International Research Journal of Finance and Economics
 Issue 134
 May, 2015
Hedging Effectiveness of Australian REIT Futures
Hsiang-Hui Chu and Chia-Jung Ting

This study examines the hedging effectiveness of the A-REIT futures contracts traded at the Australian Securities Exchange before, during and after the global financial crisis between 2008 and 2009. This paper also adds to the understanding of the hedging effectiveness of A-REIT futures by examining the risk reduction in value at risk. The empirical results indicate that the fluctuations of the average hedge ratios from different hedge strategies are relatively stable during the pre-crisis and post-crisis periods. We confirm that the hedging effectiveness of A-REITs futures performs well during the turmoil periods and in the aftermath of the financial crisis. Furthermore, the magnitude of risk reduction with stock, interest rate and foreign currency futures for cross hedging are significantly lower than that for A-REIT futures. These results have proved that establishing the REIT futures market is of great significance to the investors in trading REITs.
Keywords: Real estate investment trust (REIT), Hedging effectiveness, Cornish-Fisher VaR
JEL Classifications Codes: G11; G32
Improving Abilities and Skills using a Business Game of Scientific-Technological Base
Noemí Peña-Miguel and Máximo Sedano Hoyuelos

The aim of this work is to analyse the abilities and skills that can be worked in this business game which allows users to manage for several months a company of the technological sector. The methodology used in this work is based on the analysis of an experience of simulation carried out in the learning area and orientated to university and vocational training students in the Scientific-Technological Base. We have used in this study the ordinary least squares (OLS) or linear least squares to analyze the positive influence in the process of learning that it had been achieved using the business simulation game.
Keywords: Educational Games, Innovative Technology-Based, business simulation games
Would Capitalizing the Imputation Credits Better Reflect Firm Value?
Kung-Hong Shih, Tsing-Zai C. Wu and Yi-Ling Peng

Since the 1998 tax reform, corporate income tax in Taiwan has been integrated with an individual’s consolidated income tax, and imputation credits are given to shareholders to offset this. This study examines the nature of imputation credits and whether market participants would hold different views when considering the relative proportion of non-resident shareholders to domestic shareholders at the same time. In the second part of this study, this paper discusses whether the association between accounting earnings and security returns would be stronger under pro forma statements when reclassifying and incorporating imputation credits into the statement of financial positions. Lastly, this work evaluates whether the implicit tax theory is applicable to the distribution of imputation credits.
The empirical results confirm that imputation credits can be seen as an intangible asset, the value of which is recognized by market participants. The results remain the same when considering the influence of non-resident shareholders at the same time. We also find no evidence supporting the implicit tax theory with regard to the distribution of imputation credits. Finally, the most important finding of this study is that capitalizing imputation credits would improve the informativeness of financial statements, and thus help provide a set of financial statements that better reflect firm value.
Keywords: Integrated Income Tax System, Imputation Credit, Implicit Tax, Value Relevance, Financial Restatement.
The Information Content of Gains on Disposal of Assets Reclassified from Additional Paid-In Capital to Retained Earnings: Empirical Evidence from Taiwan
Tsing-Zai C. Wu, Chii-Shyan Kuo, Kung-Hong Shih and Yi-Ru Wang

In 2001, newly promulgated Article 238III of Corporation Acts in Taiwan stated that firms may choose to reclassify disposal gains on assets into non-operating revenue or extraordinary gains. If firms choose to reclassify the cumulative gains into retained earnings, the disposal gains then can be used for purpose of dividend distribution.
We found that the cumulative average returns for firms choosing to reclassify the cumulative disposal gain of assets from paid-in capitals to retained earnings are substantially higher that those without making such a decision. This evidence indicates that the cumulative gain from asset disposal as of year 2000 contain information content.
The empirical results confirm that the ratio of accumulated asset disposal scaled by the total equity (DAR) and cumulative average return (CAR) creates a positive influence with a significance level of 10% in the good-news groups. There is a positive relevance with a significance level of 5% between expected cash dividend distribution ratio (CASH) and cumulative average return (CAR). There is a positive relevance with a significance level of 1% between the balance of retained earnings or accumulated deficit plus the accumulated gains on disposal asset (REDUMMY) and cumulatively abnormal return (CAR). Meanwhile, in the bad news groups having negative returns show that there is a negative relevance with a significance level of 5% between expected stock dividend distribution ratio and cumulatively abnormal average return.
Keywords: Gains on Disposal of Assets, Paid-in Capital, Information Content
The Impact of Forex Rate Variations on Equity Market Volatility: An Empirical Analysis
Mondher Bellalah, Bora Aktan and Omar Masood

In this paper, we examine the impact of foreign exchange (forex) rate variations on equity market volatility, using weekly data for four selected emerging markets on the Pacific Rim “Hong Kong, Singapore, Malaysia and Mexico” over the period December, 1994 – March, 2009. Our methodology based on a two-regime Markov Switching-EGARCH model that allows estimating the relation between equity and forex markets during “calm” as well as “turbulent” period. The results provide strong evidence of regime shifts in the volatility behavior of the equity markets on the Pacific Rim.
Keywords: Markov Regime switching, equity market volatility, forex rates,time varying transition probabilities, Pacific rim
Good Governance and Economic Development: An Overview
Marwa Biltagy

This paper focuses on the issue of good governance because improving the quality of governance is essential for economic development and growth. The issue of good governance has gained a lot of importance, since big organizations, donors, and lenders are basing their aid and loans on the condition of adopting policies that ensure good governance. What is especially significant about this paper is the emphasis on the issue of the impact of good governance on economic development. It is known that, democracy and good governance influence economic development. For example, secure private property rights that give incentives to individuals to be productive, rule of law, political stability and lack of violence and control of corruption are essential in promoting economic development. The main objectives of this paper are to provide decision-makers with tools to understand the importance of good governance in supporting other policy goals and to propose recommendations for governments on how to improve quality of governance. The main questions that this paper aims to answer are: How to improve the quality of governance by adopting different kinds of policies and institutional arrangements? What is the relation between good governance and economic development? The methodology of this paper is based on studying and analyzing the topic of good governance by clarifying the concept and identifying the relation between good governance and economic development. The learning outcomes of this paper are the recommendations that lead to increased level of good governance by changing the attitudes and behavior of institutions to promote and sustain good governance.
Keywords: Governance; Good governance; Economic development; Democracy.
JEL: O11: O40
Budget Investments in Russia: Not Investment but Transformation of Public Property
D.L. Komyagin

The article covers the budget investments, which can be understood both as a type of budget expenses and as a procedure of transformation of budget funds to public property. At the same time, budget and public property are parts of the state (municipal) treasury. The article raises an issue of no account taken of future benefits when exercising budget investments.
Keywords: budget, investments, budget expenses, public and municipal property, state and municipal treasury.
Jel Classification: P33
Efficiency of Morocco’s Compensation Fund Reforms to Alleviate Heavy Burden on the State Budget
Hasnaa Bendouz

The implementation, in 2013 and 2014, of the fuel indexation system is part of a project of gradual reform of the compensation system in Morocco. It allows controlling the burden of compensation for liquid petroleum products up of appropriations under the budget law and avoid the use of other charge budget during the year, and the use of debt that accentuate the vulnerability of macroeconomic balances, reduce the margin for investment and impact negatively the growth and employment of Moroccan economy. Through our research work we are going to present a reminder of the compensated Sectors in Morocco, explain the indexation system fuel, in what context was made this measure, what are the basics of the partial indexation system? And finally what are the mechanisms and calculation method?
Keywords: Compensation Fund, Indexation system fuel, partial indexation system, Charge budget.
Determining Earning Managementin Companies Admitted to Tehran Stock Exchange during Initial Public Offering (IPO)
HosseinIzadi and Ali Akbar Farzinfar

In this study, examine whether initial public offering (IPO) firms record unusually high discretionary current accruals in the annual periods IPO and after stock offerings. Using a sample of 56 Iranian IPOs for the period of2003-2004-2005, we investigate the pattern of discretionary current accruals(DCA) over time.We find that managersdonot manage their company’s earnings in the first year as a public company and three after initial public offerings.
Keywords: Initial public offering, Earnings management, Discretionary.
Future Value Prediction of US Stock Market using ARIMA and RBFN
Dinesh K. Sharma, Hari P. Sharma and H.S. Hota

Stock market predictions help determining the future value of a financial instrument or company stock that is traded on an exchange. The efficient-market hypothesis (EMH) suggests that the movements of stock price are random and are inherently unpredictable. Despite the random movements of stock prices, stock market predictions are essential for actively managing investment portfolios.Researchers are designing and developing sophisticated models to capture the random movements of stock prices as precisely as possible despite the fact that their reliability of predictions is always questioned.In this paper, wedesigned and developed stock market prediction models using both a traditional and an advanced technique.Finally, a best model is suggested with a suitable partition of data is used for N-week prediction. The models are developed using two techniques:(1) Auto Regressive Integrated Moving Average (ARIMA),a statistical technique and (2)Radial Basis Function Network (RBFN), an Artificial Neural Network (ANN) technique. The models were tested on both DOW30 and NASDAQ100 index data. The results revealed that the RBFN model with a80-20 partition size predicted future values with more precision consistently than that predicted by the ARIMA model.Thus, the results proved that the RBFN model is more reliable than the ARIMA model.
Keywords: Radial Basis Function Network (RBFN), Auto Regressive Integrated MovingAverage (ARIMA).