Stock return reversal and continuance anomaly: new evidence from Hong Kong

Using weekly data, this article conducts a comprehensive analysis and presents new empirical evidences on the short-term stock return reversal and continuance anomaly in the Hong Kong stock market. We confirm that winner stocks behave differently from loser stocks in that the return reversal phenomenon is pervasive within past winner stocks only while past loser stocks tend to show weak return continuance. The arbitrage strategy can earn significantly positive contrarian profits, especially for small firms and illiquid stocks. The anomaly varies across different industries and is also sensitive to the market movement. Despite the existence of the anomaly, our results still in general suggest that the Hong Kong stock market is weak-form efficient because arbitrage trading costs would largely overwhelm the available profits in most cases.     

The Impact of the China Factor on the pre-1997 Hong Kong Economy: a macroeconometric analysis

After the reunification of Hong Kong and China in 1997, Hong Kong is assured of a high degree of autonomy by the Basic Law. However, there remains some worry about the territory's economic viability and financial stability. Whether Chinese policies and China's remarkable growth momentum could continue to boost Hong Kong's prosperity has become an issue of concern. As the Chinese economic reform proceeds, the ‘China factor’ has been generating an increasing influence on the performance of the Hong Kong economy. Unfortunately, there have been very few rigorous quantitative analyses of this rapidly evolving development. To fill the gap, we have constructed a macroeconometric model of Hong Kong which takes into detailed account the linkages of the two economies including trade and capital flows. Estimation of the model incorporates error correction techniques to establish short-run dynamics and long-run equilibria. Our findings have identified crucial channels through which the ‘China factor’ has exerted impact on the Hong Kong economy. It is shown that the factor was not overwhelming up to the recent past, in terms of its stabilizing effects in the financial market and its stimulation on growth, although its influence may rise in the post-1997 era.     

In the Shadow of the United States: The International Transmission Effect of Asset Returns

We examine how fluctuations in financial and housing markets in the United States affect asset returns and GDP in Hong Kong. In contrast to studies using linear specifications, which find that the United States and Hong Kong are virtually delinked in terms of the asset markets, our regime‐switching models indicate that an unexpected change in US stock returns, followed by the TED spread, has the most significant effect on Hong Kong asset returns and GDP, typically in a regime of high return and low volatility. For in‐sample one‐step‐ahead forecasting, the US term spread is the best predictor.     

Overeducation and Undereducation and their Effect on Earnings: Evidence from Hong Kong, 1986–1996

The expansion of the higher education sector and the structural changes in the Hong Kong economy in the late 1980s raise the issue of the incidence of overeducation in the Hong Kong labor market. Using the 1991 Hong Kong Census, and the 1986 and 1996 Hong Kong By‐census data, the present study finds that the incidence of overeducation in Hong Kong is only a temporary phenomenon. The rate of return to education increased, while the premium to overeducation decreased, between 1986 and 1996. It also finds that there is a tradeoff relation between education and experience.     

Behavioral Finance as Science: Implications From the Research of Paul Slovic

In this paper, we examine the short-run overreaction phenomenon in the Hong Kong market using data from March 1996 to June 1998. The study period encompasses the pre- and post-Asian financial crisis period. Consistent with prior studies on other markets, we find evidence of overreaction in the Hong Kong market prior to the Asian financial crisis. The overreaction phenomenon is more pronounced for winners than losers. While we document evidence of overreaction in the pre-crisis period, we find that abnormal profits obtained from exploiting such a phenomenon are economically insignificant after accounting for transaction costs. Thus, the Hong Kong stock market is efficient in the weak form. We also explore the possibility that the results are affected by factors such as the bid-ask bounce, the size effect, and the day-of-the-week effect. The results, however, are robust to these factors.     

城市土地利用政策——以香港、深圳为例

土地作为城市的基本构成要素,是城市发展的重要载体。土地利用政策决定着城市土地利用的动态变化。同时该政策的制定又受到社会发展阶段、经济水平等其他因素的影响。研究中国深圳特区和香港两个国际化大都市在不同的发展历程下城市土地利用政策的变化。对于其他城市的发展具有借鉴意义。文章对两座城市所经历的土地利用政策进行深刻剖析．结果发现香港占总面积24％的建成区（住宅区占总面积的7％）容纳了700多万的居住人口,并且人均生产总值30041．43美元。其郊野面积及非建筑占总面积的76％。这样高密度、高效率同时又为城市的可持续发展保留大量的有待开发的土地资源,其城市土地利用政策,值得世界其他城市借鉴。而深圳作为中国改革开放城市发展的成功典范,到2009年,其建设土地占特区总面积的32．8％,容纳了超过331万居住人口．其人均生产总值19760．80美元。说明深圳特区的土地利用的经济效益远远达不到香港水平,城市建筑面积在短时间内的大肆扩张。也说明深圳经济的增长是以大量的土地投入作支撑。土地的空间利用效益不高,不利于城市的可持续发展。     

The Role of Productivity and Financial Frictions in the Business Cycles of a Small Open Economy: Hong Kong 1984–2011

This paper analyzes the business cycle properties of the Hong Kong economy during the 1984–2011 period, which includes the financial crisis experienced in 1997/98 and the economic crisis of 2008–2010. We show that the volatility respectively, of output, of the growth rate of output and of real interest rates in Hong Kong are higher than the corresponding average volatility among developed economies. Furthermore, interest rates are countercyclical. We build a stochastic neoclassical small open‐economy model estimated with a Bayesian likelihood approach that seeks to replicate the main business cycle characteristics of Hong Kong, and through which we try to quantify the role played by exogenous total factor productivity (TFP) shocks (transitory and permanent), real interest rate shocks and financial frictions. The main finding is that financial frictions, jointly with the assumption that the country spread is endogenous, seem important in explaining the countercyclicality of the real interest rates.     

The behaviour of Hong Kong stock prices

The primary function of a stock market is to allocate resources to the most profitable investment opportunities. If stock prices provide accurate signals for resource allocation, firms are able to make correct production–investment decisions, and investors are able to choose the most suitable stocks for investment. These choices are only possible if the market is efficient, that is, if stock prices ‘fully reflect’ all available information.

Hong Kong is now an international financial centre. Although Hong Kong's stock market is ranked as one of the five largest in the world in terms of turnover, little research has been devoted to the behaviour of its stock prices. This is a study of the efficiency of Hong Kong's stock market. It is based upon two widely accepted statistical tests, namely, serial correlation analysis and runs tests. Data used cover the daily prices of 28 major Hong Kong stocks over a period of four years from 1977 to 1980. The evidence is mixed; it does not provide clear support for the efficient market hypothesis.     

Investor Attention Strategy

This article documents the motivation, the construction, and the profitability of an investment strategy based on investor attention in the options market. Using the option volume after a 1-week dormant period as a proxy for investor attention, the author shows that heightened investor attention after the dormant period has rich investment implications. A portfolio constructed on the basis of volume spike events immediately after the dormant period generates an abnormal return of 68 basis points on a monthly basis (8.16% on an annualized basis). This abnormal return is robust to risk adjustment using standard asset pricing models. The author's findings constitute strong evidence that it is profitable for outside investors to mimic attentive investors in the options market and reap economically and statistically significant profits.     

不同所有制企业创新主体地位评价——规模与效率双重视角的研究

推动企业成为创新决策、研发投入、科研组织和成果应用的主体，是实施创新驱动发展战略的关键。针对企业创新主体地位较难衡量且缺乏考虑企业创新效率的问题，从规模视角入手，基于创新价值链分析，通过区分企业所有制性质，研究企业创新主体地位评价指标体系和评价方法。同时，结合BCC-DEA模型和DEA-Malmquist指数，从创新效率角度系统探讨企业创新主体地位。以上海为例的实证结果表明，上海企业在研发投入端的创新主体地位相对突出，但呈不断弱化趋势，尤其是R&D经费增长显著落后于科研机构和高等院校；在以发明专利为代表的产出端，企业创新主体地位尚不明显，且同样存在比重下滑迹象。外资企业年度创新效率表现最优，内资企业处于明显劣势，但得益于技术效率增长，科技创新全要素生产率保持年均微幅增长，而港澳台商投资企业创新效率存在递减态势。最后提出加强科技资源配置、挖掘科技产出、加大科技成果转化力度等建议。     

Asymmetric spillover effects between the Shanghai and Hong Kong stock markets: evidence from quantile lagged regression

This article surveys the asymmetric spillover effects between the mainland China-based Shanghai Composite Index (SCI) and the Hong Kong based Hang Seng Index (HSI) using a quantile lagged regression model. Compared to previous studies, this article, based on data before and after the 2008 global financial crisis, presents a more detailed analysis, as we investigate the spillovers in terms of returns, volatilities and exchange rates between the renminbi (RMB) and the Hong Kong dollar (HKD) throughout the entire conditional return distribution, including the central quantiles, which are closely related to the normal circumstances, and the extreme quantiles, which correspond to the bear and bull markets. First, we find that the return spillovers from its lagged returns or from the other index not only vary across time but also depend on stock state. Second, while return volatility may boost the stock market in a bull market, it accelerates the decline in a bear market. Third, the depreciation of the RMB relative to the HKD does not significantly affect current returns for the HSI, while it negatively affects current returns for the SCI in a bad state after the crisis. The findings presented in this article will facilitate investors’ understanding of the two stock markets.     

中欧关系中的香港因素探析

在一个半世纪的英殖民统治时期．香港就逐渐成为中国与欧洲乃至西方交流的一座桥梁。自1997年主权回归后。香港在“一国两制”下的特殊地位以及欧盟对香港经济政治事务的密切关注使其在中欧关系中发挥着独特的影响。香港既可以成为中欧之间密切经贸联系的桥梁和纽带,也可能因其内部政治事务的发展而对中欧关系构成挑战。为此,我们在战略性地推动香港在中欧关系中的“门户”作用的同时,也不能忽视外来势力对中国主权与安全构成的潜在威胁。     

Currency Substitution Between the Hong Kong Dollar and the Renminbi in South China

The present paper estimates the demand for the Hong Kong currency circulating in the Guangdong Province of China and Macau. The amount of Hong Kong dollars circulating in the Guangdong (Macau) region is reckoned to be 7.4 (3.2) percent of the total amount issued in Hong Kong. The estimated coeficients in the currency demand equation suggest that the Hong Kong currency in Guangdong is used mainly for transactions. Therefore, in spite of strong evidence of currency substitution of the Renminbi with the Hong Kong Dollar, its impact on the exchange rate and on the international reserves of Hong Kong during currency crisis should be minimal.     

A DYNAMIC FACTOR MODEL OF ECONOMIC ACTIVITY IN HONG KONG

Abstract. This paper applies the single‐index dynamic factor model developed by J. H. Stock and M. W. Watson to construct (almost) real‐time estimates of economic activity in Hong Kong. The Hang Seng index, a residential property price index, retail sales and total exports are used as coincident indicators. Principal component analysis is first used to obtain an impression of the common component of the indicator series. This component and the dynamic factor identified by the Stock–Watson methodology are strongly correlated and seem to capture economic fluctuations in Hong Kong reasonably well.     

Foreign Direct Investment and Contract Enforcement

A long-standing deterrent to foreign direct investment in developing countries is weak enforcement of binding contracts. A local firm may learn business skills from a cooperating multinational firm and subsequently do business on its own based on the acquired skills. In a two-period, double-moral-hazard model, non-binding contracts are shown to be preferred by all parties, implying that contract enforcement is unnecessary. Our results shed light on the puzzling phenomenon that substantial FDI has been carried out under contractual arrangements in developing countries in which contract enforcement is problematic. They can also explain some interesting stylized facts on contractual joint ventures between multinationals and local firms in the early stage of an economic transition.J. Comp. Econom.,December 1998, 26(4), pp. 761–782. School of Business, The University of Hong Kong, Hong Kong; and Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong.     

港澳台—中国对外开放的独特优势

中国对外开放三十多年,经济发展速度之快举世瞩目。作为对外开放的典型标志,对外贸易和引进外资更是突飞猛进,成为世界贸易排名第二、发展中国家引进外资最多的经济体。中国对外开放之所以取得如此成就,港澳台地区功不可没,甚至可言,如果没有同文同种的新型工业化经济体港澳台与中国内地的密切经贸往来,中国对外开放将经历较长的探索阶段。港澳台地区是中国对外开放最早的也是迄今最主要的投资者,是中国承接国际产业转移最重要的推动者,也是中国进军国际市场的最重要中介与平台。无论是珠三角经济带还是长三角经济带,港澳台企业都是重要的支柱力量。中国最早的区域经济一体化协议,是与香港和澳门签署的,今后中国的自贸区战略,港澳台地区将成为核心。     

剐果（金）案对完善《香港基本法》解释机制的启示

《香港基本法》被喻为香港特区的“小宪法”，其制定有着独特的历史背景，核心内容源自《中英联合声明》及一系列外交谈判，某些具体领域因求同存异的需要而刻意保持了模糊，以留待时间及后人的智慧去解释。香港回归十多年来，两地法律和学术界围绕基本法解释问题争议不断，有些人甚至视全国人大常委会解释基本法如“洪水猛兽”。本文试图在探寻《香港基本法》法律解释机制的背景及其实践的基础上，辩证反思有关问题，特别是通过分析刚果（金）案释法这一最新案例的影响及启示，加深对基本法解释领域形势发展的认识，并就今后进一步完善释法工作提出一些思考与建议。     

Competition and Competition Policy: Implications of Hong Kong's Reversion to China

The paper explores how Hong Kong's new status as China's Special Administrative Region (SAR) may affect the competitiveness of the industries and the relative position of companies owned by non-Hong Kong investors. The conclusion is that mainland Chinese firms will play an increasingly more important role in Hong Kong's economy and British firms will lose their dominance further. This does not, however, indicate a return to unequal competition in favor of firms from the sovereign country, but the beginning of a period of greater competition by all firms in Hong Kong, whether they be local or non-local. There is a risk that governmental and semi‐governmental corporations of the SAR and other Chinese governments may use their official and semi-official status to tilt the playing field in their favor, but appropriate competition law can address this concern.     

Pricing for Capacity Utilisation with Public Enterprises

Pricing Individual services provided by public busines enterprises so that the use of available capacity is, where possible, maximised during peak as well as slack demand periods will for many enterprises correspond closely to ideal marginal cost pricing. Such a pricing strategy will usually result in excess profits when the level of capacity is deficient and in losses when capacity is excessive. Optimal long-run capacity can thus be sought under this pricing strategy by increasing or reducing capacity over time with a view to achieving normal profits or a target rate of return. In the short run, before capacity can be changed, enterprise profits are driven by the pricing strategy, not by the target rate of return. For enterprises with large lumpy investments it is particularly important for the rate of return objective to be achieved over several years, allowing for reduced returns when new lumpy capacity is first introduced. For enterprises whose services involve significantly increasing congestion costs before full capacity is reached, pricing to achieve something less than full capacity utilisation is required but technological advancement is reducing the relevance of this complication.     

The Effect of Ex Ante Price on Momentum Profits

We find a strong effect of component stock prices (as of one year before the returns-ranking period) on the magnitude and duration of momentum. Relative strength portfolios formed of high-priced stocks earn statistically significant momentum profits for any holding period in the first three to four years. The effective annual return of the high-priced momentum portfolio for the first year is economically significant at 18.4%, after controlling for the capitalization, trading volume, and unconditional mean effects. This return is considerably higher than the 11.3% earned by low-priced momentum portfolios. Although the price level is correlated with capitalization and trading volume, the price effect is not a mere manifestation of the capitalization and volume effects, as it endures even when the other factors are controlled for. We discuss several implications of our results for the existing behavioral and risk-based explanations of momentum, as none of these models have an explicit role for the price effect.