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The paper aims to empirically examine the forecasting ability of US-based world mutual funds during the 2001-2007 time period.

World mutual funds are treated as portfolios composed of two sets of securities, i.e. domestic and foreign and two methodologies are used to measure forecasting ability: domestic differential exposure and assertion rates. Domestic differential exposure is based on the difference between each fund exposure to the domestic market when it is the outperforming market and the portfolio exposure to the domestic market when the foreign market is outperforming. Similar to the differential exposure, assertion rates measure the ability of fund managers to pick, on a monthly basis, an outperforming market.

Although changing economic conditions in both domestic and foreign markets provided plenty of opportunities to outperform market benchmarks, the results of two empirical tests reveal that fund managers fail to effectively manage their exposure to both markets. Some evidence of good forecasting ability is found when funds are examined on a yearly basis.

This study provides the first implementation of both methodologies: domestic differential exposure and assertion rates, to examine global funds.

The purpose of this paper is to provide some insights into the exchange rate exposure of Australian stock returns.

Using a dynamic econometric approach that allows for both asymmetry and time‐varying risk exposures in both the exchange rate variable and the market variable, a large sample of Australian firms were tested over the period of January 2001 and December 2005. The data were analysed using three different classification methods, forming portfolios according to industry sector, size deciles, and censoring deciles.

Although the evidence of exchange rate exposure is limited across the sample of industries, the following were found: a time‐varying asymmetric effect primarily in the utilities sector, time‐varying exposure in the materials and energy sectors, and an asymmetric effect in the technology sector. Further, some time‐varying asymmetric exchange rate exposure was found across most size and censoring deciles and also substantial evidence of a positive asymmetric effect in the market beta across all three classification methods.

This approach varies from previous studies in this area that only allow for asymmetry and time variation in exchange rate exposures. The paper also examines the Australian stock market, a market which has not been extensively tested in this area of empirical research.

It has been increasingly recognized that exchange rate changes affect the cash flow and the value of firms. Existing studies on exchange rate exposure do not have much success in finding significant exposure, and the failure to find this relationship empirically has been termed “exposure puzzle”. Motivated by the limited success in detecting significant exchange rate exposure in the extant literature, China's exchange rate regime reform in 2005, the increasing role of China's stock market played in the global financial market and its attractiveness in international portfolio diversification, the purpose of this paper is to resolve the so-called “exposure puzzle” and thus make a contribution to the literature by investigating whether the renminbi (RMB) exchange rate movements have any significant impact on China's stock market from the perspective of US investors who may want to diversify their portfolios with Chinese stocks.

Since previous studies which rely heavily on the standard Ordinary Least Squares (OLS) or seemingly unrelated regression (SUR) method of estimation with the assumption of constant variance of firm's or industry's returns do not have much success in detecting significant exchange rate exposure, in this study, we apply an asymmetric GARCH(1,1) with generalized error distribution (GED) model which takes conditional heteroscedasticity and leptokurtosis of asset returns into account in the estimation of first- and second-moment exchange rate exposure.

Using weekly data over the period August 10, 2005–January 1, 2020 on 40 Chinese sector stock returns, the authors find strong evidence of first-moment exchange rate exposure. In particular, 65% (26 out of 40) of sectors examined have significant first-moment exposures and 73.08% (19 out of 26) of these significant first-moment exposures are asymmetric. For the second-moment exchange rate exposures, they are less frequently detected with 20% (8 out of 40) significant cases. These results are robust to whether an unorthogonalized or orthogonalized bilateral US dollar (USD)/Chinese Yuan (CNY) exchange rate is used in the estimation.

Because this study concerns only with whether exchange rate movements affect ex post returns as opposed to expected (ex ante) returns, and given the significant exposures with respect to different risk factors found in the study, it is interesting to see if any of these risk factors commands a risk premium. In other words, a natural extension of this study is to test whether any of these risk factors is priced in China's stock market.

The findings of the study have interesting implications for US investors who would like to diversify their portfolios with Chinese stocks and are concerned about whether the unexpected movements in CNY will affect their portfolio returns in addition to its local and world market risk exposures.

The study extends previous research on the first- and second-moment exchange rate exposure of Chinese stock returns by utilizing an asymmetric GARCH(1,1) with generalized error distribution (GED) model, which has not been fully exploited in the literature.

The purpose of this paper is to examine the level of foreign exchange exposure of listed nonfinancial firms in South Africa. The study spans the period January 2002 and November 2015. Foreign exchange risk exposure is estimated in relation to the exchange rate of the South African Rand relative to the US$, the Euro, the British Pound and the trade-weighted exchange rate index.

The study is based on the augmented-market model of Jorion (1990). The Jorion (1990) is a capital asset pricing model-inspired framework which models share returns as a function of the return on the market index and changes in the exchange rate factor. The market risk factor is meant to discount the effect of macroeconomic factors on share returns, thus isolating the foreign exchange risk factor. In addition, the study further added the size, value, momentum, investment and profitability risk factors in line with the Fama–French three-factor model, Carhart four-factor model and the Fama–French five-factor model to account for the fact that equity capital markets in countries such as South Africa are known to be partially segmented.

Foreign exchange risk exposure levels were estimated at more than 40% for all the proxy currencies on the basis of the standard augmented market model. However, after controlling for idiosyncratic factors, through the application of the Fama–French three-factor model, the Carhart four-factor model and the Fama–French five-factor model, exposure levels were found to range between 6.5 and 12%.

These results indicate the importance of controlling for the effects of idiosyncratic facto0rs in the estimation of foreign exchange risk exposure in the context of emerging markets of Sub-Saharan Africa (SSA).

This is the first study to apply the Fama–French three-factor model, Carhart four-factor model and the Fama–French five-factor model in the estimation of foreign exchange exposure of nonfinancial firms in the context of a SSA country. These results indicate the importance of controlling for the effects of idiosyncratic factors in the estimation of foreign exchange risk exposure in the context of emerging markets.

The purpose of this paper is to empirically analyze the “market-neutral” characteristics of the market-neutral strategy hedge funds in Chinese A-share market.

The analyses in the paper are conducted to study the market-neutral characteristics by means of index analysis, correlation analysis, β-neutral analysis and the three-factor model analysis.

The results show that the performance advantage of the market-neutral strategy hedge funds is obvious. Most market-neutral strategy funds are exposed to market risks and the α strategy funds also have obvious style factor exposure; strictly speaking, all of the market-neutral strategies have not reached the “market-neutral” requirements. This paper also finds that Chinese trading restrictions on stock index futures in September 2015 have a significant impact on Chinese market-neutral strategy hedge funds.

The conclusion of this paper has a certain reference value for understanding the risk characteristics and possible problems of hedge funds in emerging markets, and also has important reference value for investors.

The issue of exposure management, a significant subset of international financial management, is closely intertwined with the notions of foreign exchange risk and exchange market efficiency. Since value is a function of risk, that makes an understanding of these notions germane to those who seek value in global markets. This study finds earlier attempts specifying exchange market efficiency inadequate and those dealing with foreign exchange risk deficient in generating prescriptions for exposure management. The paper focuses on the notion of the market hierarchy (goods, financial and foreign exchange) and the inter‐relationships among the markets. It helps the reader understand the theoretical constructs underlying prevailing schemes for foreign exchange exposure management. Most importantly, it identifies situations under which exposure management is relevant and potentially rewarding. It also points out circumstances when existing dictates for management will yield benefits only by accident. The paper offers some specific alternative suggestions to guide managers in making informed and logical decisions.

Using capital asset pricing model (CAPM) and the Z-risk index based on weekly data, this study aims to estimate yearly unsystematic, total, three systematic and insolvency risks in the Gulf Cooperation Council (GCC) countries for the period 2010–2018. The findings of CAPM show positive systematic market risk exposure in all GCC countries for all years, which support the contribution of stock markets to bank prices and returns. The mixed signs of systematic interest rate and exchange rate risks in GCC countries provide hedging opportunities, diversification strategies and regional cooperation, which help risk managers to hedge and stabilize their portfolios against interest rate and exchange rate fluctuations. Therefore, it is necessary that managers and policymakers develop a monitoring system on factors affecting bank insolvency risks to avoid bankruptcies and insolvencies.

This study uses the three-factor CAPM and Z-risk index to measure six types of risks. The CAPM uses market information to estimate the sensitivity of banks to the fluctuations of equity markets, debt markets and foreign exchange markets. Sharpe (1964), Lintner (1965) and Treynor (1965) developed a single-factor CAPM and the coefficient of the model was called systematic market risk. The single-factor CAPM highlights stock markets as the only non-diversifiable source of systematic risks, whereas Stone (1974) and Jorion (1990) highlighted interest rate and exchange rate fluctuations as the other types of non-diversifiable systematic risks. The following functional form in equation (1) estimates five types of risks using CAPM.

The findings of CAPM show positive systematic market risk exposure in all GCC countries for all years, which support the contribution of stock markets to bank prices and returns based on CAPM theory. The mixed signs of systematic interest rate and exchange rate risks in GCC countries support hedging opportunities and diversification strategies which may help risk managers to hedge and stabilize their portfolios against the fluctuations of interest rate and exchange rate. Although, this policy may decrease the profits of banking sectors but at the same time it would stabilize the portfolios and prevent bankruptcies and big losses because of the fluctuations of interest rate. Moreover, a bank has a better chance to have more liquidity position during financial crises because of the diversifications into different regional markets.

Therefore, this study contributes to the existing literature by using risk measurement by a three-factor CAPM and the Z-risk index as discussed further in methodology.

It is necessary that managers and policymakers develop a monitoring system on factors affecting bank insolvency risks to avoid bankruptcies and insolvencies.

Sport events have become an important component of many city marketing plans. Media coverage is believed to increase awareness of the host city. This study reports the results of a content analysis of 2002 NCAA Women's Final Four telecasts. Event logos provide the most exposure for the host city, with little obtained via city images. Icons were found to effectively differentiate the city from competitors. Practical implications and future research extensions are suggested.

The purpose of this paper is to investigate the effects of information asymmetry (between the realized return and the expected return) on market timing in the mutual fund industry.

For the purpose, the authors use a panel of 1,488 active open-end mutual funds for the period 2004-2013. The authors use fund-specific time-dynamic betas. The information asymmetry is measured as the standard deviation of idiosyncratic risk. The data set is decomposed into five market fundamentals in order to emphasis the policy implications of the findings with respect to: equity, fixed income, allocation, alternative, and tax-preferred mutual funds. The empirical evidence is based on endogeneity-robust difference and system generalized method of moments.

The following findings are established. First, the information asymmetry broadly follows the same trend as volatility, with a higher sensitivity to market risk exposure. Second, fund managers tend to raise (cutback) their risk exposure in time of high (low) market liquidity. Third, there is evidence of convergence in equity funds. The authors may, therefore, infer that equity funds with lower market risk exposure are catching-up with their counterparts with higher exposure to fluctuation in market conditions.

The paper complements the sparse literature on market timing in the mutual fund industry with time-dynamic betas, information asymmetry and an endogeneity-robust empirical approach.

This paper explores the sensitivity of Chinese stock returns to changes in trade-weighted indexes of the renminbi (RMB) and the currencies of China's trading partners from 1999 to 2003. It analyses this exposure elasticity cross-sectionally using accounting variables to proxy for size and costs of financial distress. It finds that internationally oriented Chinese companies have experienced exchange exposure particularly against the yen. It also finds that, against a trade-weighted index, there is no empirical evidence that Chinese firms are engaged in hedging activities. However, when exposures are measured in yen terms, it finds that Chinese firms, particularly exporters, engage in active currency hedging.