SCH OF ECONOMICS & FINANCE
| Researcher : Bai C |
| Project Title: | The system of incentives for managers with multitasks: theory and evidence from Chinese state-owned enterprises |
| Investigator(s): | Bai C, Xu C.L.X. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Seed Funding Programme for Basic Research |
| Start Date: | 01/2003 |
| Abstract: |
| To contribute to the general economic literature on incentive issues in firms rather than policies about firms in China. |
| Project Title: | Franchising as a nexus of incentive devices for production involving a brand name |
| Investigator(s): | Bai C |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 09/2003 |
| Completion Date: | 08/2005 |
| Abstract: |
| To provide a unified theoretical framework to understand various incentive devices in franchising, including dual distribution, minimum quality standards, asset specificity, mandatory advertising expenditures, and area development plans. |
| Project Title: | Franchising as a nexus of incentive devices for production involving a brand name |
| Investigator(s): | Bai C |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 09/2003 |
| Completion Date: | 08/2005 |
| Abstract: |
| N/A |
| List of Research Outputs |
| Bai C., Liu Q., Lu J.Z., Song F.M. and Zhang J.J., An Empirical Study on Corporate Governance and Market Valuation in China, Frontiers of Economics in China. Higher Education Press, 2006, 1: 83-111. |
| Bai C. and Xu C., Incentives for CEOs with Multitasks: Evidence from Chinese State-owned Enterprises., Journal of Comparative Economics. 2005, 33: 517-539. |
| Bai C., Lu J. and Tao Z., The Multitask Theory of State Enterprise Reform: Empirical Evidence from China, American Economic Review. 2006. |
| Bai C., The Soft Budget Constraint and China’s Financial Regulations, European Economic Association 20th Annual Congress. 2005. |
| Liu Q., Bai C. and Song F.M., Bad News Is Good News? Tunneling And Propping Evidence From China, China Research Conference. 2006. |
| Researcher : Carverhill AP |
| Project Title: | Non-parametric modelling of the term structure of interest rates, using Eurodollar futures |
| Investigator(s): | Carverhill AP |
| Department: | School of Business |
| Source(s) of Funding: | Seed Funding for New Staff |
| Start Date: | 08/2002 |
| Abstract: |
| To model the Term Structure of Interest Rates, that is the ways in which interest rates of various maturities move, and the equilibrium relationships between then, taking as data the Eurodollar futures prices, and using a non-parametric modelling approach. |
| List of Research Outputs |
| Carverhill A.P. and Chan A.W.H., Jardine Matheson Group's Delisting from the Stock Exchange of Hong Kong: Evidence on International Market Integration/Segmentation, Review of Pacific Basin Financial Markets and Policies. World Scientific Publishing Co., 2006, 9, No.2: 219-228. |
| Researcher : Chan AWH |
| Project Title: | Information contents of the end-of-day effect |
| Investigator(s): | Chan AWH, Chen N.F. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 12/2002 |
| Completion Date: | 12/2005 |
| Abstract: |
| Many studies find that stock prices systematically increase just before the end of trading day. This phenomenon, end-of-day effect, exists in many different exchanges of different countries; it does not depend on any particular trading system. This project is to empirically study this end-of-day effect. |
| List of Research Outputs |
| Carverhill A.P. and Chan A.W.H., Jardine Matheson Group's Delisting from the Stock Exchange of Hong Kong: Evidence on International Market Integration/Segmentation, Review of Pacific Basin Financial Markets and Policies. World Scientific Publishing Co., 2006, 9, No.2: 219-228. |
| Chan A.W.H., Impact from the End-of-Day Effect of Underlying Stock on the Option Trading Behavior, Global Business & Economics Anthology. USA, Business & Economics Society International, 2005, 164-175. |
| Chan A.W.H., Postgraduate Teaching Awards 2004-05 for Taught Postgraduate Programs in Hong Kong from the Faculty of Business and Economics, HKU, Faculty of Business and Economics, University of Hong Kong. 2005. |
| Chan A.W.H., Relationship between Trading at Ask Price and the End-of-Day Effect in Hong Kong Stock Exchange, Investment Management and Financial Innovations. Publishing Company, 2005, no.4: 124-136. |
| Researcher : Chan K |
| Project Title: | The value of analyst coverage to IPOs |
| Investigator(s): | Chan K |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Seed Funding Programme for Basic Research |
| Start Date: | 12/2005 |
| Abstract: |
| Firms going to the public heavily rely on investment banks for various services, such as registration, pricing, marketing, distribution, stabilization, market making and security analyst coverage. Recently, research coverage has become one of the most important components of these services that issuing firms try to secure. For example, Loughran and Ritter (2004) find that the number of underwriters has increased significantly over time and their primary role is to provide research coverage. Cliff and Denis (2004) argue that issuing firms pay for research services through underpricing. Although it is believed that the analyst coverage is crucial, there is no systematic evidence suggesting that the coverage from security analysts really provides value for firms issuing equity. For example, Womack (1996) finds a positive market reaction to the favorable recommendation from analysts. On the other hand, Michaely and Womack (1999) propose a conflict of interest hypothesis where lead underwriters issue biased reports to secure their investment banking deals, and find consistent result that initial public offerings (IPOs) with lead underwriter recommendations significantly underperform. Therefore, one objective of this project is to test whether or not research coverage from these managing underwriters provides economic benefits to IPOs. The second issue we will examine is the role of analyst coverage in issuers’ decision to switch underwriters. Krigman, Shaw, and Womack (2001) document that IPO firms switch the lead underwriter in their seasoned equity offerings (SEOs) to obtain better research coverage. This result suggests that research coverage is an important factor in determining issuer’s switching decision. However, Fernando, Gatchev and Spindt (2005) argue that the matching between issuers and underwriters are based on firms’ characteristics at time of issuance, indicating that the research coverage is not the primary reason why issuers switch underwriters. Therefore, the literature provides mixed results regarding the role of research coverage in switching underwriter, and we attempt to address this issue in this project. In this project, we will examine the two aforementioned issues by focusing on the long-run performance of IPOs for the following two reasons. First, the finance literature suggests that the market is often slow to incorporate information in stock prices and thus lead to predictable future returns (e.g., value premium (Fama and French (1992), and the underperformance of equity offerings (Loughran and Ritter (1995)). As a result, it's also likely that the market may under or over-react to analyst coverage in the long-run. Second, analyst recommendations are generally long-term in nature. A lot of clients for security analysts are mutual fund and pension fund managers. The investment horizon for these professionals is typically one year or longer. Therefore, we need to examine longer horizon to test if analyst recommendations really provide value. References Cliff, M., and Denis, D., 2004. Do IPO firms purchase analyst coverage with underpricing? Journal of Finance 59, 2871-2901. Fama, E., and French, K., 1992. The cross-section of expected returns. Journal of Finance 47, 427-466. Fernando, C., Gatchev, V., and Spindt, P., 2005. Wanna dance? How firms and underwriters choose each other. Journal of Finance 60, 2437-2469. Krigman, L., Shaw, W., and Womack, K., 2001, Why do firms switch underwriters? Journal of Financial Economics 60, 245-284. Loughran, Tim, and Jay R. Ritter, 1995, The new issue puzzle. Journal of Finance 50, 23-51. Loughran, T., and Ritter, J., 2004. Why has underpricing changed over time? Financial Management 33, 5-37. Michaely, R., and Womack, K., 1999. Conflict of interest and the credibility of underwriter analyst recommendations. Review of Financial Studies 12, 653-686. Womack, K., 1996. Do brokerage analysts’ recommendations have investment value? Journal of Finance 51, 137-167. |
| List of Research Outputs |
| Chan K., Earnings quality and stock returns, Journal of Business. 2006, 79: 1041-1082. |
| Chan K., Ikenberry D., Lee I. and Wang Y., Share repurchases as a manipulation tool: Evidence from earnings quality and stock performance , American Finance Association (AFA) meeting. 2006. |
| Chan K., Ikenberry D., Lee I. and Wang Y., Share repurchases as a manipulation tool: Evidence from earnings quality and stock performance , 13th SFM conference (Kaohsiung, Taiwan). 2005. |
| Chan K., Wu Ta-You Memorial Prize, 吳大猷紀念獎, National Science Council (Taiwan). 國科會, 2005. |
| Researcher : Chan W |
| Project Title: | Investing in reputation: strategic choices in career-building |
| Investigator(s): | Chan W, Suen WC |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 08/2002 |
| Completion Date: | 02/2006 |
| Abstract: |
| In most economics literature, the match between workers and careers is not random bu involves selection. Yet, most economists tend to treat a career as a static concept, ignoring the fact that pursuing a successful career involves strategic decisions at different stages. This project attempts to explore the dynamics of a career path. |
| Project Title: | Help and factionalism in organizations |
| Investigator(s): | Chan W |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2006 |
| Abstract: |
| N/A |
| Project Title: | Help and factionalism in organizations |
| Investigator(s): | Chan W |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 01/2006 |
| Abstract: |
| To analyse formation of factions and help behaviour within factions in competitive environments; to analyse the sorting of heterogeneous agents into different roles within factions; to explore how reward schemes can be designed to foster cooperation or coordination among agents. |
| List of Research Outputs |
| Chan W., External Recruitment and Intrafirm Mobility, Economic Inquiry. Oxford University Press, 2006, 44 (1): 169-184. |
| Researcher : Cheung MT |
| List of Research Outputs |
| Cheung M.T. and Liao Z., Recapitalization of Thailand's Banks After the 1997 Crisis: Interpretation and Critique from a Neo-institutional Perspective, Asia Pacific Business Review. Abingdon, UK, Taylor & Francis, 2005, 11: 411-427. |
| Researcher : Chiu SYW |
| Project Title: | Defending a fixed exchange rate regime through commitment strengthening |
| Investigator(s): | Chiu SYW, Chan K.S. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 09/2002 |
| Completion Date: | 08/2005 |
| Abstract: |
| To study the government's choice to strengthen its commitment to its currency peg; to evaluate the proposals of Hong Kong dollar put option or structured notes, which were made by Chan and Chen (1999) and Miller (1998) when Hong Kong was under attack in 1997-98. |
| Project Title: | The Efficiency of Renegotiation and Collusion with a Supervisor |
| Investigator(s): | Chiu SYW, Chou |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 09/2005 |
| Abstract: |
| Collusion (defined as side contracting between agents) and renegotiation (defined as side contracting between a principal and an agent) coexist in many real-world situations. For example, a union can be viewed as a form of collusion among workers, and firms usually renegotiate with their workers about their compensations or benefits when the firms face financial problems. While there are many studies considering collusion or renegotiation separately, very few take both into account. By working on a model with one principal, one agent, and one supervisor who observes the agent's private information (effort or type), we find various interesting interactions between collusion and renegotiation that have different efficiency implications, depending on the exogenous features of the collusion technologies. More specifically, although in most contracting situations the presence of either collusion or renegotiation is known to be costly to the principal, we find that the principal can never be worse off with both collusion and renegotiation than with neither of them (the second best). We have verified that this result holds under two major types of collusion under moral hazard (when the agent's effort is not observable to the principal), namely mutual insurance and effort coordination; we expect it to hold as well with report manipulation under adverse selection (when agent's marginal cost is not observable to the principal). Specifically, under moral hazard the first best can be achieved when the mutual insurance is moderately cooperative, whereas the second best can be achieved when the mutual insurance is most cooperative or least cooperative. This suggests an interior optimal strength of collusion under moral hazard. In an abstract sense, the research suggests that collusion and renegotiation have to be considered in tandem in organizational and contract design. |
| List of Research Outputs |
| Researcher : Hau TD |
| List of Research Outputs |
| Hau T.D., Congestion Charging Mechanisms for Roads, Part I - Conceptual Framework, Transportmetrica. 2006, 2: 87-116. |
| Hau T.D., Congestion Charging Mechanisms for Roads, Part II - Case Studies, Transportmetrica. 2006, 2: 117-152. |
| Researcher : Ho WYA |
| List of Research Outputs |
| Yetman J.A. and Ho W.Y.A., Shock Size, Asymmetries, and State Dependent Pricing, In: Eric Maskin, Economics Letters. Elsevier, 2006, 90(3): 440-445. |
| Researcher : Jao YC |
| Project Title: | Financial reform in Hong Kong |
| Investigator(s): | Jao YC |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Other Funding Scheme |
| Start Date: | 09/2000 |
| Abstract: |
| To examine the background, rational, and implementation of reform measures in the financial sector of Hong Kong, 1970-2000, and to evaluate their implications for Hong Kong's economic restructuring and position as an international financial centre. |
| List of Research Outputs |
| Researcher : Kang Q |
| Project Title: | A revisit of the nature of risks and the source of momentum profits |
| Investigator(s): | Kang Q, MacKinlay A.C. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 11/2003 |
| Completion Date: | 10/2005 |
| Abstract: |
| To resolve the following questions: (1) Is there a way to reconcile the differences in those contradicting arguments? If yes, what have caused the differences? (2) What are the natue of the risks and the economic source of the rewards to momentum investing? (3) What do those commonly-used Fama-French risk factors stand for? Is there any other economically-sound risk factor for the theoretical and empirical asset pricing models? |
| List of Research Outputs |
| Researcher : Lau SH |
| Project Title: | Achieving intertemporal efficiency and symmetry through intratemporal asymmetry: an analysis of turn taking |
| Investigator(s): | Lau SH, Mui V.L. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 11/2003 |
| Abstract: |
| To study when and how turn taking can be supported as an equilibrium outcome; to find a quantitative measure of the players' welfare gain in the turn-taking equilibrium, and to provide an economic interpretation of such gain; to study other welfare-improving methods (such as the use of correlated strategies, cheap talk) in addition to turn taking, and to assess the separate contribution of turn taking, cheap talk etc. in improving the players' payoffs. |
| Project Title: | The economics of turn taking |
| Investigator(s): | Lau SH, Mui V.L. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 09/2004 |
| Abstract: |
| To study when and how turn taking can be supported as an equilibrium outcome; to assess the welfare-improving role of turn taking by proposing a quantitative measure of the players' welfare gain in the turn-taking equilibrium, and to provide an economic interpretation of the gain; to study other welfare-improving methods in addition to turn taking, and to assess the separate contribution of turn taking, cheap talk in improving the players' welfare; to design and conduct experiments to test various hypotheses developed in this project, and to provide experimental evidence regarding turn-taking behaviour. |
| Project Title: | The economics of turn taking |
| Investigator(s): | Lau SH |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2005 |
| Abstract: |
| N/A |
| List of Research Outputs |
| Researcher : Lei ACH |
| List of Research Outputs |
| Lei A.C.H. and Song F.M., Corporate Governance and Firm Valuation, European Financial Management Association 2005 Conference . Milan, Italy, European Financial Management Association, 2005, 54. |
| Researcher : Lin T |
| Project Title: | Limits of arbitrage and overconfidence |
| Investigator(s): | Lin T, Kyle A.S. |
| Department: | School of Business |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 09/2004 |
| Abstract: |
| To provide a theoretical model linking the theory of limits of arbitrage with a particular bias often studied by behavioral economists: overconfidence; try to answer such questions as the following: in a period with increasing average confidence, how will an arbitrageur react, and what are the price impacts? to test the hypotheses generated from the theoretical framework. |
| Project Title: | Limits of arbitrage and overconfidence |
| Investigator(s): | Lin T |
| Department: | School of Business |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2005 |
| Abstract: |
| N/A |
| List of Research Outputs |
| Lin T. and Meng R., Dividend and Return Volatility, 2005. |
| Researcher : Liu Q |
| Project Title: | Measuring the impact of corporate governance in China |
| Investigator(s): | Liu Q |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 11/2004 |
| Abstract: |
| To systematically examine the dynamic interactions between various corporate governance mechanisms and important corporate decisions in the listed companies in China. |
| List of Research Outputs |
| Arner D.W., Booth C.D., Hsu B.F.C., Lejot P.L., Liu Q. and Pretorius F.I.H., Property Rights, Collateral and Creditor Rights in East Asia, In: S. Ghosh & I. Dalla, World Bank, East Asian Financial Markets: the Next Frontier, Hong Kong. 22-23 June 2006 . Washington DC, USA, World Bank, 2006, 43. |
| Bai C., Liu Q., Lu J.Z., Song F.M. and Zhang J.J., An Empirical Study on Corporate Governance and Market Valuation in China, Frontiers of Economics in China. Higher Education Press, 2006, 1: 83-111. |
| Liu Q., Associate Editor, China Finance Review. Oxford University Press, 2005. |
| Liu Q., Bai C. and Song F.M., Bad News Is Good News? Tunneling And Propping Evidence From China, China Research Conference. 2006. |
| Liu Q., Corporate Governance In China: Current Practices, Economic Effects, And Institutional Determinant, Cesifo Economic Studies. London, Oxford University Press, 2006, 1-39. |
| Liu Q., Cai H. and Xiao G., Does competition encourage unethical behavior? The case of corporate profit hiding in China, 2006 American Economic Association annual meeting. Boston, 2006. |
| Liu Q., How To Bank In China?, Minsheng Bank Annual Conference 2006 Shanghai. 2006. |
| Liu Q., How good is good news? Technology depth, book-to-market ratio, and innovative events, Journal of Accounting, Auditing and Finance. 2005, 20. |
| Liu Q., Arner D.W., Lejot P.L. and Park J.H., Introduction - Asia's Debt Capital Markets, In: Douglas Arner, Paul Lejot, Jae-Ha Park, Qiao Liu, Asia's Debt Capital Markets: Prospects And Strategies For Development. New York, NY, USA, Springer, 2005. |
| Liu Q., Lejot P. and Arner D., Missing links: regional reforms for Asian debt capital markets, Asia Pacific Business Review. 2005, 309-331. |
| Liu Q. and Kang Q., Stock market information production and executive incentives, 2006 American Finance Association annual meeting. Boston, 2006. |
| Researcher : Meng R |
| Project Title: | The Double-Play Manipulation, Government Intervention and the Role of Transaction Tax |
| Investigator(s): | Meng R, Bai L |
| Department: | School of Business |
| Source(s) of Funding: | Seed Funding Programme for Basic Research |
| Start Date: | 02/2005 |
| Abstract: |
| Some developing countries or regions have established a currency board system whereby the local currency is pegged to a more stable currency - typically the US dollar - or a composite of currencies in order to maintain the stability of the local currency. One salient feature of the currency board is that domestic interest rates adjust automatically to pressures on the currency. During the Asian financial crisis that took place in 1997 - 1998, a number of large investment houses were believed to have engaged in a so-called "double-play manipulation" which inflicted damages to affected Asian countries beyond the level justified by their own weak economic fundamentals. Hidden among legitimate hedging and speculative activities, these investment houses picked Asian currencies that were subject to the pressure of devaluation from their fixed level and took small short positions against them - to trigger a panic response in the currency market which was on the verge of "a nervous breakdown" - but aware of the local government's commitment to the peg, predicted a sharp increase in interest rate, and simultaneously taking large short positions in interest rates sensitive instruments, and in particular the equity market. In order to deter such a manipulative scheme and alleviate the pressures that it had imposed on the local currency and equity market, some Asian government, in particular the Hong Kong Monetary Authority, took an unprecedented action by intervening, not only in the currency market but also in the equity market, to squeeze out the profit of manipulators. Mr Joseph Yam, the chief executive of the Hong Kong Monetary Authority said "we wish to send the very clear message to those manipulating our currency for this purpose that they may stand to lose money instead." During the two-week intervention period from August 14th to August 28th 1998, the government bought US$15 billion (about 15.5% of Hong Kong's foreign reserves) worth of local stocks and long positions in Hang Seng index futures. For the single day of August 28th, when the August Hang Seng Index futures contract was expiring, the government was forced to lay out at least US$8 billion. The action held the Hang Seng to a 1.2% drop on a day when markets around the world plummeted. There was a mixed response to the Hong Kong government's intervention in the stock and futures markets. Nobel laureate Milton Friedman blasted the government's shopping spree as "insane". He said that the government's purchasing of shares undermined the credibility of its currency system. At a meeting of the Hong Kong Legislative Council, legislator Emily Lau slammed the HKMA's decision not to consult with law-makers before spending "hard-earned tax-payers dollars" to buy shares in a bid to foil speculators. Ms. Lau, said the government must "draw a line in the sand" and immediately stop spending money intervening in the stock market. The finance professionals questioned the sustainability of the government's intervention policy because, in the end, no government could withstand month after month of attacks on its currency and bourses by striking back through interventions. Indeed the battle did not end with the expiration of the August contract. Many traders were rolling over their short positions from the August contract to September, sensing the Hang Seng Index remained a tempting target. On August 31st 1998, the government stepped back from its intervention in the stock market. Hang Seng Index plunged 7%. This paper will consider a policy that the government imposes a temporary and one-way "Tobin-Tax" type transaction tax on short positions in the equity market and uses the tax revenue to support its intervention. The tax is effective during the period when the government believes that the double-play manipulation exists and has caused the market to deviate from its natural path. This paper will discusses the conditions under which the tax will prompt a manipulator to reduce short positions and examines whether such conditions exist by analyzing historical events of transaction cost changes that took place in bear markets. |
| Project Title: | Strategic investments or acquisitions in a duopoly patent race under uncertainty |
| Investigator(s): | Meng R |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 08/2005 |
| Abstract: |
| N/A |
| Project Title: | Strategic investments or acquisitions in a duopoly patent race under uncertainty |
| Investigator(s): | Meng R, Kyle AS |
| Department: | School of Business |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 08/2005 |
| Abstract: |
| To understand strategic investments and acquisitions made by a large firm in its small competitor. We will first develop a continuous-time real-options model to study a patent-race game between a large and a small firm. The large firm can make strategic investments or acquisitions in the small firm to gain synergy or cost savings, but exogenously imposed transactions costs make such transactions costly. We will try to answer such questions as: under what conditions do stragegic investments or acquisitions become optimal; what are the consequences of these strategic activities for investment behaviors and characteristics of firms' risk and return; and what is the role of transactions costs in firm value and firm beta. We will then bring the model to real data testing the hypothesis generated from the theoretical framework. |
| List of Research Outputs |
| Lin T. and Meng R., Dividend and Return Volatility, 2005. |
| Meng R., A Patent Race in a Real Options Setting: Investment Strategy, Valuation, CAPM Beta and Return Volatility, 2005. |
| Meng R., A Patent Race in a Real Options Setting: Investment Strategy, Valuation, CAPM Beta and Return Volatility , In: Jiang Wang; Charles Cao; and Tan Wang, 2005 China International Conference in Finance organized by Tshinghua University and MIT. 2005. |
| Meng R. and Kyle P.E.T.E., Strategic Acquisitions and Investments in a Duopoly Patent Race under Uncertainty, 2005. |
| Meng R. and Bai L.Y.N.N., The Double-Play Manipulation, Government Intervention and the Role of Transaction Tax, 2005. |
| Researcher : Shea KL |
| Project Title: | Ad Valorem tariff versus specifid tariff |
| Investigator(s): | Shea KL, Shea E.Y.P. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Other Funding Scheme |
| Start Date: | 09/2002 |
| Abstract: |
| To examine if ad valorem tariff and specific tariff are equivalent under duopoly. |
| Project Title: | Should tax be damaged dependent in correcting externalities |
| Investigator(s): | Shea KL |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Other Funding Scheme |
| Start Date: | 09/2002 |
| Abstract: |
| To compare the efficacy of three tax forms, namely, a fixed amount of tax, a tax that depends on the damage inflicted by externalties and one that depends on the fine. |
| List of Research Outputs |
| Researcher : Song FM |
| Project Title: | Corporate Governance and Market Valuation in China and Hong Kong |
| Investigator(s): | Song FM, Zhang JJ, Lin J., Zhen Z.W., Geng X., Yin H.R. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | The University of Hong Kong Foundation Seed Grant |
| Start Date: | 07/2003 |
| Abstract: |
| To develop extensive knowledge and expertise in the field of China and Hong Kong's corporate governance; to play an important role in the reform of corporate governance in China and Hong Kong. |
| Project Title: | Microstructure of Hong Kong stock exchanges: order aggressiveness, volume, and liquidity |
| Investigator(s): | Song FM, Chung RCK |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 11/2004 |
| Abstract: |
| To introduce the order aggressiveness as a proxy for asymmetric information to explain spread. The dataset used in this study will be compiled from Trade Record and Bid and Ask Record from HKSE. |
| List of Research Outputs |
| Bai C., Liu Q., Lu J.Z., Song F.M. and Zhang J.J., An Empirical Study on Corporate Governance and Market Valuation in China, Frontiers of Economics in China. Higher Education Press, 2006, 1: 83-111. |
| Lei A.C.H. and Song F.M., Corporate Governance and Firm Valuation, European Financial Management Association 2005 Conference . Milan, Italy, European Financial Management Association, 2005, 54. |
| Liu Q., Bai C. and Song F.M., Bad News Is Good News? Tunneling And Propping Evidence From China, China Research Conference. 2006. |
| Song F.M. and Zhang J.J., Securities Transaction Tax and Market Volatility, The Economic Journal. Oxformd, UK, Blackwell, 2005, 115: 1103-1120. |
| Researcher : Suen WC |
| Project Title: | The media and electoral politics: a strategic information transmission perspective |
| Investigator(s): | Suen WC |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 09/2004 |
| Completion Date: | 08/2006 |
| Abstract: |
| To provide a formal framework to understand the influence of the media in electoral politics; to contribute to the cheap talk literature by paying special attention to off-equilibrium beliefs; to provide welfare assessment about the regulation and the organization of the media industry |
| Project Title: | The media and electoral politics: a strategic information transmission perspective |
| Investigator(s): | Suen WC |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2005 |
| Abstract: |
| N/A |
| List of Research Outputs |
| Researcher : Tse KS |
| List of Research Outputs |
| Arner D.W., Hsu B.F.C., Johnstone S. and Tse K.S., Regulatory Framework: Securities and Futures Industry. Hong Kong, Hong Kong Securities Institute, 2006, 250. |
| Hsu B.F.C., Arner D.W., Tse K.S. and Johnstone S., Financial Markets in Hong Kong: Law and Practice. Oxford, UK, Oxford University Press, 2006, 509. |
| Johnstone S., Arner D.W., Hsu B.F.C. and Tse K.S., Corporate Capital, Governance and Takeovers. Hong Kong, Hong Kong Securities Institute, 2006, 225. |
| Tse K.S., Yu P.L.H. and Li W.K., A Vulnerability Index for Predicting Extreme Market Events in Hong Kong, International Journal of Applied Economics. 2005, 2(2): 130-160. |
| Tse K.S., Teaching Award for IMBA Programme , Faculty of Business and Economics, The University of Hong Kong. 2005. |
| Tse K.S., Teaching Award for Undergraduate Programmes, Faculty of Business and Economics, The University of Hong Kong. 2005. |
| Wong S.K., Yiu C.Y., Tse K.S. and Chau K.W., Do The Forward Sales of Real Estate Stabilize Spot Prices?, Journal of Real Estate Finance and Economics. Springer Science, 2006, 32(3): 289-304. |
| Researcher : Vere JP |
| Project Title: | Fertility and female labor supply |
| Investigator(s): | Vere JP |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2005 |
| Abstract: |
| N/A |
| Project Title: | Fertility and female labor supply |
| Investigator(s): | Vere JP |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 01/2005 |
| Abstract: |
| To study the causal effect of fertility on female labour supply in Hong Kong and the United States. |
| List of Research Outputs |
| Vere J.P., 2005 Editorial Board (Executive Editor), Journal of Asian Economics. Elsevier, 2005, 16. |
| Vere J.P., 2006 Editorial Board (Executive Editor) , In: M. Dutta, Journal of Asian Economics. Elsevier, 2006, 17. |
| Researcher : Wong KF |
| List of Research Outputs |
| Wong K.F., 2004-05 Teaching Awards for the Master of Economics program, The Faculty of Business and Economics, The University of Hong Kong., The Faculty of Business and Economics, The University of Hong Kong.. 2005. |
| Wong K.F. and Yung L., Do dragons have better fate?, Economic Inquiry. USA, Western Economic Assoc. Int., 2005, 43 (3): 689-697. |
| Wong K.F. and Leung S.W., Explaining the duration of exchange-rate pegs in Asia, International Journal of Applied Economics. 2005, 2: 111-129. |
| Researcher : Wong KP |
| List of Research Outputs |
| Broll U. and Wong K.P., Multinationals, Hedging, and Capital Structure under Exchange Rate Uncertainty, Open Economies Review. Springer Netherlands, 2006, 17, No. 1: 103-114. |
| Researcher : Wong RYC |
| Project Title: | Institute of economics and business strategy |
| Investigator(s): | Wong RYC |
| Department: | V-C's Office |
| Source(s) of Funding: | Areas of Excellence Scheme |
| Start Date: | 11/1999 |
| Abstract: |
| To study economic and business issues of strategic significance, to advance the frontiers of both theoretical and applied knowledge in this area and to have an impact on policy decisions and business practices through research, education and public information. |
| List of Research Outputs |
| Siu A.K.F. and Wong R.Y.C., Economic Impact of SARS: The Case of Hong Kong, Asian Economic Papers. U.S.A., MIT Press, 2005, 3.1: 62-83. |
| Wong R.Y.C., Does Hong Kong Need a Competition Law?, Joint Chamber Luncheon. 2005. |
| Wong R.Y.C., Launching of the World Investment Report (WIR) 2005, United Nations Conference on Trade and Development. 2005. |
| Wong R.Y.C., Non-Governmental Organizations Roundtable Forum, World Trade Organization Hong Kong Ministerial Conference. 2005. |
| Researcher : Xiao G |
| Project Title: | The impact of ownership, competition, and structural transformation on the performance and behaviour of Chinese large industrial enterprises |
| Investigator(s): | Xiao G |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Incentive Award for RGC CERG Fundable But Not Funded Projects |
| Start Date: | 07/2005 |
| Completion Date: | 06/2006 |
| Abstract: |
| N/A |
| List of Research Outputs |
| Liu Q., Cai H. and Xiao G., Does competition encourage unethical behavior? The case of corporate profit hiding in China, 2006 American Economic Association annual meeting. Boston, 2006. |
| Tu Z. and Xiao G., 中国经济的高速增长能否持续？基于企业生产率动态变化的分析, 世界经济, Beijing, 2006, 2006-02:330: 3-10. |
| Xiao G. and Weiss J., Development in North East People’s Republic of China: an analysis of enterprise performance: 1995-2002, Asian Development Bank Institute Discussion Paper. Tokyo, ADBI, 2005, No. 34. |
| Xiao G., Non-performing Debts In Chinese Enterprises: Patterns, Causes, And Implications For Banking Reform, Asian Economic Papers. USA, MIT Press, 2005, 4:3: 61-113. |
| Xiao G. and Tu Z., Productivity Growth In China's Large And Medium-sized Industrial Firms: Patterns, Causes, And Implications, International Workshop on Competition, Innovation and Productivity: Empirical Evidence from Firm Level Data. Nice, Sophia-Antipolis, France, 2005. |
| Xiao G., What is the true FDI flow to China? Implications of roundtripping, The Emergence of China: Challenges and Opportunities for Latin America and Asia, 2004 LAEBA ANNUAL CONFERENCE. 2005. |
| Xiao G., 中国资本市场的改革与发展, 上海财经大学, 2005. |
| Xiao G., 国有企业改革, 第四届中国经济学年会, 2005. |
| Xiao G., 公司治理、资本市场与产权基础设施：香港经验对上海的借鉴, 推进上海产权基础设施建设研讨会，上海市政协经济委员会, 2005. |
| Xiao G., 全球化与中国资本市场的发展：挑战与机会, 中国科学技术大学, 2005. |
| Xiao G., 国有企业改革与产权基础设施, 国有企业改制（出售）与法治 高级研讨会，同济大学中德学院 , 上海, 2005. |
| Researcher : Yetman JA |
| Project Title: | Optimal monetary policy with state dependent pricing |
| Investigator(s): | Yetman JA |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 10/2004 |
| Abstract: |
| To investigate optimal monetary policy in a model of state dependent pricing and contrast it with models incorporating time dependent pricing. |
| Project Title: | Optimal monetary policy with state dependent pricing |
| Investigator(s): | Yetman JA |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2005 |
| Abstract: |
| N/A |
| List of Research Outputs |
| Yetman J.A. and Ho W.Y.A., Shock Size, Asymmetries, and State Dependent Pricing, In: Eric Maskin, Economics Letters. Elsevier, 2006, 90(3): 440-445. |
| Yetman J.A., The Credibility of the Monetary Policy 'Free Lunch', In: Douglas McMillin, Theodore Palivos, Journal of Macroeconomics. Elsevier, 2005, 27(3): 434-451. |
| Researcher : Yuen CW |
| Project Title: | Globalization and the output-inflation tradeoff |
| Investigator(s): | Yuen CW, Razin A. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 08/2002 |
| Completion Date: | 07/2005 |
| Abstract: |
| The study attempts to better understand, both theoretically and empirically, how globalization in the form of opening up an otherwise closed economy to commodity trade and foreign investment will affect the economy's ability to simultaneously control inflation and output (or unemployment). It also tries to examine the implications of the changing nature of the output-inflation tradeoff under different forms of opennes for economic efficiency and social welfare and, on such bases, design optimal (loss-minimizing or welfare-maximizing) policies to stabilize inflation and output. |
| Project Title: | Aggregate supply vs. the Phillips curve: inflation and output dynamics in open economies from a new keynesian perspective |
| Investigator(s): | Yuen CW, Razin A. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 11/2004 |
| Abstract: |
| To examine how openness interacts with the degree of price rigidity in the domestic economy to affect the dynamics of inflation and output under different exchange rate (ER) regimes |
| Project Title: | Monetary Policy under Rational Inattention |
| Investigator(s): | Yuen CW, Luo Y |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Seed Funding Programme for Basic Research |
| Start Date: | 03/2006 |
| Abstract: |
| PURPOSE The primary objective of this project is to examine how the limited ability of economic entities (such as households and business firms) in processing information, hence their apparent neglect of information relevant to their economic/financial decisions (known as "rational inattention" in the recent literature), determines the dynamic effects of different kinds of monetary policy on macroeconomic activities (esp. inflation and output). KEY ISSUES • In what ways can rational inattention (or information-processing constraints) on the part of households (e.g., in their saving/portfolio decisions) and of firms (e.g., in their pricing and investment decisions) generate more realistic inflation and output dynamics than standard monetary-policy models (esp. New Keynesian sticky-price models and New Classical limited-participation models)? In other words, does rational inattention provide a better framework for monetary-policy analysis? • How does rational inattention affect the macro effects of monetary policy? Among the various kinds of (rule-based and discretionary) monetary policy, we shall consider and compare the following (1) (Taylor-type) interest-rate rules; (2) monetary targeting; (3) inflation targeting; (4) price-level targeting; and (5) nominal-income targeting; • What are the implications of rational inattention for optimal (welfare-maximizing or loss-minimizing) monetary policy? |
| List of Research Outputs |
| Yuen C.W., In: Editor: Heng-fu Zou; Co-Editors: Jushan Bai, Chi-Wa Yuen, Guofu Zhou, Annals of Economics and Finance. China, Peking University and Wuhan University, 2005. |
| Yuen C.W., Openness and the Phillips Curve, First APEA (Asia-Pacific Economic Association) Conference, Hitotsubashi University, Tokyo, Japan, July 30-31, 2005.. 2005. |
| Yuen C.W., Steve Cheung as a Macroeconomist?, In: Songzuo XIANG and Xiaoyong GAO, Ideas and Thoughts of Steven N.S. Cheung. Hong Kong, Arcadia Press, 2005, 421. |
| Researcher : Zhang J |
| Project Title: | Volatility smirk implied in option pricing models |
| Investigator(s): | Zhang J |
| Department: | School of Business |
| Source(s) of Funding: | Seed Funding Programme for Basic Research |
| Start Date: | 10/2004 |
| Completion Date: | 09/2006 |
| Abstract: |
| To perform a comprehensive comparative study on different option-pricing models. |
| Project Title: | Diffusion Processes and Option Pricing |
| Investigator(s): | Zhang J, Li Y.-S. |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Small Project Funding |
| Start Date: | 12/2005 |
| Abstract: |
| In finance, the price of an underlying asset is often modelled with a diffusion process. With the no-arbitrage argument, the price of a derivative contract written on the asset can be determined by solving an initial boundary value problem of a linear partial differential equation (PDE), i.e., the generalized Black-Scholes equation. By using the separating variable method, the problem becomes a spectral problem of an ordinary differential equation (ODE). The eigenvalues and the completeness of the eigenfunctions of the ODEs in a finite interval are fundamental issues. For a simple singular second-order ODE (i.e. the coefficient of the equation is singular at boundary point or the boundary point tends to infinity), the issue of how to give a boundary condition arises. In 1910, a famous mathematician, H. Weyl, pointed out that, for a singular ODE, there are two different cases: a limit circle case and a limit point case. In the first case, we have to give a boundary condition. In the second case, it is unnecessary to give a boundary condition. This important result had not been realized by physicists when they first solved the Schrodinger equation in quantum mechanics. The same phenomenon appears in quantitative finance as well when financial mathematicians solve the generalized Black-Scholes equation. During the World War II, a mathematician in the United Kingdom, E.C. Titchmarsh, performed a serious research on the eigenvalue problem of the Schrodinger equation. In 1946, his work was published as a monograph by Oxford University. In 1950, B. M. Levitan published a similar monographs in Russia. The self-adjoint differential operator theory in Hilbert space is established by many mathematicians, see e.g., Naimark's and Weidmann's books. It was found that the properties for the regular and singular cases are different not only in the boundary condition but also in the eigenvalues, such as the point spectrum and the continuous spectrum. We need to introduce Stieltjes integral in order to prove the completeness of the eigenfunctions. These results establish the mathematical foundation of quantum mechanics. By using the separating variable method, the generalized Black-Scholes equation, arising from option pricing, can be transformed into a Schrodinger equation, which has been well studied in quantum mechanics. Based on the theory of Schrodinger equation, we are able to establish a rigorous mathematical foundation for the problem of option pricing in finance. That is the purpose of this project. The key issues and problems being addressed are: 1. The transition probability density function: Finding the transition probability is essential in derivative pricing and model parameter estimation. In a risk-neutral world, the expected return is known to be the difference between risk-free rate and dividend yield, but the volatility is a function of asset price and time for a general diffusion process. The transition probability density is not known in general. In this project, we will try to find analytical formulas for some other diffusion processes. 2. The generalized Black-Scholes PDE: For a general diffusion, the PDE is a linear diffusion equation with a variable coefficient. Analytical solutions are available only for a few limited cases, such as, normal, lognormal, constant elasticity of variance (CEV) and quadratic volatility models. When an analytical solution is not available, practitioners rely on numerical methods such as finite difference, binomial trees, or Monte-Carlo simulation. However, for certain volatility functions, the generalized Black-Scholes equation can be transformed into the standard heat equation which, in turn, can be solved analytically. Even for the case that the problem cannot be reduced to the standard heat equation, it is still possible to solve the problem analytically for some particular volatility functions. Identifying new solvable volatility functions becomes an issue. 3. The estimation and calibration of the option-pricing model: Each option-pricing model has certain number of embedded parameters, which are usually determined from market information with one of the two different approaches. The first one is to estimate the parameters by using historical data of underlying stock price. The second one is to calibrate the parameters from the current market prices of options. With the transition probability density function, we can estimate the parameters by using maximum-likelihood method. With the option-pricing formula, we can calibrate the paramters by minimizing the sum of the squared errors. Developing an efficient algorithm for the parameter estimation and model calibration is one of our tasks in the project. |
| List of Research Outputs |
| Brenner M., Ou E.J. and Zhang J., Hedging Volatility Risk, Journal of Banking and Finance. 2006, 30: 811-821. |
| Shu J.H. and Zhang J., Testing Range Estimators of Historical Volatility, Journal of Futures Markets. 2006, 26(3): 297-313. |
| Zhang J. and Zhu Y.Z., VIX Futures, Journal of Futures Markets. 2006, 26(6): 521-531. |
| Researcher : Zhang JJ |
| Project Title: | The Financial and Operating Performance of Chinese Family-owned Listed Companies |
| Investigator(s): | Zhang JJ |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Seed Funding Programme for Basic Research |
| Start Date: | 12/2004 |
| Abstract: |
| While existing studies often use sector-level data to explain the phenomenal growth in the Chinese private sector, this project attempts to use firm-level data to conduct a comparative study on performance between family-owned and state-owned firms in China. Specifically, we attempt to use the whole population of listed firms for the latest period to analyze their financial performances. W propose five measures: (1) revenue per employee, (2) revenue per unit of cost, (3) net profit per employee, (4) return on assets, and (5) market to book ratio. These measures capture firm's human resource performance, operating efficiency, productivity, economic profitability and market value, respectively. Specifically, we attempt to address the following question: Do different ownership structures lead to different performances? We also plan to control for other firm characteristics, such as size, leverage and industry belonging, in the project. Our predicted results are that family-owned companies will have significantly superior performance as compared to state-owned enterprises. |
| List of Research Outputs |
| Bai C., Liu Q., Lu J.Z., Song F.M. and Zhang J.J., An Empirical Study on Corporate Governance and Market Valuation in China, Frontiers of Economics in China. Higher Education Press, 2006, 1: 83-111. |
| Song F.M. and Zhang J.J., Securities Transaction Tax and Market Volatility, The Economic Journal. Oxformd, UK, Blackwell, 2005, 115: 1103-1120. |
| Researcher : Zhou X |
| Project Title: | Managerial ownership, turnover, and firm performance: an examination of listed Chinese companies |
| Investigator(s): | Zhou X |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 12/2002 |
| Completion Date: | 09/2005 |
| Abstract: |
| The separation between ownership (shareholders) and control (managers) in modern corporations raises a fundamental question: how can managers be motivated to promote teh interests of shareholders? Theoretically, providing managers an equity stake in the company is said to enhance managerial working incentives. The current project will use a large sample of listed Chinese companies to re-examine the ownership-performance relationship and dismissal incentives. |
| Project Title: | Executive promotion and incentive contracts |
| Investigator(s): | Zhou X |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 01/2005 |
| Abstract: |
| N/A |
| Project Title: | Executive promotion and incentive contracts |
| Investigator(s): | Zhou X |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 01/2005 |
| Abstract: |
| To identify factors affecting executive promotion; to determine the effect of the promotion scheme on executive incentive contracts. |
| Project Title: | How do executive stock options affect managerial decisions and firm performance? |
| Investigator(s): | Zhou X |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Merit Award for RGC CERG Funded Projects |
| Start Date: | 10/2005 |
| Abstract: |
| N/A |
| Project Title: | How do executive stock options affect managerial decisions and firm performance? |
| Investigator(s): | Zhou X, Zheng L |
| Department: | Sch of Economics & Finance |
| Source(s) of Funding: | Competitive Earmarked Research Grants (CERG) |
| Start Date: | 10/2005 |
| Abstract: |
| To examine the roles of executive stock options by focusing on the performance of and decisions made by retiring CEOs. By using a control-sample comparison approach, this research will examine: (1) are there significant differences in performance between CEOs of high option holdings and those of low option holdings. The comparison will be made both for the final years before the CEO retires and for a few years after the CEO left the firm. (2) are there significant differences in corporate decisions made by retiring CEOs between those who have high option holdings and those of low option holdings? While our main focus will be on the first question, which addresses the performance effects of executive stock options, the second question is closely related to the first one and will also be examined. |
| List of Research Outputs |