News
10.10.2019
The latest issue (Vol. 23, No. 1/2) of the Multinational Finance Journal is available online
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25.09.2019
The Ben Graham Centre for Value Investing at the Ivey Business School is proud to announce the 7th Annual International MBA Stock Picking Competition made possible by our key sponsors Burgundy Asset Management and Robotti & Company Advisors, as well as Bristol Gate Capital Partners Inc., Foyston, Gordon & Payne Inc., Stacey Muirhead Capital Management and Peters MacGregor Capital Management.
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17.09.2019
Forthcoming Articles at Multinational Finance Journal
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Forthcoming MFJ Articles
17.09.2019



The Valuation of Deposit Insurance Premiums Based on a Specific Bank’s Official Default Probability

Shu Ling Chiang, National Kaohsiung Normal University, Taiwan
Ming Shann Tsai, National University of Kaohsiung, Taiwan

This study presents a formula for valuating a deposit insurance (DI) premium based on a specific official default probability. This formula can be used to flexibly determine the DI premium that reflects changes in economic circumstances. We provide a new estimation method to determine the implied asset risk based on the efficient frontier between asset value and asset risk. Doing so avoids the problem for estimating a bank’s assets and asset risk using market equity data. Empirical evidence shows current DI premium assumes that banks have too high default rates. We suggest the DI premium should be lower for banks that fully obey the financial supervisory regulations. Doing so should incentivize these banks to decrease their likelihood of default by strictly implementing financial regulations, thus stabilizing financial environment. We also suggest a new dynamic method to help them determine reasonable DI premiums and maintain the target level of DIF reserves. 

Keywords:
 deposit insurance; premium; default probability; financial supervision

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Examining Dynamic Interdependencies Among Major Global Financial Markets


Sanjay Sehgal, University of Delhi, India
Sakshi Saini, University Enclave, India
Florent Deisting, Groupe ESC Pau, France

This paper investigates dynamic interdependencies among major global financial markets from January 1999 to April 2017 by examining their risk and return spillovers. Risk and return interactions are also analyzed within the sample markets. Using block-aggregation technique under the Diebold-Yilmaz framework, strong information linkages are observed among the global equity markets that intensify during the crisis period. Results establish the dominance of the US in the global financial system based on information linkages. Further, systematic factors are found to be more prevalent in spillovers among return and volatility as compared to idiosyncratic factors. With regards to interaction between risk and return, results reveal return spillovers of high magnitude onto risk and almost negligible risk spillovers onto return. These findings have important implications for international investors and policymakers.

Keywords:
 financial markets; Diebold and Yilmaz; spillovers; conditional volatility

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Are Funds of Hedge Funds Efficient? An Empirical Analysis for North American, Asia Pacific, and European Long/Short Funds of Hedge Funds


Lan Thi Phuong Nguyen, Multinational University, Malaysia
Cheng Ming Yu, Universiti Tunku Abdul Rahman (UTAR), Malaysia
Malick Osmane Sy, Royal Melbourne Institute of Technology (RMIT), Australia
Sayed Hossain, Cedar Valley College, USA
Chen Booi Tan, Multimedia University, Malaysia

This study aims to examine whether long/short funds of hedge funds truly provide better diversification benefits to hedge fund investors as compared to efficient portfolios of long/short hedge funds in North America, Europe, and Asia Pacific. Data of long/short hedge funds and long/short FOHFs are obtained from Eurekahedge databases from 1st January 2008 to 31st December 2016. Mean-variance optimization method is employed to construct efficient portfolios of 100 long/short hedge funds with highest Sharpe ratios for each of the selected regions. To ensure the robustness of our findings, two rolling windows of observation are set up for a comparative analysis. This study concludes that most of the single-region focused long/short FOHFs in the sample, did not outperform the constructed efficient portfolios of long/short hedge funds investing in the same region. In fact, many long/short FOHFs did not survive more than a period of six years as observed in this study.

Keywords:
 funds of hedge funds; long/short strategy; diversification; efficient portfolios; mean-variance method

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Working Capital Investment: A Comparative Study - Canada Versus The United States


Abdul Rahman Khokhar, Saint Mary’s University, Canada

This study empirically compares the working capital investment of industrial firms and finds that Canadian firms invest less in working capital than their U.S. counterparts. Matched samples of 8,62 firm-year observations each from Canada and the U.S. are utilized covering the period 1988 to 2016. Compared to their U.S. counterparts, Canadian firms have a significantly lower cash conversion cycle, non-cash working capital to asset ratio and non-cash working capital to sales ratio. The difference in working capital investment is robust to variety of firm, industry and country controls as well as to year and industry fixed effects. The study also investigates the determinants of the lower investment in working capital by Canadian firms and finds that working capital investment is negatively moderated by short-term interest rates and positively associated with international operations.

Keywords:
 working capital management; cash conversion cycle; working capital investment; short-term financial policies

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