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Studies in Economics and Finance

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ISSN (Print) 1086-7376
Published by Emerald

[307 journals]

Does Venture Capital Portfolio Size Matter?
- Authors: literatinetwork@emeraldinsight.com (James Bartkus; Kabir Hassan, Geoffrey Ngene)
  Abstract: Abstract
  
  Purpose - The purpose of this study is to investigate the effects of increased fund commitments on portfolio size and subsequent effects on portfolio success rates. This paper empirically analyze the changes in average portfolio size over a twenty year time period and how these changes affect the venture capitalists’ ability to successfully exit their investments. Design/methodology/approach - We utilize venture capitalists’ fund level data and conduct both univariate and multivariate analysis. The multivariate analysis is conducted using a two-limit regression tobit model. This is justified since our dependent variable is a ratio bounded by zero and one hence the tobit specification is the most appropriate methodology.Findings - We find that increasing the size of their portfolios not only does it lead to a decrease in the number of successful investments but it also significantly affects portfolio success rates. We also find evidence which suggests that some optimal portfolio size exists. Research limitations/implications - The sample was limited to independent private partnerships that raised funds specifically for investment in U.S. portfolio companies and it represents all funds maintained in the SDC database with non-missing data on fund size and other fund characteristics. Practical implications - There are three main practical implications derived from this study. First, venture capitalists overextend themselves by investing in too many portfolio firms. Second, some optimal portfolio size exists beyond which success rate of the venture capitalist’s portfolio declines. Third, portfolio size is an important determinant of venture capital portfolio success rates.Originality/value - The study presents new evidence that venture capitalists have a tendency to increase their portfolio size in years following growth in fund inflows, an idea that has not been investigated earlier. We also use data that is not adulterated by significant economic and financial conditions such as internet bubble burst of 200 and financial crisis of 2007/2008.
  PubDate: Fri, 26 Jul 2013 00:00:00 +010
Investment deposits, risk-taking and capital decisions in Islamic banks
- Authors: literatinetwork@emeraldinsight.com (Zied SAADAOUI; Hichem Hamza)
  Abstract: Abstract
  
  Purpose - This paper examines the relationship between the volume of investment deposits (profit sharing investment accounts – PSIA) and capitalization of Islamic commercial banks in a context of asymmetric information. Design/methodology/approach - To test these assumptions, we use System GMM on a dynamic panel of 59 Islamic banks observed during the period 2005-2009. After robustness checks, the results show a significant negative relationship between PSIA and regulatory capital ratio.Findings - This may indicates that the specific nature of PSIA can be a source of excessive risk –taking and higher leverage in order to maximize shareholders value. This behavior shows that there may exist some deficiencies in their risk management and governance system.Originality/value - This research is a first attempt to test empirically wether there is a moral hazard induced positive relationship between the volume of PSIA deposits and risk-taking in Islamic commercial banks.
  PubDate: Fri, 26 Jul 2013 00:00:00 +010
Macroeconomic Surprises and Stock Returns in South Africa
- Authors: literatinetwork@emeraldinsight.com (Rangan Gupta; Monique Reid)
  Abstract: Abstract
  
  Purpose - The objective of this paper is to explore the sensitivity of industry-specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry-specific South African stock market indices and evaluates the sensitivity of these indices to a various unanticipated macroeconomic shocks. Design/methodology/approach - We begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian Vector Autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing us to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR.Findings - The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.Originality/value - To the best of our knowledge, this is the first study conducted on South Africa, which analyses the impact of wide range of unanticipated macroeconomic shocks on stock returns. This paper improves on earlier efforts by using measures of monetary policy, as well as other macroeconomic news, which more cleanly isolates the unanticipated elements of the monetary policy variable and other macroeconomic indicators, in studying the impact of these surprises on stock returns in South Africa.
  PubDate: Fri, 26 Jul 2013 00:00:00 +010
Monetary Policy Effectiveness and the Housing Market
- Authors: literatinetwork@emeraldinsight.com (Roger W Spencer; John Huston)
  Abstract: Abstract
  
  Purpose - This paper examines the controversial issue of the extent to which Federal Reserve monetary policy may have contributed to the recent housing crisis and subsequent adverse macroeconomic developments. Design/methodology/approach - We develop a small model that facilitates OLS and VAR estimates of the critical period. Findings - The empirical results support the claim of John B. Taylor and others who held that monetary policy was excessively stimulative in terms of the low fed funds rate 2002-2005, but also support the view of Alan Greenspan and others that the linkages between short-term rates, long-term rates, and the housing market deteriorated during that decade.Originality/value - The model includes the Taylor Rule, a housing equation, and a mechanism linking the two relationships. The empirical results support elements of the camp that blames monetary policy for the recent housing crisis, and elements of the opposing camp which limits policy culpability. Specifically, it suggests excessive monetary ease and a structural change (for which the Fed cannot be blamed) in the monetary policy-housing market linkage that occurred prior to the crisis. The results also support long term, prior crisis, channels of influence that run from the state of the economy to fed funds rates to mortgage interest rates to housing prices. A return to normalcy in the housing market should be accompanied by the re-establishment of these channels.
  PubDate: Fri, 26 Jul 2013 00:00:00 +010
Are PIIGS stock markets efficient?
- Authors: literatinetwork@emeraldinsight.com (Dilip Kumar)
  Abstract: Abstract
  
  Purpose - This paper tests the finite sample properties of the automatic variance ratio (AVR) test and suggests suitable measure to improve its small sample properties under conditional heteroskedasticity and apply it to test the martingale hypothesis in the stock prices of the Portugal, Ireland, Italy, Greece and Spain (PIIGS economies) markets. This paper also investigates that "If the time series is not martingale then what else?"Design/methodology/approach - Monte Carlo experiments have been undertaken to test the small sample properties of AVR test. We use AVR test on daily and weekly data of the indices to investigate their martingale behaviour. We use Detrended Fluctuation Analysis (DFA) and BDS test statistics and to answer, "If not martingale then what else?". We also apply moving subsample approach to examine the dynamic behavior of stock prices and to obtain inferential findings robust to possible structural changes and presence of influential outliers.Findings - We find that weighted bootstrap procedure significantly improve the small sample properties of AVR tests under conditional heteroskedasticity. Our results provide evidence in support of the weak-form efficiency of Italy and Spain. But Portugal, Ireland and Greece exhibit signs of long memory in the stock prices. All indices also exhibit chaotic characteristics. Originality/value - This paper has both methodological and empirical originality. On methodological aspect, we propose weighted bootstrap procedure on AVR test to improve its small sample properties. On empirical side, we find that all stocks exhibit dynamic behavioral characteristics which changes over time.
  PubDate: Fri, 26 Jul 2013 00:00:00 +010

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