Convertible Bond Arbitrage: Risk and Return

Abstract:  This paper specifies a simulated convertible bond arbitrage portfolio to characterise the risks in convertible bond arbitrage. For comparison the risk profile of convertible bond arbitrage hedge fund indices at both monthly and daily frequencies is also examined. Results indicate that convertible bond arbitrage is positively related to default and term structure risk factors. These risk factors are augmented with the simulated convertible bond arbitrage portfolio, mimicking a passive investment in convertible bond arbitrage, to assess the risk and return of individual hedge funds. We provide estimates of the performance of two hedge fund indices (an equally weighted and value weighted index) and a sample of convertible bond arbitrage hedge funds using a factor model methodology. Lagged and contemporaneous observations of the risk factors are specified, controlling for illiquidity in the securities held by funds. Our results cover two time periods. Initially we find evidence of abnormal risk adjusted returns in the individual hedge fund data and the equally weighted hedge fund index and no evidence of abnormal risk adjusted returns in the value weighted hedge fund index. When we examine performance during the credit crisis of 2007 and 2008 we find evidence of negative abnormal returns amongst individual hedge funds and the hedge fund indices.     

The Uzbek Model of Economic Development, 1991–91

Uzbekistan has been difficult to classify among the thirty-plus economies in transition during the 1990s and has posed a puzzle, because it is a slow reformer but relatively good performer. This paper argues that there is no simple Uzbek model. Uzbekistan's economic reform process has been inconsistent gradualism through three different phases during the 1990s. Economic performance was due to favourable external conditions during the first half of the 1990s and to reasonably good policy-making, although policy errors in late 1996 led to negative effects. Uzbekistan illustrates the importance of policy, but sheds little light on a debate framed in terms of rapid reform versus gradualism.     

South Korea's Automotive Labour Regime,Hyundai Motors’ Global Production Network and Trade‐Based Integration with the European Union

This article explores the interrelationship between global production networks (GPNs) and free trade agreements (FTAs) in the South Korean auto industry and its employment relations. It focuses on the production network of the Hyundai Motor Group (HMG) — the third biggest automobile manufacturer in the world — and the FTA between the EU and South Korea. This was the first of the EU's ‘new generation’ FTAs, which among other things contained provisions designed to protect and promote labour standards. The article's argument is twofold. First, that HMG's production network and Korea's political economy (of which HMG is a crucial part) limited the possibilities for the FTA's labour provisions to take effect. Second, that the commercial provisions in this same FTA simultaneously eroded HMG's domestic market and corporate profitability, leading to adverse consequences for auto workers in the more insecure and low‐paid jobs. In making this argument, the article advances a multi‐scalar conceptualization of the labour regime as an analytical intermediary between GPNs and FTAs. It also provides one of the first empirical studies of the EU–South Korea FTA in terms of employment relations, drawing on 105 interviews with trade unions, employer associations, automobile companies and state officials across both parties.     

Rezensionen

Ohne Zusammenfassung     

The economic consequences for Israel of free trade in manufactured goods with the EEC

Zusammenfassung Die wirtschaftlichen Auswirkungen des Freihandels mit Industrieerzeugnissen mit der EWG für Israel. — Die Freihandelszone zwischen Israel und der EWG in Industriegütern wird betr?chtliche Netto-Wohlfahrtsgewinne für Israel mit sich bringen, besonders langfristig, wenn die induzierten Erh?hungen von Faktormengen und Produktivit?t wirksam geworden und die kurzfristigen Anpassungskosten und negativen Handelswirkungen überwunden worden sind. Die Vorteile der EWG-Pr?ferenzen sind gr?\er als diejenigen, die sich aus den Senkungen des israelischen Zolltarifs ergeben, und die Gewinne aus der Freihandelszone sind erheblich gr?\er als diejenigen, die entstehen würden, wenn Israel seine Z?lle einseitig abschaffen würde. Obwohl Israels verh?ltnism?\ig fortgeschrittener Industrialisierungsgrad das Land besonders geeignet macht, den leichteren Zugang zu den EWG-M?rkten auszunutzen, ergibt sich doch allgemein, da\ ein pr?ferentieller Zugang zu den M?rkten von Industriel?ndern für ein Land, das eine exportorientierte Entwicklungspolitik betreibt, beachtliche Vorteile mit sich bringen kann.

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Résumé Les conséquences économiques pour l’Israel du libre-échange avec la CEE en produits manufacturiers. — La zone de libre-échange entre l’Israel et la CEE veut rapporter des nets gains de ?welfare? substantiels pour l’Israel, particulièrement à long terme si les accroissements induits des quantités de facteur et de la productivité deviennent influents et si les frais d’ajustements à court terme et les effets d’échange négatifs sont surmontés. Les bénéfices des préférences accordées par la CEE sont plus grands que ceux des réductions du tarif Israelien, et les gains dérivant de la zone de libre-échange sont considérablement plus grands que ceux qui résulteraient d’une élimination tarifaire unilaterale par l’Israel. Bien que le niveau d’industrialisation relativement avancé d’Israel le rende particulièrement capable de bénéficier plus facile aux marchés de la CEE, nous concluons que l’accès préférentiel aux marchés des pays industrialisés peut rapporter des bénéfices significatifs pour un pays poursuivant une stratégie de développement orientée à l’exportation.

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Resumen Las consecuencias económicas para Israel del libre comercio en manufacturas con la CEE. — El área de libre comercio de manufacturas entre Israel y la CEE traerá ganancias de bienestar netas sustanciales para Israel, especialmente en el largo plazo, cuando incrementos inducidos en las cantidades de factores y en la productividad adquieran influencia y los costos de ajuste de corto plazo y los efectos comerciales negativos hayan sido superados. Los beneficios de las preferencias otorgadas por la CEE son mayores que los de las reducciones en las tarifas israelíes, y las ganancias del área de libre comercio son considerablemente mayores que las que habrían resultado de una eliminación unilateral de tarifas por parte de Israel. A pesar de que el nivel de industrialización relativamente avanzado de Israel le coloca en una posición particularmente ventajosa para aprovechar el acceso preferencial a los mercados de la CEE, la implicación es que el acceso preferencial a los mercados de los países industrializados puede rendir beneficios significativos a un país que persigue una estrategia de desarrollo orientada hacia la exportación.