Asymmetric Volatility, Correlation and Returns Dynamics Between the U.S. and U.K. Securitized Real Estate Markets

We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior, asymmetric volatility spillover effects and exceedance correlations, this study shows that the real estate markets in these two countries experience significant interaction on a daily basis when synchronously priced data are utilized. These results are different from when close-to-close returns are examined, implying that the use of close-to-close data can misconstrue the true dynamics that exist between these markets. Results also show significant asymmetric effects on both the volatility and correlation dynamics between the markets. This has several implications for property portfolio managers, indicating that positive and negative news impact the markets differently. This is particularly true for the United Kindom, where daily foreign news from the United States can influence U.K. volatility.     

中美市场投资者惯性和反转交易偏好的实证研究

为了探索中国和美国证券市场的惯性和反转收益异常现象差异,本文参考了Jegedeesh和Titman的累计超额收益CAR研究方法,选取了2000年1月~2020年2月美国证券市场和中国证券市场股票数据构建了不同时期的收益期和检验期惯性和反转策略。为了检验结果的稳健性,本文还加入24个月和36个月的窗口期。同时,为了比较两国投资者之间的投资差异,本文构建惯性策略并选取企业规模、价值和波动3个指标来衡量两国间投资者差异。结果表明整体美国市场短期内具有明显的动量效应,而中国市场在短、中、长期都具有显著的反转效应。两个市场中,中国市场的投资者偏好小市值、高成长价值和高波动性的股票,而美国投资者则偏向大市值股票和低波动性股票。基于两个市场的差异(新兴市场和有效市场),本文找到了一些美国市场的先进投资经验,它对规范我国投资市场有重要的借鉴意义。     

Industrial Pricing Strategies in Singapore and the U.S.: Same or Different?

It is generally believed that business-to-business marketing strategies are more uniform worldwide than those in consumer markets, because the buying firms focus more on issues such as product performance and profits. If this is so, a strategy model validated in one industrial market should apply reasonably well in another. This study compares pricing strategies of industrial firms in two market economies, the U.S. and Singapore. A pricing strategy model validated in the U.S. was tested in Singapore to determine whether internal and external conditions incorporated in the model could adequately explain differences in strategy choices between the markets.     

Portfolio diversification into the Asia-Pacific capital markets: A currency perspective

This paper examines the potential benefits of international investment in the Asia-Pacific capital markets. Using the viewpoints of U.S., Hong Kong and Japanese investors, the study shows that the returns from international investment within the region are more dependent upon the state of exchange rate changes. For the Hong Kong investors, despite the adopted pegged-rate between the Hong Kong dollar and U.S. dollar, the pattern of exchange returns from investing in the region resembles that of Japan rather than that of the U.S.     

Malaysian Reverse Investments: Trends and Strategies

Available data indicate that Malaysian investments abroad (MIA) rose significantly in the 1990s. Singapore, Hong Kong and the U.S. are the major recipients of MIA. In order to understand why Malaysian companies invest abroad, as well as their business strategies, seven companies were interviewed. Finding new markets was cited as the main reason for locating overseas. Unlike most mature multinational corporations from developed countries, most MIA takes the form of standalone affiliates. Moreover, most respondents decentralize their decision making regarding the management of these subsidiaries. While Malaysian companies do plan to expand their overseas investments, they advise new entrants to form strategic alliances with other companies, be cautious, patient, and sensitive to the hosts' cultures in executing their ventures.     

How do institutional investors react to local shocks during a crisis? A test using the COVID-19 pandemic

We examine how institutional investors reacted to geographically dispersed local shocks during the early stages of the COVID-19 pandemic. A sample of real estate investment trusts (REITs) enables us to link two layers of geography: the locations of the assets in which the REITs were invested and the headquarters locations of institutional investors who owned REIT shares. We find that the institutional ownership of firms with an economic interest in the investors’ home markets declined more if those markets were heavily affected by the pandemic. In addition, the ownership responses to the COVID-19 shock were larger in those markets in which REITs had larger portfolio allocations and in markets that were home to the investors. Importantly, we find that nonpassive and short-term investors may have overreacted to the local shocks because their REIT portfolios subsequently underperformed relative to passive and long-term investors. Our study highlights the importance of geography in the formation of investors’ expectations during market crises.     

Domestic Market Structure and Performance in Global Markets: Theory and Empirical Evidence from U.S. Food Manufacturing Industries

This paper formally articulates Porter's hypothesis that the degree of competition in domestic markets is positively linked to performance in international markets. Hypotheses are tested using measures of the trade performance of U.S. food manufacturing industries as proxies for international competitiveness. Empirical results are generally consistent with Porter's hypothesis; net export share is negatively related to industry concentration. The competitiveness of agricultural inputs, R & D intensity, and trade barriers of other countries were also found to be important determinants of the performance of these industries in global markets.     

U.S. national security export controls: Implications for global competitiveness of U.S. high-tech firms

U.S. exporters of high-technology, ‘dual-use’ products are competitively disadvantaged in global markets by the complexity, range, and stringency of U.S. national security export controls. This paper demonstrates that fungibility of high technology and lax interpretation of multilateral export control agreements by other advanced countries have made the existing control regime ineffective. It further shows that persistent U.S. restrictiveness of exports in non-critical, widely available goods and technologies may needlessly and permanently erode U.S. firms' competitive position in existing as well as rapidly-opening markets worldwide. The need to revise the notion of national security to include not only military security, but also its complement, economic security, is discussed. The pivotal issue of enforceability of multilateral controls is explored, and corporate strategies for U.S. high-tech firms to achieve export control policy change are suggested.     

Spatial Linkages in Returns and Volatilities among U.S. Regional Housing Markets

This article investigates spatial linkages in returns, idiosyncratic risks and volatilities across 19 U.S. regional housing markets. Using Case & Shiller housing price indices from 1995 through 2009, we find that interconnections across markets can be “wider” and “stronger” than would normally be expected. They are “wider” because, in addition to geographic closeness, economic proximity is also an important source of influence; they are “stronger” because of the significant contagion effects during the 2007–2009 subprime and financial crises. The increased comovement and interdependence, especially among more geographically diverse regions with similar economic conditions, may help explain the failure of geographic portfolio diversification strategies.     

Institutional Capital Flows and Return Dynamics in Private Commercial Real Estate Markets

This article examines the short- and long-run dynamics among institutional capital flows and returns in private real estate markets. At the aggregate U.S. level, we find evidence that lagged institutional flows significantly influence subsequent returns. When disaggregating by property type at the national level, we find that capital flows predict subsequent returns in the apartment and office sectors, but not in the retail and industrial markets. At the metropolitan level, we find that the flows help explain subsequent returns in a limited number of core business statistical areas (CBSAs), although these CBSAs collectively represent about 30% of institutional capital. We find no evidence that institutional returns are predictive of future capital flows at the national or CBSA level, suggesting that institutional investors are not chasing returns.     

Illiquidity and Pricing Biases in the Real Estate Market

This article addresses the micro-analytic foundations of illiquidity and price dynamics in the real estate market by integrating modern portfolio theory with models describing the real estate transaction process. Based on the notion that real estate is a heterogeneous good that is traded in decentralized markets and that transactions in these markets are often characterized by costly searches, we argue that the most important aspects defining real estate illiquidity in both residential and commercial markets are the time required for sale and the uncertainty of the marketing period. These aspects provide two sources of bias in the commonly adopted methods of real estate valuation, which are based solely on the prices of sold properties and implicitly assume immediate execution. We demonstrate that estimated returns must be biased upward and risks downward. These biases can be significant, especially when the marketing period is highly uncertain relative to the holding period. We also find that real estate risk is closely related to investors' time horizons, specifically that real estate risk decreases when the holding period increases. These results are consistent with the conventional wisdom that real estate is more favorable to long-term investors than to short-term investors. They also provide a theoretical foundation for the recent econometric literature, which finds evidence of smoothing of real estate returns. Our findings help explain the apparent risk-premium puzzle in real estate—that is, that ex post returns appear too high, given their apparent low volatility—and can lead to the formal derivation of adjustments that can define real estate's proper role in the mixed-asset portfolio.     

Success Through Customer-Driven New Product Development: A Comparison of U.S. and New Zealand Small Entrepreneurial High Technology Firms

Although high-tech, entrepreneurial firms may be small in size, they often play a large role in developing innovative products and thus spurring economic growth. Managers from firms of all sizes may gain useful insights by examining the new-product development (NPD) practices of these small, technology-based firms. And in an era of increasingly global competition, those managers can benefit from understanding the NPD practices of firms from various countries. William Souder, David Buisson, and Tony Garrett contribute to that understanding by describing the results of a study that compares the relative NPD proficiency of small, technology-based firms in the United States and New Zealand. The firms participating in the study (26 from the U.S. and 29 from N.Z.) operate in rapidly growing, highly competitive markets characterized by evolving customer needs. The participating companies share similar goals: creating technically superior products with unique features for emerging markets, with the ultimate goal of becoming the product and market leaders within their respective industries. Despite these similarities, the study reveals several important differences between the U.S. and N.Z. participants. Overall, the N.Z. respondents had higher levels of NPD performance than those of their U.S. counterparts. In particular, the relationship marketing and customer-focused NPD practices of the N.Z. firms set them apart from the U.S. firms. Top-level managers from the N.Z. participants report higher levels of satisfaction than their U.S. counterparts with the results of their NPD efforts. The results of the study indicate that repondents from the two countries differ in terms of the focus of their NPD mangement systems and the manner in which they strive to achieve success. For the U.S. firms in the study, their NPD management systems focus on the characteristics of the project manager. The N.Z. respondents place greater emphasis on marketing skills and NPD proficiencies. The results suggest that the higher levels of NPD performance acheived by the N.Z. firms in the study arise from greater insights into their users' needs, together with better capabilities for acting on those insights.     

The relationship between portfolio diversification and firm value: The evidence from corporate venture capital activity

Corporate venture capital (CVC) activity exposes firms to new technologies and markets. An important but as yet unexplored question is the relationship of the industry diversification profile of the portfolio of venture companies to corporate value creation. Insights from options and diversification perspectives support our hypothesis that diversification of a corporate investor's portfolio of venture companies is related to corporate wealth creation in a U‐shaped relationship. We also propose that a corporate investor's financial constraints moderate the relationship between the diversification profile of its CVC portfolio and value creation. When we tested our hypotheses using a sample of CVC investments across multiple industries, we found support for them, and these findings may inform the CVC activities of corporate investors. Copyright © 2013 John Wiley & Sons, Ltd.     

Where is the opportunity in opportunity zones?

In December 2017, the U.S. Congress passed into law the Opportunity Zone (OZ) program. As an OZ, designated low-income census tracts provide considerable tax breaks to property investors, intending to attract investments and spur economic growth. As the success of the program is dependent on investors' responses, we analyze market reactions in a difference-in-differences framework. We identify two potential effects on property markets: tax breaks for investors and expected land value appreciation. Our results show that tax breaks are priced efficiently. Qualified properties increase by 7–20% in price, while vacant land increase up to 37%. In contrast, we find limited signs of expected land value appreciation.     

Increasing Convergence Between U.S. and International Securitized Property Markets: Evidence Based on Cointegration Tests

This article examines the degree of interdependence among the securitized property markets of six major countries and the United States. Long-run results indicate that, over a period beginning January 1990 and ending August 2007, the property markets of Australia, Hong Kong, Japan, the United Kingdom and the United States are tied together, implying that from the perspective of the U.S. investor the markets of the Netherlands and France provide the greater diversification benefits. Further, the United States and Japan are found to be the sources of the common trends, suggesting that the two larger property markets lead the five (cointegrated) markets toward the long-run equilibrium relationships.     

Internationalization and the Dynamics of Product Adaptation—An Empirical Investigation

Firms competing in foreign markets can choose to make no changes to the physical product and packaging, called a product standardization policy, which keeps costs low. The main drawback of such a policy is that the product might not satisfy customers. Conversely, firms may choose to modify, or to adapt, the physical characteristics or attributes of a product and its packaging to fit the needs and desires of consumers in different countries better, but this increases development, manufacturing, marketing, packaging, and distribution costs. Though product adaptation is a core aspect of customizing an export market offering, little research has investigated modifying the physical product and packaging. To be successful, an adapted product must add sufficient incremental revenue (through increased sales due to better satisfying customer needs and wants relative to competitive product offerings) such that the additional manufacturing and marketing costs that result from adapting the product are recovered. In this article, a model of the product adaptation process is developed. Using mail surveys, information is gathered from managers in 239 U.S. organizations and 302 South Korean organizations, all of which export products. The goal was to understand better the motivation of firms to adapt their products for export markets as well as the performance implications of adapting products. Furthermore, the model was tested in these two countries to determine if the model is robust and to uncover differences between the United States and South Korea. Using structural equation modeling to analyze the data, a positive association was found between the level of product adaptation and profitability at the project level. Second, U.S. firms appear to be more reactive when adapting products for export markets, doing so when laws and regulations in the export market mandate changes relative to the U.S. market. Conversely, South Korean firms appear to be more proactive and to adapt products even when not required by the governments of export markets. Third, greater international product adaptation is linked to a more responsive marketing organization with customer‐focused practices. Fourth, while a positive link was expected between business unit experience and the extent of international product adaptation, inconsistent results were found between the two country samples. For U.S. firms, it was found that greater experience in international business and product design capability is linked to a higher level of international product adaptation. For South Korean firms, however, a negative relationship was found. Greater international product adaptation occurred with less international business and product design experience. These findings are discussed, and areas for future research are noted.     

Capital investment practices: A survey of large corporations in Malaysia,Singapore and Hong Kong

This paper presents the results of a survey on the capital investment practices of large corporations in Malaysia, Singapore and Hong Kong. Our findings are fairly consistent with those from similar U.S. surveys. However, Malaysia, Singapore and Hong Kong companies seem to use multiple techniques, both simple and sophisticated, in evaluating investment projects, while U.S. companies appear to make great use of discounted cash-flow rate of return. Although Malaysia, Singapore and Hong Kong companies often make annual cash-flow forecasts over the life of a project, they do not undertake much analysis of risk involved in the project. Moreover, there is room for improving the practice of project implementation, the post-audit of implemented projects, and the use of post-audit data.Dr Wong Kie Ann is with the School of Management, National University of Singapore; Dr Edward J Farragner is with the Department of Finance, DePaul University, U.S.A.; and Mr Rupert K.C. Leung is with the Department of Business Management, Hong Kong Baptist College.     

Valuing the Defeasance Option in Securitized Commercial Mortgages

To protect the interests of investors, commercial mortgage loans pooled for the issuance of commercial mortgage-backed securities (CMBS) have restrictive covenants that discourage the borrower from refinancing. Such restrictions limit the borrower's ability to access any accumulated equity. The predominant means of accessing this equity today is defeasance. By defeasing a loan, the borrower substitutes the commercial mortgage with U.S. Treasury or agency obligations whose payments match those of the defeased mortgage. Therefore, defeasance is an exchange option whereby the borrower gives up the portfolio of Treasury or agency securities and in return receives the market value of the commercial mortgage plus the liquidity benefits arising from accessing the accumulated equity in the underlying property. The value of the option to defease is shown to depend critically on the rate of return that can be earned on the released equity, prevailing interest rate conditions, as well as the option's contractual features.     

Linear programming for bank portfolio management in Singapore

James Tobin's portfolio theory can be applied to bank portfolio management in that a bank would maximise the rates of return of its portfolio of assets, subject to the expected degree of risk and liquidity. Chambers and Charnes (1961), Cohen and Hammer (1967), Booth and Dash (1979) and others apply the linear programming model to the management of bank funds. This paper carries out a linear programming analysis on the consolidated balance sheets of commercial banks in Singapore for the period 1978–1983. The results show that by and large banks do try to maximise the returns of their portfolio, subject to legal, policy, bounding and total asset constraints, which denote riskiness and liquidity of the portfolio of assets. In a direct way, banks conform to the portfolio choice theory; they have to balance yield and liquidity against security. Although the computer cannot replace a manager, linear programming can serve as a useful guide.Dr Lee Sheng-Yi is an Associate Professor (retired) in the National University of Singapore and a Visiting Senior Research Fellow in Chung Hua Institution for Economic Research, Taipei; and Dr Yeong Wee Yong is a Senior Lecturer, School of Management Faculty of Business Administration, National University of Singapore.     

New Product Portfolio Management: Practices and Performance

Effective portfolio management is vital to successful product innovation. Portfolio management is about making strategic choices—which markets, products, and technologies our business will invest in. It is about resource allocation—how you will spend your scarce engineering, R&D, and marketing resources. It focuses on project selection—on which new product or development projects you choose from the many opportunities you face. And it deals with balance—having the right balance between numbers of projects you do and the resources or capabilities you have available. In this article, the authors reveal the findings of their extensive study of portfolio management in industry. This study, the first of its kind, reports the portfolio management practices and performance of 205 U.S. companies. Its overall objective was to gain insights into what portfolio methods companies use, whether they are satisfied with them, the performance results they achieve with the different approaches, and suggestions for others who are considering implementing portfolio management. The research first assesses management's satisfaction with portfolio methods they employ and notes that some firms face major problems in portfolio management. Next, businesses are grouped or clustered into four groups according to management's view of portfolio management: Cowboys, Crossroads, Duds, and Benchmark businesses. The research first assesses management's satisfaction with portfolio methods they employ and notes that some firms face major problems in portfolio management. Next, businesses are grouped or clustered into four groups according to management's view of portfolio management: Cowboys, Crossroads, Duds, and Benchmark businesses. Various performance metrics are used to gauge the performance of the business's portfolio. The results reveal major differences between the best and the worst. Benchmark businesses are the top performers. Their new product portfolios consistently score the best in terms of performance—high-value projects, aligned with the business's strategy, the right balance of projects, and the right number of projects. The authors take a closer look at these benchmark businesses to determine what distinguishes their projects from the rest. Benchmark businesses employ a much more formal, explicit method to managing their portfolio of projects. They rely on clear, well-defined portfolio procedures, they consistently apply their portfolio method to all projects, and management buys into the approach. The relative popularity of various portfolio methods—from financial methods to strategic approaches, bubble diagrams, and scoring approaches—are investigated. Not surprisingly, financial approaches are the most popular and dominate the portfolio decision. But what is surprising is the dubious results achieved via financial approaches. Again, benchmark businesses stand out from the rest: they place less emphasis on financial approaches and more on strategic methods, and they tend to use multiple methods more so than the rest. Strategic methods, along with scoring approaches, yield the best portfolios; financial methods yield poorer portfolio results. The authors provide a number of recommendations and suggestions for anyone setting out to implement portfolio management in their business.