Pub Date : 2004-06-02DOI: 10.32890/IJBF2004.2.1.8342
Edward R. Lawrence, Suchi Mishra, A. Prakash
In this paper we summarize the theoretical relationship between beta, the measure of relative systematic risk on one hand and financial and accounting variables, such as leverage, size, growth in earnings, capital adequacy etc. The purpose is to bring together a comprehensive treatise of these relationships.
{"title":"A Synthesis of Theoretical Relationship between Systematic Risk and Financial and Accounting Variables","authors":"Edward R. Lawrence, Suchi Mishra, A. Prakash","doi":"10.32890/IJBF2004.2.1.8342","DOIUrl":"https://doi.org/10.32890/IJBF2004.2.1.8342","url":null,"abstract":"In this paper we summarize the theoretical relationship between beta, the measure of relative systematic risk on one hand and financial and accounting variables, such as leverage, size, growth in earnings, capital adequacy etc. The purpose is to bring together a comprehensive treatise of these relationships.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131599542","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2004-06-02DOI: 10.32890/IJBF2004.2.1.8344
Abraham Mulugetta, Hristo Hadjinikolov
The purpose of this study is to examine issues surrounding the enactment of Financial Accounting Statement 133 (SFAS 133) in managing risk in the banking industry. It examined the financial statements of ten major U.S. banks by investigating their 10Ks and 10Qs from 1999 to 2002. It found out that banks that had large hedge positions before SFAS 133 reduced their exposures for a while and increased their positions in 2002. Interestingly, those banks with small hedged positions before the rule, increased their positions after the adoption of SFAS 133. As expected the statement increased the degree of disclosure and transparency of derivatives activities which compliments the Sarbanes Oxley Act of 2002.
{"title":"Derivatives and Risk Management in the Banking Industry","authors":"Abraham Mulugetta, Hristo Hadjinikolov","doi":"10.32890/IJBF2004.2.1.8344","DOIUrl":"https://doi.org/10.32890/IJBF2004.2.1.8344","url":null,"abstract":"The purpose of this study is to examine issues surrounding the enactment of Financial Accounting Statement 133 (SFAS 133) in managing risk in the banking industry. It examined the financial statements of ten major U.S. banks by investigating their 10Ks and 10Qs from 1999 to 2002. It found out that banks that had large hedge positions before SFAS 133 reduced their exposures for a while and increased their positions in 2002. Interestingly, those banks with small hedged positions before the rule, increased their positions after the adoption of SFAS 133. As expected the statement increased the degree of disclosure and transparency of derivatives activities which compliments the Sarbanes Oxley Act of 2002.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121200142","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2004-06-02DOI: 10.32890/IJBF2004.2.1.8343
A. Arize, J. Malindretos, E. Grivoyannis
This paper examines the long-run validity of purchasing power parity (PPP) for fourteen developing countries. The period examined is 1973:4 through 2002:8. The methods of Elliot, Rothemberg and Stock (1996), Kwiattkoski et al. (1992) and Geweke and Porter-Hudak (1983) are employed to detect the time series properties of exchange rates and consumer price indices of these countries. We find that these variables are nonstationary. We then utilize these data to test the PPP using both conventional and fractional approaches. Estimates of the cointegrating relations are obtained using estimators suggested by Stock and Watson (1993) and Phillips and Hanson (1990), respectively. The results are consistent with the argument that, during the recent floating exchange-rate period, PPP holds well, at least in a weak form, in developing countries where the general price level movements overshadow the factors causing deviations from the PPP.
本文考察了14个发展中国家购买力平价(PPP)的长期有效性。研究的时期是1973年4月至2002年8月。采用Elliot, Rothemberg and Stock (1996)， kwiatkoski等(1992)和Geweke和Porter-Hudak(1983)的方法检测这些国家的汇率和消费者价格指数的时间序列特性。我们发现这些变量是非平稳的。然后，我们利用这些数据使用传统和分数方法来测试购买力平价。协整关系的估计分别使用Stock和Watson(1993)和Phillips和Hanson(1990)提出的估计量。结果与以下论点一致:在最近的浮动汇率时期，购买力平价在发展中国家保持良好，至少在较弱的形式下，一般价格水平的变动掩盖了导致购买力平价偏离的因素。
{"title":"Purchasing power parity in developing countries: Evidence from conventional and fractional cointegration tests","authors":"A. Arize, J. Malindretos, E. Grivoyannis","doi":"10.32890/IJBF2004.2.1.8343","DOIUrl":"https://doi.org/10.32890/IJBF2004.2.1.8343","url":null,"abstract":"This paper examines the long-run validity of purchasing power parity (PPP) for fourteen developing countries. The period examined is 1973:4 through 2002:8. The methods of Elliot, Rothemberg and Stock (1996), Kwiattkoski et al. (1992) and Geweke and Porter-Hudak (1983) are employed to detect the time series properties of exchange rates and consumer price indices of these countries. We find that these variables are nonstationary. We then utilize these data to test the PPP using both conventional and fractional approaches. Estimates of the cointegrating relations are obtained using estimators suggested by Stock and Watson (1993) and Phillips and Hanson (1990), respectively. The results are consistent with the argument that, during the recent floating exchange-rate period, PPP holds well, at least in a weak form, in developing countries where the general price level movements overshadow the factors causing deviations from the PPP.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"122 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123490382","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-08-19DOI: 10.32890/IJBF2003.1.2.8337
Mondher Bellalah
The Black-Scholes model is derived under the assumption that heding is done instantaneously. In practice, there is a “small” time that elapses between buying or selling the option and hedging using the underlying asset. Under the following assumptions used in the standard Black-Scholes analysis, the value of the option will depend only on the price of the underlying asset S, time t and on other Variables assumed constants. These assumptions or “ideal conditions” as expressed by Black-Scholes are the following.The option us European,The short term interest rate is known, The underlying asset follows a random walk with a variance rate proportional to the stock price. It pays no dividends or other distributions.There is no transaction costs and short selling is allowed, i.e. an investment can sell a security that he does not own.Trading takes place continuously and the standard form of the capital market model holds at each instant. The last assumption can be modified because in practice, trading does not take place instantaneously and simultaneously in the option and the underlying asset when implementing the hedging strategy. We will modify this assumption to account for the “lag”. The lag corresponds to the elapsed time between buying or selling the option and buying or selling - delta units of the underlying assets. The main attractions of the Black-Sc holes model are that their formula is a function of “observable” variables and that the model can be extended to the pricing of any type of option. All the assumptions are conserved except the last one.
{"title":"The Extended Black-Scholes Model with-LAGS-and “Hedging Errors”","authors":"Mondher Bellalah","doi":"10.32890/IJBF2003.1.2.8337","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.2.8337","url":null,"abstract":"The Black-Scholes model is derived under the assumption that heding is done instantaneously. In practice, there is a “small” time that elapses between buying or selling the option and hedging using the underlying asset. Under the following assumptions used in the standard Black-Scholes analysis, the value of the option will depend only on the price of the underlying asset S, time t and on other Variables assumed constants. These assumptions or “ideal conditions” as expressed by Black-Scholes are the following.The option us European,The short term interest rate is known, \u0000The underlying asset follows a random walk with a variance rate proportional to the stock price. It pays no dividends or other distributions.There is no transaction costs and short selling is allowed, i.e. an investment can sell a security that he does not own.Trading takes place continuously and the standard form of the capital market model holds at each instant. The last assumption can be modified because in practice, trading does not take place instantaneously and simultaneously in the option and the underlying asset when implementing the hedging strategy. We will modify this assumption to account for the “lag”. The lag corresponds to the elapsed time between buying or selling the option and buying or selling - delta units of the underlying assets. The main attractions of the Black-Sc holes model are that their formula is a function of “observable” variables and that the model can be extended to the pricing of any type of option. All the assumptions are conserved except the last one.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125323558","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-08-19DOI: 10.32890/IJBF2003.1.2.8332
Ephraim Clark, M. Tan, R. Tunaru
In this paper we test for the most effective cross hedging instrument for the Singapore spot market in jet fuel over the period February 4, 1997 to August 21, 2001. Our results are mixed. We find that the heating oil contract is the best in-sample cross-hedging instrument. It has the highest correlation with the spot price and gives the best regression results. However, after correcting for serial correlation, the goodness of fit measured by R2 is rather low. Out of sample results are weak for all models and ambiguous with respect to the heating oil contract.
{"title":"Cross Hedging Jet Fuel on the Singapore Spot Market","authors":"Ephraim Clark, M. Tan, R. Tunaru","doi":"10.32890/IJBF2003.1.2.8332","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.2.8332","url":null,"abstract":"In this paper we test for the most effective cross hedging instrument for the Singapore spot market in jet fuel over the period February 4, 1997 to August 21, 2001. Our results are mixed. We find that the heating oil contract is the best in-sample cross-hedging instrument. It has the highest correlation with the spot price and gives the best regression results. However, after correcting for serial correlation, the goodness of fit measured by R2 is rather low. Out of sample results are weak for all models and ambiguous with respect to the heating oil contract.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132459609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-08-19DOI: 10.32890/IJBF2003.1.2.8333
Chandra Shekhar Bhatnagar
This paper examines the efficiency and integration of the Indian stock market. The weak form of efficiency has been tested by studying the stationarity characteristics of theMSCI Stock Price Index of India. For testing the semi-strong form of efficiency and integration of the Indian Stock Market with the macro phenomenon of emerging stock markets of the world, the causality between the MSCI Stock Price Index of India and the MSCI EMF Index has been studied. The results point out that the Indian Stock Market is efficient in its weak sense. However, the same is not true for the semi-strong form of market efficiency. Therefore, the utility of a forecasting model having the macro phenomenon (MSCI EMF Index in the present case) as a forecasting variable cannot be ruled out.
{"title":"Market Efficiency and Integration: An Examination of Indian Stock Market","authors":"Chandra Shekhar Bhatnagar","doi":"10.32890/IJBF2003.1.2.8333","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.2.8333","url":null,"abstract":"This paper examines the efficiency and integration of the Indian stock market. The weak form of efficiency has been tested by studying the stationarity characteristics of theMSCI Stock Price Index of India. For testing the semi-strong form of efficiency and integration of the Indian Stock Market with the macro phenomenon of emerging stock markets of the world, the causality between the MSCI Stock Price Index of India and the MSCI EMF Index has been studied. The results point out that the Indian Stock Market is efficient in its weak sense. However, the same is not true for the semi-strong form of market efficiency. Therefore, the utility of a forecasting model having the macro phenomenon (MSCI EMF Index in the present case) as a forecasting variable cannot be ruled out.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121878836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-04-01DOI: 10.32890/IJBF2003.1.1.8331
John T. Barkoulas, Christopher F. Baum, A. Chakraborty
We employ a nonlinear, nonparametric method to model the stochastic behavior of changes in several short and long term U.S. interest rates. We apply a nonlinear autoregression to the series using the locally weighted regression (LWR) estimation method, a nearest-neighbor method, and evaluate the forecasting performance with a measure of root mean square error (RMSE). We compare the forecast performance of the nonparametric fit to the performance of two benchmark linear models: an autoregressive model and a random-walk-with-drift model. The nonparametric model exhibits greater out-of-sample forecast accuracy than that of the linear predictors for most U.S. interest rate series. The improvements in forecast accuracy are statistically significant and robust. This evidence establishes the presence of significant nonlinear mean predictability in U.S. interest rates, as well as the usefulness of the LWR method as a modeling strategy for these benchmark series.
{"title":"Nearest-Neighbor Forecasts of U.S. Interest Rates","authors":"John T. Barkoulas, Christopher F. Baum, A. Chakraborty","doi":"10.32890/IJBF2003.1.1.8331","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.1.8331","url":null,"abstract":"We employ a nonlinear, nonparametric method to model the stochastic behavior of changes in several short and long term U.S. interest rates. We apply a nonlinear autoregression to the series using the locally weighted regression (LWR) estimation method, a nearest-neighbor method, and evaluate the forecasting performance with a measure of root mean square error (RMSE). We compare the forecast performance of the nonparametric fit to the performance of two benchmark linear models: an autoregressive model and a random-walk-with-drift model. The nonparametric model exhibits greater out-of-sample forecast accuracy than that of the linear predictors for most U.S. interest rate series. The improvements in forecast accuracy are statistically significant and robust. This evidence establishes the presence of significant nonlinear mean predictability in U.S. interest rates, as well as the usefulness of the LWR method as a modeling strategy for these benchmark series.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121384274","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-03-17DOI: 10.32890/IJBF2003.1.1.8328
Lloyd P. Blenman, Dar-Hsin Chen, Chang-wen Duan
We examine the volatility, liquidity and returns effects on stocks that switch exchange listings from the ROSE to the TSE in Taiwan from 1992 to 2000. Switching Jims earn statistically positive returns before the transfer day and earn statistically negative returns after that day. We find evidence of improved liquidity, ownership dispersion and actual trading volume for such firms. The relative volatility of trading volume, compared against the firms ' own histories, and volatility of return also increase after a listing change. We show that increased trading volume and liquidity are associated with the abnormal returns around the transfer date. We find no evidence that the past earnings of firms significantly affect the abnormal returns realized in the post-listing period.
{"title":"Exchange listing changes: volatility and liquidity effects in Taiwan","authors":"Lloyd P. Blenman, Dar-Hsin Chen, Chang-wen Duan","doi":"10.32890/IJBF2003.1.1.8328","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.1.8328","url":null,"abstract":"We examine the volatility, liquidity and returns effects on stocks that switch exchange listings from the ROSE to the TSE in Taiwan from 1992 to 2000. Switching Jims earn statistically positive returns before the transfer day and earn statistically negative returns after that day. We find evidence of improved liquidity, ownership dispersion and actual trading volume for such firms. The relative volatility of trading volume, compared against the firms ' own histories, and volatility of return also increase after a listing change. We show that increased trading volume and liquidity are associated with the abnormal returns around the transfer date. We find no evidence that the past earnings of firms significantly affect the abnormal returns realized in the post-listing period.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"187 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121305100","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-03-17DOI: 10.32890/IJBF2003.1.1.8327
D. Ghosh
Within the framework of general equilibrium in which there are two corporations generating net earnings by efficient utilization of debt and equity capital it is demonstrated that optimum capital structure indeed exists for each firm and for the economy in competitive capital market. Since the result is strikingly different from the celebrated proposition on capital structure, an attempt is made to compare this analytical model with the classic paradigm of Modigliani and Miller: The efects of resource allocation are also examined and the existing thoughts on leverage are brought out in this work that subsumes growth and capital accumulation.
{"title":"Corporate leverage and growth: a general equilibrium analysis","authors":"D. Ghosh","doi":"10.32890/IJBF2003.1.1.8327","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.1.8327","url":null,"abstract":"Within the framework of general equilibrium in which there are two corporations generating net earnings by efficient utilization of debt and equity capital it is demonstrated that optimum capital structure indeed exists for each firm and for the economy in competitive capital market. Since the result is strikingly different from the celebrated proposition on capital structure, an attempt is made to compare this analytical model with the classic paradigm of Modigliani and Miller: The efects of resource allocation are also examined and the existing thoughts on leverage are brought out in this work that subsumes growth and capital accumulation.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114201253","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2003-03-17DOI: 10.32890/IJBF2003.1.1.8330
Harold A Black, Elijah Brewer, W. Jackson
{"title":"Shifting From Real Estate to Non-Real Estate Lending Activity: Evidence on the Risk and Return Profiles of Thrift Institutions","authors":"Harold A Black, Elijah Brewer, W. Jackson","doi":"10.32890/IJBF2003.1.1.8330","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.1.8330","url":null,"abstract":"","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"37 4","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121013923","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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