With the data of housing transaction records of Shanghai during 2004-2015, this paper comprehensively analyzes the housing market in this metropolis, and pays special attention to the market dynamics related to the frequent policy changes. We focus on the secondary market, and build repeat sales indexes. Then the AR(1)-GARCH(1,1) model is applied to estimate the weight of housing consumption incentives relative to investment incentives. It turns out that the overall market features strong consumption incentives, especially in the suburb area. Moreover, the market tends to overreact to policy changes. Compared with the suburb area, downtown features more investment incentives, lower returns and volatility, and less overreaction to policy changes. We infer that long-term investors overreact less than consumers. Finally, the purchase restriction policy and the issue of non-local buyers are discussed.
{"title":"Overreaction to Policy Changes in the Housing Market: Evidence from Shanghai","authors":"Zhengyi Zhou","doi":"10.2139/ssrn.2654550","DOIUrl":"https://doi.org/10.2139/ssrn.2654550","url":null,"abstract":"With the data of housing transaction records of Shanghai during 2004-2015, this paper comprehensively analyzes the housing market in this metropolis, and pays special attention to the market dynamics related to the frequent policy changes. We focus on the secondary market, and build repeat sales indexes. Then the AR(1)-GARCH(1,1) model is applied to estimate the weight of housing consumption incentives relative to investment incentives. It turns out that the overall market features strong consumption incentives, especially in the suburb area. Moreover, the market tends to overreact to policy changes. Compared with the suburb area, downtown features more investment incentives, lower returns and volatility, and less overreaction to policy changes. We infer that long-term investors overreact less than consumers. Finally, the purchase restriction policy and the issue of non-local buyers are discussed.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128308481","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 : 2015-12-11DOI: 10.21863/IJFM/2015.5.4.021
Dr. Paritosh Chandra Sinha
In the literature of Financial Economics, the connotation “noise” and “noise traders” play critical roles in stocks’ equilibrium pricing mechanism. The equilibrium prices, however, include economic and non-economic aspects. In an empirical exploration, the paper seeks to explore the nature and magnitude of the noise traders’ risk in the Indian markets specifically during its present recovery phase. Besides the daily trading data for “open”, “high”, “low”, and “close” prices, and corresponding trading volumes, the study utilizes the intra-day 1D (one minute) and also 5D (five minutes) trade-prices, trade-volumes, and trade-times data of the sample firms (mostly the Nifty-Fifty firms) listed both in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The study utilizes the NSE-Nifty and the BSE-Sensex indices for the market return data. The study examines two important critical facets in Behavioral Finance – (i) whether stocks’ total return variations incorporate noise traders’ risk or not, that is, whether noise is priced in the stock markets’ equilibrium pricing mechanism or not, and (ii) whether informed traders’ short-run risky arbitrage positioning forces them to long-short positioning for possible hedging opportunities or not. The study methodologically argues that the noise as opposed to information has both systematic and firm-specific components and it varies over time while each component includes fundamental (that is, idiosyncratic) and noise aspects. At some days’ lag-periods, long-short position by traders over the two stock markets can hedge the fundamental systematic and the fundamental firm-specific shocks and may detach the noise shocks. Once stocks are traded at long or short horizons in the markets, traders’ long-short returns expose noise aspects across stocks in the markets. On the context of current recovering markets, the study explores comparisons of the results with the current price-volume-trade time data with those of two years earlier. The findings suggest that the intra-day returns (derived from 1D and 5D data) impound a significant level of noise while the daily return (weekly) returns have high (moderate) exposures to noise. The findings of conditional volatilities of long-short returns from the GARCH models show that the estimate of time-varying idiosyncratic noise is highly persistent at presence of noise traders in the equilibrium pricing mechanism. The study concludes that stocks’ prices impound information as well as noise in the market places during the four distinct trading days.
{"title":"Dynamics of Noise Traders’ Risk in the NSE and BSE Markets.","authors":"Dr. Paritosh Chandra Sinha","doi":"10.21863/IJFM/2015.5.4.021","DOIUrl":"https://doi.org/10.21863/IJFM/2015.5.4.021","url":null,"abstract":"In the literature of Financial Economics, the connotation “noise” and “noise traders” play critical roles in stocks’ equilibrium pricing mechanism. The equilibrium prices, however, include economic and non-economic aspects. In an empirical exploration, the paper seeks to explore the nature and magnitude of the noise traders’ risk in the Indian markets specifically during its present recovery phase. Besides the daily trading data for “open”, “high”, “low”, and “close” prices, and corresponding trading volumes, the study utilizes the intra-day 1D (one minute) and also 5D (five minutes) trade-prices, trade-volumes, and trade-times data of the sample firms (mostly the Nifty-Fifty firms) listed both in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The study utilizes the NSE-Nifty and the BSE-Sensex indices for the market return data. The study examines two important critical facets in Behavioral Finance – (i) whether stocks’ total return variations incorporate noise traders’ risk or not, that is, whether noise is priced in the stock markets’ equilibrium pricing mechanism or not, and (ii) whether informed traders’ short-run risky arbitrage positioning forces them to long-short positioning for possible hedging opportunities or not. The study methodologically argues that the noise as opposed to information has both systematic and firm-specific components and it varies over time while each component includes fundamental (that is, idiosyncratic) and noise aspects. At some days’ lag-periods, long-short position by traders over the two stock markets can hedge the fundamental systematic and the fundamental firm-specific shocks and may detach the noise shocks. Once stocks are traded at long or short horizons in the markets, traders’ long-short returns expose noise aspects across stocks in the markets. On the context of current recovering markets, the study explores comparisons of the results with the current price-volume-trade time data with those of two years earlier. The findings suggest that the intra-day returns (derived from 1D and 5D data) impound a significant level of noise while the daily return (weekly) returns have high (moderate) exposures to noise. The findings of conditional volatilities of long-short returns from the GARCH models show that the estimate of time-varying idiosyncratic noise is highly persistent at presence of noise traders in the equilibrium pricing mechanism. The study concludes that stocks’ prices impound information as well as noise in the market places during the four distinct trading days.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129457850","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 : 2015-09-30DOI: 10.11644/KIEP.JEAI.2015.19.3.297
K. Ho, Jiyoun An, L. Zhou
This paper examines the existence of value premium in the Chinese stock markets and empirically provides its explanation. Our results suggest that the value premium does exist in the Chinese markets, and investor sophistication is significant in explaining its existence. In particular, there is supporting evidence that the value premium could be driven by individual investors, whereas stocks that are mostly held by institutional investors are value-premium free. We briefly discuss the implications of our findings.
{"title":"The Book-to-Market Anomaly in the Chinese Stock Markets","authors":"K. Ho, Jiyoun An, L. Zhou","doi":"10.11644/KIEP.JEAI.2015.19.3.297","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2015.19.3.297","url":null,"abstract":"This paper examines the existence of value premium in the Chinese stock markets and empirically provides its explanation. Our results suggest that the value premium does exist in the Chinese markets, and investor sophistication is significant in explaining its existence. In particular, there is supporting evidence that the value premium could be driven by individual investors, whereas stocks that are mostly held by institutional investors are value-premium free. We briefly discuss the implications of our findings.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129241563","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 : 2015-06-30DOI: 10.11644/KIEP.JEAI.2015.19.2.296
A. M., Malabika Deo, Wayne King
Multi-scale representations are effective in characterising the time-frequency characteristics of financial return series. They have the capability to reveal the properties not evident with typical time domain analysis. Given the aforesaid, this study derives crucial insights from multi scale analysis to investigate the co- movements between Indian and emerging Asian equity markets using wavelet correlation and wavelet coherence measures. It is reported that the Indian equity market is strongly integrated with Asian equity markets at lower frequency scales and relatively less blended at higher frequencies. On the other hand the results from cross correlations suggest that the lead-lag relationship becomes substantial as we turn to lower frequency scales and finally, wavelet coherence demonstrates that this correlation eventually grows strong in the interim of the crises period at lower frequency scales. Overall the findings are relevant and have strong policy and practical implications.
{"title":"Characterizing Co-Movements between Indian and Emerging Asian Equity Markets Through Wavelet Multi-Scale Analysis","authors":"A. M., Malabika Deo, Wayne King","doi":"10.11644/KIEP.JEAI.2015.19.2.296","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2015.19.2.296","url":null,"abstract":"Multi-scale representations are effective in characterising the time-frequency characteristics of financial return series. They have the capability to reveal the properties not evident with typical time domain analysis. Given the aforesaid, this study derives crucial insights from multi scale analysis to investigate the co- movements between Indian and emerging Asian equity markets using wavelet correlation and wavelet coherence measures. It is reported that the Indian equity market is strongly integrated with Asian equity markets at lower frequency scales and relatively less blended at higher frequencies. On the other hand the results from cross correlations suggest that the lead-lag relationship becomes substantial as we turn to lower frequency scales and finally, wavelet coherence demonstrates that this correlation eventually grows strong in the interim of the crises period at lower frequency scales. Overall the findings are relevant and have strong policy and practical implications.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"251 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134359914","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}
This paper measures the bid-ask spread for all listed Jordanian banks and examines its’ determinants. Based on a total of 15 banks and the time period 2012-2014, the results show that Jordanian banks’ stocks suffer from relatively high liquidity cost. This finding has a number of implications to the banks’ cost of capital, and the behavior of their stocks’ return. In addition, unless the management of the capital market takes the issue of stock liquidity more seriously, it is argued that such listed firms (banks) might choose to cross-list their stocks or leave the local market altogether and list their stocks abroad. As expected, the objective of such a move is to improve their stocks’ liquidity and hence, realize the envisaged benefits.
{"title":"On the Bid-Spread in The Jordanian Banking Sector: What are the Implications?","authors":"Ghassan Omet, Bashar Abu Khalaf","doi":"10.2139/ssrn.2682903","DOIUrl":"https://doi.org/10.2139/ssrn.2682903","url":null,"abstract":"This paper measures the bid-ask spread for all listed Jordanian banks and examines its’ determinants. Based on a total of 15 banks and the time period 2012-2014, the results show that Jordanian banks’ stocks suffer from relatively high liquidity cost. This finding has a number of implications to the banks’ cost of capital, and the behavior of their stocks’ return. In addition, unless the management of the capital market takes the issue of stock liquidity more seriously, it is argued that such listed firms (banks) might choose to cross-list their stocks or leave the local market altogether and list their stocks abroad. As expected, the objective of such a move is to improve their stocks’ liquidity and hence, realize the envisaged benefits.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125757052","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 : 2015-04-15DOI: 10.21863/IJFM/2016.6.2.029
Sunaina Kanojia, N. Arora
In general, any one known to stock market is acquainted with the phenomenon of bull and bear phases, but whether the traders or investors put air to these phases while making a decision to buy, sell, or stay invested. The present paper attempts to identify and analyse the two most popular market phases, i.e. bull and bear, for better investment decisions with the use of Bry and Boschan Algorithm and time series data. Further, it seeks to analyse the distributional characteristics of the variances in stock returns and search evidence of asymmetries, if any, in volatility under different market conditions which may help to shed light on the bull and bear phases of Indian equity market.The study arrange for evidence that in bull markets, stock prices run far ahead of earnings and for fairly long periods of time. The paper indicates12bull and bear phases in the Sensex and Nifty during the sample period of 19years with the associated factors responsible for the shift of bull and bear market phases. The results provide considerable support for the view that markets choose to ignore adverse possibilities and react with zest to favourable possibilities and market declines can partly be explained by increases in risk.
{"title":"Bull and Bear Phases: An Empirical Perusal of Indian Stock Market","authors":"Sunaina Kanojia, N. Arora","doi":"10.21863/IJFM/2016.6.2.029","DOIUrl":"https://doi.org/10.21863/IJFM/2016.6.2.029","url":null,"abstract":"In general, any one known to stock market is acquainted with the phenomenon of bull and bear phases, but whether the traders or investors put air to these phases while making a decision to buy, sell, or stay invested. The present paper attempts to identify and analyse the two most popular market phases, i.e. bull and bear, for better investment decisions with the use of Bry and Boschan Algorithm and time series data. Further, it seeks to analyse the distributional characteristics of the variances in stock returns and search evidence of asymmetries, if any, in volatility under different market conditions which may help to shed light on the bull and bear phases of Indian equity market.The study arrange for evidence that in bull markets, stock prices run far ahead of earnings and for fairly long periods of time. The paper indicates12bull and bear phases in the Sensex and Nifty during the sample period of 19years with the associated factors responsible for the shift of bull and bear market phases. The results provide considerable support for the view that markets choose to ignore adverse possibilities and react with zest to favourable possibilities and market declines can partly be explained by increases in risk.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"214 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123294734","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}
In this paper, we show that the book-to-market decomposition described in Fama–French (2008) significantly improves the predictive power of the estimation for an important emerging market, viz, Chinese shares. Second, we show that this improvement comes mainly from the change in book equity and not from the change in price. The predictive power of the change in book equity is most pronounced for large stocks, for stocks listed on Shenzhen Exchange, for stocks with low book-to-market (or growth stocks), and for Class B shares. Net Share Issue and Momentum add no explanatory power to the predictive regressions.
{"title":"Decomposition of Book-to-Market and the Cross-Section of Returns for Chinese Shares","authors":"Nusret Cakici, Sris Chatterjee, K. Topyan","doi":"10.2139/ssrn.2553373","DOIUrl":"https://doi.org/10.2139/ssrn.2553373","url":null,"abstract":"In this paper, we show that the book-to-market decomposition described in Fama–French (2008) significantly improves the predictive power of the estimation for an important emerging market, viz, Chinese shares. Second, we show that this improvement comes mainly from the change in book equity and not from the change in price. The predictive power of the change in book equity is most pronounced for large stocks, for stocks listed on Shenzhen Exchange, for stocks with low book-to-market (or growth stocks), and for Class B shares. Net Share Issue and Momentum add no explanatory power to the predictive regressions.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-12-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114382075","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}
This paper develops a new market sentiment index for the Hong Kong stock market, one of the largest stock market in the world. The components of the sentiment measure include the turnover ratio, short-selling volume, money flow, HIBOR and return of the U.S. and Japanese markets. We also include the Shanghai and Shenzhen Composite index in our measure to capture the influence of Chinese markets on the Hong Kong market. A threshold regression model using the sentiment index as a threshold variable is estimated to capture the state of the Hong Kong stock market. It is also found that the trading rule which sells (buys) the HSI or S&P/HKEx LargeCapIndex when the sentiment index is above (below) the upper threshold value can beat the buy-and-hold strategy.
{"title":"A New Principal-Component Approach to Measure the Investor Sentiment","authors":"T. Chong, B. Cao, W. Wong","doi":"10.2139/ssrn.2631910","DOIUrl":"https://doi.org/10.2139/ssrn.2631910","url":null,"abstract":"This paper develops a new market sentiment index for the Hong Kong stock market, one of the largest stock market in the world. The components of the sentiment measure include the turnover ratio, short-selling volume, money flow, HIBOR and return of the U.S. and Japanese markets. We also include the Shanghai and Shenzhen Composite index in our measure to capture the influence of Chinese markets on the Hong Kong market. A threshold regression model using the sentiment index as a threshold variable is estimated to capture the state of the Hong Kong stock market. It is also found that the trading rule which sells (buys) the HSI or S&P/HKEx LargeCapIndex when the sentiment index is above (below) the upper threshold value can beat the buy-and-hold strategy.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"477 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121839370","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}
Initial Public Offerings (IPOs) have drawn much attention among financial economists recently. However, gaps still exist and more empirical research is warranted, especially for immature stock markets, such as China. This research mainly concentrates on the aspects of “Credit rating effect on IPOs and SEOs’, ‘Complicated IPO allocation mechanisms’ and ‘Links between IPOs and SEOs, and SEOs motivations’ in the Chinese case using data from 1990 to 2011, which covers the entire history of the Chinese stock market development. First of all, this thesis confirms that the presence of credit rating is able to reduce information asymmetry and lower the IPO/SEO underpricing level no matter the rating is from the Chinese domestic rating agency or top three international rating agencies (S&P, Fitch and Moody’s), where the so-called ‘Non-creditable rating’ system does work in Chinese case. Further, this thesis proves additional evidence that multiple credit ratings' presence can lower the IPO/SEO underpricing level. What is more, this research confirms that what matters on IPO/SEO underpricing is not only the presence of credit rating, but also the level of credit rating. In order to analyse the credit-rating effect, this thesis has also divided sample into four sub-samples based on a pricing model in China and provides additional results that credit-rating presence is only able to reduce information asymmetry in time periods two and three for IPO, but the presence of credit rating can lower underpricing for SEO in all time periods. Secondly, we examine the determinants of the allocation mechanism choice and the how effective each allocation mechanism is in reducing the IPO underpricing for the Chinese market. Our results show that among the several IPO allocation mechanisms in China, the “bookbuilding” (BB) is most effective in reducing the underpricing level, and that the market conditions, firm’s risk level, information asymmetry and capital demand all play important roles in the choice of the IPO allocation mechanism. Our results also attest that firms with larger board size and or a higher proportion of legal persons sharing ownership are less likely to use the BB allocation mechanism. A higher proportion of tradable shares is negatively associated with the likelihood of using BB allocation mechanism, and the short-term and the long-term performance of IPOs vary significantly across the allocation mechanisms.Thirdly, regarding the link between IPOs and SEOs, the results provide new evidence that firms do underpricing IPOs as strategy and will compensate the loss from following SEOs with higher price and larger sizes. Additionally, this thesis also captures the link between the IPO and SEO effect in different time lengths (doing SEOs within 12 months, 24 months, 36 months and more than 36 months after IPOs). The thesis confirms corporate governance can influence SEO decisions as well. Incentives of SEOs in the Chinese case also be evaluated in this thesi
{"title":"An Empirical Analysis of IPOs and SEOs: Evidence from the Chinese Stock Markets","authors":"Tianxiang Xu","doi":"10.2139/SSRN.2676133","DOIUrl":"https://doi.org/10.2139/SSRN.2676133","url":null,"abstract":"Initial Public Offerings (IPOs) have drawn much attention among financial economists recently. However, gaps still exist and more empirical research is warranted, especially for immature stock markets, such as China. This research mainly concentrates on the aspects of “Credit rating effect on IPOs and SEOs’, ‘Complicated IPO allocation mechanisms’ and ‘Links between IPOs and SEOs, and SEOs motivations’ in the Chinese case using data from 1990 to 2011, which covers the entire history of the Chinese stock market development. First of all, this thesis confirms that the presence of credit rating is able to reduce information asymmetry and lower the IPO/SEO underpricing level no matter the rating is from the Chinese domestic rating agency or top three international rating agencies (S&P, Fitch and Moody’s), where the so-called ‘Non-creditable rating’ system does work in Chinese case. Further, this thesis proves additional evidence that multiple credit ratings' presence can lower the IPO/SEO underpricing level. What is more, this research confirms that what matters on IPO/SEO underpricing is not only the presence of credit rating, but also the level of credit rating. In order to analyse the credit-rating effect, this thesis has also divided sample into four sub-samples based on a pricing model in China and provides additional results that credit-rating presence is only able to reduce information asymmetry in time periods two and three for IPO, but the presence of credit rating can lower underpricing for SEO in all time periods. Secondly, we examine the determinants of the allocation mechanism choice and the how effective each allocation mechanism is in reducing the IPO underpricing for the Chinese market. Our results show that among the several IPO allocation mechanisms in China, the “bookbuilding” (BB) is most effective in reducing the underpricing level, and that the market conditions, firm’s risk level, information asymmetry and capital demand all play important roles in the choice of the IPO allocation mechanism. Our results also attest that firms with larger board size and or a higher proportion of legal persons sharing ownership are less likely to use the BB allocation mechanism. A higher proportion of tradable shares is negatively associated with the likelihood of using BB allocation mechanism, and the short-term and the long-term performance of IPOs vary significantly across the allocation mechanisms.Thirdly, regarding the link between IPOs and SEOs, the results provide new evidence that firms do underpricing IPOs as strategy and will compensate the loss from following SEOs with higher price and larger sizes. Additionally, this thesis also captures the link between the IPO and SEO effect in different time lengths (doing SEOs within 12 months, 24 months, 36 months and more than 36 months after IPOs). The thesis confirms corporate governance can influence SEO decisions as well. Incentives of SEOs in the Chinese case also be evaluated in this thesi","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126688756","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}
Modelling financial dependence is one of the major areas of research in quantitative finance and econometrics. Efficient quantification of dependence is desirable for portfolio theory, hedging, valuation of assets and risk management in general. Quantification of co-movement or multivariate dependence between various international stock markets results in better diversification which benefits investors as it helps in profitable risk distribution. Due to their phenomenal growth in recent years, Asian stock markets have become important for global investors. The study of dependence among Asian stock markets has gained importance as these markets promise diversification benefits. In this paper we study the multivariate dependence structure of eleven Asian financial markets, including Thailand, Malaysia, Indonesia, Singapore, Philippines, Korea, Japan, China, Hong Kong, Taiwan, and India using sophisticated and recently developed model, Regular Vine (R-Vine) Copula. R-Vine Copulas constitute a flexible kind of multivariate dependence models which offer more flexibility than standard multivariate copulas. We also introduce the international markets of Australia, UK and US to the dependence analysis in order to study the influence of these international stock markets on the Asian markets.
{"title":"Multivariate Financial Dependence Analysis of Asian Markets Using Vine Copulas","authors":"Abhay K. Singh, D. Allen, R. Powell, K. Reddy","doi":"10.2139/ssrn.2449932","DOIUrl":"https://doi.org/10.2139/ssrn.2449932","url":null,"abstract":"Modelling financial dependence is one of the major areas of research in quantitative finance and econometrics. Efficient quantification of dependence is desirable for portfolio theory, hedging, valuation of assets and risk management in general. Quantification of co-movement or multivariate dependence between various international stock markets results in better diversification which benefits investors as it helps in profitable risk distribution. Due to their phenomenal growth in recent years, Asian stock markets have become important for global investors. The study of dependence among Asian stock markets has gained importance as these markets promise diversification benefits. In this paper we study the multivariate dependence structure of eleven Asian financial markets, including Thailand, Malaysia, Indonesia, Singapore, Philippines, Korea, Japan, China, Hong Kong, Taiwan, and India using sophisticated and recently developed model, Regular Vine (R-Vine) Copula. R-Vine Copulas constitute a flexible kind of multivariate dependence models which offer more flexibility than standard multivariate copulas. We also introduce the international markets of Australia, UK and US to the dependence analysis in order to study the influence of these international stock markets on the Asian markets.","PeriodicalId":287077,"journal":{"name":"ERN: Asia & Pacific (Emerging Markets) (Topic)","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127211259","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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