The return to value in Asian stock markets

This paper investigates the returns to value strategies in four Asian stock markets: Hong Kong, Korea, Singapore and Taiwan. Hong Kong, Korea and Singapore exhibit value premia while Taiwan shows value discounts. The impact of firm characteristics on value premia differs across the four markets. The robustness tests indicate that the value premia are time-varying. They become greater in the post-crisis period across all four countries, indicating that high volatility during the crisis period did understate the value premia. The value strategy's excess return is sensitive to the sample selection rule and the firm size and liquidity effects. With tighter sample selection criteria, value premia tend to decline, which indicates that both the firm size effect and the liquidity effect are important sources of value premia. Unequal weighting assigned to financial variables in constructing the Average Price Rank (APR) based on the overall performance of single-variable approach does not necessarily improve the results.     

Effective risk aversion in thin risk‐sharing markets

We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We argue that traders relatively more exposed to the market portfolio tend to behave in a more risk tolerant manner. Noncompetitive equilibrium prices and allocations result as an outcome of a game among traders. General sufficient conditions for existence and uniqueness of such equilibrium are provided, with extensive analysis of two‐trader transactions. Even though strategic behavior causes inefficient social allocations, traders with sufficiently high risk tolerance and/or high initial exposure to tradable securities obtain more utility gain in the noncompetitive equilibrium, when compared to the competitive one.     

Stability of long-run growth in East Asian countries: New evidence from panel stationarity test with structural breaks

This paper investigates the stability of the steady-state growth process in East Asian region using a novel panel stationarity test, which allows us to control for (a) unobserved heterogeneity in form and date of potential structural breaks in a trend function, (b) the cross-sectional dependence among countries in the panel bootstrapping methods, and (c) the serially correlated errors. Evidence shows that a large majority of countries exhibit slowdowns in economic growth after their structural breaks and thus could not recover from negative shocks and return original balanced growth path.     

Risky short positions and investor sentiment: Evidence from the weekend effect in futures markets

This paper examines the weekend effect in futures markets and presents rational and behavioral reasons for its existence. Specifically, we document a weekend effect (Friday's return minus the following Monday's return) in futures markets. The weekend effect occurs partly because of asymmetric risk between long and short positions around weekends; the weekend effect increases when short positions are relatively more risky. In addition, we find that both lagged and contemporaneous changes in investor sentiment are related to the weekend effect. These results are consistent with the investor sentiment literature that finds that mood improves on Fridays but deteriorates on Mondays.     

Smooth breaks and nonlinear mean reversion in real interest parity: Evidence from East Asian countries

This study aims to explore the empirical validity of the real interest rate parity (RIP) hypothesis for East Asian countries using Japan as the base country. To this end, we employ the recently proposed unit root tests of Christopoulos and Leon-Ledesma that account for both multiple smooth structural breaks of unknown form and nonlinear mean reversion in the series. Our empirical results uncover overwhelming evidences in favor of the RIP hypothesis for the whole countries in our sample. More specifically, through a Fourier approximation, it is observed that all real interest rate differentials display a mean-reverting behavior around an infrequently smooth-breaking mean, with the breaks being in accordance with the financial reforms and economic crises witnessed by the countries. Moreover, the degree of mean reversion appears to vary nonlinearly with the size of real interest rate appreciations and depreciations.     

Exploring antecedents and consequences of consumer ethnocentrism: evidence from Asian immigrants in the US

The US is a multicultural society due to its growing number of ethnic minorities. These ethnic populations have made intracultural studies more difficult because of the different senses of identity and degrees of acculturation the varied groups possess. The current study examined the impact of perceived ethnicity (Asian vs. Asian American) and acculturation level (low vs. high) on consumer ethnocentrism towards the country of immigration (the US) and its consequences with respect to Asian immigrants, the fastest growing minority in the US. One hundred and eighty‐five responses from Asian immigrants were collected through a convenience sample from a university campus located in the southwest US as well as a snowball sampling technique. Results revealed that perceived ethnicity and acculturation play an important role in influencing Asian immigrants' ethnocentrism towards the US, which in turn affects their attitudes and behavioural intentions towards products made in the US. Implications and future research directions are suggested.     

Price transmission and volatility spillovers in Asian rice markets: Evidence from MGARCH and panel GARCH models

ABSTRACT

This article examines world rice price transmission and volatility spillovers across six major Asian rice markets over the period 2005-13. In addition to the conventional GARCH models, we use a panel GARCH framework to estimate the spillover effects along with the consideration of heterogeneity and interdependence among countries. Empirical results suggest that changes in the world rice price affected not only the price levels of domestic rice markets but also their conditional variances. Moreover, interdependence across rice markets contributed to a strong spillover of a price shock in one country to another within the region.     

To improve investors' valuation of accounting earnings in emerging markets: evidence from Taiwan

The valuation of accounting earnings is related to the level of earnings management used by the firm. In emerging markets where earnings management is typically pervasive, investors lose confidence in accounting earnings and thus tend to under‐value earnings. Using data from Taiwan, we show that better governance characteristics are associated with improved investor valuation of accounting earnings. Under weaker governance structures, such as excessive control on the part of majority shareholders, small board size, and chief executive officer/chairman of the board duality, the market tends to under‐value accounting earnings. Reducing controlling shareholders' ownership, increasing board size, and reinforcing the monitoring function of the board improves investors' ability to value accounting earnings. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

Mapping the trading behavior of the middle class in emerging markets: Evidence from the Istanbul Stock Exchange

Predicted to grow above 4.9 billion by 2030, with an overall spending capacity of $56 trillion, the rise of the middle class in emerging markets has attracted global practitioner and academic attention. How this new wealth will be invested is a central question; yet our understanding still remains fragmented. Drawing on the literatures of international business, behavioral economics and finance and using high-frequency stock market data, we examine and map the trading behavior of the middle class in Turkey, one of the fastest rising economic powers of the East. We find that middle class traders exhibit discernible differences to professionals, with respect to risk attitudes and stock preferences (e.g. prefer lower-risk, smaller-size and ‘value’ stocks). In addition, while they typically hold small portfolios and tend to realize lower gains than professionals, their role has become considerably influential to the direction of the entire market.     

The Potential for Tourism in Post-crisis Recovery: Lessons from Malaysia's Experience of the Asian Financial Crisis

The impact of crises on a national economy can be severe and it is essential that recovery is rapid and complete. This article argues that tourism may be an ideal focus for the recovery effort, as it is resilient and has many links into other sectors. Based on data collected from interviews with senior policy makers in Malaysia, the performance of tourism in four key areas is explored in the context of the Malaysian response to the Asian financial crisis. It is concluded that on balance, tourism is worthy of special consideration as a vehicle for post-crisis recovery.     

Habitus,doxa, and ethics: insights from advertising in emerging markets in the Middle East and North Africa

The advertising industry influences culture through its pervasive messages that reflect and shape culture and through the role that advertising practitioners play as cultural intermediaries. As such, the manner in which advertising practitioners confront ethical issues is important. Drawing on Bourdieu's theory of practice, this paper examines how the perceptions, practices, and discourses of advertising practitioners in the Middle East and North Africa influence the advertising field's habitus and doxa. It demonstrates that understanding ethical problems is enhanced by examining them as macro, meso, and micro phenomena. However, that is not enough. Understanding how factors at the three levels interrelate, interact, and reinforce one another is critical to understanding the habitus. Underlying biases that shape the doxa can be explained by ideas central to behavioral ethics. A better understanding of the forces that shape the habitus and doxa with respect to ethics is key to moving toward a culture that encourages ethical advertising practices.     

New perspectives on East Asian leadership in the age of globalization: local grounding and historical comparisons in the Asia Pacific region

ABSTRACT

Many management and leadership studies have traditionally been dominated by Western theories, perspectives and cases. Non-Western leadership requires additional caveats in arriving at generalizations. The theoretical trap of conceiving Asian corporations either as irrelevant concerning leadership effectiveness or as maintaining only culturally determined leadership derives from the lack of historical understanding of Asian cases. Our collection used both historical and contemporary cases of Japan, South Korea and China to show that these Asian economies have tried to some extent balance their traditional norms and values of leadership with those from the West. A key to understanding Asia is that all three countries have historically pursued leadership mandates in running both public and private corporations, although ‘corrupt’ leadership practices were also rampant during different historical periods. Further studies of leadership in non-Western cases are necessary to devise methodological and theoretical alternatives to Western-centric perspectives. In our collection, we analysed how a dynamic and evolutionary view of leadership fared in its attempt to clarify some of the conundrums surrounding East Asian leadership. From our results, it is indicated that historical and comparative methods must accompany any analysis of leadership.     

Estimation of the default risk of publicly traded companies: evidence from Canadian data

Through Canadian publicly traded companies, this study assessed how combining firms' continuous valuations by the market (structural model) with the value given in their financial statements (accounting model) could enhance prediction of a company's probability of default. The hybrid model outperformed other models. Specifically, estimated structural probabilities of default (PDs) contributed significantly to predicting default probabilities when they were included alongside accounting and macroeconomic variables in our hybrid model. These results were obtained with two versions of the structural model: the Merton model (Merton, 1973, 1974) and the default barrier model (Brockman & Turtle, 2003). Both models were estimated with the maximum likelihood method. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.     

Maximum utility portfolio construction in the forward freight agreement markets: Evidence from a multivariate skewed t copula

We form portfolios consisting of diverse quarterly forward freight agreement (FFA) contracts to maximize the market participant's expected utility. The empirical findings indicate that individual FFA returns display clear autocorrelation, seasonality, fat tail, and heteroscedasticity. The multivariate positively skewed t copula is suggested for constructing maximum utility FFA portfolios, implying that the constituent FFA returns exhibit higher correlations when they rise together. The out-of-sample trading strategy performance metrics and various robustness checks further indicate that the aforementioned copula performs best and robustly for all portfolios. These findings provide profound methodological and managerial implications for market participants to improve risk management.     

Not all family firms are equal: The moderating effect of family involvement on the political risk exposure of the foreign direct investment portfolio. Preliminary evidence from Spanish multinational enterprises

We investigate the effect of political risk (PR) exposure and family control on the internationalization strategy of multinational enterprises (MNEs) using social capital theory. Our results from a negative binomial cross‐sectional analysis in 2007 of Spanish MNEs show family ownership or the limited presence of family members on the board has no effect on internationalization. However, when the conceptualization of family firms (FFs) includes majority ownership and board presence, we find a direct negative effect on their internationalization scope but a positive moderating effect on the relationship between the exposure to PR and internationalization scope. FFs have some specific advantages suitable to be employed in their corporate political activity allowing them to develop long‐lasting relationships with relevant political actors. By disentangling the effects of family control on internationalization and PR, this article explains how FFs can be simultaneously risk‐willing and risk‐averse.