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1 – 10 of over 9000Bart Frijns, Aaron Gilbert and Alireza Tourani-Rad
The purpose of this paper is to investigate price discovery for cross-listed stocks on the New Zealand Exchange (NZX) and the Australian Stock Exchange (ASX) and find out the…
Abstract
Purpose
The purpose of this paper is to investigate price discovery for cross-listed stocks on the New Zealand Exchange (NZX) and the Australian Stock Exchange (ASX) and find out the determinants of price discovery between the two markets.
Design/methodology/approach
Gonzalo Granger Component Shares and Hasbrouck Information Shares were estimated annually for a sample of 19 cross-listed stocks between 1998 and 2012. Then dynamic panel regressions were used to investigate the driving factors behind price discovery between the NZX and ASX.
Findings
Strong downward trends were observed in the contribution to price discovery of the NZX, both for New Zealand firms cross-listing on the ASX and Australian firms cross-listing on the NZX. While in the early years in our sample period, price discovery is dominated by the home market, by 2012, 50 per cent of price discovery for New Zealand firms takes place on the ASX, and the NZX acts as a satellite market for Australian firms. It was also observed that the NZX share of trading activity has a strong positive effect on the NZX level of price discovery, while there is a negative relationship with relative bid–ask spreads.
Practical implications
Results suggest that the importance of the NZX relative to the ASX with regards to price discovery is decreasing over time. Given the importance of price discovery for exchanges, such a finding is concerning for the NZX. The determinants of price discovery found in the paper, such as relative volume and spreads, do, however, offer some guidance on how the NZX could regain price discovery.
Originality/value
This paper offers a longer and broader analysis of price discovery between the NZX and ASX, two highly integrated markets, and extends previous work by exploring the drivers of price discovery in a panel setting.
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Most governments would profess either to having a model regulatory system for their markets or at least to having a proposal for a model regulatory system. The leading…
Abstract
Most governments would profess either to having a model regulatory system for their markets or at least to having a proposal for a model regulatory system. The leading international grouping of securities market regulators, the International Organisation of Securities Commissions (IOSCO), which comprises the regulatory bodies of almost 100 countries with day‐to‐day responsibility for securities regulation and the administration of securities laws, has devised a benchmark standard of regulatory best practice against which regulators around the world can reliably measure their operations' effectiveness.
Steve Easton and Irena Ivanovic
The paper seeks to examine fair values provided by the Australian Stock Exchange (ASX) and reported daily in the Australian Financial Review to determine whether they violate…
Abstract
Purpose
The paper seeks to examine fair values provided by the Australian Stock Exchange (ASX) and reported daily in the Australian Financial Review to determine whether they violate fundamental option relationships.
Design/methodology/approach
Values reported in the Australian Financial Review from 4 January 2005 to 31 March 2005 are examined.
Findings
The results document that between 1 and 2 per cent violate the most fundamental option relationships, specifically the requirement for call and put option values to increase as term to expiry increases, and for call (put) option values to increase (decrease) as exercise price decreases. Further, the magnitude of these violations is too large to be explained solely by the bid‐ask spread. They are, nevertheless, consistent with staleness. Further, in nearly 30 per cent of cases these fair values violate the basic put‐call parity relationship. The type of these violations is also consistent with these values being stale.
Research limitations/implications
Simple screens should be included to remove fair values that breach the most basic relationships.
Originality/value
The paper is the first to highlight flaws in fair values provided by the Australian Stock Exchange (ASX) and reported in the Australian Financial Review.
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Endang Soewarso, Greg Tower, Phil Hancock and Ross Taplin
The study analyses de jure disclosure harmony between Australia and Singapore by examining selected disclosure requirements from the statutes, stock exchange listing rules and…
Abstract
The study analyses de jure disclosure harmony between Australia and Singapore by examining selected disclosure requirements from the statutes, stock exchange listing rules and five accounting standards. Empirical evidence as to Australian and Singaporean companies' de facto disclosure is provided. Two disclosure indices, specifically the no‐violation‐for‐non‐disclosure (NVND) index and the violation‐for‐non‐disclosure (VND), were used to assess the extent of company's disclosure of the selected requirements contained within their respective country's rules.
Victor Fang, Chien‐Ting Lin and Warren Poon
The purpose of this study is to examine the exposures of Australian gold mining firms in the highly volatile period from 1995 to 2000. This period has been characterized by…
Abstract
Purpose
The purpose of this study is to examine the exposures of Australian gold mining firms in the highly volatile period from 1995 to 2000. This period has been characterized by significant changes in gold price due to bulk sale of gold by collective central banks. Specifically, the paper aims to investigate several firm‐specific factors that are hypothesized to carry substantial influence on gold beta.
Design/methodology/approach
To estimate gold beta, we use the following multifactor model: Rg,t = α + βg GPRt + βx FXRt + βm Rm,t + εt, where Rg,t is the return on the gold stock Index at time t, GPRt is the gold price return denominated in US dollar at time t, FXRt is the foreign exchange return of Australian dollar in terms of US dollar at time t, Rm,t is the market return at time t, and εt is the random error term at time t.
Findings
The paper finds that the values of gold beta are consistently greater than one, implying the sensitive nature of firms’ stock returns to gold price changes. This also suggests that investors holding gold mining stock would receive higher percentage increases in stock returns from a percentage increase in gold price returns, as opposed to investors holding gold bullion. Furthermore, these values have changed substantially over time with significant changes in gold price volatility. The most important and consistent relationship that we find is the impact of firms’ hedging behavior on their respective gold betas. This is consistent with Tufano's study. It implies that firms, which hedge a greater proportion of their gold reserves, are less sensitive to movements in gold prices. The finding therefore supports the risk management theory that hedging increases shareholder's wealth. However, cash operating costs, cash reserves and the level of gold production seem to influence very little on the firms’ exposure to gold price changes.
Originality/value
This study is of interest and important to the stock mining companies and investors because the extent of the effect of gold price movements on the stock returns of gold mining companies has significant impacts on returns for both firms and investors especially in their risk management and investment decisions, respectively.
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James Bentley and Zhangxin (Frank) Liu
The purpose of this study is to examine the impact of a recent innovation in the uranium market, the Global X Uranium Exchange-Traded Fund (URA), on the trading characteristics of…
Abstract
Purpose
The purpose of this study is to examine the impact of a recent innovation in the uranium market, the Global X Uranium Exchange-Traded Fund (URA), on the trading characteristics of constituent and non-constituent stocks.
Design/methodology/approach
The authors analyse bid-ask spread measures, relative effective spreads and adverse selection costs to assess changes in information asymmetry among uranium stocks. The authors also study abnormal returns to assess the impact of URA on the market.
Findings
Over a three-month period, following the introduction of URA, the authors find uranium stocks display decreased bid-ask spread measures, driven by reductions in information asymmetry. Relative effective spreads decrease by 36% after the introduction of URA, and adverse selection costs decline by 24% over the same period. Uranium stocks experience a significant positive abnormal return of 5.0% the day after the introduction of URA with subsequent price reversals. These suggest that the introduction of URA prompted uninformed traders to rebalance portfolios and migrate to the less information-sensitive Exchange-Traded Fund (ETF), causing temporary deviations in trading characteristics.
Originality/value
The authors demonstrate that the introduction of new financial securities to the market can have a significant impact on the trading characteristics of related equities. As URA is the only ETF in the uranium sector, the authors thereby avoid the influence of multiple ETFs that may have impacted previous studies.
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The Australia–China business relationship is immensely important for the economic prosperity and living standards of both the countries. There are major differences in business…
Abstract
The Australia–China business relationship is immensely important for the economic prosperity and living standards of both the countries. There are major differences in business culture between the two countries – Australia from the Global South with Anglo Imperial business traditions and practices, compared with the fast-developing economic might of China, the largest country by population and economic scale in the Far East. China is currently experiencing a crackdown on corruption under President Xi Jinping which started in 2012. Gift giving, guanxi (significant relationships), bribery and corruption are some of the biggest business relationship management issues between Australia and China. Appropriate gift giving and guanxi are distinguished here from bribery and corruption. Guanxi has been associated in the business and academic literature with deterioration in business ethics practices, including bribery and corruption – however, the literature also notes that this does not need to be the case. Following a review of the institutional setting and the literature here, a series of research propositions are developed that provides a framework within the whole ethics of governance regime for a corporation to manage bribery and corruption challenges for corporations. This framework can be used for Australian Stock Exchange, Hong Kong Stock Exchange listed companies which have legal systems parented in the United Kingdom; elements of the model may be useful in the China business setting.
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Michael E. Drew, Madhu Veeraraghavan and Min Ye
The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian Stock…
Abstract
Purpose
The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian Stock Exchange.
Design/methodology/approach
Following the Lee and Swaminathan's approach, portfolios on past returns and past trading volume is constructed. In this approach, all stocks are ranked independently on the basis of past returns and past trading volume. The stocks are then assigned to one of five portfolios based on past returns and one of three portfolios based on trading volume over the same period.
Findings
A strong momentum effect for the Australian market during the period 1988 through 2002 is observed. Further, momentum plays an important role in providing information about stocks. Past trading volume appears to predict both the magnitude and persistence of price momentum.
Research limitations/implications
Substantial momentum observed in monthly stock returns has investment implications. Abnormal returns vary from 0.3 to 7 per cent per month in the intermediate horizon.
Originality/value
This study provides an out of sample evidence by examining the relationship between “trading volume” (measured by the turnover ratio) and “momentum” strategies in an Australian setting.
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John C. Dumay and John A. Tull
The purpose of this paper is to examine an alternative way by which firms can disclose their intellectual capital to external stakeholders who have an influence on their share…
Abstract
Purpose
The purpose of this paper is to examine an alternative way by which firms can disclose their intellectual capital to external stakeholders who have an influence on their share price.
Design/methodology/approach
The paper shows that, by applying the empirical “event studies” methodology for the 2004‐2005 financial year, the components of intellectual capital are used to classify price‐sensitive company announcements to the Australian Stock Exchange (ASX), and to examine any relationship between the disclosure of intellectual capital and the cumulative abnormal return of a firm's share price.
Findings
The disclosure of intellectual capital elements in price sensitive company announcements can have an effect on the cumulative abnormal return of a firm's share price. The market is found to be most responsive to disclosures of “internal capital” elements.
Research limitations/implications
The paper is limited to an analysis of the Australian stock market for a one‐year period. It does not take into account the timing of announcement as a variable nor does it consider differences in regulation or operations pertaining to other stock markets.
Practical implications
Researchers and practitioners are now informed that price‐sensitive disclosures to the market containing intellectual capital elements have a marginal effect on the subsequent market valuation of a firm beyond traditional financial reports and external intellectual capital reports.
Originality/value
The paper is the first to examine the disclosure of price‐sensitive stock market information from an intellectual capital perspective, using Australian data.
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Russell G. Smith and Peter N. Grabosky
Finance is the lifeblood of an economy. Businesses require capital in order to start up, and usually require additional resources to maintain or expand their activities. In some…
Abstract
Finance is the lifeblood of an economy. Businesses require capital in order to start up, and usually require additional resources to maintain or expand their activities. In some cases, they may simply reinvest their profits. But expansion on a significant scale may require more than this. Thus, businesses may also seek to borrow funds or to solicit investments in return for the investor's share of future profit. One of the basic means by which this latter strategy is pursued in industrial societies is for businesses to solicit investments from the public through the initial public offering of shares, and for subsequent buying and selling of shares by investors who expect the value of the shares in question to rise or fall. Securities markets are thus integral to a nation's economic system.