http://dspace.cityu.edu.hk:80/handle/2031/709 2013-06-14T13:39:49Z http://dspace.cityu.edu.hk:80/handle/2031/6961 Title: Two essays on financing and value of R&D : evidence from global markets Authors: Zhuang, Ziyin (莊子寅) Abstract: This thesis involves two essays on the financing and the value of R&D. The first essay extends previous literatures of financial constraints on R&D to a global context. Inherent in its nature of lacking collateral value, R&D is arguably susceptible to financing constraints. Existing literature on whether financing frictions limit R&D, however, is not clear for non-U.S. firms. We analyze fiscal year end accounting data of 4,118 stocks from 16 developed countries and 5 emerging markets over the 1995 to 2007 period and find international evidence that financing constraints matter for R&D after controlling for external equity finance and change in cash reserves. The positive link between R&D and financial factors is stronger in developed countries than in developing countries, and is strongest in G6 countries except for Canada. We also find statistically significant evidence in developing countries such as India and Taiwan. The evidence points to the conclusion that efficient access to finance drives R&D investments and in turn promotes economic growth. Our micro level findings on young and mature firms in both developed and developing countries provide greater insight of the importance of equity finance and shed light on public policy objectives for many countries. The second essay fills a gap in existing literatures on the value shareholders place on R&D and how that value differs across countries. We aim to examine the cross-sectional variation in the marginal value of R&D that arises from differences in corporate financial policy. We analyze fiscal year annual excess return and accounting data of 7,444 stocks from 16 developed countries and 6 emerging markets over the 1995 to 2007 period and find international evidence that there is a positive relationship between excess stock return and change in R&D, and that marginal value of cash declines with larger R&D investments and higher leverage. Moreover, the mean marginal value of R&D is greater than one for developed countries as a whole. This number is a quantitative measure of the importance of R&D to corporate future earnings in the eyes of shareholders. The evidence is consistent with the claim well documented in previous literature that R&D investment is one of major driving forces of economic innovation and growth. Our findings corroborate the importance of R&D to economic growth from a market perspective. Notes: CityU Call Number: HC79.R4 Z45 2012; vi, 156 leaves 30 cm.; Thesis (Ph.D.)--City University of Hong Kong, 2012.; Includes bibliographical references (leaves 80-95) 2012-01-01T00:00:00Z http://dspace.cityu.edu.hk:80/handle/2031/6483 Title: Market reaction to monetary operation changes : the behavior of Hong Kong interest rates Authors: Zhu, Weiting ( 朱偉庭) Abstract: This paper examines the impact of Hong Kong's monetary policy, especially focusing on the HKMA's decision of their operation in the foreign exchange market and the response of money market interest rate. We find that the change of HKMA’s forecast for future operation in the foreign exchange market indeed impacts the interest rates. Second, the market reacts for this change in one day and this impact does not persist in the future. Last but not least, the reactions of interest rates for different maturities are different. The middle term interest rates have the greatest responses, and the short term interest rates have smallest impacts. Notes: CityU Call Number: HG1302 .Z48 2011; iii, 49 leaves : ill. 30 cm.; Thesis (M.Phil.)--City University of Hong Kong, 2011.; Includes bibliographical references (leaves 31-33) 2011-01-01T00:00:00Z http://dspace.cityu.edu.hk:80/handle/2031/6482 Title: Three essays on market-based forecasting models Authors: Wu, Liang ( 武亮) Abstract: This thesis consists of three essays, all of which attempt to explore the forecast ability of market expectations on future macroeconomic variables. To obtain pure market view of the future economy, innovative methods are employed to filter out unwanted noises embedded in the observed data. Conventional models including time series models and theory-based economic models are used as benchmarks for out-of-sample comparison. In the first essay, we analyze the ability of Federal funds futures in predicting the monetary policy stance of the FOMC. Gürkaynak et al. (2007) showed that Federal funds futures provide superior forecasts than other financial instruments and sophisticated time series models out to six months, but the expected monetary policy rate in their analysis is contaminated by both the FOMC scheduled meeting date and risk premia embedded in Federal funds futures. We provide two approaches to clean the noise. The first one is to correct for the impacts of the FOMC scheduled meeting date while the second approach is to correct for risk premia in futures contracts. We show that our adjusted expectation of the Federal funds rate does a better job in predicting the future monetary policy rate than directly using Fed funds futures. Our approaches also beat the Taylor rule model (1993) with real time data. Our analysis suggests that participants in the Federal Funds futures market make accurate predictions of Federal funds rate. In essay two, we attempt to identify the business cycle peak turning point of the 2007-2008 U.S. recession using Google Trends data. Official recession announcements by the NBER always come with substantial lags after recessions occur. Econometric models such as the multivariate Markov-Switching model by Chauvet and Hamilton (2005) or the Harding-Pagan Algorithm (2002) made significant improvements over the NBER announcements in terms of timing, but the signals are still 5-6 months later than the actual turning point. We found that the "recession" search query index in Google experienced a significant jump in December 2007 at the onset (the turning point) of the 2007-2008 U.S. recession. Also, we found that the "recession" and "mortgage" search query index have abnormally high correlation between December 2007 and February 2008, whereas this correlation was low in other periods. The "recession" search volume is made up of online activities of web surfers who are also participants of the economy. Our study suggests that a large group of people had already started to worry about the economy at the time recession occurred. Their discernment is more prompt than econometric models and the NBER. In essay three, we attempt to predict China's Copper and Aluminum net imports using the commodity futures contracts traded in SHFE and LME, respectively. Copper and Aluminum are two most important based metals for industrial production and they have special meanings for China economy due to the economic growth structure of China. We show that the monthly average futures spreads for Copper and Aluminum have significant predictive power for net imports of these two commodities in the subsequent two months. The predictability can be attributed to the commodity arbitrageurs taking advantages of profitable opportunities when the futures prices spread in SHFE and LME exceeds the no-arbitrage band. SOE related parties are particularly active in carrying out commodity arbitrage as it requires credit approval from commercial banks and the possession of large commodity inventory in stock, both conditions are extremely difficult to be met by private retail investors in China. Notes: CityU Call Number: HB3730 .W8 2011; v, 153 leaves : ill. 30 cm.; Thesis (Ph.D.)--City University of Hong Kong, 2011.; Includes bibliographical references (leaves 134-153) 2011-01-01T00:00:00Z http://dspace.cityu.edu.hk:80/handle/2031/6481 Title: Return anomalies : insights from international stock markets Authors: Luo, Miao ( 羅淼) Abstract: This thesis work examines the return anomalies in the international stock markets. It has two features: (1) it includes a comprehensive range of emerging markets in addition to developed markets, and (2) it studies various anomaly variables simultaneously. This study mainly investigates three issues: whether return anomalies exist internationally, how to understand anomaly returns associated with investments, and what factors drive the international stock markets. To conclude, return anomalies associated with B/M, C/P, E/P, size, momentum, and accruals are observed pervasively. The relation between annual ROA and subsequent stock returns is dependent on size. Issue effect is more attributable to small stocks. Total asset growth effect is significant in developed markets and is stronger among small stocks, which is mainly due to low returns from big stocks with high investments and high returns from small stock with low investments. The findings pose challenges to behavioral explanations but support the rational based reasoning. Three parsimonious international three factor models with factors associated with "market, B/M, and size", "market, C/P, and momentum" and "market, C/P, and accruals" perform similarly on various double-sorted portfolios, although the latter two factor sets perform a bit better. Notes: CityU Call Number: HG4551 .L85 2011; v, 153 leaves : ill. (some col.) 30 cm.; Thesis (Ph.D.)--City University of Hong Kong, 2011.; Includes bibliographical references (leaves 92-97) 2011-01-01T00:00:00Z