Template-Type: ReDIF-Article 1.0
Author-Name: Lillian Kamal
Title: Do GAP Models Still have a Role to Play in Forecasting Inflation?
Abstract: Since the end of Great Recession, researchers have turned their attention to studies on economic
recovery, and the speed of correction in the United States. While the economy is recovering, researchers
have begun to expect the possibility of inflation in the future. A recent article from the Federal Reserve
Bank of Cleveland found that simple models of inflation tend to forecast inflation better than large
statistical models. This paper re-visits the price gap model where the central idea is that the price level is
determined by the money stock, output and velocity. A horse race is then run whereby a price gap model
is tested against atheoretic models based simply on past information, and a structural output gap model.
The overall results indicate that the price gap model does in fact display the lowest forecast error over
the shorter term forecast horizons, and thus has the most usefulness for inflation forecasting. Robustness
checks are then run – the models are re-estimated with a different measure of inflation (CPI less food and
energy prices), and the forecasting horizon is extended to 12 quarters. The price gap model is sensitive
to the measurement of inflation and loses some of its forecasting power when core CPI (CPI less food and
energy prices) is used. Naïve forecasts tend to perform better when forecasting inflation series that are
less volatile. However, from the policymaker’s standpoint, it would be more appropriate to have better
forecasting power over a more volatile series and so the price gap model would be the ideal choice out of
the four models tested here. When the forecasting horizon is extended, the price gap model continues to
have the lowest forecast errors.
Classification-JEL: E30, E31, E37
Keywords: Inflation, Inflation Forecasting, Price Gap Model, Output Gap Model
Journal: The International Journal of Business and Finance Research
Pages: 1-12
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-1.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:1-12

Template-Type: ReDIF-Article 1.0
Author-Name:  Ahmad Y Khasawneh
Author-Name: Husam Aldeen Al-Khadash 
Title: Risk and Profitability in Middle East and North Africa Banking System:  An Examination of off Balance Sheet Activities
Abstract: This study analyzes the role of off-balance sheet activities in banks profitability and banks risk in the
Middle East and North Africa banking system. The uniqueness of this study stems from the investigation
timing of and its sample data. The study covers the period covering the 2006/2007 financial crises. We
form our sample from Middle East and North Africa banking system, including different countries and
different bank types. The results indicate that off balance sheet activities are risk reducing as well as
profit generators in Middle East and North Africa banks. The results also indicate the effect of off
balance sheet activities on banks profitability is higher in the case of banks located in oil producing
countries. There is no significant difference between the impact of off balance sheet activities and bank
risk for banks located in oil producing countries. Furthermore, the results show that commercial bank
profitability is more sensitive to off balance sheet activities. Bank risk is more sensitive to off balance
sheet activities in case of Islamic banks.
Classification-JEL: G21, G32
Keywords: Bank Risk, Bank Performance, Off Balance Sheet Activities, MENA Banking System, Islamic Versus Commercial Banks
Journal: The International Journal of Business and Finance Research
Pages: 13-26
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-2.pdf
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Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:13-26

Template-Type: ReDIF-Article 1.0
Author-Name:  Sanjay Sehgal
Author-Name:  Srividya Subramaniam
Author-Name:  Florent Deisting
Title: Tests of Equity Market Anomalies for Select Emerging Markets
Abstract: The study tests prominent equity market anomalies for six emerging markets - Brazil, China, India,
Indonesia, South Korea and South Africa. We find that using the Fama French model (FFM) as
performance benchmark the size anomaly is present in India, South Korea and Brazil, value anomaly in
South Korea and South Africa, momentum in India and South Africa, mild reversals in Brazil, liquidity
anomaly in South Korea and South Africa, profitability anomaly in Brazil and South Africa, accruals
anomaly in South Africa and stock repurchases anomaly in India and South Africa. Stock issues anomaly
does not pose a challenge to asset pricing for sample markets. The four factor liquidity augmented FFM
is a better descriptor of asset pricing compared to CAPM and FFM only in the Indian context. The Fama
French model seems to be an appropriate performance benchmark for other sample emerging markets.
South Africa seems to be the most exciting destination for portfolio managers followed by Brazil, South
Korea and India. The research is relevant for global portfolio managers who indulge in international
diversification as well as for policy makers who are looking for long-term economic cooperation and
greater financial integration among these markets.
Classification-JEL: C51, C52, G12, G14, G15
Keywords: CAPM, Fama French Model, Emerging Markets, Market Anomalies, International Diversification
Journal: The International Journal of Business and Finance Research
Pages: 27-46
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-3.pdf
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Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:27-46

Template-Type: ReDIF-Article 1.0
Author-Name:  Rishma Vedd
Author-Name: Keji Chen
Author-Name:  Nataliya Yassinski
Title: Country and Industry Factor Influence on Investment in Latin American Emerging Markets
Abstract: In this paper, we analyze country and industry factors that influence investment strategies in Latin
American emerging markets. This analysis show investors seeks different benefits from their investment,
and country-specific political and economic events are very important to investors. In very recent years,
the gaining importance of industry effects relative to country effects has come to light. The industry
factor, studies have shown, has displaced the country factor as the main cause in the variability of equity
returns. This phenomenon appears to be tied to the increase in international investment in general, as
well as the ever increasing globalisation of the world economy. This study utilizes the variance approach
to test the relative importance of country, industry, size and time specific sources to determine the
variation between emerging Latin American markets and to assist investors in optimizing returns from
their international portfolios.
Classification-JEL: G11, G15
Keywords: Emerging Markets, Equity Return, Industry Factor, Investment Strategies
Journal: The International Journal of Business and Finance Research
Pages: 47-57
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-4.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:47-57

Template-Type: ReDIF-Article 1.0
Author-Name:  Richard Zhe Wang
Author-Name:  Menghistu Sallehu
Title: The Hidden Message in AFS Securitites of US Banks
Abstract: We examine US banks’ use of available-for-sale (AFS) securities to smooth their earnings during
the most recent macroeconomic business cycle from 2001 to 2010. We contribute to the accounting
literature by investigating the interaction between the macroeconomic environment and the income
smoothing activities of US banks, and find four main results: First, our empirical results show
evidence that US banks use AFS securities to smooth earnings. Second, we find that the realized gains
and losses on AFS securities can predict the future core earnings of a bank, consistent with the
signaling hypothesis of income smoothing (e.g. Barnea et al., 1975; Bartov, 1993). Third, we report
evidence that US banks are more likely to smooth income when the general macroeconomic
environment is favorable (good times) than when it is unfavorable (bad times). Fourth, our tests
demonstrate that the signaling power of AFS securities for future core earnings tend to be higher
during bad times than good times.
Classification-JEL: M41, G21
Keywords: Banks, Available-for-sale Securities, Signaling Theory, Income Smoothing
Journal: The International Journal of Business and Finance Research
Pages: 59-70
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-5.pdf
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Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:59-70

Template-Type: ReDIF-Article 1.0
Author-Name:  Yu-Nan Tai
Title: Investor Overreaction in Asian and US Stock Markets:  Evidence from the 2008 Financial Crisis
Abstract: This study explored the effectiveness of the contrarian and momentum strategies in the United States
stock market-S&P 500 and Chinese stock markets (Taiwan, Hong Kong, & Singapore) both during the
2008 financial crisis and during the pre-crisis period. Additionally, the study examined the similarities
and differences between investor behavior (specifically overreaction and underreaction) in western and
eastern countries, to assist global investors and fund managers in their decision-making in those regions.
The sample period was from May 2003 to October 2012, providing both long-term and short-term
analysis and including a non-crisis financial period and a crisis period. This study used an empirical
research design and was non-experimental in nature. Results showed that in the short-term, the
momentum strategy is significant in Taiwan, Hong Kong, and Singapore, but not in the S&P 500.
Additionally, the momentum strategy is not significant in the financial crisis period in the Asian markets.
However, the momentum strategy did provide significant profit in the financial crisis period in the U.S.
market. The contrarian strategy is significant in the long-term except in the S&P 500, but it is also not
significant in the crisis period.
Classification-JEL: G01, G15
Keywords: 2008 Financial Crisis, Investor Behavior, Trading Strategies, US Market, Asian Markets
Journal: The International Journal of Business and Finance Research
Pages: 71-93
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-6.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:71-93

Template-Type: ReDIF-Article 1.0
Author-Name:  Jeng-Hong Chen
Title: Return Volatility Movements in Spot and Futures Markets:  Evidence from Intraday Behavior of the S&P 500 Index
Abstract: After the Debt Ceiling Bill was passed on August 2, 2011, the S&P 500 index returns volatility increased
significantly until the end of 2011. This research investigates the return volatility movements in S&P 500
spot index and index futures markets, the lead/lag relationship between two markets, and the effect of
volatility on the trading costs using year 2011 intraday data. The analyses of intraday data show the
following results during the higher volatility period (8/3/2011–12/30/2011): First, the difference of return
variances between index futures and spot index is even greater than that during the lower volatility period.
Second, the index futures market leads the spot index market and the interaction between both markets
becomes stronger. Third, both index futures and spot index exhibit clearer U-shape intraday pattern of
return volatilities. Finally, the trading costs, measured by the bid-ask spreads, are significantly larger.
Classification-JEL: G13,G14
Keywords: Intraday Return Volatility, S&P 500 Index, Spot and Futures Markets, Bid-Ask Spreads
Journal: The International Journal of Business and Finance Research
Pages: 95-107
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-7.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:95-107

Template-Type: ReDIF-Article 1.0
Author-Name: Imed Gammoudi
Author-Name: Lotfi BelKacem
Author-Name:  Mohamed El Ghourabi
Title: Value at Risk Estimation for Heavy Tailed Distributions
Abstract: The aim of this paper is to derive a coherent risk measure for heavy tailed GARCH processes using
extreme value theory. For the proposed measure, the risk associated to a given portfolio is less than the
sum of the stand-alone risks of its components. This measure which is value at risk (VaR), is the limiting
result of an infinity shift of location and is less sensitive with respect to location change. Based on two
international stock markets applications and an empirical backtesting procedure, the proposed VaR is
found to be more accurate in all quantile levels.
Classification-JEL: C22, C58, G15
Keywords: Risk Management, Extreme Value Theory, Non-linear Models, Backtesting, Stock Market Index
Journal: The International Journal of Business and Finance Research
Pages: 109-125
Volume: 8
Issue: 3
Year: 2014
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v8n3-2014/IJBFR-V8N3-2014-8.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:109-125