Template-Type: ReDIF-Article 1.0 Author-Name: Rajarshi Aroskar Title: DYNAMIC RELATIONSHIPS BETWEEN ISHARES AND COUNTRY FUNDS: THE CASE OF EUROPE AND ASIA Abstract: This study investigates whether country effects or regional effects are prominent in iShares and country funds that trade in the US. iShares and country funds from three European and three Asian countries are investigated for possible long run and short-run relationships among iShares and country funds of each country and among regional iShares and among regional country funds. Johansen’s methodology is used to investigate long-run relationships, while vector autoregression is used to detect short-term effects. It is found that for both regions, iShares and country funds are related to their country counterparts but not to their regional counterparts in the short run. The reverse is true in the long run, with relationships among regional counterparts but not among country counterparts. These findings support the hypothesis that country effects are prominent in the short-run and regional effects take over in the long run. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 1-10 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:1-10 Template-Type: ReDIF-Article 1.0 Author-Name: Jean-Pierre Gueyié Author-Name: Ramzi Ben Sedrine Author-Name: Roger B. Atindehou Title: CANADIAN STOCK SPLITS AND FINANCIAL ANALYST FORECASTS: TESTING SIGNALING AND ATTENTION EFFECTS Abstract: This paper analyses Canadian market reaction to stock splits over the period 1985-2000. It then attempts to explain this reaction by two hypotheses, namely signaling and attention hypotheses. Results indicate that the Canadian market reacts positively to stock split announcements. Positive average abnormal returns of 1.76% and 1.14% are reported for the announcement date and the following day, respectively. This market reaction is partly explained by signaling hypothesis. An earning prediction error of 115.05% after the announcement date is observed, giving support to this hypothesis. However, the authors are unable to validate the attention hypothesis in Canadian markets. The average revision rate of earnings per share by financial analysts is 3.49%, but is not significant. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 11-20 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:11-20 Template-Type: ReDIF-Article 1.0 Author-Name: Jaime Andrés Sarmiento Espinel Author-Name: Luis Eduardo Sandoval Garrido Title: THE RATIONALITY OF THE COLOMBIAN EXCHANGE MARKET Abstract: This research analyzes the way agents participating in the Colombian exchange market form their expectations and how they arrive at an equilibrium price. The forward exchange rate was used as an approximation of the expected spot rate, implying the necessity to explain how its price is determined. Monte–Carlo techniques and three tests of the Forward Foreign Exchange Market Efficiency Hypothesis are conducted. Six hypotheses of behavior were tested, from static to rational expectations and from risk neutrality to risk premium and/or transaction costs. Weekly data from January 1997 to January 2006 presented signs of rational and adaptative expectations, together with risk neutrality. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 21-37 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:21-37 Template-Type: ReDIF-Article 1.0 Author-Name: Sid Howard Credle Author-Name: Sharad Maheshwari Author-Name: Edward Pyatt Title: A COMPARISON OF PORTFOLIO PERFORMANCES OF THE RANDOM AND STRATEGIC STOCK SELECTION STRATEGIES: THE HAMPTON ROADS STOCK PICKING CONTEST Abstract: In this paper the performance of the random and the strategic stock selection approaches are compared and tested to determine which results in the greater level of returns to a portfolio of stocks of Virginia based companies. The analysis is conducted via a stock picking contest developed by a local daily newspaper in the Hampton Roads area and hosted by a local university business school. The contest included 1,225 entries, in which contestants chose five stocks from Virginia-based companies. The portfolio return performance of contestants was observed over a 12 week period and the contestant receiving the greatest hypothetical returns over the contest period received a $1,000 US savings bond. The stocks selected by contestants were classified into two aggregated portfolios, indicating whether a random, or a technical/strategic method, was used to pick stock portfolios. A comparison of the two aggregated portfolios indicated that the technical/ strategic selection group out-performed the random walk selection group. In 10 of 12 weeks of the contest the researchers observed a statistically significant difference in the returns of these portfolios. It was also observed that the strategic group out-performed the selected population of Virginia based companies. None of the aggregated average returns from the random or the strategic selection group portfolios out-performed the Standard & Poors 500 Average during the contest. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 38-47 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:38-47 Template-Type: ReDIF-Article 1.0 Author-Name: C. Pat Obi Title: MARKET SECTOR REACTIONS TO 9-11: AN EVENT STUDY Abstract: This study presents an overview of how stocks believed to be most vulnerable to the 9-11 attacks reacted, in particular, in the pre-event period. The insider information theory about pre-knowledge of the attacks is carefully analyzed in both the airlines and the financial services sectors of the market. Standard event study methodologies are used to calculate abnormal returns before and after the attacks. Also, riskadjusted returns are examined to determine whether investors achieved differential performance during the event period. Expectedly, significant negative excess returns occurred in the airlines and financial services sectors due to the incident. A subsequent reversal of excess returns indicates that markets may have overreacted to the attacks. Uncertainties in energy supply resulted in high but short-lived oil prices. Pre-event negative excess returns in airlines and financial stocks are suggestive of a trading pattern that may have been driven by expectation of an impending anomaly. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 48-58 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:48-58 Template-Type: ReDIF-Article 1.0 Author-Name: Rahim M. Quazi Title: FOREIGN DIRECT INVESTMENT IN LATIN AMERICA: A PANEL REGRESSION STUDY Abstract: Since the early 1980s developing countries have generally experienced a heavy influx of foreign capital, and among the developing regions, Latin America has emerged as a prime destination of FDI. An extensive literature has evolved on the inflow of FDI in Latin America, which identifies a number of variables, such as market size, trade openness, etc., as the key determinants of FDI. Due to nonavailability of reliable and consistent data, domestic investment climate as a determinant of FDI has been generally excluded from the literature. This study seeks to fill that void by using the Economic Freedom Index, published since 1995 by The Heritage Foundation, as a proxy for domestic investment climate for a sample of 18 Latin American countries over 1995-2004 period. Employing panel regression methodologies, this study finds that economic freedom is a significant and robust determinant of FDI in Latin America. This study also finds that NAFTA has created an insignificant locational advantage for Mexico vis-a-vis other countries in the sample. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 59-67 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:59-67 Template-Type: ReDIF-Article 1.0 Author-Name: Hsin-Yu Liang Author-Name: Alan Reichert Title: ECONOMIC GROWTH AND FINANCIAL SECTOR DEVELOPMENT Abstract: This paper estimates an Odedokun-type supply-leading model of financial sector development (FSD) which incorporates both banking and capital market variables as potential drivers of economic growth. The current findings illustrate the impact on economic growth of various measures of FSD which includes basic intermediation services, as measured by M2 and money market mutual funds, and more advanced financial products such as stock market development and risk management services. The empirical findings in this study document an important shift from an exclusive reliance on basic banking services among emerging/developing countries towards an expanding role for the capital markets. An even stronger emphasis on the role of capital markets is documented for a group of advanced countries. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 68-78 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:68-78 Template-Type: ReDIF-Article 1.0 Author-Name: Jonathan D. Stewart Author-Name: Terrance Jalbert Author-Name: Karl-Johan Moritz Title: A TRADING RULE TEST USING STOCKHOLM AND U.S. CROSS-LISTED SECURITIES Abstract: This paper examines the relative efficiency of the U.S. and Stockholm Stock Exchanges. Numerous stocks are cross-listed on United States Exchanges and the Stockholm Stock Exchange. We compare the prices of these firms at near-simultaneous trading times. This study is an extension of an earlier work by Jalbert, Moritz and Stewart (2005), who completed an efficiency test on stocks that are cross-listed on the Stockholm and a U.S. stock exchange, finding evidence of an inefficient market. This paper extends this line of work by conducting a trading rule test to provide additional evidence regarding the efficiency of these markets. The results provided here offer additional evidence of efficiency problems between these two markets. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 79-89 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:79-89 Template-Type: ReDIF-Article 1.0 Author-Name: Karel Bruna Title: OPEN MARKET OPERATIONS AND THE PRICE OF LIQUIDITY: THE CASE OF THE CZECH REPUBLIC BETWEEN 1998 AND 2004 Abstract: Effective monetary policy depends on the ability of central banks to stabilize fluctuations of overnight interest rates around their policy rate. The function of the stabilization mechanism involves balancing aggregate bank demand for reserves with the central bank’s supply of reserves in the interbank market. This paper discusses the main sources of temporal gaps between the demand for and the supply of reserves and their impact on overnight interest rate volatility. A theoretical explanation of the role of intertemporal substitution in periods of fluctuating reserves demand is provided. Crucial features of central bank targeting of overnight interest rates are discussed. The behavior of overnight interest rates in the Czech interbank market (1998-2004) is empirically examined in the context of excess liquidity. Some relevant structural changes in the interbank market are identified. Specifically, we find undershooting of the non-stability of excess liquidity in the interbank market and a sharp decline of overnight interest rate volatility associated with the introduction of intraday credit. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 90-103 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:90-103 Template-Type: ReDIF-Article 1.0 Author-Name: Ritab S. Al-Khouri Author-Name: Moh’d M. Ajlouni Title: NARROW PRICE LIMIT AND STOCK PRICE VOLATILITY IN EMERGING MARKETS: EMPIRICAL EVIDENCE FROM AMMAN STOCK EXCHANGE Abstract: This paper empirically investigates the behaviour of daily stock return volatility around price limit hits for a sample of 159 (189) securities listed in Amman Stock Exchange (ASE), over the years 2003(2004). More specifically, we investigate whether daily return volatility for stocks that hit a price limit is lower (higher) in the post limit hit period than in the pre limit hit period. Such a finding would be consistent with the overreaction hypothesis, also referred to as the volatility spill over hypothesis. Our results indicate that stocks-hit experience their highest level of volatility on the day when stocks-hit reach their upper daily price limits of 5% (day 0), and decreases significantly one day after the hit. Similar results are found when stock hits reach their lower daily price limits of -5%, however with less magnitude. Results on the different sectors reveal that the banking sector experiences the highest volatility. However, when the stocks-hit reach its lower limit, the service sector shows the highest volatility as compared to the other sectors in the industry. Therefore, our results are more consistent with the overreaction hypothesis and that the price-limit technique is effective in reducing the volatility by providing a time-out to cool-off. Classification-JEL: Keywords: Journal: The International Journal of Business and Finance Research Pages: 104-120 Volume:1 Issue: 1 Year: 2007 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n1-2007/IJBFR-V1N1-2007-10.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:104-120