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The purpose of this paper is to examine the relation between gold return and stock market return and whether its relation changes in times of consecutive negative market returns for an emerging market, Malaysia.

The paper applies the autoregressive distributed model to link gold returns to stock returns with TGARCH/EGARCH error specification using daily data from August 1, 2001 to March 31, 2010, a total of 2,261 observations.

A significant positive but low correlation is found between gold and once‐lagged stock returns. Moreover, consecutive negative market returns do not seem to intensify the co‐movement between the gold and stock markets as normally documented among national stock markets in times of financial turbulences. Indeed, there is some evidence that the gold market surges when faced with consecutive market declines.

Based on these results, there are potential benefits of gold investment during periods of stock market slumps. The findings should prove useful for designing financial investment portfolios.

The paper evaluates the role of gold from a domestic perspective, which should be more relevant to domestic investors in guarding against recurring heightened stock market risk.

The purpose of this paper is to investigate the forecasting power of the conditional relationship between beta and international stock returns.

Using the market model, the individual betas for each country in the sample are estimated by ordinary least square. The conditional relation between beta and return is tested by estimating cross‐sectional regressions for each month (i.e. 343 cross‐sectional regressions). Mean value of coefficients and t‐statistics (one tail) are computed to test whether the mean values of coefficients are significantly positive and negative. Whether there is a systematic relationship between the bull market and the bear market is also tested.

Overall, no support of the model was found. Although positive, there is insignificant relationship between beta of current period when excess market return is positive with next period stock return. Moreover, although negative, there was insignificant relationship between beta of current period when excess market return in negative with next period stock return. Similar results were found when the sample was divided into January and non‐January months.

This contribution is to test the validity of conditional relationship between beta and stock returns in international setting by considering the effect of current period up‐ and down‐markets on the next period stock return. If the conditional version of capital asset pricing model (CAPM) holds, there must be a consistent result, i.e. similar to those obtained by the studies using contemporaneous relationship. It is important to perform such tests on the conditional version of CAPM since an ex post state dependent model may not be used as a forecasting model.

The purpose of this paper is to examine the volatility of daily returns in a sample of developed and emerging equity markets at different time scales through wavelet decomposition. Such information is vital for international investors who have different time horizons for their investment decisions and trading strategies.

The wavelet technique used here allows the return series to be viewed at different frequency by decomposing the series into different time horizons known as time scales. The decomposed return series enable investigation of return variability at different return intervals.

In an analysis at different time scales, there is no evidence to suggest that the return dynamics of developed and emerging markets are different. In both types of markets, return variance is time scale dependent, satisfying a pure power law process, and the variability in returns is more likely to be due to the dynamics at the lower time scales. While emerging markets generally exhibit a higher level of volatility, the relative contribution from each time scale is quite similar to that of the developed markets.

The difference in the return dynamics between emerging and developed markets is observed at the lowest time scale. This is an indication that differences in the return dynamics between the two types of markets may be more likely in the short term (high frequency) rather than in the long term. A plausible reason for this is speculative trading. Such information is vital for international investors who have different time horizons for their investment decisions and trading strategies.

Aims to examine the currency impact on return, risk and market correlations from the perspective of both dollar and non‐dollar‐based investments.

Monthly data on six stock index series and exchange rates from Financial Times Sources are used, covering the period 1988‐1997.

Finds that the impact of exchange rate on returns measured in the investor's currency is generally negative for all investor groups, and it raises return volatility above the level of local markets most of the time. The correlation of returns is, however, lower than that of the local returns.

The study reports little evidence of a forward hedge improving the return for investors, but the hedging does reduce volatility for four out of six investors.

Whereas past studies examining market correlations, the risk‐return outcome of international investment, and/or the impact of exchange rate movement on the risk‐return out come, have generally used dollar‐based investment, this paper uses both dollar‐ and non‐dollar‐based investments to determine whether these are any major differences in the way exchange rate affects investment outcomes and market correlations.

This study examines the fund‐level correlates of return and share price discount or premium for the closed end funds (CEFs) investing in emerging and developed capital markets. It also compares the performance of CEFs investing in emerging markets with similar types of funds that invested in the developed markets, especially significant in light of recent economic crises experienced by a number of such emerging economies and their ripple (contagion) effects felt in other emerging or developed capital markets. Lastly, as emerging markets constitute a wide array of countries with very different economic records, this paper looks into the performance of emerging markets CEFs by region as well as the performance of single‐country versus regional funds. Findings confirmed results of many studies of domestic and international open‐ or closed‐end funds on determinants of return and share price discount or premium. Emerging capital markets also continued to provide an outlet for international investors to improve their portfolio return despite significant volatility that surrounded them during the study period. Lastly, this study did not find any compelling evidence for consistent superior performance by CEFs investing in any particular region or country within the emerging markets.

The lack of portfolio‐based property indices in European property markets has led researchers to consider the use of notional property indices to determine the risk and return rewards of investing in these markets. Owing to the computation assumptions underlying notional indices, in particular their inability to capture the prevalent lease structure in a market, they are unsuitable for this purpose, and investors devising European investment strategies around them need to be wary. This paper demonstrates the differences in property investment return delivery between notional and portfolio‐based indices, concentrating particularly on lease structures, and utilises data from the UK for this purpose. German lease structures are then considered in this context.

Using the next-day and next-week returns of stocks in the Korean market, we examine the association of option volume ratios – i.e. the option-to-stock (O/S) ratio, which is the total volume of put options and call options scaled by total underlying equity volume, and the put-call (P/C) ratio, which is the put volume scaled by total put and call volume – with future returns. We find that O/S ratios are positively related to future returns, but P/C ratios have no significant association with returns. We calculate individual, institutional, and foreign investors’ option ratios to determine which ratios are significantly related to future returns and find that, for all investors, higher O/S ratios predict higher future returns. The predictability of P/C depends on the investors: institutional and individual investors’ P/C ratios are not related to returns, but foreign P/C predicts negative next-day returns. For net-buying O/S ratios, institutional net-buying put-to-stock ratios consistently predict negative future returns. Institutions’ buying and selling put ratios also predict returns. In short, institutional put-to-share ratios predict future returns when we use various option ratios, but individual option ratios do not.

This study presents evidence on the relations of stock market performance and industrial production growth for a group of 20 industrial markets. Evidence supports the notion that an increase in stock returns or a rise in the market value of stocks contributes positively to industrial production growth. Evidence suggests that stock market risk has a significantly negative effect on production growth for advanced markets. The Granger test finds a unidirectional causality running from stock returns or stock volatility to industrial growth. However, the United States shows a bilateral causality between stock volatility and industrial production growth.

This chapter compares the returns performance of the Islamic mutual funds (IMFs) with that of conventional mutual fund (CMF). It covers both pre- and post-ASEAN financial crisis and global financial crisis data for an overall sample of 128 IMFs and 350 CMFs. It also covers two market cycles from January 1995 to December 1998 and from January 2005 to December 2008.

The net raw returns of all expenses and market risk-adjusted return performance measurements are employed to examine the portfolios’ performance, and to capture the difference movement of the funds based on the particular market trend.

We observed that on average both portfolios outperform the market return. In general, average returns performance of IMFs is not better than the CMFs during bullish and bearish market trend periods. However, the empirical results based on time-series regression model reveal that the IMFs portfolio slightly outperform the conventional counterparts.

The study would benefit the investors and market players to consider IMFs in their portfolio selection, if in future such an expected event may occur.

The study provides insights to regulators and market players who plan to access investment plan in an emerging market, particularly in Malaysia.

Purpose – This research pinpoints the limitations of conventional models for evaluating the performance of hedge funds and attempts to provide a new framework for modeling the dynamics of risk structures of hedge funds.

Methodology/approach – This chapter aims to explore how the systematic risk exposures of hedge funds vary over time and depend on exogenous variables that managers are supposed to use in their dynamic investment strategies. To achieve this, we used a Bayesian time-varying CAPM-based beta model within a state space technology.

Findings – The results showed that the volatility, term spread rate, and shocks in liquidity influence significantly on the time variation of hedge funds. Besides, the dynamics of beta indicates that the transmission channels of systematic risk are mainly the leverage levels of hedge funds and liquidity shocks.

Originality/value of chapter – These results are original because they help to explain how expected and unexpected hedge fund returns are correlated with the systematic risk factors via the beta dynamics.