Asymmetric Information Spillovers between Trading Volume and Price Changes in Malaysian Futures Market

You-How Go,Wee-Yeap Lau 한국유통과학회 2014 The Journal of Asian Finance, Economics and Busine Vol.1 No.3

This study aims to examine the dynamics of price changes and trading volume of Kuala Lumpur Options and Financial Futures Exchange (KLOFFE) from 2000 to 2008. With augmented analysis, our results support two hypotheses. First, under information spillover, our findings support noise traders’ hypothesis as the time span for variance of past trading volume to cause variance of current return is found to be asymmetric under bull and bear markets. Second, looking at the dynamic relation between volume and volatility of price changes, our findings support Liquidity-Driven Trade hypothesis as past trading volume and subsequent volatility of return exhibit positive correlation. In terms of investors’ behavior in response to the news, we find that investors are more risk taking in bull market and more risk reverse in bear market. Our study suggests that investors should adjust their strategy in the futures market in a dynamic manner as the time span of new information arrival is not consistent. Also, uninformed investors with information asymmetry should expect noninformational trading from informed investors to establish their desired positions for better liquid position.

Financial Liberalization and Stock Market Efficiency: Causality Analysis of Emerging Markets

Navaz Naghavi,Wee-Yeap Lau 연세대학교 동서문제연구원 2016 Global economic review Vol.45 No.4

This paper studies the long- and short-run relationship between financial liberalization and stock market efficiency. It expands the extant body of knowledge by investigating Granger causality relationship applying mean group, common correlated effect mean group and common correlated effect pooled estimator to balanced panel data for 27 emerging markets over the period 1996–2011. We find evidence of financial liberalization Granger causes stock market efficiency, which is consistent with liberalization leads to efficiency hypothesis. Subsequently, our work makes a fresh contribution to the literature by focusing on informational efficiency of stock markets rather than financial development. Furthermore, we find that a negative long-term relationship between financial liberalization and stock return autocorrelation coexists with a positive short-term relationship between the two. The findings that financial liberalization, which has a deteriorated effect on stock market efficiency in the short-run, but positive impact in the long-run, allow us to draw an analogy similar to the J-curve hypothesis.

A Fuzzy Based Early Warning System to Predict Banking Distress on Selected Asia-Pacific Countries

Elham Farajnejad,Wee-Yeap Lau 한국유통과학회 2017 The Journal of Asian Finance, Economics and Busine Vol.4 No.1

This study develops an early warning system (EWS) to prevent the banking crisis. The proposed system incorporates both the perspective of crises and fundamental characteristics of the banking system in each economy. A fuzzy logic method with data from 1990-2009 is employed to construct the EWS of banking crisis based on 21 pre-determined variables from the aspect of total economy, financial and banking sectors. Our results show: Firstly, South Korea recorded higher probability to have a banking crisis in 1997 as there was large foreign debt in dollars. Secondly, China, Australia and New Zealand banking systems appear to be vulnerable to the crisis in 2007. The surge of China export, FDIs and booming stock market were signs of a heated economy. Australia with high commodity prices was also vulnerable to crisis. Thirdly, Australia, China, Japan and New Zealand banking systems appear to be exposed to the higher chance of a crisis in 2010. Japan with deflation coupled with expensive yen did not augur well for its export. Overall, the findings show that in Asian Financial Crisis 1997/98 and Global Financial Crisis 2008/09, many economies are exposed to a higher probability of having the crisis and this shows an urgent need of having surveillance in these economies.

A Comparative Study between Islamic and Conventional Exchange-Traded Funds: Evidence from Global Market Indices

YAP, Kok-Leong,LAU, Wee-Yeap,ISMAIL, Izlin Korea Distribution Science Association 2021 The Journal of Asian Finance, Economics and Busine Vol.8 No.2

This study investigates whether the Islamic Exchange-Traded Funds (ETFs) provide significant benefit to investors relative to conventional ETFs. Six pairs of Islamic and conventional ETFs with 10-year daily price data from 2010 to 2019 have been selected from major market indices like MSCI World Index, MSCI Emerging Markets, MyETF Dow Jones Islamic Market Malaysia, MSCI South East Asia and Wahed FTSE Shariah USA Index for this study. For ETFs that are launched after 2010, the price data from launch date to 2019 are used. Our results show: First, Islamic ETFs are more likely to trade at a premium rather than at a discount, implying the investors are willing to pay a premium. Second, it is also found that Islamic ETFs have a relatively shorter period of price deviation from the benchmark, implying more price stability. Third, conventional ETFs have higher return and lower tracking errors relative to Islamic ETFs. These new findings add to the stylized facts of Islamic ETFs in the extant literature for investors, plan sponsors and regulators as to the differences between the ETFs. As policy suggestion, asset management companies can design new investment products to bridge the gap between conventional and Islamic finance.

Do Firm Characteristics and Industry Matter in Determining Corporate Cash Holdings? Evidence from Hospitality Firms

KWAN, Jing-Hui,LAU, Wee-Yeap Korea Distribution Science Association 2020 The Journal of Asian Finance, Economics and Busine Vol.7 No.2

The study investigates a recent surge of cash literature by using a sample of hospitality firms to gain a new understanding of corporate cash holdings. Past literature states that there is a substantial variation of liquidity across industry groups. Existing literature predominantly refers to US-listed firms and focus on either hotels or restaurants and not the hospitality industry as a whole. Therefore, we provide a comparative study of cash holdings behaviour between hospitality and non-hospitality firms from an emerging market context. Using a sample of public listed hospitality firms from 2002 to 2013, dynamic panel regression techniques are used to study the relationships between firm characteristics and cash levels. Also, the non-parametric Wilcoxon-Mann-Whitney test was carried out to examine the time and sectoral differences in cash holdings. In addition, the panel regression techniques are used to investigate the relationships between firm characteristics and level of corporate cash holdings. The results reveal that firm characteristics do matter in hospitality firms. We find that firm size, capital expenditures, and liquid assets substitutes are negatively related to cash level. The results support trade-off theory and the pecking order theory. This study incrementally explains the cash holdings behaviour of hospitality firms in emerging market.

Triffin Dilemma and International Monetary System : Evidence from Pooled Mean-Group Estimation

Long Fei Guan,Wee Yeap Lau 한국유통과학회 2017 한국유통과학회 학술대회 논문집 Vol.2017 No.-

This study utilizes the panel data set of four major international currencies, USD, JPY, EUR and GBP from 1973 to 2013 with Pooled Mean-Group (PMG) estimator, to re-examine whether Triffin dilemma still exists through investigating the relationship between the reserve share, current account balance and real effective exchange rate. The evidence from the result indicates that Triffin dilemma exists only in the long run, and shows that in the long-run, current account balance is proportionate to the increased real effective exchange rate while varies inversely with the reserve shares. However, the estimation for the short-run is not significant to prove the existence of Triffin dilemma. In addition, we investigated the non-dollar panel sample and found that the international monetary system still suffers from Triffin dilemma even without the dollar. To overcome Triffin dilemma, three steps are suggested to be taken and in the longer time, a supranational currency is used to replace all the currencies in the world.

Is the Fama French Three-Factor Model Relevant? Evidence from Islamic Unit Trust Funds

Shahrin Saaid Shaharuddin,Wee-Yeap Lau,Rubi Ahmad 한국유통과학회 2018 The Journal of Asian Finance, Economics and Busine Vol.5 No.4

The study tests the Fama and French three-factor model by using the newly created Islamic equity style indices. Based on a dataset from May 2006 to April 2011, the three-factor model is tested based on returns of Islamic unit trust funds using the Generalized Method of Moments (GMM) methodology. The sample period is also divided between periods before and after the Global Financial Crisis in August 2008 to test for robustness, and the Bai and Perron (2003) multiple structural break test was used to determine the structural break in the series. The analysis shows that the Fama and French model is valid for Islamic unit trust funds before and after the collapse of Lehman Brothers. The result further indicates the reversal of size effect. As for trading strategies, value funds outperform growth funds by annualized 3.13 percent for the full period. During pre-crisis period, value funds perform better than growth funds while in post-crisis, size factor yields better return than other strategies. As policy suggestion, fund managers need to be aware of the reversal of size effect, and they need to ensure a more transparent stock selection process so that investors can make an informed decision in their asset allocation.

Triffin Dilemma and International Monetary System : Evidence from Pooled Mean Group Estimation

Long-Fei Guan,Wee-Yeap Lau 한국유통과학회 2018 The Journal of Asian Finance, Economics and Busine Vol.5 No.2

This study is motivated based on concern from some renowned scholars and central bankers whom have raised the issue of the sustainability of the International Monetary System (IMS). Using the panel data set of four major international currencies, USD, JPY, EUR and GBP from 1973 to 2013 with Pooled Mean Group (PMG) estimator, to re-examine whether Triffin dilemma still exists through investigating the relationship between the reserve share, current account balance and real effective exchange rate. The evidence from the result indicates that Triffin dilemma exists only in the long run, and shows that in the long-run, current account balance is proportionate to the increased real effective exchange rate while varies inversely with the reserve shares. However, the estimation for the short-run is not significant to prove the existence of Triffin dilemma. In addition, we investigated the non-dollar panel sample and found that the international monetary system still suffers from Triffin dilemma even without the dollar. To overcome Triffin dilemma, immediate step such as having currency swap mechanism is recommended. In medium term, a multi-polar Monetary System is suggested, and in the longer time, a supranational currency will be used to replace all the currencies in the world.

Information Arrival between Price Change and Trading Volume in Crude Palm Oil Futures Market: A Non-linear Approach

You-How Go,Wee-Yeap Lau 한국유통과학회 2016 The Journal of Asian Finance, Economics and Busine Vol.3 No.3

This paper is the first of its kind using a non-linear approach based on cross-correlation function (CCF) to investigate the information arrival hypothesis in crude palm oil (CPO) futures market. Based on daily data from 1986 to 2010, our empirical results reveal that: First, the volume of volatility is not a proxy of information flow. Second, dependence causality running from current return to future volume in conditional variance exhibit an asymmetric pattern of time span with different signs of correlation between price and volume series. This finding indicates the presence of noise traders’ hypothesis of price-volume interaction in CPO futures market. Both findings suggest that this futures market is weak-form inefficiency. In terms of investors’ behavior, they tend to change their expectations on current return based on errors made in previous trade in generating abnormal volume in the subsequent period. As implied, it is advisable for the investors devise their future trading strategies according to time span and changes of return.

Investigating the Determinants of Major IT Incident Tickets: A Case Study of an IT Service Provider Firm for Logistics and Distribution Industry

Mohamad Izham Che Ros,Wee-Yeap Lau 한국유통과학회 2016 유통과학연구 Vol.14 No.12

Purpose - This study investigates the determinants that affect the number of IT Incident tickets of an IT Service Provider (“ITSP”) to logistics industry in order to improve its management process by reducing the incident tickets. Research design, data, and Methodology - This study uses weekly data of IT incident tickets from September 2012 to June 2015. Correlation and regression analyses are conducted. Six identified determinants i.e., IT Change, User Errors, Shipment Volume, Network, Hardware and Software Issues are used as the explanatory variables. Results - Our findings show as following. First, our analysis indicates that IT Change is not a significant determinant as opposed to what commonly believed by many as the most important factor. Second, Software issue is the highest contributor to the Major IT incident tickets, followed by User Error, Network and Hardware issues. Third, it seems there is lead-lag relationship between IT Change and Major IT Incidents tickets as indicated by earlier studies. Fourth, the relationship between IT Change and Major IT tickets is also affected by shipment volume. Conclusions - As policy recommendation, all identified determinants should be treated according to priority. In addition, improving the way IT Changes are implemented will definitely reduce the IT incident tickets.