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Volume 1, Number 2 / June 1997 , Pages 93-168
Multinational Finance Journal, 1997, vol. 1, no. 2, pp. 93-99
George M. Constantinides , University of Chicago, U.S.A.    Corresponding Author

Abstract:
I would like to thank the officers of the Multinational Finance Society and the organizers of its 4th annual conference for bringing us together in the historic city of Thessaloniki to discuss research developments in finance. Specifically, I would like to recognize the President of the Society, Geoffrey Booth, President-elect, George Philippatos, Chairman of the Board of Trustees, Panayiotis Theodossiou, Program Chair, Nickolaos Travlos, and Program Cochair, Angelos Tsaklanganos. They richly deserve a round of applause.

Keywords :
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Multinational Finance Journal, 1997, vol. 1, no. 2, pp. 101-122
Moshe Arye Milevsky , York University, Canada    Corresponding Author
Eliezer Z. Prisman , York University, Canada

Abstract:
The Canadian Income Tax Act induces individual investors to close their short equity option positions at the end of the year and, if necessary, reopen them at the beginning of next year. This article analyzes the conditions under which it is optimal to close or leave open a short option position over the tax year boundary. The analysis shows that the latter decision depends on transaction costs, the investor’s marginal tax rate, the interest rates, the initial and end-of-the-year option prices, as well as whether the option position is naked or covered. The article also examines the impact of tax regulations in Canada on the pricing of naked vs. covered call options and American vs. European options.

Keywords : derivative securities, equity options, open interest, tax arbitrage
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Multinational Finance Journal, 1997, vol. 1, no. 2, pp. 123-135
Emel Kahya , Rutgers University, U.S.A.    Corresponding Author

Abstract:
This article investigates the effects of non-overlapping trading hours on the correlations and cross-serial correlations of returns in non-contemporaneous stock markets and develops a simple formula for calculating contemporaneous correlation measures. The presence of these effects is illustrated empirically using stock market returns data for the U.S., Japan, and the U.K. The results indicate that daily correlations of returns in these markets are biased downward while daily cross-serial correlations of returns are biased upwards. These findings have significant implications for studies investigating the transmission mechanism of stock price innovations across national stock markets and portfolio management.

Keywords : mean spillovers; contemporaneous correlations of returns
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Multinational Finance Journal, 1997, vol. 1, no. 2, pp. 137-152
Ilhan Meric , Rider University, U.S.A.    Corresponding Author
Gulser Meric , Rowan University, U.S.A.

Abstract:
This article studies the changes in the co-movements of the twelve largest European equity markets after the 1987 international equity market crash. Tests based on Box M and principal component analysis indicate that the comovements of these equity markets changed significantly after the crash. Low correlations among national equity markets are often presented as evidence in support of the benefits of international portfolio diversification. The findings indicate that correlations among the twelve largest European equity markets and between these equity markets and the U.S. equity market increased substantially; therefore, the benefits of international diversification with these twelve European equity markets decreased considerably after the crash

Keywords : correlation of returns; Box M analysis; European equity markets co-movements; principal component analysis
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Multinational Finance Journal, 1997, vol. 1, no. 2, pp. 153-168
Robert Haney Scott , University of Macau, Macau    Corresponding Author

Abstract:
Macau pegs its currency, the pataca, to the Hong Kong dollar, which in turn is pegged to the U.S. dollar. This type of pegging order is unique in the annals of international financial arrangements. This article analyzes the structure of the pegged exchange rate systems in Macau and Hong Kong and discusses the financial and economic implications of these systems for the two territories

Keywords : currency board system; currency substitution; pegged exchange rates; seigniorage
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