bluuebunny/crossref_metadata_2025 huggingface dataset:
Detection of Multiple Beta Shifts in Monthly Returns Data
Authors: Howe Thomas , Pope Ralph
Published: February 2023

This abstract was created post-production by the JFI Editorial Board.
This study has examined the power and type I error rate of four methods of testing for regression parameter changes when applied to detecting beta changes in monthly stock return series. The study used simulated stock return series with known betas, error variances, beta change dates, and error term distributions. In summary, it appears to be nearly impossible to detect or find the location of small or moderate beta changes in monthly stock return series. This suggests that the market model parameter changes reported by Hays and Upton (1986) are most likely not beta changes. However, they find of market model nonstationarity in almost all of the stocks in their sample-far more than this study finds. This suggests that if non-normality of stock returns accounts for the results obtained by Hays and Upton, the Stable Paretian 1.95 distribution does not adequately explain monthly stock returns.
Impact of Sarbanes-Oxley on Corporate Reporting of Working Capital
Authors: Lin Jason , Jones Steve
Published: February 2023

The Sarbanes-Oxley Act was passed in July 2002 in response to a few high profile of accounting scandals in publicly-traded companies. Among other provisions created to prevent such scandals is Section 404, which requires the executives of publicly-traded companies to formally state their responsibility for the company's system of internal controls and assess the effectiveness of those internal controls as of the end of the fiscal year. Internal controls, though perhaps costly, should theoretically improve management's ability to monitor business processes and make better decisions. It is this latter benefit that may be the hardest to recognize, and the one that this study hopes to identify. This study indicates that Sarbanes-Oxley may have led to progress in the area of working capital management. However, the results could have been influenced by other factors implicit in the business environment. As more time passes, a more definitive trend should emerge. To fully understand the impact of Sarbanes-Oxley, further research will be needed.
Academy of Finance: Past, Present and Future, 1987-2007
Authors: Johnson Don , Philpot James
Published: February 2023

It is important for members of an organization to, from time to time, look back and review what progress has been made and to look forward to see what opportunities the future holds. In this study, we analyze the history of the Academy of Finance. We categorized all the papers presented at the Academy's 21 annual meetings, identified the authors and employing institutions, measured the geographic distributions of participants, calculated the retention rates for participants, and addressed a variety of other issues. We highlight the Academy's accomplishments and detail its improvements and maturation as an organization. Finally, we offer suggestions for further improvements and growth into the future.
Ethical Investment Constraints And Fund Performance
Authors: Narain Lakshmi
Published: February 2023

This study evaluates the risk-adjusted performance of two author-defined categories of socially responsible mutual funds during the period of September 1999 to September 2004, using objective statistical measures grounded in modern portfolio theory. A socially responsible mutual fund is defined as one which employs "social screens" in stock selection. In this study, one category favors politically progressive, secular criteria and the second favors conservative religious values. The main objective of this study is to provide empirical documentation on the risk-adjusted returns of these mutual funds, to stimulate interest in further study of the political aspects of the screens that underlie them. This is one of the first, if not the first, academic studies to delineate socially responsible funds into such categories. The study results based on 30 funds indicate that funds favoring politically progressive secular criteria outperform the S&P 500 Index during the study period, while funds favoring conservative religious views overall do not outperform the S&P 500 Index.
Effect of Changes in Financial Leverage on the Relation , Between Earnings and Stock Returns: Evidence from Korean Firms
Authors: Kwak Young , Jin Jongdae , Lee Kyung
Published: February 2023

This study examines whether a firm's default risk as measured by its financial leverage affects the relationship between accounting earnings and stock returns, viz., the earnings response coefficient (ERC). From analytical results, we hypothesize that the ERC is a negative function of the firm's default risk. We test this hypothesis by comparing the ERC’s between pre-change and post-change period, using a sample of Korean firms that experienced changes in their financial leverages through either the issue of new debt or the retirement of outstanding debt. The empirical results indicate that the ERC's have decreased for the issue of new debt, but increased for the retirement of outstanding debt from pre-change to post-change period. Furthermore, these shifts in the ERC's are statistically significant, even after controlling for the differences in the systematic risk and growth between pre-change and post-change period. Overall, our findings suggest that the default risk is an important factor affecting the ERC for the Korean firms.
Shift From Defined Benefit to Defined Contribution Retirement Plans: Are College Students Ready?
Authors: Porter Brian
Published: February 2023

As defined contribution retirement plans, rather than defined benefit retirement plans, become the norm, it is imperative that people have a thorough understanding of retirement planning. From 1975 to 1998, there was an increase of 42 million Americans enrolled in non-Social Security retirement programs, from 44 million to 86 million. In 1975, the predominant plan was defined benefit with 32 million Americans participating in 103,000 different defined benefit plans. In contrast, 10 million Americans were participating in 208,000 different defined contribution plans. By 1998, the dominant plan had switched. Forty-six million Americans were in defined contribution plans and 40 million were in defined benefit plans (Migration News). The trend is clearly away from defined benefit plans and to defined contribution plans.

This study fills the gap that currently exists in this area and advances this body of knowledge in three important ways. One, it assesses the financial literacy of current college students in the specific area of retirement planning. Two, it compares three factors that may impact college students' knowledge in retirement planning: (1) taking a college course in finance with exposure to retirement planning, (2) gender, and (3) major. Three, it suggests methods for improving the retirement planning knowledge of college students. Results of this study indicate that college students are deficient in retirement planning knowledge and that even a short topical module on retirement planning included in an introductory finance course significantly improves students' retirement planning literacy.
Modeling Risk with Unit-variance Leptokurtic Fratcal Normal Statistics
Authors: Stacey James , Faseruk Alex
Published: February 2023

This abstract was created post-production by the JFI Editorial Board.
This study examines the hypothesis that there exists a family of unit-variant leptokurtic probability density functions with the attractive properties of normal statistics. It constructs numerically a family of symmetric Normal pdfs defined for fractal spaces with index q. These distributions have the attractive property of having unit variance for 1 <q<2 and approximately unit variance for 0.5<q<1 (the limit of the range that was studied). This paper studies the conjecture that there exists a family of Normal distributions with unit variance that can be defined on metric spaces of dimension m=q/2 for 0<q<2. Some analytical techniques that arise from this conjecture are explored, indicating how one could apply a broader theory of fractal statistics in practice. The power of these techniques follows from the property that the scale of the numerically generated probability distributions is independent of the fractal index q. This allows the non-linearity of fractal statistics to be absorbed into a universal non-linear function of a shape measure with the kurtosis chosen to illustrate the method: for what this study calls Fractal Normal, or Formal, pdfs. It is found that the application of Fractal Normal statistics retains the attractiveness of Normal statistics by allowing optimal solutions to be determined in a straightforward fashion.
Multivariate Stable Distributions and Value at Risk: The Case of the Asian Currency Crisis
Authors: Basterfield David , Bundt Thomas
Published: February 2023

This paper explores practical applications of multivariate stable distributions to value at risk modeling during the Asian currency crisis. We fit multivariate stable distributions to daily foreign exchange rate data 1996 through 1998 for six Asian currencies using a rolling estimation procedure and backtest daily marginal and conditional probabilities under 95% and 99% value at risk nulls. We also examine gains in value at risk accuracy from using multivariate stable distributions relative to univariate benchmarks such as generalized autoregressive conditional heteroskedasticity or univariate stable models. We find multivariate stable distributions overstate the probability of extreme losses.
Dividend Policy, Corporate Governance, and the Capital Markets
Authors: Chang Kiyoung , Kang Eun
Published: February 2023

This paper examines whether there is a difference between the dividend policies practiced by firms operating in countries with different financial systems, namely, bank-based and market-based systems. Our results show that the dividend payout ratio is significantly higher for bank-based countries. When firms are grouped according to whether they are in market-based countries or in bank-based countries, the level of investor protection is positively related to dividend payout in market-based financial systems but negatively related to dividend payout in bank-based fmancial systems.
Conditional Market Risk-Return Relationship Revisited
Authors: Tai Chu-Sheng
Published: February 2023

This abstract was created post-production by the JFI Editorial Board.
The purpose of this paper is to reexamine the puzzling relationship between the expected market risk premium (MRP) and conditional market variance found in previous studies. Unlike these studies, this paper presents a new test which recognizes the impact of using realized MRP as a proxy for expected MRP. This test allows up and down-market volatility to have distinct impacts on the MRP. We show that the estimates of the single factor market risk-return relationship may be biased downwards due to the use of the realized MRP as a proxy for the expected MRP. Therefore, not accounting for states where the realized MRP is negative leads to an aggregation bias resulting from the compensation effects of the positive and the negative MRP. We find evidence of a positive (negative) and significant relationship between the MRP and conditional market variance in bull (bear) market context. This result is robust to whether the market volatility is proxied by the conditional variance generated from a GARCH(1,1) model or by the implied volatility index from Chicago Board Option's Exchange.
Online Portfolio Evaluation and Analysis in a Basic Investments Course
Authors: Ary Eddie
Published: February 2023

This abstract was created post-production by the JFI Editorial Board.
 Many professors who teach investments require their students to participate in an online stock portfolio simulation as a means of gaining investment experience, Often near the end of this experience students are asked to analyze and evaluate their portfolios. There are many tools online that can be used to assist students in this process. This paper reviews several Web sites which provide either portfolio evaluation reports or tools, and briefly explains some ways in which the reports/tools can aid in the process of portfolio analysis and evaluation. It is hoped the information presented will prove valuable to professors who require students to become involved in some form of portfolio evaluation, as well as professors who may simply want to teach students the process of portfolio evaluation and analysis.
January Returns Phenomena: Current Evidence for the Dow-Jones Industrials and for the NASDAQ
Authors: Rayhorn Charles , Janson Kenneth
Published: February 2023

Two measures of stock performance are examined to gauge the extent of abnormal returns behavior attributable to the month of January. The January Effect (JE) and January Barometer (JB) are assessed on a large market capitalization portfolio, the Dow, and on a small market capitalization portfolio, the NASDAQ. The JE is confirmed for small capitalization firms over the period of study but is rejected for large capitalization firms. Evidence is found to support the JB effect for the large capitalization group. No evidence is found to support the JB effect for the small capitalization group.
Impact of Strikes on Shareholders' Wealth: Empirical Evidence from the 1990's
Authors: Yip Yewmun , Su Yuli , Wang Sherry
Published: February 2023

This study examines the effect of a strike on the wealth of shareholders, and whether there is a difference in the effects during various phases of a stock market cycle. Although a significant loss of shareholders' value is observed at the beginning of a strike, most of the losses are recovered upon the settlement of the strike. During a bear market, the negative impact of a strike on a firm's value is more profound, and the firm does not fully recover its value when the strike ends. On the other hand, in a bull market, struck firms not only suffer a less severe loss but also experience a quicker rebound in their firms' value. Since the duration of a strike during a bear and bull market period is not significantly different, we conclude that the observed difference in the impact of a strike during different phases of a stock market cycle cannot be attributed to the difference in the duration of a strike.
Developing Financial Acumen within an Executive MBA Program
Authors: Barrow Janice , Turner Grace
Published: February 2023

This paper is a synthesis of research related to developing the financial business acumen of students within an integrated Executive MBA program. It incorporates the perspectives of various constituents including the employer/sponsor, industry, academic boards, and program managers. The format attempts to answer three questions: (1) What do businesses need? (2) How do learning styles and student profile relate to financial acumen? (3) What and when must we deliver? The answer to the third question includes a framework for delivering the finance content consistent with recommendations and findings.
Diversification Potential of Diversified International Securities: The Case of Country Fund and iShares
Authors: Aroskar Rajarshi , Ogden William
Published: February 2023

In this study, the country funds and iShares of Europe and Asia are used to study diversification potential in the markets of Europe and Asia. Any short-term lead/lag relationships in these asset prices and net asset values (NAVs) respectively are investigated. Results show that both European and Asian iShares affect their country fund counterparts. While such relationships are found only in prices for Europe, both NA V and price relationships are found in Asia. Reverse relationships from country funds to iShares are not found in either region. Hence, investor perceptions play a major role in information transmission in these markets. The presence of such relationships might lead to a reduction in diversification potential for investors.
Market Volatility and Regulatory Governance in Emerging Markets
Authors: Uppal Jamshed , Mangla Inayat
Published: February 2023

We study the relationship of stock return volatility in 32 emerging countries to the governance environment in each country. Our results indicate that the effectiveness of public regulatory processes in different countries explains the differences in the observed market volatility. Aspect of governance relating to the political system does not appear to significantly influence the stock market volatility across countries. On the other hand, the governance aspect relating to market regulation and its effectiveness appears to be negatively associated with market volatility. It indicates that better governance, effective capital markets regulations and efficient conflict resolution mechanisms are likely to lead to a smoother process of regulatory adjustment and to lower market volatility.
Do Turtles Have Fat Tails? Donchian Channels and Turtle Trading: The Case of Soybeans
Authors: Rayome David , Jain Abhijit
Published: February 2023

This paper attempts 10 simulate "Turtle Trading" to ascertain whether the legend holds kernels of truth. More importantly, the research provides information on whether the turtle system has merit, and what the more important ingredients might be. The system, a channel breakout system, is tested with data from soybean futures contracts over a 27 year period; from 1980 into 2007. An initial amount of capital of $5,000.00 grows to $187,762.50 under the best case scenario. One of the most important ingredients in the turtle system is the use of stops to preserve capital. Indeed, the capital preservation rules may be the most important ingredient. Random behavior in the financial markets, as predicted by efficient market proponents, would lead to normal distributions of returns with "skinny" tails. Trend traders, like the turtles, believe that prices move in trends that defy the description of random movement. These trends lead to distributions of returns with "fat tails". The analysis of more than 100 futures contracts and several hundred trades over more than 27 years in this paper lend credence to the idea that the "Turtles" do have "fat tails".
Personal Financial Planning: When Should You Start?
Authors: Lin Jason , Dorosh Devin
Published: February 2023

This study was conducted to determine if age plays a factor in the level of a person's personal financial awareness and practices. An online survey of Truman State University students and Faculty was conducted, and the data was analyzed using crosstabs in SPSS software. In general, the results showed that older people are more aware of their personal finances and have begun saving for retirement. However, contrary to other studies, older people have more credit cards and credit card debt than younger people based on the data. Finally, the data showed that people who feel that they are aware of their personal finances, generally are aware and demonstrate their awareness through their actions.
Using Forecasts to Trigger Portfolios Rebalancing: Can Forecasts Reduce the Gap Between Expected and Actual Returns?
Authors: Kopp Thomas
Published: February 2023

This research finds considerable support for the notion that "buy and hold" investors will attain superior performance if they select portfolios using forecasted returns within the traditional mean variance approach. Portfolios comprised of the U.S . and five foreign i-Shares were generated using both historical and forecasted returns. Over the course of five holding periods, the portfolios generated using forecasted returns consistently outperformed those generated using the traditional mean-variance approach as well as the U.S. only, "home biased" portfolio. This suggests that buy and hold investors can attain the benefits of international diversification without the constant monitoring and rebalancing necessary to attain the expected performance of portfolios generated using historical returns.
WACC Misunderstandings
Authors: Johnson Dean , Qi Howard
Published: February 2023

The Weighted Average Cost of Capital (WACC) has become a standard term and toot in finance. Given its broad acceptance and use, individuals are tempted to apply the WACC method without critically considering its theoretical foundation. Specifically, this study explains two common misunderstandings about the WACC method found in industry, literature and textbooks. First, decision makers view the WACC approach as valid only when the capital structure does not change. This is not a true restriction on the application of WACC. Second, many individuals and textbooks view WACC as the appropriate discount rate for NPV calculations if the project has the same risk and leverage as the mother firm without considering the investment horizon of the project. As shown, this can lead to faulty capital budgeting decisions. As such, this paper joins a small but growing stream of research in critically examining capital budgeting tools. It serves as a warning to practitioners in the use of WACC and wakeup call for academics in the instruction of WACC.
Global Diversification of Equity Portfolios: Non-US Perspective
Authors: Ha Kristen , Su Yuli , Yip Yewmun
Published: February 2023

The purpose of this paper is to examine the ex-ante performances of international portfolios from a non-U .S. investor's perspective (i.e., Mexican, Thai, German, and British), and to examine whether controlling for exchange rate risk through the use of currency forwards would allow investors to capture additional gains from international diversification. Portfolio strategies such as minimum variance portfolio and the certainty equivalence portfolio are used to construct global portfolios, and their performances on an ex-ante basis are compared to those for domestic portfolios for each of the four countries. The sample period from 1999 to 2003 is selected so as to examine the effect of the introduction of the euro on the benefits of international portfolio diversification. Our results suggest that during the sample period, international portfolio diversification does not benefit Mexican and Thai investors mainly due to the fact that their domestic market performances dominate the performances using international diversificati on strategies. On the other hand. Gemlan and British investors can benefit from international portfolio diversification. However, hedging against exchange rate risk reduces the benefits of international portfolio diversification. Our result suggests that part of the diversification benefits for investors in developed economics comes from exchange risk exposure.
Detection of Multiple Beta Shifts in Mutual Fund Returns Data
Authors: Howe Thomas , Pope Ralph
Published: February 2023

Research suggests that mutual fund betas are not stationary. However, the performance of the nonstationarity tests has been called into question. This study examines the ability of four such tests. None of the tests shows good ability to detect sudden 25 percent beta shifts, and two of the tests have inflated, one of them grossly inflated, Type I error rates.
Board Independence and Firm Performance: Case of Small-Cap Firms
Authors: Lee Sharon
Published: February 2023

Many changes in the size and composition of corporate boards of directors have occurred since the enactment of the 2002 Sarbanes-Oxley Act (SOX). With the new regulations, we have seen an increase in the number of independent board members and a decrease in the average size of boards. A recent study of S & P 500 firms [Lee, Carlson, 2007] shows that firms with the most independent boards perform significantly better than firms with less independent boards. Studies before the enactment of SOX found a significant inverse relationship between board size and firm performance. However, this relationship is not found in this study. In smaller firms, the goals of management and shareholders may be more aligned than that in larger firms such as the S & P 500. It is possible that the objective monitoring from a more independent board is not a significant factor in the performance of smaller firms. This study includes small-cap firms and examines the relationship between board independence and firm performance in small-cap firms.
Enriching a Personal Finance Class with Free Online Video Clips
Authors: Ary Eddie , Files James , McKinney Bryan
Published: February 2023

In spite of the fact that many of the video clips available at YouTube and other video providers are designed for entertainment, an increasing number are educational in nature. Extensive searching by the author revealed a multitude of videos relating to the topics covered in a personal finance course. The purpose of this paper is to provide a topical video guide to professors of personal finance interested in utilizing video clips as a teaching tool. Various approaches to the effective use of video clips in the classroom are also suggested.
Investor and Management Commitment in Socially Responsible Mutual Funds
Authors: Hickman Kent , Shrader Mark , Xu Danielle
Published: February 2023

We explore the behavior of investors and managers of socially responsible mutual funds in order to gain insight into their commitment to ethical investing. Management fees, fund turnover, loads, and fund flows are contrasted between matched samples of ethical and traditional mutual funds. Our findings indicate that both managers and investors exhibit commitment in that they appear willing to sacrifice fee revenue and financial returns, respectively, for their ethical goals.
On the Pricing of Credit Risk in Eurocurrency Market
Authors: Tai Chu-Sheng
Published: February 2023

Most of previous studies on credit risk have been focused on corporate bond markets. This paper focuses on whether the credit risk is priced in the Eurocurrency market. The empirical test relies on a multivariate GARCH (1,1)-in-mean version of the ICAPM model to describe the joint stochastic process of three state variables: world market risk, interest rate risk, and credit risk, during the period January 1986 to December 2002. The paper documents a negative, significant, and time-varying systematic credit risk premium.
Insider Trading: In Search of Definitional Clarification
Authors: Bowdidge John , Swales, Jr. George , Chang C. Edward
Published: February 2023

This abstract was created post-production by the JFI Editorial Board.
Like so many human activities, insider trading can be carried out in a legal manner as well as in an illegal way. The current study has attempted to show both ways of insider trading. Further, the study has clearly established that there are indeed respectable journalists who regularly--by error--give the term a strictly criminal meaning. May we all learn to engage in this activity in a perfectly legal manner. May we also encourage appropriate officials to punish and eliminate those who use the technique in an illegal manner.
Does Investing in Interim-Terms Pay Dividends?
Authors: Graham Lise , Krueger Thomas
Published: February 2023

Interim-term course offerings are becoming more common as universities attempt to respond to student demand for courses outside the traditional semester time frames and to more fully utilize their resources (both faculty and facilities). One of the concerns with these courses is that the compressed time frame may compromise student learning, in terms of both learning within the course and knowledge retention. This paper considers these issues by comparing the performance of finance majors enrolled in the principles course in an interim session with that of students taking this course in a traditional term. For students in our study, we find that there is no statistical difference in the two groups’ performance within the principles class itself or in the subsequent courses required of all finance majors.
Group Think in Financial Analysis? A Multivariate Study
Authors: Webster Robert
Published: February 2023

This multivariate behavioral research investigates if financial assessments made by analysts may be affected by the professional employment group or sector in which the analyst works. Professional financial analysts from two separate groups were studied. The two groups were analysts for state public service commissions who regulate the public utilities industry and professional private sector analysts who specifically follow stocks and bonds of public utility companies. Members of both groups were asked by way of a mailed survey to analyze multiyear comparative financial statements of a publicly traded electric utility company using variables related to liquidity, long term debt, cash flow, dividends, profitability, as well as the overall financial condition of the firm. The paper describes the data collection process, statistical analysis, and results of the research.
Survey and Synthesis of Practices in Estimating Cost of Capital of Non-American Firms
Authors: Heino Heikki
Published: February 2023

The purpose of this paper is to presents anecdotal evidence of how financially sophisticated Multi-National Corporations (MNCs) estimate cost of capital. This paper differs from its predecessors in several aspects. The previously published surveys are based on written, closed–end surveys. The questionnaires were sent to a large sample of firms in a specific country or region. The questionnaires often covered a wide array of topics and commonly used multiple-choice or fill-in-the blank questions. So, the questionnaires provided for a limited opportunity to explore subtleties of the topic. The US surveys for obvious reasons do not survey MNCs headquartered outside the US. This paper is an attempt to address that deficiency. Our survey is based on results of telephonic survey method. Another important feature of our survey is that it identifies some ambiguities in the application of cost of capital theory in global environment.
Switching Strategies for Individual Investors: Recent Evidence from the Self-directed Family of CREF Retirement Accounts
Authors: Rayhorn Charles , Janson Kenneth , Drosen James
Published: February 2023

Systematically moving an investment balance from one account to another, and then back again, with the hope of generating returns that exceed those from a buy-and-hold alternative, is the essential description of a switching strategy. In this study, month-end switching is examined within the funds available to TIAA-CREF retirement plan participants. Data are reviewed through the end of 2008. While the transaction cost and tax acceleration hurdles that typically disadvantage switchers are mooted with the CREF strategy, institutional and regulatory impediments have remained daunting. While a simulated CREF Stock/Money Market switching strategy has yielded a positive wealth relative when compared to buy-and-hold over the period of study, the window of opportunity for this particular switching implementation has been closed by a recent SEC rule change. Nevertheless, opportunities to profitably implement switching appear to remain plausible through self-directed retirement brokerage accounts.
Exchange Traded Funds: Impact on Diversification
Authors: Aroskar Raj
Published: February 2023

The diversification potential of iShares is investigated by using sixteen iShares representing two different regions. VAR is used to detect both bidirectional relations between iShares and indexes and regional relations within iShares and indexes. Though iShares do capture information from their home markets, they also have an impact on their home market. Thus, it may be difficult for US investors to avoid systemic impact from the US market. Also, there are regional influences on individual European indexes and iShares and on Asian indexes leading to limitations for diversification. However, Asian iShares do not demonstrate any regional relationships and hence would lend themselves for diversification purposes.
Returns: An International Perspective
Authors: Patel Jayen
Published: February 2023

This study examines risk and return characteristics of developed and emerging country stock markets. In recent years, U.S. individual investors have increasingly invested in foreign markets and are therefore interested in understanding stock market performance in other countries. Also, students find financial theory more relevant if concepts are explained using actual stock market data. Therefore, the results of this study will be helpful in explaining stock market return and risk concepts to individual investors and students alike.
REIT Valuation Multiples
Authors: Sahin Olgun
Published: February 2023

This paper examines the accuracy of valuation multiples in the Real Estate Investment Trusts (REITs) Industry. We evaluate fifteen multiples based on share price, enterprise value, and adjusted enterprise value. We construct benchmark multiples by grouping REITs into property categories. We place a given REIT into a group based on its property focus reported by SNL Financial and National Association of Real Estate Investment Trusts (NAREIT). The accuracy of valuation multiples are examined by using errors defined as the natural log of the estimated value to actual value ratio. Findings suggest that valuation errors are within a 15% threshold, mostly for enterprise value to EBITDA and enterprise value to EBIT multiples. In addition, we find that REIT specific multiples such as price-to-funds from operations, price-to- adjusted funds from operations, and price-to-NAV produce valuation errors less than that of earnings based multiples.
Economic Integration and Portfolio Diversification: An Empirical Examination of ASEAN Markets
Authors: Naidu G. N. , Choudhury Askar
Published: February 2023

In this paper, we examine the potential gain achievable through international diversification using two different approaches to portfolio construction. We build portfolios in the Association of Southeast Asian Nations (ASEAN) stock markets for Japanese, German, and British investors respectively. Two sets of portfolios are constructed using two different approaches: a) Correlation based approach and b) Country Beta based approach proposed by Naidu and Choudhury (2006). Overall, our results show that Naidu-Choudhury approach (country-beta based) is a comparable alternative to Markowitz approach (correlation based) for all the three investors based on Sharpe’s performance measure for the time period considered. Moreover, our results indicate that Naidu-Choudhury approach holds a promise as an alternative method to create internationally diversified portfolios.
Islamic Banks and the Global Financial Crisis of 2007-09: An Assessment
Authors: Uppal Jamshed , Mangla Inayat
Published: February 2023

We examine the experience of the Islamic banks with respect to the global financial crisis of 2007-09 (GFC) and find that these were not immune from the ravages of the GFC. In particular, our analysis of the banking sector in Malaysia shows that the Islamic banks were adversely affected by it to a greater extend then were the conventional banks. Post-December 2008, the capital adequacy ratios for these banks were significantly lower, the loan loss ratios significantly higher, and their total loss reserves and secondary liquidity positions deteriorated.
Day of the Week Effect in the U.S. Stock Market
Authors: Varamini Hossein , Mu Bingye
Published: February 2023

This paper tests the efficiency of the U.S. stock market by examining the day-of-theweek effect for the average daily returns of the S&P 500 Index for a recent sample period and during the financial meltdown of 2008. The result of the pair-wise comparison of equal means show that the t-values for all pairs of daily returns are insignificant. The study then uses dummy variables to examine the day-of-the-week effect of the stock market by testing for equality of the mean returns across all trading days of the week. The empirical results of the study show that the individual t-values for the dummy variables and the F-value are insignificant for both time periods, signifying the absence of the day-of-the-week effect. The study concludes that there are no statistical differences among the daily returns of the S&P 500 Index for recent sample periods and provides additional support for the efficient market hypothesis.
Performance of DJIA Stocks Using Fundamental Indexation
Authors: Krueger Thomas , Wrolstad Mark
Published: February 2023

During the decade beginning on December 31, 1999, an equal-weighted portfolio of the Dow Jones Industrial Average (DJIA) stocks outperformed the market capitalization and priceweighted portfolios, with ending values of $1,020, $731, and $777 on the $1,000 originally invested, respectively. The net income and free cash flows-weighted portfolios performed the best with identical ending values of $1,082. The portfolio with the lowest standard deviation measure of total risk was weighted on net income (14.26%) and the portfolio with the highest total risk was weighted on total assets (27.78%). All portfolios had their worst performance in 2008, while the best performance varied across portfolios but were limited to the years 2003, 2006 and 2009.
Pursuing a Career in Finance: A Survey of Upper Division Finance Students at Three Universities
Authors: Pope Ralph , Howe Thomas , Duett Edwin
Published: February 2023

This paper explores the attitudes and impressions of upper division finance students in three major regions of the United States (the midwest, the west, and the south) with respect to their discipline, the reasons for selecting it, and their future in it. The research also explores whether students will increase their education through degrees and certifications after they graduate and how they became interested in the finance area.
Impact of Morningstar Five-Star Stock Ratings
Authors: Namjoshi Shantanu , Hickman Kent
Published: February 2023

We examine the behavior of stocks whose ratings by Morningstar are up-graded to the highest Five Star category. Our findings show that these up-grades follow a period of poor performance, are met with significant negative responses, and seem to foretell slightly improved performance relative to the pre-up-grade period. Additionally, trading volume is markedly higher at Morningstar’s announcement.
Recent Evidence on Insurance Stock Interest Rate Sensitivity
Authors: Bouzouita Raja , Young Arthur
Published: February 2023

A number of researchers analyzed the relationship between stock returns and interest rate risk for financial institutions with mixed results. The assets and liabilities holdings of insurance companies are regulated to reduce interest rate risk to policyholders, but not stockholders. Given the recent increase in the number of stock companies and the recent volatility in financial stocks, this paper reexamines the direction and characteristics of the relationship between interest rate risk and stock returns with more recent evidence. Our results have important policy implications for stock investors in insurance companies.
International Index Investing During the Financial Crisis
Authors: Chang C. Edward , Witte H. Doug , Yen Tsu-Hong
Published: February 2023

Conventional wisdom suggests that active portfolio management should be beneficial in international markets, given the relative inefficiency of these markets compared to the U.S. market. Also, recent empirical evidence for U.S. mutual funds suggests that active portfolio management beats indexing during bear markets. Whether this result holds for international mutual funds is an open question. The performance of international mutual funds over the last 15 years as well as during the financial crisis of 2007-2009 offers the most recent timeframes in which to examine these two issues. We compare the performance of international index funds relative to all U.S.-based international mutual funds. Our results show that international index funds, including both index mutual funds and exchange-traded funds, appear to provide higher returns and similar risk when compared with category averages and thus most actively managed international mutual funds. These results hold over the 2007-2009 timeframe as well as over the past 15 years.
Demand for Foreign Currency Reserves in Emerging Market Countries: Is Herding Applicable?
Authors: Etta-Nkwelle Maru
Published: February 2023

This paper examines the possibility of herding behavior in the demand for foreign currency reserves in 90 emerging market countries. A cross sectional absolute deviation model is utilized to detect herding by examining the volatility in the growth rates in reserves in the individual countries compared to the regional average. In addition, for comparison purposes, a contemporary model is utilized to measure the magnitude of herding. In general the results of the herding detection model exhibit herding behavior amongst Asian and Latin American and Caribbean countries, but not in Africa. Interestingly, the Asian countries show a greater tendency to herd than Latin American countries and Africa. We also observe that countries with greater monetary policy autonomy have a greater tendency to herd, while countries that belong to monetary unions are less likely to herd.
Is APV Better Than WACC for Non-Stationary Debt Ratio?
Authors: Qi Howard , Han Guangsen
Published: February 2023

The WACC method is normally considered suitable for firms maintaining a constant debt ratio; while the APV method is more convenient when debt policy and tax rate are more complex. However, we show that this is incorrect in that the APV method actually requires knowledge about more variables (than the WACC method does) in order to implement accurately. On top of this, the central issue (with the APV method) regarding the discount rate for the tax shields is still an open question to a large extent, which makes the APV method even more unreliable. The two-year example provided in this study is set up in a style as general as possible. This allows for an easy extension to more general and realistic situations. Therefore, we clarify a widespread yet mistaken notion about the WACC and the APV method. Not only does it correct a longstanding misconception in academics, but it also has useful implications in practice.
Loan Delinquencies and Bank Stock Returns
Authors: Lepley William
Published: February 2023

This paper examines the statistical relationship between bank stock returns and two fundamental banking variables: (1) changes in net interest margin (NIM), and (2) changes in the loan delinquency rate. Motivated by passage of the Gramm-Leach-Bliley Act (GLBA) in 1999, as well as the significant loan problems witnessed during 2007-09, we examine two separate time periods. For the period following passage of GLBA, bank stock returns are positively related to NIM changes, and negatively related to delinquency changes. But for the pre-2000 period, these statistically significant relationships disappear.
Wealth Effects of CFO Turnover: Evidence from Post-Sarbanes-Oxley Act
Authors: Ghani WaQar , Sharma Rajneesh
Published: February 2023

This study investigates the impact of CFO turnover on shareholder wealth in the post-Sarbanes-Oxley Act period. Our tests are based on a sample of 244 CFO turnovers during the post-SOX (2003-2007) years. Our full and sub-sample empirical results show that market reaction to CFO turnover events was significantly negative for all departure reasons. Prior Pre-SOX research showed no significant market reaction around most CFO departure events with the exception of a sudden CFO departure event. Thus, our results indicate that SOX has influenced market participants’ perception of CFO turnover event as value relevant. We provide evidence that supports existing literature that CFO turnover is disciplinary in nature.
Risk Management During the Real Estate Bubble: GARCH or Stable Distributions?
Authors: Basterfield David , Bundt Thomas
Published: February 2023

This paper backtests Value-at-Risk (VaR) for the Stable Paretian and GARCH models applied to the real estate bubble of 2005-2008. Specifically, we use a rolling time-varying quantile estimation method to backtest Value-at-Risk (VaR) on a widely-held real-estate ETF. Our statistical analysis allows us to test for both distributional assumptions and a model’s ability to track volatility clustering. We find that neither the Stable Paretian nor GARCH model performs satisfactorily for both 95% and 99% VaR and over both crisis and pre-crisis periods. In some cases our rolling time-varying parameter estimation methodology allows the Stable model to successfully track volatility clustering, a procedure simpler to apply than standard GARCH models. Our results are sensitive to the length of the conditioning window, with both models doing better for the 50-day window relative to 100 and 200-day windows. Finally, of particular interest is the Stable model’s high frequency of rejecting the unconditional coverage null, suggesting the Stable distribution poorly fit the data.
Exchange Rate Dynamics: The Case of US Dollar Exchange Rates Against Three Major Currencies in Asia
Authors: Choi Byeongyong , Jeong Jin-Gil
Published: February 2023

With the daily exchange rate against the U.S. dollar data, we found that the volatility of the value of Chinese Yuan is smallest when compared with the Japanese yen and Korean won during the normal period, the Asian financial crisis period and the recent global financial crisis period. During the two crisis periods, we observe a higher volatility for the Korean won compared to the Japanese yen, indicating the “flight to quality.” However, the difference in the volatility is much less during the recent global financial crisis period, implying the “flight to Japanese yen” is not as prevalent as before. We also found that the difference between cross rates and direct market rates for the won/yen rate are statistically significant during the two crisis periods. Although currency speculators and arbitrageurs may find the opportunity for profit, the size of transaction cost may matter.
Audiences in contemporary reality programs
Authors: Selenić Uroš
Published: February 2023

In the paper, a key objective was to determine whether reality programs necessarily have a hostile reception among media consumers, which includes daily newspapers, internet portals, TV viewers, and social network users. The questionnaire consisted of five batteries of questions answered by 250 participants online. The Likert scale method was applied in the first four batteries of questions, while in the last one, respondents gave their answers to the questions asked arbitrarily. Based on the obtained results, the audience confirmed that they are worried because they are not inclined to understand the content of reality programs, which can be manipulated. Additionally, the surveyed persons described pornographic content and violent behavior patterns as negative phenomena on television.