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Demographic transition has already become a major issue in the recent decades. Lower fertility rate and higher expected life length result in population aging. Most developed countries face social problems due to demographic transitions, especially in the economic and financial field. To take a closer look at this phenomenon, this paper screened 99 stocks provided by Taiwan Stock Exchange (TSE) to explore the impact of population aging on the stock market in Taiwan. Population aging indirectly takes up a larger portion of elder investors in the stock market, compared to the past. This paper employed risk and return variables to analyze the investors' behaviors in Taiwan stock market. We divided our samples into whole industry, financial industry, technology industry, and traditional industry groups to find the impact of investors aging among different industries. The results showed that there is no significant evidence to prove that the elder investors pursue lower risk stocks in Taiwan stock market, which is inconsistent with the results of the past research. On the other hand, the findings from the whole industry, technology industry, and traditional industry groups are different from the past research results, showing that Taiwan's elderly investors prefer stocks with higher return in those industries. [ABSTRACT FROM AUTHOR]

Dividend tax policy is one of the important tools of government taxation. Observing the dividend tax policy and the behavior of stock prices around ex-rights will not only shed light on investment strategies, but also give us a clearer understanding of the microstructure of the capital market. Taiwan went through dividend tax policy and National Health Insurance (NHI) supplementary premium changes from 2014 to 2016. Therefore, this paper adopts the event study method to conduct empirical research on this major event period. The research conclusion points out: (1) During the research period, the company studied had a positive cumulative abnormal return before and on the ex-right day, and there was a negative cumulative abnormal return after the ex-right day. (2) When the tax reduction effect is more favorable to investors, there will be only a positive relationship with positive abnormal returns. (3) There is no statistical significance between the dividend tax reform policy and the negative abnormal return after ex-rights. The empirical results of this paper can help to better understand the pricing process of stocks by market microstructure systems such as dividend tax policies and help build a more stable stock market transaction structure. On the other hand, investors and companies can also gain their own investment or dividend policy inspiration from this research. [ABSTRACT FROM AUTHOR]

Employing comprehensive limit-order data that unambiguously identify investor groups, this paper examines the order-cancellation behavior across investor groups in the Taiwan Stock Exchange. First, facing trade-offs between the monitoring cost and limit-order risks, such as non-execution and free-trade-option risks, behavioral differences exist across investor groups. Foreign investors closely monitoring the market cancel their limit orders most actively, while individual investors with the highest monitoring cost do so least actively. Second, Tobit regressions show that the order cancellations by foreign investors are the most sensitive to the free-trade-option and non-execution risks, while those by individual investors are the least sensitive. [ABSTRACT FROM AUTHOR]

This paper analyzes the marketization of trading behaviors from the view of stock indexes. While the samples include the stock markets of U.S., China and Taiwan, the comparisons are difficult to measure when the stock indices inflect the specific national and investing environments. Using Z-score transformation procedures, the comparisons with the aim of investigating the population distribution show that the U.S. and China stock markets have the same marketization of the investing risk when they are from the double exponential distribution with the same variance. Evidence from the Taiwan stock market suggests that the effects of government inventions still exist and distort the marketization even though the Taiwan stock index has transformed as Z-score values. [ABSTRACT FROM AUTHOR]

The article discusses papers published within the issue, including one on personal taxes on dividend gains, another on the impact of foreign direct investment and short-term capital investment on stock and real estate prices in China and a paper on herding behavior in the Taiwanese stock market.

Using the modified maximum daily return measure (LHR) defined as the difference between upward limit-hitting rates and downward limit-hitting rates, our paper documents the higher LHR, the lower subsequent returns, i.e., the so-called modified MAX effect, in the Taiwan stock market. Since Taiwan stock market requires listed companies to report their revenues every month, we further investigate how the arrival of revenue news affects these lottery-like stocks. It is found that when the high LHR is associated with positive shocks from the monthly revenue announcement, the stock becomes significantly less appealing to individual investors. As individual investors' order imbalances drop substantially after the revenue announcement period, the modified MAX effect is diminished. We also find monthly revenues announcements greatly dilute the importance of quarterly earnings announcements and, therefore, play the more important role in determining the modified MAX effect. Overall, our study suggests that more frequent and promptly financial information disclosures, such as monthly revenue reports, are critical to improving market efficiency and reducing behavioral bias. [ABSTRACT FROM AUTHOR]

Purpose – This paper investigates changes in risk-neutral distribution derived from Taiwan stockindex options under different market conditions. The purpose of this paper is to explore whether individual investor sentiment significantly influences the Taiwan option prices. Design/methodology/approach – The authors adopt the optimization method to estimate the risk-neutral distribution from the Taiwan stock index options and use the t-test to examine the difference in risk-neutral skewness, kurtosis, and confidence interval between the pre-crisis and crisis periods. This paper tests the impact of individual investor sentiment on risk-neutral skewness and confidence interval in two sub-periods. Findings – The authors find that errors in individual investors’ expectations significantly influence the Taiwan stock index option prices. Research limitations/implications – The data concerning the sentiment of speculative institutional investors are incomplete for the Taiwan option market. Therefore, this paper focusses on the analysis of individual investor sentiment. Further research can study the impact of institutional investor sentiment in emerging markets. Social implications – The previous literature has suggested that option prices reflect information before the information is revealed in stock prices. Therefore, an important implication is to analyze the information quality revealed in option prices by studying whether the changes in option prices are due to investor sentiment or non-sentiment-related components. Originality/value – Most of the studies in the literature have focussed on the US option market, and their applicability may vary across different microstructures. This paper shows that the influence of individual investor sentiment in an emerging market is different from that in the US market. [ABSTRACT FROM AUTHOR]

Pairs trading is an effective statistical arbitrage strategy considering the spread of paired stocks in a stable cointegration relationship. Nevertheless, rapid market changes may break the relationship (namely structural break), which further leads to tremendous loss in intraday trading. In this paper, we design a two-phase pairs trading strategy optimization framework, namely structural break-aware pairs trading strategy (SAPT), by leveraging machine learning techniques. Phase one is a hybrid model extracting frequency- and time-domain features to detect structural breaks. Phase two optimizes pairs trading strategy by sensing important risks, including structural breaks and market-closing risks, with a novel reinforcement learning model. In addition, the transaction cost is factored in a cost-aware objective to avoid significant reduction of profitability. Through large-scale experiments in real Taiwan stock market datasets, SAPT outperforms the state-of-the-art strategies by at least 456% and 934% in terms of profit and Sortino ratio, respectively. [ABSTRACT FROM AUTHOR]

Purpose: Prior studies have paid close attention to the impact of political risk on financial markets. Following this strand of literature, this paper aims to focus on the causality link between political shocks and their impacts on emerging stock markets. Design/methodology/approach: This paper highlights an innovative counterfactual model for political risk assessment. Based on a natural experiment, i.e. the Taiwan Strait Crisis in 1995-1996, this study utilizes one data-driven approach, e.g. the synthetic control methods (SCMs), to estimate causal impact of this political shock on Taiwan's stock market. Findings: Major findings in this study are consistent with existing literature on the price of political risk, e.g. political uncertainty commands a risk premium. The SCM estimations suggest that Taiwan's stock prices dramatically underperformed its newly industrialized peers and other developed markets during the crisis. The SCM results are statistically significant and robust to various cross-validation tests. Research limitations/implications: Findings in this study indicate that political risks could generate enormous impacts on emerging financial markets. In particular, political uncertainty following new geopolitical dynamics requires proper identification and assessment. Originality/value: To the author's knowledge, this paper is the first rigorous counterfactual study to the causality relationship between political uncertainty and stock prices in emerging markets. This paper is distinct from previous studies in applying a data-driven approach to combine the features of learning from others (cross-sectional) and learning from the past (time series). [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editor discusses various reports within the issue on topics including the information quality and properties of Index performance for Kospi 200 Volatility Index (VKOSPI), the application of Fama-French factors in investigating the effect of weather and seasonal factors on the stock market of Taiwan, and the development of two-dimensional value investment strategy.

Purpose The purpose of this paper is to examine how family firms affect analyst forecast dispersion, accuracy and optimism and how earnings smoothness as the moderating factor, affects these relationships in an emerging market context.Design/methodology/approach This paper uses the population sample of firms listed on the Taiwan Stock Exchange from 2009 to 2010 as the research sample, which includes 963 firm-year observations.Findings The findings show that analysts following family firms are more likely to have more dispersed, less accurate and more optimism biased forecasts than those following nonfamily firms. Earning smoothness is mainly used by nonfamily firms as a signaling strategy to improve analyst forecast quality. In contrast, earnings smoothness is mainly used by families as a garbling strategy, stimulating forecast optimism. Only earnings smoothness in family firms with a high level of family ownership concentration is likely to be signaling-oriented to improve analyst forecast accuracy and mitigate analyst optimism biases.Originality/value Emerging markets are not only featured by prevailing principal-principal conflicts but also have multiple levels of agency conflicts among large shareholders, minority shareholders and professionally hired managers. This research reveals the multiple governance roles of family owners in affecting analyst forecast quality, including their entrenchment role in extracting private benefits of control through opaque environments and market discipline distortion role in aligning interests between managers and families without prioritizing meeting or beating analyst forecasts, both at the cost of minority shareholders. This research further disentangles the intertwined signaling oriented and garbiling oriented incentives associated with earnings smoothness under family governance. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to examine the media coverage of corporate social performance (CSP), as well as the ultimate impact that such coverage has on the financial performance of corporate entities. Design/methodology/approach – Based on a sample of financial holding companies (FHC) listed on the Taiwan Stock Exchange, the authors select the two most popular newspapers in Taiwan, to construct the unique media coverage of CSP activity database. Findings – First, the quantity of news articles about social activities of FHCs is positively correlated with financial performance. Second, the authors find that news articles about FHCs’ positive social activities for shareholders will trigger a positive evaluation by shareholders; however, news articles about FHCs’ positive (negative) social activities for employees will trigger a negative (positive) evaluation by shareholders. But if the news articles about FHCs’ positive social activities for employees are initiated by the media, rather than by the company itself, they will trigger a positive evaluation by shareholders. Originality/value – The average shareholders may praise management for one particular CSP activity of a positive nature, whereas they may criticize another CSP activity, despite it being generally regarded outside of the firm as also being positive in nature. It therefore becomes clear that when setting out to investigate whether “doing good” actually does translate into “doing well,” the authors should not attempt to total different kinds of information on CSP; In this paper, the authors emphasize that they need to be analyzed separately. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to propose an occurrence-based model to improve the forecasting of regime switches so as to assist decision making. Design/methodology/approach – This paper proposes a novel model where occurrences of relationships are taken into account when forecasting. Taiwan Stock Exchange Capitalization Weighted Stock Index is taken as the forecasting target. Findings – Due to the consideration of occurrences of relationships in forecasting, the out of sample forecasting is improved. Practical implications – The proposed model can be applied to forecast other time series for regime switches. In addition, it can be integrated with other time series models to improve forecasting performance. Originality/value – The empirical results show that the proposed model can improve the forecasting performance. [ABSTRACT FROM AUTHOR]

This paper develops a two-step approach for constructing Taiwan's financial conditions index (FCI). In the first step, by employing the Panel Analysis of Nonstationarity in Idiosyncratic and Common components (PANIC) proposed by Bai and Ng (2004),we obtain six common factors to capture the price and quantity fluctuations in the stock market, the money market and the foreign exchange market. In the second step, we construct the FCI based on these factors, with their weights determined by the method of Deutsche Bank, and find the resulting signs of these weights are consistent with the implications of macroeconomic theories. Moreover, the results of Granger causality tests and the pseudo out-of-sample experiments suggest that the FCI developed in this paper can lead the dynamics of many macroeconomic variables. This property may be helpful for improving economic forecasts. [ABSTRACT FROM AUTHOR]

The act of modeling and forecasting stock market volatility has become essential to risk management practice; it has emerged as one of the most popular themes in financial econometrics and has been mainly and constantly used in the valuation of financial assets and the Value at Risk, as well as the pricing of options and derivatives, are all part of the process. The purpose of this paper is to contrast the GARCH (Generalized Auto Regressive Conditional Heteroscedasticity) family models -- GARCH, PGARCH, EGARCH, GJR-GARCH, MGARCH, and IGARCH -- with the EWMA (Exponentially Weighted Moving Average) models in the prospect of establishing the best algorithm to forecast TSEC volatility weighted index from Taiwan stock market. We employ daily returns for the range between July 1997 and July 2023. The sample data spans a long time period i.e. 26 years of data with 6375 observations, which includes dramatic events such as the financial crisis of 2008, the COVID-19 epidemic, and the war between Russia and Ukraine. We observe that the asymmetric model PGARCH with a Student's t distribution develops the best model for assessing the volatility of the chosen index, but PGARCH with a normal error distribution produces the best estimating performance outcomes and hence outperforms the EWMA model. The present empirical investigation also seeks to illustrate the potential for investment returns as well as the associated risk. Our findings may have implications for risk management in Taiwan, together with a deeper exploration of the TSEC weighted index from Taiwan stock market volatility dynamics, given the scarcity of prior such studies. [ABSTRACT FROM AUTHOR]

Structurally inert firms suffer elevated failure risks in the face of environmental change because inertia makes it difficult to keep pace with the speed of such change. Traditionally, this ecology theory based outlook focuses on the risks of mortality, treating the make-up of an organization's architecture as uniform and thus relatively inconsequential for understanding this hazard. Renewing recent debates on inertia and on structure, in this paper we examine the specifics of the make-up of structural inertia in the context of failure hazards—the measurable survival risks associated with failure. Developing a classification of structural inertia, we test a sample of 755 firms listed on the Taiwanese Security Exchange across 52 industries to develop a convention on organizational structure, ratifying that structural inertia differs by type in incorporating failure hazards. Findings differentiate between and elaborate the validating environmental and resource conditions for these different categories, detailing the extent to which failure hazards are related to the specifics of each type. This variation is helpful in explaining better why, despite conditions leading to failure, inert organizations continue to thrive over time. Discussing this logic addresses the narrow representation of structural inertia and limitations to its theoretical development over several decades. It also shows that traditional organizational ecology measures can be legitimately underplayed in organizations dealing with increased failure hazards in favor of the characteristics of different structural inertia types. [ABSTRACT FROM AUTHOR]

This paper investigates the existence of an optimal debt ratio for the electronic listed firms in Taiwan, using balanced panel data for a sample of 143 selected electronics companies listed in the Taiwan Stock Exchange (TSE) from the first quarter of 1999 to the third quarter of 2004. The result shows that there is a single threshold effect of debt ratio on firm value when return on equity (ROE) is used to proxy firm value. Furthermore, based on our combined findings of ROE and earnings per share (EPS) triple threshold estimations, we find that the appropriate debt ratio range for the electronic listed firms in Taiwan should not be over 51.57 percent or below 12.37 percent. To ensure and enhance the firm's value, the optimal range of debt ratio should be within 12.37 percent and 28.70 percent. The implications of the findings for financial managers and shareholders' welfare are discussed. [ABSTRACT FROM AUTHOR]

Indian capital market is one of the outperforming financial markets in the global index have been attracting attention of investors word wide. The market has grown over 6% during the year 2018-19 with a market capitalization of INR 151 lakh crores facilitated in raising funds through debt and equity by 5.3% amounting to 9 lakh crores. This also contributed in the growth of returns from Indian markets and attraction of European and Asian investors. Liberalization of economic policies of trade and free flow of capital resulted in integration of global economies. Euro-Asian markets are globally recognized for the economic development of the region. This paper finds impact of Euro-Asian markets on Indian capital market using multiple regression analysis. The study finds global indices of Shanghai Composite do not have an impact on Indian stock market. However, the markets of Hangseng (HSI), EuroNext 100 and Taiwan (TSE Taiwan 50) have a positive impact on Indian capital market (Sensex). Any fluctuations of increase or decrease in these markets have simultaneous effect on Indian indices. [ABSTRACT FROM AUTHOR]

Four new determinants of initial/long-run IPO (initial public offering) returns from the perspectives of market conditions are proposed in this paper. The associated effects are examined by using the samples of Taiwan's high-tech IPO companies. Our empirical findings are consistent with the following notions. First, the four new determinants proposed perform remarkable effects on the IPO returns. Second, the length for IPO and IPO clustering phenomena has notable impacts on the long-run returns of IPO. In contrast, the performances of public stock markets show significant effects on the initial returns of IPO. [ABSTRACT FROM AUTHOR]

This paper examines the arbitrage opportunity existing between Taiwan stock index futures and spot markets with the consideration of transaction costs. Index futures arbitrageurs only enter into the market if the deviation from the equilibrium relationship is sufficiently large to compensate for transaction costs, as well as risk and price premiums. Employing the 5-minute intraday data of Taiwan index futures contracts, this paper uses the threshold cointegration model to estimate the upper and lower thresholds within which arbitrage is not profitable and, hence, the mispricing errors do not adjust back to equilibrium in the central regime. Combining these thresholds with an error correction model (ECM), empirical results show that there exists bi-directional Granger-causality relationship between index futures and spot markets. However, once the long-run cointegrated equilibrium does not hold, re-establishment of the equilibrium situation mostly depends on price adjustment in the futures market. [ABSTRACT FROM AUTHOR]

The paper examines the stock price behaviour of 311 initial public offerings (IPOs) on the Taiwan Stock Exchange for the period 1971-95. The IPOs are significantly underpriced. The initial risk-adjusted excess return is 42.6% from the listed day until the first non-limit trading day. The initial risk-adjusted return is positively related to the ovesubscription ratio, which is consistent with Rock's model. The aftermarket performance is consistent with the efficient market hypothesis. The cumulative abnormal return estimated by the market model is not statistically significant after the initial trading. Further, the long-run performance of IPOs is not related to the initial risk-adjusted return. [ABSTRACT FROM AUTHOR]

The development and liberalization of the international economic and trade market in recent years have accelerated the growth and integration of the international financial market. In this regard, overall economic and financial market indicators become top priority of scholars. Hence, the study intends to explore the correlations of stock market, exchange rate and interest rate in Taiwan. This study mainly analyzes the correlation of variables based on the monthly data of Taiwan market from 1990 to 2018. Through Unit Root Test, Cointegration Test, and Granger Causality Test of Vector Autoregression (VAR), Impulse Response Function and Forecast Error Variance Decomposition, this study analyzes the causal relationship, impulse response and forecast error variance among variables, and identifies leading indicators, response time of variables and impact of other variables. Based on the empirical results of this paper, it can be seen that (1) According to the Granger Causality Test, the exchange rate is the leading indicator among variables in the short term, while the stock market is the leading indicator in the long run. (2) According to the Impulse Response Function, the response of exchange rate and interest rate to stock market is current and immediate, but the response of stock market to exchange rate and interest rate is delayed. (3) According to the Forecast Error Variance Decomposition, the exchange rate is most significantly affected by the stock market, followed by the impact on the stock market by the exchange rate, and the impact on the interest rate by the stock market. Finally, this study puts forward relevant suggestions based on the empirical results, so as to serve as references for further researchers to conduct more complete and objective researches. In addition, this paper, based on the empirical results, hopes to provide academic circles, practical circles and policy makers with reference to Taiwan's overall economic and financial market, and to understand development process of various indicators, so as to achieve market prediction, reduce risks of investment in the financial market, and achieve better investment performance. [ABSTRACT FROM AUTHOR]

Market reactions to the change of index constituents are reflected in the share prices and trading volumes of constituent stocks. More of than not, share prices and trading volumes exhibit significant ups or downs, in response to the change of index constituents. Literature mostly focuses on large-cap indexes in developed markets. There are not many studies on small-cap indexes or emerging market indexes. To fill the academic void, this paper examines how the market responds to the change of the Taiwan Mid-Cap 100 Index constituents as reflected by stock returns and trading volumes. The Taiwan Mid-Cap 100 Index is a showcase of the medium-sized companies in Taiwan with growth potential. This paper seeks to establish an understanding of the performance of its constituents on the stock market by zooming in on the long-term effects of addition and deletion in the Taiwan Mid-Cap 100 Index. [ABSTRACT FROM AUTHOR]

This study introduces an enhanced absorbing Markov chain model for predicting Taiwan Stock Exchange Capitalization Weighted Stock Index Futures (TAIEX Futures) trends. Data were gathered from the U.S. TAIEX Futures Yahoo portal site and converted into a regular Markov chain model. A regular Markov chain enables long-term behavioral predictions to be made with regard to the probability of TAIEX Futures. This paper also demonstrates an artificial variable technique for establishing an enhanced absorbing Markov chain model for determining how long TAIEX Futures will increase before prices begin to fall. The results show that the TAIEX Futures absorbing Markov chain can warn investors about the least number of days on average that a particular TAIEX Futures that increased or decreased that day will increase before its price begins to fall. [ABSTRACT FROM AUTHOR]

This paper utilizes panel threshold regression to study the impact of idiosyncratic risk of stock returns on the Taiwan Security Market over the period from 2000 to 2011, during which there has been a noticeable increase idiosyncratic volatility. An innovative panel threshold regression model is applied to test the panel threshold effect of idiosyncratic risk on expected stock returns. The results support Merton's (J Financ 42:579-590, ) investor recognition hypothesis and confirm that a threshold effect does exist. This study shows that it is possible to identify the definitive level beyond which a further increase in idiosyncratic volatility does not improve proportional expected stock returns. Some important policy implications arise from these findings. The conditional distribution of expected stock returns is allowed to vary across low volatility states. The evidence suggests that in Taiwan, idiosyncratic risk is a predictor of future market returns based upon threshold value during the lower variance state. In contrast, when the threshold value is exceeded, the relation between idiosyncratic risk and expected stock returns is not statistically significant. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper empirically examines the dynamic stock return-volume relations for six emerging Asian markets: Indonesia, Malaysia, Singapore, South Korea, Taiwan, and Thailand. Evidence is found that trading volume Granger causes stock return in quantiles and the causal effects of volume are heterogeneous across quantiles. This shows that volume carries some information to the return and could be interpreted in light of theoretical models. In addition, we find that there is bi-directional causality between stock return and trading volume in most of the markets. The finding indicates that those Asian emerging markets with different institutions and information flows than more mature markets have present similar causal effects on the stock return-volume relation. Furthermore, the cross-country evidence shows that the US market helps to predict the returns of the emerging Asian markets. [ABSTRACT FROM AUTHOR]

In this paper, we present a new method to forecast the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) using fuzzy time series and automatically generated weights of multiple factors. The proposed method uses the variation magnitudes of adjacent historical data to generate fuzzy variation groups of the main factor (i.e., the TAIEX) and the elementary secondary factors (i.e., the Dow Jones, the NASDAQ and the M1B), respectively. Based on the variation magnitudes of the main factor TAIEX and the elementary secondary factors of a particular trading day, it constructs the occurrence vector of the main factor and the occurrence vectors of the elementary secondary factors on the trading day, respectively. By calculating the correlation coefficients between the numerical data series of the main factor and the numerical data series of each elementary secondary factor, respectively, it calculates the relevance degree between the forecasted variation of the main factor and the forecasted variation of each elementary secondary factor. Based on the correlation coefficients between the numerical data series of the main factor and the numerical data series of each elementary secondary factor on a trading day, it automatically generates the weights of the occurrence vector of the main factor and the occurrence vector of each elementary secondary factor on the trading day, respectively. Then, it calculates the forecasted variation of the main factor and the forecasted variation of each elementary secondary factor on the trading day, respectively, to obtain the final forecasted variation on the trading day. Finally, based on the closing index of the TAIEX on the trading day and the final forecasted variation on the trading day, it generates the forecasted value of the next trading day. The experimental results show that the proposed method outperforms the existing methods. [ABSTRACT FROM PUBLISHER]

In this paper, I use a unique proprietary dataset from the foreign exchange market to examine the existing hypotheses on price clustering. I find that market uncertainty plays an important role in price clustering. Moreover, since trading behavior changes under different market conditions, market timing also affects the likelihood of price clustering. The results support both the price resolution hypothesis (Ball et al. J Futures Mark 5:29-43, ) and the negotiation hypothesis (Harris Rev Financ Stud 4:389-415, ). Since the data covers the interbank foreign exchange market, which is the market for the professional bank dealers, the attraction hypothesis is less likely to be a plausible explanation for price clustering in the foreign exchange market. [ABSTRACT FROM AUTHOR]

Strengthening the accountability of government officials to achieve public satisfaction in democratic countries has been a crucial issue. We study the issue empirically using the concept of national governance based on a case study of the key Taiwanese financial regulator, namely, the Financial Supervisory Commission (FSC). This paper integrates theories of resource-based views, trust, and corporate governance to motivate the empirical analysis. The findings show that accountability is positively related to public satisfaction. Capability and integrity have a positive relation to the accountability of the regulator, suggesting that one of the most effective ways to get public satisfaction is to recruit staff with capability and integrity. [ABSTRACT FROM AUTHOR]

This paper examines the major determinants of a firm's derivatives use for companies listed in Taiwan Stock Exchange in the period from 1997 to 1999. The study finds that the proportion of derivatives use in Taiwan, ranging from 31% to 37%, is comparable to that of the US (35%), but less than that of New Zealand (53%). Firms' derivatives use in Taiwan asymmetrically focuses on currency/forwards derivatives. Industry breakdown illustrates that the electronic industry stands for the heavy user both in terms of number and amount. We show that the vital determinants of a firm's derivatives use are size, the ratio of long-term debt to total debt, the electronic industry dummy, and the export ratio. The fact that firms' derivatives use positively correlated with size and the long-term-debt-to-total-debt ratio implies the capability-willingness hypothesis: only large firms are affordable to engage in derivatives use due to the concern of economies of scale in establishing and maintaining expertise, and these firms demand more derivatives use when they face with high financial risk in debt structure. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of index futures tradings on day-of-the-week effects for the equity index in Taiwan's equity market. Using the extensive model of Hiraki, Maberly and Taube (1998), the empirical findings support the hypothesis that the introduction of index futures has a significant impact on the return structure, both in terms of daily seasonalities and the lag effects of past returns on current returns. Of particular interest, Tuesday effects gradually disappeared after the introduction of index futures, and in the post-futures period, Monday returns are found to be anomalous. After controlling non-normality of the error distribution and time-varying conditional variance, the results indicate that the Monday and the Tuesday effects co-exist after the index futures listings. Although the US equity market is shown to have a strong influence on the Taiwan's market, the pattern of weekend effects shift remains unchanged after taking the US spillover into account. The closing of Saturday trading is found to be a partial cause of the observed shift. [ABSTRACT FROM AUTHOR]

This paper investigates the influences of inception of Taiwan Index futures trading on the spot price volatility on the Taiwan Stock Exchange (TSE). The macroeconomic effects are controlled and the asymmetric response behaviour is studied. The empirical evidence shows that the trading of TAIEX futures has major impacts on spot price volatility mechanism while the trading of MSCI Taiwan futures does not. In addition, the trading of both index futures has altered the asymmetric response behaviour of spot price volatility. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to investigate the effect of Taiwan's stock stabilization fund on the stock market. Stabilization funds have long been used by many countries to achieve the goal of market stabilization. However, the actual impacts of the funds still remain a puzzle. This is the first paper that empirically examines the effect of the stabilization fund on the stock market. Taiwan's stock stabilization fund, which was inaugurated in February 1996 after the panic selling induced by the announcement of military exercise by mainland China, provides an experimental environment for investigating whether this alternative mechanism is effective in stabilizing the stock price when the market is in panic. By intervention analysis, we find that in the short run, the stabilization fund is statistically significant in preventing the market price from further declining after the announcement of the mainland China's military exercise. This evidence still holds after controlling the effects of the following two events: Morgan-Stanley's announcement to include Taiwan stock index into its worldwide equity market indices, and the event of U.S. aircraft carrier sent to Taiwan Strait to secure this area during the period of military exercise by mainland China. [ABSTRACT FROM AUTHOR]

Conventional tests of capital asset pricing model usually assume that β, a measure of the systematic risk, is stable over time. Nonetheless, empirical investigations generally find that β tends to be volatile over time. This paper formulates novel empirical models for testing the capital asset pricing model (CAPM) by allowing β to be drawn from two distinct regimes, or to be time varying. The econometric method via the Gibbs sampler with data augmentation algorithm is applied to the data from Taiwan Stock Market to estimate and test the model. [ABSTRACT FROM AUTHOR]

This paper extends ISO certification research by investigating whether a stock value is influenced by the announcement of its ISO registration with respect to the firm size, industry, and ISO standard series on the Taiwan Stock Exchange. The results show that receiving ISO registration influences abnormal returns. The market reacts favorably to both small and large firms but has no reaction to medium firms in terms of a firm's capital. We also observe significant positive market reaction for Plastics and Textiles. A beneficial implication is that investors may benefit more from their investment endeavors if they can properly examine the specific effects. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to investigate the exchange-rate exposure of Taiwanese exporting firms. Particularly, we consider the effects of the timing of the three liberalization events through which the government carried out explicit policies to open gradually its foreign exchange and stock markets. First, we cannot corroborate that most exporting firms are individually exposed to exchange-rate risk. However, we cannot reject that the exporting firms are jointly exposed to exchange-rate risk in all sub-periods. Second, the timing of the three liberalization events greatly affects the exchange-rate exposure of Taiwanese exporting firms. Finally, the determinants of possibly time-varying exchangerate exposure of exporting firms are exports-to-sales ratio, firm size, and the timing of the three liberalization events. [ABSTRACT FROM AUTHOR]

This paper examines the change in corporate dividend policy and investor behavior in relation to the introduction of the imputation tax system in Taiwan. However, the findings of this study are unlike those of previous studies. Stock dividends are treated as a dividend for taxation purposes and represented the dominant payment mechanism in Taiwan before 1997. By contrast, both the number of firms paying cash dividends and aggregate cash dividend payments increase after the introduction of the imputation tax system. Consistent with the tax preference for the distribution of dividends, a higher level of tax deductible rate was associated with a higher cash dividend payout ratio. Domestic individual investors have been the only shareholders affected by the introduced dividend imputation, whereas the percentage of firms owned by domestic individual investors has decreased. However, the percentage of firms owned by foreign institutional investors has increased. [ABSTRACT FROM AUTHOR]

How to construct effective investment strategies is a core issue for modern finance. In this paper, we investigate the benefits of various models by rebalancing portfolios using the daily stock return data in Taiwan. We further consider investment constraints in portfolios to ensure the feasibility of their applications. Using five performance criteria, we find the risk models, particularly the CVaR, yield higher ex ante and ex post performance than a naïve buy-and-hold portfolio. The two-stage regressions show that high return benefits are associated with a bear market while high reduction in risk is positively related to high volatility. Though VaR is regarded as a standard model applied in the real world, our findings suggest that CVaR can serve as a good alternative. [ABSTRACT FROM AUTHOR]

A well-established financial trading system should well perform in resource allocation, risk management, and sustainability. In this paper, we propose a self-management portfolio system with adaptive association mining for practical applications. The system allocates funds into independent units for risk management, and utilizes association mining and adaptive closing mechanism for resource allocation and sustainability, and adopts a self-management module for monitoring positions. The proposed system boosts the annual return and Sharpe ratio to 9.1% and 0.578 (increased to 2.28 and 2.48 times), and reduces the drawdown risk to 34.6% (decreased to almost half). Furthermore, the system rapidly closes the stock positions to avoid drawdown risk in the bear markets, and gradually increases the stock positions when the market turns into bull. Compared with benchmarks, proposed system outperforms all benchmarks in all measurements and on randomly sampled dataset. [ABSTRACT FROM AUTHOR]

This paper evaluates monthly stock index price from the Taiwan stock market for evidence of weak form market efficiency. Four empirical methodologies are employed: the Ljung--Box Q test, the binomial distribution test, the runs test and the unit root test of stationarity in stock prices. Empirical evidence suggests that the monthly stock price for the Taiwan stock market exhibits weak-form efficiency. [ABSTRACT FROM AUTHOR]

This paper examines the martin gale hypothesis for five Asian stock markets using the spectral shape tests of Durlauf (1991). Unlike the variance ratio test employed in previous studies (eg, Pan et al, 1991), the spectral shape tests are consistent against all stationary alternatives to the martingale null. The spectral shape tests were applied to daily and weekly returns on the stock indices of Thailand, Hong Kong, Korea, Malaysia and Taiwan over a period of 17 years. The results show that the martingale null is rejected for most markets. There is some evidence that the rejections may be due to low frequency or long memory influences. [ABSTRACT FROM AUTHOR]

Using 10-year population data from 2000 through 2009 in Taiwan, this is the first paper to analyze the relationship between margin trading in stock markets and stroke hospitalizations. The results show that 3 and 6 days after an increase of margin trading in the Taiwan stock markets are associated with greater stoke hospitalizations. In general, a 1 % increase in total margin trading positions is associated with an increment of 2.5 in the total number of stroke hospitalizations, where the mean number of hospital admissions is 233 cases a day. We further examine the effects of margin trading by gender and age groups and find that the effects of margin trading are significant for males and those who are 45-74 years old only. In summary, buying stocks with money you do not have is quite risky, especially if the prices of those stocks fall past a certain level or if there is a sudden and severe drop in the stock market. There is also a hidden danger to one's health from margin trading. A person should be cautious before conducting margin trading, because while it can be quite profitable, danger always lurks just around the corner. [ABSTRACT FROM AUTHOR]

This paper examines the impact of differences of opinion (DIFOPN) on long-term price reversals using all of the common stocks listed on the Taiwan Stock Exchange over the period of 1990-2008. We choose winners and losers ranked by their cumulative abnormal returns (CARs) over the three-year formation period. The performance of the winners and losers is evaluated over the subsequent one-year holding periods. The empirical results indicate that DIFOPN are generally positively related to price reversals in the holding period for both winners and losers. When DIFOPN are measured by the financial analysts' forecasts of earnings per share and by the standard deviation of stock returns, the association between DIFOPN and price reversals is significantly different from zero. This relationship is robust when such control variables as market-to-book ratios, size, and beta are included. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to use a stochastic dominance test to examine the relative performance of value vs growth stocks based on multiple value-growth proxies in the Taiwan stock market. Design/methodology/approach – This work examines whether the return distribution of a value portfolio stochastically dominates that of a growth portfolio using a test proposed by Linton et al. (2005). Findings – By applying stochastic dominance analysis on the full-sample period, the sub-sample period and the state of the world’s economic conditions, the authors find that the earnings-to-price or dividend-to-price ratio is better than the book-to-market ratio as a value-growth proxy in Taiwan. There are robust results even after adjusting for data frequency, a sampling method and sample excluding financial services. Originality/value – This study makes the first attempt to examine value vs growth strategies based on multiple value-growth proxies in the emerging market of Taiwan by administering the stochastic dominance test. [ABSTRACT FROM AUTHOR]

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The objective of this study was to examine, using a vector autoregressive model, whether the difference in earnings growth rates caused different reaction speeds in stock prices. Monthly returns of stocks listed in the Taiwan stock market from May 2003 to April 2013 were used as empirical data in this study. The analytical results showed that the returns of portfolios with higher earnings growth rates significantly led those portfolios with lower earnings growth rates when size, trading volume, institutional ownership ratio, and revenue factors were controlled, respectively. This paper finds that the earnings growth rate is a significant determinant of the lead-lag patterns observed in monthly stock returns. [ABSTRACT FROM PUBLISHER]

This paper focuses on Taiwanese companies that applied for Gre Tai Securities Market / Taiwan Stock Exchange (GTSM-TWSE) transfer through simplified batch-reviews between 2000 and 2011. Since the listing-transfer companies were likely be motivated by earnings management, this study, which consists of 444 observations, examines whether audit firm sizes (measured by Big5) and audit industry specialization are associated with lower earnings management during the year before and the year of GTSM-TWSE transfer. The empirical results show: (1) that Big5 and SPEC generally cannot constrain listing-transfer firms' discretions over earnings any more than non-Big5 can; and (2) that listing-transfer firms audited by industry specialist auditors do engage less in income increasing--accruals than listing-transfer firms audited by non-industry specialist auditors in the year prior to transfer year. In sum, the results show that the simplified batch-review procedures seem to be over-confident of the abilities of CPAs to restrain earnings management engaged in by GTSM-TWSE transfer firms. [ABSTRACT FROM AUTHOR]

Investment analysts act as important capital market participants that transmit information about the merits of doing CSR on firm's financial perspective to investors. If an analyst perceives that CSR engagement is value-enhancing, then he/she tends to rate a ?buy? for the firm with superior CSR performance, and vice versa. This paper examines the linkage between a firm's CSR engagement and its frequency of analysts' recommendation and how favorable recommendations are. Quarterly data of listed companies on the Taiwan Stock Exchange (TWSE) from 2005Q1 to 2012Q2 is employed. We construct dichotomous CSR measures based on the Common Wealth's "Best-Corporate-Citizens" and the Global Views Monthly's "CSR-Award." We collect firm data about analyst recommendations from the DataStream I/B/E/S database. Regression results generally show: (1) firms with superior CSR performance have a higher percentage of hold recommendations and a smaller percentage of buy/sell recommendations; (2) CSR-firms do not have a superior recommendation score than non-CSR-firms and receive a lower frequency of recommendation; (3) while CSR-firms in a high-growth industry receive a higher percentage of hold recommendations and lower frequency of buy recommendations, CSR-firm in a non-high-growth industry receive a lower percentage of hold recommendations and a higher frequency of buy recommendations; and (4) after controlling for self-selection of firms engaging in CSR, firms with superior performance on CSR tend to have a greater percentage of hold recommendations, a higher recommendation score and a higher frequency of recommendation. The evidence generally supports the view that firms engaging in CSR receive financial market benefit in terms of more favorable analyst recommendation, potentially enhancing their market value. [ABSTRACT FROM AUTHOR]