J. Risk Financial Manag.2014, 7(2), 28-44; doi:10.3390/jrfm7020028 - published online 15 April 2014 Show/Hide Abstract
Abstract: In this study, we examine whether the levels and structures of top executive compensation vary discernibly with different levels of board independence. We also examine how the newly mandated adoption of the remuneration committee (RC) in Taiwan affects the board independence-executive pay relation. The mandatory establishment of RC for Taiwanese public firms, starting in 2011, is intended to strengthen the reasonableness and effectiveness of the executive compensation structure; thus, it is timely and of interest for practitioners and regulators to understand whether the establishment of RCs can effectively discipline top executive compensation policies. We first find that CEOs of firms that do not appoint independent directors have greater levels of annual pay than is the case for firms that have appointed independent directors, after controlling for the effect of CEO pay determinants. Second, we find that CEO pay for early RC adopters is more closely related to firm performance. Third, we find that the establishing of RCs may decrease CEO pay and enhance the pay-performance association, in particular for firms that have not appointed independent directors; however, this effect is not found to be statistically significant.
J. Risk Financial Manag.2014, 7(1), 13-27; doi:10.3390/jrfm7010013 - published online 25 March 2014 Show/Hide Abstract
Abstract: Bharath and Shumway (2008) provide evidence that shows that it is the functional form of Merton’s (1974) distance to default (DD) model that makes it useful and important for predicting defaults. In this paper, we investigate whether the default predictability of the Merton DD model would be affected by taking investors’ ambiguity aversion into consideration. The Cox proportional hazard model is used to compare the forecasting power of Bharath and Shumway’s naive model, which retains the functional form of the Merton DD model and computes the default probability in a naive way, with our new model, which treats investors’ ambiguity aversion as additional information. We provide evidence to show that our new model performs better than Bharath and Shumway’s naive model. In addition, our empirical results show that the statistical significance of Bharath and Shumway’s naive default probability is retained in the credit default swap (CDS) spread regressions, though the sign of the coefficient is changed. However, both the sign and the statistical significance of our model are retained in the CDS spread regressions.
J. Risk Financial Manag.2014, 7(1), 1-12; doi:10.3390/jrfm7010001 - published online 26 February 2014 Show/Hide Abstract
Abstract: Chong and Ng (2008) find that the Moving Average Convergence–Divergence (MACD) and Relative Strength Index (RSI) rules can generate excess return in the London Stock Exchange. This paper revisits the performance of the two trading rules in the stock markets of five other OECD countries. It is found that the MACD(12,26,0) and RSI(21,50) rules consistently generate significant abnormal returns in the Milan Comit General and the S&P/TSX Composite Index. In addition, the RSI(14,30/70) rule is also profitable in the Dow Jones Industrials Index. The results shed some light on investors’ belief in these two technical indicators in different developed markets.
J. Risk Financial Manag.2013, 6(1), 31-61; doi:10.3390/jrfm6010031 - published online 19 December 2013 Show/Hide Abstract
Abstract: This paper proposes the Lagrange multiplier test for the null hypothesis thatthe bivariate time series has only a single common stochastic volatility factor and noidiosyncratic volatility factor. The test statistic is derived by representing the model in alinear state-space form under the assumption that the log of squared measurement error isnormally distributed. The empirical size and power of the test are examined in Monte Carloexperiments. We apply the test to the Asian stock market indices.
J. Risk Financial Manag.2013, 6(1), 6-30; doi:10.3390/jrfm6010006 - published online 21 October 2013 Show/Hide Abstract
Abstract: This paper features an analysis of the relationship between the S&P 500 Index and the VIX using daily data obtained from the CBOE website and SIRCA (The Securities Industry Research Centre of the Asia Pacific). We explore the relationship between the S&P 500 daily return series and a similar series for the VIX in terms of a long sample drawn from the CBOE from 1990 to mid 2011 and a set of returns from SIRCA’s TRTH datasets from March 2005 to-date. This shorter sample, which captures the behavior of the new VIX, introduced in 2003, is divided into four sub-samples which permit the exploration of the impact of the Global Financial Crisis. We apply a series of non-parametric based tests utilizing entropy based metrics. These suggest that the PDFs and CDFs of these two return distributions change shape in various subsample periods. The entropy and MI statistics suggest that the degree of uncertainty attached to these distributions changes through time and using the S&P 500 return as the dependent variable, that the amount of information obtained from the VIX changes with time and reaches a relative maximum in the most recent period from 2011 to 2012. The entropy based non-parametric tests of the equivalence of the two distributions and their symmetry all strongly reject their respective nulls. The results suggest that parametric techniques do not adequately capture the complexities displayed in the behavior of these series. This has practical implications for hedging utilizing derivatives written on the VIX.
J. Risk Financial Manag.2013, 6(1), 4-5; doi:10.3390/jrfm6010004 - published online 3 October 2013 Show/Hide Abstract
Abstract: The Journal of Risk and Financial Management (JRFM)is published in full open access by MDPI as of 1 October 2013, when MDPI took over the ownership of the journal. So far, this journal has been published elsewhere in yearly volumes (one issue per yearly volume) since 2008, with a total of 25 papers released up to this moment . Starting from 1 January 2014, the journal will be published in quarterly issues.