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Full-Text Articles in Finance

The Invisible Hand Of Short Selling: Does Short Selling Discipline Earnings Management?, Massimo Massa, Bohui Zhang, Hong Zhang Jun 2015

The Invisible Hand Of Short Selling: Does Short Selling Discipline Earnings Management?, Massimo Massa, Bohui Zhang, Hong Zhang

Research Collection Lee Kong Chian School Of Business

We hypothesize that short selling has a disciplining role vis-a-vis firm managers that forces them to reduce earnings management. Using firm-level short-selling data for thirty-three countries collected over a sample period from 2002 to 2009, we document a significantly negative relationship between the threat of short selling and earnings management. Tests based on instrumental variable and exogenous regulatory experiments offer evidence of a causal link between short selling and earnings management. Our findings suggest that short selling functions as an external governance mechanism to discipline managers.

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Mochtar Riady [Indonesia, Banker], Mochtar Riady May 2015

Mochtar Riady [Indonesia, Banker], Mochtar Riady

Digital Narratives of Asia

Founder and Chairman of Lippo Group, Mochtar Riady gained the moniker "Magic Man of Banking" because of his ability to turn around and grow several of Indonesia's private banks, the most notable being Bank Central Asia (BCA). But his 15 years in BCA wasn't all smooth sailing. He speaks to DNA about his challenges in BCA, which saw him dealing with sensitive relationships with the Suharto government, as well as the firing of his own son for Forex speculation.

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China's Yuan: Asia's Future Anchor Currency?, Hwee Kwan Chow Apr 2015

China's Yuan: Asia's Future Anchor Currency?, Hwee Kwan Chow

Research Collection School Of Economics

The yuan is becoming more widely used in pricing and settling intra-regional trade and investment. Asian currencies' movements are likely to shift more in tandem with the yuan, leading to it becoming one of Asia's lead currencies. Singapore is now the world's second-most- important offshore yuan trading hub after Hong Kong.

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Self-Exciting Jumps, Learning, And Asset Pricing Implications, Andras Fulop, Junye Li, Jun Yu Mar 2015

Self-Exciting Jumps, Learning, And Asset Pricing Implications, Andras Fulop, Junye Li, Jun Yu

Research Collection School Of Economics

The paper proposes a self-exciting asset pricing model that takes into account co-jumps between prices and volatility and self-exciting jump clustering. We employ a Bayesian learning approach to implement real-time sequential analysis. We find evidence of self-exciting jump clustering since the 1987 market crash, and its importance becomes more obvious at the onset of the 2008 global financial crisis. We also find that learning affects the tail behaviors of the return distributions and has important implications for risk management, volatility forecasting, and option pricing.

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On The Effectiveness Of Housing Purchase Restriction Policy In China: A Difference In Difference Approach, Jerry X. Cao, Bihong Huang, Rose Neng Lai Mar 2015

On The Effectiveness Of Housing Purchase Restriction Policy In China: A Difference In Difference Approach, Jerry X. Cao, Bihong Huang, Rose Neng Lai

Research Collection Lee Kong Chian School Of Business

The Chinese government imposed the purchase restriction policy to rein in the housing bubble in 2010. Using a two-stage difference-in-difference approach and a comprehensive dataset covering the real estate markets across 70 cities, we find that the policy triggered substantial decline in the property price and transaction volume. Cities having higher reliance on real estate sector for fiscal revenue and economic growth experienced greater decline in housing prices following the policy implementation. However, the policy had no measurable effects on the nationwide construction boom, hinting the ineffectiveness of the policy to correct the housing bubble.

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Three Essays On Financial Econometrics, Jiang Liang Jan 2015

Three Essays On Financial Econometrics, Jiang Liang

Dissertations and Theses Collection (Open Access)

This dissertation develops several econometric techniques to address three issues in financial economics, namely, constructing a real estate price index, estimating structural break points, and estimating integrated variance in the presence of market microstructure noise and the corresponding microstructure noise function. Chapter 2 develops a new methodology for constructing a real estate price index that utilizes all transaction price information, encompassing both single-sales and repeat-sales. The method is less susceptible to specification error than standard hedonic methods and is not subject to the sample selection bias involved in indexes that rely only on repeat sales. The methodology employs a model …

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Essays On High-Frequency Financial Data Analysis, Yingjie Dong Jan 2015

Essays On High-Frequency Financial Data Analysis, Yingjie Dong

Dissertations and Theses Collection (Open Access)

This dissertation consists of three essays on high-frequency financial data analysis. I consider intraday periodicity adjustment and its effect on intraday volatility estimation, the Business Time Sampling (BTS) scheme and the estimation of market microstructure noise using NYSE tick-by-tick transaction data. Chapter 2 studies two methods of adjusting for intraday periodicity of highfrequency financial data: the well-known Duration Adjustment (DA) method and the recently proposed Time Transformation (TT) method (Wu (2012)). I examine the effects of these adjustments on the estimation of intraday volatility using the Autoregressive Conditional Duration-Integrated Conditional Variance (ACD-ICV) method of Tse and Yang (2012). I find …

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Mutual Funds And Information Diffusion: The Role Of Country-Level Governance, Chunmei Lin, Massimo Massa, Hong Zhang Nov 2014

Mutual Funds And Information Diffusion: The Role Of Country-Level Governance, Chunmei Lin, Massimo Massa, Hong Zhang

Research Collection Lee Kong Chian School Of Business

We hypothesize that poor country-level governance, which makes public information less reliable, induces fund managers to increase their use of semipublic information. Utilizing data from international mutual funds and stocks over the 2000-2009 period, we find that semipublic information-related stock rebalancing can be five times higher in countries with the worst quality of governance than in countries with the best. The use of semipublic information increases price informativeness but also increases information asymmetry and reduces stock liquidity. It also intensified the price impact and liquidity crunch during the recent global financial crisis.

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Ceo Optimism And Incentive Compensation, Clemens A. Otto Nov 2014

Ceo Optimism And Incentive Compensation, Clemens A. Otto

Research Collection Lee Kong Chian School Of Business

I study the effect of chief executive officer (CEO) optimism on CEO compensation. Usingdata on compensation in US firms, I provide evidence that CEOs whose option exercisebehavior and earnings forecasts are indicative of optimistic beliefs receive smaller stockoption grants, fewer bonus payments, and less total compensation than their peers. Thesefindings add to our understanding of the interplay between managerial biases andremuneration and show how sophisticated principals can take advantage of optimisticagents by appropriately adjusting their compensation contracts.

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Raising The Bar 2: Challenges To Productivity Initiatives In The Finance And Accounting Function, Clarence Goh Nov 2014

Raising The Bar 2: Challenges To Productivity Initiatives In The Finance And Accounting Function, Clarence Goh

Research Collection School Of Accountancy

Faced with a tightening labour supply, raising productivity has become an increasingly important issue for manybusinesses in Singapore. To understand how this impacts on the F&A functions of businesses, the Instituteof Singapore Chartered Accountants (ISCA) collaborated with Robert Half to survey over 550 senior financeexecutives in Singapore and also the region to understand the focus of F&A functions of businesses andcorporations regarding raising productivity and effectiveness. Our findings are presented in a series of three reportswith the following themes – (1) Trends in implementing productivity initiatives, (2) Challenges faced in implementingproductivity initiatives, and (3) Essential skills and training needed to …

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Managing The Accounting And Finance Function – Productivity Trends And Focus, Clarence Goh Oct 2014

Managing The Accounting And Finance Function – Productivity Trends And Focus, Clarence Goh

Research Collection School Of Accountancy

We found that firms in Singapore, HongKong, Japan, and China tend to favourstaff-related initiatives over processrelatedones when looking to raiseproductivity, with this being relativelymore prominent in the more developedeconomies of Singapore, Hong Kongand Japan.

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Wage Subsidies As A Tool To Fight Recessions, Hian Teck Hoon Oct 2014

Wage Subsidies As A Tool To Fight Recessions, Hian Teck Hoon

Research Collection School Of Economics

Since 1981, MAS has used the exchange rate as the primary tool of macroeconomic stabilisation. An exchange rate-based policy rule not only describes very well Singapore’s actual conduct of monetary policy but it has also delivered reduced volatility in inflation and output. Yet, as the quotation above suggests, during the onslaught of the contagion effects arising from the 1997–98 Asian Financial Crisis when Singapore’s export demand declined precipitously, threatening a rise in the unemployment rate, exchange rate adjustment did not act alone to counteract the decline in aggregate demand (AD). Instead, the committee set up by then - Prime Minister …

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Finance And Social Responsibility In The Informal Economy: Institutional Voids, Globalization And Microfinance Institutions, Hao Liang, Chris Marquis, Sunny Li Sun Oct 2014

Finance And Social Responsibility In The Informal Economy: Institutional Voids, Globalization And Microfinance Institutions, Hao Liang, Chris Marquis, Sunny Li Sun

Research Collection Lee Kong Chian School Of Business

We examine how different types of country-level globalization and the industry structure of microfinance institutions (MFIs) affect organization-level microcredit interest rates which crucially affect the poor's entrepreneurial opportunities. We develop an opportunity structure perspective that argues that MFI interest rates can be reduced by egalitarian-based social globalization but increased by neoliberal-based economic globalization. Moreover, stronger presence of nonprofit organizations in the microfinance industry lowers interest rates. Furthermore, these three forces can moderate the relationship between MFIs' outreach to the poor and average interest rate. Analyses of 2,559 MFI observations across 74 countries from 2002 - 2012 largely support our hypotheses.

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Raising The Bar: Trends In Implementing Productivity Initiatives In The Finance And Accounting Function, Clarence Goh Oct 2014

Raising The Bar: Trends In Implementing Productivity Initiatives In The Finance And Accounting Function, Clarence Goh

Research Collection School Of Accountancy

Faced with a tightening labour supply, raising productivity has become an increasingly important issue for manybusinesses in Singapore. To understand how this impacts the finance and accounting functions of businesses,the Institute of Singapore Chartered Accountants (ISCA) collaborated with Robert Half to survey over 550senior finance executives in Singapore and also the region to understand the focus of finance and accountingfunctions of businesses regarding raising productivity of these departments or functional units.

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Intraday Periodicity Adjustments Of Transaction Duration And Their Effects On High-Frequency Volatility Estimation, Yiu Kuen Tse, Yingjie Dong Sep 2014

Intraday Periodicity Adjustments Of Transaction Duration And Their Effects On High-Frequency Volatility Estimation, Yiu Kuen Tse, Yingjie Dong

Research Collection School Of Economics

We study two methods of adjusting for intraday periodicity of high-frequency financial data: the well-known Duration Adjustment (DA) method and the recently proposed Time Transformation (TT) method (Wu (2012)). We examine the effects of these adjustments on the estimation of intraday volatility using the Autoregressive Conditional Duration-Integrated Conditional Variance (ACD-ICV) method of Tse and Yang (2012). We find that daily volatility estimates are not sensitive to intraday periodicity adjustment. However, intraday volatility is found to have a weaker U-shaped volatility smile and a biased trough if intraday periodicity adjustment is not applied. In addition, adjustment taking account of trades with …

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Exchange Rates And Export Structure, Wen-Tai Hsu, Yi Lu, Yingke Zhou Sep 2014

Exchange Rates And Export Structure, Wen-Tai Hsu, Yi Lu, Yingke Zhou

Research Collection School Of Economics

This paper studies whether changes in the exchange rate affect a country’s export structure, using an arguably exogenous sudden appreciation of renminbi on July 21, 2005 as the main source of identification. Employing combined regression discontinuity and difference-in-differences approach, we show that China’s export structure became more similar to that of the developed countries after the currency appreciation. We also find that the majority of the appreciation effect comes from the inter-firm resource reallocation rather than the inter-region or intra-firm resource reallocation.

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Borrower Targeting Under Microfinance: Competition With Motivated Microfinance Institutions And Strategic Complementarity, Brishti Guha, Prabal Roy Chowdhury Sep 2014

Borrower Targeting Under Microfinance: Competition With Motivated Microfinance Institutions And Strategic Complementarity, Brishti Guha, Prabal Roy Chowdhury

Research Collection School Of Economics

We examine how increased competition among motivated microfinance institutions (MFIs) impacts the poorest borrowers’ access to microfinance. We find that competition depends on inequality, technology, and the possibility of double-dipping (borrowing from several sources). Without competition, even a motivated MFI may lend to the not-so-poor in preference to poor borrowers. If double-dipping is feasible, competition may encourage lending to the poor. The presence of double-dipping is critical for MFI competition to have a positive effect. When double-dipping is feasible, MFI coordination may worsen borrower targeting whenever inequality is intermediate. We discuss policy implications dealing with double-dipping, MFI coordination, and competition.

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Bayesian Testing Volatility Persistence In Stochastic Volatility Models With Jumps, Xiaobin Liu, Yong Li Aug 2014

Bayesian Testing Volatility Persistence In Stochastic Volatility Models With Jumps, Xiaobin Liu, Yong Li

Research Collection School Of Economics

Whether or not there is a unit root persistence in volatility of financial assets has been a long-standing topic of interest to financial econometricians and empirical economists. The purpose of this article is to provide a Bayesian approach for testing the volatility persistence in the context of stochastic volatility with Merton jump and correlated Merton jump. The Shanghai Composite Index daily return data is used for empirical illustration. The result of Bayesian hypothesis testing strongly indicates that the volatility process doesn’t have unit root volatility persistence in this stock market.

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Minimum Investment Requirements, Financial Market Globalization, And Symmetry Breaking, Haiping Zhang Aug 2014

Minimum Investment Requirements, Financial Market Globalization, And Symmetry Breaking, Haiping Zhang

Research Collection School Of Economics

We incorporate wealth heterogeneity and the minimum investment requirements in the model of Matsuyama (2004, Econometrica) and provide a complete characterization of symmetry breaking. In particular, we identify the extensive margin of investment as a key channel through which the interest rate may respond positively to capital accumulation, or equivalently, the interest rate can be higher in the rich than in the poor countries. Then, financial market globalization may lead to “uphill” capital flows from the poor to the rich countries, which widens the initial cross-country income gap and leads to income divergence among inherently identical countries, a phenomenon that …

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International Transmission Of Interest Rates And The Open Economy Trilemma In Asia, Hwee Kwan Chow Jul 2014

International Transmission Of Interest Rates And The Open Economy Trilemma In Asia, Hwee Kwan Chow

Research Collection School Of Economics

There has recently been much discussion on the relevance of the open economy trilemma in the context of deepening financial integration of countries across the world (see for instance, Rey (2013) and Devereux and Yetman (2014)). The open economy trilemma is an important issue for the countries in Asia not least because their financial systems are small and exchange rate stability is crucial to their economic growth. This paper investigates whether the economies in Asia are still bound by the "impossible trinity" by examining the interest rate transmission from the US to the region before and after the onset of …

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Bayesian Analysis Of Bubbles In Asset Prices, Andras Fulop, Jun Yu Jul 2014

Bayesian Analysis Of Bubbles In Asset Prices, Andras Fulop, Jun Yu

Research Collection School Of Economics

We develop a new asset price model where the dynamic structure of the asset price, after the fundamental value is removed, is subject to two different regimes. One regime reflects the normal period where the asset price divided by the dividend is assumed to follow a mean-reverting process around a stochastic long run mean. This latter is allowed to account for possible smooth structural change. The second regime reflects the bubble period with explosive behavior. Stochastic switches between two regimes and non-constant probabilities of exit from the bubble regime are both allowed. A Bayesian learning approach is employed to jointly …

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Trade And Financial Integration, Extensive Margin, And Income Divergence, Haiping Zhang Jul 2014

Trade And Financial Integration, Extensive Margin, And Income Divergence, Haiping Zhang

Research Collection School Of Economics

We revisit the classical question on economic integration and income convergence in a two-sector OLG model with financial frictions and sectoral heterogeneity in minimum investment requirements (MIR, hereafter). The extensive margin of investment is a critical channel through which aggregate income may become a determinant of comparative advantage. Free trade allows the rich (poor) country to specialize partially or completely in the high-MIR (low-MIR) sector which has a high (low) return endogenously. The specialization effect interacts with the neoclassical effect, which may lead to income divergence among inherently identical countries. Similarly, financial integration may also lead to income divergence through …

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Why Cpf-Style Systems Generally Work Better, Hian Teck Hoon Jul 2014

Why Cpf-Style Systems Generally Work Better, Hian Teck Hoon

Research Collection School Of Economics

The Central Provident Fund (CPF) has been in existence since 1955, and plays an important role in the lives of millions of Singaporeans. But this does not mean there is nothing to be learnt from asking some fundamental questions about its usefulness.

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Sequential Investment, Hold-Up, And Ownership Structure, Juyuan Zhang, Yi Zhang Jul 2014

Sequential Investment, Hold-Up, And Ownership Structure, Juyuan Zhang, Yi Zhang

Research Collection School Of Economics

We construct a sequential investment model to investigate individual firms’ strategic choices of organizational forms when outsourcing their intermediate products. Our results indicate that as a result of the encouragement effect of sequential complementary investments, sequential investment alleviates the underinvestment caused by the hold-up problem. Thereafter, we analyze the impact of sequential investment on the choice of ownership structure. We show that contrary to the result of the standard property rights theory, strictly complementary assets could be owned separately.

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Is The Renminbi East Asia’S Dominant Reference Currency? A Reconsideration, Hwee Kwan Chow Jun 2014

Is The Renminbi East Asia’S Dominant Reference Currency? A Reconsideration, Hwee Kwan Chow

Research Collection School Of Economics

Recent empirical studies show that the Chinese currency renminbi is either becoming or has become a dominant reference currency in Asia. However, the high correlation between the US dollar and renminbi movements hampers the identification of their individual effects on the Asian currencies. In particular, the application of Frankel-Wei regressions to determine the weights of the US dollar and the (unorthogonalized) renminbi in the implicit currency baskets could suffer from endogeneity problems that produce an upward bias in renminbi’s estimated weight. This paper reviews the evidence by applying country-specific VAR models to daily exchange rate data from nine Asian economies …

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Commodity Super Cycles: A Reality Check, Maureen Derooij May 2014

Commodity Super Cycles: A Reality Check, Maureen Derooij

Asian Management Insights

Do commodity super cycles exist, or are we simply seeing patterns in randomness? More importantly, are we in the middle of one that is showing signs of going bust?

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Wealth Management In Singapore, Francis Koh May 2014

Wealth Management In Singapore, Francis Koh

Research Collection Lee Kong Chian School Of Business

As early as 2015, Singapore may oust Switzerland as the world’s top finance hub. But the path forward requires adjustments in the strategic direction of individual firms. Wealth management in Singapore is vibrant, growing, challenging.

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Improving Money's Worth Ratio Calculations: The Case Of Singapore's Pension Annuities, Joelle H. Y. Fong, Jean Lemaire, Yiu Kuen Tse Mar 2014

Improving Money's Worth Ratio Calculations: The Case Of Singapore's Pension Annuities, Joelle H. Y. Fong, Jean Lemaire, Yiu Kuen Tse

Research Collection School Of Economics

This article contributes to a better understanding of the risks involved in a life annuity investment. We examine the distribution of weighted annuity benefits and assess various measures of dispersion such as the coefficient of variance. In particular, we quantify the standard deviation about the expected value, thereby extending the usefulness of the popular money’s worth framework for annuity valuation. The effort toward a more detailed and more accurate risk picture of investing in annuities enables retirees to differentiate among products that may appear seemingly uniform in terms of money’s worth, but vary widely in terms of their risk attributes.

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Monetary Regime Choice In Singapore: Would A Taylor Rule Outperform Exchange-Rate Management?, Hwee Kwan Chow, G. C. Lim, Paul D. Mcnelis Feb 2014

Monetary Regime Choice In Singapore: Would A Taylor Rule Outperform Exchange-Rate Management?, Hwee Kwan Chow, G. C. Lim, Paul D. Mcnelis

Research Collection School Of Economics

This paper adopts a dynamic stochastic general equilibrium-vector autorgressive (DSGE-VAR) approach to examine the managed exchange-rate system at work in Singapore. We examine if the country has any reason to fear floating the exchange rate and adopting a Taylor rule. Our results show that, in terms of overall inflation volatility, the exchange rate rule has a comparative advantage over the Taylor rule when export price shocks are the major sources of real volatility, while a Taylor rule dominates when domestic productivity shocks drive real volatility. The exchange-rate rule also dominates the Taylor rule for reducing inflation persistence.

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Financial Development, International Capital Flows, And Aggregate Output, Jurgen Von Hagen, Haiping Zhang Jan 2014

Financial Development, International Capital Flows, And Aggregate Output, Jurgen Von Hagen, Haiping Zhang

Research Collection School Of Economics

We develop a tractable two-country overlapping-generations model and show that cross-country differences in financial development can explain three recent empirical patterns of international capital flows: Financial capital flows from relatively poor to relatively rich countries, while foreign direct investment flows in the opposite direction; net capital flows go from poor to rich countries; despite its negative net international investment positions, the United States receives a positive net investment income. International capital mobility affects output in each country directly through the size of domestic investment and indirectly through the aggregate saving rate. Under certain conditions, the indirect effect may dominate the …

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