Finance and Financial Management Commons^™

What Factors Determine Thesubsidiary Mode Of Overseas R&D By Developing-Country Mnes? Empirical Evidence From Chinese Subsidiaries Abroad, Yanyu Wang, Wei Xie, Jizhen Li, Chenxi Liu

PhD Student’s Publications Collection

This study examines the determinants of the subsidiary modes of overseas research anddevelopment (R&D) by Chinese multinational enterprises (MNEs). Based on resource-based view and absorptive capabilities, we propose that financial resources and technologi-cal resources have different effects on the selection of overseas R&D subsidiary modes,which are competence-exploiting mode or competence-creating mode. This is supportedby the empirical results in this paper using data from a survey of 40 Chinese overseasR&D subsidiaries. The results demonstrate that the parent firms with richer financialresources and more R&D expenses prefer the competence-exploiting mode, while the par-ent firms with more R&D personnel favor the competence-creating mode. …

Thinking Finance - The Comic Book, Dimitrios V. Siskos

Publications

Thinking financially results in the best possible outcome and establishes a secure foundation for the future as an independent man. In contrast, thinking emotionally leads to short-sighted financial decisions and usually, deep regrets. However, thinking financially is not pleasant for the people around us. This comic book presents a guy, whose dream is to become an accountant. When he finally succeeds in this, he realizes that thinking financially may be effective for his boss but it is irritating for everyone else, even for his family.

Returns To Buying Winners And Selling Losers: A Look At Cryptocurrencies, Daniel Walker

CMC Senior Theses

This paper is, to my knowledge, one of the first ever to examine the effectiveness of price momentum trading strategies applied to cryptocurrencies. Using aggregate OHLCV (Open, High, Low, Close, Volume) data on cryptocurrency pairs from Poloniex, Bittrex, and Bitfinex, I apply Jegadeesh and Titman’s classic -month/-month momentum trading strategy, reporting annual returns with and without incorporating trading fees. Portfolios are resampled daily, weekly, and monthly, testing lookback and holding periods ranging from one day to one year. The results show that trading cryptocurrencies using momentum strategies derives returns that rapidly increase the more often portfolios are resampled, with the …

You Can Run But You Can’T Hide: The Advance Of Shareholder Activism, Kendall Greenberg

CMC Senior Theses

Shareholder activism has exploded in popularity since the turn of the century, due in large part to impressive relative returns generated by its major participants. The result has thus been a surge in assets invested in the category, to in excess of $170 billion today up from less than $3 billion in 2000 (Inglis 2015; Romito 2015). This influx of capital, in absolute dollars and pace of growth, has caused many to wonder whether activists truly create shareholder value and, if so, if the value generated is sustainable. Numerous studies of activist interventions prior to 2009 reveal significant stock price …

Essays In Commodities And Freight Markets, Nelson Yap

Dissertations and Theses Collection (Open Access)

Chapter 1: Structural Changes in Functional Curves: Estimation and Testing

Abstract: This paper considers the estimation and testing of structural changes in functional curves that occurs at an unknown date. The functional principal component analysis is applied to the random functional curves, decomposing them into interpretable simple latent functions and random scalars. We model the random scalars using a simple autoregressive model and test for a change in parameters that occur at an unknown date. This method is applied to the crude oil futures market to estimate and date possible structural breaks during OPEC announcement periods from 1984 to 2017.

Microcredit And Survival Microenterprises: The Role Of Market Structure, P.V. Viswanath

Faculty Working Papers and Articles

Poverty remains a pervasive problem all over the world, but the problem is worst in underdeveloped areas like Africa. While microfinance is supposed to address this problem through the promotion of viable businesses, it has not been very successful in helping survival microenterprises, i.e., businesses that the very poor with limited human capital have access to, in sectors with low barriers to entry and selling undifferentiated products. In this paper, I examine the role of market structure in mediating the impact of micro-lending to such survival enterprises. While there have been many evaluations of microfinance institutions (MFIs), there have been …

Bank Lending Channel And Changing Credit Standards In The Residential Mortgage Market, Salman Tahsin

Graduate Theses and Dissertations

My dissertation examines the relationship between bank conditions and the residential mortgage market. The first essay investigates the effect of bank distress on the residential mortgage market during the 2007-09 financial crisis. We use the county-aggregated change in the ratio of jumbo to nonjumbo mortgage acceptance rate as an instrumental variable to control for endogeneity between bank distress and county economic conditions. The median decrease in the instrumental variable explains an additional 1.5 percentage point decline in county home prices and a 20 basis point rise in the county unemployment rate, which represent 15% and 5%, respectively, of their median …

Performance Evaluation And Risk Management: Time Series Bootstrap Analysis Of The Mutual Funds And Banking Sectors, Lifa Huang

Graduate Theses and Dissertations

The Financial Services Modernization Act of 1999, also known as the Gramm–Leach–Bliley Act (“Act”), repealed a regulatory proscription in the Glass–Steagall Act of 1933 that prohibited commercial bank holding companies (BHCs) from underwriting most bonds, equities, and insurance policies. After the passage of the Act in November 1999, BHCs that converted to financial holding companies (FHCs) were allowed to engage in securities underwriting without restrictions. The first paper examines whether the removal of barriers to securities underwriting had an adverse impact on the overall stability of the financial sector, and thereby, contributed indirectly to the financial crisis of 2008. The …

Clogged Intermediation: Were Home Buyers Crowded Out?, Hyunsoo Choi, Hyun-Soo Choi, Jung-Eun Kim

Research Collection Lee Kong Chian School Of Business

Post-crisis policy interventions significantly increased the demand for mortgage refinancing, but could this surge in refinancing applications have crowded out the supply of credit to home buyers? In this paper, we examine two frictions that hamper financial intermediation and result in banks' substitution of home purchase loans for refinance loans: The risk capacity channel through which banks with limited risk appetites prefer safer loans over riskier loans, and the operating capacity channel through which banks with limited operating capacities prefer applications that require less screening time. We find that following the recent financial crisis, banks facing these capacity constraints indeed …

Clogged Intermediation: Were Home Buyers Crowded Out?, Hyunsoo Choi, Hyun-Soo Choi, Jung-Eun Kim

Research Collection Lee Kong Chian School Of Business

Post-crisis policy interventions significantly increased the demand for mortgage refinancing, but could this surge in refinancing applications have crowded out the supply of credit to home buyers? In this paper, we examine two frictions that hamper financial intermediation and result in banks' substitution of home purchase loans for refinance loans: The risk capacity channel through which banks with limited risk appetites prefer safer loans over riskier loans, and the operating capacity channel through which banks with limited operating capacities prefer applications that require less screening time. We find that following the recent financial crisis, banks facing these capacity constraints indeed …

Permanent Price Impact Asymmetry Of Trades With Institutional Constraints, Chiraphol N. Chiyachantana, Pankaj Jain, Christine Jiang, Vivek Sharma

Research Collection Lee Kong Chian School Of Business

Dynamic institutional trading constraints related to capital, diversification, and short-selling asymmetrically affect the incorporation of new information as reflected in the permanent price impact of their trades. The sign of the permanent price impact asymmetry between institutional buys versus sells is positive at the initial stage of a price run-up and reverses due to changing constraints with a prolonged price run-up in a stock. Idiosyncratic volatility, analyst forecast dispersion, trading intensity, price dispersion, and bullish market conditions further sharpen the initial asymmetry, as well as its reversal after a price run-up.

The Flow Of Funds In Asean, Philip C. Zerrillo

Research Collection Lee Kong Chian School Of Business

In his novel, Memoirs of a Geisha, Arthur Golden wrote, “Water can carve its way even through stone. And when trapped, water makes a new path.” Something similar seems to be happening with the flow of funds in ASEAN.

Do Security Analysts Learn From Their Colleagues?, Kenny Phua, T. Mandy Tham, Chi Shen Wei

Research Collection Lee Kong Chian School Of Business

We examine how learning from colleagues affects security analyst forecast outcomes. We represent the brokerage house as an information network of analysts connected through industry overlaps in their coverage portfolios. Analysts who are more centrally connected in their brokerage network produce more accurate forecast estimates and generate more influential forecast revisions. Consistent with learning, more central analysts tend to unwind their colleagues’ recent forecast errors in their forecast revisions. Learning appears to benefit all colleagues, as working at more interconnected brokerages (i.e., denser networks) improves forecast accuracy for all analysts.

Surplus Consumption, Habit Utility And Moody Investors, Jun Lou

Dissertations, Theses, and Capstone Projects

The thesis examines a blend of Asset Pricing topics: joint stock-bond pricing, consumption-based asset pricing puzzles, time variation in risk preference, among others. In chapter one, I first review the literature on respective topics in search of a consolidated framework of resolution. I then propose one, a consumption-based affine model that jointly prices bond and stock in closed form. The tractable feature of the price solutions remains standard as in affine termstructure of interest rates, but presents novelty for the stock prices. In chapter two, I discuss the GMM based procedures for model estimation. In chapter three, I interpret the …

Numerical Methods For Option Pricing Under The Two-Factor Models, Jiacheng Cai

UNLV Theses, Dissertations, Professional Papers, and Capstones

Pricing options under multi-factor models are challenging and important problems for financial applications. In particular, the closed form solutions are not available for the American options and some European options, and the correlations between factors increase the complexity and difficulty for the formulations and implements of the numerical methods.

In this dissertation, we first introduce a general transformation to decouple correlated stochastic processes governed by a system of stochastic differential equations. Then we apply the transformation to the popular two-factor models: the two-asset model, the stochastic volatility model, and the stochastic interest rate models. Based on our new formulations, we …

Twin Momentum: Fundamental Trends Matter, Dashan Huang, Huacheng Zhang, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

Using both the levels and the time-series trends of a collection of firms' major fundamentals, we find that fundamentals matter after all: they can also generate strong return momentum. A fundamental momentum strategy that goes long stocks with fundamental in the top quintile and short stocks with fundamental in the bottom quintile earns a monthly average return of 88 bps, and is comparable with the popular price momentum but has little correlation. Combining price momentum and fundamental momentum yields a twin momentum, which has an average return more than the sum of both price momentum and fundamental momentum. Twin momentum …

Hedge Fund Performance And Derivative Hedging, Yongjia Li

Graduate Theses and Dissertations

This dissertation is comprised of three essays which focus on hedge fund performance and derivative hedging. The first essay uses ETF returns as proxies for tradable risk factors in hedge fund performance evaluation and identifies contemporaneously relevant risk factors from the entire universe of ETFs. The model provides more informative estimates of alpha and beta coefficients for predicting hedge fund out-of-sample performance compared with other widely used hedge fund factor models. Portfolios of top alpha hedge funds selected by the model generate statistically significant out-of-sample performance that is substantially higher compared with portfolios selected by other models. In addition, the …

Hedging And Pricing Rent Risk With Search Frictions, Briana Chang, Hyunsoo Choi, Harrison Hong, Jeffrey Kubik

Research Collection Lee Kong Chian School Of Business

The desire of risk-averse households to hedge rent risk is thought to increase home ownership and prices. While evidence for the ownership implication is compelling, support for the price effect is mixed. We show that an important reason is search frictions. Rent risk reduces outside options, leading to less-picky buyers and worse home/buyer matches. This attenuates the rise in the price-to-rent ratio that would otherwise occur without frictions. Consistent with our model, a house remains on the market for fewer days when rent risk is higher. Accounting for frictions significantly increases the effect of rent risk on home prices.

Forecasting Stock Returns In Good And Bad Times: The Role Of Market States, Dashan Huang, Fuwei Jiang, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

This paper proposes a two-state predictive regression model and shows that stock market 12-month return (TMR), the time-series momentum predictor of Moskowitz, Ooi, and Pedersen (2012), forecasts the aggregate stock market negatively in good times and positively in bad times. The out-of-sample R-squares are 0.96% and 1.72% in good and bad times, or 1.28% and 1.41% in NBER economic expansions and recessions, respectively. The TMR predictability pattern holds in the cross-section of U.S. stocks and the international markets. Our study shows that the absence of return predictability in good times, an important finding of recent studies, is largely driven by …

Hedging And Pricing Rent Risk With Search Frictions, Briana Chang, Hyunsoo Choi, Harrison Hong, Jeffrey Kubik

Research Collection Lee Kong Chian School Of Business

The desire of risk-averse households to hedge rent risk is thought to increase home ownership and prices. While evidence for the ownership implication is compelling, support for the price effect is mixed. We show that an important reason is search frictions. Rent risk reduces outside options, leading to less-picky buyers and worse home/buyer matches. This attenuates the rise in the price-to-rent ratio that would otherwise occur without frictions. Consistent with our model, a house remains on the market for fewer days when rent risk is higher. Accounting for frictions significantly increases the effect of rent risk on home prices.

Industry Integration And Stock Price Synchronicity, Hao Cheng, Kian Guan Lim, Tien Foo Sing, Long Wang

Research Collection Lee Kong Chian School Of Business

This paper provides an alternative explanation of the negative relationship between price synchronicity and proprietary right protection that are uncorrelated to the information hypothesis. Using empirical data for 40 countries, we show that stock market volatility and firm size have significant impact on stock price synchronicity. We find significant correlations of international R2 disparity with industry structure integrations. The derived industry integration indices that capture industry correlations significantly explain cross-sectional and temporal variations in price synchronicity. The results imply that tighter industry integration leads to higher R2, and also explain away the property rights factor found in the information hypothesis.

Liquidity In A Market For Unique Assets: Specified Pool And To-Be-Announced Trading In The Mortgage-Backed Securities Market, Pengjie Gao, Paul Schultz, Zhaogang Song

Research Collection Lee Kong Chian School Of Business

Agency mortgage-backed securities (MBS) trade simultaneously in a market for specified pools (SPs) and in the to-be-announced (TBA) forward market. TBA trading creates liquidity by allowing thousands of different MBS to be traded in a handful of TBA contracts. SPs that are eligible to be traded as TBAs have significantly lower trading costs than other SPs. We present evidence that TBA eligibility, in addition to characteristics of TBA-eligible SPs, lowers trading costs. We show that dealers hedge SP inventory with TBA trades, and they are more likely to prearrange trades in SPs that are difficult to hedge.

Essays On Financial Intermediation, Yong Kyu Gam

Doctor of Business Administration Dissertations

Chapter 1 investigates a regulatory spillover effect of the Basel III liquidity standard on the real economy through a series of difference-in-difference estimations. Since the Basel Committee’s official endorsement for the new liquidity regulation in December 2010, a bank exposed to high liquidity risk reduced its loan proportion significantly, making a negative real effect on its surrounding economy via a bank-lending-channel. The new regulation also induced a bank with a weak liquid balance sheet to raise its deposit rate aggressively, generating a liquidity problem in a nearby local bank through a deposit-competition-channel and ultimately curbing an expansion of the local …

The Value Of Trading Relations In Turbulent Times, Marco Di Maggio, Amir Kermani, Zhaogang Song

Research Collection Lee Kong Chian School Of Business

This paper investigates how dealers’ trading relations shape their trading behavior in the corporate bond market. Dealers charge lower spreads to dealers with whom they have the strongest ties and more so during periods of market turmoil. Systemically important dealers exploit their connections at the expense of peripheral dealers as well as clients, charging higher markups than to other core dealers. Also, intermediation chains lengthened by 20% following the collapse of a flagship dealer in 2008 and even more for institutions strongly connected to this dealer. Finally, dealers drastically reduced their inventory during the crisis.

The Value Of Trading Relations In Turbulent Times, Marco Di Maggio, Amir Kermani, Zhaogang Song

Research Collection Lee Kong Chian School Of Business

This paper investigates how dealers’ trading relations shape their trading behavior in the corporate bond market. Dealers charge lower spreads to dealers with whom they have the strongest ties and more so during periods of market turmoil. Systemically important dealers exploit their connections at the expense of peripheral dealers as well as clients, charging higher markups than to other core dealers. Also, intermediation chains lengthened by 20% following the collapse of a flagship dealer in 2008 and even more for institutions strongly connected to this dealer. Finally, dealers drastically reduced their inventory during the crisis.

Essays In Financial Economics, Johnson Owusu-Amoako

Doctoral Dissertations (DBA)

In this study, we empirically investigate the impact of credit default swap rates on short-term interest rates. We find that CDS rates significantly impact short-term interest rates. The impact remains significant after controlling for inflation and unemployment. Applying co-integration test and vector error correction modeling, the study also finds a causal relationship between CDS rates and short-term interest rates. These relationships are confirmed through autoregressive conditional heteroscedasticity (ARCH), exponential generalized ARCH [EGARCH] and vector auto-regression (VAR) analyses. The empirical results have important implications in setting short-term interest rates. A regular revision of policy targeting to capture the continual changes in …

Corporate Donations And Shareholder Value, Hao Liang, Luc Renneboog

Research Collection Lee Kong Chian School Of Business

Do corporate donations enhance shareholder wealth or reflect agency problems? We address this question for a global sample of firms whereby we distinguish between charitable and political donations, as well as between donations in cash and in kind. We find that charitable donations are positively related to financial performance and firm value, which is consistent with the value-enhancement hypothesis. This positive effect on firm value is stronger for cash than in-kind donations. In contrast, political donations do not appear to enhance shareholder value, but rather tend to reflect agency problems, as they are higher for firms with poor internal corporate …

Does Wage-Inflation Targeting Complement Foreign Exchange Intervention? An Evaluation Of A Multi-Target, Two-Instrument Monetary Policy Framework, Taojun Xie, Jingting Liu, Joseph D. Alba, Wai-Mun Chia

Research Collection Lee Kong Chian School Of Business

We assess the inclusion of wage inflation as an intermediate target of an emerging central bank using a dynamic stochastic general equilibrium model with sticky wages and prices calibrated for the South Korean economy. The model includes wage inflation as an additional target jointly with domestic price inflation and the output gap in a Taylor- type interest rate rule operating with a sterilized foreign exchange (FX) intervention rule. Our results show a complementary relationship between wage inflation targeting and price inflation targeting. That is, by supplementing price inflation targeting with wage inflation targeting, welfare improves for cases with and without …

The Role Of Islamic Finance In Economic Development, Nora Khan

Lingnan Journal of Banking, Finance and Economics

Islamic financial institutions have been growing rapidly in the past few years. Islamic finance refers to investments that are permissible in accordance with Sharia, the Islamic law. Sharia law views money as a measuring tool for value and not an “asset” itself. “It does not permit receipt and payment of riba(interest), gharar(excessive uncertainty), maysir(gambling), short sales or financing activities that it considers harmful to society” (IMF website). Interest, a form of income from money, is therefore prohibited. For example, the income obtained from banks must come from the gain or loss of the enterprises they underwrite and not from interest …

Fdi And Manufacturing Industry In Asia, Luyi Jin

Lingnan Journal of Banking, Finance and Economics

The study finds that China’s manufacturing still maintained a growth level from 2003 to 2013. However, the growth has been declining. The rapid development of ASEAN economies led to the rise of the emerging manufacturing countries which have slowly adjusted and found their own advantages in challenging China.

The main conclusions of this paper are twofold. First, China will soon lose her low labor cost competitive advantage and needs to look for new strategy or industrial upgrades. Second, the current pattern of international division of labor will last for a fairly long period that developing countries will continue to serve …