Yu Jen Hsiao

Residual momentum versus price momentum: evidence from four Asian markets‡

Abstract This paper investigates the profitability of momentum investment strategies – residual momentum versus price momentum – for common stocks listed in Hong Kong, Singapore, Taiwan, and Thailand. This study shows that the residual-momentum winner and loser on the previous residual returns derived under the CAPM have lower time-varying exposures to the market risk. The residual momentum strategy generates not only higher but also more consistent returns over time than the price momentum strategy. Moreover, the residual momentum effect exists in the four aforementioned stock markets, whereas there is no evidence for the price momentum.

The Impact of CDS Trading on the Cost of Bank Loan

This paper investigate the impact of Credit Default Swaps (CDSs) trading on the cost of bank loan during 2001 to 2012. Theoretically, the CDS trading have lowered the cost of bank loan to firms by creating risk sharing opportunities and reducing bank monitoring and information cost. However, as a whole, we only find limited evidence that the CDS trading have lowered the cost of bank loan but the impact is stronger for smaller firms, those firms with higher liquidity in the CDS market, and bank loan market in Asia. Nevertheless, there is strong evidence, during the recent financial crisis period, those firms with CDS trading faced higher bank loan spread than those not with CDS trading.

Bank Capital Regulation and Dividend Policy

We examine whether bank capital requirements are relevant to bank dividend payout policies. On the basis of an unbalanced panel analysis of 9,127 observations in 83 countries over the period of 1999 to 2012, we find that higher capital requirement regulation stringency is negatively associated with bank dividend payouts. In addition, we also find that capital regulatory pressure clearly explains dividend payouts during the 2007 to 2009 financial crisis. However, capital regulatory pressure is effective only in limiting dividend payouts by undercapitalized banks in developing countries.

On the Diversification Benefits of Commodity ETFs

This paper investigates whether investors can improve their investment opportunity sets through the addition of commodity exchange traded funds (ETFs) into various groupings of benchmark portfolios from the perspective of the US investors. Applying mean-variance spanning tests, we analyze the monthly returns of commodity ETFs from January 2005 to December 2012 and find that adding commodity ETFs does not lead to a statistically significant increase in the investment opportunity set for the US investors. However, the US investors can utilize commodity ETFs to enhance their portfolio performance, as measured by the Sharpe ratio. We further show that the diversification contribution varies greatly among the different commodity ETFs. Overall, the results confirm that specific-commodity ETF, like Gold or Natural Gas are valuable investments from the perspective of diversification.