Monitoring the foreign exchange rate benchmark fix

ABSTRACT

We develop a Manipulation Index (ManIx) that captures the potential manipulation intention of dealers during the World Markets/Reuters (WMR) benchmark (London Close) period at 4 pm London time through a unique algorithm and simulation. The application of this model (using a dataset with dealers’ identities) can identify banks that are prone to potential manipulative behavior. The results concerning the identified banks are validated by the regulatory investigations. Implementation of this algorithm allows regulators better direct their limited resources towards more targeted in-depth investigation.     

Dynamic relationship between stock market trading volumes and investor fear gauges movements

This article applies multifractal detrended fluctuation analysis (MF-DFA) and multifractal detrended cross-correlation analysis (MF-DCCA) to investigate cross-correlation behaviours between two kinds of stock markets trading volumes and investor fear gauges covering the data of U.S. stock markets from 2 January 2004 to 31 July 2018. The empirical results show that the dynamic relationship between stock markets trading volume fluctuations and different kinds of investor fear gauges are multifractal and find that the dynamic relationship is strongly anti-persistent. Moreover, financial crisis in 2008 has a significant impact on the cross-correlated behaviour, suggesting that stock market trading volume fluctuations and investor fear gauges are more susceptible to each other during the financial crisis period. Through the rolling windows analysis, we also find that the stock markets trading volume fluctuations and different kinds of investor fear gauges are anti-persistent dynamic cross-correlated.     

Material weakness disclosures and restatement announcements: The joint and order effects

We examine differences in stock price, option volatility, and litigation reactions to restatement announcements that are associated with a material weakness (MW) disclosure. Contrasted with restatements that are not associated with any MW disclosure, our analyses reveal that firms that announce both a restatement and an associated MW experience significantly more negative market returns, greater implied volatility, and higher likelihood of class action lawsuits. Separating the restatements into timely reporters, where the MW precedes the restatement, and non‐timely reporters, where the MW is concurrent with or follows the restatement, we find that timely reporters experience more negative returns at the time of the restatement, relative to non‐timely reporters, suggesting that investors perceive the early MW disclosure to signal more pervasive control‐related problems. Interestingly, we find that timely and non‐timely reporters are equally likely to be sued, consistent with the argument that wrongdoing (through either a timely or non‐timely MW disclosure) provides stronger grounds for establishing scienter. However, timely reporters appear to secure more favorable litigation outcomes: they face higher likelihood of lawsuit dismissals and pay much lower settlements, compared to non‐timely reporters. Overall, our evidence provides new insights into how market participants incorporate information about internal control weaknesses into their perceptions regarding the economic implications of financial restatements, and financial reporting quality.     

The Impact of Farmland Transfers on Agricultural Investment in China: A Perspective of Transaction Cost Economics

There is growing concern that farmland transfers lead to less agricultural investment, which may adversely affect agricultural productivity growth in China. Prior research has primarily focused on the differences between owned cultivated land and rented plots, but little is known about how farmland transfers between relatives, which are popular in rural China, specifically affect agricultural investment. In this paper, we present a conceptual framework of transaction cost economics to compare different contracting strategies in China's farmland rental markets. As farmland rental markets in China are immature, land transfer between relatives establishes bilateral governance, which has the advantage of addressing the opportunistic activities of both parties and can ultimately increase investment by tenants. Based on data from two waves of household surveys, we empirically examine the impact of bilateral governance on the application of organic fertilizer, an indicator for agricultural investment. Our findings show that apart from economic factors, kinship is important to the functioning of farmland rental markets in rural areas.     

Tax evasion by tax deferment: Sham litigation with an informal credit market

We show theoretically how tax evasion is facilitated by informal credit market through tax deferment. Our model is empirically based. Using sham litigation, tax evaders earn a higher rate of return than the stipulated penalty rate for tax evasion while the government loses tax revenue. We propose an upfront part–payment of the disputed amount of tax as a solution to the form of tax evasion we describe.     

Corruption,market quality,and entry deterrence in emerging economies

In many emerging economies incumbent firms often use dubious means to deter entry of other firms. We analyze this scenario in a three‐stage game of entry deterrence. The incumbent has incomplete information about the entrant's costs but can increase this cost by resorting to unfair means (e.g. bribing a politician who harms the entrant). We completely characterize the optimal bribe and show that this depends on the “fairness index” and the “differentiation” parameter. We also show that zero bribes need not maximize welfare and market quality. Our results seem to be compatible with anecdotal evidence from emerging economies such as India.     

我国银行衍生产品体系发展的问题与对策研究

我国银行衍生产品体系是银行业重要的体系之一。通过我国期货交易细则、期权市场交易额等相关信息及数据的搜集,并将数据进行趋势化分析,从而对我国银行衍生产品体系的发展特点和问题进行研究,研究发现:我国银行衍生产品体系具有法律规范体系初步完善、风险评估体系国际化、衍生品市场发展迅猛等发展特点,但存在衍生品市场缺乏市场竞争力、不适应政策变化、不能自主定价等问题,提出了建立信息明确有序的交易体系、增强竞争力争取定价权益等建议。     

Trump’s Effect on the Chinese Stock Market

U.S. President Donald J. Trump tweets frequently to communicate his thoughts to the public. We quantitatively evaluate the impact of Trump's China-related tweets on the Chinese stock market. We find that following Trump’s inauguration, his tweets with a positive sentiment significantly increase abnormal returns for the manufacturing industry in the Chinese stock market. Furthermore, an increase in the absolute value of his positive sentiment increases both the trading volume and volatility of the market. The positive effect is more pronounced for those subindustries with high exposure to international trade and stronger business relations with the United States than for other subindustries. The results are robust for various sensitivity tests.     

Impacts of increased Chinese imports on Japan’s labor market

Using the Japanese firm/establishment-level census data, we investigate the impact of the Chinese import penetration on employment in Japan. We found negative impacts of the Chinese import penetration on total employment, especially in industries producing competing products to Chinese imports, and a positive impact of the import penetration in the industries from which firms purchase their inputs (upstream import penetration). The negative impacts are mainly driven by firms’ exit from the market while positive impacts are enjoyed by surviving firms. We did not find any significant impacts of the penetration in the industries to which firms sell their products (downstream penetration).     

An Exploratory analysis of flight delay propagation in China

Delay propagation is the flight departure delay caused by the arrival delay of pre-segment flight. Chinese airline market has suffered very poor on-time performance (OTP) in recent years. It is, however, unclear whether delay propagation prevails as one major source for such problem. This study first aims to empirically quantify delay propagation in the Chinese airline market. Specifically, we shed light on heterogenous levels of delay propagations across different airports and airlines. Then, the distinct delay propagation patterns in China are also discussed and compared with other developed airline markets (e.g., the US and Europe). Our estimation is based on OTP data for over 12 million Chinese flights covering the 2015–2017 period. Specifically, it is found that 10 min arrival delay of pre-segment flight within 1 hr before the departure lead to an average of 7.49 mins delay propagation for subsequent departure flight. Arrival delay of earlier pre-segments (1–2 and 2–3 hr before the departure) leads to much less delay propagation, due to longer ground buffer. Chinese airlines arrange longer ground and flight buffer than that of the US airlines to prevent the delay propagation from accumulating along the subsequent flights in a day. Thus, unlike the US market, delay propagation is not the major reason for poor OTP in China. In addition, delay propagation is less prevailing at the Chinese hub airport. This is because China has relied on point-to-point network, which does not require sophisticated schedule coordination. And the local passengers at these Chinese hub airports have higher time value such that the Chinese airlines also try to improve OTP at these hub airports to better serve these lucrative but time-sensitive local passengers. Unlike the European LCCs, Spring Airlines, the largest low-cost carrier (LCC) in China, outperforms major full-service carriers (FSCs) in controlling delay propagation. This finding may also apply to other Northeast Asian LCCs sharing common operational characteristics as Spring Airlines. Last, we find that airlines purposely tolerate moderate departure delays of up to 15 min, which is the threshold that defines delays, no matter whether the pre-segment flight arrives late or on-time. The relevant policy and managerial implications are also discussed.