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Credit channel(s) of the monetary policy transmission has not been debated much in the literature especially in the context of the European monetary union (EMU) and the apparent rising fragmentation of the previously much integrated European banking system. This discussion is even more important in the aftermath of the global financial crisis (GFC) and the decade-long European debt crisis (EDC), a number of European countries have been experiencing. This paper attempts to investigate the interconnectedness of credit channels in policy transmission in the context of EMU using bank lending survey (BLS) data for a sample of eight European countries. One of the main contributions of this paper is to use BLS data for the entire 11 credit channels. We use principal component analysis (PCA) to investigate the impact of monetary policy on the interconnectedness structure of credit channels. PCA is conducted both for EMU across channels and sample countries. EFA-orthogonal vector rotation indicates a core versus periphery interconnectedness pattern. The results suggest that the household balance sheet channel, borrower cash flow channel and interest rate channel are the most divergent channels in EMU.

This study investigates dynamic interconnectedness, spillover transmissions and risk contagion through the lens of intraday and overnight returns to ascertain whether intraday and overnight trading information (returns) have idiosyncratic effects on risk behavior of financial markets. The study employs the generalized VAR-based spillover measure, graph theory and Bayesian causality network (BN) models. Our results reveal that spillover propagation from the US market is mainly through the intraday return series to Asian markets, whereas the overnight series is mainly a recipient of spillovers. Furthermore, in terms of risk contagion, the result identifies the most systemically central financial markets (SCFMs) as Singapore, Hong Kong, Korea and Taiwan. In particular, the findings demonstrate that while Singapore maintains the role as the most systemically central markets in large part, other markets occasionally took the leading role as most central markets. Overall, the findings provide important practical implications for market regulators and investors to monitor the channels of trading information and the performance of SCFMs for better risk management and strategic investment decisions.

This article evaluates the transmission through intermediaries taking into consideration the dichotomy between peripheral and core banking systems with regards to the ECB’s standard and non- standard measures of monetary policy by the use of “shadow rate” as an indicator of the monetary policy stance. Bank sector is represented by lending surveys data (BLS) which contain robust quarterly information on changes in loan terms, conditions and standards for both firms and households. By using a Factor Augmented VAR (FAVAR) methodology, we conclude that our model performs well, but it only contradicts the predictions of theory as far as it concerns the credit volume impulse responses functions (IRFs). Selecting a sample of core and peripheral banking systems to apply our methodology, we find the theoretical predictions are confirmed only when the peripheral banking systems are neutralized, indicating that the erratic behaviour of IRFs results from the periphery’s banking system inclusion. We conclude that dislocation in the peripheral segment of European banking system impairs seriously the monetary policy transmission mechanism and, importantly, steps should be undertaken towards risk-sharing in EMU and risk reduction in peripheral banking systems to cure banking system imbalances in the context of EMU.

Since the 1990s, the economic growth of the West African region has been remarkable, with average GDP growth of 5 per cent annually. In view of that, this article investigates the Total Factor Productivity (TFP) performance for the Economic Community of West African States (ECOWAS) region, which takes into account the recent development on political stability and trade openness. There were also periods when TFP fell sharply, the most significant happened in the late 1990s and 2000s where TFP dropped significantly which might be attributed to the spillover effect of the Asian and global financial crises. Our results showed that TFP was performing well for the region as well as for each member countries for the period of the study. We acknowledged that the estimated TFP in our model captures other factors such as human capital, health and other institutional factors that could affect economic growth. We also estimated the Technical Efficiency (TE) for the ECOWAS region using the Stochastic Frontier Modelling and the result indicates that the TE performance is well below the optimal level of production.

Value Added Intellectual Coefficient (VAIC) method has become the most efficient method for measuring intellectual capital (IC). However, there are inconsistencies in the mechanism of adopting the VAIC method to measure IC, thus questioning the robustness of established relationships between IC and firm performance. Therefore, this study attempts to examine the diversity in estimates of the impact of IC on firm performance as a result of adopting the VAIC method in a diverse manner. The study also proposes a modification to the basic VAIC method to eliminate its key limitation. Findings of the study indicate that there are differences in the estimates of the impact of IC on firm performance as a result of varied VAIC adoptions. The proposed modification to the basic VAIC method incorporates theoretically agreed value compositions of IC (human capital, structural capital and relational capital) replacing traditional value compositions (human capital and structural capital) in the basic VAIC method.

This paper examines the benefits of international diversification from the perspective of local investors in 15 Asian markets whose initial portfolio holdings consist of assets from the respective domestic markets. We employ the step-down approach of the mean–variance spanning test to examine the statistical significance of regional and global diversification benefits. The analysis is conducted using three portfolio groups based on relative strength ranking technique. The empirical evidence suggests greater benefits from regional diversification compared to global diversification, in most instances. For Asian economies with restrictions on international investing, these findings suggest a further liberalization of their markets.

In recent decades, ASEAN countries have made wide-ranging commitments and concerted efforts to achieve greater financial integration. We focus on the banking sector to investigate the degree of integration that has been achieved, both within ASEAN (Singapore, Malaysia, Thailand, the Philippines, and Indonesia) and externally with global markets (Japan, Hong Kong, China, India, and the USA). Specifically, we look at bank stock indexes and test for both correlation and causality across markets. Data are for the period 2000–2012 at daily frequency. Applying a dynamic conditional correlation (DEC) GARCH framework, we find evidence of rising correlation in market movements over time, both internal and external to ASEAN, although correlation coefficients remain low to moderate. Granger-causality tests show wide ranging transmission of volatility, with Singapore transmitting to all four other ASEAN markets and the USA to all five markets and Hong Kong to four. A quantile-based test for causality in conditional asymmetry finds more isolated occurrence of transmission.

This study attempts to contribute to the literature on risk exposures by investigating the dynamic volatility spillover transmissions and volatility co-movements between oil-risk factors and sectoral stocks in BRICS countries. A spillover index and DCC-GARCH estimation techniques are applied to identify the volatility transmission mechanism and co-movement among the series using daily data from 5th May 2007 to December 31st, 2016. To provide practical implications of the volatility transmissions, the estimated results are in turn used to compute and analyze the optimal weights and hedge ratios for oil-stock portfolio holdings. Our findings indicate the existence of significant volatility spillover interdependences and a time-varying volatility co-movement between oil-risk factors and sectoral stocks. However, the direction of spillover is shown to be somewhat unidirectional mainly from some selected sectors to oil-risk factors. Thus, we show that although volatility spillovers from oil-risk factors to sectors exist, the effect is at best, marginal. Finally, the optimal weights and hedge ratios show that oil-risk factors would be better suited as instruments for portfolio diversification rather than hedging to minimize oil price and portfolio risks which is important for risk management and diversification benefits.

In this paper, we examine the exposure of sectoral equity returns to changes in oil risk factors among BRICS markets. The paper combines VAR model together with the Random Forest technique to provide a novel framework which overcome some weaknesses in VAR modelling and help in the selection of oil-risk factors considered. Our results in general show that the response of sectoral stocks to changes in oil-risk factors is not homogenous and their sensitivities are not uniform across BRICS markets. Stock returns of Basic Materials, Financials and Industrials sectors show consistently negative sensitivity to crude oil volatility (OVX) and oil price shocks for major oil importers, whereas sectoral stocks among major oil exporters seems to demonstrate systematic pattern. To explain sectoral stock variations, the results reveal OVX and oil to be the most significant risk transmitting factors in BRICS, irrespective of whether the market is a major oil importer or exporter. However, our results also confirm the presence of asymmetric effects in sectoral stocks for Brazil and Russia while no such evidence is found for India, China and South Africa. Overall, the findings suggest that the manner in which sectors respond to fluctuations in oil-risk factors varies between different sectors and it depends on the oil characteristics of the markets, nature of sectors and the type of oil-risk factors considered.

Southeast Asia has experienced an economic growth since the 1980s. This growth triggered by reforms to increasing global and regional integration has been remarkable. This article aims to examine whether regional integration promotes economic growth in Southeast Asia. It further investigates whether the economic and social factors affect economic growth. The panel data were collected over 43 years (1970–2013) in Southeast Asia. We employ a cross-country growth model using a generalized method of moments in the dynamic panel framework to empirically examine the impact of regional integration on economic growth. Our results found that regional integration had a significant effect on economic growth. More specifically, our empirical results suggest that, in order to enhance regional integration and economic growth in the region, public institutions should work towards eliminating corruption and stabilizing macroeconomics and political stability while promoting international trade among member countries. This article sheds light on the key determinants of economic growth and policy formulations to achieve higher economic growth in Southeast Asia.

Interest rates are critical to any economy. Usually the central bank of a country supervises and tries to control the interest rates but there is always an element of uncontrollable effects: local or international. A central bank adopts a monetary strategy to affect various macroeconomic parameters such as inflation, exchange rate (ER), economic growth and many others. A country may decide to adopt Ultra-low Interest Rate Policy (ULIRP) or Negative Interest Rate Policy (NIRP) or a policy with moderate/high rate of interest. In today’s global business scenario, economies are connected and influence one another. The US and UK economies have seen a very low and negative interest rates historically, at least in recent past. Indian and Sri Lankan economies are integrated with the US and UK economies and thus are affected by their prevailing interest rates. The effect of low and zero interest rate policy of a country (USA and UK) on interest rates and economy of co-integrated economies (India and Sri Lanka) have been studied in this research. The objective of this study is to understand the implications of ULIRPs and NIRPs in the context of Indian and Sri Lankan economies. Two significant conclusions of the research are that Indian and Sri Lankan economies are affected by the US and UK policies and that they are affected at a lag of eight years.

This study examines the behaviour of staple food price using Multivariate BEKK-GARCH Model. Understanding of staple food price behaviour is important for determining the unpredictability of staple food market and also for policy making. In this paper, we focus on the commodity prices of sugar, rice, soybean and wheat to examine the volatility behaviour of those commodities. The empirical results show that the own-volatility spillover are relatively significant for all food prices. The own-volatility spillover effect for sugar price is relatively large compared with the volatility spillover of other staple food commodities. The findings also highlight that the price volatility of wheat increases during food crisis more than it does when the condition is stable. Also, the own-volatility of rice and wheat in the period of the food crisis is significant and higher compared to the period before food crisis indicates that the past own-volatility effects during food crisis are relatively more difficult to predict because of the uncertainty and high price volatility. Policy recommendations that can be proposed based on the findings are: (1) a better trade agreement in food commodity trade, (2) Indonesia should not depend on wheat importation, and (3) early warning system to minimize food price volatility risks.

Asian banks have recorded 22 banking crisis between 1945 and 2008 and its total share of years in a banking crisis since 1945 is 12.4%, the highest compared to all regions. Interestingly, most of the financial institutions in the region remained largely unscathed during the recent global financial crisis, mainly due to their strong liquidity and capital buffers. Yet, given the episodes of past crisis, the rapid increase in regional corporations and cross-border flows in the region, as well as the paramount importance of the banking sector in the Asian region, it is interesting to study how the banking sectors in the various economies co-move with each other. Against this backdrop, we examine the dependence structure between banking sectors in the region using copula functions. Several findings are documented. First, average dependence generally remain at moderate levels, though dependence between the banking sectors of the developed Asian markets are relatively higher than the emerging markets. Second, we find evidence of asymmetric dependence, suggesting that banking sector returns co-movement varies in bearish and bullish markets. Third, our results show a mild increase in the bivariate dynamic correlations during crisis periods, indicating very limited risk of contagion. Our results provide significant implications for portfolio managers and policymakers.

The recent global financial crisis (GFC) has drawn much attention to systemic risk, particularly its measurement and key contributing institutions. Following this severe event, the economic and finance literature has been flooded with numerous quantitative measures of systemic risk. However, researchers have largely ignored the systemic risk potential of regions such as Asia, instead focusing on financial systems in the U.S. and Europe. This paper empirically examines systemic risk potential for banking institutions in Asia, drawing on recent systemic risk analytics. This paper employs two methods, using the Conditional Value-at-Risk method to measure the systemic contribution of institutions and the Granger-causality network approach to determine their degree of interconnectedness. The analysis reveals that the degree of interconnectedness has generally increased among banks in Asia. Nevertheless, the causal network among the banks has become less dense since the GFC (2007–2009). Thus, banks in developed Asian economies generally have higher potential for systemic risk than those in other emerging markets. Finally, we find a positive relationship between bank size and contribution to systemic risk.

BACKGROUND The presence of mucosal inflammation within appendicectomy specimens is poorly described in the literature, and there is debate regarding the clinical significance of this histological finding. The aim of this study is to correlate clinical and radiological data with histologically confirmed acute mucosal appendicitis (MA). METHODS A retrospective cohort study was performed to identify all patients who underwent appendicectomy over 5 years at Caboolture Hospital. Data were collected in regards to clinical Alvarado score, pathological specimen findings, radiological findings and coincidental conditions, and comparison made between MA and negative appendicectomy groups. RESULTS A total of 1347 appendicectomy specimens and data were reviewed. Of these, 219 (16%) specimens were microscopically confirmed to have acute mucosal inflammation, 150 (68%) were females. Median age was 19 ± 14 years. A total of 243 (18%) were histologically negative. There was a statistically significant difference in mean Alvarado score in the MA group (5.0 ± 1.9 versus 4.3 ± 1.8, P = 0.0002). Patients with MA are more likely to report migratory pain (48.4 versus 31.4%, P = 0.0001) and rebound tenderness (24.9 versus 14.6%, P = 0.002). Computed tomography and ultrasound scans were negative in 74.1 and 72.6%, respectively, in patients with MA. More MA patients benefited from appendicectomy compared with the negative appendicectomy group (82 versus 63%, P =

Highlights • De Garengeot hernia is a rare type of femoral hernia that involves an appendix within the hernia sac. • Diagnosis is clinically difficult. Imaging may assist in pre-operative diagnosis. • There are various surgical methods in the approach to repair of femoral hernia. A recently published surgical method is described in this report., Introduction De Garengeot hernia is a rare type of femoral hernia, defined as a sac containing a vermiform appendix. Due to its rare occurrence the information available on diagnosis and management is scarce. We report the use of a recently described technique for femoral hernia repair and appendicectomy. Presentation of case A 67 year old female presented to the emergency department with features of incarcerated femoral hernia. CT imaging revealed an incarcerated appendix within a femoral hernia. The patient subsequently underwent surgery, where the femoral hernia was repaired and appendicectomy performed concurrently. Discussion Clinical diagnosis is difficult, and there have only been a few documented cases of pre-operative CT diagnoses in the literature. The usual risk factors for developing a hernia would apply to this pathology, and other anatomical and embryological considerations are explored. The King’s College technique for femoral hernia repair involves an incision that allows repair of the hernia and also the ability to enter the peritoneal cavity using the same incision. This approach was used in this case, where the abdominal cavity had to be entered to perform the appendicectomy, before the femoral hernia could be repaired. Conclusion Pre-operative diagnosis of De Garengeot hernia is difficult, as it may mimic an incarcerated femoral hernia containing other contents. The diagnosis becomes apparent intra-operatively. The clinical significance lies in that intra-abdominal access may be required to safely perform an appendicectomy before the repair of the hernia defect, and this article includes a description of a suitable technique for this particular pathology.

The standard test is widely used for testing skewness. However, several studies have demonstrated that this test is not reliable for discriminating between symmetric and asymmetric distributions in the presence of excess kurtosis. The main reason for the failure of the standard test is that the expression of its variance, generally used in practice, is derived under the assumption of no excess kurtosis. In this article, we theoretically derive adjustment to the test under the framework of Rao's score (or the Lagrange multiplier) test principle. Our adjusted test automatically correct the variance formula and does not lead to over- or under-rejection of the correct null hypothesis of no-skewness. In a similar way, we also suggest an adjusted test for kurtosis in the presence of asymmetry. These tests are then applied to both simulated and real data. The finite sample performances of the adjusted tests are far superior compared to those of their unadjusted counterparts. For a proper comparison, we a...

This paper examines the impact of intellectual capital (IC) on the corporate performance of banking firms listed on the New York Stock Exchange from 2000 to 2011 as an attempt to rectify observed modeling issues in the extant IC performance models. It also studies the long-run behavior of IC as a strategic asset in the value-creation process. We propose four dynamic models to estimate IC performance, and the evidence of these models concludes that IC has a positive influence on the performance of the sample firms. However, the IC level and the magnitude of its influence on corporate performance have deteriorated over the sample period, raising doubts about the appropriateness of using IC as a strategic asset in the long term.

Highlights • Intestinal malrotation is a congenital rotational anomaly that occurs as a result of an arrest of normal rotation of the embryonic gut, said to occur in 1 in 6000 live births. Once thought to be a disease of infancy, is now more prevalent in older ages. • Cases of left sided appendicitis with previously undiagnosed intestinal malrotation therefore becomes more challenging to diagnose, and often time’s definitive surgical management is delayed. A varied list of differential diagnosis needs to be considered. • This case presentation shows the difficulties encountered and the variation in presentation that lead us down a different path prior to attaining a formal diagnosis. • CT abdomen was required to confirm the diagnosis, and in a paediatric age group, radiation exposure is always weighed upon risk-benefit ratio. • Definitive management is surgical intervention., Introduction Intestinal malrotation is a congenital rotational anomaly that occurs as a result of an arrest of normal rotation of the embryonic gut, said to occur in 1 in 6000 live births. Due to the abnormal caecal and appendix position, diagnosis of acute appendicitis becomes more challenging, thus leading to diagnostic and operative intervention delays. Our aim is to highlight the diagnostic challenges in this clinical scenario. Presentation of case We present a case of a 10 year old boy with previously undiagnosed intestinal malrotation with a left sided acute appendicitis. Initial symptoms lead to a treatment for gastroenteritis, however, due to ongoing pain a CT abdomen was done which showed the malrotation and appendicitis. He required a laparoscopy converted to open appendicectomy due to an appendicecal mass. Discussion Historically, intestinal malrotation was thought to be a disease of infancy with infrequent occurrence after the age of one year. However, recent analysis has shown an increase in presentations after one year of life into adulthood. Thus, the prevalence of malrotation in children and adults over the age of one year appear to be higher than initially presumed. Conclusion Left sided acute appendicitis is a diagnostic dilemma, thus often leading to management delays. It is pertinent to remember that malrotation of the gut is more common than previously thought, and not just a disease of infancy. It is advisable to consider imaging studies while balancing the risk-benefit-ratio of radiation exposure, especially in paediatric cases to cinch the diagnosis.

Highlights • We report a case of ileal ischemia caused by CMV in an immunocompetent individual. • CMV enteritis is a rare disease in immunocompetent persons. • Diagnosis is mainly based on the histology. • It should be considered in any unwell elderly patient with abdominal pain and diarrhoea., Introduction Cytomegalovirus (CMV) is predominantly an opportunistic infection in the immunocompromised patients. Though, there are few cases of CMV colitis being reported in the immunocompetent individuals, CMV enteritis is exceedingly rare and enteritis leading into small bowel ischemia has never been reported yet. Presentation of case A-78-year-old male patient presented with distal small obstruction for 4 days duration. Clinical examination revealed a distended abdomen and localised peritonism in right iliac fossa. An initial computed tomography (CT) scan revealed distended small bowel loops up to the thickened inflammed terminal illeum with no free fluid or gas and a normal appendix. No immunosuppressive risk factors such as human immunodeficiency virus, transplant procedures, or steroid therapy were present. Hematologic investigations showed leucocytosis with neutrophilia. Diagnostic laparoscopy confirmed a thickened terminal ileum causing small bowel obstruction. Laparoscopy converted to laparotomy and right hemicolectomy was performed. Histology showed isolated small bowel ischemia with ulcerative changes and cytomegalovirus inclusions. The patient was started on ganciclovir therapy and subsequently had an uneventful recovery and discharged after 16 days. Discussion Cytomegalovirus enteritis was initially not suspected in our patient. In this case CMV caused ischemia of the small bowel without evidence of colonic involvement. Even in elderly patients, the small bowel remains resilient to the ischemic changes because of the copious blood supply. Conclusion We report possibly the first case of isolated small bowel ischaemia caused by cytomegalovirus in immunocompetent individuals, needed surgical resection.

Objective - The vital role of entrepreneurial orientation (EO) on firm performance has been widely studied in developed countries. Most studies have found a positive linear relationship between EO and firm performance. However, the empirical findings are inconclusive. According to the recent literature, one possible reason for these inconsistent findings may be the nature of the relationship between EO and firm performance is not linear as assumed by many researchers. The objective of this study is to examine the relationship between EO and firm performance and specially to determine the best representation is whether linear or curvilinear. Methodology/Technique - This study utilizes a sample of 580 small medium enterprises (SME's) from two provinces in Sri Lanka and hierarchical regression analyses was employed for analyzing the relationships. Findings - Findings demonstrate anS-shape curvilinear relationship between EO and firm performance in the context of SME's in Sri Lanka. Type of Paper - Empirical Paper Keywords: Entrepreneurial Orientation; Firm Performance; Small Medium Enterprises; Curvilinear Relationship.

The presence of mucosal inflammation within appendicectomy specimens is poorly described in the literature, and there is debate regarding the clinical significance of this histological finding. The aim of this study is to correlate clinical and radiological data with histologically confirmed acute mucosal appendicitis (MA).A retrospective cohort study was performed to identify all patients who underwent appendicectomy over 5 years at Caboolture Hospital. Data were collected in regards to clinical Alvarado score, pathological specimen findings, radiological findings and coincidental conditions, and comparison made between MA and negative appendicectomy groups.A total of 1347 appendicectomy specimens and data were reviewed. Of these, 219 (16%) specimens were microscopically confirmed to have acute mucosal inflammation, 150 (68%) were females. Median age was 19 ± 14 years. A total of 243 (18%) were histologically negative. There was a statistically significant difference in mean Alvarado score in the MA group (5.0 ± 1.9 versus 4.3 ± 1.8, P = 0.0002). Patients with MA are more likely to report migratory pain (48.4 versus 31.4%, P = 0.0001) and rebound tenderness (24.9 versus 14.6%, P = 0.002). Computed tomography and ultrasound scans were negative in 74.1 and 72.6%, respectively, in patients with MA. More MA patients benefited from appendicectomy compared with the negative appendicectomy group (82 versus 63%, P = 0.0001).There is a subgroup of patients with MA who are young females with have low Alvarado scores, have non-diagnostic imaging, and may represent almost one-fifth of appendicectomy specimens. This study supports the probability that MA is a pathological entity.

Over the past decades, ASEAN countries have made wide-ranging commitments and concerted efforts to achieve financial integration. This puts forth the question of how far that has been realized as well as cross-market transmission in mean, volatility and conditional asymmetry. These issues are addressed at banking sector level, using cointegration technique, DCC framework, a quantile-based measure of conditional asymmetry and Granger-causality approach. The finding shows that full integration has not taken place among the banking sector in the ASEAN region and across other Asian markets. There is little evidence of conditional asymmetry spillover. Our results have implications for portfolio diversification and risk management.

This study examines the behaviour of staple food price using Multivariate BEKK-GARCH Model. Understanding of staple food price behaviour is important for determining the unpredictability of staple food market and also for policy making. In this paper, we focus on the commodity prices of sugar, rice, soybean and wheat to examine the volatility behaviour of those commodities. The empirical results show that the own-volatility spillover are relatively significant for all food prices. The own-volatility spillover effect for sugar price is relatively large compared with the volatility spillover of other staple food commodities. The findings also highlight that the price volatility of wheat increases during food crisis more than it does when the condition is stable. Also, the own-volatility of rice and wheat in the period of the food crisis is significant and higher compared to the period before food crisis indicates that the past own-volatility effects during food crisis are relatively more difficult to predict because of the uncertainty and high price volatility. Policy recommendations that can be proposed based on the findings are: (1) a better trade agreement in food commodity trade, (2) lower the dependence on wheat importation in Indonesia, and (3) reliable system to minimize food price volatility risks.

Most of the tests for symmetry are developed under the (implicit or explicit) null hypothesis of normal distribution. As is well known, many financial data exhibit fat tails, and therefore commonly used tests for symmetry (such as the standard b-sub-1 test based on sample skewness) are not valid for testing the symmetry of leptokurtic financial data. In particular, the b-sub-1 test uses third moment, which may not be robust in presence of gross outliers. In this article we propose a simple test for symmetry based on the Pearson type IV family of distributions, which take account of leptokurtosis explicitly. Our test is based on a function that is bounded over the real line, and we expect it to be more well behaved than the test based on sample skewness (third moment). Results from our Monte Carlo study reveal that the suggested test performs very well in finite samples both in terms of size and power. Simulation results also support our conjecture of the tests to be well behaved and robust to excess kurtosis. We apply the test to some selected individual stock return data to illustrate its usefulness. Copyright 2005, Oxford University Press.

Chesher and Jewitt (Econometrica 55 (1987) 1217) demonstrated that the Eicker (Ann. Math. Statist. 34 (1963) 447) and White (Econometrica 48 (1980) 817) consistent estimator of the variance–covariance matrix in heteroskedastic models could be severely biased if the design matrix is highly unbalanced. In this paper we, therefore, reconsider Rao's (J. Amer. Statist. Assoc. 65 (1970) 161) minimum norm quadratic unbiased estimator (MINQUE). We derive the analytical expressions for the mean squared errors (MSE) of the Eicker–White, one of MacKinnon and White's (J. Econometrics 29 (1985) 305) and MINQUE estimators, and perform a numerical comparison. Our analysis shows that although MINQUE is unbiased by construction, it has very large variance particularly for the highly unbalanced design matrices. Since the variance is the dominant factor in our MSE computation, MINQUE is not the preferred estimator in terms of MSE comparison. We also studied the finite sample behavior of the confidence interval of regression coefficients in terms of coverage probabilities based on different variance–covariance matrix estimators. Our results indicate that although MINQUE generally has the largest MSE, it performs relatively well in terms of coverage probabilities.

This chapter studies the performance of Asian mutual funds in Singapore, Malaysia, Hong Kong, and the Philippines using absolute and relative performance metrics in comparison with benchmark indices over time and also during calm and crises periods. The chapter further explores the factors that explain their performance. In the full sample analysis, we find that Asian funds generally under perform their benchmarks and adjusting for risk factors even makes their performance worse. However, the subsample analysis shows that fund performance based on alpha values improves over time and the performance in the post-crisis period are generally much better than the pre-crisis and crisis periods although it remains negative for most of the funds. Exclusively, Hong Kong funds outperform the benchmark during the post-crisis period.

The unusual severity of the recent global financial crisis has drawn much attention to systemic risk, particularly its measurement, and the institutions that contribute most to it. This paper provides an empirical examination of the systemic risk potential among banking institutions in Asia using CoVaR and Granger causality network approaches. The empirical evidence for a potential systemic crisis among Asia banks is ambiguous. The analysis reveals that the degree of interconnectedness has general gone up among banks in Asia. Nevertheless, the causal network among the banks has become less dense after the global financial crisis in 2007-2009. Banks from developed Asia economies generally rank higher compared to those from emerging market counterparts. Finally, we find that the greatest contributors to systemic risk are not necessarily large banks.

The bitter experience of the subprime crisis of 2007, the Global Financial crisis of 2008, and the extremely slow and painful ensuing recovery, has raised systemic risk to the center stage of global economic discourses. The crisis has brought home the urgent need for a thorough assessment of the dependence and interaction between banking sectors, from which most of the trouble began. This study investigates patterns and trends in absolute and tail dependence over time using daily returns for banking sectors from 12 Asian economies during the period 2000-2012. Static and time-varying Copula models, Gaussian copula, Symmetrized Joe-Clayton copulas, are employed to study the tail co-movements among the selected markets. The paper assumes a skew-t distribution for the innovation process of the marginal models. The results of the marginal models suggest strong volatility persistence in all twelve markets. There is high persistence in the absolute dependence of among market pairs. The evidence from the empirical analysis suggests that the cross-sectional average copula correlations generally remain at moderate levels with slight upward trend for all twelve markets. Correlation among the banking sectors of the advanced Asian markets economies are generally higher compared with the Emerging markets economies. The tail dependence is asymmetric across most of the market pairs; tail dependence at the lower side of the joint distributions is mostly higher than tail dependence at the upper side of the joint distributions. The results show that tail dependence is not upward trending for most of the pairs examined. However, the tail co-movements show significant spikes in response to financial stress in the global economy, which implies that there could be joint crashes in the regional banking system during extreme negative events. The fact that the region has not been the epicenter for most of the crisis periods covered in this study, yet responds significantly, makes it necessary for adoption of policies that maximize resilience to shocks. The study concludes that time-varying copulas are best suited for modeling the dependence structure of the Asian banking sector indices compared with static copula.

The use of conventional augmented CAPM specification in estimating the exchange rate exposure may result in less reliable estimates for, at least, two reasons. First, it does not take into account a few important stylized facts associated with financial time series. Second, one cannot estimate the total impact of the exchange rate changes on stock returns as a single coefficient with it and for this reason it does not help us analyze the reinforcing or offsetting interactions between direct and indirect exchange rate exposure effects. In this paper, we suggest an orthogonalized GJR-GARCH-t version of augmented CAPM that simultaneously addresses the above issues. Our findings have important implications for hedging and investment decision making.

This paper examines the benefits of regionally and globally diversified portfolios from the perspective of investors holding domestic-only portfolios from different Asia-Pacific countries. Three groups of regional portfolio are constructed, with sorting based on relative strength ranking technique of Levy (1967). The step-down spanning technique is employed to uncover evidence that the global minimum-variance portfolio of a local investor can be improved by investing regionally or globally, but the evidence that the tangency portfolio can be improved is weak in all cases. The results also show an increase in Sharpe ratio when the investor invests regionally or globally but this benefit declines under the assumption of short-selling. The paper concludes that there are gains in diversifying globally but higher gains are realized by investing regionally.

This study examines the value relevance of intellectual capital (IC) to investors. In this respect, associations of IC with contemporaneous market valuation, stock returns, excess returns and share prices are initially tested. In addition, associations for current IC and future data of the above stock performance indicators are estimated to investigate whether the selected performance indicators have delayed response to IC. Pulic’s VAIC TM method is selected to measure IC and fixed effects panel regressions are used to analyse data of 191 NYSE listed banking sector firms over 2000-2011. Results of contemporaneous analysis fail to establish conclusive associations between IC and selected stock performance indicators. Analyses to test the delayed reactions evident that contemporaneous IC relates significantly negatively with market valuation and stock returns, and significantly positively with excess returns and stock prices. This suggests that investors perceive IC as firm-specific risk related investments which account for uncertain future benefits. Evidence for investor relevance based on adopted stock performance indicators in this study, and delayed reaction analysis add new attributes to extant IC performance literature.

The purpose of this study is to investigate, empirically, the association between intellectual capital (IC) with productivity, profitability and investor response. This study was carried out using data drawn from NYSE listed banking sector firms in the US over the financial years 2000 to 2010. Multiple and pooled regression techniques used to test the hypothesized relationships between IC with productivity, profitability and investor response. IC level of firms, on average, has declined over the years with a substantial decrease in 2001, 2002, 2007 and 2008, seemingly during financial turbulent periods. Regression results of pooled model indicate positive and highly statistically significant associations between IC and productivity, profitability and investor response. Value creation of physical capital stands equally important as IC in our regression models. Firm leverage, firm size and earnings for shareholders are generally significant as well. The study provides evidence for IC practitioners about how IC may enhance productivity, profitability and investor response in the banking sector firms. This study provides a detailed analysis on IC performance of NYSE banking sector using longitudinal data. Also it adds evidence on the behaviour of IC and its associations with corporate performance in the long-run. The findings of significantly positive associations of IC with firm performance implied important empirical validations on the role of IC as a strategic asset. Further the study extends the prior efforts to empirically validate the VAICTM method to diverse settings.

The use of conventional augmented CAPM specification in estimating the exchange rate exposure may result in less reliable estimates for, at least, two reasons. First, it does not take into account a few important stylized facts associated with financial time series. Second, one cannot estimate the total impact of the exchange rate changes on stock returns as a single coefficient with it and for this reason it does not help us analyze the reinforcing or offsetting interactions between direct and indirect exchange rate exposure effects. In this paper, we suggest an orthogonalized GJR-GARCH-t version of augmented CAPM that simultaneously addresses the above issues. Our findings have important implications for hedging and investment decision making.

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on risk averse investors. Using daily returns from 1992 to 2002, we investigate volatility co-movement between the Singapore stock market and the markets of US, UK, Hong Kong and Japan. In order to gauge volatility comovement, we employ econometric models of (i) Univariate GARCH (ii) Vector Autoregression and (iii) a Multivariate and Asymmetric Multivariate GARCH model with GJR extensions. The empirical results indicate that there is a high degree of volatility co-movement between Singapore stock market and that of Hong Kong, US, Japan and UK (in that order). Results support small but significant volatility spillover from Singapore into Hong Kong, Japan and US markets despite the latter three being dominant markets. Most of the previous research concludes that spillover effects are significant only from the dominant market to the smaller market and that the volatility spillover effects are unidirectional. Our study evinces that it is plausible for volatility to spill over from the smaller market to the dominant market. At a substantive level, studies on volatility co-movement and spillover provide useful information for risk analysis.

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on risk averse investors. Using daily returns from 1992 to 2002, we investigate volatility co-movement between the Singapore stock market and the markets of US, UK, Hong Kong and Japan. In order to gauge volatility comovement, we employ econometric models of (i) Univariate GARCH, (ii) Vector Autoregression and (iii) a Multivariate and Asymmetric Multivariate GARCH model with GJR extensions. The empirical results indicate that there is a high degree of volatility co-movement between Singapore stock market and that of Hong Kong, US, Japan and UK (in that order). Results support small but significant volatility spillover from Singapore into Hong Kong, Japan and US markets despite the latter three being dominant markets. Most of the previous research concludes that spillover effects are significant only from the dominant market to the smaller market and that the volatility spillover effects are unidirectional. Our study evinces that it is plausible for volatility to spill over from the smaller market to the dominant market. At a substantive level, studies on volatility co-movement and spillover provide useful information for risk analysis.

Several recent articles report evidence of predictability in the skewness of equity returns, raising hopes that predictability in third moments will be useful for forecasting the probability of tail events. The evidence is unfortunately difficult to interpret, partly because they were obtained mainly from parametric models of time-varying conditional skewness, and because little is known about the behavior of such models, for instance, when there are outliers. We investigate a non-parametric approach to testing for predictability in skewness. Specifically, we explore the size and power of a Runs tests, and compare this approach with other tests. A re-examination of daily market returns reveals mild evidence of predictability in skewness. Incorporating this conditional heteroskewness into standard volatility models hardly improves out-of-sample forecasts of tail probabilities.

The standard root-b1 test is widely used for testing skewness. However, several studies have demonstrated that this test is not reliable for discriminating between symmetric and asymmetric distributions in the presence of excess kurtosis. The main reason for the failure of the standard root-b1 test is that its variance formula is derived under the assumption of no excess kurtosis. In this paper we theoretically derive adjustment to the root-b1 test under the framework of Roa's Score (or the Lagrange multiplier) test principle. Our adjusted test automatically corrects the variance formula and does not lead to over- or under-rejection of the correct null hypothesis. In a similar way, we also suggest an adjusted test for kurtosis in the presence of asymmetry. These tests are then applied to both simulated and real data. The finite sample performances of the adjusted tests are far superior compared to those of their unadjusted counterparts.

Most of the tests for asymmetry are developed under the null hypothesis of normal distribution. As is well known, many financial data exhibits fat tail, and commonly used tests (such as the standard square root test based on sample skewness) are not valid for leptokurtic financial data. Also, the square root test uses the third moment, which may not be robust in the presence of gross outliers. In this paper, we propose a simple parametric test for symmetry based on the Pearson type IV family of distributions, which take account of leptokurtosis explicitly. Our test is based on a function that bounded over the real line, and we expect it to be more well behaved than the test based on sample skewness (third moment). Results from our Monte Carlo study reveal that the suggested test performs quite well in finite samples, and it is robust to excess kurtosis. We also apply the test to stock return data to illustrate its usefulness.

This paper develops a flexible parametric approach to capture asymmetry and excess kurtosis along with conditional heteroskedasticity with a general family of distributions for analyzing stock returns data. Engle's (1982) autoregressive conditional heteroskedastic (ARCH) model and its various generalizations can account for many of the stylized facts, such as fat tails and volatility clustering. However, in many applications, it has been found that the conditional normal or Student's t ARCH process is not sufficiently heavy-tailed to account for the excess kurtosis in the data. Moreover, asymmetry in financial data is rarely modeled systematically. Therefore, there is a real need to find an asymmetric density that can be easily estimated and whose tails are heavier than the Student's t-distribution. Pearson type IV density is such a distribution, and it is much easier to handle than those that have been used in the literature, such as non-central t and Gram-Charlier distributions, to account for skewness and excess kurtosis simultaneously. Pearson type IV distribution has three parameters that can be interpreted as variance, skewness and kurtosis; and they can also be considered as different components of the risk premium. Modeling simultaneously time-varying behavior of mean, variance, skewness and kurtosis produces a better explanation of risk than mean-variance analysis only. These methodologies can also be used to analyze other financial data such as exchange rates, interest rates and spot and future prices.