INTEREST RATE RISK HEDGING FOR DUE-ON-SALE MORTGAGES WITH EARLY TERMINATION

The impact of random early termination on the interest rate elasticity and the related implications of hedging a mortgage security are examined. The common approach to computing duration using average mortgage life is shown to be biased and insufficient. Because the prepayment distributions of mortgages tend to have wide dispersions, substantial errors result from using average mortgage life. These results are also applicable to other financial obligations subject to prepayment.     

The trading behavior of foreign,domestic institutional,and domestic individual investors: Evidence from the Taiwan stock market

In this paper, we apply the threshold cointegration model of Hansen and Seo (2002), incorporating differences in the nonlinear behavior of investors across regimes. An examination of the trading behavior of foreign, domestic institutional, and domestic individual investors in Taiwan revealed no predominance among the three types of investors. When the market was near equilibrium, the purchases of domestic individual investors positively impacted stock prices. This finding, which is consistent with Choe et al. (2005), suggests that domestic individual investors have an edge in investment performance over other types of investors. However, when the market departed substantially from equilibrium, the purchases of foreign and domestic institutional investors predicted a rise in stock prices. On the other hand, domestic individuals traded at worse stock prices; these prices tended to fall (rise) after the purchase (sale).     

Coordinated capacity migration and expansion planning for semiconductor manufacturing under demand uncertainties

Semiconductor industry is very capital intensive in which capacity utilization significantly affect the capital effectiveness and profitability of semiconductor manufacturing companies. Due to constant technology advance driven by Moore's Law in semiconductor industry, multiple production technologies generally co-exist in a wafer fabrication facility with utilization of a pool of common tools for multiple technologies and critical tools dedicated for a specific technology. Because part of the equipment is common for products of different technologies, production managers have limited flexibility to dynamically allocate the capacity among the technologies via capacity migration. The possibility of capacity migration and interrelationship among different technologies make capacity planning difficult under demand and product-mix uncertainties.This paper aims to develop a dynamic optimization method that captures the unique characteristics of rolling demand forecast mechanism to solve capacity expansion and migration planning problems in semiconductor industry. In semiconductor industry, demand forecasts are rolling and updated when the latest market and demand information is available. This demand forecast mechanism makes forecast errors in different time periods correlated. We estimate the validity and robustness of the proposed dynamic optimization method in an empirical study in a semiconductor manufacturing company in Taiwan. The results showed practical viability of this approach and the findings can provide useful guidelines for capacity planning process under rolling forecast mechanism.     

Why and when organizational culture fosters affective commitment among knowledge workers: the mediating role of perceived psychological contract fulfilment and moderating role of organizational tenure

Drawing on Denison and Mishra (1995)’s framework of organizational culture, this study examines why and when organizational culture is related to knowledge workers’ affective commitment. Data were collected from 640 employees working in three high-technology companies in China. The findings indicate that the relationship between organizational culture and affective commitment is mediated by perceived psychological contract fulfilment. In addition, organizational tenure moderates the relationship between two external dimensions (i.e. adaptability and mission) of organizational culture and perceived psychological contract fulfilment. This study extends the current theoretical framework of organizational culture by demonstrating the underlying mechanism and the boundary condition of the relationship between organizational culture and affective commitment. The findings also provide practical implications for international managers to design appropriate human resource management policies and practices in China.     

Long-run equilibrium, short-term adjustment, and spillover effects across Chinese segmented stock markets and the Hong Kong stock market

This paper adopts a novel FIVECM-BEKK GARCH approach to examine the bilateral relationships among the A-share and B-share stock markets in China and the Hong Kong stock market. The evidence shows that these stock markets are fractionally cointegrated. Analyses of the spillover effects across these markets indicate that the A-share markets are most influential. The relaxation of government restrictions on the purchase of B shares by domestic residents accelerates the market integration process of A-share markets with the B-share and Hong Kong markets. The effects of the Asian crisis on the stock-return dynamic correlations vary across these markets.     

Real Estate Risk Exposure of Equity Real Estate Investment Trusts

This study examines the linkage between equity real estate investment trust (REIT) returns and the private real estate factor. The results reveal a tighter connection between REIT and the private real estate market starting from 1993. In addition, large-cap REITs seem to behave more like real estate than do small-cap REITs. Overall, the results are consistent with three notions: (1) that institutional investors provide information-gathering services (Bradrinath et al., Rev. Financ. Stud., 8:401–430, 1995), (2) that a more sophisticated investor base improves information flow, and (3) that a high degree of participation from institutional investors strengthens the linkage between REIT returns and the underlying real estate factor (Ziering et al., The evolution of public and private market investing in the new real estate capital markets, Prudential Real Estate Investors, Parsippany, NJ, 1997).

Evidence of Stock Returns and Abnormal Trading Volume: A Threshold Quantile Regression Approach

This paper presents a capital asset pricing model‐based threshold quantile regression model with a generalized autoregressive conditional heteroscedastic specification to examine relations between excess stock returns and “abnormal trading volume”. We employ an adaptive Bayesian Markov chain Monte Carlo method with asymmetric Laplace distribution to study six daily Dow Jones Industrial stocks. The proposed model captures asymmetric risk through market beta and volume coefficients, which change discretely between regimes. Moreover, they are driven by market information and various quantile levels. This study finds that abnormal volume has significantly negative effects on excess stock returns under low quantile levels; however, there are significantly positive effects under high quantile levels. The evidence indicates that each market beta varies with different quantile levels, capturing different states of market conditions.     

Managers’ Escalation Behavior in Equity Investment Decisions and the Role of Corporate Governance

The aim of this study is to investigate the relationship between free cash flows and escalation behavior in the long-term stock buying decisions for the firms listed in Taiwan. The main findings include: (1) Managers tend to exhibit the escalation behavior in the long-term equity investment. (2) There is a positive association between the level of free cash flows and the magnitude of managers’ behavioral escalation. (3) The corporate governance mechanisms play a contributory role in mitigating the escalation behavior. The evidence is robust across subsamples for electronic versus non-electronic industries, growth versus value firms, and loss versus gain firms.     

Pricing currency options under double exponential jump diffusion in a Markov-modulated HJM economy

Extending the framework of Amin and Jarrow (J Int Money Financ 10:310–329, 1991) and Bo et al. (Insur Math Econ 46:461–469, 2010), this study provides a theoretical exploration of currency options pricing under the presence of interest-rate regime shifts and exchange-rate asymmetric jumps. Evidence of interest-rate regime shifts inferred from UK and US zero coupon bond yields provides support for the regime-switching specifications which we reflect upon the domestic and foreign forward rates. Results of statistical tests conducted on JPY/USD and EUR/USD FX rates provide further support the rationale behind using a double exponential jump diffusion process within a Markov modulated Heath–Jarrow–Morton economy. Our numerical results suggest that, the pricing performance of our model is closely comparable to the Bo-Wang-Yang model for at-the-money options, yet yields improvements in percentage root mean errors for in-the-money options.     

ON THE IMPACT OF PUBLIC DEBT ON ECONOMIC GROWTH: DOES COUNTRY RISK MATTER?

This study examines the nonlinear impacts of four country risk indices on the debt‐growth nexus for 61 countries in a panel data framework. Our results show evidence of the different debt‐growth nexus under the different degrees of country risk. Under a high‐risk environment, a country's economic growth is harmed by raising its public debt. The negative effects public debt has on economic growth become weak under low political and financial‐risk environments, while an increase in public debt could help to stimulate economic growth under low composite and economic risk environments. In addition, the differences of countries' income and debt levels also lead country risks to have different effects on the debt‐growth nexus, suggesting that a country should borrow appropriately based on its current risk environments while improving economic performance. (JEL C33, E02, H63, O43)