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Articles 1141 - 1170 of 1293

Full-Text Articles in Finance and Financial Management

Discretionary Behavior With Respect To The Adoption Of Sfas 142 And The Behavior Of Security Prices, Yoonseok Zang Feb 2008

Discretionary Behavior With Respect To The Adoption Of Sfas 142 And The Behavior Of Security Prices, Yoonseok Zang

Research Collection School Of Accountancy

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 142, Goodwill and Other Intangible Assets, which takes a very different approach to how goodwill is accounted for subsequent to the initial recognition. The new statement requires that goodwill no longer be amortized, but instead requires a transitional goodwill impairment (initial impairment loss or IIL) test in the adoption fiscal year and an annual impairment test thereafter. Since SFAS 142 allows firms substantial judgment in the adoption year in determining the amount of impairment loss, this dissertation first examines management discretionary behavior in measuring the IIL. The result shows …

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An Efficient Method For Maximum Likelihood Estimation Of A Stochastic Volatility Model, Junying, Shirley Huang, Jun Yu Jan 2008

An Efficient Method For Maximum Likelihood Estimation Of A Stochastic Volatility Model, Junying, Shirley Huang, Jun Yu

Research Collection Lee Kong Chian School Of Business

In this paper an efficient, simulation-based, maximumlikelihood (ML) method is proposed for estimating Taylor’sstochastic volatility (SV) model. The new method isbased on the second order Taylor approximation to the integrand.The approximation enables us to transfer the numericalproblem in the Laplace approximation and that inimportance sampling into the problem of inverting two highdimensional symmetric tri-diagonal matrices. A result recentlydeveloped in the linear algebra literature shows thatsuch an inversion has an analytic form, greatly facilitatingthe computations of the likelihood function of the SVmodel. In addition to provide parameter estimation, the newmethod offers an efficient way to filter, smooth, and forecastlatent log-volatility. The …

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The Effect Of Rivals When Firms Emerge From Bankruptcy, Gary L. Caton, Jeffrey Donaldson, Jeremy Goh Jan 2008

The Effect Of Rivals When Firms Emerge From Bankruptcy, Gary L. Caton, Jeffrey Donaldson, Jeremy Goh

Research Collection Lee Kong Chian School Of Business

Studies on the announcement effects of bankruptcy filings have found that when a firm files for Chapter 11 bankruptcy protection its shareholders suffer significant losses. A recent paper extends these findings by investigating the announcement effect on rival companies, while another examines the equity performance of firms emerging from bankruptcy. We combine these two lines of inquiry by examining the effect on rivals when a firm emerges from the protection of Chapter 11. We find both significant negative stock market returns and significant negative revisions in analysts’ earnings forecasts for rivals of successfully reorganized companies.

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Firm Diversification And Earnings Management: Evidence From Seasoned Equity Offerings, Chee Yeow Lim, Tiong Yang Thong, David K. Ding Jan 2008

Firm Diversification And Earnings Management: Evidence From Seasoned Equity Offerings, Chee Yeow Lim, Tiong Yang Thong, David K. Ding

Research Collection Lee Kong Chian School Of Business

Popular press suggests that diversified firms are more aggressive in managing earnings than non-diversified firms. We examine this claim in the seasoned equity offering (SEO) setting, where firms have been shown to have the incentive to manage earnings upwards. Using the cross-sectional modified Jones [(1991) J Accounting Res 29:193–228] model to measure discretionary current accruals, we find that discretionary current accruals are higher among diversified firms than in non-diversified ones. Our evidence is consistent with the view that the extent of firm diversification is directly related to the degree of earnings management. We further show that diversified issuers with high …

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The Cross-Section Of Stock Return And Volatility, Hongchao Han Jan 2008

The Cross-Section Of Stock Return And Volatility, Hongchao Han

Dissertations and Theses Collection (Open Access)

There has been increasing research on the cross-sectional relation between stock return and volatility. Conclusions are, however, mixed, partially because volatility or variance is modeled or parameterized in various ways. This paper, by using the Jiang and Tian (2005)'s model-free method, estimates daily option implied volatility for all US individual stocks from 1996:01 to 2006:04, and then employs this information to extract monthly volatilities and their idiosyncratic parts for cross-sectional regression analyses. We follow the Fama and French (1992) cross-sectional regression procedure and show that each of the 4 monthly measures of change of total volatility, total volatility, expected idiosyncratic …

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Estimating The Dynamics Of Mutual Fund Alphas And Betas, Harry Mamaysky, Matthew Spiegel, Hong Zhang Jan 2008

Estimating The Dynamics Of Mutual Fund Alphas And Betas, Harry Mamaysky, Matthew Spiegel, Hong Zhang

Research Collection Lee Kong Chian School Of Business

This article develops a Kalman filter model to track dynamic mutual fund factor loadings. It then uses the estimates to analyze whether managers with market-timing ability can be identified ex ante. The primary findings are as follows: (i) Ordinary least squares (OLS) timing models produce false positives (nonzero alphas) at too high a rate with either daily or monthly data. In contrast, the Kalman filter model produces them at approximately the correct rate with monthly data; (ii) In monthly data, though the OLS models fail to detect any timing among fund managers, the Kalman filter does; (iii) The alpha and …

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Cost Structures In Defined Contribution Systems: The Case Of Singapore's Central Provident Fund, Benedict S. K. Koh, Olivia S. Mitchell, Joelle H. Y. Fong Jan 2008

Cost Structures In Defined Contribution Systems: The Case Of Singapore's Central Provident Fund, Benedict S. K. Koh, Olivia S. Mitchell, Joelle H. Y. Fong

Research Collection Lee Kong Chian School Of Business

Retirement systems are increasingly asked to do an ever-better job of enhancing the performance of pension investments. The Singaporean Central Provident Fund permits pension system participants to keep their money in a government-run investment pool, or if they wish, they may select professionally managed unit trusts for their retirement accumulations. Opting for investment choice also exposes members to additional investment costs not charged by the government-managed account. This paper explores the charges levied by the private fund managers and we show that foreign ownership, active style of management and equity/balanced funds tend to be most expensive. We conclude with a …

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Project Options Valuation With Net Present Value And Decision Tree Analysis, Bert De Reyck, Zeger Degraeve, Roger Vandenborre Jan 2008

Project Options Valuation With Net Present Value And Decision Tree Analysis, Bert De Reyck, Zeger Degraeve, Roger Vandenborre

Research Collection Lee Kong Chian School Of Business

Real options analysis (ROA) has been developed to correctly value projects with inherent flexibility, including the possibility to abandon, defer, expand, contract or switch to a different project. ROA allows computing the correct discount rate using the replicating portfolio technique or risk-neutral probability method. We propose an alternative approach for valuing Real Options based on the certainty-equivalent version of the net present value formula, which eliminates the need to identify market-priced twin securities. In addition, our approach can be extended to the case of multinomial trees, a useful tool for modeling uncertainty in projects. We introduce within decision tree analysis …

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Value Discount Of Business Groups Surrounding The Asian Financial Crisis: Evidence From Korean Chaebols, James Jinho Chang, Young Jun Cho, Won Kang, Hyun-Han Shin Dec 2007

Value Discount Of Business Groups Surrounding The Asian Financial Crisis: Evidence From Korean Chaebols, James Jinho Chang, Young Jun Cho, Won Kang, Hyun-Han Shin

Research Collection School Of Accountancy

We examine the effect of business group membership on firm value in each pre-and postcrisis Korea. Consistent with prior studies, results show that group affiliated chaebol firms suffer value discount relative to non-chaebol firms in the precrisis period. However, we also find that chaebol firms experience an improvement in firm value relative to non-chaebol firms after the financial crisis. These findings imply that the value discount of business groups reported in prior studies is not an inevitable consequence of diversification, but can be alleviated or overcome by structural reforms in business practices or economic conditions.

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Lessons From The Sub-Prime Crisis, Melvyn Teo Nov 2007

Lessons From The Sub-Prime Crisis, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

We show that there is significant variation in performance across hedge funds during the subprime crisis. Hedge funds that (i) invested in Asia, (ii) had equity exposure, (iii) adopted directional strategies, or (iv) allowed for frequent redemptions, underperformed other funds. Moreover, leveraged funds did not fare significantly worse than their non-leveraged counterparts. Our results suggest that credit market illiquidity was not directly responsible for the bloodshed amongst hedge funds. Rather, funds were hurt by an increase in global risk aversion and by fire sales conducted in anticipation of redemptions.

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Is Direct Method Cash Flow Reporting Better At Predicting Future Performance?, Knowledge@Smu Nov 2007

Is Direct Method Cash Flow Reporting Better At Predicting Future Performance?, Knowledge@Smu

Knowledge@SMU

“Cash is king” goes the saying. Even companies enjoying brisk business have been known to fail because of unhealthy cash flows. The accounting profession is split over the benefits of the direct method (DM) versus the indirect method (IM) of preparing cash flow reports. In a study of over 100 US-based companies which used direct cash flow statements, Singapore Management University accounting professor Yoonseok Zang shows conclusively that the direct method does better at predicting future performance and earnings. --------------------------------------------------------------------------------

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The Change In Corporate Transparency Of Korean Firms After The Asian Financial Crisis: An Analysis Using Analysts' Forecast Data, Jinho Chang, Young Jun Cho, Hyun-Han Shin Nov 2007

The Change In Corporate Transparency Of Korean Firms After The Asian Financial Crisis: An Analysis Using Analysts' Forecast Data, Jinho Chang, Young Jun Cho, Hyun-Han Shin

Research Collection School Of Accountancy

Using analysts' forecast error and forecast dispersion of firms covered by the I/B/E/S database, this study examines the change in information asymmetry of Korean firms around the financial crisis of 1997. Results show that the information asymmetry of Korean firms is lower after the financial crisis than before, implying that corporate transparency did, in effect, improve with the change in business environment. In addition, this study finds that chaebol firms have higher information asymmetry than non-chaebol firm, and also that the corporate transparency improvement of chaebol firms is not higher than that of non-chaebol firms in the post-crisis period despite …

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Top Performing Hedge Funds: Does Geography Make A Difference?, Knowledge@Smu Oct 2007

Top Performing Hedge Funds: Does Geography Make A Difference?, Knowledge@Smu

Knowledge@SMU

Do hedge funds earn above-average returns? Is there a way to identify these top performers? Where hedge funds are located makes the difference, according to Singapore Management University finance professor Melvyn Teo, who is also director of the university’s BNP Paribas Hedge Fund Centre. Teo puts forward evidence for the hypothesis that locally-managed hedge funds are better able to monitor their investments and, therefore, generate superior returns.

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Minimum Profitability Ruling A Boon Or Bane? Some Lessons From China, Knowledge@Smu Oct 2007

Minimum Profitability Ruling A Boon Or Bane? Some Lessons From China, Knowledge@Smu

Knowledge@SMU

China’s Securities Regulatory Commission (CSRC) stands out in its approach to tighten restrictions for listed companies wanting to initiate rights issues or seasoned equity offerings (SEOs). The country’s experience, relevant to other emerging markets, is the subject of a research paper published recently in the International Journal of Accounting, co-authored by Kevin C.W. Chen, accounting professor at the Hong Kong University of Science and Technology and Singapore Management University accounting professor Jiwei Wang. --------------------------------------------------------------------------------

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European Venture Capital Market: Scaling Beyond Current Boundaries, Gerard George, Eva Nathusius Oct 2007

European Venture Capital Market: Scaling Beyond Current Boundaries, Gerard George, Eva Nathusius

Research Collection Lee Kong Chian School Of Business

This study systematically documents the perceptions of LPs, venture capitalists and entrepreneurs and their views of the trends and challenges facing the European venture capital market. The interest from LPs in European venture capital funds was found to be neutral to marginally negative because of historical returns. However, buoyancy in the supply of high quality opportunities at reasonable valuations has the potential to improve this outlook. The findings suggest that European venture capitalists still face structural barriers in the form of heterogeneous consumer preferences, improving but weak exit and fundraising environments, and the scarcity of LPs of significant size. The …

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Should China Keep Its Dollar Peg? Some Parallels From Japan, Knowledge@Smu Sep 2007

Should China Keep Its Dollar Peg? Some Parallels From Japan, Knowledge@Smu

Knowledge@SMU

At a recent Singapore Management University School of Economics Distinguished Lecture, Stanford University international economics professor Ronald I. McKinnon warned of a possible ‘lost decade’ of falling price levels and undesirably low interest rates in China, similar to those experienced by Japan in the 1990s. McKinnon draws parallels between Japan in the late 1980s and present day China in his paper entitled “Why China Should Keep its Exchange Rate Pegged to the Dollar: A Historical Perspective from Japan”. --------------------------------------------------------------------------------

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Asymmetries In Stock Returns: Statistical Tests And Economic Evaluation, Yongmiao Hong, Jun Tu, Guofu Zhou Sep 2007

Asymmetries In Stock Returns: Statistical Tests And Economic Evaluation, Yongmiao Hong, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

We provide a model-free test for asymmetric correlations in which stocks move more often with the market when the market goes down than when it goes up, and also provide such tests for asymmetric betas and covariances. When stocks are sorted by size, book-to-market, and momentum, we find strong evidence of asymmetries for both size and momentum portfolios, but no evidence for book-to-market portfolios. Moreover, we evaluate the economic significance of incorporating asymmetries into investment decisions, and find that they can be of substantial economic importance for an investor with a disappointment aversion (DA) preference as described by Ang, Bekaert, …

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Singapore’S Cpf Retirement Scheme: Delivering More Bang For The Buck, Knowledge@Smu Aug 2007

Singapore’S Cpf Retirement Scheme: Delivering More Bang For The Buck, Knowledge@Smu

Knowledge@SMU

Singapore’s Central Provident Fund (CPF) is one of Asia’s oldest and best known defined contribution retirement schemes. As the country rapidly ages, government policymakers are paying close attention to whether its citizens and residents are saving enough for retirement. Benedict Koh, Olivia Mitchell and associates recently prepared two working papers which examine the CPF Investment Scheme (CPFIS) as well as its potential to adequately support members in retirement.

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Exploring The Role That Forecast Surprise And Forecast Error Play In Determining Management Forecast Precision, Jong-Hag Choi, Linda Myers, Yoonseok Zang, David Ziebart Aug 2007

Exploring The Role That Forecast Surprise And Forecast Error Play In Determining Management Forecast Precision, Jong-Hag Choi, Linda Myers, Yoonseok Zang, David Ziebart

Research Collection School Of Accountancy

No abstract provided.

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A New Approach To The Measurement Of Polarization For Grouped Data, Eckart Bomsdorf, Clemens A. Otto Aug 2007

A New Approach To The Measurement Of Polarization For Grouped Data, Eckart Bomsdorf, Clemens A. Otto

Research Collection Lee Kong Chian School Of Business

In this paper we develop a measure of polarization for discrete distributions of non-negative grouped data. The measure takes into account the relative sizes and homogeneities of individual groups as well as the heterogeneities between all pairs of groups. It is based on the assumption that the total polarization within the distribution can be understood as a function of the polarizations between all pairs of groups. The measure allows information on existing groups within a population to be used directly to determine the degree of polarization. Thus the impact of various classifi- cations on the degree of polarization can be …

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Investing In Hedge Funds When Returns Are Predictable, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo Aug 2007

Investing In Hedge Funds When Returns Are Predictable, Doron Avramov, Robert Kosowski, Narayan Y. Naik, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

This paper evaluates hedge fund performance through portfolio strategies that incorporate predictability in managerial skills, fund risk loadings, and benchmark returns. Incorporating predictability substantially improves performance for the entire universe of hedge funds as well as various subsets based on investment styles. Such out-performance is strongest during market downturns when the marginal utility of consumption is relatively high. Moreover, the major source of investment profitability is predictability in managerial skills. In particular, long-only strategies that incorporate predictable skills outperform their Fung and Hsieh (2004) benchmarks by over 12 percent per year. The economic value of predictability obtains for various rebalancing …

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Asian Hedge Funds: A Tale Of Three Cities, Melvyn Teo Jul 2007

Asian Hedge Funds: A Tale Of Three Cities, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

The hedge fund industry in Asia is dominated by a trio of financial centres: Hong Kong, Singapore, and Sydney. In this inaugural issue of the statistical digest, we provide a broad overview of the hedge fund industry in Asia and zero in on issues relevant to investors. Our analysis will be organized along the lines of manager location. Accordingly, we ask the following questions: How are hedge fund assets deployed across the three centres? What investment strategies do these assets partake in? Does the risk-adjusted performance of those assets differ across centres? To shed light on these issues, we employ …

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Managing Retirement Risk In An Ageing World: The Global Picture, Knowledge@Smu Jul 2007

Managing Retirement Risk In An Ageing World: The Global Picture, Knowledge@Smu

Knowledge@SMU

According to HSBC’s 2007 global retirement study, most retirees in their 60s and 70s are living healthy, happy and productive lives. However, as the world rapidly ages, most pre-retirees are surprisingly unconcerned about how they will cope in their retirement. In Part 1 of a 2-part article, Olivia Mitchell, Wharton professor of insurance and risk management, who is also a chaired professor at Singapore Management University, cautions that these people might be living with a false sense of security, and could face a rude awakening when it is too late to do anything about it.

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Exploring Steps To Create A Regional Monetary Unit For Asean+3, Knowledge@Smu May 2007

Exploring Steps To Create A Regional Monetary Unit For Asean+3, Knowledge@Smu

Knowledge@SMU

As part of an initiative to move towards greater financial stability in the Asian region, a Regional Monetary Unit is being proposed for the ASEAN+3 nations. These include China, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore and Thailand. Other countries can be added in the future. Professors Hwee Kwan Chow, Peter N. Kriz, Roberto S. Mariano and Augustine H. H. Tan, from the School of Economics at Singapore Management University, offer their views on the need for a RMU, what its benefits are and how it would work.

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Do Hedge Funds Deliver Alpha? A Bayesian And Bootstrap Analysis, Robert Kosowski, Narayan Y. Naik, Melvyn Teo Apr 2007

Do Hedge Funds Deliver Alpha? A Bayesian And Bootstrap Analysis, Robert Kosowski, Narayan Y. Naik, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

Using a robust bootstrap procedure, we find that top hedge fund performance cannot be explained by luck, and that hedge fund performance persists at annual horizons. Moreover, we show that Bayesian measures, which help overcome the short-sample problem inherent in hedge fund returns, lead to superior performance predictability. Relative to sorting on OLS alphas, sorting on Bayesian alphas yields a 5.5 percent per year increase in the alpha of the spread between the top and bottom hedge fund deciles. Our results are robust, and relevant to investors, as they are neither confined to small funds, nor driven by incubation bias, …

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China Forges Ahead On Financial Reform – At Its Own Pace, With Its Own Rules, Knowledge@Smu Apr 2007

China Forges Ahead On Financial Reform – At Its Own Pace, With Its Own Rules, Knowledge@Smu

Knowledge@SMU

China’s fast-evolving financial industry, like the country itself, defies the type of easy, sound bite-friendly synopses that foreign investors might like. It’s often unclear exactly what factors are stoking China’s remarkable economic growth engine. Or, as Winston Wenyan Ma, an investment banker who most recently worked for J.P. Morgan in New York and is the author of Investing in China – New Opportunities in a Transforming Stock Market, puts it: “The Chinese financial industry is a very complex story.” Speaking at the recent Wharton China Business Forum in Philadelphia, Ma moderated a panel on financial reform – a key ingredient …

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The Effect Of Financial Hedging On The Incentives For Corporate Diversification: The Role Of Stakeholder Firm-Specific Investments, Sonya Seongyeon Lim, Heli Wang Apr 2007

The Effect Of Financial Hedging On The Incentives For Corporate Diversification: The Role Of Stakeholder Firm-Specific Investments, Sonya Seongyeon Lim, Heli Wang

Research Collection Lee Kong Chian School Of Business

Financial hedging and corporate diversification are often considered substitutive means of risk management, implying that rapid development of financial hedging markets will yield less need for firms to manage risk through costly diversification. Building on a stakeholder-based view of risk management, we show that financial hedging and corporate diversification are more often complementary than substitutive. Financial hedging reduces a firm’s systematic risk, encouraging firm-specific investment by stakeholders. Larger firmspecific investment loads excessive idiosyncratic risk on the stakeholders, increasing the benefits of reducing idiosyncratic risk through diversification. Therefore, financial hedging can increase a firm’s incentives to manage risk through diversification.

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Do Hedge Funds Deliver Alpha? A Bayesian And Bootstrap Analysis, Robert Kosowski, Narayan Y. Naik, Melvyn Teo Apr 2007

Do Hedge Funds Deliver Alpha? A Bayesian And Bootstrap Analysis, Robert Kosowski, Narayan Y. Naik, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

Using a robust bootstrap procedure, we find that top hedge fund performance cannot be explained by luck, and that hedge fund performance persists at annual horizons. Moreover, we show that Bayesian measures, which help overcome the short-sample problem inherent in hedge fund returns, lead to superior performance predictability. Relative to sorting on OLS alphas, sorting on Bayesian alphas yields a 5.5 percent per year increase in the alpha of the spread between the top and bottom hedge fund deciles. Our results are robust, and relevant to investors, as they are neither confined to small funds, nor driven by incubation bias, …

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Optimal Liquidation Strategies And Their Implications, Christopher Ting, Mitch Warachka, Yonggan Zhao Apr 2007

Optimal Liquidation Strategies And Their Implications, Christopher Ting, Mitch Warachka, Yonggan Zhao

Research Collection Lee Kong Chian School Of Business

This paper studies optimal liquidation when the selling price depends on the rate of liquidation, transaction time, volume, and the asset's intrinsic value. A generic closed-form solution for maximizing the discounted liquidation proceeds is derived. To obtain financial insights, three parametric specifications that proxy for increasingly realistic market conditions are examined. In our framework, maximizing liquidation proceeds and minimizing liquidity costs are equivalent. The optimal strategies imply more rapid liquidations in less liquid markets. We also show that volatility is stochastic when market liquidity is unpredictable.

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Realized Daily Variance Of S&P500 Cash Index: A Revaluation Of Stylized Facts, Shirley J. Huang, Qianqiu Liu, Jun Yu Mar 2007

Realized Daily Variance Of S&P500 Cash Index: A Revaluation Of Stylized Facts, Shirley J. Huang, Qianqiu Liu, Jun Yu

Research Collection Lee Kong Chian School Of Business

In this paper, the realized daily variance is obtained from intraday transaction prices of the S&P 500 cash index over the period from January 1993 to December 2004. When constructing realized daily variance, market microstructure noise is taken into account using a technique proposed by Zhang, Mykland, and Ait-Sahalia (2005). The time series properties of realized daily variance are compared with those of variance estimates obtained from parametric GARCH and stochastic volatility models. Unconditional and dynamic properties concerning the realized daily variance are examined, the relationship between realized variance and returns is investigated, and the stylized facts concerning realized daily …

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