Using the time weighted method to estimate betas of emerging markets

As the economic and financial characteristics of countries change, so would be their betas and correlations of their investment returns with that of the U.S. Such changes are expected to be particularly significant for emerging market nations as they strive for rapid industrialization and modernization. OLS estimator for the beta coefficient would not be the Best Linear Unbiased Estimator (BLUE) if beta is non-stationary or changes from period to period. This paper proposes a special type of time weighted least square method (TWLS), which assigns greater weights on the regression errors in more recent periods, for estimating the current beta. This TWLS approach can tackle the problem of intertemporal heteroscedasticity and thus yields a beta that is more efficient. The breakthrough lies on the viability of the method without a-priori knowledge or estimation of the values of the weights. This yields a significant practical advantage since the weights are unobservable in the real world. Since the Time Weighted Method estimator is the coefficient estimator of beta value for the latest period in the sample, statisticians who base their forecasts on the beta estimates derived from the Time Weighted Least Square can expect to outperform those relying on beta values obtained from conventional estimation. We use a sample of daily returns of thirty-one emerging markets stock over the period of January 1, 2000 through December 31, 2002. We find that most of the tstatistics for the variances are significant at the 95% level, indicating that the Var(s)‘s are not zero for nearly every emerging-markets. This implies that the betas for these markets do shift over time. © Emerald Group Publishing Limited 2004

Accounting treatment recommendations for bottom-up shareholding increase

AbstractAn increasing number of companies in China are adopting bottom-up shareholding increases to incentivize employees and stabilize stock prices. However, a research gap exists regarding China’s current accounting regulations for handling bottom-up equity incentives. This study aims to address this research gap by clarifying the accounting treatment of bottom-up shareholding increases by publicly traded companies in China. Specifically, it seeks to analyze the economic essence of such transactions and propose a framework for their accounting treatment. To achieve the objectives, this study conducts a comprehensive analysis of the relevant provisions of current corporate accounting standards in China. Additionally, it considers perspectives from contract law to provide a holistic understanding of the issue. Based on the analytical results, this study proposes that the economic essence of a publicly traded company’s implementation of a bottom-up shareholding increase is akin to the sponsor’s equity donation to the company. Consequently, it suggests that such transactions can be accounted for similarly to capital donations by controlling shareholders to publicly traded companies. Hence, this research offers valuable reference and guidance for the accounting treatment of bottom-up shareholding increases by publicly traded companies in China. Furthermore, it holds significant importance in the context of further standardizing China’s corporate accounting practices and contributes to international accounting standards