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Index tracking and enhanced indexation using a parametric approach
Get PDFBased on the work of Brandt et al.(2009), we formulate an index tracking and enhanced indexation model using a parametric approach. The portfolio weights are modeled as functions of assets characteristics and similarity measures of the assets with the index to track. This approach permits handling nonlinear and nonconvex objectives functions that are difficult to incorporate in existing index tracking and enhanced indexation models. Additionally, this approach gives the investor more information about the portfolio holdings since the optimization is performed over portfolio strategies. Finally, an empirical implementation and an analysis of selected characteristics are presented for the S&P500 index.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.03.00
Examining mean-volatility spillovers across national stock markets
Get PDFThe study of the stock market in a country and the understanding of the influence of stock market crashes within and across the markets has been the subject matter of many researches, academicians and analysts during recent times. In this study we investigate the mean-volatility spillover effects that happen across international stock markets. The study, by taking into consideration the stock market returns based on various indices, investigates the mean-volatility spillover effects using the GARCH in Mean model for the period January 2002 to December 2011. The GARCH-M model seeks to provide useful insights into how information is transmitted and disseminated across stock markets. In particular, the model examines the precise and separate measures of return spillovers and volatility spillovers. The analysis provides the evidence of strong mean and volatility spillover across some stock exchanges.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.01.00
Are over-paid Chief Executive Officers better innovators?
Get PDFThis paper focuses on the pay level of the highest paid executive directors, which we label as “Executive Director’s Organizational Level” (henceforth EDOL), to raise the question if highest paid CEOs invest heavily in innovative projects. Two-stage least squares (2SLS) regressions show that over-paid CEOs are more likely to invest in R&D projects. They highlight, moreover, both from a “statutory” and an “activist” perspective, that CEOs’ intends to invest in value-enhancing innovations are contingent upon compensation committee independence and investor protection level. Check tests reveal that the pay-performance “innovation” effect for option-based compensation is higher than that for stock-based compensation. Within the options (stocks) rewards, unvested options (restricted stocks) are the most effective. However, we find that over-paid CEOs of low-growth firms achieve less innovation compared to those of high-growth firms. Throughout, we reveal that the effect of CEOs performance-pay on innovation is mainly relevant among overconfident managers than non-overconfident ones.
DOI: 10.1016/S2077-1886(13)70031-
The impact of intellectual capital disclosure on cost of equity capital: A case of French firms
Get PDFThe purpose of this paper is to examine empirically the impact of intellectual capital disclosure (IC) on cost of Equity capital. The empirical research is based on companies listed in the French SBF 120 stock market index. The findings confirm our hypotheses that stipulate the existence of a significant and negative association between intellectual capital disclosure with its two components (human capital, structural) and the cost of equity. However, the negative impact of the relational capital disclosure is not validated. The results in this paper are of considerable importance to both policy makers and firms. In fact, the understanding of the impact of Intellectual capital disclosure on cost of equity capital helps policy makers in the evaluation of the costs and benefits of disclosure. Moreover, with regard to managers of firms, the results show the benefit of enhanced IC disclosure regarding the reduction in their cost of capital. This study is one of the very first to provide empirical evidence of the association between Cost of equity capital and the level of disclosure in the three individual intellectual capital categories (human; structural and relational capital).
DOI: https://doi.org/10.1016/S2077-1886(13)70022-
In this issue
Get PDFWe are proud to introduce the thirty-fifth issue of the Journal of Economics, Finance and Administrative Science (JEFAS). For the first time, we have presented three issues within a year due to the introduction of a special publication based on the CLADEA conference. The first article here, “Adoption determinants of the International Accounting Standards IAS/IFRS by the developing countries”, identifies certain explanatory factors that likely clarify the choice of applying IAS/IFRS adopted by developing countries (DCs) up until the year 2008
The twin deficits hypothesis and reverse causality: A short-run analysis of Peru
Get PDFThis study examines causation between the current account and the fiscal surplus and fiscal spending for a commodity-based economy, Peru. Using quarterly data for the open economy, the outcomes reject the twin deficits hypothesis. Instead, the evidence points strongly to reverse causality, that is, the current account causes the fiscal account. However, unlike previous empirical evidence on this subject, for a year, the reverse causality indicates a negative causation because the fiscal consumption is not smoothed when positive permanent shocks to the current account occur. In the short run, the fiscal policy has no effect on the current account, but improvements in the current account increase the probability of attaining a lower bounded fiscal deficit. This evidence is consistent with a small open commodity-based economy that is highly exposed and sensitive to external price shocks.
DOI: 10.1016/S2077-1886(13)70018-
In this issue
Get PDFWe are proud to present the 34th issue of the Journal of Economics, Finance and Administrative Science (JEFAS). The Journal counts with the support of the prestigious Elsevier Editorial. This issue will be shown in the database of ScienceDirect, one of the most prestigious databases worldwide. The first paper, “Transactional capability: Innovation’s missing link”, aims to present a framework with two essential dimensions: (1) the technological capability and (2) the transactional capability. Technological capability is the ability of firms to make effective use of technical knowledge in order to improve production processes and develop new products and services
Adoption determinants of the International Accounting Standards IAS/IFRS by the developing countries
Get PDFThis paper’s main objective is to identify certain explanatory factors that likely clarify the choice of applying IAS/IFRS adopted by developing countries (DCs) up until the year 2008. Based on a sample consisting of 74 DCs, the empirical results have indicated that the DCs most likely to adopt IAS/IFRS have a high level of economic growth, along with a legal system of common law and an advanced educational level.
DOI: 10.1016/S2077-1886(13)70030-
Institutional investors, corporate governance, and earnings management around merger: evidence from French absorbing firms
Get PDFThis paper examines the association between institutional ownership and the earnings management behavior of some French absorbing firms. Using a sample of 76 French mergers and absorptions concluded over the period ranging from 2000 to 2010, we undertake to present some empirical evidence highlighting that absorbing-firms manipulate earnings relevant to the year preceding the merger-offer in the presence of institutional cross-holding. However, the presence of active institutions turns out to limit the managerial accruals discretion. The monitoring role exerted by the active-institutional investors does restrict the opportunities of earnings management around mergers and acquisitions. Further analyses suggest that the average value of discretionary accruals with regards to the absorbing firms proves to be influenced by the nature of merger deal (takeover vs. restructuring).
DOI: 10.1016/S2077-1886(13)70033-
Efecto sobre la rentabilidad que tiene para el afiliado la comisión cobrada por las administradoras de fondos de pensiones
Get PDFThe pension system in Chile is operated by private entities, called AFP, to which every worker must contribute 10% of their income on mandatory individual savings plans for retirement plus a variable fee to the direct benefit of the AFP. On the other hand, the employer quotes a percentage of worker’s compensation insurance to fund disability and survivors through the AFP itself. The affiliate can freely choose the fund that will integrate its individual contribution, as the level of risk to take and the expected return to be obtained, among the five available funds. It is expected that the AFP achieves the highest possible return to their members with the commission charged by your management, but according to the results obtained, there is no evidence found to say conclusively that the commissions influence the behavior of the income of the various funds.
DOI: http://dx.doi.org/10.1016/S2077-1886(13)70020-