Modelling multivariate financial time series using copulas. What are the chances that the losses in the market value of investments exceed the anticipated levels? Given that one country's financial market collapsed, what are the chances that it would lead to financial crises in other countries? These questions often arise in risk management and international finance. This project takes a significant step forward from the existing literature to develop new flexible and innovative methods to an ....Modelling multivariate financial time series using copulas. What are the chances that the losses in the market value of investments exceed the anticipated levels? Given that one country's financial market collapsed, what are the chances that it would lead to financial crises in other countries? These questions often arise in risk management and international finance. This project takes a significant step forward from the existing literature to develop new flexible and innovative methods to answer the foregoing type of questions. Further, this project proposes new measures of market risks that are suitable for communicating to the broader public as well as the experts.Read moreRead less
Asset pricing with social interactions, adaptive learning, and differences in opinion. This project seeks to understand how social interactions and adaptive learning of investors affect asset prices in highly competitive and adaptive financial markets. It will develop an evolutionary asset pricing theory, novel empirical hypotheses and tests of financial market characteristics and provide implications for policy and market regulation.
Dynamic Asset Pricing and Portfolio Decision Rules under Heterogeneous Expectations and Adaptive Learning. The outcomes of this project will provide two benefits to Australian financial market researchers in academe, in industry and financial market regulators. First, a better theoretical and empirical foundation for understanding and analysing optimal portfolio decision rules in a setting that captures many realistic features of market behaviour such as heterogeneity of investor types and adapt ....Dynamic Asset Pricing and Portfolio Decision Rules under Heterogeneous Expectations and Adaptive Learning. The outcomes of this project will provide two benefits to Australian financial market researchers in academe, in industry and financial market regulators. First, a better theoretical and empirical foundation for understanding and analysing optimal portfolio decision rules in a setting that captures many realistic features of market behaviour such as heterogeneity of investor types and adaptive behaviour by market participants. Second, new tools to more effectively understand and manage portfolio risk in financial markets. Consequently Australia will have a more efficient and competitive financial system. It also has the potential to lead to the development of more finance related industries such as financial market software.Read moreRead less
The impact of COVID-19 economic stimulus measures on corporate stakeholders. Australia's economic response to COVID-19 saw cash injections to companies and bailouts of some insolvent firms. This project aims to quantify the market value of these government subsidies and how it was shared across corporate stakeholders. The project expects to generate new knowledge for the design of financial stability regimes by developing the world-first dynamic structural model of firm assets that allows for go ....The impact of COVID-19 economic stimulus measures on corporate stakeholders. Australia's economic response to COVID-19 saw cash injections to companies and bailouts of some insolvent firms. This project aims to quantify the market value of these government subsidies and how it was shared across corporate stakeholders. The project expects to generate new knowledge for the design of financial stability regimes by developing the world-first dynamic structural model of firm assets that allows for government interventions both prior to and at default. Expected outcomes include a novel public dataset that tracks expected future subsidies and how they are shared by stakeholders. These forecasts should provide significant benefits to taxpayers as they fund the subsidies and gain from them as claimants to Australian firms.Read moreRead less
An Examination of the Structure, Performance, Trading Activity and Portfolio Compositions of Small-Cap Equity Managers. Australian investment managers currently manage $A904 billion in assets. Given that Australians compulsorily commit 9% of their salaries this figure is set to rise rapidly. Developing a better understanding of the performance and trading activities of these managers offers significant benefit to all Australians. The growth in assets under management has forced managers to in ....An Examination of the Structure, Performance, Trading Activity and Portfolio Compositions of Small-Cap Equity Managers. Australian investment managers currently manage $A904 billion in assets. Given that Australians compulsorily commit 9% of their salaries this figure is set to rise rapidly. Developing a better understanding of the performance and trading activities of these managers offers significant benefit to all Australians. The growth in assets under management has forced managers to invest in alternative assets such as small cap stocks. Small companies have been described as the engine room of economic growth, promoting employment, national prosperity, and innovation and entrepreneurship. Our research considers a significant and growing part of Australia's national economy.Read moreRead less
Evaluating the Performance of Active Australian Equity Managers Utilising their Daily Portfolio Holdings and Trades. The aim is to evaluate the performance of active institutional Australian equity fund managers by statistical and mathematical modelling of their trades. Using a unique dataset of daily portfolio holdings and trades, we compare the trading styles of those who have persistently outperformed the market with those that have not so as to reveal drivers of superior performance. Such a ....Evaluating the Performance of Active Australian Equity Managers Utilising their Daily Portfolio Holdings and Trades. The aim is to evaluate the performance of active institutional Australian equity fund managers by statistical and mathematical modelling of their trades. Using a unique dataset of daily portfolio holdings and trades, we compare the trading styles of those who have persistently outperformed the market with those that have not so as to reveal drivers of superior performance. Such a study has been impossible until now due to non-disclosure of trades. Understanding the fundamental origins of fund performance enhances the overall returns to investors, provides a new ratings system yielding superior information, and redirects the nest-eggs of "mums and dads" towards better-performing managers.Read moreRead less
When Markets Fail: A Comparative Assessment of Costs and Benefits of Trade Interruption. Stock exchanges worldwide provide the opportunity to instantaneously and continuously trade securities. The introduction of automated trading systems has considerably enhanced this opportunity. Surprisingly, exchanges still have (and use) the discretion to occasionally suspend trading in certain stocks. These trading halts are used to prevent a disorderly or uninformed response to pertinent company informati ....When Markets Fail: A Comparative Assessment of Costs and Benefits of Trade Interruption. Stock exchanges worldwide provide the opportunity to instantaneously and continuously trade securities. The introduction of automated trading systems has considerably enhanced this opportunity. Surprisingly, exchanges still have (and use) the discretion to occasionally suspend trading in certain stocks. These trading halts are used to prevent a disorderly or uninformed response to pertinent company information releases. Practitioners and academics tend to believe that trading halts do not serve this role well. We propose a new methodology to more accurately measure the costs and benefits of trade suspensions. We compare their impact on different trading systems, and evaluate their intertemporal performance.Read moreRead less
A Synthesis of Agency and Managerial Power Theories and Its Applications to Corporate Governance, Management Compensation, and Firm Performance. The existing models of corporate governance in economics and finance based on agency theory do not successfully portray all modern corporations. Thus the importance of a new and rigorous way to study corporate governance can be hardly exaggerated. This project will provide a synthesized theory of corporate governance and is expected to produce highest- ....A Synthesis of Agency and Managerial Power Theories and Its Applications to Corporate Governance, Management Compensation, and Firm Performance. The existing models of corporate governance in economics and finance based on agency theory do not successfully portray all modern corporations. Thus the importance of a new and rigorous way to study corporate governance can be hardly exaggerated. This project will provide a synthesized theory of corporate governance and is expected to produce highest-quality research publishable in top-tier journals. This will, among others, enhance Australia's standing as a knowledge nation. This project is also expected to contribute to the discussions on how to improve corporate governance and regulation of management compensation both in Australia and abroad. Read moreRead less
Investment Opportunities and the Impact of Interaction Between Global Integration, International Capital Flows and Price Movements in Emerging Stock Markets. Emerging stock markets now represent an integral component of international investment portfolios comprising billions of dollars. But stocks in these markets are perceived as excessively volatile and frequently inconsistent with economic fundamentals. This project investigates the linkage between emerging stock prices and both local and glo ....Investment Opportunities and the Impact of Interaction Between Global Integration, International Capital Flows and Price Movements in Emerging Stock Markets. Emerging stock markets now represent an integral component of international investment portfolios comprising billions of dollars. But stocks in these markets are perceived as excessively volatile and frequently inconsistent with economic fundamentals. This project investigates the linkage between emerging stock prices and both local and global economic influences; develops quantifiable time-varying measures of capital market integration based on fundamentals allowing ranking across markets; and explores how integration levels are affected by capital flows. The project will benefit the investment community and governments in understanding, and modelling, the impact of policy and trade flows on market integration and the consequent effect on stock markets.Read moreRead less
The impact of payout policy changes on firm value and short selling activities across different taxation regimes. Brealey et al (2011) assert that we don't know enough yet about how payout policy varies across firms. This project examines the information content of dividend changes and repurchase programs and the long-term market impact of these announcements, controlling for the substitution effect of repurchases/dividends in different institutional/tax regimes. This project also examines wheth ....The impact of payout policy changes on firm value and short selling activities across different taxation regimes. Brealey et al (2011) assert that we don't know enough yet about how payout policy varies across firms. This project examines the information content of dividend changes and repurchase programs and the long-term market impact of these announcements, controlling for the substitution effect of repurchases/dividends in different institutional/tax regimes. This project also examines whether short sellers manifest abnormal behaviour around the announcement of dividend changes and repurchase programs, and whether earnings are manipulated upwards to maintain the dividend or downwards prior to the announcement of repurchase programs. The findings will be of major interest to academics, managers, investors and regulators.Read moreRead less