Asian Review of Financial Research

pISSN: 1229-0351
eISSN: 2713-6531

Past Issues

Past Issues

Asian Review of Financial Research / May 2005 Vol. 18 No. 1

Valuing IT Investment Using Real Options : Application of Two-Factor Model for Dynamic Changes of Individual Risks

Beum-Jo Park

Asian Review of Financial Research :: Vol.18 No.1 pp.1-30

Abstract
Valuing IT Investment Using Real Options : Application of Two-Factor Model for Dynamic Changes of Individual Risks ×

Traditional methods for project evaluation, like the net present value (NPV), the internal rate of return (IRR), and the tree models, are inadequate because they underestimate IT investment projects that require huge initial cost and have high uncertainty of future cash flows and a high upside potential. Thus, lately IT project evaluation using real options has been an important subject of much research. However, most research related to valuation of IT investment projects as real options has been limited to the application of Black-Scholes formula or tree models under the assumption of risk-neutral investor. This paper develops a continuous two-factor (present value of cash flow and risk rates) model to take into account individual risks and their dynamic changes. To estimate the model the paper adopts least squares Monte Carlo (LSMC) simulation method presented by Longstaff and Schwartz (2001).The empirical study applying the model to the case of software platform investment (Taudes, et al., 2000) shows that the increase of uncertainty has conflicting effects on the option values. That is, while the uncertainty increases the option values, it gives rise to risk causing relatively slight reduction of the option values. The paper provides IT managers with the appropriate real option model to assist evaluating and justifying IT investment.

Download PDF Export Citation
Valuing IT Investment Using Real Options : Application of Two-Factor Model for Dynamic Changes of Individual Risks ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

A Study On the Behavior of Fund Investors and Fund Managers

Young-Kyu Park

Asian Review of Financial Research :: Vol.18 No.1 pp.31-67

Abstract
A Study On the Behavior of Fund Investors and Fund Managers ×

This research investigates the relationship between the performance and cashflow of equity fund based on monthly as well as weekly data. Several interesting result are found. First, I found that both simple excess return over benchmark and risk adjusted excess return are important determinant of equity fund cashflow. Second, it is also found that fund size, age, beta, SMB coefficient, and HML coefficient play significant roles to determine the cashflow of equity fund. Third, not only the performance of individual fund, but also the performance of same category funds and of investment company seems to determine the cashflow of individual fund. On the other hand, there was no evidence that cashflow in general influence the performance of equity fund. Only large amount of cash outflows have negative impact on equity fund performance and make fund managers respond with the increase in the risk level trying to recover the loss.

Download PDF Export Citation
A Study On the Behavior of Fund Investors and Fund Managers ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

Equity Investment across Affiliated Firms and Business Structure within a Corporate Conglomerate

Jung Bum Wee

Asian Review of Financial Research :: Vol.18 No.1 pp.69-92

Abstract
Equity Investment across Affiliated Firms and Business Structure within a Corporate Conglomerate ×

This paper analyzes the effects of the cross equity investment, the business structure, and the regulation on cross equity investment within a corporate conglomerate. In equilibrium, the cross equity investment increases as the controlling shareholder can extract f perquisite more easily. The business structure of a conglomerate becomes more closely related as the potential synergy is larger. The conglomerate expands cross equity investment if the potential synergy is small, and emphasizes risk management otherwise. Perquisite not only directly hampers distributive fairness, but also indirectly improves allocative efficiency by mitigating agency problem of outside equity. Thus, the influence of the regulation on cross equity investment depends on the parameters of the model. Such regulation improves fairness without hampering efficiency if the potential synergy is sufficiently large.

Download PDF Export Citation
Equity Investment across Affiliated Firms and Business Structure within a Corporate Conglomerate ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

The Arrival of Public information and the Intraday Market Volatility

Jaeuk Khil;Kwija Chung

Asian Review of Financial Research :: Vol.18 No.1 pp.93-120

Abstract
The Arrival of Public information and the Intraday Market Volatility ×

This study explores the relationship between the arrival of public information and the intraday volatility in the Korean stock market using the GARCH model under the assumption of the existence of conditional heteroskedasticity in the intraday stock return. The number of E-daily news headlines in a certain time interval for the period of 2001~2003 has been used as the proxy for public information, whereas the KOSPI return and the trading volume for the same period have been used for the market activity variables. The addition of news variable in the conditional variance equation in the GARCH model results the increasing effect on the market volatility. But, as the time interval has been increased, the relative impact of public information has decreased the market volatility. It indicates that the market volatility has been affected mainly by the arrival of public news in short term, but the investors have reacted on those news as well as some private information very shortly. Finally, the domestic and international news has separately been tested in that how those news affect the magnitude of the persistence of volatility. It turns out that domestic news has decreased the level of persistence more than the international news, and the relative impact of international news is larger than that of domestic news.

Download PDF Export Citation
The Arrival of Public information and the Intraday Market Volatility ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

Is Family Ownership a Determinant of Firm Performance?

Woo-Suk Choi;Woo-Baik Lee

Asian Review of Financial Research :: Vol.18 No.1 pp.121-155

Abstract
Is Family Ownership a Determinant of Firm Performance? ×

This paper reports the empirical evidence on the relation between family ownership and firm performance using the 1,616 non-financial firms at the Korean Stock Market. We find that the family ownership is a significant determinant of the firm performance. The family firms significantly outperform the non-family firms, and the performances in the young-family firms and the old-family firms are indifferent. We classify the family ownership into direct and indirect one which the indirect-family firm is governed by the affiliated companies. The indirect-family firms as well as the direct-family ones perform better than non-family firms. Our results provide the family firms are prevalent and effective business structure in Korea, and support the convergence of interest hypothesis.

Download PDF Export Citation
Is Family Ownership a Determinant of Firm Performance? ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

The Effect of Expanding Publicly Available Quote Disclosure on Korean Stock Markets

Jong-Ho Park;Kyong Shik Eom

Asian Review of Financial Research :: Vol.18 No.1 pp.157-198

Abstract
The Effect of Expanding Publicly Available Quote Disclosure on Korean Stock Markets ×

Download PDF Export Citation
The Effect of Expanding Publicly Available Quote Disclosure on Korean Stock Markets ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

Structural Breaks, Politics, and the Stock Market : the Korean Experience after 1980

Seungwook Bahng

Asian Review of Financial Research :: Vol.18 No.1 pp.199-228

Abstract
Structural Breaks, Politics, and the Stock Market : the Korean Experience after 1980 ×

This paper discussed how abrupt changes of the stock price index could be linked to uncertainties in the political events in Korea. Using the presidential regimes as proxies for political uncertainty, I first tested for the question of whether return generating processes of the respective presidential regimes were different from those of other regimes. Then, using the logic of sequential testing procedures, I investigated the existence of the possible break points in the stock index returns. The following results were obtained. First, the financial crisis in 1997 is confirmed to have greatly influenced the return and volatility generating processes of the Korean stock market. Second, when the model incorporated unexpected changes of macroeconomic variables, I found that the structural break points had existed several months earlier than the official announcement of the beginning of the IMF-controlled period. Third, I also found that the break points occurred around a point of presidential regime changes, which was taken as partial evidence for the impact of the political factors on the behavior of the stock market.

Download PDF Export Citation
Structural Breaks, Politics, and the Stock Market : the Korean Experience after 1980 ×
  • EndNote
  • RefWorks
  • Scholar's Aid
  • BibTeX

Export Citation Cancel

1
Export citation