Yan-Leung Cheung

What moves the gold market

In this article, we provide a detailed characterization of the intraday return volatility in gold futures contracts traded on the COMEX division of the New York Mercantile Exchange. The approach allows the study of intraday patterns, interday ARCH effects, and announcement effects in a coherent framework. We show that the intraday patterns exert a profound impact on the dynamics of return volatility. Among the 23 U.S. macroeconomic announcements, we identify employment reports, gross domestic product, consumer price index, and personal income as having the greatest impact. Finally, by appropriately filtering out the intraday patterns, we find that the high‐frequency returns reveal long‐memory volatility dependencies in the gold market, which have important implications on the pricing of long‐term gold options and the determination of optimal hedge ratios.

Do Investors Really Value Corporate Governance? Evidence from the Hong Kong Market

To examine the relation between corporate governance and firm value, we develop an instrument to assess the corporate governance practices of listed companies in Hong Kong. Based on the Revised OECD Principles of Corporate Governance (OECD) and the Code of Best Practices (HKEx), we construct a corporate governance index (CGI) for Hong Kong listed companies. Unlike measures used in other studies, the CGI score reflects the presence of good corporate governance practices as well as variation in the quality of corporate governance practices. Empirical evidence shows that a companys market valuation is positively related to its overall CGI score, a composite measure of a firms corporate governance practices. We also find that the transparency component of the CGI score drives the relation with market valuation. In summary, this study provides supporting evidence for the notion that, in Hong Kong, good corporate governance practices are consistent with value maximization.

Ownership Concentration and Executive Compensation in Closely Held Firms: Evidence from Hong Kong

Owners-managers of closely held firms effectively decide on the level of their own compensation. We test the relationship between ownership concentration and executive compensation, using panel data for a sample of 412 Hong Kong firms during 1995-1998. We find a positive relationship between managerial ownership and top executive cash emoluments for levels of ownership of up to 25 percent in small and in family controlled firms, and for up to 5 percent in large firms. We also find no sensitivity of pay to performance in small firms. These findings may indicate that in the presence of information asymmetry between owners-managers and outside investors the former may use their ownership rights to extract higher salaries for themselves. There is also evidence that top executives with larger shareholdings may be using dividends as a way to supplement their cash salaries. Further tests show that the observed relationships do not result from a link between compensation, performance, managerial effort, and managerial ownership. With the exception of boards of directors having an auditing committee, we find that boards cannot prevent this form of expropriation.

The pricing of risky assets in two emerging Asian markets—Korea and Taiwan

This study presents the results of empirical tests on the relationships between average stock returns and various measures of risk in two of the most important emerging Asian stock markets, Korea and Taiwan, over the period 1980–88. The findings show that the applicability of CAPM seems weak in both markets, particularly in Taiwan. In some subperiods, total risk appears to be a better risk measure in both markets. A comparison with other studies on Hong Kong and Singapore reveals that the inapplicability of the CAPM on emerging Asian markets is rather common.

The intraday patterns of the spread and depth in a market without market makers: The Stock Exchange of Hong Kong

We examine the temporal behavior of the spread and depth for common stocks listed on the Stock Exchange of Hong Kong (SEHK), which operates as a purely order-driven mechanism. We find U-shaped intraday and intraweek patterns in the spread and reverse U-shaped patterns in the depth. Our finding is consistent with that of the study of Lee et al. (1993) [Lee, C.M.C., Mucklow, B., and Ready, M.J., 1993, Spreads, depths, and the impact of earnings information: an intraday analysis, Review of Financial Studies 6, 345–374] of New York Stock Exchange (NYSE) stocks that wide spreads are associated with small depths and narrow spreads are associated with large depths. The negative association between spread and depth on the SEHK implies that limit order traders actively manage both price and quantity dimensions of liquidity by adjusting the spread and depth. Further, larger spreads and narrower depths around the market open and close indicate a trading strategy by limit order traders to avoid possible losses from trading with informed traders when the adverse selection problem is severe. The paper provides further evidence that U-shaped spread and reverse U-shaped depth patterns should not be solely attributed to specialist market making activities.

Seasonal pattern in volatility in Asian stock markets

Using the Levene test, it is found that there exist day-of-the-week variations in volatility in most of the emerging Asian stock markets. Monday returns, in general, have the lowest volatility for all the emerging Asian markets except Korea. Three of the five markets that have significant day-of-the-week effect in volatility have the lowest volatility on the last trading day of the week. It is also found that the close-market effect is not a good explanation of the volatility pattern across day-of-the-week.

Corporate Governance in China: A Step Forward

Recently, the presumed benefits of corporate governance have become one of the most contentious issues especially for emerging markets in Asia where institutional settings are quite different from other parts of the world. Using an internationally accepted benchmark (OECDs Principles of Corporate Governance, OECD, 2004), this study evaluates the progress of corporate governance practice of Chinese listed companies. A corporate governance index (CGI) is constructed to measure the quality of corporate governance practices of the 100 largest listed firms in China during 2004-2006. The results show that Chinese companies have been making progress in the corporate governance reform. The findings also show a positive relation between market valuation and overall corporate governance practices, as measured by the CGI, among these Chinese listed companies. Additional investigation reveals that the rights of shareholders are the main driver in the relationship.

Intraday stock return volatility: The Hong Kong evidence

Abstract The intraday market return volatility of the Hong Kong stock market, when plotted against the time of the day, follows a double U-shaped pattern. This pattern is different from that of U.S. because of the existence of a session when the market is closed for two hours for the lunchbreak. Another feature of the Hong Kong market that is different from the U.S. is that the open-to-close return variance and the close- to-open return variance is not significantly different from each other. This may be due to the fact that, the close-to-open period is not actually a non-trading session as some of the major Hong Kong stocks are being traded in the London market. Analysis of individual stocks shows that the Hong Kong stocks traded on the London Stock Exchange, after the trading hours of the Stock Exchange of Hong Kong, exhibit a lower open-to-open return variance (versus the close-to-close return variance) and a less negative open-to-open return autocorrelation than those that are not traded on the London Stock Exchange.

Behaviour of intra-daily stock return on an Asian emerging market - Hong Kong 1

This study examines the intra-daily return behaviour of one of the most open Asian emerging markets - Hong Kong. It is found that there is a general increase in the positive skewness and kurtosis of all the intra-daily returns after the 1987 October crash and the distributions of all the returns have become non-normal after the crash. There seems to be more day-of-the-week and time-of-the-day variations in the post-crash period than in the pre-crash period. There also exists some day-end effect in both of the periods and such a day-end effect seems to be related to the day of the week.

Bank monitoring and the maturity structure of Japanese corporate debt issues

Abstract Extant literature suggests that bank lending results in greater information production and control over corporate borrowers. We show that bank lending creates positive externalities in that it improves the contracting environment for other public debt providers. Focusing on the maturity structure of Japanese corporate debt issues, we provide evidence that a higher proportion of bank debt results in public debt of longer maturity. More importantly, the sensitivity of the debt maturity to bank debt ratio is significantly higher for independent firms compared with that of keiretsu-affiliated firms. The evidence is consistent with keiretsu firms having less agency costs of debt compared with independent firms.