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Purpose This study empirically examines how industrial diversification and partner business relatedness influence shareholder value, focusing on US multinational enterprises’ (MNEs) worldwide joint venture (JV) announcements, with particular emphasis on East Asian economies. Design/methodology/approach Drawing on theories from finance, strategic management and international business, we apply a standard event study methodology and employ three parametric and nonparametric tests (i.e. the Patell Z-test, the rank test and the generalized sign test) to assess the impact. We calculate abnormal returns (ARs) as the difference between actual and expected returns and average them across firms to obtain the average AR for each day in the [−10, +10] window, thereby capturing potential information leakage before JV announcement and delayed market reactions afterward (Brown and Warner, 1985; Fama, 1998). Findings We find robust evidence of a diversification premium, confirming that diversification through IJVs increases shareholder value for US partners and partnering with businesses in unrelated industries can amplify the value gains from diversification. Practical implications The findings suggest that IJVs can be a more effective entry mode than acquisitions or greenfield investments when MNEs expand into non-core business areas, offering strategic guidance for both investment mode choice and partner selection. Social implications Our findings have important implications for firms’ investment mode and partner selection decisions when they expand internationally. Originality/value To the best of our knowledge, this study is among the first to systematically investigate the combined effects of industrial diversification and partner business relatedness on shareholder value in the context of US firms undertaking IJV investments in East Asian economies.

A recent article (Tse, 1998) published in this journal analysed the conditional heteroscedasticity of the yen-dollar exchange rate based on the fractionally integrated asymmetric power ARCH model. In this paper, we present replication results using Tse's (1998) yen-dollar series. We also examine the robustness of Tse's (1998) findings across different currencies, sample periods and non-nested GARCH-type models. Unlike Tse (1998), we find some evidence of asymmetric conditional volatility for daily returns of currencies measured against the dollar or the yen.

In this paper, the first study of stochastic economic modelling with Chinese data is conducted for actuarial use. Univariate models, vector autoregression and two cascade systems (equity-driving cascade system and price-inflation-driving cascade system) are described and compared. We focus on six major economic assumptions for modelling purposes, which are price inflation rate, wage inflation rate, long-term interest rate, short-term interest rate, equity total return and bond total return. Granger causality tests are used to identify the driving force of a cascade system. Robust standard errors are estimated for each model. Diagnostic checking of residuals, goodness-of-fit measures and out-of-sample validations are applied for model selection. By comparing different models for each variable, we find that the equity-driving cascade system is the best structure for actuarial use in China. The forecasts of the variables could be applied as economic inputs to stochastic projection models of insurance portfolios or pension funds for short-term asset and liability cash flow forecasting.

This paper examines the existence of value premium in the Chinese stock markets and empirically provides its explanation. Our results suggest that the value premium does exist in the Chinese markets, and investor sophistication is significant in explaining its existence. In particular, there is supporting evidence that the value premium could be driven by individual investors, whereas stocks that are mostly held by institutional investors are value-premium free. We briefly discuss the implications of our findings.

Most studies of business cycle exclude the dimension of asymmetric conditional volatility. In this paper, we propose three bivariate asymmetric GARCH models to capture the properties of conditional volatility and time-varying conditional correlations of business cycle indicators in four OECD countries. Our study extends the constant conditional correlation framework proposed by Bollerslev (1990) and the time-varying conditional correlation approach by Tse and Tsui (2002), respectively. Using indices of industrial production as proxies for business cycles indicators, we detect statistically significant evidence of asymmetric conditional volatility in the UK and US. Additionally, we find that the conditional correlations are significantly time-varying, and that the strength of varying correlations may be linked to the degree of economic integration between the countries.

This article examines the volatility dynamics of the mainland Chinese stock markets (Shanghai A- and B-shares, Shenzhen A- and B-shares, H-shares, and red chips) by employing the daily returns data from 1993 to 2012 and a multivariate volatility framework that incorporates the features of asymmetries, persistence, and time-varying correlations, which are typically observed in stock markets of developed econonnes. Our results indicate that, unlike the Shenzhen and Shanghai A-share markets, the B-share, H-share and red chip markets do not exhibit significant asymmetric volatility (leverage effect). Furthermore, return volatility in the A-share markets is relatively more volatile than the others before 1997 and becomes more stable afterward. In addition, there is strong evidence of volatility persistence in all the markets, and this finding is robust to changes in model specification. The Chinese stock markets apparently share a common degree of persistence (fractional integration) in volatility. Moreover, the conditional correlations are significantly time-varying and are strengthening over time, especially after 2002. These findings have important implications for hedging and portfolio management and diversification. [PUBLICATION ABSTRACT]

This paper examines the existence of value premium in the Chinese stock markets and empirically provides its explanation. Our results suggest that the value premium does exist in the Chinese markets, and investor sophistication is significant in explaining its existence. In particular, there is supporting evidence that the value premium could be driven by individual investors, whereas stocks that are mostly held by institutional investors are value-premium free. We briefly discuss the implications of our findings.

This dissertation is on the topic of multivariate conditional heteroskedasticity modeling in time series and financial econometrics. It is of interest to consider multivariate volatility models because it is widely accepted that financial volatilities move together over time across assets and markets. There are several challenges associated with this class of models, such as ensuring positive-definiteness of the conditional variance-covariance matrix in practice, interpreting the model parameters, and incorporating the various features such as long-range persistence and asymmetries in volatility. Given these challenges, it is not surprising that theoretical analysis and empirical applications of multivariate models have lagged behind the univariate version and knowledge of the asymptotic (large-sample) and finite-sample properties of these models remains fairly limited. This dissertation fills the gap in the literature on multivariate conditional heteroskedasticity models by considering their finite-sample properties and empirical applications in different contexts. Chapter 1 analyzes the finite-sample properties of various models that not only incorporate features such as asymmetries, persistence, and time-varying correlations but also ensure the positive-definiteness of the conditional variance-covariance matrix at every point in time. The main conclusion is that their finite-sample properties do not perform too poorly in terms of bias and mean square error. Chapters 2–4 present three different empirical applications of this class of models. In particular, Chapter 2 considers the volatility dynamics of the greater China equity markets and notes that the stylized facts established for financial markets in developed economies are not necessarily applicable to those in developing economies. The next chapter analyzes cross rates that do not involve the US dollar as the numeraire currency. It is concluded that empirical regularities for the bilateral US dollar exchange rates could be different from the volatility and correlation properties of cross currency rates. The final chapter examines macroeconomic fluctuations of the Australian economy using a group of multivariate volatility models. The correlations among the fluctuations of the national income components are observed to be time-invariant based on the Lagrange Multiplier and Information Matrix tests. These components also do not display significant asymmetries in their response to macroeconomic shocks.

The evolution of volatility and correlation patterns of the Malaysian ringgit and the Singapore dollar are analyzed in this paper. Our approach can simultaneously capture the empirical regularities of persistent and asymmetric effects in volatility and time-varying correlations of financial time series. Consistent with the results of Tse and Tsui (1997), there is only some weak support for asymmetric volatility in the case of the Malaysian ringgit when the two currencies are measured against the US dollar. However, there is strong evidence that depreciation shocks have a greater impact on future volatility levels compared with appreciation shocks of the same magnitude when both currencies measured against the yen. Moreover, evidence of time-varying correlation is highly significant when both currencies are measured against the yen. Regardless of the choice of the numeraire currency and the volatility models, shocks to exchange rate volatility are found to be significantly persistent.