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
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
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
Measuring the Effects of Interest Rate Volatility. Interest rate changes have important implications for highly influential macroeconomic variables and, for the investor, have direct implications for asset prices, net worth and future wealth. By considering unresearched areas concerning the behaviour and influence of interest rates our research will be of interest to an academic audience, government, regulators and market practitioners. Attention to Australia, the US and Asia means that the rese ....Measuring the Effects of Interest Rate Volatility. Interest rate changes have important implications for highly influential macroeconomic variables and, for the investor, have direct implications for asset prices, net worth and future wealth. By considering unresearched areas concerning the behaviour and influence of interest rates our research will be of interest to an academic audience, government, regulators and market practitioners. Attention to Australia, the US and Asia means that the research will be directly relevant to Australian decision-makers. Further, the project will yield papers for publication in top international journals, reinforcing Australia's reputation as a leading centre for financial research and enhance it's reputation for cutting-edge work.Read moreRead less
Asset Pricing, Signal Type and Overconfident Investors. Recent bubbles in financial markets and other anxieties with regard to whether financial assets are correctly valued have led to a reduction in the confidence in financial markets. This study, by focussing upon potential biases in the price formation process, will provide strong insights into this important topic. In covering three major equity markets, the project will provide important guidance for the design of regulatory policies on c ....Asset Pricing, Signal Type and Overconfident Investors. Recent bubbles in financial markets and other anxieties with regard to whether financial assets are correctly valued have led to a reduction in the confidence in financial markets. This study, by focussing upon potential biases in the price formation process, will provide strong insights into this important topic. In covering three major equity markets, the project will provide important guidance for the design of regulatory policies on corporate disclosure by both Governments and Stock Exchanges. Given the increased need for funded superannuation/pension schemes, an increase in the confidence in capital market processes will benefit the development of successful funded schemes.Read moreRead less
A Complex Systems Approach to Modelling Time-Varying Risk in the Presence of Market Frictions. Risk and return are two fundamental variables underlying all business decisions. Risk is difficult to measure - potentially leading to sub-optimal outcomes needlessly wasting $millions. This project focuses on two important data problems in risk measurement - thin trading and price limits - applying a complex systems approach. Specifically, we develop a new time varying risk estimator from the clas ....A Complex Systems Approach to Modelling Time-Varying Risk in the Presence of Market Frictions. Risk and return are two fundamental variables underlying all business decisions. Risk is difficult to measure - potentially leading to sub-optimal outcomes needlessly wasting $millions. This project focuses on two important data problems in risk measurement - thin trading and price limits - applying a complex systems approach. Specifically, we develop a new time varying risk estimator from the class of generalised Tobit models - popular in other areas of economics. Using data across several markets, the new risk measure will be developed, applied and compared to existing approaches. This will improve future decision-making - delivering considerable long-term economic benefits.Read moreRead less
An international study of seasoned equity offerings: long term returns, earnings management, liquidity, ownership structure, and financial crisis. This study will provide critical insights into the impact of alternative mechanisms for seasoned equity offerings on liquidity and firm value. Considering the lack of confidence in financial markets during the financial crisis, this study will have significant implications regarding the current use and regulation of seasoned equity offerings.
Causes and Consequences of Short Selling for Equity Returns. Short selling involves holding negative quantities of an asset. As prices fall, the short position makes profit. Short selling is thought to reflect the market's expectation of future underperformance. This study aims to explore the determinants and consequences of short selling. In particular we aim to address the following:
1. Do short sales create excessive volatility?
2. Can we price the volatility associated with short selling i ....Causes and Consequences of Short Selling for Equity Returns. Short selling involves holding negative quantities of an asset. As prices fall, the short position makes profit. Short selling is thought to reflect the market's expectation of future underperformance. This study aims to explore the determinants and consequences of short selling. In particular we aim to address the following:
1. Do short sales create excessive volatility?
2. Can we price the volatility associated with short selling in a modern risk management framework?
3. What factors underlie the volume of short sales?
4. Should we distinguish between long and short transactions, or is gross traded volume a sufficient measure of turnover?
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A New Approach to Information-Based Securities Trading. This project develops and tests a new approach to information-based securities trading, which can effectively describe trading dynamics and accurately measure the effects of information impounded in price and trading activities. It aims to provide a novel and practical framework for studying information asymmetry, belief heterogeneity and asset pricing, and apply the new approach to address a series of financial issues. The project will mak ....A New Approach to Information-Based Securities Trading. This project develops and tests a new approach to information-based securities trading, which can effectively describe trading dynamics and accurately measure the effects of information impounded in price and trading activities. It aims to provide a novel and practical framework for studying information asymmetry, belief heterogeneity and asset pricing, and apply the new approach to address a series of financial issues. The project will make significant contributions to finance research by shedding new insights on market dynamics and creating a new stream of models and modelling techniques. Academics, practitioners and regulators can use the new approach to better analyse the Australian financial market and improve its efficiency.Read moreRead less