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By applying symbolic principal component analysis (SPCA) to 10 years (1996–2005) of interquartile data, we find that two factors—corporate style and corporate performance—parsimoniously characterize the innate structure of the Chinese stock markets. Further analysis shows that the seemingly peculiar negative beta/return relation is not truly anomalous but is associated to using a very high risk-free rate, pervasive negative returns, and stock styles. The negative returns in recent years coincided with the bearish stock market, which started in mid-2001. Time-indexed zoom-star plots also confirm a trend of high speculation on growth stocks in recent years.

Although Aitchison’s [Aitchison, J., 1986. The Statistical Analysis of Compositional Data, Chapman and Hall, London] method of logratio transformation of compositional data is widely used in various domains, it is limited by the assumption of a strict non-negativity of the components and the requirement of special treatments in practice of the zero components. We propose a dimension-reduction approach through a hyperspherical transformation that is capable of resolving the difficulty in maintaining non-negativity and unit-sum in forecasting compositional data over time. Applying the proposed model to a numerical simulation with a 4D compositional data embedded with zero components and forecasting the three production sectors in the Chinese economy both demonstrate the usefulness and validity of the new approach.

Using a box spread arbitrage strategy, we examine the pricing efficiency of the emerging, thinly traded Hang Seng Index options market in Hong Kong, where market makers operate under a competitive open outcry system. In 20 months of tick-by-tick bid-ask and transaction quotes we find very few arbitrage opportunities. Our examination of the reporting time of quotes shows that in effect, all the apparent mispricings are deceptive and could be explained by stale quotes. The absence of real arbitrage opportunities supports the pricing rationality hypothesis in the Hong Kong options market.

By early unwinding of initial arbitrage positions simulated from bid/ask quotes and transaction prices, options-futures arbitrageurs can capture extra profits. Profits peak when arbitrageurs apply the dynamic early-unwinding strategy to the bid/ask quotes. Profits are at their lowest when arbitrageurs use the static hold-to-expiration strategy based on transaction prices. However, due to stale quotes, executing trades at prevailing bid/ask quotes can overstate both the size and frequency of arbitrage profits compared to transaction data for either the early-unwinding or the hold-to-expiration strategy.

We delineate Hong Kong listed corporations into three levels of privatization: the fully privatized blue chips, semi-privatized red chips and the least privatized H shares. Both H shares and red chips are mixed enterprises that mimic private ownership with joint government and private stock ownership. We find that mixed enterprises are less profitable and lower valued than the fully privatized blue chips, but red chips are more efficient and perform better than blue chips when market confidence swings to their favor. Regression analysis suggests that increased stock ownership by the government and increased emolument incentives are counterproductive to profitability, especially in bad economic times of the 1997–98 Asian financial crisis.

We can infer from bid/ask quotations and transaction prices that where options contracts are traded under a competitive open-outcry market-making system, the options and futures markets are dynamically efficient. Ex-ante analysis shows that potential arbitrage opportunities disappear within five minutes. Transaction price data understate both the frequency and magnitude of arbitrage opportunities that are signaled by bid/ask quotes. Quotes stale fast, so opportunities are short-lived and some of the arbitrage opportunities are deceptive. Nonetheless, the evidence suggests that bid/ask quotes provide valuable trading signals to arbitrageurs. Profitability from exploiting the quotes is negatively related to execution delay and execution risk.

A-share initial public offerings (IPOs) in Shanghai were 289% underpriced, against a mere 26% for B-share IPOs. Regression analysis suggests that the `Chinese characteristic' of high equity retention by the state, a long time-lag between offering and listing and ex-ante risk of new issues were key determinants of market-adjusted IPO underpricing. After controlling for the market comovements, infrequent trading and a higher risk for new issues, the excess returns of overpriced A-share IPOs and B-share IPOs persisted over a long period of time. Rather than being a speculative conjecture, this represents a real phenomenon in that large excess returns accrue in the long run, albeit it meant less negative accumulated returns than the overall market, which had dropped sharply.

In this paper, we propose to construct efficient portfolios in the Hong Kong stock market by making use of a homogeneous grouping of stocks based on common family ownership. After taking family grouping into account, it is found that correlation structure of stocks' price movements can be predicted more accurately. Also portfolios can be constructed so that its performance in a future period are better than those constructed under a single index model or a multi-index model using standard industry classification as grouping criteria for stocks.

A quasi-experimental assessment of Hawaii Visitor Bureau's city magazine advertising campaign shows an inelastic visitor demand with respect to advertising and a disparity in market responses in different cities. The tourism return on advertising expenditure ratios obtained is about half of those ratios usually obtained in conversion studies.

Tourism took on a new and crucial role in regional development and modernization in PR China with the introduction of the ‘Open Door Policy’ in late 1978. For the first time, the tourist expenditure patterns in the ‘Southern Gateway to China’, Guangzhou, are presented. Per capita tourist expenditure of Hong Kong and Macao Chinese is estimated to be much lower than that of a foreign tourist visiting the region, but the gross contribution is still significant to Guangzhou's tourist industry. Also previous per capita expenditure estimates of Hong Kong residents visiting PR China are suggested to have been overstated by 130% to 300%.