Exploring uncharted territories of the hedge fund Industry: Empirical characteristics of mega hedge fund firms

This paper investigates mega hedge fund management companies that collectively manage over 50% of the industry's assets, incorporating previously unavailable data from those that do not report to commercial databases. We find similarities among mega firms that report performance to commercial databases compared with those that do not. We show that the largest divergences between the performance of reporting and nonreporting mega firms can be traced to differential exposure to credit markets. Thus, the performance of hard-to-observe mega firms can be inferred from observable data. This conclusion is robust to delisting bias and the presence of serially correlated returns.     

Chinese Offshore RMB Currency and Bond Markets： The Role of Hong Kong

This paper discusses the role of Hong Kong in China’s grand scheme to build up the RMB as a global reserve currency.We highlight the economic importance of Hong Kong to China in terms of channeling foreign direct investment into China,some of which,in the future,will be denominated in the RMB.We discuss the development of China’s RMB currency swap and deposit markets in Hong Kong.These offshore markets enable the RMB to trade freely, setting the stage for the RMB to become fully convertible and allowing market forces to play a role in pricing the value of the RMB,and help in the development of the RMB-denominated bond(or dim sum bond)market in Hong Kong.Finally,we present evidence of the phenomenal growth of the dim sum bond market in Hong Kong,which can further enhance and strengthen the use of the RMB outside China.     

Public Hospital Costs in Two Australian States

This study examines the long-run and short-run behaviour of public hospital average costs in two Australian States: Victoria and Queensland. Using adjusted weighted inlier-equivalent separations as a measure of hospital output, and floor area as a measure of capacity, the study finds a hump- or '∩'-shaped long-run average cost curve at the 5 per cent significance level in both data sets. The study also finds a saucer- or '∪'-shaped relationship between capacity utilisation and short-run average cost at the 5 per cent level.     

The Political Economy of Strategic Trade Policies*

This paper applies Grossman and Helpman's (1994 ) common agency model to investigate the formation of strategic export subsidy and strategic import tariff under both Cournot competition and Bertrand competition. The results of this paper indicate that even with political pressure, the Grossman–Helpman politically‐determined export policy is identical to the rent‐shifting export policy, which is export subsidy (export tax) in Cournot (Bertrand) competition. The politically‐determined import tariff will be higher than the optimal level. This paper highlights the possibility that lobbying can restore the level of trade intervention to a more efficient one in the absence of the benevolent dictator.     

Order imbalance and the pricing of index futures

This study examines whether the aggregate order imbalance for index stocks can explain the arbitrage spread between index futures and the underlying cash index. The study covers the period of the Asian financial crisis and includes wide variations in order imbalance and the indexfutures basis. The analysis controls for realistic trading costs and actual dividend payments. The results indicate that the arbitrage spread is positively related to the aggregate order imbalance in the underlying index stocks; negative order‐imbalance has a stronger impact than positive order imbalance. Violations of the upper no‐arbitrage bound are related to positive order imbalance; of the lower no‐arbitrage bound to negative order imbalance. Asymmetric response times to negative and positive spreads can be attributed to the difficulty, cost, and risk of short stock arbitrage when the futures are below their no‐arbitrage value. The significant relationship between order imbalance and arbitrage spread confirms that index arbitrageurs are important providers of liquidity in the futures market when the stock market is in disequilibrium. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:697–717, 2007     

SEGMENTATION OF THE A‐ AND B‐SHARE CHINESE EQUITY MARKETS

In this study we use the latent variable asset pricing model to examine the pricing of A and B shares in the Chinese stock markets. The hypothesis tested is whether markets for the A and the B shares of the same companies are segmented. We document only one latent variable in both A‐ and B‐share markets. However, the latent risk premiums for the A and B shares are only weakly correlated, indicating the two‐tier markets are loosely related. The weak correlation implies the two markets reflect different fundamental forces. Additional analysis demonstrates that the Shanghai market responds to the Shenzhen market rather than the other way around.     

Daily volatility behavior in Chinese futures markets

This study examines the daily volatility of four futures contracts on Chinese futures exchanges (copper, mungbeans, soybeans and wheat). We find that returns have asymmetric effects on volatility, meaning that negative returns have a greater effect on volatility than positive returns do. Volume is positively related to volatility, open interest is negatively related to volatility, and the extent of large-volume traders’ participation is also positively related to volatility. We conjecture that the global patterns of volatility relationship, which have become more pronounced in Chinese markets in more recent years, are attributable to the results of ongoing government attempts to achieve transparency and better disclosure.     

Technological Opportunity and Productivity of R&D Activities

Economists have managed to find a positive impact of R&D efforts on productivity. However, the empirical results of their studies have not explained the observed sectoral differences in this important impact. With due reference to three global industries, namely, chemical, computer, and electrical/electronic, the objective of this study is to evaluate the impact of technological opportunity on the productivity of R&D activities. Technological opportunity refers to the ease of achievement of innovations and technical improvements, which could be jointly represented by the intensities of knowledge spillovers, inter-firm research overlap and scope of research. In this study, the degree of technological opportunity is quantified by patent statistics. The empirical findings confirm a positive relationship between technological opportunity and the productivity of R&D effort, and the estimated rate of return falls within the range as reported by past studies.     

The impact of real exchange rate movements on firm performance: A case study of Taiwanese manufacturing firms

Taiwan experienced large depreciations of its currency, the New Taiwan (NT) dollar, in the late 1990s. The largest real depreciation, 13 per cent, occurred during the East Asian Financial Crisis. Since Taiwan was subjected neither to the economic turmoil of the crisis itself nor to the subsequent reforms, its experience provides a good opportunity for studying the effects of exchange rate changes on firm performance. This paper empirically examines the exchange rate effects on firm exports, domestic sales, total sales, value-added and productivity, by using data on firms listed on the Taiwan Stock Exchange merged with customs trade data covering the period of 1992–2000. Our findings indicate that the real depreciation of the NT dollar led to an increase in exports, domestic sales, total sales, value-added, and productivity. In addition, we find that the productivity improvement induced by real currency depreciation may be a result of firm scale expansion.     

Financing Alternatives for Chinese Small and Medium Enterprises： The Case for a Small and Medium Enterprise Stock Market

Financing alternatives for small and medium enterprises in China are discussed in the present study. In particular, we analyze the significant changes and developments in China s “second board” stock market. China s extensive network of regional assets and equity exchanges, which were set up to facilitate private equity transfer, and non‐performing loan transactions seem to partially fill the void for small and medium enterprises, which cannot easily obtain approval for listing on the stock exchanges. Foreign investors can identify investment opportunities in non‐listed domestic state‐owned and private businesses through these regional assets and equity exchanges. At the same time, foreign stock markets are now attracting the young Chinese enterprises to list their stocks on their exchanges. (Edited by Zhinan Zhang)