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Articles 121 - 150 of 157
Full-Text Articles in Finance
The Effect Of Monetary Policy On Bank Wholesale Funding, Hyunsoo Choi, Hyun Soo Choi
The Effect Of Monetary Policy On Bank Wholesale Funding, Hyunsoo Choi, Hyun Soo Choi
Research Collection Lee Kong Chian School Of Business
We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the retail deposit supply due to, for example, a decrease in bank reserves or in money demand, banks try to substitute the deposit outflows with more wholesale funding in order to mitigate the policy impact on their lending. Banks have varying degrees of accessibility to wholesale funding sources because of financial frictions, and those banks that are large or that have a greater reliance on wholesale funding increase their wholesale funding more. As a result, monetary tightening increases both the reliance on and …
Days To Cover And Stock Returns, Harrison G. Hong, Frank Weikai Li, Sophie X. Ni, Jose A. Scheinkman, Philip Yan
Days To Cover And Stock Returns, Harrison G. Hong, Frank Weikai Li, Sophie X. Ni, Jose A. Scheinkman, Philip Yan
Research Collection Lee Kong Chian School Of Business
A crowded trade emerges when speculators' positions are large relative to the asset's liquidity, making exit difficult. We study this problem of recent regulatory concern by focusing on short-selling. We show that days to cover (DTC), the ratio of short interest to trading volume, measures the costliness of exiting crowded trades. Crowding is an important concern as short-sellers avoid illiquid stocks, which we establish using an instrumental-variables strategy involving staggered stock market decimalization reforms. Arbitrageurs require a premium to enter into such trades as a strategy shorting high DTC stocks and buying low DTC stocks generates a 1.2% monthly return. …
Textual Analysis And Machine Leaning: Crack Unstructured Data In Finance And Accounting, Li Guo, Feng Shi, Jun Tu
Textual Analysis And Machine Leaning: Crack Unstructured Data In Finance And Accounting, Li Guo, Feng Shi, Jun Tu
Research Collection Lee Kong Chian School Of Business
In finance and accounting, relative to quantitative methods traditionally used, textual analysis becomes popular recently despite of its substantially less precise manner. In an overview of the literature, we describe various methods used in textual analysis, especially machine learning. By comparing their classification performance, we find that neural network outperforms many other machine learning techniques in classifying news category. Moreover, we highlight that there are many challenges left for future development of textual analysis, such as identifying multiple objects within one single document.
Benchmarking And Currency Risk, Massimo Massa, Yanbo Wang, Hong Zhang
Benchmarking And Currency Risk, Massimo Massa, Yanbo Wang, Hong Zhang
Research Collection Lee Kong Chian School Of Business
We show that the currency risk embedded in the benchmarks of international mutual funds negatively affects fund performance. More specifically, a high benchmark-implied currency risk induces funds to invest in markets with less volatile currencies, leading to a higher degree of currency concentration in portfolio holdings. This currency concentration, however, departs from the optimal equity allocation strategy across countries and reduces fund performance. We document that funds resorting to high currency concentrations underperform funds with low currency concentrations by as much as 1%-2% per year.
A Tale Of Two Option Markets: Pricing Kernels And Volatility Risk, Zhaogang Song, Dacheng Xiu
A Tale Of Two Option Markets: Pricing Kernels And Volatility Risk, Zhaogang Song, Dacheng Xiu
Research Collection Lee Kong Chian School Of Business
Using both S&P 500 option and recently introduced VIX option prices, we study pricing kernels and their dependence on multiple volatility factors. We first propose nonparametric estimates of marginal pricing kernels, conditional on the VIX and the slope of the variance swap term structure. Our estimates highlight the state-dependence nature of the pricing kernels. In particular, conditioning on volatility factors, the pricing kernel of market returns exhibit a downward sloping shape up to the extreme end of the right tail. Moreover, the volatility pricing kernel features a striking U-shape, implying that investors have high marginal utility in both high and …
Competition Of The Informed: Does The Presence Of Short Sellers Affect Insider Selling?, Massimo Massa, Wenlan Qian, Weibiao Xu, Hong Zhang
Competition Of The Informed: Does The Presence Of Short Sellers Affect Insider Selling?, Massimo Massa, Wenlan Qian, Weibiao Xu, Hong Zhang
Research Collection Lee Kong Chian School Of Business
We study how the presence of short sellers affects the incentives of the insiders to trade on negative information. We show it induces insiders to sell more (shares from their existing stakes) and trade faster to preempt the potential competition from short sellers. An experiment and instrumental variable analysis confirm this causal relationship. The effects are stronger for "opportunistic" (i.e., more informed) insider trades and when short sellers' attention is high. Return predictability of insider sales only occurs in stocks with high short-selling potential, suggesting that short sellers indirectly enhance the speed of information dissemination by accelerating trading by insiders. …
The Invisible Hand Of Short Selling: Does Short Selling Discipline Earnings Management?, Massimo Massa, Bohui Zhang, Hong Zhang
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.
On The Effectiveness Of Housing Purchase Restriction Policy In China: A Difference In Difference Approach, Jerry X. Cao, Bihong Huang, Rose Neng Lai
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.
Mutual Funds And Information Diffusion: The Role Of Country-Level Governance, Chunmei Lin, Massimo Massa, Hong Zhang
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.
Ceo Optimism And Incentive Compensation, Clemens A. Otto
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.
Finance And Social Responsibility In The Informal Economy: Institutional Voids, Globalization And Microfinance Institutions, Hao Liang, Chris Marquis, Sunny Li Sun
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.
Wealth Management In Singapore, Francis Koh
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.
An Epidemiological Approach To Opinion And Price-Volume Dynamics, Dong Hong, Harrison G. Hong, Andrei Ungureanu
An Epidemiological Approach To Opinion And Price-Volume Dynamics, Dong Hong, Harrison G. Hong, Andrei Ungureanu
Research Collection Lee Kong Chian School Of Business
We develop a simple and tractable model of opinions and price-volume dynamics based on a word-of-mouth communication process widely used in epidemiology. Risk-averse investors have different opinions depending on whether they heard the news from a friend. Opinions initially diverge and then converge over time as news spreads, which leads to price adjustment and trading volume. News released to many leads to an expected difusion rate (the change in the fraction of investors with the news) that declines with time. But news initially released to few leads to an expected diffusion rate that initially increases in time and only then …
Growing The Asset Management Franchise: Evidence From Hedge Fund Firms, William Fung, David Hsieh, Narayan Y. Naik, Melvyn Teo
Growing The Asset Management Franchise: Evidence From Hedge Fund Firms, William Fung, David Hsieh, Narayan Y. Naik, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
We investigate the growth strategies of hedge fund firms. We find that firms with successful first funds are able to launch follow-on funds that charge higher performance fees, set more onerous redemption terms, and attract greater inflows. While first funds outperform follow-on funds, the superior performance of the former attenuates following the launch of the second fund. Multiple-product firms underperform single-product firms, but harvest greater fee revenues. Consequently, the multiple-product firm has become the dominant business model in the hedge fund industry.
Forecasting Government Bond Risk Premia Using Technical Indicators, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou
Forecasting Government Bond Risk Premia Using Technical Indicators, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
While economic variables have been used extensively to forecast bond risk premia, little attention has been paid to technical indicators which are widely used by practitioners. In this paper, we study the predictive ability of a variety of technical indicators vis-a-vis the economic variables. We find that technical indicators have significant in both in- and out-of-sample forecasting power. Moreover, we find that using information from both technical indicators and economic variables increases the forecasting performance substantially. We also find that the economic value of bond risk premia forecasts from our methodology is comparable to that of equity risk premium forecasts.
Testing Whether The Underlying Continuous-Time Process Follows A Diffusion: An Infinitesimal Operator-Based Approach, Bin Chen, Zhaogang Song
Testing Whether The Underlying Continuous-Time Process Follows A Diffusion: An Infinitesimal Operator-Based Approach, Bin Chen, Zhaogang Song
Research Collection Lee Kong Chian School Of Business
We develop a nonparametric test to check whether a process can be represented by a stochastic differential equation driven only by a Brownian motion. Our testing procedure utilizes the infinitesimal operator-based martingale characterization combined with a generalized spectral approach. Such a testing procedure is feasible and convenient because the infinitesimal operator of the diffusion process has a closed-form expression. The proposed test is applicable to both univariate and multivariate processes and has an limit distribution under the diffusion hypothesis. Simulation and empirical studies show that the proposed test has reasonable performance in small samples.
Can Us Economic Variables Predict Chinese Stock Market?, Jeremy Goh, Fuwei Jiang, Jun Tu, Yuchen Wang
Can Us Economic Variables Predict Chinese Stock Market?, Jeremy Goh, Fuwei Jiang, Jun Tu, Yuchen Wang
Research Collection Lee Kong Chian School Of Business
In the last few decades, we observed a significant increase in global economic activities and these activities may have an impact on both China's economy and stock market. Given the potential impact, we empirically examine whether US economic variables are leading indicators of the Chinese stock market. Prior to China joining the World Trade Organization (WTO) in the end of 2001, we find no statistical relationship between US economic variables and the Chinese stock market returns. However, we find US economic variables have statistically significant predictive power for periods after China's admission into the WTO. In addition, we show that …
Nature Of Vix Jumps On Market Timing Of Hedge Funds, Yueh-Neng Lin, Choo Yong, Jeremy Goh
Nature Of Vix Jumps On Market Timing Of Hedge Funds, Yueh-Neng Lin, Choo Yong, Jeremy Goh
Research Collection Lee Kong Chian School Of Business
The study indicates that Brownian motion, finite and infinite activity jumps are present in the ultra-high frequency VIX data. The total quadratic variation can be split into a continuous component of 29% and a jump component of 71%. Jump activities on ultra-high frequency VIX data are found informative in ex-ante identifying subgroups of hedge funds that deliver significant outperformance. In the months that follow large jumps, strategies exposing to long volatility and extreme risk tend to deliver positive performance in extreme market environments. In the months that follow small jumps, possibly as a result of trading illiquidity, most fund strategies …
What Are Analysts Really Good At?, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi. Zach
What Are Analysts Really Good At?, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi. Zach
Research Collection Lee Kong Chian School Of Business
Sell-side analysts employ different benchmarks when defining their stock recommendations. Forexample, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector(“industry benchmarkers”), while for other brokers it means the stock is expected to outperform themarket (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We use thesebenchmarks to analyze the role of stock picking, industry picking and market timing in contributing to theperformance of stock recommendations. We are able to do so given that different benchmarks suggest theuse of different sets of abilities. Analysis of the relation between analysts’ recommendations and theirlong-term …
An Institutional Perspective And The Role Of The State For Chinese Ofdi, Bing Ren, Hao Liang, Ying Zheng
An Institutional Perspective And The Role Of The State For Chinese Ofdi, Bing Ren, Hao Liang, Ying Zheng
Research Collection Lee Kong Chian School Of Business
Napoleon called China a ‘sleeping dragon’, but recent economic developments as China enters the twenty-first century show that the dragon is awakening. China has maintained strong economic growth since 1979 and sustained a GDP increase of more than 9 percent over the years. The total volume of economic output increased from 2.8 percent in 1970 to 7.23 percent in 2008, ranking China as the third largest economy in the world (United Nation Statistics Division Statistical Databases). China launched its ‘Go Global’ policy in 1999 to encourage highperforming Chinese firms to invest abroad and upgrade their global competence. Since then, outward …
Grey Market For Indian Ipos: Investor Sentiment And After-Market Performance, Chandrasekhar Krishnamurti, Tiong Yang Thong, Vishwanath Ramanna
Grey Market For Indian Ipos: Investor Sentiment And After-Market Performance, Chandrasekhar Krishnamurti, Tiong Yang Thong, Vishwanath Ramanna
Research Collection Lee Kong Chian School Of Business
Extant research on developed markets shows that investor sentiment is a prominent feature in IPO grey markets. There is sparse work in the context of emerging markets. We fill this lacuna by studying the working of the Indian IPO market. We consider this work interesting and relevant for the following reasons. First, grey market trading always involves short-selling as securities are not yet available. Since legal and institutional environment is less developed in emerging markets, the functioning of grey markets is of interest to policy makers and financial economists. Second, retail investors participate to a greater extent in IPOs of …
The Implications Of Sovereign Wealth Fund Investment On Capital Markets: A Bottom-Up View, David Fernandez
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 …
A Martingale Approach For Testing Diffusion Models Based On Infinitesimal Operator, Zhaogang Song
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 …
The Unintended Effects Of The Sarbanes-Oxley Act, Vidhi Chhaochharia, Clemens A. Otto, Vikrant Vig
The Unintended Effects Of The Sarbanes-Oxley Act, Vidhi Chhaochharia, Clemens A. Otto, Vikrant Vig
Research Collection Lee Kong Chian School Of Business
The Sarbanes-Oxley Act (SOX) was passed in the wake of several scandals that rocked corporate America in 2001 and 2002. The objective behind SOX was to improve corporate governance by improving accounting disclosures. Compliance with Section 404 is considered by many to be the most costly requirement of SOX and has been argued to be a disproportionate burden for small firms. Consequently, firms with a public float below $75 million were granted several exemptions from compliance. We document an unintended effect of these exemptions: a weakening of corporate governance through a weakening of the market for corporate control.
On The Robustness Of The Positive Relation Between Expected Idiosyncratic Volatility And Expected Return, Fangjian Fu
On The Robustness Of The Positive Relation Between Expected Idiosyncratic Volatility And Expected Return, Fangjian Fu
Research Collection Lee Kong Chian School Of Business
My 2009 JFE paper ["Idiosyncratic Risk and the Cross-Section of Expected Stock Returns', Journal of Financial Economics, Vol. 91, pp. 24-37] documents a positive and statistically significant cross-sectional relation between expected idiosyncratic volatility (E(IVOL)) and expected stock return. A recent working paper titled "On the Relation between EGARCH Idiosyncratic Volatility and Expected Stock Returns" by Guo, Ferguson, and Kassa of University of Cincinnati suggests that the positive relation is driven by an in-sample approach to estimate E(IVOL). They fail to find a significant relation between return and their E(IVOL) estimated out of sample. I find that two estimation settings in …
Hype My Stock: Do Firms Really Want Biased Research?, Roger Loh
Hype My Stock: Do Firms Really Want Biased Research?, Roger Loh
Research Collection Lee Kong Chian School Of Business
Analyst research is alleged to be biased because of conflicts of interest when analysts’ employers underwrite securities for the firms covered. I posit that affiliated analyst optimism should be the strongest for offering firms with a desire to over-inflate stock prices. I hypothesize that a firm’s corporate governance and its CEO incentives are related to the affiliation bias. Using stock recommendations data, I find evidence that the affiliation bias is indeed more pervasive for firms with high CEO wealth sensitivity to stock price (i.e., high CEO delta). The larger affiliation bias for high delta firms remains even after the introduction …
Can Liquidity Shifts Explain The Lockup Expiration Effect In Stock Returns?, Chandrasekhar Krishnamurti, Avanidhar Subrahmanyam, Tiong Yang Thong
Can Liquidity Shifts Explain The Lockup Expiration Effect In Stock Returns?, Chandrasekhar Krishnamurti, Avanidhar Subrahmanyam, Tiong Yang Thong
Research Collection Lee Kong Chian School Of Business
Several studies on the expiration of IPO lockups document a strong negative reaction even though the unlock event is devoid of any informational content. The empirical finding has remained a conundrum. In this paper, we find that changes in liquidity can account for the observed stock price reaction around lockup expiration. Specifically, firms which show improvement in liquidity subsequent to the unlock day experience positive abnormal returns in the post-expiration period, and vice versa. Another interesting conclusion that emerges from our research is that liquidity changes can predict future abnormal returns. Our results remain robust to the use of alternate …
Earnings Asymmetric Timeliness And Shareholder Distributions, Richard M. Frankel, Yan Sun, Rong Wang
Earnings Asymmetric Timeliness And Shareholder Distributions, Richard M. Frankel, Yan Sun, Rong Wang
Research Collection Lee Kong Chian School Of Business
We study whether more asymmetrically timely earnings constrain payouts to shareholders in the presence of bad news. Our goal is to provide evidence on the ex post contracting benefits of accounting conservatism. We distinguish between cash flow asymmetric timeliness and accrual asymmetric timeliness to examine how each relates to asymmetric sensitivity of shareholder payouts. We find that only the asymmetric timeliness of cash flows is significantly related to the asymmetric sensitivity of shareholder payouts. Other measures of conservatism (earnings skewness and accumulated nonoperating accruals) are also not significantly related to the sensitivity of shareholder payouts given bad news. These results …
Asymmetric Information And Conglomerate Discount: Evidence From Spinoffs, Charlie Charoenwong, Kuan Yong David Ding, Jing Pan
Asymmetric Information And Conglomerate Discount: Evidence From Spinoffs, Charlie Charoenwong, Kuan Yong David Ding, Jing Pan
Research Collection Lee Kong Chian School Of Business
The existing literature argues that diversified firms may be undervalued due to the information asymmetry between a firm's management and the market. Splitting the firm's divisions into multiple business components is thought to facilitate the market valuation of each component more accurately. We investigate the information hypothesis from corporate spinoffs from 1981 through 2004. We use the post-spinoff data to reconstruct the diversified firm, assess the improvement in value at the combined firm level, and relate the value improvement to the change in the level of information asymmetry. We find that, prior to the spinoff, the sample firms have significantly …
Estimating The Dynamics Of Mutual Fund Alphas And Betas, Harry Mamaysky, Matthew Spiegel, Hong Zhang
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 …