Finance Commons^™

Opaqueness Of Financial Institutions, Todd G. Griffith

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

Spectators and professionals have targeted financial institutions as being at the epicenter of recent markets crises The opaqueness of bank holding companies' assets has been assumed to have created additional volatility and inefficiency within the market. It appears that the capital structure of a bank is the actual driving force behind the inefficiency. I conduct multiple empirical analyses to measure whether the lack to financial institutions asset transparency negatively impacts the ability of the firms price to respond to informational innovations in a timely manner. Through additional econometric tests, I explore several economic theories to narrow in on the root …

Options Vs. Futures: Which On Average Will Have The Greater Payoff?, Ryan Silvester

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

The use and idea of futures contracts has been around for almost as long as humans have existed. Many of these contracts can be as simple as the shaking of someone’s hand with the agreement to trade an asset for an agreed upon price in the future. These contracts have often been used by farmers to ensure a needed price for an asset, or for a store owner to ensure a needed asset for a given price. The idea of a futures contract is to either buy or sell an asset later on at a specified price. In this paper …

How Are Interest Rates Affecting Household Consumption And Savings?, Lacy Christensen

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

This paper explores the optimal interest rates that could potentially maximize overall consumption and savings. I attempt to determine whether artificially low interest rates are positively or negatively affecting consumption. There has been speculation on whether the United States needs to raise the effective federal funds rate to provide financial institutions the incentive to lend money and increase household consumption. The Federal Reserve is currently keeping the effective funds rate between 0 and .25 in hopes of increasing consumption levels. This paper uses fifty years of interest rate data to narrow in on an optimal interest rate that leads to …

Out Of Sight, Out Of Mind: The Value Of Political Connections In Social Networks, Quoc-Anh Do, Yen Teik Lee, Bang Dang Nguyen, Kieu-Trang Nguyen

Research Collection School Of Economics

This paper investigates the impact of social-network based political connections on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Comparing firms connected to elected versus defeated politicians in the Regression Discontinuity Design of close elections from 2000 to 2008, we provide evidence that political connections enhance firm value. However, the value of political connections varies in a more complex way than expected. While connections to powerful members of the Senate generate strong positive impact on firm value, connections to newly elected congressmen are less valuable to firms than …

Off The Cliff And Back? Credit Conditions And International Trade During The Global Financial Crisis, Davin Chor, Manova Kalina

Research Collection School Of Economics

We examine the collapse of international trade flows during the 2008-2009 global financial crisis using detailed data on the evolution of monthly U.S. imports over the November 2006 - April 2009 period. We show that credit constraints and the reduction in the availability of external capital were an important channel through which the crisis affected trade volumes. We identify the effects of credit tightening by exploiting the variation in the cost of capital across countries and over time, as well as the variation in financial dependence across sectors. We find that countries with higher interbank interest rates and thus tighter …

Global Savings And Global Investment: The Transmission Of Identified Fiscal Shocks, James Feyrer, Jay Shambaugh

Dartmouth Scholarship

This paper examines the effect of exogenous shocks to savings on world capital markets. Exogenous tax increases in the United States (from Romer and Romer 2010) are only partially offset by changes in domestic private savings, and only a small amount is absorbed by increased domestic investment (contra Feldstein and Horioka 1980). Almost half the change in taxes is transmitted abroad through a change in the US current account. Other countries experience decreases in current accounts and increases in investment in response to exogenous US tax increases. We cannot reject symmetric responses across countries with different currency regimes and levels …

The Household's Savings And The Industrial Production : A Time Series Analysis For Poland, Michal Wojewodzki

Lingnan Journal of Banking, Finance and Economics

In this paper the author will examine the short and long-run causality between the growth rate of households‟ savings in the consolidated banking system in Poland, and the Polish economic growth rate (using the industrial production index as its proxy). This research paper will cover Poland‟s economic development over the periods 1997 to 2010 (in a quarterly approach). The main purpose of this paper is to shed light on the direction of the causality between saving and growth, so that the Polish policymakers can either focus on policies promoting growth or focus on saving policies in order to effectively and …

A Quantitative Study Of Influential Factors On Hibor Under Hong Kong's Linked Exchange Rate System, Jianbin Situ

Lingnan Journal of Banking, Finance and Economics

Hong Kong Inter-Bank Offered Rate (HIBOR) is one of the most important interest rates in the Hong Kong money market. This paper studied some of the significant factors in determining HIBOR under Hong Kong‟s Linked Exchange Rate System using a VAR model to describe how various factors affect the movement of HIBOR. The result indicates that HIBOR, foreign exchange rate and M1 are correlated.

Herding Evidence In Chinese Stock Market : A Study Of The Relationship Between Stock Price Index And Trading Volume Based On Behavioral Finance Theory, Xiaofeng Zhao

Lingnan Journal of Banking, Finance and Economics

Over the last couple decades, more evidence has been found supporting the notion that investors are not always rational. Herding behaviors have been observed in both the stock market crash1 and financial bubbles2, which were beyond the understanding of modern finance theory. In this paper, the herding phenomenon was explored in the Chinese stock market by the study of the relationship between stock prices and trading volume over the past 7 years. It was found that the change of price is statistically significant to have caused the change of trading volume, but the reverse is not true. Theoretically, this identifies …

Analysis On Accrual-Based Models In Detecting Earnings Management, Tianran Chen

Lingnan Journal of Banking, Finance and Economics

This paper analyzes the problems with the alternative accrual-based models in detecting earnings management. The researcher will focus on comparing the Jones Model and the Modified Jones Model, which are the two most frequently used model in empirical analysis nowadays. Earnings management is a kind of management which uses accounting techniques to meet the executives‟ needs for earnings; it is a widely debated topic, hence it is worth looking at. Experts and professionals in this area found many approaches to detect the earnings management; within these approaches are the accrual-based models which include the modified Jones model, which currently is …

The Uncovered Interest Rate Parity Failure From 2002 To 2005 : An Implicit Consensus Of Carry Trade, Yui Law

Lingnan Journal of Banking, Finance and Economics

There are many literatures devoted to the study of the uncovered interest parity (UIP); however, majority of them focus on whether UIP exists and only a few concentrate on the pattern of the UIP failure. By using a panel VAR approach, this paper compares the intensive carry trade period, between 2002 and 2005, and the pre-intensive carry trade period, between 1998 and 2001. The results show that during the intensive carry trade period UIP failure was caused by the self-fulfilling behaviour of investors. High interest rate currencies made investors believed that the currencies would appreciate and bided their price even …

How Can Saving Deposit Rate And Hang Seng Index Affect Housing Prices : An Empirical Study In Hong Kong Market, Tao Tang

Lingnan Journal of Banking, Finance and Economics

The main objective of this paper is to examine the impact of savings deposit rate and Hang Seng index on real estate prices in Hong Kong Market. Two different periods are chosen to conduct this research: one period is the deflationary time, from 1998 to 2003, and the other is the reviving economical time from 2004 to 2007. The aim of this research is to examine the influences of these variables in different economic conditions, and find out whether there are any causal effects amongst them.

The Benefits Of Introducing A Housing Price Index Future In Hong Kong, Yingsi Feng

Lingnan Journal of Banking, Finance and Economics

It is widely recognized and accepted that, financial innovation such as options and futures can help to manage risk, speculate, arbitrage and discover price in financial markets. As such, the researcher believes that the introduction of a Housing Price Index Futures in Hong Kong can greatly improve the investment environment in Hong Kong‟s property market. Therefore, the purpose of this paper is to perform a feasibility study of the proposed Housing Price Index Futures in Hong Kong financial Market, to reveal the crucial need of this innovation for the betterment of the real estate market in Hong Kong, and the …

Evidences Of High Sensitivity Of Investors To Financial News After Crises : Cases Study Of Asian Financial Crisis And Sub-Prime, Yui Law

Lingnan Journal of Banking, Finance and Economics

In the academic field of international stock market, some critics argue that, after having a global financial crisis, stock markets around the world will become more integrated. In fact, many researchers have put forward empirical works showing that the co-relation, or Granger-Causality, among different stock markets, strengthens comparatively at the post crisis period. This finding is rational; however, the explanation given for the increased co-movement after the crisis is not sufficient. The critics suggest that this increase is caused by the increase in international arbitrage activities and the higher degree of integration among markets. The Purpose of this paper is …

Implications Of A Managed Floating Exchange Rate System On The Interest-Rate Behavior Of Singapore, Jingjing Wei

Lingnan Journal of Banking, Finance and Economics

Singapore and Hong Kong are two similar economies, but they have rather different monetary systems and exchange-rate regimes. Singapore’s managed floating exchange rate regime contrasts with Hong Kong’s currency board system (CBS) featured by the Hong Kong–United States dollar peg. In this paper, we appraise the implications of the managed floating exchange rate regimes on the interest-rate behavior of Singapore. We examine the Singapore-US interest differential under the Singapore’s exchange-rate regimes during the Asian Financial Crisis (AFC), current Global Financial Crisis and none-crisis periods by using generalized autoregressive conditional heteroscedasticity (GARCH) model. We hope that the good performance of Singapore’s …

Analysis Of Hong Kong To Be An Offshore Financial Center Of Rmb, Qichao Song

Lingnan Journal of Banking, Finance and Economics

In this article we aim to discuss the possibility and feasibility as well as the disadvantages and barriers for Hong Kong to be an offshore financial center of RMB. As the most biggest financial center in China, Hong Kong need to develop the RMB business for strengthening its position in the international competition. And we think that to become an RMB offshore financial center is not only an opportunity but also a responsibility for Hong Kong. We also give some suggestions on this issue.

Citizens’ Satisfaction With The Sar Government's Overall Performance In Post-Colonial Hong Kong : Result Of Ols Analysis, Luo Yang

Lingnan Journal of Banking, Finance and Economics

Through studying of the impact of the Hong Kong Special Administration Region government’s performance in various policy areas upon the level of citizen’s satisfaction with the government’s overall performance, this paper confirms the general wisdom that economic development is an important source of citizens’ satisfaction with the government’s performance. It further proves that, government’s performance on democratic development and freedom of speech and assembly are also very powerful variables in the model and its partial coefficients are impressive.

An Experimental Study About Effective Factors Of First-Day Offer Pricing : Taking Stock Markets As An Example, Yi Liu

Lingnan Journal of Banking, Finance and Economics

The author examines the literature with respect to the pricing of initial public offerings and focus upon the effective factors of pricing. Using a data base of all share offerings undertaken in Hong Kong over a one year period (in 2007), the author finds that there is considerable evidence for the proposition that large and well-capitalized companies tend to price their share offerings at a higher absolute level in order to get a higher level of first-day closing price. Using classical statistical methods, the author finds that the pricing strategy of offering companies is connected to shareholders’ desire of the …

The Fall Of Long-Term Capital Management, Xiaowei Guo

Lingnan Journal of Banking, Finance and Economics

The author examines the literature with respect to the pricing of initial public offerings and focus upon the effective factors of pricing. Using a data base of all share offerings undertaken in Hong Kong over a one year period (in 2007), the author finds that there is considerable evidence for the proposition that large and well-capitalized companies tend to price their share offerings at a higher absolute level in order to get a higher level of first-day closing price. Using classical statistical methods, the author finds that the pricing strategy of offering companies is connected to shareholders’ desire of the …

What Determines Public Pension Investment Risk-Taking Policy, Nancy Mohan, Ting Zhang

Economics and Finance Faculty Publications

State public pension plans, mostly defined benefit plans, cover pension benefits for 12.8 million active public employees and 5.9 million retirees and other annuitants. However, by the end of 2009, public pension plans had accumulated a total funding deficit of $697 billion (measured by the difference between actuarial pension assets and liabilities). On average, public pension funds cover 75 percent of their liabilities, but individual state results vary greatly.

The 2008 stock market crash strongly affected pension asset value in that equity allocation on average accounted for 56 percent of invested assets. The average 2009 pension asset beta of 0.63 …

Fund My Trip: Is Outmigration Changing The Functioning Of Microfinance In Rural Areas?, Vadim A. Berg

Independent Study Project (ISP) Collection

Remittances have been integral to Nepal’s economy since the 19^th century, and they have never been as crucial to the nation’s income as today, accounting for about a quarter of GDP. Microfinance first appeared in Nepal in the 1950s under the form of agricultural cooperatives, and today both saving and credit cooperatives and formal microfinance banks play an important role in giving rural populations access to financial institutions. Increasingly, both these two flows have begun to interact, and this research aims to shed light on these microfinance foreign employment loans. Is microcredit making migration a more affordable and viable …

Developing International Self-Reliance In Undergraduate Students Through Study Trips, Elizabeth Yobaccio, Ramesh Mohan, Jack Trifts

Finance Department Faculty Journal Articles

This paper reports on the development of a large scale international study trip program developed by an AACSB accredited institution to enhance the global perspective of its students. Developed collaboratively between the College of Business, the College of Arts and Sciences and the university's Student Affairs division, the program has resulted in more than 750 students participating in international experiences in one of 18 trips throughout the world. This paper documents the development of this program and provides important insights for anyone planning to offer a similar experience to their students.

How One Trade Could Change The World: High Frequency Trading And The Flash Crash Of 2010, Sarah Perlman

Honors Projects in Finance

Financial markets are controlled directly by a small population of people, but have direct effects on almost every aspect of the global community. Financial markets are now flooded with computerized algorithms that have drastically changed the face of trading. As with any advances in technology, there are always unforeseen events that create new challenges, and adjustments that need to be made. In our increasingly global and technological world, one wrong click of the mouse in New York could affect the stock markets in London, Tokyo, and Brazil. On May 6th, 2010, such a situation occurred and caused the Dow Jones …

Massachusetts And The Financial Crisis, College Of Management, University Of Massachusetts Boston

Financial Services Forum Publications

Although Massachusetts suffered the consequences of the crisis along with the rest of the US economy, the state weathered the storm relatively well. Now, with the impact of the policies still playing out, there are encouraging signs of recovery which may provide much needed relief for all.

Foreclosing Foreclosure: Escaping The Yawning Abyss Of The Deep Mortgage And Housing Crisis, Aleatra P. Williams

Northwestern Journal of Law & Social Policy

In 2007, Rick Sharga, vice president of marketing at RealtyTrac, stated that with more stringent lending and underwriting standards, “we will likely see a significant foreclosure decrease” within the next three years. However, a sustained and considerable decrease in foreclosures has yet to occur. In fact, the real estate market downfall and resulting mortgage and housing crisis have proven to be wider, deeper, and more serious than first anticipated. Since 2007, millions of homeowners faced, and continue to face, foreclosure proceedings. To provide protections for homeowners, federal and state actors have attempted regulatory and legislative solutions to stem the foreclosure …

Mexico Consensus Economic Forecast, Volume 15, Number 2, Thomas M. Fullerton Jr., Adam G. Walke

Departmental Papers (E & F)

No abstract provided.

Government Influence And The Failure Of Fannie Mae And Freddie Mac, Aravind Mohan

Honors Theses

In 2008 two government-sponsored enterprises, Fannie Mae and Freddie Mac, were placed into conservatorship due to insolvency. The financial bailout of the two publically traded corporations came at the expense of the American tax payer. This study investigates the relationship between direct and indirect government influence and the increasing risk taking of Fannie Mae and Freddie Mac from the late 1990’s through their conservatorship in 2008. As government-sponsored enterprises Fannie Mae and Freddie Mac have many special advantages that other publically traded companies did not possess. These advantages allowed Fannie Mae and Freddie Mac to increase their profitability. Theoretical literature …

Fair Value Accounting: How Bad Decisions Bring Blame To Beneficial Accounting Procedures, Thomas John Ciulla

Senior Honors Theses

The Great Recession has sparked a debate amongst accounting professionals and economic analysts. There has been a concerted effort to blame fair value accounting and FAS 157 as the recession’s root cause and an attempt to challenge FASB to return to the historic cost principle. This paper examines the guidelines and procedures for mark to market as established by FASB, observes the events leading up to the recession, conditions that materialized at the start of the recession, evaluates the role fair value played in the financial crisis, and considers how fair value should be used in the future.

Hard, Soft, And Embedded: Implementing Principles On Promoting Responsible Sovereign Lending And Borrowing, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

This paper, prepared for UNCTAD’s initiative on responsible sovereign lending and borrowing, considers concrete strategies for implementing the Principles. It draws on studies in soft law and new governance, and on the recent experience in promoting best practices in international finance, including project finance, extraction revenue management, foreign aid, sovereign investment, and sovereign borrowing in the capital markets. It recommends maintaining the current non-binding character of the Principles, while embedding implementation in multi-stakeholder arrangements for ongoing disclosure, assessment, interpretation, and adaptation. This strategy has the best chance of changing behavior in sovereign lending and borrowing by creating constituencies for implementation …

El Microcrédito Como Herramienta Para Promover La Autonomía Económica Y El Empoderamiento Social En Mujeres De Bajos Recursos En El Conurbano Norte: El Caso De “Mujeres 2000” / Microcredits As A Tool To Promote Economic Autonomy And Social Empowerment In Women With Few Resources In The Northern Metropolitan Area: The Case Of “Mujeres 2000”, Stephanie Allen

Independent Study Project (ISP) Collection

In recent years, Argentina has been faced with many economic downfalls, specifically the economic crisis of 2001. These economic hardships led to higher rates of poverty and unemployment throughout the country. The populations most affected but such harsh economic downturns were the already vulnerable; one of which being women. Many women in Argentina and throughout Latin America occupy a lower position in society and often bear most of the burden of poverty and unemployment.

As a response to the isolation of some groups from the formal economic system, the idea of microfinance took shape. Presently in Argentina there exist over …