Pierre Yourougou

Interest-rate risk and the pricing of depository financial intermediary common stock: Empirical evidence

Abstract Using the likelihood ratio test, this paper presents evidence that interest-rate risk is priced. These results are consistent with earlier findings presented by Sweeney and Warga, based on a different sample and methodology. The statistical results further reveal that failure to discern significant interest-rate premia is attributable to insufficient rate sensitivity rather than being an outcome of monetary policy (i.e., inadequate rate volatility).

Are banks special? The separation of banking from commerce and interest rate risk

Abstract This paper derives some insights into the monetary policy specialness of banking firms, relative to commercial firms, from an analysis of the sensitivity of their stock returns to monetary policy changes. The results indicate that banks are “special” in the sense that the activity/balance-sheet regulation forces them to bear unnecessary interest rate risk. The evidence supports the view that eliminating the separation of banking from commerce would produce a banking system that is less sensitive to interest rate risk.

Short interest and the asymmetry of the price-volume relationship in the Canadian stock market

Abstract Several studies have revealed an asymmetry in the price-volume relationship in the equities markets. This paper verifies this relationship using Canadian data and presents an alternative test of the costly short-sales hypothesis based on the volume of outstanding short interest in the stock market. Contrary to previous studies, the empirical tests in this study do not rely on futures markets data but rather measure and compare the effects of relative short interest positions on the price-volume relationship for positive and negative price changes. The results suggest that the greater the ratio of short positions to the number of shares outstanding, the greater the trading volume associated with price increases relative to that accompanying price decreases.

Market expectations of the effects of the Tax Reform Act of 1986 on banking organizations

Abstract This study investigates market expectations regarding the effect of the Tax Reform Act of 1986 on the banking industry. The evidence shows that overall the tax reform did not adversely affect the stocks of banking institutions. The findings suggest that overall banking organizations were expected to largely mitigate any negative effects of the tax reform on their cash flow by rebalancing and/or repricing their portfolios of assets and liabilities. The most significant provision of the new act was the limitation on foreign tax credits. Interestingly, the markets did not expect any adverse valuation effects from the recapture of loan-loss reserves or the elimination of the interest deductibility for carrying tax-exempt securities.

FDI and Financial Market Development in Africa

The literature on the relationship between foreign direct investment (FDI), financial market development (FMD) and economic growth focuses mainly on two aspects: the relationship between FDI and economic growth, and the role played by FMD in that linkage. The literature is almost silent on the relationship and the direction of causality between FDI and FMD. Although it has been established that FDI contributes more to growth in countries with a more developed financial market, it is not clear how FDI and FMD interact with each other. The aim of this paper is to fill this gap in the African context. Particularly, in Africa, where stock markets experience low liquidity and less transparency, FDI can be an impetus for financial market reforms and serve as a mechanism to improve the transparency and the depth of the financial markets. Also, well‐functioning financial markets can help channel foreign investments more efficiently into productive sectors, and therefore create more value for investors, hence making the countries more attractive to FDI. In short, both FDI and FMD will impact each other simultaneously, which is confirmed by our findings. We document a bidirectional causality between FDI and FMD. Furthermore, the multivariate regression results of the system of simultaneous equations also confirm the positive relationship between FDI and FMD in Africa. We also find that FDI contributes to economic growth in Africa after controlling for endogeneity between FDI, FMD and economic growth.

A multicriterion approach to country selection for global index funds

Global Index Funds have evolved rapidly in recent years as many pension plans, foundations, trusts, and other institutional investment funds allocate more of their assets to foreign securities. One article of faith underlying this evolution is that global diversification is expected to produce, over time, higher average returns at the same or even at a lower level of portfolio risk. This expectation, however, is conditional on the assumption that portfolio optimization models used by investment managers provide an adequate tool for risk measurement and control and that the required inputs are known and fairly stable over time. It has become apparent that global portfolio management is more complex than single-country fund management. Not only must currency risk be considered, but also market inefficiencies (or anomalies), as well as specific differences among countries, must be considered when capturing the many aspects of investment risk. Moreover, the degree of integration of the various capital markets of the world also has an impact on risk measurement in this case since, with market segmentation, different risk/reward trade-offs may exist in different countries. All these considerations add up to the fact that while a given optimization model may work well for one-country portfolio management, it may fail to properly address the various aspects of the problems inherent to global equity diversification. At the present time, the country selection process for global index funds is usually implemented in two consecutive steps. In the first step, a number of characteristics are identified and evaluated for each country’s index and related historically to their respective world levels. These characteristics are then combined to form a composite projected risk and composite projected return for each index adjusted for past relationships between countries. In the second step, a mean-variance (thereafter M-V) optimization procedure is applied to construct the “efficient frontier”, using the adjusted projected risk and return composites as

Female entrepreneurs in Africa: negotiating power and production in the informal markets

Abstract The informal sector forms an important component of women?s livelihoods in Africa, and women in the informal sector contribute substantially to the portion of the continent?s GDP that arises from non-agricultural employment. However, to what extent does participation in the informal economy help or hinder women?s economic development in Africa? What factors contribute to women?s ability to navigate the informal sector in the same manner as men? The paper attempts to adequately to ascertain the specific constraints and social contexts that face poor women in the informal markets. While these factors do impact the ease and extent to which women are able to participate equally in the informal sector, it, by no means, implies a lack of resistance or negotiation on the part of women.