Carlos C. Bautista

Stock market volatility in the Philippines

Regime-switching-ARCH regression was used on weekly aggregate Philippine stock return data from February 1987 to October 2000 to estimate its conditional variance. The estimated volatility was then related to major political/economic events and to fluctuations in economic activity as measured by real GDP growth. Four high volatility episodes were observed for the period under study. It was seen that high stock return volatility preceded a bust cycle, defined as a sequence of low growth periods. The study showed the sensitivity of the Philippine stock market to drastic changes in the political environment as well. This was observed twice during the late 1980s when a series of military coup attempts led to large fluctuations in the stock price index. In the 1990s, high return volatility was also observed twice. The lifting of the remaining foreign exchange and capital account restrictions in 1993 led to the third high volatility episode. In 1997, the start of the fourth volatility episode preceded the onset of the Asian financial crisis by a few months.

Interest rate-exchange rate dynamics in the Philippines: a DCC analysis

This article examines interest rate-exchange rate interaction using dynamic conditional correlation (DCC) analysis, a multivariate GARCH method. Weekly Philippine data from 1988 to 2000 are used in the study. The results show that the correlation between these variables is far from constant. Structural changes in the correlation structure are largely seen to be the effects of policies or policy responses to exogenous events. The shift in the direction of correlation, observed after the liberalization of the capital markets in 1993, is shown as evidence. Strong positive correlations observed during the two crisis episodes covered by the study present evidence of ineffective interest rate defense of the currency.

Income Polarization in Asia

The subject of this study is income polarization, an important but neglected dimension of income distribution. Estimates of two measures of income polarization are obtained for the population, rural, and urban sectors using household survey data on expenditures per capita for a sample of Asian countries. The findings include the following: Income polarization and inequality, the latter measured using the Gini coefficient, are highly positively correlated; in most countries, urban income polarization is higher than rural income polarization; and lastly, higher rates of growth in GDP and per capita GDP, higher levels of educational attainment of household heads, and high rates of employment in manufacturing may be important in keeping income polarization at low levels.

How volatile are East Asian stocks during high volatility periods

This study reports estimates of the magnitude of volatility during abnormal times relative to normal periods for seven East Asian economies using a rudimentary univariate Markov-switching ARCH method. The results show that global and regional events such as the 1990 Gulf War and the 1997 Asian currency crisis led to high volatility episodes whose magnitude relative to normal times differ from country to country. Country-specific events such as the opening up of country borders in the mid-1990s are also observed to lead to high volatility periods. Additional insights are obtained when volatility is assumed to evolve according to a three-state Markov regime switching process.

The Determinants of Domestic and Cross Border Bank Contagion Risk in South East Asia

This paper addresses the issue of both domestic and cross border systemic risk for 8 countries in Southeast Asia (Hong Kong, Indonesia, Korea, Malaysia, The Philippines, Singapore, Taiwan and Thailand). We use weekly data on individual bank stock prices from 2000 to 2005 to construct bank contagion measures based on the exponential weighted average correlations of the residuals of the market model. Our results show that average pair-wise correlations significantly differ among countries and that the probability that a specific shock extends to other banks is better predicted by asset risk indicators and market based risk measures, such as systematic risk, for cross country contagion. In contrast, for domestic contagion, liquidity risk indicators and bank opaqueness proxies perform better. Our findings suggest that whereas illiquidity, but not insolvency, is a major concern at the domestic level the opposite result holds for cross country contagion.

Estimates of output gaps in four Southeast Asian countries

Abstract The output gaps derived for four countries using a generalized Hamilton model are compared with conventional output gap estimates. Further research is needed to explain why the output gap identifies crisis episodes as slowdowns instead of recessions in some countries.

The determinants of bank stock returns' co-movements in East Asia

We examine co-movements of bank stock returns in eight East Asian countries after the 1997 crisis and attempt to determine the factors that influence them. The return correlations among banks within each country are computed and used as a dependent variable in weighted least squares regressions. The factors were chosen from a wide range of accounting and market-based indicators using a stepwise procedure. The results show that the share of interbank activities in the balance sheet does not explain the level of correlations. However, a strong link is found between the bank return co-movements and bank default risk measured by a z-score. To a lesser extent, the share of loan activities in a banks balance sheet, which is a proxy of opacity, is also a significant factor of the level of correlation.

Multidimensional Poverty in the Philippines

An index of multidimensional poverty is constructed for the Philippines using the Alkire-Foster methodology. Data from the annual poverty indicators survey (APIS) collected in 2011 are used to calculate the index. An examination of household poverty using mixed logit analysis shows that large-sized households have higher poverty risk. A substantial reduction of this risk is observed for households with heads who at a minimum were able to enter high school. The household head’s health status has a negative impact on the household’s risk of being poor. Small but statistically significant effects, less than 2 percentage points in the probability of being in the state of poverty, are observed with respect to the rest of the variables. Poverty likelihood rises with average household age but declines with the head’s age. The likelihood declines with the presence of OFW remittances. The household is less likely to be in poverty with a female head. These are compared with results of estimates using the income poverty definition. (Original version title: Multidimensional Poverty in the Philippines)

Graduate Business Program Admission Criteria and Student Graduate Academic Performance

The study evaluates a graduate business program by examining the academic performance of its students and its admission procedures using a sample selection model. It is shown that successful academic performance in the University of the Philippines’ graduate business program can be explained by past undergraduate performance and the quantitative aptitude test score. Other abilities revealed by test scores in reading and logic that are used as bases for admission to the program do not seem to have a bearing on performance. Hence it is possible that altering the relative weights of the three test scores will change the profile of successful applicants and at the same time improve the overall performance.