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Determining bid-ask prices for options with stochastic illiquidity and applications to index options Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-04 Ming-Che Chuang, Jeffrey Tzuhao Tsai
Market makers must quote two prices - bid and ask prices - for options. This article provides a GARCH model with stochastic illiquidity risks and gives analytical approximation solutions for the bid and ask prices for options. A joint calibration method is applied for calibrating the implied parameters. The empirical evidence shows an illiquidity smile for short-term calls and a negatively sloped illiquidity
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The role of anti-tax avoidance in tax base flow and international tax competition Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-02 Jiaxing Zheng, Sida Bai, Cheng Gu, Bihui Huang, Mengxu Xiong
By constructing the profit shifting model for MNCs, this study uses transfer pricing rules and bilateral tax conventions to examine the impact of anti-avoidance system on a country's corporate income tax base. Based on the balanced panel data of 50 countries from 2000 to 2013, we use the SYS-GMM method and find that the transfer pricing rules of neighboring countries significantly reduces the tax base
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Switching spillovers and connectedness between Sukuk and international Islamic stock markets Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-01 Walid Mensi, Yeonjeong Lee, Sami Al-Kharusi, Seong-Min Yoon
This study examines the switching volatility spillovers and connectedness between the Dow Jones Sukuk and global and two regional Islamic stock markets (World, Asia, and Europe). Using the Markov switching-vector autoregression and spillover index models, we show that Islamic stock markets are significantly affected by their own shocks under the low-volatility regime (Regime 1), whereas the results
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External asset network and international transmission of economic policy uncertainty Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-01 Guowei Cai, Xiaowei Chen, Yujia Cao
With the gradual deepening of economic globalization, the scale of international External Asset holdings has become significant, while its role in the international transmission of Economic Policy Uncertainty is rarely discussed. By using the Rolling-Lasso method to construct a cross-border transmission network of Economic Policy Uncertainty, this article explores how it is affected by the external
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Predicting the equity premium with financial ratios: A comprehensive look over a long period in Korea Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-01 Dojoon Park, Jaehoon Hahn, Young Ho Eom
This study investigates whether financial ratios, such as the dividend-price, price-to-book, or price-earnings ratios, reliably predict the equity premium in Korea. We construct the longest possible time series data for the stock market index excess returns including dividends and associated financial ratios by collecting data from various sources including data only available in hard copy publications
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Mobile device use and the ranking effect on trading behavior: Evidence from natural experiments Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-01 Haibo Wu, Chongfeng Wu
This paper investigates how the trading behavior of investors using mobile devices differs from that of investors using PCs in the context of limited attention. We hypothesize that mobile device-based trading is associated with a stronger “ranking effect” that investors disproportionally trade top-ranked stocks. By exploiting the exogeneity of the return-based ranking of price limit events, we examine
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To fix or not to fix: The representativeness of the WM/R methodology that underpins the FX benchmark rates. A pre-registered report Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-03-01 Matteo Benenchia, Luca Galati, Andrew Lepone
This paper examines the effectiveness of the WM/Reuters (WM/R) methodology for FX benchmark rates since its revision in 2015. After a series of market manipulation scandals, the WM/R methodology underwent significant changes to enhance its reliability and minimise the risk of market manipulation. However, the dynamic nature of the FX market, characterised by evolving investor behaviour and continuous
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Non-deposit liability and bank risk-taking: International evidence Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-27 Yizhong Wang, Shuting Hou, Ting Wang, Mengxuan Li
We conduct a comprehensive analysis using data from 9,724 commercial banks across 97 countries from 2002 to 2022 to investigate the impact of banks’ non-deposit liabilities on their risk-taking. Our findings reveal that an increase in the proportion of non-deposit liabilities triggers amplified bank risk-taking. Heterogeneity analysis indicates that the positive impact of non-deposit liabilities on
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Applied AI for finance and accounting: Alternative data and opportunities Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-23 Sean Shun Cao, Wei Jiang, Lijun (Gillian) Lei, Qing (Clara) Zhou
Big data and artificial intelligence (AI) have transformed the finance industry by altering the way data and information are generated, processed, and incorporated into decision-making processes. Data and information have emerged as a new class of assets, facilitating efficient contracting and risk-sharing among corporate stakeholders. Researchers have also increasingly embraced machine learning and
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How do banks price carbon risk? Evidence from India Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-15 Neeru Chaudhry, Damini Kumari
Do banks assign more weight to borrower characteristics such as growth prospects and information quality than to carbon risk exposure? For a sample of Indian firms, we find that the cost of debt decreases with increasing energy-consumption. This relationship is stronger for young firms, which have more growth opportunities and are dependent on external sources for their financing needs. Banks protect
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Surges of cross border capital flow: The impact of digital finance Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-15 Qin Gou, Xingshen Li, Guojun Zhao
In this paper, we empirically investigate whether and how digital finance development affects the probability of cross border capital inflow surges. Based on cross country datasets for 120 countries from 2000 to 2021, we mainly find that with a higher level of digital finance development, a country is more likely to experience capital inflow surges. We provide further evidence that digital finance
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When they say ‘not affected’, what do they mean? Evidence from trade disputes Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-03 Xin Pang, Kemin Wang, Lin Zhou
This paper investigates the effects of trade dispute investigations against China initiated by foreign countries on corporate textual disclosure strategies. We demonstrate that firms involved in trade dispute investigations tend to strategically use whitewashed words to indicate that they are unaffected or little affected by trade disputes. This interesting effect is enhanced when these firms face
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Extrapolation and option-implied kurtosis in volatility forecasting Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-01 Ging-Ginq Pan, Yung-Ming Shiu, Tu-Cheng Wu
Prior studies have employed extrapolation to reduce truncation errors when computing risk-neutral moments. However, extrapolation may have a disadvantage in that it obscures the predictive power of risk-neutral skewness and kurtosis. Our out-of-sample results show that extrapolation does not enhance the predictive power of the volatility forecasting models when risk-neutral volatility, skewness, and
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Non-native players in the domestic league: Foreign penetration and domestic banking sector in an emerging market Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-02-01 Nhan Huynh
This paper investigates the influence of foreign bank presence on the Vietnamese banking sector. Using a comprehensive dataset spanning from 2005 to 2020, this study establishes a link between the presence of foreign banks and increased competitiveness in the Vietnamese market. As more foreign banks enter the local market, domestic banks tend to experience diminished profits and take on higher levels
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From fundamental signals to stock volatility: A machine learning approach Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-28 Cunfei Liao, Tian Ma
Enriched with a large set of accounting-based characteristics, we find that the aggregate fundamental risk, constructed with several machine learning algorithms, predicts stock return volatility. We find that nonlinear models, especially neural networks, outperform linear methods and single characteristics and attribute the improvements in prediction accuracy to their ability to capture nonlinear patterns
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Overlapping committee membership and cost of equity capital Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-28 Md. Borhan Uddin Bhuiyan, Muhammad A. Cheema
This study examines the association between overlapping committee membership and the cost of equity capital among listed companies in Australia. Overlapping committee membership occurs when a director serves on multiple supervisory committees concurrently. To the extent overlapping committee membership reduces information asymmetry, improves financial reporting quality, and consequently reduces the
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Private efforts, public test policy and insurance against pandemic health risks Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-24 Jimin Hong, Kyungsun Kim, S. Hun Seog
In a pandemic, testing and personal protection efforts (e.g., masking) can help reduce contagion and ultimate health costs. These options are costly, however, and so individuals and policymakers must weight their costs against the benefits they provide. Insurance can help smooth the expenses associated with contagion. In this paper, we incorporate testing and effort decisions in an expected utility
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Asset pricing implications of firms' profit sharing Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-23 Jaewan Bae, Jangkoo Kang
This study examines the asset pricing implications of a profit-sharing policy by measuring a profit-sharing coefficient (PSC) that captures the firm's tendency to share profits with its employees. We find that firms with a high PSC earn higher future stock returns than firms with a low PSC. This arises because investors underestimate the positive effects of PSC on worker productivity while overreacting
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Does the risk spillover in global financial markets intensify during major public health emergencies? Evidence from the COVID-19 crisis Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-20 Yifan Wang, Xiqi You, Yanhang Zhang, Hanfang Yang
Taking the COVID-19 as an example, we study the impact of major public health emergencies on global financial risk spillovers. We found that the increase in the severity of the epidemic will increase the imported and exported financial risks of the economy, and the improvement in the degree of epidemic prevention and control will have a restraining effect on risk contagion. From a market perspective
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ESG engagement, country-level political risk and bank liquidity creation Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-11 Chien-Chiang Lee, Meiting Lu, Chih-Wei Wang, Chia-Yu Cheng
This study explores the influence of banks' environmental, social, and governance (ESG) performance and country-level risk factors on liquidity creation. Utilizing a distinctive sample of 2103 bank-year observations from 2000 to 2020 in Asia, the study finds that banks' ESG performance exerts a positive impact on bank liquidity creation. Furthermore, this relationship is more prominent in countries
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Sequence and longevity risks of South Korean retirees: Insights and potential remedies Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-11 Hyungjin Ko, Seungyun Lee, Jaewook Lee
This study investigates the retirement landscape in South Korea, highlighting major challenges like sequence and longevity risks. Our analysis reveals that over half of South Koreans are not well-prepared for retirement. For example, retirees risk depleting 56.3% of their portfolio in 25 years, increasing to 97.6% in poor market conditions. We propose a dynamic withdrawal strategy to mitigate these
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Islamic banks and capital buffer behavior: A view from the Gulf cooperation council markets Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-11 Anissa Naouar, Zakaria Boulanouar, Rihab Grassa
This study explores the determinants of the capital buffer behavior (CB) of Islamic banks (IBs) using a sample of 42 IBs in the Gulf Cooperation Council (GCC) markets during 2009–2018. We also investigate the transmission mechanism, efficacy of the macroprudential policies, relationships between these policies, and financial stability of these banks. Unlike previous research, this study considers certain
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An empirical evaluation of the salience-based asset pricing model: Evidence from Australia Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-08 Deok-Hyeon Lee, Byoung-Kyu Min, Yucaho Xiao
We empirically evaluate a salience-based asset pricing model in which the demand for stocks is affected by their most salient payoffs. We first reproduce the main results of Cosemans and Frehen (2021) for the U.S. market, that stocks with past upside (downside) salience returns earn lower (higher) subsequent returns, using portfolio sorts and firm-level cross-sectional regressions. We next examine
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Political uncertainty and commonality in liquidity Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-04 Tung Lam Dang, Hoang Luong, Lily Nguyen, My Nguyen
We examine whether political uncertainty affects commonality in liquidity worldwide. Using national elections as a proxy for political uncertainty across 40 countries over 2000–2019, we document a positive effect of political uncertainty on commonality in liquidity. This effect is stronger for firms with greater institutional ownership but weaker for those headquartered in countries with greater checks
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Strengthening operational creditor rights and trade credit: Evidence from creditor reforms Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-03 Ranjeet Singh, Yogesh Chauhan, Nemiraja Jadiyappa, Anto Joseph
Trade creditors are exposed to credit risk when they extend credit to their clients during the sale of goods. The present study exploits a regulatory intervention that enhances the rights of trade creditors in cases of default. By leveraging the implementation of the Insolvency and Bankruptcy Code (IBC) in 2016 as a policy intervention, we employ the difference-in-differences (DID) approach to demonstrate
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Director turnover, board monitoring and audit fees: Some Australian evidence Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2024-01-03 Sutharson Kanapathippillai, Ali Yaftian, Soheila Mirshekary, Heibatollah Sami, Ferdinand A Gul
This paper explores the association between director turnover and increased audit fees in Australia. The study, aligned with upper echelon theory, reveals that the characteristics and actions of top management, as reflected in director turnover, impact corporate decisions and risk-taking behavior. Specifically, higher director turnover is linked to elevated audit fees, disrupting the stability of top
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The impact of the Pitching Research Framework on AFAANZ grant applications: A pre-registered study Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-12-31 Chelsea Gill, Vishal Mehrotra, Olayinka Moses, Binh Bui
Despite the popularity of grant schemes, there is a noticeable absence of research into the impacts of streamlined grant processes on both assessors and applicants. This study conducted 46 interviews with finance and accounting academics in Australia and New Zealand to explore their experiences with the Pitching Research Framework (PRF) within the streamlined AFAANZ grant process. Utilising an inputs-process-outputs
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Volatility spillover features in financial industries and identification of systemically important financial institutions: A new perspective Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-12-27 Hu Wang, Xin Liu
We study the spillover effects between financial industries and the identification of systemically important financial institutions (SIFIs) from a new perspective. The total volatility is decomposed into two categories, i.e., good volatility triggered by positive returns and bad volatility triggered by negative returns, which are applied to the volatility spillover index (the DY spillover index) model
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Foreign investors and stealth trading: An examination of price movements in developing markets Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-12-17 Mamduh M. Hanafi
We investigate whether foreign investors have better information than domestic investors. We are motivated by (1) the controversy over the performance of foreign versus domestic investors and (2) market dynamics that require investors to adapt constantly. Using 123 positive and 81 negative news items from the Indonesia Stock Exchange (IDX), we find that foreign investors account for larger price movements
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Demystifying COVID-19 policy actions: The case of inflation control in ASEAN Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-12-14 Syed Aun R. Rizvi, Susan Sunila Sharma, Solikin M. Juhro
In this paper, we study the impact of policy actions undertaken by governments and other policy authorities during the COVID-19 pandemic on core inflation in four major economies of ASEAN region namely Indonesia, Malaysia, Singapore, and Thailand. Utilizing panel fixed effects regression, we find that policy interventions where financial authority and the central governments were the implementing institutions
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Corporate social responsibility dimensions and stock price crash risk: Evidence from the management's self-interest perspective Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-12-15 Chunying Wu, Xiong Xiong, Ya Gao, J. Ginger Meng
This paper adopts the lens of management's self-interest motives to explore the potential influence of corporate social responsibility (CSR) and its distinct dimensions on the risk of stock price crashes. Our findings reveal that CSR performance can effectively reduce the likelihood of future stock price crashes. Notably, the principal source of this risk mitigation stems from the dimensions of environmental
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Can mergers and acquisitions internalize positive externalities in funding innovation? Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-12-03 Thomas J. Chemmanur, Leo Ang Li, Mark H. Liu
Fundamental innovation usually involves huge upfront costs, but the benefits are spread across various sectors of the economy. Given the large costs and limited appropriability of the benefits associated with fundamental innovations, individual firms underinvest in these innovations relative to the socially optimal level. We find that mergers and acquisitions (M&As) can internalize the positive externalities
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Labor leverage and firm risk: Evidence from Korea Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-11-28 Wonho Cho, Yongjun Kim
Labor expenditure can induce a form of operating leverage at the firm level due to the relative smoothness of wages compared to output. This study investigates the effect of labor-induced operating leverage (i.e., labor leverage) measured by labor share on a firm's risk dimensions in the Korean stock market. We find that labor share increases both equity returns and the default probability at the firm
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How does stock liquidity affect corporate cash holdings in Japan?: A pre-registered report Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-11-17 Ryosuke Fujitani, Kiyonori Iwata, Yukihiro Yasuda
This pre-registered report outlines a comprehensive plan for a paper aimed at examining the positive relationship between stock liquidity and corporate cash holdings within the context of Japan. This study aims to offer a novel explanation. Our explanation is rooted in the “dark side” of stock liquidity, suggesting that liquidity could exacerbate corporate financial constraints by increasing the stock
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Modeling underwriting risk: A copula regression analysis on U.S. property-casualty insurance byline loss ratios Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-11-20 Jeffrey Tzuhao Tsai, Chien-Ling Lo
This article evaluates underwriting risks for U.S. property-casualty insurance company using a by-line multivariate framework. We propose a regression system with copula structure to estimate the dynamics and dependences of by-line loss ratio changes. The dynamics are characterized by autoregressive, macroeconomic, and line-specific variables. The dependences are characterized by symmetric, asymmetric
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Investor decision making within retirement savings schemes Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-11-11 Christopher Bebbington, Robert B. Durand, Joyce Khuu
We study the investment allocation decisions of over 32,000 investors in a retirement savings program using data from 1994 to 2019. Investors exhibit a “reduce risk or increase risk response” when faced with signals of increased market volatility. Investors behave as if they perceive patterns in prices. Different age cohorts display different decision-making “cultures”, but all age groups display a
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Momentum: Evidence and insights 30 years later Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-11-07 Narasimhan Jegadeesh, Sheridan Titman
Since Jegadeesh and Titman (1993) documented the momentum effect in the US 30 years back, the literature has grown substantially. This paper evaluates various explanations for the phenomenon, which include the view that such evidence of market inefficiencies likely results from data mining, rational theories that suggest that past winners have greater exposure to systematic risk than past losers, and
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Return predictability of prospect theory: Evidence from the Thailand stock market Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-11-03 Xi Chen, Junbo Wang, Xiaoling Zhong
Using Thailand stock market data, we find that prospect theory has strong predictive power for returns. This predictive power is strengthened during crises and bear and bull markets. The loss aversion component is the main contributor to the increased predictive power during crises and bear markets. In contrast, the probability weighting and concavity/convexity components contribute more to the predictive
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Return predictability of short-selling and financial distress firms: Evidence from Korean stock market Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-28 Shu-Feng Wang
This paper investigates the relationship between short-selling activity and one-month ahead stock returns, with a focus on the role of distressed firms in the Korean stock market. In contrast to the U.S. market, we find that short-selling activity is concentrated on firms in the investment-grade group. Consistent with prior research, we find predictability of short-selling trading in stock returns
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Bank liquidity hoarding and bank systemic risk: The moderating effect of economic policy uncertainty Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-17 Yiming Lu, Yu Wang
In this article, we use panel data from 457 listed banks in 20 countries to investigate the impact of bank liquidity hoarding on systemic risk in the banking sector and discuss it under the condition of economic policy uncertainty (EPU). Empirical evidence suggests that when banks' liquidity hoarding increases, their systemic risk contribution decreases significantly. Furthermore, we demonstrate that
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Extreme illiquidity and stock returns: Evidence from Thailand market Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-20 Xi Chen, Junbo Wang, Yanchu Wang, Xiaoling Zhong
Extreme illiquidity (EIL) is priced in the cross-section of stock returns in the Thailand market. The EIL premium permeates stock categories with various risk factor loadings and characteristics. EIL is persistent and has predictive power for expected stock returns to at least a one-year horizon. The Market for Alternative Investment (MAI) with a higher proportion of individual investors, who are more
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Momentum, reversals and liquidity: Indian evidence Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-16 Andy Chui, Kavitha Ranganathan, Abhishek Rohit, Madhu Veeraraghavan
This paper addresses three interesting questions. First, we explore whether price momentum exists for equities listed on the Bombay Stock Exchange (BSE). Second, whether liquidity (measured by turnover ratio) enhances the momentum effect. Third, whether momentum profits exhibit reversals for illiquid stocks. Using a large sample of 3956 stocks for the period 2000 to 2021, we establish three key results
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High-frequency traders’ evolving role as market makers Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-12 Anirban Banerjee, Prince Roy
The current academic literature on HFTs considers them as the present-day de facto market makers. We show that HFT trading strategies have moved away from passive market-making over time. We explore the role of regulatory hurdles in this regard and find that penalties on high OTR (order-to-trade ratio) negatively affect HFT market-making and result in HFTs participating in trades as liquidity takers
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Momentum and individual investor trades: Evidence from Singapore Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-16 Allaudeen Hameed, Zhenghui Ni, Chek Ann Tan
This paper examines the role of retail investor trading activity on stock price momentum. We find that there is little evidence of momentum for stocks traded on the Singapore Exchange (SGX) unconditionally and momentum is concentrated in stocks with high market capitalization and high nominal prices. While these stocks are likely to be the trading habitat of institutional investors, they exhibit substantially
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Charitable CEOs and employee protection Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-15 Yao Du, Chia-Ying Chan, Chih-Yung Lin, Chien-Lin Lu
In the recent surge of Environmental, Social and Governance (ESG) development, one focus is on human rights protection, while another is continuous strengthening of corporate governance mechanisms. Our study explores these by collecting data on the employee communication from firm corporate social responsibility (CSR) reports and collecting firm practices on employee protection, to examine their association
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Factors and anomalies in the Vietnamese stock market Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-12 Xiangqian Huang, Clark Liu, Tao Shu
We conduct a comprehensive analysis of factors and anomalies in the Vietnamese stock market. Our analysis indicates that the size effect is significant in Vietnam, and the earnings-to-price (EP) ratio outperforms the book-to-market ratio in capturing the value effect in Vietnam. Furthermore, we find that a three-factor model, which includes a market factor, a size factor, and an EP factor (the VN-3
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Resurrecting the market factor: A case of data mining across international markets Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-13 Khoa Hoang, Ronghong Huang, Helen Truong
In this paper, using the stepwise model selection method proposed by Harvey and Liu (2021), we study whether anomalies can explain the cross-sectional individual stock returns in 38 countries for the period between 1992 and 2018. Among the 95 anomalies examined, we document the following results: (1) the market factor is the single most dominant factor in explaining the cross-sectional equity returns
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Comparing competing factor and characteristics models: Evidence in Japan Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-09 Pin-Huang Chou, Kuan-Cheng Ko, S. Ghon Rhee
The main purpose of this study is to simultaneously compare the explanatory abilities of various firm characteristics and factor models in the Japanese stock market. We show that the factor models developed by Fama and French (1993, 2015, 2018), Carhart (1997), and Hou et al. (2015) all fail to be priced in Japan. In addition, value and operating profitability anomalies are prevalent in Japan, while
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Risk factors in the Indonesian stock market Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-12 Nanqi Li, Chishen Wei, Linti Zhang
This paper identifies the relevant risk factors that determine the cross-section of returns in the Indonesian stock market. We examine 152 factors using the Bayesian framework developed in Jensen et al. (2022). Our results show that size, value, quality, and profitability are the characteristics themes that explain future cross-sectional stock returns during the period 1991–2022. Momentum is not significant
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Special issue to honor landmarked momentum paper: Preface and selective views on empirical asset pricing research in emerging markets Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-07 Andy C.W. Chui, K.C. John Wei
This article is the preface to this special issue to honor Jegadeesh and Titman's (1993) landmarked momentum paper. In this preface, we also give the reasons for the lack of empirical studies in emerging markets and highlight the vast variations of formal and informal institutions across countries in Asia, giving us valuable opportunities to test existing asset pricing models. We express our views
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Technical trading rules, loss avoidance, and the business cycle Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-06 Lerby Ergun, Alexander Molchanov, Philip Stork
We show that simple technical trading rule (TTR) strategies substantially reduce investment left tail risk. An investor following a TTR strategy can also avoid a high percentage of extremely negative returns. This percentage increases substantially during recessions. Interestingly, tail risk reduction does not come at a cost of lower performance – risk adjusted returns of TTR strategies are in fact
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Mood seasonality around the globe Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-10-06 Yigit Atilgan, K. Ozgur Demirtas, A. Doruk Gunaydin, Imra Kirli
This paper examines the existence of mood seasonality, documented by Hirshleifer et al. (2020, JFE) for the cross-section of US equity returns, in an international setting. First, we confirm the results of the original study. Next, we extend these findings to non-US markets and show that they are not sample-specific. A stock's relative historical seasonal returns are positively correlated with its
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Uneasy lies the head that wears a crown: Firm network status and market response to negative rumors Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-28 Michelle Xiaomin Fan, Huiying Wu, Sammy Xiaoyan Ying, Jiaxing You
This study investigates whether firm status in networks is a burden in the context of negative rumors. We use a network approach to capture firms' network of affiliations through cross-shareholding and to identify status hierarchies embedded in the relational structure. Using a sample of 1428 negative rumors related to 913 firms during the period 2007–2015, we find that the market responds negatively
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Multidimensional connectedness among the volatility of global financial markets around the Russian-Ukrainian conflict Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-25 Imran Yousaf, Ahmed Imran Hunjra, Muneer M. Alshater, Elie Bouri, Yanshuang Li
This study investigates the impact of the Russo–Ukrainian war-induced uncertainty on multidimensional connectedness measures across the volatility of global stock and commodity markets using time-, frequency-, and quantile-based approaches. The results show that the war-induced uncertainty significantly increases the connectedness among the volatilities of global financial markets, notably in the short
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Economic shocks, M&A advisors, and industry takeover activity Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-18 Yun Feng, Chelsea Liu, Alfred Yawson
The paper examines the role of M&A advisors in propagating takeover activity following economic shocks that affect industry conditions. M&A advisors constitute an important intermediary in the market for corporate control by enhancing M&A success at a transaction level. We posit that, at an industry level, M&A advisors also play a significant role in propagating aggregate merger activity in the wake
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International stock return predictability: The role of U.S. uncertainty spillover Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-22 Fuwei Jiang, Hongkui Liu, Jiasheng Yu, Huajing Zhang
This paper explores the implications of U.S. uncertainty for cross-country asset pricing. We propose a global common spillover index of U.S. uncertainty (GSIU) based on the Partial Least Square method, and show that this index is a powerful predictor of aggregate stock returns around the globe, both in- and out-of-sample. Additionally, we find that GSIU affects stock returns through both cash flow
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Research ideas matter: Guidance for research students and early career researchers Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-17 Keith Duncan, Adrian Gepp, Justin Craig, Helen O'Neill
This paper draws on the collective experience of the authors as researchers, supervisors and editors spanning the fields of medical science, psychology, analytics, entrepreneurship, accounting, and finance. We provide guidance about research idea formulation for novice researchers, both Higher Degree Research students (HDRs) such as PhD students, and Early Career Researchers (ECRs). Drawing on parallels
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Interlinkages between stability, carbon emissions and the ESG disclosures: Global evidence from banking industry Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-17 Mohsin Ali, Wajahat Azmi, V. Kowsalya, Syed Aun R. Rizvi
The main aim of this paper is to investigate the interlinkages between bank stability, emissions and the ESG activities. The findings can be summarized as follows. First, we find statistically and economically significant association between bank stability and the carbon emissions. Second, banks can partially negate the adverse consequences of emissions through more non-financial (ESG) activities.
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Systemically important financial institutions and drivers of systemic risk: Evidence from India Pacific-Basin Finance Journal (IF 3.239) Pub Date : 2023-09-17 Shivani Narayan, Dilip Kumar, Elie Bouri
The aim of this study is twofold: (1) identify the systemically important financial institutions in India and their contributing role to Indian systemic risk during various global and domestic events; and (2) uncover the factors driving systemic risk in Indian financial institutions. To serve the first aim, we estimate financial institutions' involvement in the overall risk of the Indian financial