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Published Articles for Year 2000
Multinational Finance Journal, 2000, vol. 4, no. 1&2, pp. 1-4
George J. Papaioannou , Hofstra University, U.S.A.    Corresponding Author
Nickolaos G. Travlos , Athens Laboratory of Business Administration (ALBA), Greece

Abstract:
No Abstract

Keywords : n/a
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Multinational Finance Journal, 2000, vol. 4, no. 1&2, pp. 5-34
Richard Chung , Concordia University, Canada    Corresponding Author
Lawrence Kryzanowski , Concordia University, Canada
Ian Rakita , Concordia University, Canada

Abstract:
The overallotment option (OAO) gives underwriters the right to acquire additional shares from the issuing firm at the offer price (less underwriting fees) in order to meet any excess demand for an issue. Thus, underwriters can use overallotment options to stabilize market prices post-issue by increasing the supply of shares for oversold issues. Unlike IPOs in the U.S., the Canadian evidence finds that OAOs are included less frequently, that underwriting fees are positively associated with OAO inclusion, and that the OAO appears to play a minor role in market price stabilization, which is itself less detectable and appears to be limited to the very early stages of secondary market trading. These results suggest that the role of the OAO differs markedly for IPOs in Canadian versus U.S. markets

Keywords : initial public offerings; overallotment options; price stabilization; underwriting fees
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Multinational Finance Journal, 2000, vol. 4, no. 1&2, pp. 35-68
Tim Brailsford , Australian National University, Australia    Corresponding Author
Richard Heaney , Australian National University, Australia
John Powell , University of Otago, New Zealand
Jing Shi , Australian National University, Australia

Abstract:
The market for unseasoned equity has the unusual and distinguishing feature of periods of concentrated activity in terms of both volume and underpricing. This paper formally documents the existence of such periods using a regime-switching model that dates transitions between hot and cold states. A number of hot periods are identified over a 20-year period using a variety of IPO activity measures that capture different aspects of new issue volume, proceeds and underpricing. The study further documents a leading relationship between underpricing and IPO volume of up to six months. This relationship supports the contention that the decision to issue is a function of current underpricing. Various reasons are hypothesised for this result and the paper finds supportive evidence through a VAR analysis that reveals the influence of stock market and business conditions.

Keywords : hot issues; IPOs; regime-switching; stock market; unseasoned issues
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Multinational Finance Journal, 2000, vol. 4, no. 1&2, pp. 69-99
Wolfgang Aussenegg , Vienna University of Technology, Austria    Corresponding Author

Abstract:
This article compares the characteristics and the price behavior of case-by-case privatization initial public offerings and private sector initial public offerings in Poland over the first nine years after the reopening of the Warsaw Stock Exchange in April 1991. There is evidence that the Polish government is market-oriented, trying to build up reputation for its privatization policy over time by underpricing, selling a high fraction at the initial offer and underpricing more when selling to domestic retail investors. In the long run privatization initial public offerings experience neither an under- nor an overperformance. A lower political influence has no effect on the long-run performance of privatized companies

Keywords : initial public offerings; long-run performance; privatization; underpricing
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Multinational Finance Journal, 2000, vol. 4, no. 1&2, pp. 101-132
Neil Hartnett , The University of Newcastle, Australia    Corresponding Author
Jennifer Römcke , The University of Newcastle, Australia

Abstract:
Contemporaneous evidence of corporate revenue and profit forecasting error is provided in a different institutional context, Australian sharemarket initial public offerings. This article extends the literature on company forecast risk by incorporating new proxies for forecasting error (float motive, subscription price premium, range of activities and internationalisation) and by refining others. The study investigates the association between earnings forecast risk and conventional ex-ante uncertainty proxies used to explain IPO underpricing. Ex-ante and ex-post explanatory variables are distinguished and a forecast error prediction model is tested. The results show revenue forecast errors were smaller and less sensitive than those for profit. Strong associations are reported between forecast error and float motive, audit quality and unanticipated industry activity. The link between earnings forecast error and proxies for initial public offering underpricing is observed. Predictability was poor regarding individual company forecast error, but improved for portfolio average forecasting error.

Keywords : error; forecast; IPO; prediction, profit; underpricing
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Multinational Finance Journal, 2000, vol. 4, no. 1&2, pp. 133-153
Li Li Eng , The National University of Singapore, Singapore    Corresponding Author
Hwee Shan Aw , The National University of Singapore, Singapore

Abstract:
This article investigates the impact of fundamentals of initial public offering (IPO) firms on two categories of investors, large and small investors. In the decision to purchase IPOs, the demand by large investors is positively associated with earnings yield, firm size and underpricing, and negatively associated with book-to-market ratio. Large investor demand is higher for issues denominated in the local currency (Singapore dollars) than issues denominated in foreign currencies. In contrast, the demand by small investors is negatively associated with earnings yield, firm size and underpricing. Small investor demand is also lower for issues denominated in Singapore dollars than issues denominated in foreign currencies

Keywords : initial public offerings; fundamentals; small investors; large investors
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Multinational Finance Journal, 2000, vol. 4, no. 3&4, pp. 155-157
Yin-Wong Cheung , University of California Santa Cruz, U.S.A.    Corresponding Author

Abstract:
no abstract

Keywords : n/a
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Multinational Finance Journal, 2000, vol. 4, no. 3&4, pp. 159-179
Torben G. Andersen , Northwestern University, U.S.A.    Corresponding Author
Tim Bollerslev , Duke University and NBER, U.S.A.
Francis X. Diebold , University of Pennsylvania and NBER, U.S.A.
Paul Labys , University of Pennsylvania, U.S.A.

Abstract:
It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution, and that the fat tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular ARCH and stochastic volatility models. We consider two major dollar exchange rates, and we show that returns standardized instead by the realized volatilities of Andersen, Bollerslev, Diebold and Labys (2000a) are very nearly Gaussian. We perform both univariate and multivariate analyses, and we trace the differing effects of the different standardizations to differences in information sets

Keywords : high-frequency data; integrated volatility; realized volatility; risk management
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Multinational Finance Journal, 2000, vol. 4, no. 3&4, pp. 181-200
Michael Hertzel , Arizona State University, U.S.A.    Corresponding Author
Paul Lowengrub , Nathan Associates, U.S.A.
Michael Melvin , Arizona State University, U.S.A.

Abstract:
This article analyzes the impact on stock prices in the home market of important events associated with a U.S. listing. Events include the "filing effect" of financial statements made public by the SEC in preparation for an ADR program; the "announcement effect" of the forthcoming ADR program; and the "listing effect" of the first day of U.S. trading. The sample includes German firms that listed in the U.S. between 1991 and 1997. While German accounting standards allow firms to show profits when U.S. GAAP would show losses, we find that the reconciliation to U.S. GAAP reported in the "filing effect" is associated with positive abnormal returns. Perhaps this reflects self-selection where firms with nothing to hide list in the U.S. The announcement effects are mixed across firms. The listing effect is associated with positive abnormal returns. We also find some evidence of volume migrating from the home market to the U.S. after U.S. trading begins

Keywords : ADRs; international cross-listing; international equity markets; German stocks
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Multinational Finance Journal, 2000, vol. 4, no. 3&4, pp. 201-219
Hailiang Yang , The University of Hong Kong, Hong Kong    Corresponding Author

Abstract:
This article presents a simple methodology for computing Value at Risk (VaR) for a portfolio of financial instruments that is sensitive to market risk, rating change, and default risk. An integrated model for market and credit risks is developed. The Jarrow, Lando and Turnbull model (the Markov chain model) is used to represent the dynamics of the credit rating. Procedures for calculating VaR are presented. Numerical illustration results are included

Keywords : credit rating; default risk; integrated risk management; Markov chain; value at risk
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Multinational Finance Journal, 2000, vol. 4, no. 3&4, pp. 221-245
Cheol S. Eun , Georgia Institute of Technology, U.S.A.    Corresponding Author
H. Jonathan Jang , Inha University, Korea

Abstract:
In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately following the crash, stock prices of firms with different bond ratings display dramatically divergent behavior. Specifically, stocks with speculative bond ratings exhibit significantly negative cumulative abnormal returns (CAR) in the wake of crash; the more speculative a firm's bond is, the more negative is the CAR of the firm's stock. Regression analysis confirms that there indeed exists a significantly negative relationship between the post-crash CARs and individual firms' bankruptcy risk proxied by their bond ratings, a variable that measures the likelihood of financial distress ex ante.

Keywords : n/a
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Multinational Finance Journal, 2000, vol. 4, no. 3&4, pp. 247-267
Richard T. Baillie , Michigan State University, U.S.A.    Corresponding Author
Aydin A. Cecen , Central Michigan University, U.S.A.
Young-Wook Han , Michigan State University, U.S.A.

Abstract:
This article considers the use of the long memory volatility process, FIGARCH, in representing Deutschemark - US dollar spot exchange rate returns for both high and low frequency returns data. The FIGARCH model is found to be the preferred specification for both high frequency and daily returns data, with similar values of the long memory volatility parameter across frequencies, which is indicative of returns being generated by a self similar process. The BDS test for non-linearity is applied to the residuals of the model for the high frequency returns. No evidence is found to suggest that the procedure for filtering the high frequency returns to remove the intraday periodicity has induced any non-linearities in the residuals; and the FIGARCH specification is found to be adequate.

Keywords : BDS test; correlation dimension; FIGARCH; high frequency data; intra day periodicity; volatility
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Multinational Finance Journal, 2000, vol.4, no. 3&4, pp. 269-288
W.C Lo , Open University of Hong Kong, Hong Kong    Corresponding Author
W.S. Chan , The University of Hong Kong, Hong Kong

Abstract:
Using a modified outlier identification procedure by Chen and Liu (1993), this article studies the large shocks of the Greater China stock markets. We find that while large shocks are typical in all the markets and more outliers appear in the Chinese stock markets than in the other markets. We also find that most of the outliers identified in the Hong Kong market cluster in the periods of the 1997 Asian financial crisis and after the government's market intervention in August 1998. With the exception of Hong Kong, most outliers seem to be driven by local events

Keywords : Greater China stock markets; large shocks; time series outliers
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