Multinational Finance Journal

Exchange Rate Shocks and Firm Competitiveness in a Small, Export-Oriented Economy: The Case of Finland

Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 1-47 | https://doi.org/10.17578/17-1/2-1

Anand B. S. Gulati, Hanken School of Economics, Finland

Johan Knif, Hanken School of Economics, Finland

James W. Kolari, Texas A&M University, USA

Abstract:
This study empirically examines how exchange rate shocks affect firms’ competitiveness in the small, export-oriented country of Finland. Specifically, using Sweden as a benchmark and controlling for cross-country sector and industry effects, the forex competition hypothesis is tested using the impact of exchange rate shocks on Finnish stock returns. The empirical tests reveal statistically significant exchange rate exposure of Finnish stock returns. Comparing pre- versus post-euro periods, equities’ exchange rate exposure is much stronger after the introduction of the euro. Further results indicate that Finnish and Swedish sector and industry stock returns positively co-move. This implies market integration in contradiction to the forex competition hypothesis. However, for some sectors and industries interaction variables reveal that the co-movement is conditional on exchange rate movements, especially in the post-euro period. Consequently, countries with small, open economies can be prone to exchange rate movements that (dis)advantage some firms relative to competing firms in other countries.

Keywords: exchange rate exposure, stock returns, cross-country industry competition, market integration, pre- and post-euro.

Citation (Format 1)
Gulati, Anand B., James W. Kolari, and Johan Knif, 2013, Exchange Rate Shocks and Firm Competitiveness in a Small, Export-Oriented Economy: The Case of Finland, Multinational Finance Journal 17, 1-47.
Citation (Format 2)
Gulati, A., Kolari, J., Knif, J., 2013. Exchange Rate Shocks and Firm Competitiveness in a Small, Export-Oriented Economy: The Case of Finland. Multinational Finance Journal 17, 1-47.

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Asset Markets Contagion During the Global Financial Crisis

Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 49-76 | https://doi.org/10.17578/17-1/2-2

Dimitris Kenourgios, University of Athens, Greece

Dimitrios Dimitriou, University of Athens, Greece

Apostolos Christopoulos, University of Athens, Greece

Abstract:
This study investigates the contagion effects of the 2007–2009 global financial crisis across multiple asset markets and different regions. It uses daily return data of six asset classes: stocks, bonds, commodities, shipping, foreign exchange and real estate. A robust analysis of financial contagion is provided by estimating and comparing asymmetric conditional correlations among asset markets during stable and turmoil periods. Results provide evidence on the existence of a correlated-information channel as a contagion mechanism among the U.S. stocks, real estate, commodities and emerging Brazilian bond index. The findings also support the decoupling of BRIC equity markets from the crisis, the diversification benefits of shipping and foreign exchange value of the U.S. dollar indices, and the existence of a flight to quality mechanism from risky U.S. assets to German bonds. This evidence has important implications for portfolio diversification strategies and the future work of policymakers.

Keywords: Global financial crisis, asset markets, contagion, asymmetric dynamic conditional correlations.

Citation (Format 1)
Kenourgios, D., Dimitriou, D., Christopoulos, A., 2013. Asset Markets Contagion During the Global Financial Crisis. Multinational Finance Journal 17, 49-76.
Citation (Format 2)
Kenourgios, Dimitris, Dimitrios Dimitriou, and Apostolos Christopoulos, 2013, Asset Markets Contagion During the Global Financial Crisis, Multinational Finance Journal 17, 49-76.

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Interest Rate and Foreign Exchange Sensitivity of Bank Stock Returns: Evidence from China

Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 77-106 | https://doi.org/10.17578/17-1/2-3

Xiangnan Meng, University of South Australia, Australia

Xin Deng, University of South Australia, Australia

Abstract:
This study employs a GARCH model to investigate the effects of interest rate and foreign exchange rate changes on Chinese banks’ stock returns. The results suggest that market movement and foreign exchange rate changes are statistically significant in explaining banks’ stock returns, despite different reactions from different bank portfolios in regard to risks. Interest rate fluctuations, on the other hand, appear to be insignificant factors in equity pricing. The results confirm the link between market risks and stock returns and highlight the need for further interest rate liberalization.

Keywords: risks, GARCH, banking industry, China

Citation (Format 1)
Meng, Xiangnan, and Xin Deng, 2013, Interest Rate and Foreign Exchange Sensitivity of Bank Stock Returns: Evidence from China, Multinational Finance Journal 17, 77-106.
Citation (Format 2)
Meng, X., Deng, X., 2013. Interest Rate and Foreign Exchange Sensitivity of Bank Stock Returns: Evidence from China. Multinational Finance Journal 17, 77-106.

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The Underperformance of Young Closed-End Funds in Greece

Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 107-148 | https://doi.org/10.17578/17-1/2-4

Dimitrios V. Kousenidis, Aristotle University of Thessaloniki, Greece

Christos I. Negakis, University of Macedonia, Greece

Abstract:
In the present paper we study the performance of young closed-end funds (CEFs) in Greece. Using monthly CEF data from 1997 to 2007, we provide evidence showing that young funds underperform both old funds and the market. As in Kaplan and Schoar (2005), we note that new underperforming funds occur more frequently during hot market periods, potentially due to the presence of uninformed investors. The entrance of the newly raised funds in the market dilutes the overall industry performance and motivates financial institutions to take over fairly-performing subsidiary funds. As a result, well-performing funds are gradually delisted from the market and eventually only poor-performing funds survive. In this context the take-over activities prevail as a rational explanation for the underperformance and the shrinking of the closed-end fund industry in Greece.

Keywords: Closed-end funds, young fund underperformance, models of portfolio performance, ATHEX

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