Annals of Financial Economics

The classical capital asset pricing model postulates a linear relationship between stock returns and stock risks. However, a number of subsequent empirical studies have revealed some anomalies in this relationship, especially for firms with small size and high book-to-market values. A possible explanation for the anomalies is the existence of threshold effects in the proxies of stock risks. However, conventional threshold models only allow for one threshold variable, which limits their applicability in this context. In this paper, we address this issue by applying the econometric technique developed by Bai et al. (2012). We estimate the joint threshold effects of firm size and book-to-market equity ratio on the stock returns using a sample of 5,271 US firms. The test results yield clear evidence for the existence of threshold effects in both firm features. We find that abnormal returns exist when the firm size falls below 52.04 million USD and the book-to-market ratio exceeds 0.4085.

This study provides an overview of the characteristics of stockholdings of foreign and local investors in terms of firm sizes, price levels and liquidity. There are four key findings. First, the IDX is a highly concentrated market and foreign investors dominate the ownership of high market capitalization stocks. Second, foreign investors trade less frequently than domestic counterparts. Third, small, illiquid lower priced stocks dominate this market with domestic individual investors holding most of the stocks with these characteristics. Finally, the paper profits of foreign institutional and domestic individual investors are found to be higher than those of domestic institutional investors.

This paper is amongst the first to investigate weak-form efficiency of the most developed (G-20) countries in the world. It also measures the impact of the 2007 financial crisis on the stock markets of these countries, in terms of their efficiency. Serial correlation test, ADF unit root test, Lo and MacKinlay (1988) variance ratio test, Chow and Denning (1993) RWH test and Wrights' 2000 ranks and signs based multiple variance ratio test were utilized to carry out this analysis. The entire study period was divided into a pre-crisis period (January 1, 2005 – August 8, 2007) and a during crisis period (August 9, 2007 – Deccember 31, 2011). Strong contemporaneous effects emerged across all international markets (except Saudi Arabia) as a consequence of the 2007 crisis. This may be due to increased international intra-day activity across the world markets. It was concluded that the "Samuelson dictum," which states that "while individual stocks are efficient, the market index is inefficient," seems to hold good on a global level by analogy. This is evident on the premise that, on the whole the 2007 crisis reduced return and increased volatility, even though individual markets became more efficient. The most robust result from the analysis is that most of the individual markets are weak-form efficient. Following the crisis of 2007, the methodology used indicates that on the whole, the market efficiency of individual stock markets improved.

Hence, during the pre-crisis, volatility was low but heteroskedastic. However, during the period of the crisis, volatility was high but homoscedastic. The heightened volatility and low return that are a consequence of the crisis coupled with improved market efficiency, due to market vigil and control, ensure that abnormal returns and persistent arbitrage possibilities are wiped out. This appears to be a paradox of a crisis.

This study examines the causal link between bank efficiency and bank competition. The study estimates bank competition with the Lerner index and bank cost efficiency with data envelopment analysis using annual data over the period 2001–2010. Using system generalized method of moments (system GMM) estimator, the results suggest that bank cost efficiency positively Granger-causes market power and hence causality negatively runs from bank cost efficiency to bank competition indicating that bank cost efficiency precedes bank competition. However, the reverse causality running from bank competition to bank cost efficiency is not supported.

Experts possess knowledge and information that are not publicly available. The paper is concerned with forecasting academic journal quality and research impact using a survey of international experts from a national project on ranking academic finance journals in Taiwan. A comparison is made with publicly available bibliometric data, namely the Thomson Reuters ISI Web of Science citations database (hereafter ISI) for the Business–Finance (hereafter Finance) category. The paper analyses the leading international journals in Finance using expert scores and quantifiable Research Assessment Measures (RAMs), and highlights the similarities and differences in the expert scores and alternative RAMs, where the RAMs are based on alternative transformations of citations taken from the ISI database. Alternative RAMs may be calculated annually or updated daily to answer the perennial questions as to When, Where and How (frequently) published papers are cited (see Chang et al., 2011a,b,c). The RAMs include the most widely used RAM, namely the classic 2-year impact factor including journal self citations (2YIF), 2-year impact factor excluding journal self citations (2YIF^*), 5-year impact factor including journal self citations (5YIF), Immediacy (or zero-year impact factor (0YIF)), Eigenfactor, Article Influence, C3PO (Citation Performance per Paper Online), h-index, PI-BETA (Papers Ignored — By even the Authors), 2-year Self-citation Threshold Approval Ratings (2Y-STAR), Historical Self-citation Threshold Approval Ratings (H-STAR), Impact Factor Inflation (IFI), and Cited Article Influence (CAI). As data are not available for 5YIF, Article Influence and CAI for 13 of the leading 34 journals considered, 10 RAMs are analysed for 21 highly-cited journals in Finance. The harmonic mean of the ranks of the 10 RAMs for the 34 highly-cited journals are also presented. It is shown that emphasizing the 2-year impact factor of a journal, which partly answers the question as to When published papers are cited, to the exclusion of other informative RAMs, which answer Where and How (frequently) published papers are cited, can lead to a distorted evaluation of journal impact and influence relative to the Harmonic Mean rankings. A linear regression model is used to forecast expert scores on the basis of RAMs that capture journal impact, journal policy, the number of high quality papers, and quantitative information about a journal. The robustness of the rankings is also analyzed.