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Articles 961 - 990 of 1293

Full-Text Articles in Finance and Financial Management

Flagship Funds At Hedge Fund Families, Melvyn Teo Oct 2011

Flagship Funds At Hedge Fund Families, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

Motivated by the stellar performance of flagship funds such as the Renaissance Medallion fund, we ask whether hedge fund firms (e.g. Renaissance Technologies) have incentives to protect the performance of their flagship funds (e.g. Medallion). We find that the flagship fund tends to outperform other funds within the fund family. The fees and redemption terms of non-flagship funds at launch is correlated with the past performance of the flagship fund. Finally, flagship fund performance has a positive impact on net flows into the other funds within the same family.

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Predictions For Protection: A System To Measure And Detect Asset Bubbles, Knowledge@Smu Oct 2011

Predictions For Protection: A System To Measure And Detect Asset Bubbles, Knowledge@Smu

Knowledge@SMU

Millions of lives can be ruined with the bursting of economic bubbles. Just in the past two decades alone, the world has had the misfortune of witnessing two such incidents; first with the dot-com burst, and then most recently, with the housing and sub-prime crisis that led to a global recession. While there is reportedly no cure for the greed, economists have made strides to identify and predict bubbles – thereby paving the way for institutional stopgaps that could well prevent a financial crisis.

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What Is Behind The Asset Growth And Investment Growth Anomalies?, Fangjian Fu Oct 2011

What Is Behind The Asset Growth And Investment Growth Anomalies?, Fangjian Fu

Research Collection Lee Kong Chian School Of Business

Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that shrink their assets or investments subsequently earn higher returns than firms that expand their assets or investments. I show that the superior returns of the low asset and investment growth portfolios are due to the omission of delisting returns in CRSP monthly stock return file and that the poor returns of the high asset and investment growth portfolios are largely driven by the subsample of firms that have issued large amounts of debt or equity in the previous year. Controlling for the effects of the …

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How The Mindless Growth Mantra Of Modern Economics Is Failing Us, Knowledge@Smu Sep 2011

How The Mindless Growth Mantra Of Modern Economics Is Failing Us, Knowledge@Smu

Knowledge@SMU

As the world ponders the possibility of yet another global recession, one economist has offered up, instead, a critical view of the fundamental flaws within a system so caught up with consumption that a second wave recession would seem more intentional than unnerving. In 'The End of Progress: How modern economics has failed us', author Grame Maxton takes readers through a re-examination of 'the invisible hand' and puts forth several radical ideas for how the world economy may repair itself.

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Building Structured Products: Like Manufacturing A Complex, Abstract Car, Singapore Management University Aug 2011

Building Structured Products: Like Manufacturing A Complex, Abstract Car, Singapore Management University

Perspectives@SMU

What are structured products, and how do they fit in with clients' needs and the banks' range of services? Experts from Standard Chartered Bank's (SCB) structuring business provided their take at SMU's Lee Kong Chian School of Business Public Lecture.

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Building Structured Products: Like Manufacturing A Complex, Abstract Car, Knowledge@Smu Aug 2011

Building Structured Products: Like Manufacturing A Complex, Abstract Car, Knowledge@Smu

Knowledge@SMU

The inner workings of structured financial products and the structured products industry might seem complicated to outsiders looking in. After all, regulatory restrictions, quantitative financial modelling, and foreign exchange options are not exactly universally understood commonplace terms. Industry insiders at a Lee Kong Chian School of Business Public Lecture say, however, that an appreciation for this seemingly complex domain is more about attitude than aptitude.

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Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer Aug 2011

Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer

Research Collection Lee Kong Chian School Of Business

Overvaluation may motivate a firm to use its stock to acquire a target whose stock is not as overpriced (Shleifer and Vishny (2003)). Though hypothetically desirable, these acquisitions in practice create little, if any, value for acquirer shareholders. Two factors often impede value creation: payment of a large premium to the target and lack of economic synergies in the acquisition. We find that overvaluationdriven stock acquirers suffer worse operating performance and lower long-run stock returns than control firms that are in the same industry, similarly overvalued at the same time, have similar size and Tobin’s q, but have not pursued …

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Financial Capital And Startup Survival, Jeongsik Lee, Wei Zhang Aug 2011

Financial Capital And Startup Survival, Jeongsik Lee, Wei Zhang

Research Collection Lee Kong Chian School Of Business

Are entrepreneurs liquidity-constrained? We attempt to answer this question by investigating the impact of financial capital on startup survival. The analysis of about 5,000 startups from the Kauffman Firm Survey data shows that, controlling for human capital, having some type of financial capital increases survival chances, supporting the existence of liquidity constraints. Interestingly, however, the effects are not uniform across types of capital: securing loans is associated with higher survival likelihood but receiving equity investments shortens startup longevity. Accounting for the endogeneity in financing using the Inverse Probability Treatment Weighted (IPTW) estimation reveals that the negative effect of equity capital …

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Effects Of National Culture On Earnings Quality Of Banks, Chee Yeow Lim, Kanagaretnam Kiridaran, Gerald J. Lobo Aug 2011

Effects Of National Culture On Earnings Quality Of Banks, Chee Yeow Lim, Kanagaretnam Kiridaran, Gerald J. Lobo

Research Collection School Of Accountancy

We examine the relation between four dimensions of national culture and earnings quality of banks using a sample of banks from 39 countries. Our main analysis, which focuses on the pre-financial crisis period 1993–2006, indicates that banks in high individualism, high masculinity, and low uncertainty avoidance societies manage earnings to just-meet-or-beat the prior year's earnings. In tests of income smoothing through loan loss provisions, we find that banks in high individualism, high power distance, and low uncertainty avoidance societies report smoother earnings. Our exploratory analysis of the effects of national culture on accounting outcomes during the financial crisis period 2007–2008 …

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The Risk Exposures Of Asia-Focused Hedge Funds, Melvyn Teo Jul 2011

The Risk Exposures Of Asia-Focused Hedge Funds, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

How have Asia-focused hedge funds adjusted their risk exposures in response to the recent financial crisis? By evaluating fund performance relative to an augmented Fung and Hsieh (2004) model, we find that Asia-focused hedge funds have broadly trimmed risk exposures post-crisis. They have reduced their exposure to small stocks relative to large stocks, scaled back their loadings on high yield corporate bonds relative to low yield U.S. sovereign debt, and pared their allocation to the Japanese equity markets. At the same time, however, they are now more exposed to Asian equity markets.

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Size And Return: A New Perspective, Fangjian Fu, Wei Yang Jul 2011

Size And Return: A New Perspective, Fangjian Fu, Wei Yang

Research Collection Lee Kong Chian School Of Business

We document robust empirical evidence that, after controlling for idiosyncratic volatility, large stocks earn significantly higher returns than small stocks. Our empirical results indicate that idiosyncratic volatility is positively related to return, but negatively related to size. Hence, failure to control for idiosyncratic volatility generates a downward omitted variable bias and leads to the widely documented negative relation between size and return. We explain the two contrasting size-return relations, with and without the control for idiosyncratic volatility, in a parsimonious equilibrium model that incorporates three empirical regularities: some individual investors are under-diversified; small stocks have higher idiosyncratic volatilities than large …

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Do Merger-Related Operating Synergies Exist?, Gennaro Bernile, Scott W. Bauguess Jul 2011

Do Merger-Related Operating Synergies Exist?, Gennaro Bernile, Scott W. Bauguess

Research Collection Lee Kong Chian School Of Business

Executives frequently forecast large operating efficiency gains from mergers. Using these projections, we study the impact of operating synergies on merger performance. Investors' reaction to mergers varies directly with the availability of these forecasts and the gains they imply, and post-merger operating performance increases with the predictable component of forecasted synergies based on deal characteristics. The realized improvements, however, do not depend on the availability of forecasts or the surprise they convey, and post-merger stock returns reconcile discrepancies between investors' ex ante beliefs and mergers' ex post performance related to management forecasts. Overall, the evidence supports the neoclassical view that …

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Asset Performance Evaluation With Mean-Variance Ratio, Zhidong Bai, Kok Fai Phoon, Keyan Wang, Wing-Keung Wong Jul 2011

Asset Performance Evaluation With Mean-Variance Ratio, Zhidong Bai, Kok Fai Phoon, Keyan Wang, Wing-Keung Wong

Research Collection Lee Kong Chian School Of Business

Bai, et al. (2011c) develop the mean-variance-ratio (MVR) statistic to test the performance among assets for small samples. They provide theoretical reasoning to use MVR and prove that our proposed statistic is uniformly most powerful unbiased. In this paper we illustrate the superiority of our proposed test over the Sharpe ratio (SR) test by applying both tests to analyze the performance of Commodity Trading Advisors (CTAs). Our findings show that while the SR test concludes most of the CTA funds being analyzed as being indistinguishable in their performance, our proposed statistics show that some funds outperform the others. On the …

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The Implications Of Sovereign Wealth Fund Investment On Capital Markets: A Bottom-Up View, David Fernandez Jun 2011

The Implications Of Sovereign Wealth Fund Investment On Capital Markets: A Bottom-Up View, David Fernandez

Research Collection Lee Kong Chian School Of Business

The buzz around sovereign wealth funds has been turned down a notch, but they remain a hot topic. The accusations of sovereign wealth funds having hidden agendas remain, but with the very public losses suffered by some during the recent financial turmoil, such talk has even less credibility. And given that most of those losses were from investments in US, UK, and European financial institutions, hope that sovereign wealth funds would be the saviors of Wall Street has also faded. At its base, four trends continue to keep sovereign wealth funds in focus. First, there is the phenomenal rise of …

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Adverse Selection And Corporate Governance, Charlie Charoenwong, David K. Ding, Vasan Siraprapasiri Jun 2011

Adverse Selection And Corporate Governance, Charlie Charoenwong, David K. Ding, Vasan Siraprapasiri

Research Collection Lee Kong Chian School Of Business

This paper examines the impact of corporate governance on the adverse selection component of the bid-ask spread of stocks listed on the Singapore Exchange. These companies have been identified by Credit Lyonnais Securities Asia (CSLA) with the highest level of corporate governance among 25 emerging markets. We measure corporate governance by several criteria: discipline, transparency, independence, accountability, responsibilities, fairness, and social awareness. The results show that corporate governance has an inverse relationship with adverse selection. However, only the transparency dimension exhibits a significant inverse relationship with adverse selection. In addition, Government-Linked Companies (GLCs) are shown to have a smaller adverse …

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Sec Rule 105 And Price Discovery In The Secondary Market, C. Charoenwong, David K. Ding, P. Wang Jun 2011

Sec Rule 105 And Price Discovery In The Secondary Market, C. Charoenwong, David K. Ding, P. Wang

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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Financial Hedging Decision On Procurement Risk For Newsvendor Model With Value-At-Risk Constraint, Yuan Wen, Qing Ding, Jian Chen Jun 2011

Financial Hedging Decision On Procurement Risk For Newsvendor Model With Value-At-Risk Constraint, Yuan Wen, Qing Ding, Jian Chen

Research Collection Lee Kong Chian School Of Business

Manufacturers must now deal with increasingly fluctuating procurement prices for commodities and industrial component parts. However, it is hard for them to pass cost increases on to downstream markets efficiently. Therefore, manufacturers have sought to solve this problem with various supply management tactics. While vertical integration of key suppliers or signing long-term contracts is possible, financial hedging emerges as the most effective approach to counter commodities price risks. In situations where market demand uncertainty is still unresolved and often interplays with upstream price volatilities, Value-at-Risk (VaR) can help managers handle the multi-fold uncertainties and their potential interactions, by effectively measuring …

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A Martingale Approach For Testing Diffusion Models Based On Infinitesimal Operator, Zhaogang Song Jun 2011

A Martingale Approach For Testing Diffusion Models Based On Infinitesimal Operator, Zhaogang Song

Research Collection Lee Kong Chian School Of Business

I develop an omnibus specification test for diffusion models based on the infinitesimal operator. The infinitesimal operator based identification of the diffusion process is equivalent to a “martingale hypothesis” for the processes obtained by a transformation of the original diffusion model. My test procedure is then constructed by checking the “martingale hypothesis” via a multivariate generalized spectral derivative based approach that delivers a  asymptotical null distribution for the test statistic. The infinitesimal operator of the diffusion process is a closed-form function of drift and diffusion terms. Consequently, my test procedure covers both univariate and multivariate diffusion models in a unified …

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Earnings Management Surrounding Seasoned Bond Offerings: Do Managers Mislead Ratings Agencies And The Bond Market, Gary L. Gaton, Chiraphol New Chiyachantana, Choong Tze Chua, Jeremy Goh Jun 2011

Earnings Management Surrounding Seasoned Bond Offerings: Do Managers Mislead Ratings Agencies And The Bond Market, Gary L. Gaton, Chiraphol New Chiyachantana, Choong Tze Chua, Jeremy Goh

Research Collection Lee Kong Chian School Of Business

We study earnings management (EM) efforts surrounding seasoned bond offerings using discretionary current accruals. We find that issuers tend to inflate earnings performance prior to an offering. In order for EM efforts to effectively mislead ratings agencies and the bond market, they must lead to inflated bond ratings and decreased offering yields. Regression results indicate the opposite; aggressive EM efforts are associated with lower initial ratings and higher offering yields. We also find a statistically lower proportion of subsequent downgrades for firms with the most aggressive EM efforts, which is inconsistent with these firms’ inflated initial ratings. While some firms …

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Investor Heterogeneity, Investor-Management Agreement And Open Market Share Repurchase, Sheng Huang, Anjan V. Thakor Jun 2011

Investor Heterogeneity, Investor-Management Agreement And Open Market Share Repurchase, Sheng Huang, Anjan V. Thakor

Research Collection Lee Kong Chian School Of Business

This paper develops and tests a new theoretical explanation for why a firm conducts open-market stock repurchases. Investors may disagree with the manager about the firm’s investment projects. A repurchase causes a change in the investor base as investors who are more likely to disagree with the manager tender their shares. This model leads to the following predictions: first, a firm is more likely to buy back shares when the level of investor-management agreement is low, and second, the level of agreement improves following a repurchase. Our empirical tests provide strong support for these predictions. The results are robust to …

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Back To Basics: The Little Book That Still Beats The Market, Knowledge@Smu May 2011

Back To Basics: The Little Book That Still Beats The Market, Knowledge@Smu

Knowledge@SMU

Investment theories and principles can be complex and befuddling for many. Yet, one man has devised a formula so simple that it could speak to novices and children. In The Little Book That Still Beats the Market, Columbia University lecturer Joel Greenblatt explains, in large fonts, how he derived what has been termed "the magic formula" and provides some examples as proof of its wizardry. As for weather-beaten investors with no latitude left for "magic", Greenblatt offers a humorous revision of the fundamentals.

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China’S Red Capitalism: A Gravity-Defying Economy Built On A Foundation Of Sand?, Knowledge@Smu May 2011

China’S Red Capitalism: A Gravity-Defying Economy Built On A Foundation Of Sand?, Knowledge@Smu

Knowledge@SMU

With more than US$3 trillion in foreign exchange reserves, the clutch of four big banks and dozens more internationally-listed state-owned enterprises, there is not much doubt that China has some serious economic muscle. Yet, as authors Carl E. Walter and Frasier J.T. Howie explained in their book, 'Red Capitalism: The fragile financial foundation of China’s extraordinary rise', not all is as it seems in the labyrinth that is China's financial system.

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Filling Stomachs Worldwide With Agriculture Risk Transfer Solutions, Knowledge@Smu May 2011

Filling Stomachs Worldwide With Agriculture Risk Transfer Solutions, Knowledge@Smu

Knowledge@SMU

A confluence of factors, such as weather, energy and growing demand, has given rise to a volatile food supply situation worldwide. With few investors willing to take the plunge with this industry, supply and production problems perpetuate. Speaking at a recent seminar at the Singapore Management University, Roman Hohl, an expert in this field with Swiss Re, explains how this issue can be addressed with some help from the insurance industry in the form of risk transfer products. --------------------------------------------------------------------------------

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Roubini On Global Economic Risks: “Dr Doom” Or “Dr Realist”?, Knowledge@Smu May 2011

Roubini On Global Economic Risks: “Dr Doom” Or “Dr Realist”?, Knowledge@Smu

Knowledge@SMU

Renowned as the brutally frank commentator that correctly predicted the 2008 financial crisis, New York University's economics professor Nouriel Roubini has made a reputation for himself as the prophet of doom. What does 'Doctor Doom' make of all the fuss about Asia's tiger and dragon economies? He shares his take at a lecture organised by SMU's Sim Kee Boon Institute for Financial Economics while informing audiences that he prefers to be known as 'Doctor Realist'.

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Value Investment And Market Timing: Opportunities In Times Of Crises, Knowledge@Smu May 2011

Value Investment And Market Timing: Opportunities In Times Of Crises, Knowledge@Smu

Knowledge@SMU

Luminary 'small-cap king' Dr Tan Chong Koay sees opportunities in crises. After all, this industry stalwart's most prolific performances have been during the periods of global economic meltdowns. Beyond financial gains, those who survive these crises would have gained much confidence, he believes. Sharing his investment philosophies at SMU's Centre for Asset Securitisation and Management in Asia, Tan, founder of Pheim Asset Management, explains what he sees as the art and science of investing.

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The Disparity Between Long-Term And Short-Term Forecasted Earnings Growth, Zhi Da, Mitchell Craig Warachka May 2011

The Disparity Between Long-Term And Short-Term Forecasted Earnings Growth, Zhi Da, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and long-term analyst forecast errors. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or far below their implied short-term forecasts for earnings growth have negative and positive subsequent risk-adjusted returns along with downward and upward revisions in long-term forecasted earnings growth, respectively. Additional results indicate that investor inattention toward firm-level changes in long-term earnings growth is responsible for these risk-adjusted returns.

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How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Xuan Duong, Stanimir Markov, Eng Joo Tan May 2011

How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Xuan Duong, Stanimir Markov, Eng Joo Tan

Research Collection Lee Kong Chian School Of Business

In a competitive information market, a single information source can only dominate other sources individually, not collectively. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar's (2008) [How much new information is there in earnings?, Journal of Accounting Research, 2008, 46(5), pp. 975–1016] R 2 metric: the proportion of the variation in annual returns explained by the four quarterly earnings announcement returns. We find that the earnings announcement days' R 2 is 11% – higher than the corresponding R 2 of days with dividend announcements, management forecasts, preannouncements, and 10-K and 10-Q filings and …

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Technical Appendix To "Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets", Onur Boyabatli May 2011

Technical Appendix To "Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets", Onur Boyabatli

Research Collection Lee Kong Chian School Of Business

Technical appendix with proofs for the technical statements in the article: Stochastic capacity investment and flexible vs. dedicated technology choice in imperfect capital markets. (2011). Management Science, 57 (12), 2163 - 2179. https://doi.org/10.1287/mnsc.1110.1395

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Quantitative Hedge Fund Selection (Part 2), Melvyn Teo Apr 2011

Quantitative Hedge Fund Selection (Part 2), Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

Do fund incentives, volatility exposure, and liquidity risk affect fund performance? We show that hedge funds with high performance fees and high water mark provisions tend to outperform those with low performance fees and no high water marks. Moreover, funds that short volatility and embrace liquidity risk deliver significantly higher returns relative to funds that long volatility and eschew liquidity risk. Investors with access to secure capital and managed account platforms may be positioned to take advantage of these performance differences.

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The Liquidity Risk Of Liquid Hedge Funds, Melvyn Teo Apr 2011

The Liquidity Risk Of Liquid Hedge Funds, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

This paper evaluates hedge funds that grant favorable redemption terms to investors. Within this group of purportedly liquid funds, high net inflow funds subsequently outperform low net inflow funds by 4.79 percent per year after adjusting for risk. The return impact of fund flows is stronger when funds embrace liquidity risk, when market liquidity is low, and when funding liquidity, as measured by the TED spread, aggregate hedge fund flows, and prime broker stock returns, is tight. In keeping with an agency explanation, funds with strong incentives to raise capital, low manager option deltas, and no manager capital co-invested are …

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