【CFRI 第十一卷 第1期】

CFRI 2021年第1期共6篇文章。

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1.Consumer finance/household finance: the definition and scope

Authors

Jing Jian Xiao

University of Rhode Island, Kingston, Rhode Island, USA,and

Chunsheng Tao

Minzu University of China, Beijing, China

Abstract

Purpose 

The purpose of this literature review paper is to define consumer finance, describe the scope of consumer finance and discuss its future research directions.

Design/methodology/approach 

In this paper, consumer finance is used as a synonym of household finance. Consumers refer to individuals and families. After defining the term “consumer finance,” we conducted a critical review of consumer finance as an interdisciplinary research field in terms of money managing, insuring, borrowing and saving/investing. Future research directions are also discussed.

Findings

This paper discusses similarities and differences among several terms such as consumer finance, household finance, personal finance, family finance and behavioral finance. The paper also reviewed key studies on consumer financial behavior around four key financial functions, namely, money management, insurance, loan and saving/investment and several nontraditional topics such as fintech and financial capability/literacy. The paper also introduced several datasets of consumer finance commonly used in the United States and China.

Originality/value

This paper clarified several similar terms related to consumer finance and sorted out the diverse literature of consumer finance in multiple disciplines such as economics, finance and consumer science, which provide a foundation for generating more fruitful research in consumer finance in the future.

Keywords

Behavioral finance, Consumer finance, Family finance, Household finance, Personal finance

Citation

Xiao, J.J. and Tao, C. (2020), "Consumer finance/household finance: the definition and scope", China Finance Review International, Vol. 11 No. 1, pp. 1-25. https://doi.org/10.1108/CFRI-04-2020-0032

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2.Inference for variance risk premium

Authors

Shuang Zhang

Guanghua School of Management, Peking University, Beijing, China,and

Song Xi Chen 

Guanghua School of Management, Peking University, Beijing, China,and

Lei Lu 

Asper School of Business, University of Manitoba, Winnipeg, Canada

Abstract

Purpose

With the presence of pricing errors, the authors consider statistical inference on the variance risk premium (VRP) and the associated implied variance, constructed from the option prices and the historic returns.

Design/methodology/approach

The authors propose a nonparametric kernel smoothing approach that removes the adverse effects of pricing errors and leads to consistent estimation for both the implied variance and the VRP. The asymptotic distributions of the proposed VRP estimator are developed under three asymptotic regimes regarding the relative sample sizes between the option data and historic return data.

Findings

This study reveals that existing methods for estimating the implied variance are adversely affected by pricing errors in the option prices, which causes the estimators for VRP statistically inconsistent. By analyzing the S&P 500 option and return data, it demonstrates that, compared with other implied variance and VRP estimators, the proposed implied variance and VRP estimators are more significant variables in explaining variations in the excess S&P 500 returns, and the proposed VRP estimates have the smallest out-ofsample forecasting root mean squared error.

Research limitations/implications

This study contributes to the estimation of the implied variance and the VRP and helps in the predictions of future realized variance and equity premium.

Originality/value

This study is the first to propose consistent estimations for the implied variance and the VRP with the presence of option pricing errors.

Keywords

Implied variance, Variance risk premium, Pricing errors, Kernel estimation

Citation

Zhang, S., Chen, S.X. and Lu, L. (2020), "Inference for variance risk premium", China Finance Review International, Vol. 11 No. 1, pp. 26-52. https://doi.org/10.1108/CFRI-04-2020-0044

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3.Impact of uncertainty on foreign exchange market stability: based on the LT-TVP-VAR model

Author

Jingshan Liu 

Bohai Securities Co., Ltd, Tianjin, China, Nankai University, Tianjin, China

Abstract

Purpose

The purpose of this study is to investigate the effects of uncertainty, namely, macroeconomic uncertainty (MU) and financial uncertainty (FU) on foreign exchange market stability, specifically on foreign exchange market pressure (EMP) and jump risk (RJV).

Design/methodology/approach

The latent threshold time-varying parameter VAR (LT-TVP-VAR) econometric approach is used in estimations to solve structural breaks.

Findings

The relationship of uncertainties and China’s foreign exchange market stability is latent threshold nonlinear dynamic time-varying. In China’s renminbi (RMB) appreciation stage, both MU and FU weaken the appreciation pressure of RMB. Moreover, MU and FU significantly increase the RJV, while MU significantly affects the RJV of the foreign exchange market. In the RMB depreciation stage, both MU and FU strengthen the EMP.

Research limitations/implications

Findings based on data in China’s foreign exchange market can be considered for other global markets in future research.

Practical implications

An increase in MU and FU has a negative effect on foreign exchange stability. Regulators can prevent the economic system uncertainty shocks on foreign exchange market stability through observation and judgment of MUand FU, which helps prevent and relieve financial risks. Investors can reduce foreign exchange risk as the exchange rate rebounds after hedging behavior during high uncertainty periods.

Originality/value

The effect of MU on the foreign exchange market stability is greater than that of FU, regardless of whether EMP or RJV occurs in the foreign exchange market.

Keywords

Macroeconomic uncertainty, Financial uncertainty, Foreign exchange market stability, Foreign exchange market pressure, Jump risk

Citation

Liu, J. (2020), "Impact of uncertainty on foreign exchange market stability: based on the LT-TVP-VAR model", China Finance Review International, Vol. 11 No. 1, pp. 53-72. https://doi.org/10.1108/CFRI-07-2019-0112

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4.Economic policy uncertainty and firms’ labor investment decision

Authors

Jian Chu 

School of Business, Nanjing University, Nanjing, China,and

Junxiong Fang 

School of Management, Fudan University, Shanghai, China

Abstract

Purpose

The purpose of this paper is to empirically investigate the impact of economic policy uncertainty on firms’ labor investment decision, which includes labor investment level and efficiency, especially human capital allocation.

Design/methodology/approach

This paper uses Economic Policy Uncertainty Index for China and Chinese A-share listed firms in the period 2002–2016 to constructs a sample of 20,779 firm-year observations and applies the methods of pooled OLS regressions to do an empirical study.

Findings

This paper finds that firms’ labor investment is negatively correlated with economic policy uncertainty. And firms’ labor investment efficiency (and overinvestment in labor) is positively (negatively) correlated with economic policy uncertainty, which is more significant for non-SOEs and firms with less government intervention. Further, the positive relation between economic policy uncertainty and labor investment efficiency is more significant for labor-intensive firms, firms in competitive industry, firms in developed labor market and firms under strong labor law protection. In addition, economic policy uncertainty induces firms to make adjustment on human capital structure and allocate more employees with high human capital, which eventually helps firms achieve higher total factor productivity.

Social implications

The study of this paper indicates that the government needs to consider economic policies’ impact on firms when introducing and changing policies and guide firms to improve human capital allocation under different internal and external conditions to finally realize the optimal allocation of social resources.

Originality/value

This paper studies the influence of external economic policy environment on firms’ labor investment decision, which lacks adequate attention in the literature and indicates that under economic policy uncertainty, firms actively decrease labor demand and increase labor investment efficiency by optimizing human capital allocation.

Keywords

Economic policy uncertainty, Labor investment, Labor investment efficiency, Human capital allocation

Citation

Chu, J. and Fang, J. (2020), "Economic policy uncertainty and firms' labor investment decision", China Finance Review International, Vol. 11 No. 1, pp. 73-91. https://doi.org/10.1108/CFRI-02-2020-0013

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5.Venture capital network and the M&A performance of listed companies

Authors

Yonghong Jin

Department of Finance, Shanghai Normal University, Shanghai, China,and

Meng Xu

Department of Finance, East China University of Science and Technology, Shanghai, China,and

Wei Wang

Department of Finance, Shanghai Normal University, Shanghai, China, and

Yuqin Xi

Department of Human Resources, Shanghai University of International Business and Economics, Shanghai, China

Abstract

Purpose

The purpose of this paper is to discuss how venture capital institutions can use their syndicated investment network to help listed companies to achieve better performance in mergers and acquisitions (M&A) activities.

Design/methodology/approach 

This paper builds a fixed effect unbalanced panel regression model to study the impact of venture capital network on the M&A performance of listed companies.

Findings

Evidence indicated that the stronger the information resource acquisition ability of venture capital institutions in the network, the better the listed company’s M&A performance supported; the stronger the information resource control ability of venture capital institutions in the network, the better the listed company’s M&A performance supported; the higher the participation of venture capital institutions, the more significant the positive impact of information resource acquisition and information resource control abilities on M&A performance in the network.

Research limitations/implications

The data in this paper are from China’s Growth Enterprise Market (GEM), other markets may be considered in the future research studies.

Practical implications

The research conclusions of this paper affirm the positive role played by venture capital institutions through syndicated investment in eliminating information asymmetry in M&A of invested companies. The information resource acquisition and control abilities and participation degree of the venture capital network have positively promoted the M&A performance of the invested enterprises.

Originality/value

The conclusions of this paper not only provide useful supplements to existing research literature on venture capital network functions and corporate M&A but also have certain guiding value for venture capital institutions and start-ups to better use venture capital practices to improve their capabilities and performance.

Keywords

Venture capital, Venture capital network, M&A performance

Citation

Jin, Y., Xu, M., Wang, W. and Xi, Y. (2020), "Venture capital network and the M&A performance of listed companies", China Finance Review International, Vol. 11 No. 1, pp. 92-123. https://doi.org/10.1108/CFRI-02-2020-0016

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6.Heterogeneous beliefs and idiosyncratic volatility puzzle: evidence from China

Authors

Mao He 

School of Economics and Management, Southwest Jiaotong University, Chengdu, China,and

Juncheng Huang

School of Economics and Management, Southwest Jiaotong University, Chengdu, China,and

Hongquan Zhu 

School of Economics and Management, Southwest Jiaotong University, Chengdu, China

Abstract

Purpose

The purpose of our study is to explore the “idiosyncratic volatility puzzle” in Chinese stock market from the perspective of investors' heterogeneous beliefs. To delve into the relationship between idiosyncratic volatility and investors' heterogeneous beliefs, and uncover the ability of heterogeneous beliefs, as well as to explain the “idiosyncratic volatility puzzle”, we construct our study as follows.

Design/methodology/approach

Our study adopts the unexpected trading volume as proxies of heterogeneity, the residual of Fama–French three-factor model as proxies of idiosyncratic volatility. Portfolio strategies and Fama–MacBeth regression are used to investigate the relationship between the two proxies and stock returns in Chinese A-share market.

Findings

Investors' heterogeneous beliefs, as an intermediary variable, are positively correlated with idiosyncratic volatility. Meanwhile, it could better demonstrate the negative correlation between the idiosyncratic volatility and future stock returns. It is one of the economic mechanisms linking idiosyncratic volatility to subsequent stock returns, which can account for 11.28% of the puzzle.

Originality/value

The findings indicate that idiosyncratic volatility is significantly and positively correlated with heterogeneous beliefs and that heterogeneous beliefs are effective intervening variables to explain the “idiosyncratic volatility puzzle”.

Keywords

Idiosyncratic volatility, Heterogeneous beliefs, Stock returns, A-share market

Citation

He, M., Huang, J. and Zhu, H. (2020), "Heterogeneous beliefs and idiosyncratic volatility puzzle: evidence from China", China Finance Review International, Vol. 11 No. 1, pp. 124-141. https://doi.org/10.1108/CFRI-07-2019-0128

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The China Finance Review International is founded by Antai College of Economics and Management at Shanghai Jiao Tong University, one of the top universities in Asia. The journal publishes quality empirical and theoretical research on financial and economic issues.

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