Chee-Wooi Hooy

Non-Linear Predictability In G7 Stock Index Returns

This paper re‐examines the persistence and source of non‐linear predictability in the stock markets of G7 countries. Applying the Brock–Dechert–Scheinkman (BDS) test on autoregression (AR)‐filtered returns in rolling estimation windows, we find evidence of local non‐linear predictability in all the sampled stock markets. To identify the source, we apply the BDS test on AR‐generalized autoregressive conditional heteroskedasticity (GARCH)‐filtered returns in rolling windows. After accounting for conditional heteroskedasticity, we still find brief time periods with non‐linear predictability in all markets, contradicting the weak‐form efficient markets hypothesis.

Bank merger and bank stock volatility: a post‐announcement analysis

The collapse of the Malaysian exchange rate and the stock market during the Asian financial crisis had elevated uncertainties in the financial market and increased the instability of the bank stock returns. Whilst it is commonly known that the crisis rooted from a complex interplay of various factors, there seemed to exist some fundamental and systemic problems in the banking sector. Besides, the challenges from the wave of financial globalization also urged the authorities to conduct structural enhancement in the sector. This paper briefly outlined the main aspects of the Malaysian bank merger program, and tracked as well as evaluated the effects of the program on the volatility of the Malaysian bank stock returns. It was found that the proposed merger did bring about stability for the banks’ stock prices and returns, especially after the initial consolidation announcement of 29 July 1999 based on the estimations of conditional variances. The analysis also documented a persistency positive risk returns tradeoff and asymmetrical news effects in the bank stocks before the announcement. After the announcement, bank stocks clearly enjoyed a huge reduction in the volatilities and the asymmetrical news effects.

Relative efficiency measures for the knowledge economies in the Asia Pacific region

Purpose – The objective of this paper is to assess the relative efficiency of 12 selected Asia Pacific countries in their development of knowledge‐based economies (KEs).Design/methodology/approach – The performances of the selected countries are evaluated using data envelopment analysis (DEA).Findings – The DEA scores indicate that four of the emerging countries (India, Indonesia, Thailand and Mainland China) are relatively inefficient in K‐E development compared to the other eight which are equally efficient. The main reason for their backwardness is due to the outflow of their human capital resource to the developed countries. This seriously undermines the level of their K‐E development compared to their counterparts. The results also indicate that knowledge dissemination is generally not a serious problem, except for India.Research limitations/implications – The results and the discussion should be taken as the first step in an analysis which warrants further research. The knowledge clusters identified...

A macro assessment of China effects on Malaysian exports and trade balances

This paper focuses on the impact of China’s export expansion on Malaysian monthly trading with to her 12 major trading partners over the liberalization era. Structural break(s) found mostly coincides with the Asia financial crisis and China’s accession into WTO and, regime shifts are evident in the long run relationship among the variables being studied. While the income effects are more apparent, real exchanges are rather insignificant and incorrectly signed for Malaysian bilateral trading. An attempt to correct current account imbalances by currency devaluation would thereby inappropriate. In addition, estimation of the trade balance models is more superior that complementary China effects are better captured for Malaysia trading with the advanced markets such as Australia, German, Japan, UK and the US. Such finding may partly due to the increase in global product fragmentation

Country Versus Industry Diversification in ASEAN-5

This paper examines the role of common, country, and industry effects on international diversification potential in ASEAN (Association of Southeast Asian Nations) stock markets. Following a decomposition approach, we extract these effects from stock returns and further examine the determinants of country effects using International Country Risk Guide indexes. Our results indicate that country effects dominate industry effects despite the increasing integration of economic and financial markets. However, a diminishing trend of country effects domination coupled with improving fundamentals in ASEAN-5 was observed during the recent subprime crisis in 2008, together with the presence of strong integration of stock markets in ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). Last, political risk is found to be one of the main driving forces behind the dominance of country effects.

Crisis typologies and tourism demand

The study on tourism crisis management has been established since decades ago. Prior to crisis management, researchers find that it is essential to develop crisis typologies for better understanding on the nature of crisis. Hence, the classification of crisis has been established. In the literature, crises have been classified from two perspectives: gestation period to occur and human involvement. For instance, Booth (1993) classifies crises into gradual, periodic, and suddenwhile Parsons (1996) (as cited inMaditinos &Vassiliadis, 2008) considers crises by immediate, emerging, and sustained. Seymour and Moore (2000) also classify crises into cobra which strikes suddenly and python which occurs gradually. Besides, Karagiannis, Maditinos, and Vassiliadis (2006) classify crises into direct, indirect, and no human involvement while Sausmarez (2007) classifies crises into man-made and natural disaster. The nexus between crisis and tourism demand is focused in tourism research. However, the literature review finds that limited studies provide empirical evidence on the relationship between each type of crises and tourism demand. This study fills the research gap by providing empirical evidence on the effects of the two crisis typologies (namely cobra/python type of crises and natural disaster/man-made-type of crises) towards tourism demand. Panel regression with fixed effect specification is applied by covering tourism demand from 96 countries globally between the years 1995 and 2009.

A STOCHASTIC SETTING TO BANK FINANCIAL PERFORMANCE FOR REFINING EFFICIENCY ESTIMATES

This study contributes to develop a framework to measure the financial performance of banks in a stochastic setting. The framework comprises several steps, the first of which is the development of a financial performance measurement model to evaluate a banks financial performance using a set of factors from the CAMEL Capital adequacy, Assets, Management Capability, Earning and Liquidity system. Second, the stochastic setting of the efficiency measurement is handled using the data collection budget allocation approach, whereby Monte Carlo simulations are used to analyse additional generated data and a genetic algorithm is used to refine the accuracy of the efficiency estimates. The results show that the accuracy of the model is greatly improved using the proposed approach. In contrast to the conventional deterministic model, the proposed framework is more useful to managers in determining the banks future financial operations to improve the overall financial soundness of the bank. Copyright

Exchange-Rate Volatility, Exchange-Rate Regime, and Trade in OIC Countries

The authors examine the impact of exchange rate volatility on trade in the Organization of the Islamic Conference (OIC) countries from 1995 to 2008 using panel estimations to distinguish differences between disaggregate trade, and examine its threshold effects. Results reveal that exchange rate volatility generally has significant negative effect on export and import with lag. However, exports of OIC with flexible exchange rate regime have significant positive exposure to exchange rate volatility. The authors also document a threshold effect for countries with trade value constitutes more than 30% of the real gross domestic product, and the exchange rate volatility becomes significant positive for export but significant negative for import with lag.

Malaysia–China in the Liberalization Era: Structural Modelling of International Parity Conditions and Transmission Mechanism

Abstract We construct a structural system that jointly examines Purchasing Power and Interest Parity conditions for Malaysia–China during 1996Q1–2010Q4. Structural VARX, VECMX, over-identifying restrictions, bootstrapping and persistent profiles are utilized in the analyses. We find support for interaction between the goods and capital markets of Malaysia–China, when Asia crisis and sub-prime crisis are taken into accounts. The faster pace of adjustment towards price instead of interest equilibrium implies the non-appearance of sequencing problem in economic integration. Nevertheless, it is of concern that maintaining a rigid foreign exchange with major trading partner could be costly with potentially contagious price instability and financial risk.

The effect of exchange rate volatility on the nexus of technology sophistication and trade fragmentation of ASEAN5 exports to China

ABSTRACT This article investigates the effect of exchange rate volatility on the exports of ASEAN countries to China. Using 5-digit COMTRADE data over 1994 to 2008, the authors analyze total exports by usage, total exports by technology, and disaggregated exports of component goods by technology. Two findings are documented. First, exchange rate volatility has a negative and significant effect only on high-tech and medium-tech exports, but the magnitude implies that technology sophistication leads to higher currency volatility exposure. Second, exchange rate volatility also has a significant negative effect on parts and components exports but the elasticity is much smaller relative to the aggregate exports.