Browsing by Author "Chou, Ray Yeutien"

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Explaining international stock correlations with CPI fluctuations and market volatility
(2009-11-01)
Cai, Yijie
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Chou, Ray Yeutien
;
Li, Dan
;
交大名義發表
;
National Chiao Tung University
This paper investigates the dynamic correlations among six international stock market indices and their relationship to inflation fluctuation and market volatility. The current research uses a newly developed time series model, the Double Smooth Transition Conditional Correlation with Conditional Auto Regressive Range (DSTCC-CARR) model. Findings reveal that international stock correlations are significantly time-varying and the evolution among them is related to cyclical fluctuations of inflation rates and stock volatility. The higher/lower correlations emerge between countries when both countries experience a contractionary/expansionary phase or higher/lower volatilities. (C) 2009 Elsevier B.V. All rights reserved.
Interest rate risk propagation: Evidence from the credit crunch
(2014-04-01)
Yang, Hsin-Feng
;
Liu, Chih-Liang
;
Chou, Ray Yeutien
;
經營管理研究所
;
Institute of Business and Management
During the 2007-2009 financial crisis, US subprime mortgage risk exposures led to severe liquidity problems in several other foreign markets. Such risk contagion was caused by enormous changes in interest rates. Although risk contagion has been investigated by several literatures, the magnitude of propagated interest rate risk around global financial markets remains unexplored. Therefore, this study quantifies the degree to which the increased credit risk within the US financial system propagated to the European markets' liquidity risks. Specifically, using a conditional value-at-risk (CoVaR) model, we quantitatively measure interest rate risk of a European country, by looking at the upside risk in distribution of changes in interest rate. And such propagation risk measure considers additional value-at-risk conditional on the interest rate movements in the US. The results show significantly positive differences between European country's value-at-risk conditional on the US financial markets being in a normal or distressed state. This propagating effect increased from 2007, and was particularly pronounced in the 2008-2009. In addition, the interest rate risk contagion is especially severe for some countries in the Euro regions with greater sovereign debt problems. Hence our result foretells the deterioration of the European sovereign debt crisis which started to unfold in 2010. Our work supplements the literature by successfully quantifying the magnitude of additional interest rate risk conditional on risk exposure from external sectors. (C) 2014 Elsevier Inc. All rights reserved.
Interest rate risk propagation: Evidence from the credit crunch
(2014-04-01)
Yang, Hsin-Feng
;
Liu, Chih-Liang
;
Chou, Ray Yeutien
;
經營管理研究所
;
Institute of Business and Management
During the 2007-2009 financial crisis, US subprime mortgage risk exposures led to severe liquidity problems in several other foreign markets. Such risk contagion was caused by enormous changes in interest rates. Although risk contagion has been investigated by several literatures, the magnitude of propagated interest rate risk around global financial markets remains unexplored. Therefore, this study quantifies the degree to which the increased credit risk within the US financial system propagated to the European markets\' liquidity risks. Specifically, using a conditional value-at-risk (CoVaR) model, we quantitatively measure interest rate risk of a European country, by looking at the upside risk in distribution of changes in interest rate. And such propagation risk measure considers additional value-at-risk conditional on the interest rate movements in the US. The results show significantly positive differences between European country\'s value-at-risk conditional on the US financial markets being in a normal or distressed state. This propagating effect increased from 2007, and was particularly pronounced in the 2008-2009. In addition, the interest rate risk contagion is especially severe for some countries in the Euro regions with greater sovereign debt problems. Hence our result foretells the deterioration of the European sovereign debt crisis which started to unfold in 2010. Our work supplements the literature by successfully quantifying the magnitude of additional interest rate risk conditional on risk exposure from external sectors. (C) 2014 Elsevier Inc. All rights reserved.
Market conditions and the effect of diversification on mutual fund performance: should funds be more concentrative under crisis?
(2014-02-01)
Hu, Jin-Li
;
Chang, Tzu-Pu
;
Chou, Ray Yeutien
;
經營管理研究所
;
Institute of Business and Management
This paper investigates the non-monotonic and non-linear effect of diversification on mutual fund performance. We apply a frontier-based efficiency measure, the stochastic frontier approach, to estimate fund efficiency and the benefit of diversification. The empirical results indicate that concentration strategy may not be appropriate for fund managers, and the benefit of diversification disappears or negatively affects performance when a fund holds too large a number of different stocks. Moreover, this paper examines whether market conditions moderate the relation between diversification and fund performance. The result shows that the benefit of diversification increases within low market return, high market volatility, and financial crisis, implying that the number of stocks needed to achieve a well-diversified portfolio increases under such market conditions.
The economic value of volatility timing using a range-based volatility model
(2010-11-01)
Chou, Ray Yeutien
;
Liu, Nathan
;
經營管理研究所
;
Institute of Business and Management
There is growing interest in utilizing the range data of asset prices to study the role of volatility in financial markets. In this paper, a new range-based volatility model was used to examine the economic value of volatility timing in a mean-variance framework. We compared its performance with a return-based dynamic volatility model in both in-sample and out-of-sample volatility timing strategies. For a risk-averse investor, it was shown that the predictable ability captured by the dynamic volatility models is economically significant, and that a range-based volatility model performs better than a return-based one. (C) 2010 Elsevier B.V. All rights reserved.
The sources of bank productivity growth in China during 2002-2009: A disaggregation view
(2012-07-01)
Chang, Tzu-Pu
;
Hu, Jin-Li
;
Chou, Ray Yeutien
;
Sun, Lei
;
經營管理研究所
This study investigates the sources of bank productivity growth in China over the period 2002-2009. In order to perform this research, we propose an advanced index - input slack-based productivity index (ISP) - a model that disaggregates total factor productivity growth into each input productivity change. Funds, capital, and employees are chosen as the inputs, whereas loans and other earning assets are outputs in this study. Our results show that technological gains transcend the efficiency regressions and result in total factor productivity growth. More specifically, technical progress in capital productivity reveals the dominant force behind the total factor technical change and productivity improvement. In addition, this paper uses these disaggregation terms to find out the competitive advantages and disadvantages of input usages for each Chinese bank. These findings indicate that the ISP index provides more insights than traditional total factor productivity indices. (C) 2012 Elsevier B.V. All rights reserved.