Appraising Performance across Borders: An Empirical Examination of the Purposes and Practices of Performance Appraisal in a Multi‐Country Context

This study empirically investigated culture's consequences on the major purposes and practices of performance appraisal using a sample (n = 1749) drawn from the banking industry in seven countries across Europe, Asia, and North America. We found that the effects and predictive capability of assertiveness, uncertainty avoidance, in‐group collectivism, and power distance should not be overstated nor are they straightforward. Organizations must be cognizant of the potential influence that a range of other organizational, institutional, and economic factors may wield on appraisal. These findings hold significant implications for the theoretical underpinnings of appraisal, a management tool largely rooted in US equity, expectancy, and procedural justice values and traditions. They also offer important lessons for practice. Not only is the transferability of appraisal and its operationalization affected by interactions with divergent cultures and contextual settings, but new hybrid appraisal architectures are emerging that necessitate further research.     

Further Evidence on the Performance of Funds of Funds: The Case of Real Estate Mutual Funds

Funds of funds (FOFs) are created when investment companies invest in other investment companies. Although the additional layer of fees incurred by FOFs has a negative effect on returns, there is empirical evidence that real estate FOFs generate superior performance net of fees and risk adjustments. The evidence is inconsistent with a growing consensus that most actively managed mutual funds do not, on average, generate excess returns after adjusting for fees and risk. This study explains this apparent contradiction and finds that most real estate FOFs do not outperform their benchmarks under alternative risk adjustment specifications.     

Do aggressive funds reallocate their portfolios aggressively?

This study examines pairs of asset allocation mutual funds that are controlled for all informational attributes, except for the level of risk aversion. Standard mean‐variance models of portfolio choice suggest that the percentage rebalancing of common stocks in aggressive funds would be the same as that in conservative funds. However, this study finds the rebalancing of common stocks in aggressive funds to be disproportionally less intense.     

Analyzing yield, duration and convexity of mortgage loans under prepayment and default risks

In this article, we construct a general model, which considers the borrower’s financial and non-financial termination behavior, to derive the closed-form formula of the mortgage value for analyzing the yield, duration and convexity of the risky mortgage. Since the risks of prepayment and default are reasonably expounded in our model, our formulae are more appropriate than traditional mortgage formulae. We also analyze the effects of the prepayment penalty and partial prepayment on the yield, duration and convexity of a mortgage, and provide lenders with an upper-bound for the mortgage default insurance rate. Our model provides portfolio managers a useful framework to more appropriately appraise the mortgage and more effectively hedge their mortgage holdings. From the results of sensitivity analyses, we find that higher interest-rate, prepayment and default risks will increase the mortgage yield and reduce the duration and convexity of the mortgage.     

Pricing of new equity issues in Singapore

This paper analyzes the pricing performance of new equity issues by companies which came to the new issue market and sought a listing on the Stock Exchange of Singapore during the period 1975–84. We find that the new equity issues in Singapore are more underpriced than those in the U.S., the U.K. and Australia. It appears that the greater underpricing is due largely to more conservative pricing policies followed by underwriters in Singapore. This results in greater losses suffered by the existing shareholders of the issuing companies.Dr Kie A. Wong is Senior Lecturer in the School of Management at the National University of Singapore, and Mr H. L. Chiang is Bank Officer in the Citibank N.A., Singapore.     

FISCAL EXPENDITURE AND INDUSTRIAL LAND PRICE IN CHINA: THEORY AND EVIDENCE

This paper aims to discover the mechanism behind the positive correlation between local fiscal expenditure and industrial land price in China, a stylized fact discovered by bivariate and regression analyses. The model shows that if the positive externality of government expenditure on growth is sufficiently high, the local government has an incentive to increase public spending in exchange for the reduced demand for industrial land by charging a higher markup and driving up the industrial land price. Therefore, we observe a positive correlation between the local fiscal expenditure and industrial land price. (JEL D42, H72, R51)     

BILATERAL RENT‐SEEKING AND GROWTH OF FDI INFLOW IN CHINA: THEORY AND EVIDENCE

This research proposes a new theory called bilateral rent‐seeking to explain the dramatic growth of foreign direct investment (FDI) inflow into China over the past several decades. We construct a Nash bargaining model to illustrate the relevance of how the reciprocal relationship between the local state and foreign investors leads to the greater incentives for the latter to invest in the local market, thus resulting into the huge FDI inflows into the domestic market in China in the past several decades. The empirically evidence presented in the end is broadly consistent with the theories proposed in this paper (JEL D21, D72, L52)     

The Role of Correlated Trading in Setting REIT Prices

This study investigates the role of correlated trading by individuals in setting equity real estate investment trust (REIT) prices. Consistent with existing literature, this study finds that there is a common element in correlated trades that drives both traditional closed-end fund prices and REIT prices. Perhaps more important, we find evidence suggesting that (1) the effects of correlated trading on REIT prices are stronger for those REITs that are hypothesized to be preferred by individual investors, and (2) this linkage is stronger when the REIT market is hot and exuberant; i.e., when the average share turnover in the REIT market is high.     

Discovering REIT Price Discovery: A New Data Setting

This study decomposes real estate investment trust (REIT) returns into two components: (1) real returns, and (2) public returns. The real returns are based on the changes in the private, appraisal-based net asset values of REITs, whereas the public returns are measured by the variations in REITs’ premiums/discounts. This study then investigates the price discovery of REIT prices. The results indicate that lagged public returns are useful in predicting real returns. In addition, the study documents concurrent factor exposures for public returns and lagged factor exposures for private returns under a variety of asset pricing models. Overall, the results are consistent with the notion that public markets are more efficient in processing information.

Whose call is it? Targeting universal service programs to low-income households’ telecommunications preferences

Do universal service programs give customers what they want? This paper uses new survey data to study low-income households’ telecommunications choices in the United States and to consider the degree to which such households’ preferences are addressed by existing universal service programs. The research shows that households that choose only one form of telecommunications increasingly are choosing a mobile phone, while those that choose to have both modes of communications are shifting their usage towards their mobile phones. These trends are less pronounced among higher-income households. One implication for universal service policy is that traditional subsidies for landline phones are increasingly ineffective in reaching low-income households such subsidies are designed to help; subsidies for acquiring and using mobile phone services might be more beneficial to low-income households than traditional subsidies for landline phones.