Lawrence C. Rose

Topology of Foreign Exchange Markets using Hierarchical Structure Methods

This paper uses two common physics techniques, a minimal spanning tree and an ultrametric hierarchical tree, to extract a topological influence map for major currencies from the ultrametric distance matrix. We find that these two techniques generate a defined and robust scale free network with meaningful taxonomy, which is fundamentally different from that obtained from stock market topology. The topology is shown to be robust with respect to method, to time horizon and is stable during market crises. This topology gives a guide to determining the underlying economic or regional causal relationships for individual currencies and will prove useful to understanding the dynamics of exchange rate price determination as part of a complex network.

Derivatives Usage and Financial Risk Management in Large and Small Economies: A Comparative Analysis

The objective of this paper is to expand and update previous New Zealand - based surveys in order to compare and contrast risk management practices of firms in the small, foreign trade-dependent economy of New Zealand to those of firms in the considerably larger, more developed US, UK, and German markets. This survey examines patterns of usage, reasons and objectives for derivatives use, and reporting and control procedures and finds that the practice of hedging with derivative instruments among New Zealand firms appears to be evolving as global markets become more integrated. We find that the percentage of firms involved in hedging, both large and small, has grown since the last New Zealand surveys, and that New Zealand firms have many of the same reasons and objectives for using derivatives as firms in the much larger American and European economies. We also find that the focus on control and reporting derivatives transactions in New Zealand is similar to that of firms in the other countries and appears to have strengthened since previous surveys. Copyright Blackwell Publishers Ltd 2000.

Brand equity and brand vulnerability: The impact of gray marketing/parallel importing on brand equity and values

Brand equity has received significant academic attention since the mid‐1990s. This has been driven partly by changes in international accounting standards as they relate to the reporting of the financial value of intangible assets. A more prominent driver concerns the impact of marketing, and of marketing communication activity in particular, on brand performance. Much of the academic debate, however, has centered on conflicting definitions of brand equity and on seeking ways of measuring or quantifying the value of equity. Attention is now turning to examining the nature of equity and of factors that may threaten it. This paper examines the potential impact of parallel importing on brand equity and provides a substantive theoretical background. The paper then reports the findings from an exploratory study involving depth interviews with New Zealand brand managers whose brands have been affected by this activity.

The persistence of international diversification benefits before and during the Asian crisis

Abstract This research examines whether international diversification benefits achieved in an initial portfolio-formation period continue to be realized in subsequent evaluation periods and in the face of a major market disturbance. A New Zealand-only (NZO) efficient frontier is used as a base investment from which “off-shore” unit trusts (UTs) are added. Off-shore UTs considered are from Australia, Hong Kong, Japan, and Great Britain. The analysis is conducted over a 6-year period that includes the recent “Asian crisis.” It is found that diversification reduced the impacts of the crisis, and that the traditional, full-covariance portfolio-formation model performed better than three simpler models.

Stock Dividend Announcement Effects in an Imputation Tax Environment

A key question in asset pricing is the extent to which tax effects are passed through market prices or are capitalised in them. New Zealand stock dividends provide a useful window into this debate because of (1) the existence of both taxable and non-taxable stock dividends, and (2) the particular form of imputation tax system which allows the full pass through of corporate taxes to the investor on the proportion of profits which are distributed either as cash or taxable stock dividends. We present evidence that investors value future tax benefits associated with imputation tax credits. Copyright Blackwell Publishers Ltd 2001.

Brand sickness and health following major product withdrawals

Purpose – The mandatory withdrawal of almost 2,000 complementary and alternative medicines, manufactured under contract on behalf of multiple brand names, primarily in the Australian and New Zealand markets, provides an opportunity to examine the impact on sales levels and both brand and category loyalty of a major product confidence crisis. Sets out to deal with this issueDesign/methodology/approach – Focuses on the impact of the events surrounding the recall within both the Australian and New Zealand markets and links the events surrounding the recall with the scant international literature relating to brand management during crisis situations. Then reports on findings from an investigation of New Zealand consumer perceptions of the sector after the recall event.Findings – The substantial impact on both category and brand loyalty in the face of prolonged non‐availability of some products is revealed, as is the lack of contingency planning across product supply and marketing communications dimensions. Co...

Market integration and extreme co-movements in APEC emerging equity markets

Extreme market co-movements in the context of time-varying market integration are investigated for APEC emerging equity markets using the concept of extreme correlation. We show that both foreign and domestic portfolio investments have contributed to extreme market movements; and extreme correlation is time-varying and dependent on local and regional market integrations. However, the relationship between market integration and extreme correlation varies across markets.

Intangible Assets and Firm Diversification

Purpose – To re-examine empirically internalisation and transaction cost theories of firm FDI. Design/methodology/approach – Empirical analysis based on cross sectional multivariate regressions and the Fama-French three factor event study procedure. In addition to the key explanatory variables the paper introduces and models several important control variables. Findings – The paper finds evidence consistent with the internalisation and transaction cost hypotheses. Firms classified with internalisation advantages earn event period abnormal returns of 6.84 percent above firms that are classified without such advantages. In support of transaction cost theory the paper finds that FDIs generate an average abnormal event period return of -2.36 percent. Further, in line with transaction cost theory firms classified with intangible asset advantages also tend to engage in the more complex forms of foreign and industrial diversification. Research limitations/implications – The paper does not determined if the effect linked to the possession of intangible asset advantages is temporary or permanent. FDI is costly, but firms that enjoy high market valuations tend to do well in M&A or FDI activity. Originality/value – The study provides new and strengthened support for internalisation theory. The study provides new evidence in support of transactions cost theory.

Examination of NZ Finance Company Failures: The Role of Corporate Governance

Recently any difficulty a financial institution found itself in seems to have been blamed on the global financial crisis. This paper, employing forensic case study analysis of finance companies in New Zealand rebuts this excuse. Instead, it is argued the large number of failures in New Zealand finance companies in the last four years was due to a failure of regulation and corporate governance, occurring well ahead of the global financial crisis.

ASYMMETRIC INFORMATION IMPACTS: EVIDENCE FROM THE AUSTRALIAN TREASURY‐BOND FUTURES MARKET

The effect of information flows on the return volatility of Australian 3-year Treasury bond futures is examined using linear and non-linear GARCH models. Results show significant asymmetric information effects, where bad news has a greater impact on volatility than good news and a non-linear Threshold ARCH(1,1) in mean model provides the most accurate estimation of return volatility. Diagnostic tests confirm this finding and out of sample forecasting error statistics verify that the Threshold ARCH(1,1) in mean model yields the lowest forecasting error. The Threshold ARCH(1,1)-M model is best at capturing the asymmetric information impact on the Australian three-year T-Bond futures return volatility. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd