Finance and Financial Management Commons^™

Portfolio Recallocation And Exchange Rate Dynamics, King Chun Wong

Lingnan Journal of Banking, Finance and Economics

This empirical paper aims to review a previous literature entitles “Portfolio Reallocation and Exchange Rate Dynamics”. The literature stated that including financial market structure can provide a micro-foundation to complement other macro-based models for exchange rate dynamics which typically are meaningful for the medium and long terms but not satisfactory for the short run. The model in the literature offers another way to look at exchange rate dynamics that is significant in the short run and more practical in nature. Undoubtedly, many investors in the financial market, such as traders, dealers, fund managers, and speculators who adjust their portfolio components …

How Do Cdos And Cdss Influence The Crisis Of 2008, Martin Buffet

Lingnan Journal of Banking, Finance and Economics

Everybody has heard about the “subprime” crisis but do we really know how it occurred and why this phenomenon had such an impact on our economies. One aspect of the answer to this question lies in the trade of credit default swaps (CDSs). These financial products led to less transparency in the markets and to a very collectively vulnerable financial system. This created a vicious circle that had not been anticipated by our financial regulators. In this paper, we will discuss how it occurred and what could have been done to avoid, or at lease reduce, the impact of these …

The Study Of Enhanced Performance Measurement Of Mutual Funds In Asia Pacific Market, Juzhen Li

Lingnan Journal of Banking, Finance and Economics

This empirical paper will compare the result by running Costa and Jakob's models (2010) using mutual funds in Asia Pacific market excluding Japan. Costa and Jakob's paper, Enhanced Performance Measurement of Mutual Funds: Running the Benchmark Index through the Hurdles, is highly related to this empirical paper and is generally based on Carhart's four-factor model (Carhart, 1997) with US securities market data. Apart from the comparison between Asia Pacific market excluding Japan and US market, further research on auxiliary and heteroscedasticity will also be conducted.

Essays In Corporate Responsibility And Finance, Mert Demir

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters:

Chapter 1: The Effects of Corporate Social Performance and Social Norms on Market Valuation of Nonfinancial Disclosures Using a novel measure of the quality of corporate social responsibility (CSR) disclosures by global companies, this paper analyzes how CSR report quality affects firm value when mediating roles of social pressure and CSR performance are considered. I find that firms operating in socially controversial industries enjoy higher valuations when they issue high-quality CSR reports. I also find that for firms with poor CSR performance, higher-quality CSR disclosure is associated with a decline in firm value, while …

Is Silence The Answer?, Gator Adams

CMC Senior Theses

This study examines the relationship between company management guidance, and ex-ante crash risk over the duration of 2008(Jan 2006-Dec 2009) financial crisis using the implied volatility skew, which is based upon ex-ante volatility implied by the pricing model developed by Black-Scholes (1973). The study finds that over the duration of this crisis period, management guidance decreases with a rise in ex-ante crash risk. Further, the study provides evidence on the relationship of management guidance and earnings volatility, and how that is affected by a firm's industry product concentration based on the Herfindahl-Hirschman Index (HHI) score.

Luck, Justice And Systemic Financial Risk, John Linarelli

Scholarly Works

Systemic financial risk is one of the most significant collective action problems facing societies. The Great Recession brought attention to a tragedy of the commons in capital markets, in which market participants, from first-time homebuyers to Wall Street financiers, acted in ways beneficial to themselves individually, but which together caused substantial collective harm. Two kinds of risk are at play in complex chains of transactions in financial markets: ordinary market risk and systemic risk. Two moral questions are relevant in such cases. First, from the standpoint of interactional morality, does a person have a moral duty to avoid risk of …

Do Disaster Experience And Knowledge Affect Insurance Take-Up Decisions?”, Jing Cai, Changcheng Song

Research Collection Lee Kong Chian School Of Business

This study examines the effect of experience and knowledge on weather insurance adoption. First, we conduct insurance games with farmers, and find that the treatment improves real insurance take-up by 46%. The effect is not driven by changes in risk attitudes and perceived probability of disasters, or by learning of insurance benefits, but is driven by the experience acquired in the game. Second, we find that providing information about the payout probability has a strong positive effect on insurance take-up. Finally, when subjects receive both treatments, the probability information has a greater impact on take-up than does the disaster experience.

Are Shorts Equally Informed? A Global Perspective, Ekkehart Boehmer, Zsuzsa R. Huszar, Yanchu Wang, Xiaoyan Wang

Research Collection Lee Kong Chian School Of Business

Short selling predicts future stock returns globally. We use 11 short-sale measures to examine the informativeness of short sales in 38 countries for the July 2006 to December 2014 period. We find that different short-sale measures display different return predictability. The days-to-cover ratio and loan supply measures have the most robust predictive power in the global capital market. We also document significant cross-country differences in the predictive power of the short selling measures and find that return predictability is stronger in countries with mild forms of short-sale restrictions, better market quality, and more developed markets.

Short Selling Meets Hedge Fund 13f: An Anatomy Of Informed Demand, Yawen Jiao, Massimo Massa, Hong Zhang

Research Collection Lee Kong Chian School Of Business

The existing literature treats the short side (i.e., short selling) and the long side of hedge fund trading (i.e., fund holdings) independently. The two sides, however, complement each other: opposite changes in the two are likely to be driven by information, whereas simultaneous increases (decreases) of the two may be motivated by hedging (unwinding) considerations. We use this intuition to identify informed demand and document that it exhibits highly significant predictive power over returns (approximately 10% per year). We also find that informed demand forecasts future firm fundamentals, suggesting that hedge funds play an important role in information discovery. (C) …

The Effect Of Monetary Policy On Bank Wholesale Funding, Hyunsoo Choi, Hyun Soo Choi

Research Collection Lee Kong Chian School Of Business

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the retail deposit supply due to, for example, a decrease in bank reserves or in money demand, banks try to substitute the deposit outflows with more wholesale funding in order to mitigate the policy impact on their lending. Banks have varying degrees of accessibility to wholesale funding sources because of financial frictions, and those banks that are large or that have a greater reliance on wholesale funding increase their wholesale funding more. As a result, monetary tightening increases both the reliance on and …

The Effect Of Monetary Policy On Bank Wholesale Funding, Hyunsoo Choi, Hyun Soo Choi

Research Collection Lee Kong Chian School Of Business

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the retail deposit supply due to, for example, a decrease in bank reserves or in money demand, banks try to substitute the deposit outflows with more wholesale funding in order to mitigate the policy impact on their lending. Banks have varying degrees of accessibility to wholesale funding sources because of financial frictions, and those banks that are large or that have a greater reliance on wholesale funding increase their wholesale funding more. As a result, monetary tightening increases both the reliance on and …

Days To Cover And Stock Returns, Harrison G. Hong, Frank Weikai Li, Sophie X. Ni, Jose A. Scheinkman, Philip Yan

Research Collection Lee Kong Chian School Of Business

A crowded trade emerges when speculators' positions are large relative to the asset's liquidity, making exit difficult. We study this problem of recent regulatory concern by focusing on short-selling. We show that days to cover (DTC), the ratio of short interest to trading volume, measures the costliness of exiting crowded trades. Crowding is an important concern as short-sellers avoid illiquid stocks, which we establish using an instrumental-variables strategy involving staggered stock market decimalization reforms. Arbitrageurs require a premium to enter into such trades as a strategy shorting high DTC stocks and buying low DTC stocks generates a 1.2% monthly return. …

Textual Analysis And Machine Leaning: Crack Unstructured Data In Finance And Accounting, Li Guo, Feng Shi, Jun Tu

Research Collection Lee Kong Chian School Of Business

In finance and accounting, relative to quantitative methods traditionally used, textual analysis becomes popular recently despite of its substantially less precise manner. In an overview of the literature, we describe various methods used in textual analysis, especially machine learning. By comparing their classification performance, we find that neural network outperforms many other machine learning techniques in classifying news category. Moreover, we highlight that there are many challenges left for future development of textual analysis, such as identifying multiple objects within one single document.

B.E.I.B. And Financial Inclusion In Northwest Cameroon, Kareen Ngendape Atchala

Capstone Collection

The Bee Effect Initiative Bank uses an integrated approach to foster financial inclusion in the North West region of Cameroon. This paper has several services under three main themes; economic wellbeing, capacity building, and insurance. Its theory of change and objectives while seeking to make profit centers on creating social change. The mechanics in the paper seek to evoke sustainable economic change in cross sectors- savings, credit, capacity building, and insurance with ROSCAs as target clientele.

The Integrity Of Financial Analysts: Evidence From Asymmetric Responses To Earnings Surprises, Rui Lu, Wenxuan Hou, Henry Oppenheimer, Ting Zhang

Economics and Finance Faculty Publications

This paper investigates the integrity of financial analysts by examining their recommendation responses to large quarterly earnings surprises. Although there is no significant difference in recommendation changes between affiliated and unaffiliated analysts in response to positive earnings surprises, affiliated analysts are more reluctant than unaffiliated analysts to downgrade stock recommendations in response to negative earnings surprises. The evidence implies that conflicts of interest undermine the integrity of financial analysts. We further examine the effects of reputation concern and the Global Research Analyst Settlement as informal and formal mechanisms, on restoring analysts’ integrity. The results show that the positive bias in …

Self-Correcting Kelly Strategies For Skeptical Traders, Aaron C. Brown

International Conference on Gambling & Risk Taking

The Kelly criterion gives the appropriate bet size in idealized situations with known parameters. In financial trading situations parameters are generally unknown and the mathematical assumptions underlying the Kelly proof are not met precisely. Moreover a risk manager typically must cooperate with a trader who may be skeptical about both the Kelly criterion specifically and the concept of mathematical optimization of bet size in general.

This presentation tackles the problem of designing a Kelly-based system for setting trade risk management parameters that is both self-correcting (the system delivers good results even if initial parameter are misestimated or parameters change) and …

Endogeneity In Ceo Power: A Survey And Experiment, Zhichuan Li

Business Publications

The endogeneity problem has always been one, if not the only, obstacle to understanding the true relationship between different aspects of empirical corporate finance. Variables are typically endogenous, instruments are scarce, and causality relations are complicated. As the first attempt to summarize different econometric methods that are commonly used to address endogeneity concerns in the context of corporate governance, we explore the relation between CEO power and firm performance, as an experiment, to illustrate how these methods can be used to mitigate the endogeneity problem and by how much. After carefully dealing with the endogeneity issues, we find strong evidence …

On The Behavior Of Entrepreneurial Factor Supply To The Firm, Nicos Zafiris

The Journal of Entrepreneurial Finance

This paper draws on an existing, but little used, approach to the choices governing the supply of ‘entrepreneurial’, in the sense of ‘residually remunerated’, resources to an enterprise, especially post start up. It focuses in particular on the hybrid ‘own factor demand/supply curve’ to the firm of Bronfenbrenner (1960), but attempts to treat such supply in conjunction with ‘contractual’ employment of resources, thus making use of gearing and portfolio concepts. To achieve this, it is found necessary for the hybrid schedule to be reinterpreted and recast as the locus of the relevant utility maximising choices. A model is presented which …

Financial Performance In Upstream, Downstream, And Integrated Oil Companies In Response To Oil Price Volatility, Jonathan P. Garcia

Finance Undergraduate Honors Theses

This paper investigates the relation between crude oil price volatility and stock returns among oil companies using a three-part methodology, by using the West Texas Intermediate (WTI) as oil price benchmark. I asses the various indicators that set signals for oil price volatility and the interpretation of each (PMI, S&P500, DJIA, and World Crude Oil Output). This research also focuses on the relation between different types of companies in the oil industry (integrated, upstream, and downstream) and how each type of company will be assessed in a particular way to predict abnormal returns, based on market data and statistical analyses …

Women In Microfinance And Its Social Effects On The Community: A Case Study In Hue, Vietnam, Madison Spigel

Independent Study Project (ISP) Collection

Microfinance, a form of micro lending with no collateral, has been used as a way to finance the poor since the foundation of the Grameen Bank in Bangladesh by Muhammad Yunus in 1983. Since the Doi Moi period, the Vietnamese government has showed great interest in microfinance and has made this loan system available to both its rural and urban citizens through organizations like the Women‟s Union. Through detailed surveys and semi-structured in depth interviews of both women in the Union as well as related parties in Hue, I was able to study how microfinance is used by these women …

From Hard Money To Branch Banking California Banking In The Gold Rush Economy, Larry Schweikart, Lynne Pierson Doti

Economics Faculty Articles and Research

In Gold Rush–era California, banking and the financial sector evolved in often distinctive ways because of the Gold Rush economy. More importantly, the abundance of gold on the West Coast provided an interesting test case for some of the critical economic arguments of the day, especially for those deriving from the descending—but still powerful—positions of the “hard money” Jacksonians.

Benchmarking And Currency Risk, Massimo Massa, Yanbo Wang, Hong Zhang

Research Collection Lee Kong Chian School Of Business

We show that the currency risk embedded in the benchmarks of international mutual funds negatively affects fund performance. More specifically, a high benchmark-implied currency risk induces funds to invest in markets with less volatile currencies, leading to a higher degree of currency concentration in portfolio holdings. This currency concentration, however, departs from the optimal equity allocation strategy across countries and reduces fund performance. We document that funds resorting to high currency concentrations underperform funds with low currency concentrations by as much as 1%-2% per year.

Essays On The Equity Risk Premium, Mohamed Mehdi Rahoui

Finance Theses & Dissertations

The equity risk premium (ERP) is an essential component of any asset pricing model both for academics and practitioners alike. Nevertheless, the financial literature does not accord much attention to the ERP estimation issues (Damodaran, 2015). The first chapter of this dissertation gives a summary of the recent literature review on the subject of the ERP. The second chapter explores four of the most commonly cited models in literature for estimating the ERP: the Historical Mean of Realized Returns Model (HMRRM), the Dividend Discount Model (DDM), the Free Cash Flow Model (FCFM), and the Sharpe Ratio Model (SRM). The results …

Two Essays On Short Selling, Zhaobo Zhu

Finance Theses & Dissertations

This dissertation provides some new evidence that the information contained in short selling is informative about future returns, confirming the role of short sellers in the price discovery process.

The first essay examines the cross-sectional relation between the change in short interest and expected stock returns. NYSE/AMEX stocks with large decreases (increases) in short interest over past medium-term horizon experience significant and positive (negative) abnormal returns. Moreover, the positive abnormal returns are larger in absolute value and are more persistent than negative abnormal returns. The return spread between bottom and top deciles is economically and statistically significant and persistent. The …

Two Essays On Investor Emotions And Their Effects In Financial Markets, Jiancheng Shen

Finance Theses & Dissertations

This dissertation provides empirical evidences on media-based investor emotions in predicting stock return, conditional volatility, and stock and bond return comovements.

We first studied the interaction between US media content and the US stock market returns and volatility. We utilize propriety investor sentiment measures developed by Thompson Reuters MarketPsych. We select four measures of investor sentiment that reflect both pessimism and optimism of small investors. Our objective is two-fold. First, we examine the ability of these sentiment measures to predict market returns. For this purpose, we use dynamic Vector Auto-Regressive models. Second, we are interested in exploring the effects of …

Ipo Markets In Asia Financial Centers : How The Different Ipo Locations Affect Firms’ Stock Prices, Yuanzhen Jiang

Lingnan Journal of Banking, Finance and Economics

For most of non-listed corporations when they are confronting the issues of cutting capital cost, to increase the base of their investors, to develop the firm business quicker, or even to diversify the pool of investors, one of the most important alternatives that the executives and shareholders of these corporations may think is to do IPO (Initial Public Offering); which could be done in the domestic or in the foreign IPO markets. This paper firstly introduces the situation and differences among different IPO markets in Asia major financial centers that includes Mainland China, Hong Kong and Singapore. Then it will …

Should Hong Kong Maintain A Linked Exchange Rate System?, Hoi Yin Tsoi

Lingnan Journal of Banking, Finance and Economics

The linked exchange rate was implemented in 1983. This paper finds that over these 32 years, this system did bring lots of benefits to Hong Kong. Nevertheless, as Hong Kong is a vastly different place now relative to what it was 32 years ago, the costs for the adoption of the link outweigh the benefits so this system is no longer suitable for Hong Kong. It is suggested that in order to serve the best interest of Hong Kong, it should not maintain the linked exchange rate system and should switch to the managed floating exchange rate system.

Empirical Study : Shanghai-Hong Kong Stock Connection Sign Of Efficiency Improvement?, Ming Cheung Fok

Lingnan Journal of Banking, Finance and Economics

Stock market connection encourages local corporations cross-listing in overseas stock markets which will, theoretically, enhance the information flow between countries and the stock market efficiency. In view of a closed economy like China and a free economy like Hong Kong, the announcement of Shanghai-Hong Kong stock connection program seems to be a great opportunity for testing the well-known Efficiency Market Hypothesis (EMH). Employing Capital Asset Pricing Model (CAPM) and the random walk model suggested by previous studies, this paper will present the comparison of market performance before and after the connection as evidences for the hypothesis testing.

An Empirical Analysis Of Factors Influencing China's Real Estate Prices-Based On The Var Model, Pan Xiao

Lingnan Journal of Banking, Finance and Economics

The real estate industry has an increasingly significant position in our national economy. It is important for real estate investment and national macro-control to analyze the main factors that affect its prices, in order to predict its future movements. In this paper, the dynamic econometric analysis method was used to analyze these macroeconomic factors that influence the real state prices on a empirical research. And the results show that the expected prices of real estate, money supply, real estate development investment and household income are the dominant factors influencing them.

Factors In The Returns On Stock : Inspiration From Fama And French Asset Pricing Model, Yuanzhen Jiang

Lingnan Journal of Banking, Finance and Economics

Under the inspiration of Fama and French asset pricing model, this paper mainly studies the relationship between the month return of A shares and the factors that may have an effect on the stocks’ month return. It also compares the differences in the reaction of all shares and GEM board shares to these factors. It is important to highlight that these factors include the market, firm size, earnings and book-to-market information. The data used in this project comes from the quarterly data of China stock market from March of 2000 to December of 2011 and was used in panel model …