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Pricing efficiency of stock rights issues in Malaysia
No full textThis article undertakes an empirical examination of pure rights issues in Malaysia. Though pricing efficiency is the main focus, we also examine related issues. We study a total of 38 pure rights issues that occurred over the 8-year period January 1998 to December 2005. Using two alternative valuation models, the adjusted Black–Scholes Call Option Model (BSOPM) and the traditional Implied Rights Valuation Model (IRVM), we find the Malaysian market to be inefficient in pricing the rights. Mispricing is quite extensive with a predominance of overpricing. Significantly, both pricing models, despite their different theoretical underpinnings produce similar results. These results are further validated by the returns to our two arbitrage strategies. The trading strategy, which establishes a net short position in the rights produces substantial positive returns, whereas the strategy which effectively goes long the rights, produced marginally negative returns. We found underlying stock price volatility, liquidity and moneyness of the rights to be the key determinants of the extent of mispricing. Finally, we find that underlying stock price volatility was significantly lower post rights issue
An Islamic perspective on economic development
No full textIslam has provided a blueprint of how a society is to be organized, and how the affairs of its members are to be conducted in accordance with its prescriptions. The system itself has not been applied in its entirety, with the exception of a brief period at the inception of Islam. Only in recent decades have Muslims become interested in society-wide implementation of Islamic teachings, with all this implies for development
Profit sharing ratios in mudaraba contracts revisited
No full textThis paper examines three interlinked issues: First, what is the current state of profit sharing in Islamic banking, that is, is the division of profi t between the banks and the depositors satisfactory? Second, can the profit sharing in a two-tier mudaraba contract give the same rate of return to depositors as the bank receives from the investment of their deposits in business? Finally, can the central bank use in some ways the profi t sharing ratio along with the rate of interest as an instrument for credit control in a dual banking system? The answer to the first two questions is in the negative. To the third, a tentative response is yes. The paper also suggests a policy tool the central banks can presumably use for controlling credit, more so in view of the recurring fi nancial crises like the one emanating from the US that the world is facing today. The tool may in addition help improve the link between the banks and depositors by adopting an iniquitous distribution of profits
Estimation of capital stock in agricultural sub-sectors and the process of capital formation in Iran’s development plans
No full textThe lack of statistics has hampered attempts to estimate fixed capital for the agricultural sub-sectors of Iran. Giving a non anonymous agreement on the depreciation rate of capital in machineries and constructions, an indirect method of estimation is employed using capital consumption statistics in different sub-sectors of input-output tables. In this study, capital stock is estimated in agricultural sub-sectors of Iran using the perpetual inventory method. According to the results of this paper, the capital stock in 2006 is estimated to be 53374.9 billion rials in cropping and horticulture, 24334.6 billion rials in animal husbandry, 4982 billion rials in forestry and rangelands and 16374.2 billion rials in fishery sub-sectors at constant 1997 prices, respectively. The findings based on the five year development plans of the country revealed that over the third development plan, the total agricultural capital stock, both in machinery and equipment and constructions, experienced the highest growth while during the second development plan, the machinery and equipment capital stock experienced the lowest growth. Moreover, during the first development plan and over the eight year war, the construction capital stock experienced the lowest growth
An empirical analysis of real activity and stock returns in an emerging market
No full textThe present paper analyzes the role of stock market returns as a predictor of real output for a fast-growing emerging market, Malaysia. In the analysis, forecasting equations for 1-, 2-, 4-, and 8-quarter forecasting horizons based on autoregressive distributed lags framework are adopted. From the estimation, we find evidence that stock market returns do contain predictive ability at short-forecasting horizons, especially at less than 4-quarter horizons. Estimating the forecasting models recursively, we note reduction of out-of-sample forecasting evaluation statistics, namely the mean absolute errors (MAE) and the mean squared forecast errors (MSFE), from those obtained from the simple autoregressive (AR) model. More importantly, the null hypothesis of equal predictive accuracy between the model with stock returns as a predictor and the AR model is rejected for the 1-quarter and 2-quarter forecasting horizons by the McCraken’s (2007) out-of-sample-F statistic
The milestone of blogs and bloggers in Malaysia
No full textIn this era of technology, paper-based media is diffident. With the advent of blogs people are also to liberally express themselves across the borders at zero cost. Freedom of expression is constitutional right with a limitation. This paper identifies the liabilities faced by blogger under existing Malaysia laws, determines the loopholes, if any, in these legislations and proposes ways in which blogs and bloggers can be regulated in Malaysia. In the course of doing this, a curious issue arises and is answered, that is, whether bloggers in Malaysia are regarded as journalists
The 2007-2009 financial crisis, global imbalances and capital flows: implications for reform
No full textThe paper discusses the currents that led to the 2007-2009 financial crisis. We discuss the crisis in a historical context and present evidence regarding the incidence and unit price of risk. Our results show that the unit price of risk prior to the subprime crisis is comparable to the price of risk prior to the great depression and similar to the price of risk at onset of the technology bubble. We then discuss global imbalances, the associated risks with regard to international optimal allocation of capital, and arrangements to minimize problems of global imbalances
Price dynamics of crude oil and the regional ethylene markets
No full textThis paper is the first attempt to investigate: (i) is the crude oil (WTI) price significantly related to the regional ethylene prices in the Naphtha intensive ethylene markets of the Far East, North West Europe, and the Mediterranean? (ii) What drives the regional ethylene prices? The paper is motivated by the recent and growing debate on the lead-lag relationship between crude oil and ethylene prices. Our findings, based on the long-run structural modelling approach of Pesaran and Shin, and subject to the limitations of the study, tend to suggest: (i) crude oil (WTI) price is cointegrated with the regional ethylene prices (ii) our within sample error-correction model results tend to indicate that although the ethylene prices in North West Europe and the Mediterranean were weakly endogenous, the Far East ethylene price was weakly exogenous both in the short and long term. These results are consistent, during most of the period under review (2000.1–2006.4) with the surge in demand for ethylene throughout the Far East, particularly in China and South Korea. However, during the post-sample forecast period as evidenced in our variance decompositions analysis, the emergence of WTI as a leading player as well, is consistent with the recent surge in WTI price (fuelled mainly, among others, by the strong hedging activities in the WTI futures/options and refining tightness) reflecting the growing importance of input cost in determining the dynamic interactions of input and product prices
Islamic house financing: current models and a proposal from social perspective
No full textShelter is one of the basic needs for human beings. Its availability for the people is an Islamic imperative. In view of the appalling living conditions of a substantial proportion of the population in most countries around the world, especially Muslim, Islamic banks have entered the field with various schemes for home financing. In this infant industry, this effort is understandably guided by the profit motive, but a social dimension has to surface in the course of time.Unfortunately, the models banks currently use for home financing remain under the juridical gaze, more so as the practice is not always found to be transparent. This paper looks at Islamic home financing models in a broader societal context. It evaluates the efficacy of the current financing structures practised and suggests a new approach.The proposed model is shown as superior to the existing ones. It meets the norms of equity, fair play and openness does not, presumably,violate any other Islamic norm. Finally, the paper makes some policy suggestions to integrate Islamic home financing into the broader social goals of an Islamic econom
Exploring family takaful's evolving landscape
No full textAs the appetite for family takaful grows, its underwriting principles and conventions are facing closer scrutiny. Mr Ezamshah Ismail and Dr Ahcene Lahsasna, both council members of the Shariah Advisory Council of the RGA Global Reinsurance Co Ltd Labuan Branch Retakaful Window, examine family takaful’s strengths, and how it can serve its core market while continuing to evolve to serve a broader constituency