Review of Pacific Basin Financial Markets and Policies

The main purpose of this paper is to investigate macroeconomic variables that are predictive of banking crisis. We focus on selecting variables that have high predictive power to discriminate between two groups of countries: the sound and the distressed. We consider a sample of 50 emerging market and developing countries during 1990–2005 time period, and apply generalized estimating equations as well as univariate, bivariate and trivariate transvariation analysis to choose the variables that have high predictive and discriminative powers to separate the distressed countries from the sound countries. In order to compare the predictive performance of these selected variables, we calculate the leave one out predictive error rate for the top ranking variables with low transvariation probability using discrimination procedures. Not surprisingly the results show that countries with better macroeconomic and monetary environments and healthier banking institutions are less likely to suffer systemic banking crisis.

This study examines the relationship between initial public offering (IPO) managers' earnings management behavior during lockup (measured with discretionary accruals, DAs) and operating performance following lockup expiration (measured with operating return on assets, OPROAs). Based on a U.S. IPO sample, the results indicate that DAs during lockup are significantly higher than after lockup expiration. In addition, the reversal effect of DAs results in a negative association of DAs in lockup with post-lockup OPROAs. This negative relation is primarily concentrated in small-sized, non-venture backed, high-tech, and hot-market issued IPOs and is consistent with prior findings that such IPO firms have poorer post-issue performance. The overall evidence supports the role of managerial earnings management behavior during lockup in explaining post-IPO operating underperformance.

Due to the numerous studies of asymmetric portfolio returns, asymmetric risk measures have widely been used in risk management with extensive uses on the methodology of n-degree lower partial moment (LPM). Unlike the initial studies, we use the risk measure of n-degree maximum drawdown, which is a special case of n-degree LPM, to investigate the reduction impacts of n-degree maximum drawdown risk on risk tolerances generated by management styles from US equity-based mutual funds. We found that skewness does not impose any significant problems on the model of n-degree maximum drawdown. Thus, the tolerance effect of maximum drawdown risk in the n-degree M-DRM models is a decrease in fund returns. The n-degree CM-DRM optimization model decreased investors' risk more than two conventional models. Thus, the M-DRM can be accommodated with risk-averse investors' approach. The efficient set of mean-variance choices from the investment opportunity set, as described by Markowitz, shows that the n-degree CM-DRM algorithms create this set with lower risk than other algorithms. It implies that the mean-variance opportunity set generated by the n-degree CM-DRM creates lower risk for a given return than covariance and CLPM.

This study examines the effects of oil shocks by their respective causes and of volatility spillover including leverage effects. Previous studies did not analyze oil factor by categorizing it into three components (supply shock, demand shock, and market shock) as determinants of rate of return in stock markets, a key issue in finance. Results show that oil shocks determine returns in the global stock market, bond market, foreign exchange market, and energy market, and that their effects vary by types of markets, levels of oil prices, and types of oil shocks. Second, the leverage effect of oil shocks and the spillover effect of volatility in demand shock and market shock are mostly statistically significant during periods characterized by high oil prices.

This study fills a huge gap in literature by providing some evidence on the level and determinants of bank efficiency in a Pacific island context. DEA results show that overall efficiency levels may be lower than in Australia, the home country of major banks. Dynamic GMM and panel data results show that personnel expenses and bank credit matter for efficiency, but not other bank-specific and macroeconomic factors. These insights substantially improve policy-making capacities for Fiji and other Pacific economies, including Papua New Guinea, Samoa, Tonga, Solomon Islands and Vanuatu where banking and regulatory systems and structures are highly comparable.

We examine buy and hold and a number of rebalancing strategies on a portfolio of indices that are tracked by ETFs. The indices include Barkley's treasuries and MSCI indices on emerging markets, Pacific and European markets, value funds, and growth funds. Portfolios are rebalanced using threshold schemes and compared with portfolios rebalanced using weights from different points on the Markowitz efficient frontier. We also examine portfolios that are rebalanced across monetary policy regimes. We find that portfolios rebalanced using Markowitz weights that allow for shifts in monetary policy regimes easily outperform both threshold rebalancing and buy and hold strategies.

This is the 22nd Annual Conference on Pacific Basin Finance, Economics, Accounting, and Management which was held in Aichi University, Nagoya, Japan on September 4 to September 5, 2014. The first conference was held at Rutgers University in 1993. Since then, the conference has been held in Hong Kong (1994, 1998), Taipei (1995, 1999, 2003, 2006, 2011), Bangkok (2000, 2004, 2009), Rutgers (1996, 2001, 2005, 2012), Singapore (1997, 2002), Vietnam (2007), Australia (2008, 2013) and China (2010). The program co-directors of the conference was Cheng-Few Lee, Rutgers University, USA, Yasuo Hoshino, Aichi University and the University of Tsukuba, Japan and Mohd Fazli Mohd Sam, Aichi University, Japan and University of Technical Malaysia, Melaka, Malaysia.