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Article
Publication date: 13 November 2018

Bart Frijns and Ivan Indriawan

This paper aims to assess the ability of New Zealand (NZ) actively managed funds to generate risk-adjusted outperformance using portfolio holdings data. Focusing on…

Abstract

Purpose

This paper aims to assess the ability of New Zealand (NZ) actively managed funds to generate risk-adjusted outperformance using portfolio holdings data. Focusing on domestic equity allocations addresses the benchmark selection issue, particularly for funds with national and international exposures.

Design/methodology/approach

The authors assess performance using several asset pricing models including the CAPM, three-factor and four-factor models. The authors also assess performance across funds with different characteristics such as fund size, size of local holdings, type of fund provider, past returns and fees. The authors further examine whether funds engage in any stock-picking or market timing by considering the active share and tracking error.

Findings

The returns on NZ equity holdings of NZ actively managed funds from 2010 to 2017 provide little evidence of risk-adjusted outperformance and stock-picking skill. These exposures yield pre-cost returns that have a nearly perfect correlation with the market index and an insignificant alpha. Funds show little tendency to bet on any of the main characteristics known to predict stock returns, such as size, book-to-market and momentum. In addition, the authors show that the average active shares and tracking errors are low, suggesting that the majority of funds hold NZ equity portfolios that closely mimic the market index.

Originality/value

Existing studies rely on returns data which aggregate performance across all asset classes with varying exposures. This may lead to benchmark selection issues (particularly for funds with international exposures) which may obscure the fund manager’s true stock-picking skills. Assessment using holdings data would enable suitable performance measurement by researchers and industry analysts.

Details

Pacific Accounting Review, vol. 30 no. 4
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 7 August 2017

Jun Chen, Yi Chen and Bart Frijns

The aim of this study is to examine the tracking performance and tracking error (TE) of New Zealand exchange traded fsunds (ETFs).

Abstract

Purpose

The aim of this study is to examine the tracking performance and tracking error (TE) of New Zealand exchange traded fsunds (ETFs).

Design/methodology/approach

The authors use regression methods and cointegration analysis to examine tracking performance. Multivariate regressions are used to examine the determinants of TE.

Findings

At the daily frequency, the authors observe that the ETFs have substantially different exposures to their underlying indexes from what they should be, which is confirmed by cointegration analysis. At the monthly frequency, tracking performance improves but still shows significant differences between the ETF and its underlying index. When the authors examine the TEs of the ETFs, the authors observe that these are substantial and that there is considerable variation in TE. Regression analysis shows that both characteristics of the ETF and the constituents of the index the ETF tracks, as well as the volatility of the underlying benchmark are determinants of the TE of the ETFs.

Originality/value

This is the first study to examine New Zealand-based ETFs. The findings contribute to understanding the performance of these ETFs and are of relevance to academics, investors and the ETF provider.

Details

Pacific Accounting Review, vol. 29 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Content available
Article
Publication date: 10 November 2014

Bart Frijns, Aaron Gilbert and Alireza Tourani-Rad

Abstract

Details

Pacific Accounting Review, vol. 26 no. 3
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 10 November 2014

Bart 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…

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.

Details

Pacific Accounting Review, vol. 26 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Content available
Article
Publication date: 7 September 2012

Abstract

Details

Pacific Accounting Review, vol. 24 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

Content available
Article
Publication date: 16 November 2012

Abstract

Details

Pacific Accounting Review, vol. 24 no. 3
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 1 February 2016

Bart Frijns and Alireza Tourani-Rad

The aim of this paper is to construct a historical index for the New Zealand stock markets going back to 1899. From these historical returns, the authors can extract the…

Abstract

Purpose

The aim of this paper is to construct a historical index for the New Zealand stock markets going back to 1899. From these historical returns, the authors can extract the average capital gains and dividend yield. It also allows them to provide an estimate for the equity risk premium (ERP).

Design/methodology/approach

The authors collect stock-level data (prices, dividends, etc.) from quote records that are kept at the National Library in Wellington. From the stock-level data, the authors compute a value-weighted market index over the period 1899-2013.

Findings

Over the period 1899-2013, the arithmetic mean of equity returns is 10.82 per cent p.a., with a standard deviation of 20.09 per cent. The New Zealand equity market had 92 years of positive returns and 23 years of negative returns during the sample period. The 10-year government bond yield, over the entire period, has an arithmetic mean return of 5.75 per cent. The ERP, on average, is 5.07 per cent.

Originality/value

The authors collect the longest available historical data series for the New Zealand equity market. They document statistical properties as well as the long-term ERP over the entire sample period of 115 years and several subperiods. The ERP is a key input in corporate/project valuation.

Details

Pacific Accounting Review, vol. 28 no. 1
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 26 September 2008

Rob Beaumont, Marco van Daele, Bart Frijns, Thorsten Lehnert and Aline Muller

The purpose of this paper is to investigate the impact of individual investor sentiment on the return process and conditional volatility of three main US market indices…

Abstract

Purpose

The purpose of this paper is to investigate the impact of individual investor sentiment on the return process and conditional volatility of three main US market indices (Dow Jones Industrial Average, S&P500 and Nasdaq100). Individual investor sentiment is measured by aggregate money flows in and out of domestically oriented US mutual funds.

Design/methodology/approach

A generalised autoregressive conditional heteroscedasticity (GARCH)‐in‐mean specification is used, where our measure for individual sentiment enters the mean and conditional volatility equation.

Findings

For a sample period of six years (February 1998 until December 2004), we find that sentiment has a significant and asymmetric impact on volatility, increasing it more when sentiment is bearish. Using terminology of De Long et al., we find evidence for the “hold more” effect, which states that when noise traders hold more of the asset, they also see their returns increase, and the “create space” effect, which states that noise traders are rewarded for the additional risk they generate themselves.

Originality/value

In contrast to existing studies using explicit measures of market sentiment on low sampling frequencies, the use of daily mutual flow data offers a unique picture on investors' portfolio rebalancing and trading behavior. We propose an integrated framework that jointly tests for the effects of mutual fund flows on stock return and conditional volatility.

Details

Managerial Finance, vol. 34 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 March 2006

Bart Frijns, Farshid Navissi, Alireza Tourani‐Rad and Lana Tsai

This paper aims to investigate whether completed vs withdrawn equity offerings result in different stock price performance prior to announcement and between announcement…

Abstract

Purpose

This paper aims to investigate whether completed vs withdrawn equity offerings result in different stock price performance prior to announcement and between announcement and withdrawal or completion.

Design/methodology/approach

Investigates stock price performance prior to equity offerings announcements and between the announcement and actual completion or withdrawal. Stock price performance is measured by cumulative abnormal returns (CARs).

Findings

It was found that stock price performance is strong only for firms that later complete the offerings. Firms that withdraw their offerings have poor stock price performance even before the announcement. Additionally, it was found that stock price performance for both the completed and the withdrawn offerings is poor after the announcement. Contrasting with prior research, the results show that firms complete their equity offerings, even though their stock price performance deteriorates. The fact that this deterioration is significantly smaller (approximately one‐third) than that of withdrawn offerings indicates that there is an acceptable level of deterioration that firms tolerate.

Originality/value

The paper evaluates short‐run stock price performance for a number of firms in the period 1984‐2000.

Details

Managerial Finance, vol. 32 no. 3
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 3 August 2015

Bart Frijns and Alireza Tourani-Rad

– This paper aims to investigate the risk-adjusted performance of the KiwiSaver Growth funds for the period 2007-2013 in New Zealand.

Abstract

Purpose

This paper aims to investigate the risk-adjusted performance of the KiwiSaver Growth funds for the period 2007-2013 in New Zealand.

Design/methodology/approach

Performance attribution regressions are used to measure risk-adjusted performance of KiwiSaver funds.

Findings

This paper found that there is no evidence of systematic risk-adjusted outperformance of KiwiSaver Growth funds, and in several cases, there is evidence of significant underperformance. This paper further reports substantial variation in the amount of risk-taking, and local and international stock market exposure of KiwiSaver Growth funds.

Originality/value

KiwiSaver is becoming an increasingly important investment vehicle for many New Zealanders saving for retirement. This is the first paper that considers the performance of KiwiSaver funds.

Details

Pacific Accounting Review, vol. 27 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

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