Investment financing: evidence from Korea

This study examines the relative importance of various forms of capital in financing investments by Korean firms. Our results from the seemingly unrelated regression (SUR) method indicate that, unlike U.S. firms, Korean firms rely substantially on cash holdings to finance investments. These results also suggest that Korean firms use long‐term debt more actively than equity issuance to finance investments. Subgroup analyses show that large firms and Chaebol‐affiliated firms use more long‐term debt but less equity issuance than comparison firms do, suggesting that debt capacity allows firms to reduce the use of equity issuance. However, there is little evidence that financing decisions are driven by information asymmetry. The results from the quantile regression (QR) method suggest that Korean firms tend to use debt capital more than they do equity capital at low and medium levels of investments, while their reliance on equity capital increases at high levels of investments.     

Extreme interdependence and extreme contagion between emerging markets

This paper uses seemingly unrelated probit techniques to separate the transmission of a crisis due to broadly defined macroeconomic interdependence from contagion due to herding, avoiding some of the caveats of the more traditional cross-correlation approach. We find that pure contagion occurred in a limited number of country pairs generally belonging to the same region. A reduction in speculative pressure can also be identified between countries in different regional blocks. This seems to suggest that after an initial crisis episode, investors tend to discriminate on the basis of location and common macroeconomic weakness or perceived similarity.     

Weekend gold returns in bull and bear markets

This study examines the weekend effect in gold returns during bull and bear markets over the period 1975 through 2011. It shows that gold returns from close on Friday to close on Monday are significantly lower than returns during the rest of the week. This result is due largely to gold returns during bear markets. During gold bull markets, gold weekend returns are not significantly different from weekday returns. The study shows that the effect has substantial economic implications for gold investors. The effect is shown to be related to a significantly negative skewness in the weekend returns.     

The January effect across volatility regimes

Using a Markov regime switching model, this article presents evidence of the well-known January effect on stock returns. The specification allows a distinction to be drawn between two regimes: one with high volatility and another with low volatility. We obtain a time-varying January effect that is, in general, positive and significant in both volatility regimes. However, this effect is larger in the high-volatility regime. In sharp contrast with most of the previous literature, we find two major results: (1) the January effect exists for all sizes of portfolio; (2) the negative correlation between the magnitude of the January effect and portfolio size fails across volatility regimes. Moreover, our evidence supports a slight decline in the January effect for all sizes of portfolio except the smallest, for which it is even larger.     

Pre-holiday effects: International evidence on the decline and reversal of a stock market anomaly

The pre-holiday effect is one of the best known of the calendar effect anomalies. This paper extends prior work by examining whether the effect has declined for the U.S., U.K. and Hong Kong markets. For all three markets, the effect is shown to have declined, but only significantly in the U.S. The result is not surprising given the relative sophistication of the market. What is surprising, however, is the reversal of the pre-holiday effect during the period 1991–1997, with the mean return on pre-holiday days becoming negative, and the subsequent elimination of this effect during 1997–2003.     

The day-of-the-week effect in foreign exchange markets: multi-currency evidence

To investigate to what extent transaction mechanism matters, we examine the daily returns of 29 foreign exchange rates in the New York market. This paper finds that the day-of-the-week effect existed in the 1980s for some, not all, currencies. The fact that the day-of-the-week effect existed for only some currencies suggests that the US transaction mechanism alone cannot explain the anomaly. Furthermore, this paper finds that the day-of-the-week effect disappears for almost all currencies in the 1990s. This latter result is consistent with previous studies on anomalies in the stock markets.     

Risk perceptions and risk attitudes among Chinese consumers: the toxic capsule crisis

The toxic capsule crisis (TCC) shocked China in 2012, and seriously harmed consumer confidence. Based on a firsthand survey in 12 provinces with 850 observations, this paper examines Chinese consumers’ risk perceptions and risk attitudes about drugs after the TCC. The empirical results suggest that Chinese consumers’ risk perceptions (attributed likelihood of a drug safety accident occurrence) and risk attitudes (measured as level of concern about drug labeling) are weakly negatively correlated, but that risk perceptions are positively correlated with consumer concern about drug safety problems in general. Risk perception was higher among male consumers and those from rural areas, reporting a religious faith, of higher education, and with a family member who has experienced problems caused by drug safety problems. Those reporting a higher level of concern about drug safety issues, with a higher level of understanding of TCC, who reported less frequent physical examinations, and who searched for information after the TCC also had a higher level of risk perception. Being or having a family member who engaged in the health industry and being more satisfied with the government response to the TCC decreased risk perception. Regarding risk attitude, older consumers, those with a higher level of education and with a self-reported religious faith, and those less prepared including those who did not purchase health insurance, do not have health exams as frequently, and who do not take measures of protection and isolation when ill are more concerned about drug labeling information.     

贸易收支改善的汇率弹性条件与ML条件——兼论人民币汇率传递的贸易收支效应

如果汇率变动不传递给进出口价格,即使马歇尔-勒纳条件成立,汇率变动也不能影响进出口。本文通过将汇率变动对净出口的影响分解为汇率的价格效应和数量效应,在此基础上论证了汇率传递与马歇尔-勒纳条件的关系,重新构造了贸易收支改善的汇率弹性条件。然后用中国2005-2009年分类商品的月度面板数据估计了人民币名义汇率变动对中国各类商品进出口的价格效应、数量效应和贸易收支效应,以便理解近期人民币汇率升值影响中国贸易顺差持续扩大的过程和机制。     

Rules versus discretion in loan rate setting

Loan rates for seemingly identical borrowers often exhibit substantial dispersion. This paper investigates the determinants of the dispersion in interest rates on loans granted by banks to small and medium sized enterprises. We associate this dispersion with the loan officers’ use of “discretion” in the loan rate setting process. We find that “discretion” is most important if: (i) loans are small and unsecured; (ii) firms are small and opaque; (iii) the firm operates in a large and highly concentrated banking market; and (iv) the firm is distantly located from the lender. Consistent with the proliferation of information-technologies in the banking industry, we find a decreasing role for “discretion” over time in the provision of small credits to opaque firms. While widely used in the pricing of loans, “discretion” plays only a minor role in the decisions to grant loans.     

Size and book to market effects and the Fama French three factor asset pricing model: evidence from the Australian stockmarket

The present study adds to the sparse published Australian literature on the size effect, the book to market (BM) effect and the ability of the Fama French three factor model to account for these effects and to improve on the asset pricing ability of the Capital Asset Pricing Model (CAPM). The present study extends the 1981–1991 period examined by Halliwell, Heaney and Sawicki (1999) a further 10 years to 2000 and addresses several limitations and findings of that research. In contrast to Halliwell, Heaney and Sawicki the current study finds the three factor model provides significantly improved explanatory power over the CAPM, and evidence that the BM factor plays a role in asset pricing.     

Motives for partial acquisitions between firms in the spanish stock market

The paper analyses the motivations for inter-company investment on the Spanish Stock Market through the study of a sample of significant acquisitions reported to the CNMV (the Spanish Securities and Exchange Commission) by quoted firms. By analysing the sign of the cumulative abnormal returns (CAR) and of the correlations among the gains produced by the operation, an attempt is made to find out which motives predominate of the three most important ones suggested by the literature for takeovers: synergy, agency and hubris. Empirical evidence is presented that in the Spanish Stock Market the main motive for acquiring a holding is similar to synergy, especially in partial acquisitions with positive total gains. However, in the samples with negative total gains a main motive similar to hubris always appears. The analysis takes into account the size of the investment and distinguishes between the first report and subsequent ones. Results are similar to those obtained by other authors for takeovers in the US Stock Market, except that in this sample, agency motives do not appear clearly.     

中国股市涨跌停板对投资者交易行为的影响

利用A股市场的日内高频数据,研究我国股市涨跌停板制度是否存在"磁吸效应",从而判断涨跌停板的存在是否会影响投资者在面临个股较大涨跌幅时的交易行为.研究结果表明:一,我国A股市场涨跌停板的设定并不会导致投资者流动性风险的增加;二、投资者观察到股价大幅波动时会比较谨慎,涨跌停板的存在抑制了股价波动的进一步增大;三,临近收盘时,如果股价已下跌了较大的幅度,投资者的损失规避交易会造成股价的继续下跌.     

The implied liquidity premium for equities

Over the long term, the returns on smaller stocks are likely to be higher than the returns on larger stocks. This phenomenon has been called size effect, and a number of explanations have been proposed to account for it. Here we show that the difference in return between the larger and the smaller stocks can be accounted for by a liquidity premium for the smaller stocks, and we estimate the value of this premium using structural parameters for the capital distribution of the U.S. stock market during the 1990s The authors wish to express their gratitude to an anonymous referee for a very thorough and incisive reading, as well as for many constructive suggestions that have significantly improved this paper. The authors wish to express their gratitude to an anonymous referee for a very thorough and incisive reading, as well as for many constructive suggestions that have significantly improved this paper.     

How should we estimate value-relevance models? Insights from European data

We study the consequences of unobserved heterogeneity when employing different econometric methods in the estimation of two major value-relevance models: the Price Regression Model (PRM) and the Return Regression Model (RRM). Leveraging a large panel data set of European listed companies, we first demonstrate that robust Hausman tests and Breusch-Pagan Lagrange Multiplier tests are of fundamental importance to choose correctly among a fixed-effects model, a random-effects model, or a pooled OLS model. Second, we provide evidence that replacing firm fixed-effects with country and industry fixed-effects can lead to large differences in the magnitude of the key coefficients, with serious consequences for the interpretation of the effect of changes in earnings and book values per share on firm value. Finally, we offer recommendations to applied researchers aiming to improve the robustness of their econometric strategy.     

The magnet effect of price limits: A logit approach

We investigate the magnet effect of price limits using transaction data from the Taiwan Stock Exchange. A logit model incorporates explanatory variables from microstructure literature and reveals that the conditional probability of a price increase (decrease) increases significantly when the price approaches the upper (lower) price limit, in support of the magnet effect. Our approach recognizes when the magnet effect starts to emerge and identifies possible determinants of magnet effect. The probability of information-based trading has a significant impact on the magnet effect for lower price limits.     

Corporate reporting of intellectual capital: Evidence from UK companies

This paper reports the results of an empirical investigation into the intellectual capital reporting practices of UK companies in four distinct sectors. It differs from prior intellectual capital reporting studies in that it analyses a wide range of corporate reports for their intellectual capital content. It finds major differences between the elements of intellectual capital reported in each sector studied. The study also finds that a range of different types of corporate reports were used for communicating intellectual capital information, and that the annual reports were not a good proxy for the proportion of disclosures across all corporate reports analysed in this study.     

Extending the capital asset pricing model: the reward beta approach

This paper offers an alternative method for estimating expected returns. The proposed reward beta approach performs well empirically and is based on asset pricing theory. The empirical section compares this approach with the capital asset pricing model (CAPM) and the Fama–French three‐factor model. In out‐of‐sample testing, both the CAPM and the three‐factor model are rejected. In contrast, the reward beta approach easily passes the same test. In robustness checks, the reward beta approach consistently outperforms both the CAPM and the three‐factor model.