Finance and Financial Management Commons^™

Persistence In Style-Adjusted Mutual Fund Returns, Melvyn Teo, Sung-Jun Woo

Research Collection Lee Kong Chian School Of Business

The literature on mutual fund persistence took a hit with the finding that one-year stock momentum and expense ratios account for most of the persistence in mutual fund performance (Carhart, 1992; Carhart, 1997). However, since equity mutual funds are grouped into styles (e.g., large value, small growth, mid-cap growth, etc.) and are often confined to trading stocks within their style, one should measure fund performance relative to style when investigating managerial ability. Using CRSP mutual fund data and a methodology similar to Carhart (1997), we find that differences in style-adjusted fund returns persist for up to six years. Neither one-year …

The Effectiveness Of Institutional Activism, Gary L. Caton, Jeremy Goh, Jeffrey Donaldson

Research Collection Lee Kong Chian School Of Business

Researchers examined earnings-forecast revisions and stock returns after release of the Focus List of poorly performing companies by the Council of Institutional Investors. Using Tobin's q as a measure of a company's ability to improve performance, researchers found significant and positive abnormal forecast revisions and post-release stock returns for companies with q greater than one. Findings support the proposition that institutional activism is effective for underperforming companies - but only those companies with the ability to respond to the challenge to improve performance.

Is A Convertible Bond Call Really Bad News?, Louis H. Ederington, Jeremy C. Goh

Research Collection Lee Kong Chian School Of Business

The article tests and rejects the hypothesis that managers call in-the-money convertibles when they view a decline in the value of the firm as likely. Inconsistent with this view, it finds that insiders generally buy equity before conversion-forcing calls. Also, analysts tend to raise their earnings forecasts following a call. There is no evidence that earnings analysts interpret a conversion-forcing call as bad news. Indeed there is evidence that, relative to firms in general, analysts are revising their earnings forecasts upward in the months surrounding conversion-forcing calls. The article concludes that an announcement of a conversion-forcing call of a firm's …

Market Interdependence; Gold Bullion, S&P500, Mining Company Adr’S And Underlying Security Markets, Roberto Curci, Robert A. Clark, Cynthia J. Brown

Scholarship and Professional Work - Business

The internationalization of equity markets appears to be associated with a level of interdependence and transmission of stock price movements across national markets. This study examines the responses of international and ADR securities common stimulus. The study analyzes the equity price behavior of companies engaged in the production of such companies which are cross-listed in U.S. equity markets through ADRs and in underlying economic markets.

Strategic Asset Allocation For Individual Investors: The Impact Of The Present Value Of Social Security Benefits, Steve Fraser, William Jennings, David King

Management Faculty Research and Publications

This paper demonstrates the dramatic effect of social security wealth on individuals’ asset allocation. We first discuss why social security wealth should be included in portfolio asset-mix decisions. We then draw parallels between social security benefits and inflation-indexed treasury bonds to help quantify the present value of social security benefits. Finally, we show the portfolio impact of including social security wealth under several asset-mix decision rules. Excluding social security wealth from the asset mix decision results in sub-optimal portfolios. Including social security wealth provides an incentive for including more stock in the asset mix.

Eva Evidence On Public Listed Companies In Malaysia, Walter Lo

Student Works (2000-2009)

This study examines claims that Economic Value Added (EVA) better explain stock values and stock returns than traditional accounting measures. Also, this study examines the relationship between EVA and Marl

Macroeconomic Responses To Oil Price Changes And Volatility, Fui Kiun Soong

Student Works (2000-2009)

Petroleum is the third factor of production and is expected to remain so as Malaysia targets to achieve full industrialization in twenty years time. It is therefore, crucial to understand the impact of oil price on the macroeconomy. Thus, this paper attempts to examine the short-run dynamics of industrial production, interest rates and, stock market activity, in relation to oil price changes and oil price volatility by using the vector autoregressive (VAR) model. Volatility is modeled using the Generalised Autoregressive Conditional Heteroskedasticity (GARCH) model. Systematic shocks are introduced and the impacts of anticipated and unanticipated oil price changes are analyzed …

Insider Trading On The Kuala Lumpur Stock Exchange : An Empirical Study, Jooky Lim

Student Works (2000-2009)

In Malaysia there are strict laws that prohibit insider trading. With the presence of such laws, this study explores whether insider trading exists on the Kuala Lumpur Stock Exchange (KLSE). Information on insider trading obtained from filing made to the KLSE by directors and substantial shareholders from 1 March 2000 to 7 March 2000 were analysed for abnormal returns. Based on daily price movements for 150 days before and after a transaction was carried out, it was observed that there are signals of insider trading on the KLSE. Insiders managed to maximise their average market adjusted returns prior to selling …

Does The Value Investing Strategy Outperform The Klci? : (Empirical Refutation Against The Efficient Market Hypothesis In Its Semi-Strong Form), Jee Mun Wong

Student Works (2000-2009)

A value strategist is a fund manager who seeks to buy stocks that are a discount to their fair value and sell them· in excess of that value. Value strategists see value where many other market participants do not. Value investing strategy was popularized by Benjamin Graham and later, his protégé Warren Buffett. Graham, a finance professor, taught security analysis at Columbia University and retired a millionaire as a result of his investments in the NYSE. Together with David Dodd, he laid out the analytical framework for investing in stocks that are cheap on the basis of their underlying assets. …

Holiday Effect : A Decade Of Change In The Performance Of The Kuala Lumpur Stock Exchange, Rina Bee Yan Tong

Student Works (2000-2009)

This empirical research investigates the holiday effect in the Kuala Lumpur Stock Exchange (KLSE) using three daily stock indices: Kuala Lumpur Stock Exchange Composite Index (KLSE Cl), Exchange Main Board All-Share Index (KLSE EMI), and Kuala Lumpur Stock Exchange Second Board Index (KLSE SBI) over the period January 1990 to June 2001. The results show abnormally high pre­holiday returns which predominate only on the single trading day immediately prior to holidays and the pre-holiday fraction of positive return is found significantly higher for all three indices. On the other hand, the post-holiday returns are higher than normal trading days but …

An Analysis Of The Cross Section Of Returns For Ereits Using A Varying-Risk Beta Model, C. Mitchell Conover, H. Swint Friday, Shelly W. Howton

Finance Faculty Publications

A dual-beta asset pricing model is employed to examine the cross-section of realized equity real estate investment trust (EREIT) returns over bull and bear markets. No significant relationship is found between EREIT returns and a constant beta. However, beta explains cross-sectional returns when betas are allowed to vary across bull markets. This positive relationship exists for both January and non-January months. During bear-market months, no significant relationship is found between REIT betas and returns. But, during such months, size and book-to-market ratio are found to be negatively related to returns.

Corporate Governance In Selected Public Listed Companies In Malaysia, Sue Lin Lim

Student Works (2000-2009)

During economic boom periods, most shareholders and company regulators paid little attention to good corporate governance, hence the reason for weak corporate governance. This study investigates whether weak corporate governance has significant effects on the corporate performance, investment and financing patterns of selected public listed companies in Malaysia. Previous researches done by Xu and Wang (1997) and Saldana (1999) seem to show that there is a close link between these variables. Based on the regression model formulated in this study, a relationship between weak corporate governance with respect to corporate performance, investment and financing patterns have been established. From the …

The Performance Of Bumiputera-Controlled Companies At The Klse, Before And During The Currency Crisis, Nor Azizan Che Embi

Student Works (2000-2009)

The National Development Policy has successfully achieved their objectives to increase the number of Bumiputera companies that can play an important role in the economy. The number of Bumiputera-controlled companies has increased during the booming period (1995-1996). During this period, many Bumiputera individuals showed their capabilities to handle mega projects in Malaysia. In order to achieve the NDP objectives, many Bumiputera companies stick together and listed in the KLSE. However the Asian countries were hit by currency crisis in the middle of 1997. For almost two and half years, Malaysia experienced a turbulent economy caused by currency crisis. In order …

Economic Value Added : Superior Measurement Of Shareholders' Value, Amalanathan Thomas

Student Works (2000-2009)

In 1961, Prof. Franco Modigliani and Prof. Merton H. Miller (MM) said in their article Dividend Policy, Growth and The Evaluation of Shares: "To measure corporate performance for market capitalization, companies should consider earnings, cash flows, dividends and investment opportunities as alternatives". Stern Stewart, an advocate of Economic Value Added (EVA) approach to shareholder value understands the issues raised under the MM model which has led him to the view that "free cash flows is cash from operations that is available, attributable to both leaders and shareholders. In other words, it is the cash that is free for distribution to …

Impact Of Corporate Performance And Financial Policies On Shareholder Value In Malaysia, Kuan Hua Quah

Student Works (2000-2009)

This study examines the relationships between firms' shareholder value levels and its corporate performance, financial policies and growth opportunities. A five-year period was used ranging from 1995 to 1999. and involved a total of 106 companies that are listed in the Kuala Lumpur Stock Exchange (KLSE). In attempting to increase knowledge regarding shareholder value issues in Malaysia, a better understanding about the various financial variables that affect shareholder value of companies in Malaysia is expected. Findings show that firms with higher growth opportunities tend to have higher shareholder value levels. The results are more mixed with regard to a company's …

Mergers And Acquistions : A Study On The Performance Of Non-Financial Companies In Malaysia, Maran Marimuthu

Student Works (2000-2009)

This study examines the performance of non-financial companies that were involved in merger and acquisition activities between 1990 and 1995. A sample of 60 non-financial companies has been selected which are then split into two main groups; low sales growth companies and high sales growth companies. The objectives of the study are; to examine those companies' performance over the period 1996-1998, to compare their performance with respect to pre-crisis and crisis periods and to assess shareholder value appreciation in comparison between the low sales growth companies and high sales growth companies during their post-acquisition period. Capital gains are used to …

Performance Of Unit Trusts In Malaysia In The Period Of 1995 To 1999, Khing Wee Ong

Student Works (2000-2009)

Malaysia has experienced one of the Vv'Orst economic and financial crises in the history, in the second half of 1997. Many people are aware on how the crisis affected the share market, but not many know about the effects to the unit trusts industry. This research provides an insight on how the unit trusts in Malaysia have performed during the financial crisis. To make comparisons, the period of the research has been divided into two sub-periods, the first one being prior to the financial crisis (March-95 to June-97) and the second or.e being during the financial crisis (July-97 to November-99). …

An Investigation Of Price Discovery In Informationally-Linked Markets: Equity Trading In Malaysia And Singapore, David K. Ding, Frederick H. Harris, Sie Ting Lau, Thomas H. Mclnish

Research Collection Lee Kong Chian School Of Business

Using transactions data for the Kuala Lumpur Stock Exchange and the Stock Exchange of Singapore (SES) for a major Malaysian conglomerate, Sime Darby Berhad, and intraday exchange rate data, we investigate whether and to what extent each exchange contributes to price discovery. Results indicate that the price series are cointegrated. The raw data appear to indicate the presence of arbitrage opportunities, but none exist after taking exchange rate changes into account. Using the common long-memory factors of Gonzalo and Granger (1995, Journal of Business and Economic Statistics 13, 1-9), we show that while the majority of the price discovery (approximately …

Securitisation, Kannan Venkateshwar

IIMB Management Review

No abstract provided.

The Determinants Of Bid-Ask Spreads In The Foreign Exchange Futures Markets: A Microstructure Analysis, David K. Ding

Research Collection Lee Kong Chian School Of Business

This paper investigates and analyzes the intraday and daily determinants of bid-ask spreads in the foreign exchange futures market. It is found that the number of transactions is negatively related to the BAS, whereas volatility in general is positively related to it. The study also finds that there are economies of scale in trading FXF contracts. The intraday BAS follows a U-shaped pattern, and they tend to be higher on Mondays and Tuesdays than on other days of the week. Higher spreads at the beginning and end of a trading day are consistent with the presence of adverse selection and …

Searching For Periods Of Volatility: A Study Of The Behavior Of Volatility In Thai Stocks, Theodore Bos, David K. Ding, Thomas A. Fetherston

Research Collection Lee Kong Chian School Of Business

This paper improves the precision of the useful new procedure of Inclán and Tiao (1994) that estimates variance shift points in a time series. It accomplishes this by incorporating the evidence of Bos and Fetherston (1992) that the linear Brown, Durbin, and Evans (Brown et al., 1975) critical CUSUM of squares boundaries [used by Inclán and Tiao] produce an understatement of instability at the data end points. This is solved by Tanizaki (1995) which, like Bos and Fetherston (1992) and Bos and Fetherston (1995), uses the fact that the CUSUM of squares statistic follows a beta distribution. This study uses …

How Much Is Purchasing Power Parity Worth?, Stefan C. Norrbin, C. Mitchell Conover

Finance Faculty Publications

Updating Bilson 's (1984) investment strategy using an out-of-sample forecast procedure, we find much smaller profits from a trading strategy based on purchasing power parity. Though the total profit is significant at a 5 percent level, it is substantially lower than what Bilson found. Our results suggest Bilson's excess profits are due to the sample of data used and the in-sample nature of the tests. Hence, this paper demonstrates that the simple investment strategy leads to the same conclusion that econometric testing does; namely, that purchasing power parity is only marginally useful in forecasting exchange rates.

Recent Developments In Modern Finance, Subroto Roy

IIMB Management Review

While it has become commonplace to speak of whirlwind changes in global financial markets, the lay investor is often faced with mysterious new terms without being given an adequate description of the concepts behind them. An attempt has been made to demystify some of the myths and mysteries connected with these developments.

The Information Content Of Fdi Announcements: Evidence From An Emerging Market, David K. Ding, Qian Sun

Research Collection Lee Kong Chian School Of Business

This study examines the stock return responses to the announcements of foreign direct investments (FDI) by Singaporean companies. A standard event study methodology is used to ascertain the abnormal returns around the announcement day (day 0). The study covers the period from 1989 to 1994 with a sample size of 70 events. The announcement effect is positive and significant around the announcement day. The average abnormal return is 0.4913 percent on day 0, and the two-day (days 0 and 1) cumulative abnormal return is 0.9642 percent. However, the abnormal return is unequally distributed across the sample firms. A cross-sectional analysis …

The Opening Price Behavior: Foreign Exchange Futures Market Versus Equity Market, Quentin C. Chu, David K. Ding, C. S. Pyun

Research Collection Lee Kong Chian School Of Business

Daily opening, noon, and closing prices of Deutschemark and Japanese yen futures are examined for the efficiency of the foreign exchange futures (FXF) market. Variance ratio and multiple variance ratio tests, are employed. The prices are found to be serially uncorrelated. This random walk behavior sheds light on the differences between the FXF and commodity or equity markets. The conclusions suggest that the FXF market is a 24-hour global market, reflecting a disparity with equity markets where round-the-clock trading is advocated since the high volatility during market opening would be eliminated, leading to potential cost reductions for traders as spreads …

Share-Price-Changes-Volume Relation On The Singapore Equity Market, David K. C. Lee, Mohamed Ariff

Research Collection Lee Kong Chian School Of Business

A critical review of the literature on security-price-changes-volume research suggests that the published studies in the United States and one each in Hong Kong and Japan have largely ignored the impacts on the results from autocorrelation, non-normality of distributions, heteroscedasticity and non-linear functional forms. Therefore, the reported findings are not robust. In testing for this relation from a small sample of continuously traded shares in the Singapore share market, we find that consistent results may not be obtained because of violations of basic test conditions. A task that remains is an application of alternative test models with data transformation using …

Bulletin No 4167 - Futures Markets, Roderick Grieve

Bulletins 4000 -

Most people have heard of futures but many are unsure of what they are or how they work. The primary purpose of futures is to reduce the risks associated with selling or buying commodities whose price fluctuates. The futures market operates by bringing buyers and sellers together in one place where they negotiate prices at which certain specified commodities will change hands at given future dates. Users of the futures market include producers or users of the commodity, traders in the commodity and speculators.

Futures contracts differ in several respects from typical contracts for cash sales. The futures contract standardizes …

Ambiguities In The Cross-Section Analysis Of Per Share Financial Data, E G. Davis, D M. Dunn, William (Bill) H. Williams

Publications and Research

In analyzing corporate financial data it is standard procedure to adjust the data to reflect the current number of shares outstanding. In this study, we show that this simple ,standard procedure can cause serious difficulties in a financial analysis.