Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited
The theme of this special issue is "International Financial Markets". The criterion used here for selection of articles is that the issues examined should be of current interest to financial managers, international investors, providers of global financial services, and should be relatively under-researched in business academia.
At the risk of stating the obvious, it needs to be re-emphasized that most financial securities now trade in a global marketplace. Two prominent drivers of the process of globalization are financial de-regulation and advances in information technology. Although global investors can choose from a menu of financial securities that is unprecedented in its wide range of choice, the very same abundance makes the job of security selection more challenging now than it has ever been in the past. One of the objectives of this special issue is to provide a selection of research articles which would be of use to global investors as input in the evaluation of international investing opportunities.
The first article evaluates the risk-adjusted performance of US-based international equity mutual funds using objective measures grounded in modern portfolio theory. This article utilizes a relatively new performance measure (developed by Modigliani and Modigliani in 1997) to report the risk-adjusted returns on these funds. It is evident from the results that some funds with high average returns look less attractive when the risk of the fund is factored into the analysis. Conversely, financial leverage can be used to raise the returns on international mutual funds with low risk.
The second article examines the motivation for issuing global bonds. The relationship between the issue of global bonds and corporate reputation, firm size, issue size, and interest rate environment, is examined. The stock market reaction to issue of domestic bonds and global bonds is compared. This study provides information on both the issuance costs and signaling implications of global bonds.
The third article evaluates the impact of New Zealand and Australian privatization programs on the growth and efficiency of their stock markets. In both countries, privatization resulted in significant growth in market capitalization, and, in the case of New Zealand, significant improvement in stock market liquidity. The article reports the comparison of the performance of the portfolio of privatized companies with a market portfolio, in each country. The issue of possible under-pricing of privatized company IPOs is also examined.
Finally, the fourth article studies the impact on price and trading volume, of changes in the composition of Australian stock market indexes. The index effect has been well-documented in USA markets, and the authors examine whether a similar reaction is evident in Australian markets. This study has clear implications for investors looking at the possibility of market speculation based on index inclusion (or exclusion) in Australia.
Ajay SamantSpecial Issue Editor, Western Michigan University (USA)