The underperformance of the growth enterprise market in Hong Kong

This paper examines the stock return performance of the IPO stocks which are listed on the Growth Enterprise Market (GEM) in Hong Kong. By using several benchmarks, over 3 years, this paper finds that the results produced are sensitive to the benchmark employed. The two factors causing the underperformance of GEM stocks are the `technology boom and `IPO effects. This suggests that appropriate benchmarks are very important for assessing the performance of newly issued stocks. The results of the cross-sectional analyses suggest that the Hong Kong GEM is a unique market. Since at least 70 percent of the IPO stocks listed on theGEMare technology stocks, the `technology factor outweighs the various hypotheses advocated by previous researchers to explain the poor performance of newly listed stocks

Evolution of international stock and bond market integration: Influence of the European Monetary Union

This paper examines the dynamic relationship between daily stock and government bond returns of selected countries over the past decade to infer the state and progress of inter-financial market integration. We proceed to empirically investigate the influence of the European Monetary Union (EMU) on time variations in inter-stockbond market integration/segmentation dynamics using a two-step procedure: First, we document the downward trends in time-varying conditional correlations between stock and bond market returns in European countries, Japan and the US. Second, we investigate the causality and determinants of this interdependent relationship, in particular, whether the various macroeconomic convergence criteria associated with the EMU have played a significant role. We find that real economic integration and the reduction in currency risk have generally had the desired effect on financial integration but monetary policy integration may have created uncertain investor sentiments on the economic future of the EMU, thereby stimulating a flight to quality phenomenon

Model specification and IPO performance: New insights from Asia

This study examines the post-issue stock price performance of initial public offerings (IPOs) from advanced and emerging Asian markets from 1991 to 2004.We provide a comparative assessment on the short- and long-term stock performance of Asian IPOs with comprehensive international evidence. We use several different methods to examine the robustness of IPO performance. Our results reveal that whilst there is initial underpricing in Asian IPOs, the existence of long-run underperformance for the Asian IPOs depends resoundingly on the methodology used for assessment

Foreign exchange exposure: Evidence from the U.S. insurance industry

We study the foreign exchange exposure of U.S. insurers. The evidence shows that no systematic difference exists in the currency risk profiles of life and non-life segments within the insurance industry. This suggests that life and non-life insurers have similar risk exposure management strategies arising from similar risk pooling and financial intermediary functions. The empirical results reveal that a sizable proportion of U.S. insurers are exposed to foreign exchange movements against the seven largest U.S. trade partners in insurance services (U.K., Japan, Switzerland, Netherlands, France, Germany and Canada). Significant operational and size effects are also documented and we find that the frequency of foreign exchange exposure increases with time horizon

How do foreign institutional investors enhance firm innovation?

We examine the effect of foreign institutional investors on firm innovation. Using firm-level data across 26 non-U.S. economies between 2000 and 2010, we show that foreign institutional ownership has a positive, causal effect on firm innovation. We further explore three possible underlying mechanisms through which foreign institutions affect firm innovation: Foreign institutions act as active monitors, provide insurance for firm managers against innovation failures, and promote knowledge spillovers from high-innovation economies. Our article sheds new light on the real effects of foreign institutions on firm innovation

Better the Devil that You Know: Evidence on Entry Costs Faced by Foreign Banks

Institutional and legal differences between countries increase entry costs and reduce the ability of banks to expand abroad. We use bilateral foreign banking data for 176 countries to estimate a gravity model in which bilateral cross-border banking activity is explained, in addition to standard variables, by legal and institutional differences. We find that foreign banking is negatively affected by absolute differences in the legal setup and in basic institutions between source and host countries. Differences in the legal origin, for example, reduce bilateral participation in the banking system by nearly 11 percent. Additionally we do not find strong evidence suggesting asymmetries in adapting to better or worse institutional/legal environments