Armanious, A 2013, 'Arab Stock Markets Integration: The Case Study of Agadir Agreement Countries' in Peeters, M, Sabri, N & Shahin, W (eds), Financial Integration A Focus on the Mediterranean Region, Springer Science & Business Media.
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In light of this socio-political and economic shift in both inland and in world markets, this book offers a thorough analysis on problems, prospects and the way ahead for the financial integration of the South-Mediterranean region.
Hambusch, G 2013, 'Ethics and Investment Professionalism' in 2015-2016 Claritas Investment Certificate, Volume One, John Wiley, USA.
Lützenkirchen, K, Rösch, D & Scheule, H 2013, 'Regulatory Capital Requirements for Securitizations' in Roesch, D & Scheule, H (eds), Credit Securitisations and Derivatives: Challenges for the Global Markets, Wiley, Australia, pp. 341-356.
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Asset securitizations are one of the most significant developments in financial intermediation in recent years. Financial institutions use vehicles such as asset-backed securities (ABSs), collateralized debt obligations (CDOs) or mortgage-backed securities (MBSs) to restructure the asset risks of their portfolios and transfer these to investors. Under regulations which are currently implemented, banks may apply the following three approaches: at present two different ways for financial institutions that have received the approval to use the IRB Approach to determine regulatory capital for securitized assets are provided: the Ratings Based Approach (RBA) and Supervisory Formula Approach (SFA). Non-IRB banks (banks that use the Standardized Approach (SA) for their calculations of regulatory capital for their credit exposures) are required to apply the SA to calculate capital requirements for their securitization exposures. The SA is also based on external ratings but is less sophisticated than the RBA approach.
Roesch, D & Scheule, H 2013, 'Credit Securitizations and Derivatives' in Rösch, D & Scheule, H (eds), Credit Securitisations and Derivatives: Challenges for the Global Markets, Wiley, Australia, pp. 1-9.
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This is the introductory chapter of Credit Securitisations and Derivatives, which provides regulators with an overview of the risk inherent in credit securitizations and derivatives. The book aims to help quantitative analysts improve risk models and managers of financial institutions evaluate the performance of existing risk models and future model needs. The book addresses challenges in relation to the evaluation of credit portfolio securitizations and derivatives. It covers the following areas: credit portfolio risk measurement, credit portfolio risk tranching, credit ratings, credit default swaps, indices and tranches, counterparty credit risk and clearing of derivatives contracts, liquidity risk, and regulation.
Abidin, S, Bird, R & Yeung, DC 2013, 'Forecasting extreme performance: The experience with Australian equities', JASSA, vol. 2013, no. 1, pp. 32-37.
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Over any 12-month period, there is an enormous difference between the returns realised from investing in the best- and worst-performing stocks. We investigate the characteristics of these stocks and find that they share several features: extreme performers tend to be small companies that have volatile share prices and spend significant amounts of money on research and development. Accounting variables tend to be useful in separating out the best and worst performers; the latter also tend to be smaller companies which have lower share prices.
Alexeev, V & Tapon, F 2013, 'What Australian investors need to know to diversity their portfolios', JASSA, vol. 2013, no. 4, pp. 14-20.
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According to a report by the Australian Securities and Investments Commission in 2008, most (78%) of Australian investors had heard the term diversification. Nevertheless, around half of investors (49%) held only one type of investment (shares only) with the average number of holdings of 2.19 securities. More telling, a third (33%) of share owners acquired their shares passively (as part of a demutualisation or had received shares through an inheritance or gift), while almost two-thirds (63%) of share owners acquired the shares actively. One conclusion is that Australian investors, on average, own poorly diversified portfolios and leave themselves exposed to excessive diversifiable risk. To study this issue, we simulate portfolios using daily observations for all traded and delisted equities in Australia between 1975 and 2011. We calculate two measures of risk, including heavy tailed to account for extreme events. For each risk measure, we recommend the number of portfolio holdings that result in a 90% reduction in diversifiable risk for an average and a more conservative investor. We find that, on average, 24 to 30 stocks are sufficient to attain a well-diversified portfolio.
Bird, R, Grosse, M & Yeung, D 2013, 'The market response to exploration, resource and reserve announcements by mining companies: Australian data', AUSTRALIAN JOURNAL OF MANAGEMENT, vol. 38, no. 2, pp. 311-331.
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This is the first paper to study the market response to 'Joint Ore Reserve Committee' -compliant announcements made by Australian mining firms. Results from an event study based on matched firms suggest that these announcements are highly value relevant, with the market reacting in a significantly positive way to both exploration and resource announcements. Larger abnormal returns are found to accrue to smaller firms, to firms that use positive adjectives in their announcement headlines and to firms whose announcements imply larger percentage increases in resource levels. We also find evidence of markets anticipating both exploration and resource announcements a few days before they are released, which may be suggestive of some insider trading. © The Author(s) 2013.
Bodenstedt, M, Roesch, D & Scheule, H 2013, 'The path to impairment: do credit-rating agencies anticipate default events of structured finance transactions?', EUROPEAN JOURNAL OF FINANCE, vol. 19, no. 9, pp. 841-860.
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The global financial crisis (GFC) has led to a general discussion of the accuracy and declining standards of credit-rating agency ratings. Substantial criticism has been directed towards the securitisation market, which has been identified as one of the main sources of the crisis. This study focuses on the ability of rating agencies to adjust their ratings prior to impairments of structured finance transactions. We develop a new measure that quantifies a rating agency's performance in advance of defaults. By analysing a large number of impaired transactions rated by Moody's Investors Service, we find that rating quality deteriorated during the GFC. Furthermore, we identify tranche-specific and macroeconomic factors that explain differences in Moody's performance. © 2013 Taylor & Francis.
Cotton, D & Trück, S 2013, 'Emissions Mitigation Schemes in Australia—The Past, Present and Future', Low Carbon Economy, vol. 04, no. 02, pp. 80-94.
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Australia was one of the first countries in the world to adopt mandatory emissions trading schemes as part of its emissions mitigation program. To date there have been six states and one federal emissions mitigation schemes. Some state schemes operate in conjunction with other states or the federal scheme and some operate independently. This complex set of regulations and requirements for emitters has led to a deficiency in nationwide coverage with no firm target set for Australia. In July 2011 the Federal Labor Government released details of a carbon tax proposal which was passed by the two houses of Parliament by the end of 2011 and was introduced in July 2012. The Government states that an emissions trading scheme will be introduced in 2015 with a possible link to the European Emissions Trading Scheme (EU ETS). This paper provides a critical overview of Australian responses to climate change, with a particular emphasis on the numerous emissions mitigation schemes.
Ebrahimpour, M, Putniņš, TJ, Berryman, MJ, Allison, A, Ng, BW-H & Abbott, D 2013, 'Automated Authorship Attribution Using Advanced Signal Classification Techniques', PLoS ONE, vol. 8, no. 2, pp. e54998-e54998.
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In this paper, we develop two automated authorship attribution schemes, one based on Multiple Discriminant Analysis (MDA) and the other based on a Support Vector Machine (SVM). The classification features we exploit are based on word frequencies in the text. We adopt an approach of preprocessing each text by stripping it of all characters except a-z and space. This is in order to increase the portability of the software to different types of texts. We test the methodology on a corpus of undisputed English texts, and use leave-one-out cross validation to demonstrate classification accuracies in excess of 90%. We further test our methods on the Federalist Papers, which have a partly disputed authorship and a fair degree of scholarly consensus. And finally, we apply our methodology to the question of the authorship of the Letter to the Hebrews by comparing it against a number of original Greek texts of known authorship. These tests identify where some of the limitations lie, motivating a number of open questions for future work. An open source implementation of our methodology is freely available for use at https://github.com/matthewberryman/author-detection.
Gibson, RJ, Michayluk, D & Van de Venter, G 2013, 'Financial risk tolerance: An analysis of unexplored factors', Financial Services Review, vol. 22, no. 1, pp. 23-50.
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Using data from a survey alliance between Kiplinger's Personal Finance Magazine, PBS's Nightly Business Report, and FinaMetrica, this study explores various demographical and attitudinal factors related to financial risk tolerance. Investigating risk tolerance scores of more than 2,000 individuals immediately after the 2008 Global Financial Crisis, we find a positive relationship between risk tolerance and income, investment knowledge and positive stock market expectations. Risk tolerance is found to be lower for females, older individuals, those that currently use a financial advisor and individuals that perceive the stock market to be riskier than two years before.
Glover, K, Hulley, H & Peskir, G 2013, 'THREE-DIMENSIONAL BROWNIAN MOTION AND THE GOLDEN RATIO RULE', ANNALS OF APPLIED PROBABILITY, vol. 23, no. 3, pp. 895-922.
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Let X = (Xt)t≥0 be a transient diffusion process in (0,∞) with the diffusion coefficient σ < 0 and the scale function L such that Xt → ∞ as t → ∞, let It denote its running minimum for t ≥ 0, and let θ denote the time of its ultimate minimum I∞. Setting c(i, x) = 1.2L(x)/L(i) we show that the stopping time [equation presented] minimizes E(|θ-ρ|-θ) over all stopping times τ of X (with finite mean) where the optimal boundary f. can be characterized as the minimal solution to [equation presented] staying strictly above the curve h(i) = L-1(L(i)/2) for i < 0. In particular, when X is the radial part of three-dimensional Brownian motion, we find that where ψ = (1 +□5)/2 = 1.61.. is the golden ratio. The derived results are applied to problems of optimal trading in the presence of bubbles where we show that the golden ratio rule offers a rigorous optimality argument for the choice of the well-known golden retracement in technical analysis of asset prices. © 2013 Institute of Mathematical Statistics.
Glover, KJ & Hambusch, G 2013, 'The Trade-Off Theory Revisited: On the Effect of Operating Leverage', International Journal of Managerial Finance, vol. 10, no. 1, pp. 2-22.
Gochoco‐Bautista, MS, Wang, J & Yang, M 2013, 'Commodity Price, Carry Trade, and the Volatility and Liquidity of Asian Currencies'.
Hulley, H, Mckibbin, R, Pedersen, A & Thorp, S 2013, 'Means-Tested Public Pensions, Portfolio Choice and Decumulation in Retirement', ECONOMIC RECORD, vol. 89, no. 284, pp. 31-51.
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Age Pension means-testing buffers retired households against shocks to wealth and may influence decumulation patterns and portfolio allocations. Simulations from a simple model of optimal consumption and allocation strategies for a means-tested retired household indicate that, relative to benchmark, eligible and near-eligible households should optimally decumulate faster, and choose more risky portfolios, especially early in retirement. Empirical modelling of a Household, Income and Labour Dynamics in Australia panel of pensioner households confirms a riskier portfolio allocation by wealthier retired households. Poorer pensioner households decumulate at around 5 per cent p.a. on average; however, better-off households continue to add around 3 per cent p.a. to wealth, even when facing a steeper implicit tax rate on wealth.
HULLEY, H, MCKIBBIN, R, PEDERSEN, A & THORP, S 2013, 'Means-Tested Public Pensions, Portfolio Choice and Decumulation in Retirement*', Economic Record, pp. no-no.
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Age Pension means-testing buffers retired households against shocks to wealth and may influence decumulation patterns and portfolio allocations. Simulations from a simple model of optimal consumption and allocation strategies for a means-tested retired household indicate that, relative to benchmark, eligible and near-eligible households should optimally decumulate faster, and choose more risky portfolios, especially early in retirement. Empirical modelling of a Household, Income and Labour Dynamics in Australia panel of pensioner households confirms a riskier portfolio allocation by wealthier retired households. Poorer pensioner households decumulate at around 5 per cent p.a. on average; however, better-off households continue to add around 3 per cent p.a. to wealth, even when facing a steeper implicit tax rate on wealth. © 2013 The Economic Society of Australia.
Loehr, S, Mursajew, O, Roesch, D & Scheule, H 2013, 'Dynamic Implied Correlation Modeling and Forecasting in Structured Finance', JOURNAL OF FUTURES MARKETS, vol. 33, no. 11, pp. 994-1023.
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Correlations are the main drivers for credit portfolio risk and constitute a major element in pricing credit derivatives such as synthetic single-tranche collateralized debt obligation swaps. This study suggests a dynamic panel regression approach to model and forecast implied correlations. Random effects are introduced to account for unobservable time-specific effects on implied tranche correlations. The implied-correlation forecasts of tranche spreads are compared to forecasts using historical correlations from asset returns. The empirical findings support our proposed dynamic mixed-effects regression correlation model. © 2013 Wiley Periodicals, Inc.
Löhr, S, Claussen, A, Roesch, D & Scheule, HH 2013, 'Valuation of Systematic Risk in the Cross-Section of Credit Default Swap Spreads', Quarterly Review of Economics and Finance, vol. 64, pp. 183-195.
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© 2016 Board of Trustees of the University of Illinois We analyze the pricing of systematic risk factors in credit default swap (CDS) contracts in a two-stage empirical framework. Firstly we estimate contract-specific sensitivities (betas) to several systematic risk factors by time-series regressions using quoted CDS spreads of 339 U.S. entities from January 2004 to December 2010. Secondly, we show that these contract-specific sensitivities are cross-sectionally priced in CDS spreads after controlling for individual risk factors. We find that the credit market climate, the Cross-market Correlation, and the market volatility explain CDS spread changes and that their corresponding sensitivities (betas) are particularly priced in the cross-section. Our basic risk factors explain about 83% (90%) of the CDS spreads prior to (during) the crisis.
Luetzenkirchen, K, Roesch, D & Scheule, H 2013, 'Ratings based capital adequacy for securitizations', JOURNAL OF BANKING & FINANCE, vol. 37, no. 12, pp. 5236-5247.
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This paper develops a framework to measure the exposure to systematic risk for pools of asset securitizations and measures empirically whether current ratings-based rules for regulatory capital of securitizations under Basel II and Basel III reflect this exposure. The analysis is based on a comprehensive US dataset on asset securitizations for the time period between 2000 and 2008. We find that the shortfall of regulatory capital during the Global Financial Crisis is strongly related to ratings. In particular, we empirically show that insufficient capital is allocated to tranches with the highest rating. These tranches account for the greatest part of the total issuance volumes. Furthermore, this paper is the first to calibrate risk weights which account for systematic risk and provide sufficient capital buffers to cover the exposure during similar economic downturns. These policy-relevant findings suggest a re-calibration of RBA risk weights and may contribute to the current efforts by the Basel Committee on Banking Supervision and others to re-establish sustainable securitization markets and to improve the stability of the financial system.
Nguyen, P, Rahman, N & Zhao, L 2013, 'Ownership Structure and Divestiture Decisions: Evidence from Australian Firms', International Review of Financial Analysis, vol. 30, pp. 170-181.
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Divestitures create shareholder value by helping firms to optimize their portfolio of assets. However, firms may forego value enhancing divestitures because of agency problems. More specifically, large controlling shareholders may prefer to retain the assets in order to extract private benefits of control at the expense of minority shareholders. In this paper, we explore the role that other blockholders play in constraining the largest shareholder's influence. The results indicate that divestiture activity decreases with the ownership of the largest shareholder. The presence of another significant blockholder appears to curb this negative bias towards divestitures. Our findings provide an economic rationale for the higher performance of firms characterized by more balanced ownership structures. Involvement of family owners also appears to provide similar benefits. © 2013 Elsevier Inc.
Putninš, TJ 2013, 'Exporting by Latvian companies: vitality, drivers of success, and challenges', Baltic Journal of Economics, vol. 13, no. 2, pp. 3-33.
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This paper sheds light on Latvian exporters – how active they are, what challenges they face, what makes them succeed or fail. Our study draws on a survey of 503 medium-sized Latvian companies. We find that most medium-sized Latvian companies are exporters (either directly or indirectly) and for a typical exporting company, export turnover constitutes more than half of its total turnover. Exporting companies tend to be larger, younger and faster growing than their non-exporting counterparts. They pay higher average wages, consistent with the notion that they have higher labour productivity or utilise more skilled labour on average. For a typical company, export activity has been stable over the past five years, with zero growth in export turnover and an average increase of one additional export destination; however, there is wide dispersion in export growth and success among exporting companies. Successful exporters tend to be larger, with higher productivity growth and greater innovativeness, proactiveness and risk taking, i.e., stronger entrepreneurial orientation. The main obstacle preventing non-exporters from commencing exporting is lack of international competitiveness. This is also the main reason why companies discontinue exporting, and should be the focus of policy aimed at promoting exporting.
Putniņš, TJ 2013, 'What Do Price Discovery Metrics Really Measure?', JOURNAL OF EMPIRICAL FINANCE, vol. 23, no. 1, pp. 68-83.
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A market is typically considered to dominate price discovery if it is the first to reflect new information about the fundamental value. Our simulations indicate that common price discovery metrics Hasbrouck information share and HarrisMcInishWood component share are only consistent with this view of price discovery if the price series have equal levels of noise, including microstructure frictions and liquidity. If the noise in the price series differs, the information and component shares measure a combination of leadership in impounding new information and relative avoidance of noise, to varying degrees. A third price discovery metric, the `information leadership share uses the information share and the component share together to identify the price series that is first to impound new information. This third metric is robust to differences in noise levels and therefore correctly attributes price discovery in a wider range of settings. Using four recent empirical studies of price discovery we show that the choice and interpretation of price discovery metrics can have a substantial impact on conclusions about price discovery
Wang, J 2013, 'Liquidity commonality among Asian equity markets', PACIFIC-BASIN FINANCE JOURNAL, vol. 21, no. 1, pp. 1209-1231.
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This paper examines the impact of a set of common factors on liquidity variations in twelve Asian equity markets. The cross-market liquidity co-movements, i.e. liquidity commonality, represent an important dimension of capital market integration. I find that (1) liquidity variations in Asian equity markets are increasingly driven by the common factors. By 2009 and early 2010, the common factors account for 15% of daily liquidity variations in Asian emerging markets, and for 22% in Asian developed markets. (2) Volatility as a factor for liquidity commonality is at least as important as the cross-market average liquidity. It explains 12.4% of liquidity variations in Asian developed markets after the global financial crisis. (3) Regional factors affect local market liquidity through shocks in liquidity and volatility. U.S. and U.K. factors have little direct impact on Asian emerging markets. They affect liquidity in Asian developed markets mainly through volatility. The findings shed new light on the level of market integration in Asia and associated liquidity risks. © 2012 Elsevier B.V.
Wang, J 2013, 'The Impact of Foreign Ownership on Stock Volatility in Indonesia', ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, vol. 42, no. 3, pp. 493-509.
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This study documents the negative relationship between foreign ownership and the future volatility of Indonesian stocks. The calming effect of foreign ownership is present before, during, and after the Asian financial crisis. It is independent of gross and net foreign trading and the stock's historical volatility. The effect increases with the level of foreign holdings. The findings are contrary to the volatility impact of institutional ownership in developed markets, and indicate the presence of different economic mechanisms leading to the opposite volatility impact from foreign ownership and foreign trading. © 2013 Korean Securities Association.
Wang, J & Yang, M 2013, 'On the risk return relationship', JOURNAL OF EMPIRICAL FINANCE, vol. 21, no. 1, pp. 132-141.
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While the risk return trade-off theory suggests a positive relationship between the expected return and the conditional volatility, the volatility feedback theory implies a channel that allows the conditional volatility to negatively affect the expected return. We examine the effects of the risk return trade-off and the volatility feedback in a model where both the return and its volatility are influenced by news arrivals. Our empirical analysis shows that the two effects have approximately the same size with opposite signs for the daily excess returns of seven major developed markets. For the same data set, we also find that a linear relationship between the expected return and the conditional standard deviation is preferable to polynomial-type nonlinear specifications. Our results have a potential to explain some of the mixed findings documented by previous studies. © 2013 Elsevier B.V.
Wang, J & Zheng, X 2013, 'INDUSTRIAL AGGLOMERATION: ASYMMETRY OF REGIONS AND TRADE COSTS', Review of Urban & Regional Development Studies, vol. 25, no. 2, pp. 61-78.
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AbstractThis paper investigates the impact of international trade liberalization and regional integration on the distribution of economic activities within countries such as China. We extend Krugman's original New Economic Geography model to account for a two‐country, three‐region case where the home country is fully asymmetrical in terms of its size and access to global markets. Our simulation results show that the spatial economy of the home country changes in a more complex way than is shown in Krugman's results. When international trade liberalization continues but domestic regions remain poorly integrated, the gate region experiences a change from partial to full agglomeration. When the home country is closed to international trade, the decrease in domestic transport costs makes the hinterland more attractive for manufacturing. However, when it is open to global markets, more manufacturing is undertaken in the gate region.
Wang, J, Gochoco‐Bautista, MS & Sotocinal, NR 2013, 'Corporate Investments in Asian Emerging Markets: Financial Conditions, Financial Development, and Financial Constraints', Asian Development Bank Economics Working Paper Series, vol. 346, no. 346, pp. 1-26.
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Motivated by the literature on the finance-growth nexus, this paper explores the mechanisms through which finance affects corporate investments and capital accumulation. We separate the effects of financial conditions from those of financial development.
