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Articles 1 - 15 of 15
Full-Text Articles in Business
Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell
Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell
Research Collection Lee Kong Chian School Of Business
There is ample evidence that past performance affects the trading decisions of individual investors. This paper looks at this issue using a detailed database of currency trading decisions of institutional investors. Past performance manifestly affects currency risk-taking in this group, but the sign and magnitude of the effect runs counter to much of the existing theory and evidence. There is no evidence whatsoever of disposition effects; rather, the dominant characteristic is aggressive risk reduction in the wake of losses. This effect is more prominent later in the year, and among older and more experienced funds. A modified version of the …
Incorporating Diversification Into Risk Management, Mitchell Craig Warachka, A. Purnanandam, Y. Zhao, W.T. Ziemba
Incorporating Diversification Into Risk Management, Mitchell Craig Warachka, A. Purnanandam, Y. Zhao, W.T. Ziemba
Research Collection Lee Kong Chian School Of Business
No abstract provided.
Stock Exchange Governance And Market Quality, Chandrasekhar Krishnamurti, John M. Sequeira, Fangjian Fu
Stock Exchange Governance And Market Quality, Chandrasekhar Krishnamurti, John M. Sequeira, Fangjian Fu
Research Collection Lee Kong Chian School Of Business
We show that organization structure of a stock exchange matters by utilizing the unique setting prevailing in India. India has two major stock markets, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). These two exchanges adopt similar trading systems, trade essentially identical stocks, and follow the same trading hours. However, these exchanges have different organizational structures: BSE is mutualized whereas NSE is demutualized. Using the Hasbrouck [Review of Financial Studies 6 (1993) 191] measure of market quality we show that NSE provides a better quality market than BSE. This result is consistent with the work of Domowitz …
Trading Your Neighbor's Etfs: Competition Or Fragmentation?, Beatrice Boehmer, Ekkehart Boehmer
Trading Your Neighbor's Etfs: Competition Or Fragmentation?, Beatrice Boehmer, Ekkehart Boehmer
Research Collection Lee Kong Chian School Of Business
On July 31, 2001, for the first time in its history, the New York Stock Exchange (NYSE) began trading three unlisted securities. The DIA, SPY, and QQQ are the most actively traded Exchange Traded Funds (ETFs) and are listed on the American Stock Exchange. On April 15, 2002 another 27 ETFs followed. These two events provide a unique experiment for studying the impact of a new entrant on market quality. In contrast to recently revived concerns about the adverse impact of market fragmentation, we document that the NYSE entry leads to a dramatic improvement in liquidity that we attribute to …
Does Underwriter Reputation Affect The Performance Of Ipo Stocks?, Chunchi Wu, Sheen Liu, Junbo Wang
Does Underwriter Reputation Affect The Performance Of Ipo Stocks?, Chunchi Wu, Sheen Liu, Junbo Wang
Research Collection Lee Kong Chian School Of Business
In this paper we examine the relationship between performance of the Chinese IPO firms and the reputation of investment bankers underwriting their stocks. Similar to previous studies on well-developed stock markets, we find that the initial return on the first day of trading is strongly positive for Chinese IPO stocks due to underpricing. This initial return is negatively related to the underwriter's reputation, suggesting that the better the reputation of the underwriter, the less underpricing and hence, the lower the initial return of the IPO stock. Extending the analysis to a ten-day window after the first trading day, we find …
Estimating Credit Risk Premia, Kian Guan Lim
Estimating Credit Risk Premia, Kian Guan Lim
Research Collection Lee Kong Chian School Of Business
This paper investigates the nature of the credit risk premium adjustments in the Jarrow-Lando-Turnbull model of credit risk spreads. The adjustments relate the equivalent martingale measures to the empirical measures of unconditional transition probabilities. We provide a modi ed version of the risk adjustment that allows a linear partition of the credit spread into an unconditional default component, a recovery component, and the risk premium adjustment. The risk adjustments are related to conditional default risk, illiquidity risk, and other factors not related to recovery e ects. The log-transform of these risk adjustments can be speci ed as linear regressions on …
Asymptotic Dynamics And Value-At-Risk Of Large Diversified Portfolios In A Jump-Diffusion Market, Kian Guan Lim, Xiaoqing Liu, Kai Chong Tsui
Asymptotic Dynamics And Value-At-Risk Of Large Diversified Portfolios In A Jump-Diffusion Market, Kian Guan Lim, Xiaoqing Liu, Kai Chong Tsui
Research Collection Lee Kong Chian School Of Business
This paper studies the modelling of large diversi ed portfolios in a nancial market with jump-di usion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk minimizing portfolios, and market indices. Reduced-form dynamics driven jointly by one Brownian Motion and one Poisson process are derived for the asymptotics of such portfolios. We prove that derivatives written on a portfolio can be priced by treating the asymptotic dynamics as the underlying process if the number of assets in the portfolio is su ciently large. Analytical and Monte Carlo Value-at-Risk (VaR) can be computed for the portfolios based on their …
Operationalizing Technology Improvements In Product Development Decision-Making, Shantanu Bhattacharya, V. Krishnan, Vijay Mahajan
Operationalizing Technology Improvements In Product Development Decision-Making, Shantanu Bhattacharya, V. Krishnan, Vijay Mahajan
Research Collection Lee Kong Chian School Of Business
Achieving competitive advantage and price premiums in many technology-based markets requires the incorporation of current technology in new products. To do so, firms in hyper-competitive environments increasingly plan and design their products concurrent with the independent development and validation of underlying technologies. Simultaneous validation of a core technology has important implications for a company's product positioning and launch sequence decisions making these traditional marketing decisions relevant to operations managers. Prior research has shown that to minimize cannibalization in the absence of such improvements in technology, a firm should not launch low-end products before high-end products. However, concurrent evolution of technology …
Maturity Effect On Bid-Ask Spreads Of Otc Currency Options, Beng Soon Chong, David K. Ding, Kok Hui Tan
Maturity Effect On Bid-Ask Spreads Of Otc Currency Options, Beng Soon Chong, David K. Ding, Kok Hui Tan
Research Collection Lee Kong Chian School Of Business
The paper ascertains the relation between bid-ask spreads and the contract maturity of OTC currency options. Contrary to previous findings in the futures market, spreads of currency options are found to be negatively related to the contract's term-to-maturity. The negative relation persists even after controlling for the effects of price risks, competition, and trading activity. The pronounced differences in the term-to-maturity results are attributable to the market risk effect and differences in the market structure of options and futures markets.
Asian Hedge Funds: Return Persistence, Style, And Fund Characteristics, Francis Koh, Winston T. H. Koh, Melvyn Teo
Asian Hedge Funds: Return Persistence, Style, And Fund Characteristics, Francis Koh, Winston T. H. Koh, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
This study explores the return persistence properties, styles, and fund characteristics of hedge funds that mainly invest in Asia. We examine, for the first time, a high resolution hedge fund dataset which includes monthly return information as well as detailed fund characteristics data. We find that the returns of Asian hedge funds persist most strongly at monthly horizons to quarterly horizons. This persistence weakens considerably when we lengthen the measurement period beyond a quarter, and does not appear to be due to the imputation of fees or to systematic risk as measured by a simple factor model. Further, we show …
The Quality Of Analysts Earnings Forecasts During The Asian Crisis: Evidence From Singapore, Roger Loh, Mujtaba Mian
The Quality Of Analysts Earnings Forecasts During The Asian Crisis: Evidence From Singapore, Roger Loh, Mujtaba Mian
Research Collection Lee Kong Chian School Of Business
Examines the efficiency of security analysts' earnings forecasts in Singapore. Regression of actual earnings change on forecasted change; Extremism in forecasted change; Impact of business crisis on the quality of earnings forecasts.
Dividend Omissions And Intraindustry Information Transfers, Gary L. Caton, Jeremy Goh, Ninon Kohers
Dividend Omissions And Intraindustry Information Transfers, Gary L. Caton, Jeremy Goh, Ninon Kohers
Research Collection Lee Kong Chian School Of Business
We examine potential information transfers from companies that announce dividend omissions to their industry rivals. Specifically, we examine the abnormal stock returns and abnormal earnings forecast revisions of rivals after a company makes a dividend-omission announcement. Our results show negative and significant abnormal stock returns and negative and significant abnormal forecast revisions for rival companies in response to the announcement, and a significant and positive relation between the two. We conclude that a dividend-omission announcement transmits unfavorable information across the announcing company's industry that affects cash flow expectations and ultimately stock prices.
Stimulating Firm-Specific Investment Through Risk Management, Heli Wang, Jay B. Barney, Jeffrey J. Reuer
Stimulating Firm-Specific Investment Through Risk Management, Heli Wang, Jay B. Barney, Jeffrey J. Reuer
Research Collection Lee Kong Chian School Of Business
This article suggests a rationale for firm risk management that has been largely ignored in financial economics literature. It presents an argument for harnessing the influence of a company’s stakeholders who, whether as employees, suppliers or customers, make a valuable investment specific to the company. Such investments are crucial for a firm’s competitive advantage, yet because they are firm-specific and therefore cannot be transformed or transferred, stakeholders are often concerned about the risks involved in making them. A company’s efforts to manage risk can therefore persuade stakeholders to make even greater firm-specific investments, bringing benefits to shareholders and stakeholders alike.
Are All Rivals Affected Equally By Bond Rating Downgrades?, Gary L. Caton, Jeremy Goh
Are All Rivals Affected Equally By Bond Rating Downgrades?, Gary L. Caton, Jeremy Goh
Research Collection Lee Kong Chian School Of Business
We use revisions in analysts' earnings forecasts to examine how the bad news associated with a bond rating downgrade gets transferred from the downgraded company to its rivals. In general, we find that stock analysts revise their earnings expectations downward for rivals of companies with downgraded debt. However, the significance of the revision is limited to rivals of downgraded companies with non-investment grade debt only. For the rivals of companies with investment grade debt, we find no significant forecast revisions. We hypothesize that this differential impact is due to differing levels of market visibility. This is consistent with our finding …
The Effect Of Taxes On The Pricing Of Defaultable Debt, Kian Guan Lim, Fenghua Song, Mitchell Craig Warachka
The Effect Of Taxes On The Pricing Of Defaultable Debt, Kian Guan Lim, Fenghua Song, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
Empirical studies have documented the dependence of corporate credit spreads on default risk, equity premiums, and taxes. However, taxes have previously not been incorporated into reduced-form credit risk models. Therefore, we first extend the existing literature by considering a default intensity that depends on taxes as well as the default-free short rate and a market index. Consequently, we establish a theoretical basis to explain previous empirical findings regarding the significant impact of taxation on defaultable bond prices. Unlike previous models, tax implications for defaultable debt cannot be constructed from a sum of tax effects on zero coupon bonds. Our empirical …