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Volume 1, Number 4 / December 1997 , Pages 255-324
Multinational Finance Journal, 1997, vol. 1, no. 4, pp. 255-271
Yin-Wong Cheung , University of California Santa Cruz, U.S.A.    Corresponding Author
Hung-Gay Fung , University of Missouri-St. Louis, U.S.A.

Abstract:
The pattern of information flows between Eurodollar spot and futures markets is examined using a robust two-step procedure. This procedure allows for conditional mean and variance dynamics as well as conditional heteroskedasticity. We find spot rates affect futures data and vice versa. In addition, there is evidence of volatility spillover between the two markets. Our results also indicate that information conveyed by data on futures tends to have a more persistent impact on both the mean and volatility of cash market price movements than the other way around

Keywords : Granger causality; cointegration; Eurodollar spot and futures interest rates; information flow
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Multinational Finance Journal, 1997, vol. 1, no. 4, pp. 273-289
Unro Lee , University of the Pacific, U.S.A.    Corresponding Author

Abstract:
This article investigates whether the stock markets of the Pacific Basin countries of Hong Kong, Singapore, South Korea, and Taiwan are informationally efficient with respect to macroeconomic policies. Granger causality tests are utilized in the context of a Vector Error Correction Model to test the relationship between aggregate stock prices and monetary and fiscal policies. The findings indicate that the stock markets of all four countries are not efficient with respect to both macroeconomic policies. These findings are different from those of other articles focusing on major industrialized countries. Rejection of market efficiency may be attributed to the unique structure of financial markets in these countries.

Keywords : Pacific Basin countries; stock returns; macroeconomic policies; informational efficiency
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Multinational Finance Journal, 1997, vol. 1, no. 4, pp. 291-307
Martin Laurence , William Paterson University of New Jersey, U.S.A.    Corresponding Author
Francis Cai , William Paterson University of New Jersey, U.S.A.
Sun Qian , Nanyang Technological University, Singapore

Abstract:
China has two major stock exchanges, the Shanghai and the Shenzen exchanges. Each of these exchanges trades two types of shares, type “A” and type “B” shares. Type “A” shares are available to domestic investors only and type “B” shares are available to foreign investors. This article tests for the weak-form efficiency in these markets and explores the statistical relationships and causality among these Chinese stock markets with each other and with the U.S. and Hong Kong stock markets. The results indicate the existence of (1) a weak-form efficiency in the market for “A” shares but not “B” shares, (2) statistically weak linkages between the Chinese markets, (3) a weak causal effect from the Hong Kong to the four Chinese markets, and (4) a strong causal effect from U.S. stock mark to all four Chinese stock markets and the Hong Kong Stock market, particularly during the second period of the sample. These results support the assertion that the Chinese stock markets are becoming more integrated to the global economy.

Keywords : Chinese stock markets; Granger causality tests; Hong Kong stock market; market efficiency
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Multinational Finance Journal, 1997, vol. 1, no. 4, pp. 309-324
Roger D. Stover , Iowa State University, U.S.A.    Corresponding Author
Mark F. Schmitz , Rutgers University, U.S.A.

Abstract:
This article inquires into the factors that affect the pricing of new issues of corporate tax-exempt bonds backed by standby letter of credit of U.S. and foreign commercial banks. Previous literature suggests that U.S. banks possess superior certifying ability in this market due to their unique access to low-cost private information. This article also examines the extent to which such information is priced by the market. The results indicate that pricing of these bonds depends primarily on the quality of the commercial bank issuing the standby letter of credit irrespective of where the bank is domiciled. The quality influence on yield occurs indirectly through its significant effect on the issue’s bond rating

Keywords : bank certification; industrial revenue bond financing; Moody?s bond rating; standby letter of credit
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