Pub Date : 2020-06-01DOI: 10.1142/s2010495220500050
D. Tran
Using a large sample of U.S. bank holding companies (BHC) from 2000:Q1–2017:Q4, we investigate the impacts of dividend policy to bank earnings management, and document that banks that pay dividends tend to be less opaque than banks that do not pay dividends. The dividend policy not only impacts the conditional average earnings management of banks, but also exerts influence on their dispersion. The impact of dividend policy appears to be more profound for highly opaque banks. We identify different conditions that motivate different discretionary behaviors of banks, which allows us to better observe different managerial motives between dividend-paying and dividend-non-paying banks. Under high information asymmetry context, there is valuably additional information conveyed by paying dividends, and it follows that the role of dividends as a means of conveying information is more pronounced. For banks subject to high agency problems, paying dividends make them to be less opaque through reducing the discretionary behaviors.
{"title":"BANK EARNINGS MANAGEMENT AND DIVIDEND POLICY UNDER AGENCY PROBLEM CONTEXTS","authors":"D. Tran","doi":"10.1142/s2010495220500050","DOIUrl":"https://doi.org/10.1142/s2010495220500050","url":null,"abstract":"Using a large sample of U.S. bank holding companies (BHC) from 2000:Q1–2017:Q4, we investigate the impacts of dividend policy to bank earnings management, and document that banks that pay dividends tend to be less opaque than banks that do not pay dividends. The dividend policy not only impacts the conditional average earnings management of banks, but also exerts influence on their dispersion. The impact of dividend policy appears to be more profound for highly opaque banks. We identify different conditions that motivate different discretionary behaviors of banks, which allows us to better observe different managerial motives between dividend-paying and dividend-non-paying banks. Under high information asymmetry context, there is valuably additional information conveyed by paying dividends, and it follows that the role of dividends as a means of conveying information is more pronounced. For banks subject to high agency problems, paying dividends make them to be less opaque through reducing the discretionary behaviors.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495220500050","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43308140","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 : 2020-06-01DOI: 10.1142/s2010495220500098
Moawia Alghalith, W. Wong
Macro-hedging is one of the most important issues in hedging, but there are very few studies on the welfare impact of macro-hedging. To bridge a gap in the literature of macro-hedging, this paper introduces a method that generalizes and extends existing models of macro-hedging in several significant ways. We first assume the existence of basis risk in a small country to hedge in futures markets instead of forward contracts and relax the full-hedging assumption. We use the quantity being hedged in futures contracts as a decision variable. We also relax the restrictive assumption regarding the form of the spot price. We then derive the formula to estimate the welfare gain which can be easily implemented in any empirical case. In contrast to quasi-simulation being used in some existing approaches, our proposed method can be used for any real data, including future data, but existing methods in the literature cannot. Our approach is for investors for their investment decision-making when they use macro-hedging as their trading strategy.
{"title":"WELFARE GAINS FROM MACRO-HEDGING","authors":"Moawia Alghalith, W. Wong","doi":"10.1142/s2010495220500098","DOIUrl":"https://doi.org/10.1142/s2010495220500098","url":null,"abstract":"Macro-hedging is one of the most important issues in hedging, but there are very few studies on the welfare impact of macro-hedging. To bridge a gap in the literature of macro-hedging, this paper introduces a method that generalizes and extends existing models of macro-hedging in several significant ways. We first assume the existence of basis risk in a small country to hedge in futures markets instead of forward contracts and relax the full-hedging assumption. We use the quantity being hedged in futures contracts as a decision variable. We also relax the restrictive assumption regarding the form of the spot price. We then derive the formula to estimate the welfare gain which can be easily implemented in any empirical case. In contrast to quasi-simulation being used in some existing approaches, our proposed method can be used for any real data, including future data, but existing methods in the literature cannot. Our approach is for investors for their investment decision-making when they use macro-hedging as their trading strategy.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42576100","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 : 2020-05-20DOI: 10.1142/s2010495220800019
Subhojit Biswas, Saif Jawaid, Diganta Mukherjee
We consider an investor who seeks to maximize his expected utility of the portfolio, consisting of multiple risky assets and one risk-free asset, derived from the terminal wealth relative to the maximum wealth achieved over a fixed time horizon. This is achieved under a portfolio draw down constraint, in a market with local stochastic volatility. In empirical application, considering two risky assets, the assets have been identified with the help of pairs trading. In the absence of closed form solution of the value function and the optimal strategy, we obtain the approximates of these quantities using coefficient series expansion techniques and finite difference schemes. We utilize the risk tolerance factor function to ease our approximations of this value functions and the strategies. All the parameters were estimated from the triplets and used to illustrate and compare the stochastic volatility with the constant volatility situation, and how an investor can deploy different portfolio plans.
{"title":"MULTI-ASSET PORTFOLIO OPTIMIZATION WITH STOCHASTIC SHARPE RATIO UNDER DRAWDOWN CONSTRAINT","authors":"Subhojit Biswas, Saif Jawaid, Diganta Mukherjee","doi":"10.1142/s2010495220800019","DOIUrl":"https://doi.org/10.1142/s2010495220800019","url":null,"abstract":"We consider an investor who seeks to maximize his expected utility of the portfolio, consisting of multiple risky assets and one risk-free asset, derived from the terminal wealth relative to the maximum wealth achieved over a fixed time horizon. This is achieved under a portfolio draw down constraint, in a market with local stochastic volatility. In empirical application, considering two risky assets, the assets have been identified with the help of pairs trading. In the absence of closed form solution of the value function and the optimal strategy, we obtain the approximates of these quantities using coefficient series expansion techniques and finite difference schemes. We utilize the risk tolerance factor function to ease our approximations of this value functions and the strategies. All the parameters were estimated from the triplets and used to illustrate and compare the stochastic volatility with the constant volatility situation, and how an investor can deploy different portfolio plans.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"1-33"},"PeriodicalIF":2.0,"publicationDate":"2020-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495220800019","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41522563","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 : 2020-03-03DOI: 10.1142/s2010495220500049
P. Franses, Max Welz
The current (as of 2012) denominational range of the Malaysian ringgit has banknotes of RM1, 5, 10, 20, 50 and 100, but no RM2. The previous range (1996) carried RM1, 2, 5, 10, 50 and 100, but no RM20. We compare the efficiency of these two ranges with a full range like the Euro has, that is, 1, 2, 5, 10, 20, 50 and 100. We estimate that if the Bank Negara Malaysia would reintroduce an RM2 banknote, the efficiency of the payment system in Malaysia would increase substantially.
{"title":"THE CASH USE OF THE MALAYSIAN RINGGIT: CAN IT BE MORE EFFICIENT?","authors":"P. Franses, Max Welz","doi":"10.1142/s2010495220500049","DOIUrl":"https://doi.org/10.1142/s2010495220500049","url":null,"abstract":"The current (as of 2012) denominational range of the Malaysian ringgit has banknotes of RM1, 5, 10, 20, 50 and 100, but no RM2. The previous range (1996) carried RM1, 2, 5, 10, 50 and 100, but no RM20. We compare the efficiency of these two ranges with a full range like the Euro has, that is, 1, 2, 5, 10, 20, 50 and 100. We estimate that if the Bank Negara Malaysia would reintroduce an RM2 banknote, the efficiency of the payment system in Malaysia would increase substantially.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050004"},"PeriodicalIF":2.0,"publicationDate":"2020-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495220500049","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48533126","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 : 2020-03-03DOI: 10.1142/s2010495220500037
Tanweer Akram, A. Das
This paper empirically models the dynamics of Australian government bonds’ nominal yields using the autoregressive distributed lag (ARDL) approach. Keynes held that the central bank exerts a decisi...
{"title":"AUSTRALIAN GOVERNMENT BONDS’ NOMINAL YIELDS: A KEYNESIAN PERSPECTIVE","authors":"Tanweer Akram, A. Das","doi":"10.1142/s2010495220500037","DOIUrl":"https://doi.org/10.1142/s2010495220500037","url":null,"abstract":"This paper empirically models the dynamics of Australian government bonds’ nominal yields using the autoregressive distributed lag (ARDL) approach. Keynes held that the central bank exerts a decisi...","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050003"},"PeriodicalIF":2.0,"publicationDate":"2020-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495220500037","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42474709","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 : 2020-03-01DOI: 10.1142/s2010495220500013
F. Mehrdoust, Idin Noorani
This paper proposes a new hybrid algorithm to price the arithmetic Asian options under the geometric Brownian motion (GBM). The proposed algorithm is based on the control variate technique, such th...
本文提出了一种几何布朗运动(GBM)下的算术亚洲期权定价的混合算法。该算法基于控制变量技术，如…
{"title":"AN EFFICIENT VARIANCE REDUCTION-BASED SIMULATION ALGORITHM FOR PRICING ARITHMETIC ASIAN OPTIONS","authors":"F. Mehrdoust, Idin Noorani","doi":"10.1142/s2010495220500013","DOIUrl":"https://doi.org/10.1142/s2010495220500013","url":null,"abstract":"This paper proposes a new hybrid algorithm to price the arithmetic Asian options under the geometric Brownian motion (GBM). The proposed algorithm is based on the control variate technique, such th...","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050001"},"PeriodicalIF":2.0,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495220500013","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45541913","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 : 2020-02-24DOI: 10.1142/s2010495220500025
A. Kudryavtsev
The study explores the correlation between the immediate and the longer-term stock returns following large daily price moves. Following the previous literature, which documents a tendency for price...
该研究探讨了近期和长期股票收益之间的相关性。根据之前的文献，其中记录了价格的趋势…
{"title":"IMMEDIATE AND LONGER-TERM STOCK PRICE DYNAMICS FOLLOWING LARGE STOCK PRICE CHANGES","authors":"A. Kudryavtsev","doi":"10.1142/s2010495220500025","DOIUrl":"https://doi.org/10.1142/s2010495220500025","url":null,"abstract":"The study explores the correlation between the immediate and the longer-term stock returns following large daily price moves. Following the previous literature, which documents a tendency for price...","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"15 1","pages":"2050002"},"PeriodicalIF":2.0,"publicationDate":"2020-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42778853","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 : 2019-12-23DOI: 10.1142/s2010495219500209
O. Ben-Salha, M. Zmami
The debate on the impact of business climate on private investment is still ongoing today. This paper contributes to the existing literature by examining the impact of a wide range of dimensions of the business climate on domestic investment and foreign direct investment in a sample of Middle East and North African economies between 2000 and 2015. Findings of the paper add new evidence and shed interesting insights into the debate. While almost all areas matter for domestic and foreign investors, the common and most important dimensions for both of them are regulations, macroeconomic management and infrastructure. Moreover, the control of corruption and labor market regulation are found to exert opposite effects on domestic investment and foreign direct investment. We conclude that setting up a good business climate is an overall process that should touch simultaneously and gradually all dimensions.
{"title":"DOES THE BUSINESS CLIMATE AFFECT PRIVATE DOMESTIC AND FOREIGN INVESTMENT? EMPIRICAL EVIDENCE FROM THE MENA REGION","authors":"O. Ben-Salha, M. Zmami","doi":"10.1142/s2010495219500209","DOIUrl":"https://doi.org/10.1142/s2010495219500209","url":null,"abstract":"The debate on the impact of business climate on private investment is still ongoing today. This paper contributes to the existing literature by examining the impact of a wide range of dimensions of the business climate on domestic investment and foreign direct investment in a sample of Middle East and North African economies between 2000 and 2015. Findings of the paper add new evidence and shed interesting insights into the debate. While almost all areas matter for domestic and foreign investors, the common and most important dimensions for both of them are regulations, macroeconomic management and infrastructure. Moreover, the control of corruption and labor market regulation are found to exert opposite effects on domestic investment and foreign direct investment. We conclude that setting up a good business climate is an overall process that should touch simultaneously and gradually all dimensions.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"14 1","pages":"1950020"},"PeriodicalIF":2.0,"publicationDate":"2019-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/s2010495219500209","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44159972","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 : 2019-12-23DOI: 10.1142/S2010495219500167
Ranjeeta Sadhwani, Suresh Kumar Oad Rajput, Asad Ali-Rind, M. Suleman
This study aims to find the impact of change in economic policy uncertainty (EPU) on the returns and volatilities of 11 CRSP Ziman value-weighted US real estate investment trusts (REITs) during 1985–2016. The results indicate that the change in EPU has a positive relationship with volatility and a negative one with the REITs returns. Among EPU components, news-based component has the major impact than the others. Change in economic policy uncertainty has a significant impact on the returns of all the indices except hybrid, healthcare and unclassified REITs after controlling for macroeconomic variables. Whereas, the volatility is mainly explained by its own past values and macroeconomic variables.
{"title":"DOES CHANGE IN ECONOMIC POLICY UNCERTAINTY AFFECT REAL ESTATE INVESTMENT TRUSTS (REITs)?","authors":"Ranjeeta Sadhwani, Suresh Kumar Oad Rajput, Asad Ali-Rind, M. Suleman","doi":"10.1142/S2010495219500167","DOIUrl":"https://doi.org/10.1142/S2010495219500167","url":null,"abstract":"This study aims to find the impact of change in economic policy uncertainty (EPU) on the returns and volatilities of 11 CRSP Ziman value-weighted US real estate investment trusts (REITs) during 1985–2016. The results indicate that the change in EPU has a positive relationship with volatility and a negative one with the REITs returns. Among EPU components, news-based component has the major impact than the others. Change in economic policy uncertainty has a significant impact on the returns of all the indices except hybrid, healthcare and unclassified REITs after controlling for macroeconomic variables. Whereas, the volatility is mainly explained by its own past values and macroeconomic variables.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"14 1","pages":"1-24"},"PeriodicalIF":2.0,"publicationDate":"2019-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/S2010495219500167","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45596351","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 : 2019-12-23DOI: 10.1142/S2010495219500179
Richard Lu, Meng-Sung Hsieh
The return and risk of dollar-cost averaging (DCA) and self-annuitization (SA) investing are compared with the underlying return in this paper. The underlying return, which is assumed to be normally distributed, is generated by Monte Carlo simulations under six market scenarios including upward and mean reverting markets across several investment horizons. Owing to the multiple cash flows of DCA and SA, the annual internal rate of return is used to measure the DCA and SA returns. The results show that the mean return of DCA is slightly higher than the underlying return, while the SA is lower, particularly under short investment horizons. Both DCA and SA produce higher return volatility and riskiness than the underlying return. They also create negative skewness and excess kurtosis for the return distributions. For comparing their performances, we use the economic performance measure which can consider those high moments of distribution. Except for the mean reverting market, the underlying return is the best performer, while SA is the worst. This evidence becomes even clearer and convincing as the investment horizon increases. DCA can have lower riskiness and perform better only under the mean reverting market.
{"title":"A PERFORMANCE ANALYSIS OF DOLLAR-COST AVERAGING AND SELF-ANNUITIZATION","authors":"Richard Lu, Meng-Sung Hsieh","doi":"10.1142/S2010495219500179","DOIUrl":"https://doi.org/10.1142/S2010495219500179","url":null,"abstract":"The return and risk of dollar-cost averaging (DCA) and self-annuitization (SA) investing are compared with the underlying return in this paper. The underlying return, which is assumed to be normally distributed, is generated by Monte Carlo simulations under six market scenarios including upward and mean reverting markets across several investment horizons. Owing to the multiple cash flows of DCA and SA, the annual internal rate of return is used to measure the DCA and SA returns. The results show that the mean return of DCA is slightly higher than the underlying return, while the SA is lower, particularly under short investment horizons. Both DCA and SA produce higher return volatility and riskiness than the underlying return. They also create negative skewness and excess kurtosis for the return distributions. For comparing their performances, we use the economic performance measure which can consider those high moments of distribution. Except for the mean reverting market, the underlying return is the best performer, while SA is the worst. This evidence becomes even clearer and convincing as the investment horizon increases. DCA can have lower riskiness and perform better only under the mean reverting market.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"14 1","pages":"1950017"},"PeriodicalIF":2.0,"publicationDate":"2019-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1142/S2010495219500179","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41594594","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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