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Studies in Economics and Finance
Journal Prestige (SJR): 0.374
Citation Impact (citeScore): 1
Number of Followers: 2  
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 1086-7376
Published by Emerald Homepage  [341 journals]
  • Portfolio balance effects and the Federal Reserve’s large-scale
           asset purchases
    • Pages: 2 - 24
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 2-24, March 2018.
      Purpose Whereas much of previous literature focuses upon the impact on yields from the Federal Reserve’s large-scale asset purchases (LSAPs), the purpose of this paper is to study the changes to expected returns. Design/methodology/approach This empirical investigation offers support for changes to risk premia coincident with LSAPs. Findings For both equity and bonds, the authors find evidence for supply/demand LSAPs effects; the equity effects are consistent with a substitution effect from bonds to equities, whereas the bond effects appear to be an anomaly. Originality/value The findings represent new insight for weighing the efficacy and identifying the scope of LSAPs.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:40Z
      DOI: 10.1108/SEF-10-2017-0284
  • Cap rates and risk: a spatial analysis of commercial real estate
    • Pages: 25 - 43
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 25-43, March 2018.
      Purpose This study aims to assess the impact of location on capitalization rates and risk premia. Design/methodology/approach Using a transaction-based data series for the five largest office markets in Germany from 2005 to 2015, regression analysis is performed to account for a large set of asset-level drivers such as location, age and size and time-varying macro-level drivers. Findings Location is found to be a key determinant of cap rates and risk premia. CBD locations are found to attract lower cap rates and lower risk premia in three of the five largest markets in Germany. Interestingly, this effect is not found in the non-CBD locations of these markets, suggesting that the lower perceived risk associated with these large markets is restricted to a relatively small area within these markets that are reputed to be safe investments. Research limitations/implications The findings imply that investors view properties in peripheral urban locations as imperfect substitutes for CBD properties. Further analysis also shows that these risk premia are not uniformly applied across real estate asset types. The CBD risk effect is particularly pronounced for office and retail assets, apparently considered “prime” investments within the central locations. Originality/value This is one of the first empirical studies of the risk implications of peripheral commercial real estate locations. It is also one of the first large-scale cap rate analyses of the German commercial real estate market. The results demonstrate that risk perceptions of investors have a distinct spatial dimension.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:36Z
      DOI: 10.1108/SEF-11-2016-0267
  • Informed trading around biotech M&As
    • Pages: 44 - 64
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 44-64, March 2018.
      Purpose This paper aims to test the extent to which downward bias due to a floating-point exception in probability of informed trading (PIN) estimates obtained using the Easley, Hvidkjaer and O’Hara (EHO; 2002) method is remedied using the Yan and Zhang (YZ; 2012) method. The paper also aims to test the sample-size sensitivity of EHO PIN and identify PIN determinants for acquirers and targets in the biotech sector. Design/methodology/approach EHO and YZ PIN performances are compared for US biotech acquirers and targets around their mergers and acquisition (M&A) announcements. The sampling method of Kryzanowski and Lazrak (2007) is used to assess sample-size sensitivity of announcement window EHO PIN estimates. Cross-sectional regressions are estimated to identify PIN determinants. Findings EHO and YZ PIN are not significantly different. EHO PIN exhibits significant sample-size sensitivity. Information leakage prior to M&A announcements is strongly affected by some firm characteristics. Significant determinants of PIN behavior around M&A announcements include insider and institutional holdings and research and development (R&D) expense. Research limitations/implications Findings imply that PIN partially reflects the activities of insiders and other informed investors about takeover intentions. Subsequent research can examine PIN behavior around pre-announcement rumors for M&As in the same or other industries and for potential targets that are peers of the M&A targets. Originality/value This paper contributes to the ongoing debate in the empirical finance literature on whether PIN measures informed trading by examining its behavior and the importance of some methodological issues associated with its use in examining market behavior around M&A announcements.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:28Z
      DOI: 10.1108/SEF-10-2016-0257
  • Position adjusted turnover ratio and mutual fund performance
    • Pages: 65 - 80
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 65-80, March 2018.
      Purpose The purpose of this study is to examine the impact of position adjusted turnover ratio on mutual fund performance. Design/methodology/approach The author calculates position adjusted turnover ratio in the same three steps as Edelen et al. (2013). Position adjusted turnover ratio is intended to be a trading cost proxy that captures both fund trading volume and per-trade costs. A metric of eight Morningstar performance measures is utilized. Findings Results show that funds with a higher position adjusted turnover ratio tend to have a lower risk-adjusted performance, such as indicated by both Sharpe and Sortino ratios, and even though these funds may have a higher annualized return. Research limitations/implications The sample selection process is subject to a survival bias. Also, this study utilizes Morningstar performance measures rather than the widely used factors models. Practical implications This study examines the impact of invisible costs from fund trading. These findings encourage fund managers to take strategic steps to reduce the overall invisible cost impact to improve fund performance. Originality/value Few studies have investigated fund trading cost measured by position adjusted turnover ratio and its impact on fund performance. Further, this study contributes to current literature by using eight Morningstar fund performance variables, which are practitioner-oriented and are accessible by investors.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:50:53Z
      DOI: 10.1108/SEF-03-2016-0075
  • Can stock market liquidity and volatility predict business cycles'
    • Pages: 81 - 96
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 81-96, March 2018.
      Purpose The purpose of this paper is to predict real gross domestic product (GDP) growth and business cycles by using information from both liquidity and volatility measures. Design/methodology/approach The paper estimates liquidity and volatility measures from over 5,000 NYSE rms and extracts a common factor, which the paper calls uncertainty. In-sample and out-of-sample forecasting tests are used to determine the ability of the uncertainty factor to predict growth in real GDP, industrial production, consumer price index, real consumption and changes in real investment. Findings The paper finds that on average, positive shocks to the uncertainty factor occur in the quarters preceding and at the beginning of a recession. During the quarters toward the end of recessions, there are negative shocks to uncertainty on average. Originality/value Previous research has explored using either liquidity or volatility to forecast economic activity. The paper bridges the two branches of research and finds a link to real GDP growth and business cycles.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:50:58Z
      DOI: 10.1108/SEF-05-2016-0131
  • New results on the predictive value of crude oil for US stock returns
    • Pages: 97 - 108
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 97-108, March 2018.
      Purpose The purpose of this study is to clarify the nature of the predictive relationship between crude oil and the US stock market, with particular attention to whether this relationship is driven by time-varying risk premia. Design/methodology/approach The authors formulate the predictive regression as a state-space model and estimate the time-varying coefficients via the Kalman filter and prediction-error decomposition. Findings The authors find that the nature of the predictive relationship between crude oil and the US stock market changed in the latter half of 2008. After mid-2008, the predictive relationship switched signs and exhibited characteristics which make it much more likely that the predictive relationship is due to time-varying risk premia rather than a market inefficiency. Originality/value The authors apply a state-space approach to modeling the predictive relationship. This allows one to watch the evolution of the predictive relationship over time. In particular, the authors identify a dramatic shift in the relationship around August 2008. Prior research has not been able to identify shifts in the relationship.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:42Z
      DOI: 10.1108/SEF-01-2017-0020
  • Retirement saving in the UK: a life-cycle analysis
    • Pages: 109 - 136
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 109-136, March 2018.
      Purpose This paper aims to study long-term savings accumulation in the UK. The authors use cross-sectional information from the extensive data set of the Family Resources Survey to compare long-term saving amongst different ethnic groups with the control group, the native population. The paper reflects on whether different groups are more likely to suffer poverty in retirement. Design/methodology/approach In this analysis, the authors apply the life-cycle framework to explain saving profiles. This theoretical model has been used extensively in the field of economics and can be applied to empirical studies to examine changes in income and saving patterns over the life-course. The framework contends that individuals make savings decisions to smooth consumption over different phases of their life-cycle. Findings The findings indicate that socio-economic factors are key elements in determining whether individuals plan for retirement if factors are controlled for the differences in saving behaviours between ethnic minorities and the control population decrease considerably. Asian women, with good education and social standing, display greater saving rates than the control group, while the socio-economic disadvantage suffered especially by Pakistani and Bangladeshi women is key to their inability to save long-term. High levels of poverty in retirement are more likely to be caused by the interaction of low levels of education, part-time work and long spells of unemployment than by ethnicity. Originality/value The important contribution to the debate on savings by ethnic minorities is the extension of the life-cycle model to specific sections of the population and to proffer new insights into their saving/dis-saving patterns and ultimately their welfare in retirement.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:02Z
      DOI: 10.1108/SEF-01-2017-0018
  • Do mutual fund ratings provide valuable information for retail
    • Pages: 137 - 152
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 137-152, March 2018.
      Purpose Retail investors use information provided by mutual fund rating agencies to make investment decisions. This paper aims to examine whether the ratings provide useful information to retail investors by analyzing the rating migration and closure risk of mutual funds that received Morningstar’s mutual fund ratings from 2005 to 2012. Design/methodology/approach The research design differentiates between buy-and-hold investment strategies and dynamic investment strategies. To assess the information content of mutual fund ratings for buy-and-hold investment strategies, the rating migration based on the first and the last mutual fund rating during two-, four-, six- and eight-year horizons is determined. With respect to dynamic investment strategies, the number of rating changes per fund on a monthly basis during these time horizons is calculated. Findings Mutual fund rating persistence is low or even inexistent, in particular, during longer time periods. Only for lower-rated funds, the rating appears to indicate higher risk of fund closure. In addition, mutual funds face a large number of up to 38 monthly rating changes in the eight-year window. Originality/value Mutual fund rating persistence has hardly been analyzed for funds offered to retail investors so far. This paper clearly points out that because of the extensive rating migration and the high number of monthly rating changes, retail investors barely benefit from using mutual fund ratings.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:21Z
      DOI: 10.1108/SEF-05-2017-0120
  • Corporate cash-pool valuation: a Monte Carlo approach
    • Pages: 153 - 162
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 153-162, March 2018.
      Purpose This paper aims to analyze a special corporate banking product, the so-called cash-pool, which gained remarkable popularity in the recent years as firms try to centralize and manage their liquidity more efficiently. Design/methodology/approach A Monte Carlo simulation has been applied to assess the key benefits of the firms arising from the pooling of their cash holdings. Findings The main conclusion of the analysis is that the value of a cash-pool is higher in the case of firms with large, diverse and volatile cash flows having less access to the capital markets, especially if the partner bank is risky but offers a high interest rate spread at the same time. It is also shown that cash pooling is not the privilege of large multinational firms as the initial direct costs can be easily regained within a year even in the case of SMEs. Originality/value The novelty of this paper is the formalization of a valuation model. The literature emphasizes several benefits of cash pooling, such as interest rate savings, economy of scale and reduced cash flow volatility. The presented model focuses on the interest rate savings complemented with a new aspect: the reduced counterparty risk toward the bank.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:17Z
      DOI: 10.1108/SEF-03-2016-0056
  • Fair-value accounting, asset sales and banks’ lending
    • Pages: 163 - 177
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 163-177, March 2018.
      Purpose This paper aims to examine the interaction between fair-value accounting, asset sales and banks’ lending in booms and busts. Throughout, the author uses “fair value” and “mark-to-market” interchangeably, to denote an accounting regime where changes in the prices of banks’ assets affect regulatory capital. “Historic-cost accounting” has been used in the paper to denote an accounting regime where changes in asset prices do not affect regulatory capital. Design/methodology/approach The author built a model that examines how the accounting regime affects banks’ incentives to sell assets and how the impact of the accounting regime on asset sales affects lending. Findings In a bust, fair value strengthens banks’ incentives to sell assets. The resulting increase in sales increases banks’ lending capacity. Consequently, lending can be higher under fair value. Conversely, in a boom, historic cost strengthens banks incentives to sell assets. The resulting increase in sales increases banks’ lending capacity. Hence, lending can be higher under historic cost. Originality/value This paper identifies a new channel through which the accounting regime could affect lending. The accounting regime can affect banks’ incentives to sell assets. The resulting difference in sales can affect banks’ ability to make new loans. Hence, in a boom, although banks book mark-to-market gains under fair value, asset sales could be higher under historic cost. Lending, thus, could be higher under historic cost. Conversely, in a bust, although banks book mark-to-market losses under fair value, sales could be higher under fair value. Lending, thus, could be higher under fair value.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:09Z
      DOI: 10.1108/SEF-10-2017-0294
  • Managerial implications of off-balance sheet items in community banks
    • Pages: 178 - 195
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 178-195, March 2018.
      Purpose Community banks were affected distinctly by changes in banking regulation in the 1990s when compared with large commercial banks. These banks offer non-traditional finance items, presumably to compete with these financial institutions. This study aims to examine the importance of accounting for off-balance sheet (OBS) items when estimating the financial performance of community banks. Design/methodology/approach This study applies a two-stage analysis pathway that initially calculates X-efficiency scores as part of the overall cost structure and then deploys data envelopment analysis bootstrapping method for a second-stage ordinary least square model. Findings Study findings indicate that failure to include OBS items in the X-efficiency calculation for community banks understates the efficiency performance of these banks. Furthermore, results indicate that factors internal and external to the community bank affect X-efficiency. Increases in OBS items are associated with growth in assets and growth in net non-interest income. Therefore, OBS items become an attractive alternative source of income and a mechanism for expanding output with the same volume of inputs. In addition, OBS items allow the largest community banks to deleverage their balance sheet, whereas the smallest community banks still emphasize on traditional lending products and benefit from existing equity. Also, larger banks may be using OBS items as a mechanism to isolate their performance from macroeconomic fluctuations. Research limitations/implications Research limitations include a reduced number of community banks as consolidation accelerates partly because of compliance concerns. Practical implications The approach used supports a series of community bank managerial approaches that may be adopted by management. Originality/value The results of this study show several reasons why community banks may have managerial incentives to include OBS items. As observed by Gilbert et al. (2013), community banks are adjusting their product line so as to operate efficiently. Community banks must provide a product line which provides margin and meets customer needs at a profit to the firm. OBS items allow existing staff to provide funds without additional equity requirements from the balance sheets. The increase in OBS activities may signal the perception that the associated interest income is less risky and less costly than other alternatives, including adopting technologies to diversify traditional loan product offerings. As community banks tend to have lower default rates than their larger counterparts, the most likely explanation is that the OBS interest risk is more attractive than compliance or development of mechanisms to offer a broader suite of traditional loan products.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:12Z
      DOI: 10.1108/SEF-05-2017-0109
  • Order book microstructure and policies for financial stability
    • Pages: 196 - 218
      Abstract: Studies in Economics and Finance, Volume 35, Issue 1, Page 196-218, March 2018.
      Purpose The purpose of this paper is two-fold: first, to introduce an innovative model of financial order book, less simplified than the existing literature and still able to replicate all statistical features of true markets; second, to simulate realistically the effects of policies aimed to reduce the instability of financial markets. Design/methodology/approach The paper is based on an agent-based model and the applied methodology is the computational simulation. Findings The policymaker can actively reduce the instability of financial market by means of policies aimed to increase the heterogeneity of investors, both in terms of the behavioral attitude for market participation and of the differentiation of opinions; favor investors who show insensibility with regard to market information; limit the allowed number of counterparts for any market order; reduce the time validity of orders; and maintain flexibility and efficient bargaining, reduce transaction costs and avoid Tobin taxes. Research limitations/implications In future research, an opinion dynamics engine within a clustered community network will be embedded. Practical implications Indeed, the obtained results are policy rules which could be immediately applied. Originality/value The order book model contained in the paper is completely new, innovative and original. Innovativeness is based on a reduced number of simplifying assumptions. The realism of the presented mechanism is higher than in other existing models. The value of the model is high because of several factors. From the scientific point of view, it constitutes the reliable framework on which many other papers will be based: it is the core center of future research. From the policymaker’s point of view, it represents a credible tool for policy hypotheses testing.
      Citation: Studies in Economics and Finance
      PubDate: 2018-04-04T09:51:43Z
      DOI: 10.1108/SEF-04-2017-0087
  • Cross-border merger and acquisition activities in Asia: the role of
           macroeconomic factors
    • Abstract: Studies in Economics and Finance, Ahead of Print.
      Purpose This paper aims to examine the influence of key macroeconomic factors on the inward and outward acquisition activities of six ASEAN (ASEAN: Association of Southeast Asian Nations) countries, namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, over the 1996-2015 period. Design/methodology/approach The study uses alternative panel data methods, including pooled mean group, mean group and dynamic fixed-effect estimators. Findings The results indicate that gross domestic product (GDP), interest rate, exchange rate, money supply and inflation rate are the most important macroeconomic factors explaining the trends of cross-border mergers and acquisition outflows of the ASEAN-6 countries. Specifically, GDP, money supply and inflation rate have significant positive relationships with acquisition outflows, while interest rate and exchange rate exert significant negative influence. On the other hand, the authors find four significant macroeconomic factors explaining the trends of the inward acquisitions. Essentially, GDP, money supply and inflation rate have significant positive impacts on inward acquisitions, while the impact of exchange rate is negatively significant. Research limitations/implications Unavailability of data limits this study to pool six sample countries from ASEAN, instead of ten representative member countries. Practical implications The results of this study can signal to firms or investors, involving in cross-border mergers and acquisitions, where to direct foreign resources flows. Moreover, having the knowledge about the relative levels of market size and other macroeconomic factors in both home and host countries can be of great importance for investment decision. Therefore, policymakers of ASEAN countries should make appropriate macroeconomic policies that can stimulate inward and outward acquisitions. Originality/value The main contribution of this paper is that it is the first to present the analysis of macroeconomic influences on the trends of inward and outward merger and acquisition activities in six ASEAN countries.
      Citation: Studies in Economics and Finance
      PubDate: 2018-05-29T12:05:47Z
      DOI: 10.1108/SEF-06-2017-0146
  • Portfolio selection using the Riskiness Index
    • Abstract: Studies in Economics and Finance, Ahead of Print.
      Purpose The purpose of this paper is to increase the accuracy of the efficient portfolios frontier and the capital market line using the Riskiness Index. Design/methodology/approach This paper will develop the mean-riskiness model for portfolio selection using the Riskiness Index. Findings This paper’s main result is establishing a mean-riskiness efficient set of portfolios. In addition, the paper presents two applications for the mean-riskiness portfolio management method: one that is based on the multi-normal distribution (which is identical to the MV model optimal portfolio) and one that is based on the multi-normal inverse Gaussian distribution (which increases the portfolio’s accuracy, as it includes the a-symmetry and tail-heaviness features in addition to the scale and diversification features of the MV model). Research limitations/implications The Riskiness Index is not a coherent measurement of financial risk, and the mean-riskiness model application is based on a high-order approximation to the portfolio’s rate of return distribution. Originality/value The mean-riskiness model increases portfolio management accuracy using the Riskiness Index. As the approximation order increases, the portfolio’s accuracy increases as well. This result can lead to a more efficient asset allocation in the capital markets.
      Citation: Studies in Economics and Finance
      PubDate: 2018-05-29T12:05:17Z
      DOI: 10.1108/SEF-03-2017-0058
  • Assessing the effects of housing market shocks on output: the case of
           South Africa
    • Abstract: Studies in Economics and Finance, Ahead of Print.
      Purpose This paper aims to assess the effects of housing market shocks on real output in South Africa, by focusing on the real private consumption channel. Design/methodology/approach It measures housing market shocks as non-monetary housing shocks, uses a data set covering the period 1969Q4–2014Q4 and uses the agnostic identification procedure. Findings The paper finds that 20 per cent of the variation in house prices is explained by these shocks. The paper also finds that the effects of housing demand shocks on real private consumption are short-lived and generate a transitory real output response. Overall, housing demand shocks have managed to explain nearly 13 per cent and 14 per cent of the variation in real private consumption and real output respectively, over 20-quarters ahead forecast revision. Research limitations/implications This finding suggests that shocks emanating from the housing market in the country are essential and should be considered when making macroeconomic policy decisions. Originality/value None of the existing studies, to our knowledge, have empirically assessed the effects of housing market shocks on real output directly. This paper attempts to contribute to the literature by assessing the direct impact of housing market shocks on the real output, using South Africa as a case study.
      Citation: Studies in Economics and Finance
      PubDate: 2018-05-29T12:02:00Z
      DOI: 10.1108/SEF-09-2016-0237
  • The performance of IPOs excluding the jump
    • Abstract: Studies in Economics and Finance, Ahead of Print.
      Purpose This paper aims to examine performance of firms with a negative second-day return after the Initial Public Offering (IPO) relative to stocks with a positive second-day return after the IPO. Loughran and Ritter (1995) document that firms which have done an IPO or an SEO underperform similar firms over three- and five-year investment horizons. Loughran and Ritter (2002) also document that firms that go public “leave money on the table”, with this amount being almost twice as large as the fees paid to the investment banks. Design/methodology/approach The study’s null hypothesis is that stocks with a negative return on the second day of the IPO perform better than firms with a positive return on the second day of the IPO. The authors estimate the second-day return based on first- and second-day closing prices from the Center for Research in Security Prices, and they use a regression model and Jensen’s alpha to test the hypothesis. Findings The authors find evidence that rejects the paper’s working null hypothesis of superior performance of negative second-day return IPO firms relative to positive second-day return IPO firms in the three-year and five-year period samples. They fail to find statistically significant evidence in the entire period samples which suggest that negative second-day return IPO firms perform similarly to positive second-day return IPO firms. Originality/value The findings in this study raise interesting questions with regards to the ideas developed by Loughran and Ritter (2002) and the “money left on the table”. These findings are of interest to both entrepreneurs and investment bankers who advise them during the underwriting process. If there is not a benefit in terms of IPO performance to investors, then the question becomes – shouldn’t owners possibly consider actually “taking money from the table”. After all, the return to investors will be the same either way but if entrepreneurs make more money at IPO they would be motivated to start more companies in the future.
      Citation: Studies in Economics and Finance
      PubDate: 2018-05-29T11:58:11Z
      DOI: 10.1108/SEF-11-2016-0264
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