March 2016 (Global Economy and Finance Journal)

March 2016 (Global Economy and Finance Journal)

Total Articles - 6

Pages 1 – 10

Author: Erik Benrud and Elena Smirnova

We examine the effectiveness of trading strategies that use exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that offer various types of exposure to gold returns. The strategies are based on the results of recent research that indicate gold is a safe haven when financial market risk increases.  We make adjustments to a stock/bond/gold portfolio based upon signals provided by the VIX and examine the effectiveness and relative effectiveness of the gold-related vehicles to enhance return.  We also examine the returns of the ETFs and ETNs on a stand-alone basis. Our findings show that improved portfolio performance could have been possible over the sample period 2009-2014 by increasing exposure to gold when the VIX rises above a certain threshold and reducing exposure to gold when the VIX declines.  The best results are from using an ETF that provides a simple one-to-one, i.e., unlevered, positive exposure gold, and the results support the hypothesis that gold is a safe haven. The other choices of financial vehicles that offer a levered and/or inverse relationship to gold are found to be less effective or to offer no benefits in the strategies we employ here.

Pages 11 – 26

Author: Raj Varma

Managers may seek autonomy because they disagree with investors on what course of action will maximize a project’s returns.  Alternatively, managers may want autonomy to allow them to extract private benefits from the project.  I examine managerial motives for seeking autonomy using rich ex post project-byproject data for a comprehensive sample of projects in the movie industry.  My findings are consistent with a competitive equilibrium in which managerial autonomy does not distort investment efficiency. Specifically, managers seeking autonomy are matched with projects where disagreement between managers and investors is more likely. Similarly, managers without autonomy are matched with projects where disagreement is less likely to arise and such projects fetch lesser private benefits to managers.

Pages 27 – 37

Author: Daniel Park, Jau-Lian Jeng and Elwin Tobing

Previous studies dealing with gender and retirement savings found that one of the main causes for the differences between genders was largely due to occupation differences between men and women. Surveying 304 men and women working in a non-profit institution in the United States, we investigate whether gender differences exist in retirement savings under identical retirement benefit plans. We find that the retirement contributions between men and women do not show any statistically significant difference.  However, the comparison for male and female groups shows that gender differences in retirement related issues still exist even with identical retirement benefit plans.

Pages 38 – 55

Author: Yoko Shirasu

We empirically examine the factors affecting Japanese bond spreads. We compare banks’ investing activities during the Japanese financial crisis of the 1990s with the global financial crisis of 2008. Our results show that during the 1990s, focusing on liquidity risk, bond spreads were affected by market liquidity and funding liquidity and during the 2008 crisis only by market liquidity. However, when the bond-issuing market was stopped temporarily, banks faced heavy loan funding needs. Banks transferred assets from illiquid corporate bonds to highly liquid government bonds. This phenomenon was flight to liquidity caused not only by a need for market liquidity but for funding liquidity.

Pages 56 – 66

Author: Kashi Khazeh, Leonard Arvi and Eugene D. Hahn

This study focuses and compares the efficacy of two approaches of the transaction exposure (value at risk “VaR” and modified value-atrisk “MVaR”) for multinational enterprises (MNEs) conducting business in one and/or up to seven specific emerging markets for the duration of 2011-2014.  The significance of this study is that it provides the optimal currency portfolio of emerging market currencies.  These two approaches (VaR and MVaR) are compared with the ex-post results. The maximum 1-day loss is assessed, matched across the two aforementioned approaches, but also paralleled with actual results.  These comparisons afford realistic evidence to assist MNEs to determine the level of their tolerance with respect to each version of value-at-risk over time. Moreover, these outcomes will present MNEs useful information in defining if hedging this risk is warranted.  If they decide to hedge (due to the reversal of risk reduction at some point), MNEs need to contemplate as to which hedging technique (i.e., forward/futures, money market, and or option) to use given that the real cost of hedging could be positive.

Pages 67 – 78

Author: Ratneswary Rasiah, Muzafar Shah Habibullah and Baharom Abdul Hamid

This study examines the long-run relationships and short-run dynamic interactions between stock returns and its determinants comprising of GDP per capita, inflation and happiness, over the period 1973 to 2012. The study applies the dynamic heterogenous panel estimation techniques of Mean Group (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effects (DFE) to analyse a set of macro panel data on selected OECD countries to establish the possible causal relations between these variables. The theoretical framework of this study is based on the stock returns theories of Present Value Model/Discounted Cash Flows and “Risk-as-feelings” Theory. The results of this study show evidence that income has a favourable impact on stock returns, while inflation dampens stock returns. Interestingly, the study also revealed that happiness is not significant in determining stock returns in these selected countries, indicating that the market participants are rational economic beings who always act in self-interest, making optimal decisions by trading off costs and benefits weighted by statistically correct probabilities.

Total Articles- 6

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