An examination of conditional asset pricing models in the Australian equities market

This article examines the link between macroeconomic variables and equity returns in Australia by testing conditional asset pricing models. We find that conditioning the Fama-French model with a series of macroeconomic variables does not considerably improve its performance. However, we do find that the Fama-French factors, SMB and HML, retain their ability to explain equity returns even after the model is conditioned on macroeconomic variables. Our findings suggest that investors do not adjust their risk premiums according to the changes in the macroeconomic variables we employ.

Basel risk weights, asset correlations, and book-to-market equity: evidence from Asian countries

We examine the effect of firm book-to-market equity values (BE/ME) on asset correlations which play an important role in determining risk weights under the current Basel capital requirements. Using firms in China, Hong Kong, Japan, Korea, Singapore and Taiwan over a sample period from 1988 to 2013, we find that BE/ME has a negative effect on asset correlations. This suggests a role for BE/ME as an additional factor in determining asset correlations, and thus risk weights, also potentially reducing incentives for regulatory capital arbitrage.

Mortgages and bonds: the asset management practices of Australian life insurers to 1960

Recent studies of the experience of the British life insurance industry indicate that a period of transition, and the development of more diversified investment strategies, began in the interwar period. Australian life insurers lagged behind their British counterparts in the introduction of such strategies. This paper investigates why this was the case. It argues that in the Australian market there was both a lack of opportunity and incentive to broaden asset portfolios. However, this did not mean that asset management practices did not advance. Australian life offices became progressively more sophisticated in their approach to portfolio management during this period. Developments in the interwar period provided a grounding for post-war expansion into the equity market.

Revisiting capital structure theory : a test of pecking order and static order trade-of model from Malaysian capital market

This study revisits the capital structure theory and test Pecking Order Hypothesis (POH) and Static Order Trade-off theory (STOT) using Malaysian Listed firms over a period from 1999 to 2002. The evidence from pecking order model suggests that the internal fund deficiency is the most important determinant that possibly explains the issuance of new debt in Malaysian capital market despite the lower predicting power.  While static trade off-model is not fit to explain the issuance of new debt issue in Malaysian capital market. This is an interesting findings that confirm the fact that Malaysian firms do not too much care about tax-shield benefit derive from employ both debt and non-debt tax-shield. The finn's size, which is used to neutralize the size effect, appears to provide some explanation for the variation in its capital structure policy choice; however asset structure and growth no evidence of static-order-trade-off is observed in Malaysian capital market.

Multifractality and long-range dependence of asset returns: the scaling behavior of the Markov-switching multifractal model with lognormal volatility components

In this paper, we consider daily financial data from various sources (stock market indices, foreign exchange rates and bonds) and analyze their multiscaling properties by estimating the parameters of a Markov-switching multifractal (MSM) model with Lognormal volatility components. In order to see how well estimated models capture the temporal dependency of the empirical data, we estimate and compare (generalized) Hurst exponents for both empirical data and simulated MSM models. In general, the Lognormal MSM models generate "apparent" long memory in good agreement with empirical scaling provided that one uses sufficiently many volatility components. In comparison with a Binomial MSM specification [11], results are almost identical. This suggests that a parsimonious discrete specification is flexible enough and the gain from adopting the continuous Lognormal distribution is very limited.

Understanding equity as an asset to national interest: developing a social contract analysis of policy

Alongside the influence of market-based reforms in education policy has been the growth of policy that has largely been overlooked – those that outline social contracts. This paper draws on policies that connect with equity as a way of illustrating this social contract turn in policy and develops a conceptualisation of social contracts as they apply to education policy. The argument provides three principles that underpin social contracts, including informed consent, negotiation and accountability. This paper applies these principles to three levels of social contract. At the first level are broad social contracts, which are associated with debates about the kinds of things that states should expect from its citizens, and the things that citizens could expect from governments and the state. The second level of social contract is an institutional or field-based social contract, which spells out the obligations and connections between a specific field and other fields. This level names a kind of social contract that is often exemplified in policies or statements by specific institutions. The third level of social contract deals with contract-like mechanisms embedded in fields that make tangible the obligations and expectations of citizens in fulfilling the expectations of fields.

Non-nested tests of a GDP-augmented Fama–French model versus a conditional Fama–French model in the Australian stock market

We extend Vassalou (2003) by conditioning the Fama–French model with the same macroeconomic variables used to construct a GDP factor. The motivation for doing so is to ascertain whether the ability of the GDP-augmented model to explain equity returns is actually due to news about future GDP growth or whether it is due to the macroeconomic conditioning variables used to construct the GDP factor. We compare the performance of a GDP-enhanced Fama–French model with the conditional Fama–French model using non-nested testing techniques. We find that the GDP-augmented model considerably underperforms the conditional version of the model.

Dividend payout policy in the Chinese equity market

Jianan Guo’s thesis focus on the dividend payout policy and its interaction with corporate governance mechanism, operating performance and asset pricing in the Chinese equity market. His thesis contributes to the empirical study and literature on the corporate finance in emerging markets.