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Int. J. Financial Stud., Volume 5, Issue 1 (March 2017)

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Editorial

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Open AccessEditorial Acknowledgement to Reviewers of the International Journal of Financial Studies in 2016
Int. J. Financial Stud. 2017, 5(1), 3; doi:10.3390/ijfs5010003
Received: 11 January 2017 / Accepted: 11 January 2017 / Published: 11 January 2017
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Abstract The editors of the International Journal of Financial Studies would like to express their sincere gratitude to the following reviewers for assessing manuscripts in 2016.[...] Full article

Research

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Open AccessArticle Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect
Int. J. Financial Stud. 2017, 5(1), 4; doi:10.3390/ijfs5010004
Received: 29 August 2016 / Revised: 29 November 2016 / Accepted: 29 November 2016 / Published: 18 January 2017
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Abstract
From the 1994 bailout policies to the 2015 Shanghai-Hong Kong Stock Connect, the policy impact on the Chinese stock market has changed over time. By May 2015, global investors can directly invest in a more legalized and normalized Chinese stock market, whereas they
[...] Read more.
From the 1994 bailout policies to the 2015 Shanghai-Hong Kong Stock Connect, the policy impact on the Chinese stock market has changed over time. By May 2015, global investors can directly invest in a more legalized and normalized Chinese stock market, whereas they are still concerned about the policy-oriented market and its attendant risks. In this study, we employ the family of GARCH models to investigate the structural changes in risks with the implementation of a series of policies. Our results show that although many policies improve or stabilize the stock market, certain policies lead to substantial volatility. Among them, macro-control policies and transaction cost adjustments are a double-edged sword, which should be used with caution. Furthermore, with opening-up policies being launched recently, the Chinese stock market has entered a new stage in which it affects international capital markets. However, the increased risks, which may result in a sharp turnaround, cause worry. Full article
(This article belongs to the Special Issue New Challenges in Asian Capital Markets)
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Open AccessArticle FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America
Int. J. Financial Stud. 2017, 5(1), 6; doi:10.3390/ijfs5010006
Received: 25 August 2016 / Revised: 14 January 2017 / Accepted: 17 January 2017 / Published: 14 February 2017
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Abstract
This paper investigates the impact of price and real exchange rate volatility on Foreign Direct Investment (FDI) inflows in a panel of 10 Latin American and Caribbean countries, observed between 1990 and 2012. Both price and exchange rate volatility series are estimated through
[...] Read more.
This paper investigates the impact of price and real exchange rate volatility on Foreign Direct Investment (FDI) inflows in a panel of 10 Latin American and Caribbean countries, observed between 1990 and 2012. Both price and exchange rate volatility series are estimated through the Generalized Autoregressive Conditional Heteroscedasticity model (GARCH). Our results obtained, employing the Fixed Effects estimator, confirm the theory of hysteresis and option value, in so far as a statistically significant negative effect of exchange rate volatility on FDI is found. Price volatility, instead, turns out to be positive but insignificant. Moreover, we show that human capital and trade openness are key for attracting foreign capital. From the policy perspective, our analysis suggests the importance of stabilization policies as well as the policy of government credibility in promoting trade openness and human capital formation. Full article
Open AccessArticle What Should You Pay to Cap your ARM?—A Note on Capped Adjustable Rate Mortgages
Int. J. Financial Stud. 2017, 5(1), 10; doi:10.3390/ijfs5010010
Received: 6 January 2017 / Accepted: 23 February 2017 / Published: 6 March 2017
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Abstract
In this paper, an Adjustable Rate Mortgage (ARM) and a Fixed Rate Mortgage (FRM) are formalized and studied in a simple continuous-time setting under the assumption of a simple one-factor Affine Term Structure (ATS). Through an application of existing results from ATS theory,
[...] Read more.
In this paper, an Adjustable Rate Mortgage (ARM) and a Fixed Rate Mortgage (FRM) are formalized and studied in a simple continuous-time setting under the assumption of a simple one-factor Affine Term Structure (ATS). Through an application of existing results from ATS theory, it is shown that when the short rate reaches a certain pre-determined boundary, the constant payment stream on a new FRM equals the payments on an existing ARM. Hereby, this paper provides a theoretical build-in cap on the formalized ARM. The finite boundary for the short-rate suggests that certain caps on ARMs should (in theory) be offered free of charge. Full article
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Open AccessArticle Causality between Stock Prices and Exchange Rates in Turkey: Empirical Evidence from the ARDL Bounds Test and a Combined Cointegration Approach
Int. J. Financial Stud. 2017, 5(1), 8; doi:10.3390/ijfs5010008
Received: 6 September 2016 / Revised: 4 February 2017 / Accepted: 10 February 2017 / Published: 1 March 2017
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Abstract
This paper investigates the interaction between stock prices and real exchange rates by applying monthly data from Turkey for the period between January 2001 and September 2016. This study uses the autoregressive distributed lag (ARDL) model and the Error Correction Model (ECM) in
[...] Read more.
This paper investigates the interaction between stock prices and real exchange rates by applying monthly data from Turkey for the period between January 2001 and September 2016. This study uses the autoregressive distributed lag (ARDL) model and the Error Correction Model (ECM) in order to investigate the existence of a long-run equilibrium relationship between the variables. The evidence reveals that there is a strong long-run cointegration. The robustness of the ARDL bounds test cointegration was confirmed using the newly-developed combined cointegration, which also provided the same evidence for a strong long-run relationship. The Granger causality test results indicate a long-run bidirectional causality between stock prices and real exchange rates, and also a unidirectional causality from the real exchange rates to the stock prices in the short-run. In order to analyze the validity and reliability of the test results, diagnostic tests were applied in both the short-run and long-run models. Full article
Open AccessArticle Japanese Mutual Funds before and after the Crisis Outburst: A Style- and Performance-Analysis
Int. J. Financial Stud. 2017, 5(1), 9; doi:10.3390/ijfs5010009
Received: 30 December 2016 / Revised: 9 February 2017 / Accepted: 16 February 2017 / Published: 1 March 2017
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Abstract
This paper investigates how mutual funds performed in Japan before and after the 2008 outburst of the global financial crisis, that is during the extension of an extraordinary unconventional monetary policy by the Bank of Japan. Style and performance analyses are employed in
[...] Read more.
This paper investigates how mutual funds performed in Japan before and after the 2008 outburst of the global financial crisis, that is during the extension of an extraordinary unconventional monetary policy by the Bank of Japan. Style and performance analyses are employed in order to investigate whether active or passive management has been affected by unconventional times and to what extent. Evidence indicates that in four out of eight funds, asset selection presents a significant contribution to returns. The Selection Sharpe Ratios for sectoral and style analyses exhibit positive values added per unit of risk due to active management for the majority of our funds in the pre-Lehman default period. Nevertheless, none of them presents statistical significance according to the t-statistic. Moreover, over the post-Lehman default, only two out of eight funds achieved lower volatility levels and higher returns due to active management. A style drift to big capitalization stocks with low values of book to market ratio is to be held responsible for the outperformance. Overall, our findings imply that active management in a monetary easing environment does not add significant value to the mutual fund performance. Full article
(This article belongs to the Special Issue Asset Pricing and Portfolio Choice)
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Open AccessArticle Effectiveness of Weather Derivatives as a Risk Management Tool in Food Retail: The Case of Croatia
Int. J. Financial Stud. 2017, 5(1), 2; doi:10.3390/ijfs5010002
Received: 30 September 2016 / Revised: 1 December 2016 / Accepted: 12 December 2016 / Published: 1 January 2017
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Abstract
Non-catastrophic weather risk is gaining importance as climate change becomes more pronounced and economic crisis forces companies to strengthen their cost control. Recent literature proposes weather derivatives as flexible weather risk mitigating tools. Only a handful of studies analysed the feasibility of weather
[...] Read more.
Non-catastrophic weather risk is gaining importance as climate change becomes more pronounced and economic crisis forces companies to strengthen their cost control. Recent literature proposes weather derivatives as flexible weather risk mitigating tools. Only a handful of studies analysed the feasibility of weather derivatives in industries other than agriculture and energy. The purpose of this paper is to review available weather risk management solutions in retail, present weather derivatives as non-catastrophic weather risk management tools, empirically demonstrate the process of designing weather derivatives and assess their effectiveness as risk mitigating tools in retail. Empirical analysis is performed on beverage sales in 60 large food stores in Croatia, and performance of monthly temperature put options during the summer season is examined. For weather sensitivity analysis of sales, the method of panel regression was used. Results show that weather has a statistically significant effect on beverage sales and that weather derivatives prove to be effective in beverage sales uncertainty reduction. Their effectiveness differs between covered periods and cities. Full article
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Open AccessArticle New Insight into the Finance-Energy Nexus: Disaggregated Evidence from Turkish Sectors
Int. J. Financial Stud. 2017, 5(1), 1; doi:10.3390/ijfs5010001
Received: 31 July 2016 / Revised: 24 November 2016 / Accepted: 12 December 2016 / Published: 1 January 2017
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Abstract
Seeing that reshaped energy economics literature has adopted some new variables in energy demand function, the number of papers looking into the relationship between financial development and energy consumption at the aggregate level has been increasing over the last few years. This paper,
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Seeing that reshaped energy economics literature has adopted some new variables in energy demand function, the number of papers looking into the relationship between financial development and energy consumption at the aggregate level has been increasing over the last few years. This paper, however, proposes a new framework using disaggregated data and investigates the nexus between financial development and sectoral energy consumption in Turkey. To this end, panel time series regression and causality techniques are adopted over the period 1989–2011. Empirical results confirm that financial development does have a significant impact on energy consumption, even with disaggregated data. It is also proved that the magnitude of financial development is larger in energy-intensive industries than in less energy-intensive ones. Full article
(This article belongs to the Special Issue Energy Finance)
Open AccessArticle Efficiency Analysis of Islamic Banks in the Middle East and North Africa Region: A Bootstrap DEA Approach
Int. J. Financial Stud. 2017, 5(1), 7; doi:10.3390/ijfs5010007
Received: 30 November 2016 / Revised: 29 January 2017 / Accepted: 8 February 2017 / Published: 15 February 2017
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Abstract
This paper measures and analyzes the technical efficiency of Islamic banks in the Middle East and North Africa (MENA) region during the period 2007–2012. To do this, the bootstrap Data Envelopment Analysis (DEA) approach was employed in order to provide a robust estimation
[...] Read more.
This paper measures and analyzes the technical efficiency of Islamic banks in the Middle East and North Africa (MENA) region during the period 2007–2012. To do this, the bootstrap Data Envelopment Analysis (DEA) approach was employed in order to provide a robust estimation of the overall technical efficiency and its components: pure technical efficiency and scale efficiency in the case of MENA Islamic banks. The main results show that over the period of study, pure technical inefficiency was the main source of overall technical inefficiency instead of scale inefficiency. This finding was confirmed for all MENA Islamic banks as well as for the two subsamples: Gulf Cooperation Council (GCC) and non-GCC Islamic banks. Furthermore, our results show that GCC Islamic banks had stable efficiency scores during the global financial crisis (2007–2008) and in the early post-crisis period (2009–2010). However, a decline in overall technical efficiency of all panels of MENA Islamic banks was recorded in the last two years of the study period (2011–2012). Thus, we recommend that MENA Islamic bank managers focus more on improving their management practices rather than increasing their sizes. We also recommend that financial authorities in MENA countries implement several regulatory and financial measures in order to ensure the development of MENA Islamic banking. Full article
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Review

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Open AccessReview Capital Markets, Infrastructure Investment and Growth in the Asia Pacific Region
Int. J. Financial Stud. 2017, 5(1), 5; doi:10.3390/ijfs5010005
Received: 14 July 2016 / Revised: 3 November 2016 / Accepted: 5 January 2017 / Published: 9 February 2017
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Abstract
This paper examines the relationship between infrastructure investment activity, capital market development, the role of public institutions and economic development in the Asia Pacific. It adopts a review approach drawing on empirical evidence over recent decades. Infrastructure is shown to be an important
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This paper examines the relationship between infrastructure investment activity, capital market development, the role of public institutions and economic development in the Asia Pacific. It adopts a review approach drawing on empirical evidence over recent decades. Infrastructure is shown to be an important asset class playing a central role in a nation’s output, growth, productivity and microeconomic performance. Infrastructure investment also requires investment and predictions of a widening gap in the future supply of infrastructure in the Asia Pacific will require new forms of capital from both traditional and new sources including wider use of private participation, institutional investment, asset recycling and revenue bonds. Capital market development is also necessary to raise long-term local currency finance and evidence suggests that progress with regional capital market integration is slow and a continuing reform agenda is required. The dividend for regional countries is the prospect of higher levels of economic growth with infrastructure investment, capital market development, and foreign direct investment shown to have a strong and positive association with growth. A crucial link in this association identified in the review is the part played by national and regional institutions in improving the efficiency with which infrastructure is managed and providing promising ground for further research where the importance of these links can be researched in greater depth. Full article
(This article belongs to the Special Issue New Challenges in Asian Capital Markets)

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