Tests of rationality,neutrality and market efficiency: A Monte Carlo analysis of alternative test statistics

This paper examines the small sample properties of three testing strategies used to analyze the rationality, monetary neutrality and market efficiency hypotheses. We focus on the original ‘two-step’ Barro test of the MRE hypothesis formed entirely from OLS results, a test that employs the correct variance-covariance formulae for these ‘two-step’ estimates, and Mishkin's FIMLE testing framework. Each test is examined under likely model respecifications. The findings highlight the extensive bias incurred by drawing inferences from simple unadjusted ‘two-step’ estimates and reveal the relative power of all tests in identifying alternatives to the null hypotheses.     

Bitcoin – Its Economics for Financial Reporting

Despite its increasing popularity, no official guidance on the financial reporting of Bitcoin transactions has been provided by standard setters, although tax accounting guidance began to appear in 2014. Designed as a decentralised currency, Bitcoin is not intended to become a reporting currency and will instead complement fiat money. We argue that in the case of Bitcoin the accounting principle of faithful representation requires interpretation of the economic substance for financial reporting that varies with reporting entity: trading firms recognise Bitcoin like a foreign currency and measure the revenue, or expense, at the equivalent amount of the reporting currency and digital currency exchanges recognise Bitcoin as goods in line with tax accounting treatment. An Economica paper by Radford (1945), which describes the use of cigarettes as commodity money in a prisoner of war camp alludes to this economic basis. This paper applies accounting principles to a practical issue and contributes to the process by which standard setters may issue an interpretation.     

Refinements to the Sharpe Ratio – Evidence from Malaysian Equity Funds

Abstract

We apply M-squared measure to evaluate the performance of Malaysian equity funds. Specifically, we show how financial leverage can be applied to increase the returns or to reduce the risk exposures of funds. Several alternative refinements to the original Sharpe ratio are also employed to evaluate the funds during periods of negative excess returns. We find that modified versions of Sharpe measure generally lead to similar performance rankings as the original Sharpe ratio. Our findings imply that while Sharpe ratio has experienced several methodological improvements, its basic underlying concept remains remarkably intact.     

Modelling the demand for housing over the life cycle

We model individual demand for housing over the life cycle, and show the aggregate implications of this behaviour. Individuals delay purchasing their first home when incomes are low or uncertain. Higher house prices lead households to downsize, rather than to stop being owners. Fixed costs (property transactions taxes) have important impacts on welfare (a wealth effect) and house purchase decisions (substitution effect). In aggregate, positive house price shocks lead to consumption booms among the old but falls in consumption for the young, and reduced housing demand; positive income shocks lead to consumption booms among the young and increased housing demand.     

Is the ASEAN Free Trade Area a Second Best Option?

This paper evaluates the ASEAN Free Trade Area (AFTA) which has been accepted as an ASEAN endeavour to be achieved by 2008 in the Singapore Summit in 1992. Noting the new circumstances and environment which have prompted a more proactive strategy of economic integration, the paper first surveys empirical studies on the economic impact of complete trade liberalisation. The consensus is that AFTA would not have a substantial impact in increasing intra-ASEAN trade. This suggests that AFTA, like previous ASEAN efforts at economic cooperation, seems more a political than economic effort. The inherent lack of complementarity in trade remains though the ASEAN countries' industrial structures have become more competitive and complementary. The paper however concludes that AFTA would still be useful as a demonstration of ASEAN solidarity and commitment especially if supplemented by other measures such as more deregulation and cross-country investment and other exchanges of factors like technology and human resource development.     

The intelligent city: singapore achieving the next lap

Singapare has become one of the Asian dragons, or newly industrializing economies (NIEs), and aspures tobecome a developed country over the next lap of 30-40 years. Its economic restruchuring to become an intelligent' city-state thrwing on manufacturing cum-services is spported by entigtened human resource development which has hanessed infosrmeation technology and telecommunications (IT&T). The success of Singapore as an intelligent city' is not only driven by companies but also bu clear-sighted govenmnent stratgies. In the next lap, IT&T is envisaged as upgrading the quality of life too.     

Development of Industruct: A Scale for the Measurement of Perceptions of Industry Structure

The development of INDUSTRUCT, an instrument designed to measure perceptions of industry structure based on Porter's five competitive forces formulation, is described. A seven-step procedure based on psychometric principles was used in the process. The results indicate that a valid five dimensional scale can be defined and an instrument developed to provide a satisfactory basis for implementation in future theory testing.