Alexeev, V & Dungey, M 2015, 'Equity portfolio diversification with high frequency data', QUANTITATIVE FINANCE, vol. 15, no. 7, pp. 1205-1215.
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Anthonisz, SA & Putniņš, TJ 2015, 'Asset Pricing with Downside Liquidity Risks', Management Science, vol. 63, no. 8, pp. 2549-2572.
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© 2016 INFORMS. We develop a parsimonious liquidity-adjusted downside capital asset pricing model to investigate whether phenomena such as downward liquidity spirals and flights to liquidity impact expected asset returns.We find strong empirical support for the model. Downside liquidity risk (sensitivity of stock liquidity to negative market returns) has an economically meaningful return premium that is 10 times larger than its symmetric analogue. The expected liquidity level and downside market risk are also associated with meaningful return premiums. Downside liquidity risk and its associated premium are higher during periods of low marketwide liquidity and for stocks that are relatively small, illiquid, volatile, and have high book-to-market ratios. These results are consistent with investors requiring compensation for holding assets susceptible to adverse liquidity phenomena. Our findings suggest that mitigation of downside liquidity risk can lower firms' cost of capital.
Augustiani, C, Casavecchia, L & Gray, J 2015, 'Managerial Sharing, Mutual Fund Connections, and Performance', INTERNATIONAL REVIEW OF FINANCE, vol. 15, no. 3, pp. 427-455.
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In this study, we examine the effect of mutual fund connections, throughmanagerial sharing, on performance and stock holding commonalities. Ouranalysis of return correlations and portfolio holdings indicates that moreinterconnected funds tend to buy and sell similar stocks, hence increasingthe similarity of portfolio holdings and undermining the distinctiveness oftheir investment strategy. Our results also indicate that highly connectedfunds significantly underperform weakly connected funds by about 1.4% ona yearly risk-adjusted basis. We show that fund family performance is unaf-fected by the intensity of fund connections, and that greater fund connec-tions could significantly enhance family-level profit margins.
Bird, R, Pellizzari, P & Yeung, D 2015, 'Performance Implications of Active Management of Institutional Mutual Funds', Accounting & Finance, vol. 55, no. 1, pp. 1-27.
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Bugeja, M, Patel, V & Walter, TS 2015, 'The Microstructure of Australian Takeover Announcements', Australian Journal of Management, vol. 40, no. 1, pp. 161-188.
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Using several microstructure variables, this study provides an intra-day examination of aggressive
trading around Australian takeover announcements. We conduct this analysis for both target
and bidding firms. We examine aggressive trading (i.e. by those who initiate the trade) using the
abnormal behaviour of returns, trading volume, volatility and time-weighted spreads and depth.
In addition, we develop a novel profit/loss measure (PLM) based on trade initiation and provide
new evidence using the recently developed volume-synchronised probability of informed trading
(VPIN) metric. In a univariate setting, these measures provide evidence of increased aggressive
trading in Australian target firms. Further, after controlling for several microstructure variables,
multivariate analysis reveals the presence of abnormally elevated time-weighted spreads prior to
the announcement date for target firms. We show that VPIN is significantly elevated for target
firms, especially in the four days prior to the takeover announcement.
Chai, EFL, Lee, AD & Wang, J 2015, 'Global information distribution in the gold OTC markets', INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, vol. 41, pp. 206-217.
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© 2015 Elsevier Inc. This paper aims to estimate the global information distribution in the OTC gold market. Using the two-scale realized variance as a proxy for information flow, we estimate the information shares of Asia, Europe, London/New York and the United States, with London/New York covering the two-hour overlapping trading in London afternoon and New York morning. We find that over the sample period of 1996 to 2012, the average daily information shares are 17%, 31%, 22%, and 30% for Asia, Europe, London/New York and the U.S., respectively. On a per-hour basis, the information share of London/New York is over two and half times of those of the rest of Europe and the U.S., and over five times of the information share of Asia. Despite doubling its share of OTC trading, Asia's information share actually declined from about 20% in the late 1990s to around 15% in 2009-2012, with the opposite trend for the London/New York market. Private information flow, measured by the volatility impact of unexpected order flows, has a flatter distribution across Asia, Europe, and the U.S., possibly due to the presence of the same large gold dealers in different markets. The declining information share of Asia and the concentration of information to the two-hour London/New York trading raise concerns for regional market development and global market stability.
Chiarella, C, Kang, B, Sklibosios Nikitopoulos, C & To, TD 2015, 'The Return-Volatility Relation in Commodity Futures Markets', UNSW Business School Research Paper, vol. 36, no. 2015, pp. 127-152.
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© 2016 Wiley Periodicals, Inc. By employing a continuous time multi-factor stochastic volatility model, the dynamic relation between returns and volatility in the commodity futures markets is analyzed. The model is estimated by using an extensive database of gold and crude oil futures and futures options. A positive relation in the gold futures market and a negative relation in the crude oil futures market subsist, especially over periods of high volatility principally driven by market-wide shocks. The opposite relation holds over quiet periods typically driven by commodity-specific effects. According to the proposed convenience yield effect, normal (inverted) commodity futures markets entail a negative (positive) relation.
Comerton-Forde, C & Putniņš, TJ 2015, 'Dark trading and price discovery', Journal of Financial Economics, vol. 118, no. 1, pp. 70-92.
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Regulators globally are concerned that dark trading harms price discovery. We show that dark trades are less informed than lit trades. High levels of dark trading increase adverse selection risk on the lit exchange by increasing the concentration of informed traders. Using both high- and low-frequency measures of informational efficiency we find that low levels of non-block dark trading are benign or even beneficial for informational efficiency, but high levels are harmful. In contrast, we find no evidence that block trades in the dark impede price discovery.
Comerton-Forde, C, Jones, CM & Putniņš, TJ 2015, 'Shorting at Close Range: A Tale of Two Types', Journal of Financial Economics, vol. 121, no. 3, pp. 546-568.
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© 2016 We examine returns, order flow, and market conditions in the minutes before, during, and after NYSE and Nasdaq short sales. We find two distinct types of short sales: those that provide liquidity, and those that demand it. Liquidity-supplying shorts are strongly contrarian at intraday horizons. They trade when spreads are unusually wide, facing greater adverse selection. Liquidity-demanding shorts trade when spreads are narrow and tend to follow short-term price declines. These results support a competitive rational expectations model where both market-makers and informed traders short, indicating that these two shorting types are integral to both price discovery and liquidity provision.
Gregory, K & Hambusch, G 2015, 'Factors driving risk in the US banking industry', International Journal of Managerial Finance, vol. 11, no. 3, pp. 388-410.
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Purpose – The purpose of this paper is to investigate how several key risk factors, including capital-to-asset ratio (CAR), franchise value and lobbying, affect various measures of risk in the US banking industry before, during and after the financial crisis. The empirical analysis covers the period 2004-2013. Design/methodology/approach – Using recent bank holding company data, this research explores several factors driving risk in the US banking industry. The authors follow recent regulatory models and use a cross-sectional approach that can be employed as a complement to established regulatory bank failure and early warning models to detect and prevent bank crisis and to guide policy intervention over time. Findings – The findings provide evidence that the CAR has a negative relationship with bank risk. The authors also show that banks’ franchise values exhibit a positive relationship with bank risk in non-crisis years and a negative relationship during the crisis. The authors further find evidence suggesting that lobbying decreases bank risk in non-crisis years and increases risk during the crisis. Originality/value – Previous studies have controversially discussed the effect of factors driving bank risk. The authors contribute to the discussion and provide the first empirical study to analyze the effects of lobbying activities by bank holding companies on bank risk before, during and after the...
Hambusch, G, Hong, KJ & Webster, E 2015, 'Enhancing Risk-Adjusted Return Using Time Series Momentum in Sovereign Bonds', Journal of Fixed Income, vol. 25, no. 1, pp. 96-111.
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This article studies an actively managed bond strategy based on time series momentum in sovereign bond markets. The author assesses the performance of an active strategy and investigates diversification benefits in comparison with a passive buy-and-hold strategy when each strategy is combined with international equity indexes. The analysis provides evidence that the active strategy offers higher expected returns without increasing return volatility. Importantly, and in comparison with the passive strategy, the active strategy results in both significant return and diversification enhancements when combined with international equity indexes. Therefore, the author suggests that his active momentum strategy can serve fund managers as an alternative to common long-only passive bond strategies to enhance the riskadjusted return of a combined portfolio of sovereign bonds and equities.
Hauptfleisch, M, Putniņš, TJ & Lucey, BM 2015, 'Who Sets the Price of Gold? London or New York?', Journal of Futures Markets, vol. 36, no. 6, pp. 564-586.
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We investigate which of the two main centers of gold trading—the London spot market and the New York futures market—plays a more important role in setting the price of gold. Using intraday data during a 17-year period we find that although both markets contribute to price discovery, the New York futures play a larger role on average. This is striking given the volume of gold traded in New York is less than a tenth of the London spot volume, and illustrates the importance of market structure on the process of price discovery. We find considerable variation in price discovery shares both intraday and across years. The variation is related to the structure and liquidity of the markets, daylight hours, and macroeconomic announcements that affect the price of gold. We find that a major upgrade in the New York trading platform reduces the relative amount of noise in New York futures prices, reduces the impact of daylight hours on the location of price discovery, but does not greatly increase the speed with which information is reflected in prices.
Hulley, H & McWalter, T 2015, 'Quadratic Hedging of Basis Risk', Journal of Risk and Financial Management, vol. 8, no. 1, pp. 83-102.
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Research Paper Number: 225 Abstract: This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Follmer-Schweizer decomposition of a European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk-minimizing strategy. Furthermore, since the mean-variance tradeoff process is deterministic in our setup, the minimal martingale- and variance-optimal martingale measures coincide. Consequently, the mean-variance optimal strategy is easily constructed. Simple closed-form pricing and hedging formulae for put and call options are derived. Due to market incompleteness, these formulae depend on the drift parameters of the processes. By making a further equilibrium assumption, we derive an approximate hedging formula, which does not require knowledge of these parameters. The hedging strategies are tested using Monte Carlo experiments, and are compared with recent results achieved using a utility maximization approach.
Jobst, R, Roesch, D, Scheule, H & Schmelzle, M 2015, 'A SIMPLE ECONOMETRIC APPROACH FOR MODELING STRESS EVENT INTENSITIES', JOURNAL OF FUTURES MARKETS, vol. 35, no. 4, pp. 300-320.
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Navone, M & Pagani, M 2015, 'Brothers from different mothers how distribution fees change investment behavior', JOURNAL OF BANKING & FINANCE, vol. 51, pp. 12-25.
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© 2014 Elsevier B.V. We ask whether loads affect investment flows in the US mutual fund industry. We argue that sales fees make the investment decision partially irreversible. Under these circumstances investors await for a stronger signal of managerial ability before committing to a new fund. This stronger signal can take the form of a particularly strong performance or a particularly long series of positive performance realizations. Looking at pairs of fund shares with the same portfolio but different sales fee arrangements we show that investment flows in share classes with front loads react disproportionally to good performances (higher convexity in the flow-performance relationship) and react to performance realizations further back in time (longer memory). A counterfactual example of fund shares with back-end loads allows us to rule out the hypothesis that this behavior is due to the incentive structure of brokers. Finally we show that these behavioral modifications induced by front loads have a negative and significant effect on investors' timing ability.
Nguyen, P, Rahman, N, Tong, A & Zhao, R 2015, 'Board Size and Firm Value: Evidence from Australia', Journal of Management & Governance, vol. 20, no. 4, pp. 851-873.
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We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001-2011, we find strong evidence of a negative relationship. We show that firms with a large board areassociated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.
Richards, K-A, Peters, GW & Dunsmuir, WTM 2015, 'Heavy-Tailed Features and Dependence in Limit Order Book Volume Profiles in Futures Markets', International Journal of Financial Engineering, vol. 02, no. 03, pp. 1550033-1550033.
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This paper investigates fundamental stochastic attributes of the random structures of the volume profiles of the limit order book. We find statistical evidence that heavy-tailed sub-exponential volume profiles occur on the limit order book and these features are best captured via the generalized Pareto distribution MLE method. In futures exchanges, the heavy tail features are not asset class dependent and occur on ultra or mid-range high frequency. Volume forecasting models should account for heavy tails, time varying parameters and long memory. In application, utilizing the generalized Pareto distribution to model volume profiles allows one to avoid over-estimating the round trip cost of trading.
Schmidt, C, Zhao, L & Terry, CS 2015, 'Index Effects: Evidence from Australia', Journal of Internet Banking and Commerce, vol. 21, no. 1, pp. 1-17.
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© Zhao R, 2016. This paper presents the findings of the first study of the index effects from changes in the composition of Australia’s tradeable benchmark index: the S&P/ASX 200. Prior to the introduction of the S&P/ASX200 changes to the composition of the market’s (then) benchmark index (the All Ordinaries Index) became evident before the formal announcement dates and the changes were made the following trading day. These announcement arrangements enabled profitable front-running trading. Along with the introduction of the new indices (including the S&P/ASX200) the arrangements for announcing changes to the composition of the index were changed to remove the opportunity for profitable frontrunning trading. While this objective was largely met for additions to the index the study found statistically significant evidence of price pressure between the announcement and implementation dates which were partially offset over the subsequent 20-day period. In relation to deletions the study found negative abnormal returns prior to announcement dates as well as between the announcement and implementation dates that were partially reversed over the subsequent 20-day period. The overall conclusion is that the event of changes in the composition of the S&P/ASX200 is on average associated with positive abnormal returns for additions and negative abnormal returns for deletions.
Van de Venter, TW & Michayluk, D 2015, 'Student use of electronic study materials in tertiary business courses', Australasian Journal of Economics Education, vol. 12, no. 1, pp. 1-26.
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Many universities are following the shift to online publishing by moving part orall of their curriculum online in an attempt to reduce costs. While consumers havebeen quick to adopt e-books for leisure reading, the attitude of higher educationstudents towards e-books for academic purposes is not very well known. Thisstudy addresses this deficiency by examining student attitudes in an Australianpostgraduate finance subject towards an e-book and how this perception changesthroughout a teaching semester. We report a high e-book adoption rate, especiallyfor younger and for working students. Also, students that use public transport spenton average approximately three times longer accessing the e-book. Although twothirdsof sampled students indicated no greater efficiency attributed to the e-book,efficiency was perceived to be higher for approximately half of students that solelyrelied on the e-book. The monetary value that students placed on the e-bookincreased from the start to the end of the semester. While this study employed onlya small sample it suggests two broad conclusions. The first is that printed formatscontinue to dominate e-formats in student perceptions even after greater exposureto and experience with the e-format. The second is that there is some evidence thatthe potential advantages of e-formats are real and that these advantages may wellprovide the basis for expanded future use.
Wang, J & Xu, J 2015, 'Home market effect, spatial wages disparity: an empirical reinvestigation of China', ANNALS OF REGIONAL SCIENCE, vol. 55, no. 2-3, pp. 313-333.
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Wang, J & Yang, M 2015, 'How well does the weighted price contribution measure price discovery?', JOURNAL OF ECONOMIC DYNAMICS & CONTROL, vol. 55, pp. 113-129.
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© 2015 . The weighted price contribution (WPC) is a popular measure for price discovery. This paper examines the theoretical properties and empirical performance of the WPC in sequential markets. The benchmark used to judge the WPC is the information share (IS) measure based on the variation of the efficient price. We derive the asymptotic value of the WPC, which is a complex combination of the unconditional means and variances of the returns of sequential markets, under the assumption of normality. We show that the WPC correctly converges to the IS only when the returns are uncorrelated with zero means. Our theoretical predictions based on normality hold well in simulations and in empirical analyses of the overnight price discovery for the S&P 100 index and its constituent stocks. As the correlation between overnight and daytime returns increases, the WPC deviates from the IS substantially.
Wang, J & Yang, M 2015, 'How well does the weighted price contribution measure price discovery? (vol 55, pg 113, 2015)', JOURNAL OF ECONOMIC DYNAMICS & CONTROL, vol. 57, pp. 131-131.
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Armanious, A 1970, 'A Comparative Study of the 2008 Global Financial Crisis and the 1929 Great Depression', 15th Eurasia Business and Economics Society Conference, Lisbon, Portugal.
Armanious, A 1970, 'Anatomy of the 2009 Eurozone Sovereign Debt Crisis: Kindleberger-Minsky Paradigm', The British Accounting and Finance Association Conference, Manchester, United Kingdom.
Armanious, A 1970, 'Measuring Systemic Risk and Financial Linkage in the Eurozone Financial System: European CoVaR Approach', 17th Euroasia Business and Economics Society (EBES) Conference, Venice, Italy.
Patel, VG & Michayluk, D 1970, 'Disentangling the different sources of value creation', Behavioural Finance and Capital Markets Conference, Adelaide, Australia.
Patel, VG & Michayluk, D 1970, 'Disentangling the different sources of value creation for US divestitures', Financial Research Network (FIRN) Corporate Finance Meeting, Sydney, Australia.
Patel, VG & Michayluk, D 1970, 'Disentangling the different sources of value creation for US divestitures', Financial Management Association Europe Doctoral Student Symposium, Venice, Italy.
Patel, VG & Michayluk, D 1970, 'Disentangling the different sources of value creation for US divestitures.', Financial Management Association Doctoral Student Symposium, Orlando, USA.
Patel, VG & Michayluk, D 1970, 'Disentangling the different sources of value creation for US divestitures.', Securities Industry Research Centre of Asia-Pacific (SIRCA) Young Researcher Workshop, Sydney, Australia.
Patel, VG & Michayluk, D 1970, 'Disentangling the different sources of value creation for US divestitures.', Australasian Finance and Banking Conference, Sydney, Australia.
Patel, VG, Putnins, T, Michayluk, D & Foley, S 1970, 'Price discovery in stock and options markets', Financial Management Association Europe Doctoral Student Symposium, Venice, Italy.
Patel, VG, Putnins, T, Michayluk, D & Foley, S 1970, 'Price discovery in stock and options markets', Royal Economic Society Conference, Manchester, UK.
Patel, VG, Putnins, T, Michayluk, D & Foley, S 1970, 'Price discovery in stock and options markets.', Financial Management Association Doctoral Student Symposium, Orlando, USA.
Patel, VG, Putnins, T, Michayluk, D & Foley, S 1970, 'Price discovery in stock and options markets.', Australasian Finance and Banking Conference, Sydney, Australia.
