Template-Type: ReDIF-Article 1.0
Author-Name: Ming-Chih Lee
Author-Name: Chien-Liang Chiu
Author-Name:  Wan-Hsiu Cheng
Title: ENHANCING FORECAST ACCURACY BY USING LONG ESTIMATION PERIODS
Abstract: A tradeoff between forecast accuracy and the length of an estimation period always exists in forecasting. Longer estimation periods are argued to be less efficient, however, using the forecast encompassing and accuracy test, this study discusses the importance of considering the overall usefulness of information in the in-sample period. The empirical results demonstrate that forecasts using the correct model have reduced measurement loss and the mean of forecast errors decrease with an increase in in-sample period. Moreover, for the forecast accuracy and encompassing tests, reducing the use of observations in making estimates leads to the wrong model being easily accepted. Additionally, these analytical results are also consistent with the application in hedge performance, that is, the hedge effectiveness is optimized when the estimation period is longest, particularly under the recursive scheme.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 1-9
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-1.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:1-9

Template-Type: ReDIF-Article 1.0
Author-Name: Luca Vincenzo Ballestra
Author-Name: Roberto Ferri
Author-Name: Graziella Pacelli 
Title: THE HESTON STOCHASTIC VOLATILITY MODEL FOR SINGLE ASSETS AND FOR ASSET PORTFOLIOS: PARAMETER ESTIMATION AND AN APPLICATION TO THE ITALIAN FINANCIAL MARKET
Abstract: We investigate the performance of the Heston stochastic volatility model in describing the probability distribution of returns both in the case of single assets and in the case of asset portfolios. The R. parameters of the Heston model are estimated from observed market prices using a simple calibration method based on an integral representation of the exact probability density function of returns derived by Dragulescu and Yakovenko (2002). In the case of multiple correlated assets, the correlation parameters are obtained using a heuristic procedure based on a matrix completion algorithm. We present numerical experiments where several stocks traded on the Italian financial market are considered. We show that, both in the case of single assets and in the case of multiple correlated assets, the Heston model provides an excellent agreement with historical time series data and fits the empirical probability distribution of returns far better than the lognormal model.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 11-23
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-2.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:11-23

Template-Type: ReDIF-Article 1.0
Author-Name: Sunando Sengupta 
Title: IMPLICATIONS OF EUROPEAN TRADING FOR THE NEW YORK STOCK EXCHANGE OPEN
Abstract: We test the hypothesis that a market maker in New York faces a more competitive market for cross-listed European firms trading simultaneously in their home market during overlapping trading hours as compared to U.S. firms which trade mainly in New York. A sample of seventy two European firms is matched with a control group of U.S. firms, under the same industry and with same liquidity. We find that the mean percentage bid-ask spread for the European firms is significantly smaller than that of the U.S. firms for the opening thirty minutes of trading at the NYSE, even after controlling for liquidity and probability of informed trading. When we compare the percentage bid-ask spreads during the NYSE afternoon after the European markets have closed trading, we find no significant difference. This suggests that the U.S. and the European markets are integrated during the period of overlap and synergies exist between trading venues.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 25-39
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-3.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:25-39

Template-Type: ReDIF-Article 1.0
Author-Name: Vera A. Adamchik
Author-Name:  Arthur E. King
Title: LABOR MARKET EFFICIENCY IN POLAND: A STOCHASTIC WAGE FRONTIER ANALYSIS
Abstract: In this paper, we apply a stochastic frontier approach in order to analyze labor market efficiency in Poland – a transition economy and a new entrant to the European Union. Wage efficiency is defined as the ratio of a worker’s actual and potential (maximum) wage, given his or her demographic and socio-economic characteristics. Our findings indicate that, on average, in 2001 the full-time hired Polish workers realized 86 percent of their potential earnings. It implies inefficiency in acquiring and processing job market information. At the same time, an international comparison shows that the degree of wage efficiency in Poland was similar to or higher than that in other developed countries. Our attempt to identify the determinants of wage efficiency in Poland produced mixed results. However, in sum, worker performance in the Polish labor market seems to be rewarded appropriately, with some typical-for-Europe degrees of inefficiency in acquiring information, by a standard of wage efficiency and proximity to the wage frontier.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 41-50
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-4.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:41-50

Template-Type: ReDIF-Article 1.0
Author-Name: Sabur Mollah 
Title: PRICE REACTION TO DIVIDEND INITIATIONS AND OMISSIONS IN EMERGING MARKET: EVIDENCE FROM PRE AND POST MARKET CRISIS IN BANGLADESH
Abstract: Dividend signalling and information content of dividends are areas of interest in financial literature. A vast majority of the research conducted on information content of dividend. However, no study has examined the effectiveness of dividend announcements as a signalling device in the stock market of Bangladesh. This study employs conventional event study methodology to investigate whether dividend announcements convey information to the market or whether investors dividend announcements as the signalling device of the firm’s prospects. The analysis is completed for the time period before and after the1998 market crisis in Bangladesh. The sample consists of cash dividend announcements for Dhaka Stock Exchange (DSE) listed firms preceding and following the market crisis. The empirical results suggest that the reactions to dividend announcements are not significant either preceding or following the financial crisis in Bangladesh, therefore, announcements of dividends neither convey information to the market nor do investors consider dividend announcements as a signal.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 51-68
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-5.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:51-68

Template-Type: ReDIF-Article 1.0
Author-Name: Olubanjo Taiwo Ajilore
Author-Name:  D.O. Elumilade
Title: DOES CORRUPTION MATTER FOR NIGERIA LONG RUN GROWTH: EVIDENCE FROM COINTEGRATION ANALYSES AND CAUSALITY TESTS?
Abstract: The study examines the relationship between corruption and economic growth in the Nigeria economy for sample periods ranging from 1970 to 2004. Johansen’s maximum likelihood cointegration techniques and Granger causality tests were applied to annual, national-level data. The results of this study indicate that corruption is cointegrated with Economic growth in Nigeria. In addition, for Nigeria, the study found a one-way causality from corruption to economic growth. These findings provide a statistical confirmation of unfavorable effects of corruption on economic performance as widely hypothesized in economic literature. For policy, the results of this study suggest that the current anti corruption drive in the country should be more vigorously pursued as this result indicated that it has important consequence on economic growth aspirations of the country.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 69-79
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-6.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:69-79

Template-Type: ReDIF-Article 1.0
Author-Name: Lynda S. Livingston 
Title: A SIGNALING MODEL OF CONTROL BLOCK SALES BY ENTREPRENEURS
Abstract: In this paper, we present a model in which higher-valued managers signal their value by voluntarily submitting to shareholder oversight. If a manager is willing to sell enough stock to release voting control, he is perceived to be of higher quality than if he had defensively maintained control. The implication of the model is that voluntary/control sales by insiders can be good news for the firm. This is consistent with the share-price increases that follow the deaths of entrenched managers.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 81-98
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-7.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:81-98

Template-Type: ReDIF-Article 1.0
Author-Name: Rajarshi Aroskar 
Title: SURROGATE INVESTMENT STRATEGY: THE CASE OF SPAIN FOR LATIN AMERICA
Abstract: This study analyzes a surrogate investment strategy by using a developed market as a possible candidate for investment in developing markets. It examines the markets of Spain and four Latin American countries: Argentina, Brazil, Mexico and Chile. Both short-run and long-run relationships are analyzed in this paper by using vector autoregression (VAR) and cointegration methodology respectively. It is found that Spain is affected by the Latin American countries in question, but does not affect them. Thus, it has exposure to these markets. This relationship is also maintained in the long run. Thus, Spain serves as an excellent surrogate for investment in Latin America.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 99-108
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-8.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:99-108

Template-Type: ReDIF-Article 1.0
Author-Name: E.M. Ekanayake
Author-Name: Mihalis Halkides
Author-Name: Robin Rance
Author-Name: Iliana Filyanova 
Title: INTRA-INDUSTRY TRADE BETWEEN THE UNITED STATES AND LATIN AMERICAN COUNTRIES
Abstract: This paper aims to explain the extent of vertical and horizontal intra-industry trade (IIT) in United State's foreign trade with 20 Latin American countries. It also attempts to identify the country- and industry-specific determinants of vertical and horizontal IIT. One of the main findings is that, with the exception of Mexico, the U.S. trade patterns with rest of Latin American countries are dominated by one-way trade. Another main finding is that the observed increase in intra-industry trade between the United States and Latin America is almost entirely due to two-way trade in vertical differentiation. The third important finding is that, among the country-specific determinants, the level of per capita income and trade intensity are found to affect the shares of all three types of IIT positively while difference in per capita income, difference in economic size, distance, difference in factor endowment, and trade imbalances are found to affect the share of all three types of IIT negatively. Finally, among the industry-specific variables, product differentiation, vertical product differentiation, industry size, and product quality differences are found to have a positive effect while industry concentration is found to have a negative and statistically significant effect on all three types of IIT share.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 109-124
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-9.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:109-124

Template-Type: ReDIF-Article 1.0
Author-Name: Nikolas Papasyriopoulos
Author-Name: Athanasios Koulakiotis
Author-Name: Pyrros Papadimitriou
Author-Name: Dimitris Kalimeris 
Title: AN EVENT STUDY ANALYSIS OF STOCK PRICE REACTION TO MERGERS OF GREEK INDUSTRIAL AND CONSTRUCTION FIRMS
Abstract: Using the event study methodology introduced by Brown and Warner (1985) for six Greek industrial and construction firms, we attempt to measure the abnormal returns on stock prices on the day of the acquisition announcement. Estimation period and event period in our market model is -211 -11 -10, +10 respectively. In order to allow for asymmetric effect of news on the abnormal returns we use an E-GARCH model for period -211,-1. Empirical results show that on day t=0, AAR go slightly positive, while CAAR remain positive (0.4% and 1.3% respectively). E-GARCH model results show that good news have a positive effect on abnormal returns, while bad news a marginal negative one.
Classification-JEL: 
Keywords:
Journal: The International Journal of Business and Finance Research
Pages: 125-132
Volume:1
Issue: 2
Year: 2007
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v1n2-2007/IJBFR-V1N2-2007-10.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:2:p:125-132