Alexeev, V, Dungey, MH & Yao, W 2017, 'Time-Varying Continuous and Jump Betas: The Role of Firm Characteristics and Periods of Stress', Journal of Empirical Finance, vol. 40, pp. 1-19.
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Using high frequency data we decompose the time-varying beta for stocks into beta for continuous systematic risk and beta for discontinuous systematic risk. Estimated discontinuous betas for S&P500 constituents over 2003-2011 generally exceed the corresponding continuous betas. Smaller stocks are more sensitive to discontinuities than their larger counterparts, and during periods of financial distress, high leverage stocks are more exposed to systematic risk. Higher credit ratings and lower volatility are each associated with smaller betas. Industry effects are also apparent. We use the estimates to show that discontinuous risk carries a significantly positive premium, but continuous risk does not.
Bird, R, Gao, X & Yeung, D 2017, 'Time-series and cross-sectional momentum strategies under alternative implementation strategies', Australian Journal of Management, vol. 42, no. 2, pp. 230-251.
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The study compares the performance of alternative implementations of both time-series and cross-sectional momentum strategies across 24 markets. We find that over our sample period, both types of momentum strategies generate positive returns under the majority of implementations evaluated but that time-series momentum is clearly superior. An important difference between the two momentum strategies is that with time-series momentum, the number of stocks included in the winner and loser portfolios vary with the state of the market. As a consequence, cross-sectional momentum digs deeper to select winning stocks when markets are weak and deeper to select losing stocks when markets are strong. As the information in the momentum signals is concentrated in the tails of the return distribution, it is not that surprising that momentum is best implemented using time-series momentum.
Bui, C, Scheule, H & Wu, E 2017, 'The value of bank capital buffers in maintaining financial system resilience', Journal of Financial Stability, vol. 33, pp. 23-40.
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© 2017 Elsevier B.V. There is a current controversy concerning the appropriate size of banks’ capital requirements, and the trade-off between the costs and benefits of implementing higher capital requirements. We quantify the size of capital buffers required to reduce system-wide losses using confidential regulatory data for Australian banks from 2002 to 2014 and annual public accounts from 1978 to 2014. We find that a moderate increase in bank capital buffers is sufficient to maintain financial system resilience, even after taking economic downturns into consideration. Furthermore, while banks benefit from paying a lower cost of debt when they have a higher capital buffer, lending volumes are lower indicating that credit supply may be hampered if bank capital levels are too high within a financial system.
Casavecchia, L & Suh, JY 2017, 'Managerial Incentives for Risk-Taking and Internal Capital Allocation', Australian Journal of Management, vol. 42.
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Dahiya, S, Iannotta, G & Navone, M 2017, 'Firm Opacity Lies in the Eye of the Beholder', Financial Management, vol. 46, no. 3, pp. 553-592.
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We classify and test empirical measures of firm opacity and document theoretical and empirical inconsistencies across these proxies by testing the relative opacity of banks versus non-banks. We evaluate the effectiveness of these proxies by observing the effect of two cleanly identified shocks to firm-specific information: credit rating initiation and inclusion in the S&P 500 index. Using a difference-in-difference approach, we compare firms that are newly rated and firms that are included in the S&P 500 index with a propensity matched sample of “unchanged” firms. We find that only the number of analysts and Amihud's illiquidity ratio provide consistent patterns across different estimation specifications and different econometric settings. These two proxies show that banks are more opaque than non-banks. Based on our tests, we recommend that these proxies be used as the primary measures of firm opacity.
Ekström, E, Glover, K & Leniec, M 2017, 'Dynkin games with heterogeneous beliefs', Journal of Applied Probability, vol. 54, no. 1, pp. 236-251.
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AbstractWe study zero-sum optimal stopping games (Dynkin games) between two players who disagree about the underlying model. In a Markovian setting, a verification result is established showing that if a pair of functions can be found that satisfies some natural conditions then a Nash equilibrium of stopping times is obtained, with the given functions as the corresponding value functions. In general, however, there is no uniqueness of Nash equilibria, and different equilibria give rise to different value functions. As an example, we provide a thorough study of the game version of the American call option under heterogeneous beliefs. Finally, we also study equilibria in randomized stopping times.
Khan, MS, Scheule, H & Wu, E 2017, 'Funding liquidity and bank risk taking', Journal of Banking & Finance, vol. 82, pp. 203-216.
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© 2016 Elsevier B.V. This study examines the relationship between funding liquidity and bank risk taking. Using quarterly data for U.S. bank holding companies from 1986 to 2014, we find evidence that banks having lower funding liquidity risk as proxied by higher deposit ratios, take more risk. A reduction in banks’ funding liquidity risk increases bank risk as evidenced by higher risk-weighted assets, greater liquidity creation and lower Z-scores. However, our results show that bank size and capital buffers usually limit banks from taking more risk when they have lower funding liquidity risk. Moreover, during the Global Financial Crisis banks with lower funding liquidity risk took less risk. The findings of this study have implications for bank regulators advocating greater liquidity and capital requirements for banks under Basel III.
Nguyen, P, Miloud, T & Zhao, R 2017, 'CEO tenure and firm growth: A conditional analysis', Economics Bulletin, vol. 37, no. 4, pp. 2301-2308.
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This paper investigates the influence that CEO tenure may have on firm growth. We hypothesize that the effect of CEO tenure is conditional on the firm's growth rate. The empirical analysis reveals that the effect on growth is negative in high-growth firms and positive in low-growth firms. These findings are consistent with the view that long CEO tenure is beneficial in a more stable environment, but detrimental under rapidly-changing circumstances.
Nikitopoulos, CS, Squires, M, Thorp, S & Yeung, D 2017, 'Determinants of the crude oil futures curve: Inventory, consumption and volatility', Journal of Banking & Finance, vol. 84, pp. 53-67.
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Wang, J, Lv, K, Bian, Y & Cheng, Y 2017, 'Energy efficiency and marginal carbon dioxide emission abatement cost in urban China', Energy Policy, vol. 105, pp. 246-255.
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Energy efficiency improvement and carbon emission reduction are two important ways to mitigate energy consumptions and global warming. This paper aims to examine energy efficiency and carbon dioxide (CO2) emissions abatement costs of city urban areas in China. To this end, an improved slacks-based measure approach is introduced, which considers the linkage between desirable and undesirable outputs. Then, measures of energy efficiency, CO2emission abatement cost and comprehensive state index of CO2emissions abatement cost and CO2emissions reduction potential are defined. The proposed model is then applied to the dataset of 285 cities in China during 2008–2012. The results show that most city urban areas in China have relatively low energy efficiencies. Surprisingly, there are gradually narrowing gaps regarding mean energy efficiencies between areas during 2008–2012. Nevertheless, there are great disparities in energy efficiencies between cities within a typical area, and even a provincial region. It is found that CO2emissions abatement cost in urban China exhibits an increasing trend during the study period. Also, significantly geographic disparities in abatement costs between areas, regions and cites are found. Specifically, energy efficiency has significantly positive correlation with the comprehensive state index in China. Some important findings and useful policy implications are achieved.
Armanious, A 1970, 'Financial Dependence Patterns among Arab Banking Sectors in the Aftermath of the 2007 Global Financial Crisis', United Nations Economic and Social Commission for Western Asia, Lebanon.
Armanious, A 1970, 'Systemic Risk Contribution of Banks, Diversified Financials, Insurance and Real-estate in the Eurozone', 22nd Euroasia Business and Economics Society (EBES) Conference, Rome, Italy.
Armanious, A 1970, 'Too-Systemic-to-Fail: Empirical Comparison of Systemic Risk Measures in the Eurozone Financial System', European Financial Management Association Conference, Athens, GREECE.
Cheng, B, Nikitopoulos Sklibosios, C & Schlogl, E 1970, 'Empirical hedging performance of long-dated crude oil derivatives', 1st Australasian Commodity Markets Conference, Sydney, Australia.
Cheng, B, Nikitopoulos Sklibosios, C & Schlogl, E 1970, 'Empirical hedging performance of long-dated crude oil derivatives', Commodity and Energy Markets 2017 Annual Meeting, Oxford, UK.
Chi, S & Xu, J 1970, 'Why Do Underperforming CEOs Retain Their Jobs? Evidence from Executive Turnover', 2017 FMA Asia/Pacific Conference, Tapei, Taiwan.
Dahiya, S, Iannotta, G & Navone, M 1970, 'Firm Opacity Lies in the Eye of the Beholder', Financial Management, 2012 FMA Annual Meeting, Wiley, Atlanta, Georgia, USA, pp. 553-592.
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We classify and test empirical measures of firm opacity and document theoretical and empirical inconsistencies across these proxies by testing the relative opacity of banks versus non‐banks. We evaluate the effectiveness of these proxies by observing the effect of two cleanly identified shocks to firm‐specific information: credit rating initiation and inclusion in the S&P 500 index. Using a difference‐in‐difference approach, we compare firms that are newly rated and firms that are included in the S&P 500 index with a propensity matched sample of “unchanged” firms. We find that only the number of analysts and Amihud's illiquidity ratio provide consistent patterns across different estimation specifications and different econometric settings. These two proxies show that banks are more opaque than non‐banks. Based on our tests, we recommend that these proxies be used as the primary measures of firm opacity.
Hutcheson, TJ & Newell, G 1970, 'Property Investment Decision-Making by Superannuation Funds', Pacific Rim Real Estate Society 23rd Annual Conference, Sydney, Australia.
Patel, VG & Michayluk, D 1970, 'Do divestitures create value? Evidence from options markets', Financial Management Association Conference, Boston.
Xu, J 1970, 'The Gender Gap in Executive Promotions', 2017 FIRN Annual Conference, Uluru, Australia.
Sklibosios Nikitopoulos, C, Squires, M, Thorp, S & Yeung, D 2017, 'Determinants of the Crude Oil Futures Curve: Inventory, Consumption and Volatility', SSRN.
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Since 2008, the WTI oil futures curve has been positively sloped for extended periods. We test whether changes in inventory alone can explain this atypically long contango. To do this, we estimate monthly VARs of the CME WTI oil futures spread and OECD and U.S. inventory in line with standard theory, and add petroleum consumption and implied volatility to the vector of endogenous variables. When we model the futures spread as one continuous series, results confirm two-way causation between inventory and the futures curve, as predicted by the theory of storage. However when we separate negative and positive futures spreads we find that: two-way causation between the futures spread and U.S. inventory breaks down; shocks to OECD petroleum consumption cause more negative spreads and shocks to U.S. consumption cause more positive spreads in addition to inventory-driven changes; and increases in volatility directly raise positive spreads. These new causal channels have become significant since 2008 and can be related to higher inventory, inelastic supply of oil and uncertainty about global economic conditions.
Su, F & Wang, J 2017, 'Conditional Volatility Persistence in the Foreign Exchange Market: Meteor Shower and Heat Wave Revisited'.
