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Int. J. Financial Stud., Volume 7, Issue 1 (March 2019)

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Open AccessArticle Explanatory Power of Pre-Issue Financial Strength for Long-Term Market Performance: Evidence From Initial Equity Offerings on an Emerging Market
Int. J. Financial Stud. 2019, 7(1), 16; https://doi.org/10.3390/ijfs7010016
Received: 10 December 2018 / Revised: 3 March 2019 / Accepted: 4 March 2019 / Published: 12 March 2019
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Abstract
This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable [...] Read more.
This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable for many years, though improvements in capital market infrastructure have led to its recent reclassification as a developed country. It is an important European equity market. Thus, research on IPO pricing explanation for Poland is important for both investors and academics. In this study, we estimate risk premiums and run regressions on four asset pricing models, including the latest innovation, which is the Fama-French 5-factor model. We also check the robustness. The research documents the existence of the long-run underperformance for Polish IPOs independently of the specification of the calendar-time portfolio approach as alphas range from -9.6% to -13.2% annually. We show that the underperformance is mainly driven by IPOs in a position of weak pre-issue financial health. More profitable IPOs experience less negative long-term returns and the underperformance is even absent in some specifications. Full article
(This article belongs to the Special Issue Financial Economics)
Open AccessArticle Hedge Fund Performance during and after the Crisis: A Comparative Analysis of Strategies 2007–2017
Int. J. Financial Stud. 2019, 7(1), 15; https://doi.org/10.3390/ijfs7010015
Received: 3 December 2018 / Revised: 1 February 2019 / Accepted: 19 February 2019 / Published: 6 March 2019
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Abstract
The performance of hedge funds is of interest to investors looking for ways of generating value over passive strategies, particularly in bad times. This study used the Hedge Index database with over 9500 hedge funds to analyse, in depth, the performance of ten [...] Read more.
The performance of hedge funds is of interest to investors looking for ways of generating value over passive strategies, particularly in bad times. This study used the Hedge Index database with over 9500 hedge funds to analyse, in depth, the performance of ten major strategies, during and after the financial crisis (June 2007–January 2017). To the best of our knowledge, such a study covering the last ten years has not been published. Performance of the various strategies was analysed, using correlations, the Carhart’s four factor model, persistence of performance, and reward-risk ratios. The findings are that some hedge fund strategies which have persistent performances are also able to outperform the benchmark in some periods. In the crisis period, value-wise, all strategies did better than the S&P500, thereby, conserving value for investors, better than passive investment in the S&P500. Over the entire period of the research (June 2007–January 2017), seven strategies performed better than the S&P500: Global Macro, Multi Strategy, Emerging Markets, Long/Short Equity, Event Driven, Convertible Arbitrage, and Fixed Income Arbitrage. As hedge funds typically have skewed return distributions, performance was analysed in different periods, within conventional and downside risk frameworks. This research contributes to the advancement of knowledge on the outcomes of hedge fund strategies in different market conditions and the reliability of alternative risk frameworks in their evaluation. Apart from the theoretical implications, this research provides practical knowledge to managers and investors on which strategies hold better value and in what circumstances. Full article
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Open AccessArticle The Impact of Financial Leverage on the Variance of Stock Returns
Int. J. Financial Stud. 2019, 7(1), 14; https://doi.org/10.3390/ijfs7010014
Received: 10 January 2019 / Revised: 25 February 2019 / Accepted: 28 February 2019 / Published: 6 March 2019
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Abstract
This paper investigates the direct theoretical relationship between the variance of stock returns (σ2E) and financial leverage (L) considering both corporate and personal taxes. Using a dataset of U.S. industrial firms, we examine the variance of stock returns as a [...] Read more.
This paper investigates the direct theoretical relationship between the variance of stock returns (σ2E) and financial leverage (L) considering both corporate and personal taxes. Using a dataset of U.S. industrial firms, we examine the variance of stock returns as a function of the firm’s financial leverage. We demonstrate that (1) the variance of stock returns is positively related to the firm’s financial leverage, (2) the relationship between the variance of stock returns and financial leverage is positive when corporate and personal taxes are also considered, and (3) with regard to the relationship between the variance of stock returns and financial leverage, using market measures of the latter tends to generate a higher coefficient of determination and a more accurate approximation of the theoretical relationship between financial leverage and the variance of stock returns. Full article
Open AccessArticle Performance Bonuses and Effort: Evidence from Fight Night Awards in Mixed Martial Arts
Int. J. Financial Stud. 2019, 7(1), 13; https://doi.org/10.3390/ijfs7010013
Received: 12 January 2019 / Revised: 7 February 2019 / Accepted: 10 February 2019 / Published: 20 February 2019
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Abstract
This paper investigates the role of fight night bonus awards on fighter behavior in the Ultimate Fighting Championship (UFC) and World Extreme Cage (WEC) fighting mixed martial arts (MMA) promotions. Behavior is analyzed using detailed fighter performance statistics, exploiting variation in bonus size [...] Read more.
This paper investigates the role of fight night bonus awards on fighter behavior in the Ultimate Fighting Championship (UFC) and World Extreme Cage (WEC) fighting mixed martial arts (MMA) promotions. Behavior is analyzed using detailed fighter performance statistics, exploiting variation in bonus size across events and over time. Findings suggest that fighters are not meaningfully influenced by bonus levels within the range observed in the sample period and possible explanations are discussed. Fight night bonuses appear to serve as a lottery compensation mechanism to ex post reward performances consistent with an MMA promotion’s desires rather than ex ante incentivize such performances. Findings have implications for strategic MMA promoter decisions and contribute more broadly to the personnel economics literature on incentives and compensation. Full article
(This article belongs to the Special Issue Sports Finance 2018)
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Open AccessArticle Attendance in the Canadian Hockey League: The Impact of Winning, Fighting, Uncertainty of Outcome, and Weather on Junior Hockey Attendance
Int. J. Financial Stud. 2019, 7(1), 12; https://doi.org/10.3390/ijfs7010012
Received: 21 December 2018 / Revised: 11 February 2019 / Accepted: 13 February 2019 / Published: 19 February 2019
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Abstract
An attendance model is specified for the Canadian Hockey League (CHL), the top level of junior hockey in Canada with some teams located in the United States. The natural log of attendance is used as the dependent variable, with explanatory variables consisting of [...] Read more.
An attendance model is specified for the Canadian Hockey League (CHL), the top level of junior hockey in Canada with some teams located in the United States. The natural log of attendance is used as the dependent variable, with explanatory variables consisting of the timing of the game, team performance characteristics, uncertainty of outcome measures, and weather-related variables. Weekends and Mondays were the most popular days for games. Winning and fighting were shown to be popular team characteristics that drive attendance. Uncertainty of outcome plays little role, if any, in fan interest at this level, while precipitation significantly reduces attendance. Full article
(This article belongs to the Special Issue Sports Finance 2018)
Open AccessArticle Howzat? The Financial Health of English Cricket: Not Out, Yet
Int. J. Financial Stud. 2019, 7(1), 11; https://doi.org/10.3390/ijfs7010011
Received: 21 December 2018 / Revised: 30 January 2019 / Accepted: 8 February 2019 / Published: 19 February 2019
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Abstract
In 1997 a review of the financial health of English county cricket highlighted strategic weaknesses within the professional game, principally an over-reliance by clubs on the annual grants provided to them by the England and Wales Cricket Board (ECB). Without such grants the [...] Read more.
In 1997 a review of the financial health of English county cricket highlighted strategic weaknesses within the professional game, principally an over-reliance by clubs on the annual grants provided to them by the England and Wales Cricket Board (ECB). Without such grants the teams, in general terms, would be insolvent. Using the financial statements of the First Class Cricket Counties, this paper explores how the financial position and performance of the county game has changed, 20 years on from the seminal study. A series of structural changes to the game had been made, yet financial problems are still evident. Counties are as reliant on central grant income as they were in 1997, although there are cases where clubs have made strategic enhancements and are becoming self-sustainable as going concerns. Rather than the ECB directly funding county revenue it should be working in collaboration with individual clubs to achieve developments in the game from the grassroots upwards, in order to help clubs grow their own revenue streams. Full article
(This article belongs to the Special Issue Sports Finance 2018)
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Open AccessArticle The Role of Canceled Warrants in the LME Market
Int. J. Financial Stud. 2019, 7(1), 10; https://doi.org/10.3390/ijfs7010010
Received: 7 January 2019 / Revised: 8 February 2019 / Accepted: 8 February 2019 / Published: 12 February 2019
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Abstract
This article visits the question of whether canceled warrants (CWs) have a positive effect on LME metal prices. To examine this question carefully, a regression model is applied. This paper finds a statistically significant positive link between CWs and LME metal prices, including [...] Read more.
This article visits the question of whether canceled warrants (CWs) have a positive effect on LME metal prices. To examine this question carefully, a regression model is applied. This paper finds a statistically significant positive link between CWs and LME metal prices, including aluminum, zinc, tin, and nickel. However, other metals such as copper and lead are not statistically significant. The second objective of the study is to identify the dynamic response of metal price returns for aluminum, zinc, tin, and nickel to an innovation in the CWs using VAR. It is found that the positive impact of the CWs on metal returns is transitory. Full article
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Open AccessArticle The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach
Int. J. Financial Stud. 2019, 7(1), 9; https://doi.org/10.3390/ijfs7010009
Received: 2 November 2018 / Revised: 13 January 2019 / Accepted: 13 January 2019 / Published: 3 February 2019
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Abstract
This paper uses event study analysis to estimate the impact of the United States Federal Reserve Bank’s (Fed) quantitative easing (QE) announcements on the mortgage market during the zero lower bound (ZLB) period. A total of 35 QE announcements are identified and their [...] Read more.
This paper uses event study analysis to estimate the impact of the United States Federal Reserve Bank’s (Fed) quantitative easing (QE) announcements on the mortgage market during the zero lower bound (ZLB) period. A total of 35 QE announcements are identified and their effects are evaluated. The best-fitting integrated generalized autoregressive conditional heteroskedasticity (IGARCH) model with skewed t distribution is used to measure the QE announcement effects on daily changes of the 30-year mortgage rate, the 30-year Treasury rate and the spread between them. Announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. The delayed effects of QE announcements on the mortgage rate were less than short-run effects but persistent. We also find that the previous literature overestimates QE effects on interest rates in general. Full article
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Open AccessEditorial Acknowledgement to Reviewers of International Journal of Financial Studies in 2018
Int. J. Financial Stud. 2019, 7(1), 8; https://doi.org/10.3390/ijfs7010008
Published: 2 February 2019
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Abstract
Rigorous peer-review is the corner-stone of high-quality academic publishing [...] Full article
Open AccessArticle Stock Market Reactions to Brexit: Case of Selected CEE and SEE Stock Markets
Int. J. Financial Stud. 2019, 7(1), 7; https://doi.org/10.3390/ijfs7010007
Received: 4 January 2019 / Revised: 15 January 2019 / Accepted: 16 January 2019 / Published: 26 January 2019
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Abstract
The debate on the UK leaving the European Union is still hot and ongoing today due to many economic, political, social, and other consequences on many different countries over the world. This paper focuses on the reactions of selected Central and Eastern European [...] Read more.
The debate on the UK leaving the European Union is still hot and ongoing today due to many economic, political, social, and other consequences on many different countries over the world. This paper focuses on the reactions of selected Central and Eastern European (CEE) and South and Eastern European (SEE) stock markets to the Brexit vote on 23 June 2016. Using daily data for the time span from January 2010 until July 2016 and the event study methodology (ESM), the return and volatility series are being tested for significant reactions to the Brexit event. The results indicate mixed results regarding the abnormal cumulative return series, but the volatility series were found to be significantly affected by the mentioned event. This is important for international investors and gives information on the reaction of mentioned markets to big political and economic events in order to tailor international portfolios in a way to hedge from risk. Full article
(This article belongs to the Special Issue Impact of Brexit on Financial Markets)
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Open AccessArticle An Empirical Investigation of the Performance of Japanese Mutual Funds: Skill or Luck?
Int. J. Financial Stud. 2019, 7(1), 6; https://doi.org/10.3390/ijfs7010006
Received: 23 October 2018 / Revised: 7 January 2019 / Accepted: 9 January 2019 / Published: 17 January 2019
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Abstract
This paper assesses the performance of 355 actively managed Japanese Equity Mutual Funds between April 2011 and April 2016. The equal weight portfolio and Jensen’s alpha measures of active management provide strong evidence that Japanese Mutual Funds fail to outperform the benchmark four-factor [...] Read more.
This paper assesses the performance of 355 actively managed Japanese Equity Mutual Funds between April 2011 and April 2016. The equal weight portfolio and Jensen’s alpha measures of active management provide strong evidence that Japanese Mutual Funds fail to outperform the benchmark four-factor capital asset pricing model. When it comes to market timing, the Treynor and Mazuy measure shows that 33 funds have significant positive market timing ability which is largely offset by 31 funds with significant negative timing ability. To ensure the statistical inference is robust to the non-normality found in 33 funds we employ Fama and French’s cross-sectional bootstrap. The results show that a large proportion of funds fail to outperform a hypothetical world with no skill. On the persistence of skill we find that there is stronger persistence for poor performing funds than for strong performing funds. Full article
Open AccessArticle Abuses and Penalties of a Corporate Tax Inversion
Int. J. Financial Stud. 2019, 7(1), 5; https://doi.org/10.3390/ijfs7010005
Received: 26 October 2018 / Revised: 12 December 2018 / Accepted: 8 January 2019 / Published: 13 January 2019
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Abstract
There is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. [...] Read more.
There is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. This practice is known as “corporate tax inversion”. This paper discusses the abuses and penalties of this phenomenon. It is rooted in some deficiencies in the U.S. tax law. This paper points out that the U.S. has the highest corporate tax rate in the world. It imposes tax on worldwide income. It permits deferral of tax on foreign-sourced income until dividends are repatriated back to the U.S. As a result, it creates tax loopholes. This paper reveals six actual cases of corporate tax inversion. This practice has triggered the Congress to enact §7874, the Internal Revenue Service (IRS) to issue Notices IR 2014-52 and IR 2015-79, and the U.S. Treasury Department to promulgate TD 9761. This paper investigates some details of these penalties. This paper further demonstrates an example in determining the amount of tax savings by engaging in a corporate tax inversion. It also offers many strategies. Full article
Open AccessArticle Risk Taking and Fiscal Smoothing with Sovereign Wealth Funds in Advanced Economies
Int. J. Financial Stud. 2019, 7(1), 4; https://doi.org/10.3390/ijfs7010004
Received: 29 November 2018 / Revised: 29 December 2018 / Accepted: 31 December 2018 / Published: 9 January 2019
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Abstract
In an economy with a sovereign wealth fund (SWF), the government may draw on the fund to supplement other government revenues. If the fund is invested in risky assets, this introduces a new stochastic element into the government’s budget. We analyze the interaction [...] Read more.
In an economy with a sovereign wealth fund (SWF), the government may draw on the fund to supplement other government revenues. If the fund is invested in risky assets, this introduces a new stochastic element into the government’s budget. We analyze the interaction between the draw from and risk taking in the SWF. Using non-expected utility preferences, we distinguish between intended changes and stochastic changes in the SWF draws over time. We show that the desire for smoothness in taxes and public services translates into smoothing of SWF draws and lower risk taking. It can even lead to procyclical rebalancing of the SWF portfolio. Future interest rates are associated with interest-rate risk. We show that this risk may lead to a higher optimal equity share in the SWF portfolio. Policy makers can use the draws from the SWF to smooth over time variation in risk-free rates. Full article
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Open AccessArticle To What Extent Do Regional Effects Influence Firms’ Capital Structure? The Case of Southern Italian SMEs’
Int. J. Financial Stud. 2019, 7(1), 3; https://doi.org/10.3390/ijfs7010003
Received: 20 October 2018 / Revised: 21 December 2018 / Accepted: 24 December 2018 / Published: 4 January 2019
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Abstract
There is tremendous interest, in the economic literature, for the determinants of firms’ capital structure decisions. A rich body of empirical works now exists that purports to identify firm- and country-level factors affecting firms’ financing patterns. In addition, more recently, a new stream [...] Read more.
There is tremendous interest, in the economic literature, for the determinants of firms’ capital structure decisions. A rich body of empirical works now exists that purports to identify firm- and country-level factors affecting firms’ financing patterns. In addition, more recently, a new stream of studies has emerged that investigates cross-regional variation in small firms’ capital structure. While small firms’ leverage does seem to vary across regions, at least in countries where significant regional differences in economic and financial development and in the quality of institutions exist, not much yet is known about variation in debt maturity, in debt in relation to equity, and between different types of small firms. The present paper aims to fill this gap through an empirical analysis of cross-regional variation in the capital structure of a sample of about 30,000 Italian small firms over a 13-year period, including the aftermath of the credit crunch that followed the 2007–2008 global financial crisis. The findings confirm the view that small firms in underdeveloped regions are more financially constrained, but also amend some of the results shown in the literature, in particular by showing how small firms in Italy’s Southern regions have higher levels of equity and fixed assets than small firms in other regions. Full article
Open AccessArticle Do Firm’s Organisational Slacks Influence the Relationship between Corporate Lobbying and Corporate Financial Performance? More Is Not Always Better
Int. J. Financial Stud. 2019, 7(1), 2; https://doi.org/10.3390/ijfs7010002
Received: 20 August 2018 / Revised: 14 December 2018 / Accepted: 19 December 2018 / Published: 28 December 2018
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Abstract
A political involvement in any organisation has often proved to be profitable for such firms that are seeking support and favourable regulatory conditions. Though many studies have investigated the effect of the corporate lobbying activities on the organisations, no clear results have been [...] Read more.
A political involvement in any organisation has often proved to be profitable for such firms that are seeking support and favourable regulatory conditions. Though many studies have investigated the effect of the corporate lobbying activities on the organisations, no clear results have been achieved. In this study, we have investigated the lobbying expenditure of some of the most famous United States (US)-based companies, which support the U.S. government during 2007–2016. Primarily, we tested the relationship between the corporate lobbying and the Corporate Financial Performance (CFP), with the help of a dynamic panel data analysis, which is based on the System Generalised Methods of the Moment (SYS-GMM). The results of this study indicated that the corporate lobbying did not increase the probability of gaining more support from the government in comparison to the firms that did not use any lobbying techniques. Furthermore, the findings showed that corporate lobbying is a component of the zero-sum political agenda that cannot be accurately evaluated and does not contribute towards the improvement of the CFP. This study introduced the important component of organisational slack and noted that the corporate lobbying could significantly destroy the CFP if the organisational slack was high. Full article
(This article belongs to the Special Issue Sustainability and Corporate Financial Environment)
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Open AccessArticle Using Grey Incidence Analysis Approach in Portfolio Selection
Int. J. Financial Stud. 2019, 7(1), 1; https://doi.org/10.3390/ijfs7010001
Received: 4 November 2018 / Revised: 20 December 2018 / Accepted: 20 December 2018 / Published: 23 December 2018
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Abstract
Due to the development of financial markets, products, financial and mathematical models, portfolio selection today represents a comprehensive set of activities. Investors take into consideration many different factors, such as the market factors, return distribution characteristics and financial statements information. This research applies [...] Read more.
Due to the development of financial markets, products, financial and mathematical models, portfolio selection today represents a comprehensive set of activities. Investors take into consideration many different factors, such as the market factors, return distribution characteristics and financial statements information. This research applies a Grey Relational Analysis (GRA) approach to evaluate the performance on a sample of stocks by taking those different factors into consideration. The results based upon a sample of 55 stocks for the trading year 2017 on the Croatian capital market show that using GRA approach in portfolio selection provides useful guidance for investors when making investment decisions, and better portfolio results in terms of risk and return are reachable compared to an equally weighted portfolio benchmark. Full article
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Int. J. Financial Stud. EISSN 2227-7072 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
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