Does option provide more informative content than stock after regulation fair disclosure?

This article examines the impact of Regulation Fair Disclosure (Reg FD), which intends to eliminate selective disclosure to only a few privileged interested parties, on the information embedded in the stock-and-option markets prior to tender offer announcements. In the pre-announcement period after Reg FD, the volume of public option information contains less information about subsequent stock price movements. Although the quantity of public information may be higher after Reg FD, the inferior quality of publicly available option information dominates the higher quantity. Thus, the predictive power of option information decreases. In the post-RFD pre-announcement period, the volume of public option information is more informative than the volume of stock private information. It indicates that although the quality of private stock information is superior to that of public option information, the much lower quantity of stock information results in a lower predictive power of private stock information than that of public option information.     

Forecasting volatility in the Singapore stock market

Volatility forecasting is a major area in the pricing of derivative securities, such as stock and index options. In this paper, we compare three methods of forecasting volatility. These are the naive method based on historical sample variance, the exponentially weighted moving average (EWMA) method, and the generalised autoregressive conditional heteroscedasticity (GARCH) model. Out-of-sample forecasts of monthly return variances generated by these three methods are compared. The results strongly favour the EWMA method.The authors are from the Department of Economics and Statistics, National University of Singapore and the Government of Singapore Investment Corporation respectively. The views expressed in this paper are entirely personal, and do not represent those of any institution.     

The stereotyping of tourism management students in a business school setting

Previous research has shown that students in business schools hold stereotypes concerning their peers who are undertaking different specializations. Yet, to the authors’ knowledge, no research to date has investigated the stereotyping of tourism management students by other business students. The present study seeks to fill this research gap. The insights are important because negative perceptions exacerbate the challenge of attracting high-quality prospects for tourism degree programs and of producing graduates who enjoy favorable recognition by their peers and by industry. Tourism management students are future leaders who are critical to the long-term sustainability and competitiveness of the tourism sector. In-depth interviews revealed three stereotyping themes: personality attribution, legitimacy, and professionalism. The study concludes by discussing potential stereotype-reducing strategies.     

Experimental Evidence on Portfolio Size and Diversification: Human Biases in Naïve Security Selection and Portfolio Construction

We conduct an experiment in which individuals select securities to reproduce the well‐known relationship between portfolio risk and the number of securities. The standard result occurs on average but not for most individuals, many of whom effectively de‐diversify as they add seemingly random securities. Moreover, only slightly better results are achieved using a random number generator. This finding challenges the belief that only a small number of securities are required for diversification and shows that it is applicable only to a large sample. The implications are important given that many individual investors hold very few stocks in their portfolios.     

Customers’ savings rate and share of wallet: the moderating role of religion and ethnicity/immigrant generation vis-à-vis attitude as mediator

This study explores the role of attitude toward money, religion and ethnicity in the relationship between income and consumer behavior. The three-country (Australia, Canada and China) study sampled 755 consumers and uses structural equation modeling and multivariate analysis to test for mediating effects of attitude toward money and moderating effects of religion and ethnicity/immigrant generation. Religion is found to be a moderating variable for savings rate and share of wallet, while ethnicity/immigrant generation only moderates the association between income and savings rate. We also demonstrate the interaction effects of religion and ethnicity/immigrant generation with income as determinants of savings rate and share of wallet. This research provides the foundation for modeling savings rate and share of wallet, incorporating attitude, religion, and ethnicity/immigrant generation, as well as income, demonstrating the need to include other factors (i.e. demographic factors in addition to attitudinal/satisfaction measures) to better identify, understand and strategically target consumer segments with potential for profitability and growth.     

Regression-based Monte Carlo methods for stochastic control models: variable annuities with lifelong guarantees

We present regression-based Monte Carlo simulation algorithm for solving the stochastic control models associated with pricing and hedging of the guaranteed lifelong withdrawal benefit (GLWB) in variable annuities, where the dynamics of the underlying fund value is assumed to evolve according to the stochastic volatility model. The GLWB offers a lifelong withdrawal benefit, even when the policy account value becomes zero, while the policyholder remains alive. Upon death, the remaining account value will be paid to the beneficiary as a death benefit. The bang-bang control strategy analysed under the assumption of maximization of the policyholder’s expected cash flow reduces the strategy space of optimal withdrawal policies to three choices: zero withdrawal, withdrawal at the contractual amount or complete surrender. The impact on the GLWB value under various withdrawal behaviours of the policyholder is examined. We also analyse the pricing properties of GLWB subject to different model parameter values and structural features.     

Financial Liberalisation and Growth in China’s Economic Reform

This paper summarises China’s financial liberalisation experience and examines the contributions of financial resources on economic growth during the post‐reform period. Financial liberalisation has resulted in the reallocation of the four sources of total investment in fixed assets: state budget appropriation, national bank loans, self‐raised funds, and foreign investment. We find that the growth of GDP and industrial production are positively related to the growth of self‐raised funds and foreign investment. We conclude that the use of foreign investment and funds raised by the enterprises themselves are more efficient than the government’s appropriation and provision of bank loans.