Bank Lending Decisions Using Projections: A Case-study Approach

This paper, by emphasizing on the process and dynamics of bank corporate credit decisions, presents a description of an introductory case-study suitable for an undergraduate/MSc banking or business finance course.  The case exists in two parts and is designed for instructors to be able to use only those parts which they consider appropriate to their objectives and time considerations. In two or three seventy-five minute classes—depending on the parts of the case utilized and the time allowed for student interaction—instructors can have students explore the factors that influence the lending decision and focus on the interpretation of the mechanical process used in constructing projected financial statements for the identification of the actual borrowing needs of a specific company.

Empirical Testing Of Different Alternative Proxy Measures For Firm Size

This paper examines the relationship among total sales revenue, total assets, book value of equity, and market value of equity for different economic sectors and timeperiods.  Five statistical tools are used to examine the relationship among the different proxies of size of the firm for the period 1999-2002. Our study shows that the relationships among the four measures of the size of the firm are not the same for the different economic sectors and are not stable over time for each economic sector.  Our results suggest that the use of the four measures interchangeably as a proxy for the firm size may not be appropriate

Empirical Testing Of Random Walk Of Euro Exchange Rates: Evidence From The Emerging Markets

This paper utilizes the new non-parametric variance ratio tests based on signs and ranks to examine the random walk hypothesis of Euro exchange rates for 10 Middle Eastern and North African (MENA) currencies.  The results of the new- variance ratio tests reject the random walk hypothesis for all currencies except the Kuwaiti and the Emirate currencies.  Given the improved size and power properties of Wright’s (2000) ranks and signs tests, the results of the new variance ratio tests are robust to the results of the traditional LOMAC variance ratio tests.&nbsp

The impact of thin trading on day-of-the-week effect: Evidence from the United Arab Emirates

Purpose – The purpose of this study is to examine the impact of thin trading on the day-of-the-week effect in the emerging equity markets of the United Arab Emirates (UAE). Researchers have stated that emerging markets are typically characterized by low liquidity, thin trading and possibly less well-informed investors with access to unreliable information and considerable volatility. It is well known that thin trading can affect the results of empirical studies on patterns of equity markets by introducing a serious bias into the results. Design/methodology/approach – This study applies a stochastic dominance approach to detect the day-of-the-week effect. The reason for utilizing this approach is that the parametric tests are not strictly appropriate for assets with non-normally distributed returns. In fact, stochastic dominance is a useful tool for making comparisons among distributions without relying on parametric assumptions. Findings – The findings indicate that there is day-of-the-week effect in published daily prices, while daily effect vanishes when data are corrected to remove any measurement bias arising from thin trading. The stochastic dominance results show that the day-of-the-week effect in the UAE equity markets is not present when we correct raw data for thin and infrequent trading. Originality/value – There has been no research in the literature testing the day-of-the-week effect on the emerging financial markets in the UAE. The study provides empirical evidence on their degree of market efficiency. If the day-of-the-week effect exists, this means that the Abu Dhabi Securities Markets and the Dubai Financial Markets are inefficient. These results will help investors to develop a good investment strategyBias, Emerging markets, Equity capital, Stochastic processes, Trading capital, United Arab Emirates

The generalized Fisher hypothesis in the Asian markets

This paper investigates the generalized Fisher hypothesis for nine equity markets in the Asian countries. It states that the real rates of return on common stocks and the expected inflation rate are independent and that nominal stock returns vary in a one-to-one correspondence with the expected inflation rate. The regression results indicate that stock returns in general are negatively correlated to both expected and unexpected inflation, and that common stocks provide a poor hedge against inflation. However, the results of the VAR model indicate the lack of a unidirectional causality between stock returns and inflation. It also fails to find a consistent negative response neither of inflation to shocks in stock returns nor of stock returns to shocks in inflation in all countries. It appears that the generalized Fisher hypothesis in the Asian markets is as puzzling as in the developed markets.Asian studies, Equity capital, Equity theory, Inflation, Variance, Vectors

A New Variance Ratio Test of Random Walk in Emerging Markets: A Revisit

Using a nonparametric variance ratio (VR) test, we revisit the empirical validity of the random walk hypothesis in eight emerging markets in the Middle East and North Africa (MENA). After correcting for measurement biases caused by thin and infrequent trading prevalent in nascent and small stock markets, we cannot reject the random walk hypothesis for the MENA markets. We conclude that a nonparametric VR test is appropriate for emerging stock markets, and argue that our findings can reconcile previously contradictory results regarding the efficiency of MENA markets. Copyright 2007, The Eastern Finance Association.

Calendar anomaly in the Greek stock market: Stochastic dominance analysis

Using stochastic dominance (SD) analysis, this paper examines calendar anomalies in the Athens Stock Exchange (ASE), an emerging market thrust into a path of rapid transition by the economic integration of Greece with the European Union. SD offers two essential analytical attributes: It requires no assumptions regarding the normality of return distributions, and it imposes few restrictions on investors' risk-return tradeoff preference. Between 1985 and 2004, we find temporal predictability of returns in the ASE -- a strong "day" effect and rather weak "week" and "January" effects. Our findings on the week and January effects are far less robust as compared to those reported in earlier studies based on parametric tests.