial stability …
Siphoned Apart: A Portfolio Perspective On Order Flow Segmentation, Markus Baldauf, Joshua Mollner, Bart Zhou Yueshen
Siphoned Apart: A Portfolio Perspective On Order Flow Segmentation, Markus Baldauf, Joshua Mollner, Bart Zhou Yueshen
Research Collection Lee Kong Chian School Of Business
We study liquidity supply in fragmented markets. Market makers intermediate heterogeneous order flows, trading off spread revenue against inventory costs. Applying our model to payment for order flow (PFOF), we demonstrate that portfolio-based considerations of inventory management incentivize market makers to segment retail orders by siphoning them off-exchange. Banning order flow segmentation reduces total welfare, can make trading more costly for all investors, and can resolve a prisoner's dilemma among market makers. These results differentiate our inventory-based model from the existing information-based theories of PFOF.
Environmental, Social, And Governance (Esg) And Artificial Intelligence In Finance: State-Of-The-Art And Research Takeaways, Trstan Lim
Research Collection School Of Computing and Information Systems
The rapidly growing research landscape in finance, encompassing environmental, social, and governance (ESG) topics and associated Artificial Intelligence (AI) applications, presents challenges for both new researchers and seasoned practitioners. This study aims to systematically map the research area, identify knowledge gaps, and examine potential research areas for researchers and practitioners. The investigation focuses on three primary research questions: the main research themes concerning ESG and AI in finance, the evolution of research intensity and interest in these areas, and the application and evolution of AI techniques specifically in research studies within the ESG and AI in finance domain. Eight archetypical …
Investing In Climate: A Role For 'Sovereign Climate Funds', Marianna Kozintseva, Thierry Wizman
Investing In Climate: A Role For 'Sovereign Climate Funds', Marianna Kozintseva, Thierry Wizman
Sim Kee Boon Institute for Financial Economics
Efforts to address climate change have generally been focused on deploying mitigation technologies. However, it is adaptation technologies (and climate risk transfer) that will have to gain an increasing share of an investment pool dedicated to climate if human systems are to stay resilient to climate forces. Just like mitigation projects, adaptation projects have a strong public goods aspect, wherein public returns exceed private returns, and thus call for the state’s involvement. We argue that sovereign climate funds (SCFs) - new types of sovereign wealth funds with a climate investment mandate - can be critical purpose-built conduits especially for undertaking …
On The Effects Of Information Asymmetry In Digital Currency Trading, Kwansoo Kim, Robert John Kauffman
On The Effects Of Information Asymmetry In Digital Currency Trading, Kwansoo Kim, Robert John Kauffman
Research Collection School Of Computing and Information Systems
We report on two studies that examine how social sentiment influences information asymmetry in digital currency markets. We also assess whether cryptocurrency can be an investment vehicle, as opposed to only an instrument for asset speculation. Using a dataset on transactions from an exchange in South Korea and sentiment from Korean social media in 2018, we conducted a study of different trading behavior under two cryptocurrency trading market microstructures: a bid-ask spread dealer's market and a continuous trading buy-sell, immediate trade execution market. Our results highlight the impacts of positive and negative trader social sentiment valences on the effects of …
Diverse Hedge Funds, Yan Lu, Narayan Y. Naik, Melvyn Teo
Diverse Hedge Funds, Yan Lu, Narayan Y. Naik, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Hedge fund teams with heterogeneous educational backgrounds, academic specializations, work experiences, genders, and races, outperform homogeneous teams after adjusting for risk and fund characteristics. An event study of manager team transitions, instrumental variable regressions, and an analysis of managers who simultaneously operate solo- and team-managed funds address endogeneity concerns. Diverse teams deliver superior returns by arbitraging more stock anomalies, avoiding behavioral biases, and minimizing downside risks. Moreover, diversity allows hedge funds to circumvent capacity constraints and generate persistent performance. Our results suggest that diversity adds value in asset management. Authors have furnished an Internet Appendix, which is available on the …
What Difference Do The New Factor Models Make In Portfolio Allocation?, Frank J. Fabozzi, Dashan Huang, Fuwei Jiang, Jiexun Wang
What Difference Do The New Factor Models Make In Portfolio Allocation?, Frank J. Fabozzi, Dashan Huang, Fuwei Jiang, Jiexun Wang
Research Collection Lee Kong Chian School Of Business
This paper compares the Hou-Xue-Zhang four-factor model with the Fama-French five-factor model from an investing perspective both in- and out-of-sample. Without margin requirements and model uncertainty, the Hou-Xue-Zhang model outperforms the Fama-French model. However, the outperformance could become negligible if an investor is subject to margin requirements and model uncertainty. The Hou-Xue-Zhang model shows similar power as the Fama-French model in describing the covariance matrix of asset returns. Overall, the two models do not make a difference for investing in a realistic setting.
Analyzing Global Utilization And Missed Opportunities In Debt-For-Nature Swaps With Generative Ai, Nataliya Tkachenko, Simon Frieder, Ryan-Rhys Griffiths, Christoph Nedopil
Analyzing Global Utilization And Missed Opportunities In Debt-For-Nature Swaps With Generative Ai, Nataliya Tkachenko, Simon Frieder, Ryan-Rhys Griffiths, Christoph Nedopil
Sim Kee Boon Institute for Financial Economics
We deploy a prompt-augmented GPT-4 model to distill comprehensive datasets on the global application of debt-for-nature swaps (DNS), a pivotal financial tool for environmental conservation. Our analysis includes 195 nations and identifies 21 countries that have not yet used DNS before as prime candidates for DNS. A significant proportion demonstrates consistent commitments to conservation finance (0.86 accuracy as compared to historical swaps records). Conversely, 35 countries previously active in DNS before 2010 have since been identified as unsuitable. Notably, Argentina, grappling with soaring inflation and a substantial sovereign debt crisis, and Poland, which has achieved economic stability and gained access …
Navigating Geopolitical Crises For Energy Security: Evaluating Optimal Subsidy Policies Via A Markov Switching Dsge Model, Ying Tung Chan, Maria Teresa Punzi, Hong Zhao
Navigating Geopolitical Crises For Energy Security: Evaluating Optimal Subsidy Policies Via A Markov Switching Dsge Model, Ying Tung Chan, Maria Teresa Punzi, Hong Zhao
Sim Kee Boon Institute for Financial Economics
This paper aims to provide insights on the design of optimal subsidy policies to enhance energy security amidst energy disruptions triggered by geopolitical conflicts. We introduce a novel Markov switching dynamic stochastic general equilibrium (MS-DSGE) model to address the limitations of existing integrated assessment models in environmental evaluation. These models often fail to adequately consider the environmental and economic impacts of geopolitical conflicts and do not prioritize energy security sufficiently in policymaking. Our application of the MS-DSGE model to the Russia–Ukraine conflict reveals significant decreases in output, social welfare, and energy consumption during disruptions. The mere anticipation of an energy …
Local Institutional Investors And Corporate Monitoring: Evidence From Cross-Listed Korean Stocks In The Us Market, Changhwan Choi, Chune Young Chung, Jun Myung Song
Local Institutional Investors And Corporate Monitoring: Evidence From Cross-Listed Korean Stocks In The Us Market, Changhwan Choi, Chune Young Chung, Jun Myung Song
Sim Kee Boon Institute for Financial Economics
Using Korean firms that are cross-listed in the US market, this paper investigates whether there are standalone effects of geographic and market proximity of institutional investors on monitoring performance. We find that Korean institutional ownership is negatively associated with earnings management while the US institutional ownership has no impact on earnings management. This suggests that there is the geographic proximity advantage over the market proximity advantage in the emerging markets. Furthermore, we also show that the impact of geographic proximity is stronger for firms with high informational opacity
Derivatives And Market (Il)Liquidity, Shiyang Huang, Bart Zhou Yueshen, Cheng Zhang
Derivatives And Market (Il)Liquidity, Shiyang Huang, Bart Zhou Yueshen, Cheng Zhang
Research Collection Lee Kong Chian School Of Business
We study how derivatives (with nonlinear payoffs) affect the underlying assets liquidity. In a rational expectations equilibrium, informed investors expect low conditional volatility and sell derivatives to the others. These derivative trades affect different investors utility differently, possibly amplifying liquidity risk. As investors delta hedge their derivative positions, price impact in the underlying drops, suggesting improved liquidity, because informed trading is diluted. In contrast, effects on price reversal are ambiguous, depending on investors relative delta hedging sensitivity, i.e., the gamma of the derivatives. The model cautions of potential disconnections between illiquidity measures and liquidity risk premium due to derivatives trading.
Geographic Links And Predictable Returns, Zuben Jin, Frank Weikai Li
Geographic Links And Predictable Returns, Zuben Jin, Frank Weikai Li
Research Collection Lee Kong Chian School Of Business
Using establishment-level data of U.S. public firms, we construct a novel measure of geographic linkage between firms. We show that the returns of geography-linked firms have strong predictive power for focal firm returns and fundamentals. This effect is distinct from other cross-firm return predictability and is not easily attributable to risk-based explanations. It is more pronounced for focal firms that receive lower investor attention, are more costly to arbitrage, and during high sentiment periods. The cross-firm information spillovers and return predictability are also stronger for geographic peers with economic linkages and with positive information. Our results are broadly consistent with …
Climate Change Concerns And Mortgage Lending, Tinghua Duan, Frank Weikai Li
Climate Change Concerns And Mortgage Lending, Tinghua Duan, Frank Weikai Li
Research Collection Lee Kong Chian School Of Business
We examine whether beliefs about climate change affect loan officers’ mortgage lending decisions. We show that abnormally high local temperature leads to elevated attention to and belief in climate change in a region. Loan officers approve fewer mortgage applications and originate lower amounts of loans in abnormally warm weather. This effect is stronger among counties heavily exposed to the risk of sea-level rise, during periods of heightened public attention to climate change, and for loans originated by small lenders. Additional tests suggest that the negative relation between temperature and approval rate is not fully explained by changes in local economic …
Shadow Bank, Risk-Taking, And Real Estate Financing: Evidence From The Online Loan Market, Xiaoying Deng, Chong Liu, Eng Seow Ong
Shadow Bank, Risk-Taking, And Real Estate Financing: Evidence From The Online Loan Market, Xiaoying Deng, Chong Liu, Eng Seow Ong
Research Collection Lee Kong Chian School Of Business
This paper examines whether and how individual risk-taking behavior affects real estate financing through shadow banks. Using the loan data from an online platform in China, we show that riskier households tend to employ online loans to meet the increasing down-payment in their home purchase. Individual investors are likely to fund riskier real estate loans with higher expected returns. Real estate loans experience higher ex-post default rates than other types of loans. The effect is more pronounced during the period of credit constraints.
Legal Risk And Insider Trading, Marcin Kacperczyk, Emiliano Sebastian Pagnotta
Legal Risk And Insider Trading, Marcin Kacperczyk, Emiliano Sebastian Pagnotta
Research Collection Lee Kong Chian School Of Business
Do illegal insiders internalize legal risk? We address this question with hand-collected data from 530 SEC (the U.S. Securities and Exchange Commission) investigations. Using two plausibly exogenous shocks to expected penalties, we show that insiders trade less aggressively and earlier and concentrate on tips of greater value when facing a higher risk. The results match the predictions of a model where an insider internalizes the impact of trades on prices and the likelihood of prosecution and anticipates penalties in proportion to trade profits. Our findings lend support to the effectiveness of U.S. regulations' deterrence and the long-standing hypothesis that insider …
The Economics Of Financial Scams: Evidence From Initial Coin Offerings, Kenny Phua, Bo Sang, Chi Shen Wei, Yang Yu
The Economics Of Financial Scams: Evidence From Initial Coin Offerings, Kenny Phua, Bo Sang, Chi Shen Wei, Yang Yu
Research Collection Lee Kong Chian School Of Business
We examine the economics of financial scams by analyzing the market for initial coin offerings (ICOs). Using data snapshots of 5,873 ICOs, we find that irregularities in ICO characteristics across listing websites predict higher scam risk and are likely intentional. These patterns are consistent with a model where malicious issuers maximize profits by using irregularities to screen for naïve investors. Almost half of the ICOs in our sample may be scams, amounting to more than U.S. $6 billion in losses. Our results draw attention to the frequent use of screening mechanisms in financial scams.
Leviathan Inc. And Corporate Environmental Engagement, Po-Hsuan Hsu, Hao Liang, Pedro Matos
Leviathan Inc. And Corporate Environmental Engagement, Po-Hsuan Hsu, Hao Liang, Pedro Matos
Research Collection Lee Kong Chian School Of Business
In a 2010 special report, The Economist magazine termed the resurgence of state-owned, publicly listed enterprises “Leviathan Inc.” and criticized the poor governance and low efficiency of these firms. We compile a new comprehensive data set of state ownership of publicly listed firms in 44 countries over the period of 2004–2017 and show that state-owned enterprises are more responsive to environmental issues. The effect is more pronounced in economies lacking energy security and strong environmental regulation, and among firms with more local operations and higher domestic government ownership. We find a similar effect on corporate social engagement but not on …
Are Bond Returns Predictable With Real-Time Macro Data?, Dashan Huang, Fuwei Jiang, Kunpeng Li, Guoshi Tong, Guofu Zhou
Are Bond Returns Predictable With Real-Time Macro Data?, Dashan Huang, Fuwei Jiang, Kunpeng Li, Guoshi Tong, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
We investigate the predictability of bond returns using real-time macro variables and consider the possibility of a nonlinear predictive relationship and the presence of weak factors. To address these issues, we propose a scaled sufficient forecasting (sSUFF) method and analyze its asymptotic properties. Using both the existing and the new method, we find empirically that real-time macro variables have significant forecasting power both in-sample and out-of-sample. Moreover, they generate sizable economic values, and their predictability is not spanned by the yield curve. We also observe that the forecasted bond returns are countercyclical, and the magnitude of predictability is stronger during …
Partisanship In Loan Pricing, Ramona Dagostino, Janet Gao, Pengfei Ma
Partisanship In Loan Pricing, Ramona Dagostino, Janet Gao, Pengfei Ma
Research Collection Lee Kong Chian School Of Business
Does partisanship influence the way investors price financial assets? Using voter registration data of bankers originating large corporate loans, we show that bankers whose party differs from that of the U.S. President charge 7% higher loan spreads than other bankers. This effect holds regardless of borrowers’ partisanship, and becomes stronger for politically active bankers and when partisan media exhibit greater disagreement. Bankers do not match disproportionately with co-partisan borrowers but they lead syndicates more frequently with co-partisan bankers. Our results are not driven by bank or borrower fundamentals, but suggest that investor optimism, driven by political alignment, shapes asset prices.
In Search Of Cryptocurrency Failure, Donglian Ma, Jun Tu, Zhaobo Zhu
In Search Of Cryptocurrency Failure, Donglian Ma, Jun Tu, Zhaobo Zhu
Research Collection Lee Kong Chian School Of Business
This paper explores the determinants of cryptocurrency failure and the pricing of crypto failure risk. We document different significant market- and characteristic-based predictors for coin and token failures. The introduction of Bitcoin futures and the outbreak of COVID19 affect the importance of many predictors. Investors require extra return for bearing high failure risk of crypto assets. The return difference across high and low failure risk crypto assets is not explained by the market, size and momentum factors in the cryptocurrency market. Finally, investors benefit from diversifying into high failure risk crypto assets that is little correlated with the stock market.
How Commonality Persists? (Through Investors' Sentiment And Attention), Chyng Wen Tee, Raja Velu, Zhaoque Zhou
How Commonality Persists? (Through Investors' Sentiment And Attention), Chyng Wen Tee, Raja Velu, Zhaoque Zhou
Research Collection Lee Kong Chian School Of Business
Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors via a reduced-rank regression. We provide empirical evidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attention measures themselvesexhibit a nonlinear mutual relationship, …
The Value Of Official Website Information In The Credit Risk Evaluation Of Smes, Cuiqing Jiang, Chang Yin, Qian Tang, Zhao Wang
The Value Of Official Website Information In The Credit Risk Evaluation Of Smes, Cuiqing Jiang, Chang Yin, Qian Tang, Zhao Wang
Research Collection School Of Computing and Information Systems
The official websites of small and medium-sized enterprises (SMEs) not only reflect the willingness of an enterprise to disclose information voluntarily, but also can provide information related to the enterprises’ historical operations and performance. This research investigates the value of official website information in the credit risk evaluation of SMEs. To study the effect of different kinds of website information on credit risk evaluation, we propose a framework to mine effective features from two kinds of information disclosed on the official website of a SME—design-based information and content-based information—in predicting its credit risk. We select the SMEs in the software …
Is Anti-Herding Always A Smart Choice? Evidence From Mutual Funds, John Byong-Tek Lee, Jun Ma, Dimitris Margaritis, Wanyi Yang
Is Anti-Herding Always A Smart Choice? Evidence From Mutual Funds, John Byong-Tek Lee, Jun Ma, Dimitris Margaritis, Wanyi Yang
Sim Kee Boon Institute for Financial Economics
Recent empirical studies document a negative relation between herding behaviour and the skill of mutual fund managers. We explore this relationship further by focusing on fund managers' contrarian buy and sell behaviour against the market. Our study reveals an asymmetry in the performance of mutual funds with contrarian buy behaviour and contrarian sell behaviour. The contrarian-buy behaviour reflects skill by positively predicting the cross-section of next period's mutual fund returns, while the contrarian-sell behaviour reflects a lack of skill associated with a negative prediction. These findings are robust to various risk-adjusted performance measures. Contrarian-buy funds outperform momentum-buy funds by 3% …
Tail Risk Hedging: The Search For Cheap Options, Poh Ling Neo, Chyng Wen Tee
Tail Risk Hedging: The Search For Cheap Options, Poh Ling Neo, Chyng Wen Tee
Research Collection Lee Kong Chian School Of Business
The authors find that a simple heuristic of sorting liquid equity options by dollar price to construct a portfolio of cheap put options leads to a surprisingly robust hedge for tail risk – the superior performance holds even when compared against more advanced empirical strategies. Further investigation reveals the asymmetry in market correlation under different market conditions as the mechanism of this robust hedging performance. The cheap options selected by the heuristic comprises of stocks with diverse firm characteristics. The correlation spike accompanying tail risk events leads to the majority of these put options moving into-the-money (ITM), thus compensating the …
Money Changers Have Their Own Fintech Disruption To Grapple With, Aurobindo Ghosh
Money Changers Have Their Own Fintech Disruption To Grapple With, Aurobindo Ghosh
Research Collection Lee Kong Chian School Of Business
In a commentary, SMU Assistant Professor of Finance (Education) and Director of the Citi Foundation-SMU Financial Literacy Programme for Young Adults Aurobindo Ghosh discussed the outlook for money changers in a world of multi-currency apps. He however noted money changers still have a role to play, and shared his views on how money changers can respond to technological disruption.
Physical Frictions And Digital Banking Adoption, Hyun Soo Choi, Roger Loh
Physical Frictions And Digital Banking Adoption, Hyun Soo Choi, Roger Loh
Research Collection Lee Kong Chian School Of Business
The behavioral literature suggests that minor frictions can elicit desirable behavior without obvious coercion. Using closures of ATMs in a densely populated city as an instrument for small frictions to physical banking access, we find that customers affected by ATM closures increase their usage of the bank's digital platform. Other spillover effects of this adoption of financial technology include increases in point-of-sale (POS) transactions, electronic funds transfers, automatic bill payments and savings, and a reduction in cash usage. Our results show that minor frictions can help overcome the status-quo bias and facilitate significant behavior change.
Time To Regulate Influencers Who Tell You Where To Put Your Money, Patricia Lui
Time To Regulate Influencers Who Tell You Where To Put Your Money, Patricia Lui
Research Collection Lee Kong Chian School Of Business
Financial scandals elsewhere have shown that ‘finfluencers’ do not always act in good faith and can mislead their followers.
An Idealist’S Approach For Smart Contract Correctness, Duy Tai Nguyen, Hong Long Pham, Jun Sun, Quang Loc Le
An Idealist’S Approach For Smart Contract Correctness, Duy Tai Nguyen, Hong Long Pham, Jun Sun, Quang Loc Le
Research Collection School Of Computing and Information Systems
In this work, we experiment an idealistic approach for smart contract correctness verification and enforcement, based on the assumption that developers are either desired or required to provide a correctness specification due to the importance of smart contracts and the fact that they are immutable after deployment. We design a static verification system with a specification language which supports fully compositional verification (with the help of function specifications, contract invariants, loop invariants and call invariants). Our approach has been implemented in a tool named iContract which automatically proves the correctness of a smart contract statically or checks the unverified part …
Mitigating Industry Contagion Effects From Financial Reporting Fraud: A Competitive Dynamics Perspective Of Non-Errant Rival Firms Exploiting Product-Market Opportunities, Eugene Kang, Nongnapat Thosuwanchot, David Gomulya
Mitigating Industry Contagion Effects From Financial Reporting Fraud: A Competitive Dynamics Perspective Of Non-Errant Rival Firms Exploiting Product-Market Opportunities, Eugene Kang, Nongnapat Thosuwanchot, David Gomulya
Research Collection Lee Kong Chian School Of Business
Existing studies show that financial reporting frauds by errant firms cause declines in stock market valuations for non-errant rival firms (i.e. industry contagion effects). We posit that contagion effects may be mitigated by investors’ expectations of non-errant rivals exploiting product-market opportunities at the expense of errant firms. We apply the competitive dynamics literature to argue that non-errant rivals experience lower contagion effects when they have more available slack to engage in competitive actions. This effect is expected to strengthen when rival firms have previously deployed more resources for research and development and advertising investments or have higher prior market share …
Digital Wealth Management And Consumption: Micro Evidence From Individual Investments, Qian Gong, Mingyuan Ban, Yunjun Yu, Luying Wang, Yan Yuan
Digital Wealth Management And Consumption: Micro Evidence From Individual Investments, Qian Gong, Mingyuan Ban, Yunjun Yu, Luying Wang, Yan Yuan
Research Collection Lee Kong Chian School Of Business
With the rapid advancement of digital finance in China, accessing wealth management services through digital platforms has become considerably convenient. However, the potential impact of digital platform investments on residents' consumption remains a relatively unexplored question. This study addresses this gap by leveraging a unique dataset obtained from one of China's largest fintech companies, encompassing individual-level data on consumption and investment. Our findings indicate that engaging in digital platform investments can indeed stimulate residents' consumption. Importantly, participation in digital platform investment has an inclusive effect, with a more pronounced marginal impact on consumption among low-income residents and in-dividuals residing in …