【CFRI 第十一卷 第2期】

CFRI 2021年第2期共6篇文章。扫描文中二维码可免费下载本期文章，感谢您对CFRI的关注和支持！

1

The causes and challenges of low interest rates: insights from basic principles and recent literature

Author

Youchang Wu 

Department of Finance, Lundquist College of Business, University of Oregon, Eugene, Oregon, USA

Abstract

Purpose

What causes the downward trend of real interest rates in major developed economies since the 1980s? What are the challenges of the near-zero interest and inflation rates for monetary policy? What can the policymakers learn from the latest developments in the monetary and interest rate theory? This paper aims to answer these questions by reviewing both basic principles of interest rate determination and recent academic and policy debates.

Design/methodology/approach

The paper critically reviews the explanations for the downward trend of real interest rates in recent decades and monetary policy options in a near-zero interest rate environment.

Findings

The decline of real interest rates is likely an outcome of multiple technological, social and economic factors including diminished productivity growth, changing demographics, elevated tail-risk concerns, time-varying convenience yields of safe assets, increased global demand for safe assets, rising wealth and income inequality, falling relative price of capital, accommodative monetary policies, and changes in industry structure that alter the investment and saving behaviors of the corporate sector. The near-zero interest rate limits the space of central banks' response to economic crises. It also challenges some conventional wisdoms of monetary theory and sparks radically new ideas about monetary policy.

Originality/value

This survey differs from the existing work by taking a broader view of both economics and finance literature. It critically assesses the economic forces driving the global decline of real interest rates through the lens of basic principles and empirical evidence and discusses the merits and limitations of each proposed explanation. The study emphasizes the importance of a better understanding of economic forces driving diverging trends of corporate investment and saving behaviors. It also discusses the implications of the neo-Fisherism and the fiscal theory of price level for monetary policy in a low interest rate environment.

Keywords 

Interest rate, Safe asset, Tail risk, Secular stagnation, Monetary policy, Zero lower bound

Citation

Wu, Y. (2021), "The causes and challenges of low interest rates: insights from basic principles and recent literature", China Finance Review International, Vol. 11 No. 2, pp. 145-169. https://doi.org/10.1108/CFRI-06-2020-0071

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2

Fat-tailed stochastic volatility model and the stock market returns in China

Authors

Donglian Ma 

Graduate School of Economics, Osaka University, Osaka, Japan,and,

Hisashi Tanizaki 

Graduate School of Economics, Osaka University, Osaka, Japan

Abstract

Purpose

The purpose of this paper is to investigate how the selection of return distribution impacts estimated volatility in China’s stock market.

Design/methodology/approach

The authors use a Bayesian analysis of fat-tailed stochastic volatility (SV) model with Student’s t-distribution, and conduct an out-of-sample test with realized volatility.

Findings

Empirical analysis results indicate that fat-tailed SV model performs better in capturing the dynamics of daily returns. The authors find that asymmetry, holiday and day of the week effects are detected in estimated volatility. However, the out-of-sample comparison shows that fat-tailed SV models fail to outperform SV models with normal distribution in fitting and predicting realized volatility.

Originality/value

The contribution of this paper to existing literature is twofold. First, it proves that fat-tailed SV models with Student’s t-distribution perform better than normally distributed SV models in fitting daily returns of China’s stock market. Second, this paper takes asymmetry, holiday and day of the week effects into consideration at the same time in the fat-tailed SV model.

Keywords 

China, Bayesian, Realized volatility, Fat-tailed, Stochastic volatility

Citation

Ma, D. and Tanizaki, H. (2021), "Fat-tailed stochastic volatility model and the stock market returns in China", China Finance Review International, Vol. 11 No. 2, pp. 170-184. https://doi.org/10.1108/CFRI-03-2018-0028

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3

Whether stock market provides high returns: evidence from skewness of individual stocks in China

Authors

Tianning Ma 

School of Management Science and Engineering, Central University of Finance and Economics, Beijing, China,and,

Shuo Li

Tianjin University, Tianjin, China

China Transport Telecommunicationa and Information Center, Beijing, China,and,

Xu Feng 

Tianjin University, Tianjin, China

Abstract

Purpose

This paper studies whether individual stocks provide higher returns than government bond in the Chinese market.

Design/methodology/approach

The authors compare individual stock returns and government bond returns in the Chinese market.

Findings

The authors find that more than half of individual stocks underperform government bonds over the same period in China, which highlights the important role of positive skewness in the distribution of individual stock returns. The high return of a few stocks is the reason why the stock market return is higher than that of government bond in China.

Originality/value

The results of this paper emphasize that portfolio diversification plays an important role in the Chinese market.

Keywords 

Skewness, Individual stock returns, Government bond returns, Chinese stock market

Citation

Ma, T., Li, S. and Feng, X. (2021), "Whether stock market provides high returns: evidence from skewness of individual stocks in China", China Finance Review International, Vol. 11 No. 2, pp. 185-200. https://doi.org/10.1108/CFRI-12-2019-0162

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4

Do FDI inflows affect the off-balance sheet activities of banks in GCC economies?

Author

Abdulazeez Y.H. Saif-Alyousfi 

Department of Finance, College of Business Administration, University of Hafr Al-Batin, Hafr Al Batin, Saudi Arabia) (Department of Finance and Banking, Faculty of Administrative Sciences, Taiz University, Taiz, Yemen)

Abstract

Purpose

This paper investigates and compares the impact of foreign direct investment (FDI) inflows (flow and stock) on bank off-balance sheet (OBS) activities in aggregate as well as at the level of conventional and Islamic banks in GCC countries. It also tests hypotheses of direct and indirect impacts of FDI flow and FDI stock on OBS activities.

Design/methodology/approach

This paper uses both static and dynamic panel generalized methods of moments (GMM) estimation techniques to analyze the data of 70 GCC banks (45 conventional and 25 Islamic banks) over the period 1995–2017.

Findings

Empirical results indicate that FDI flow and FDI stock have a significant negative direct impact on OBS activities of GCC banks. The results lend support for the direct channel hypothesis for the effect of FDI on OBS activities and find no evidence in support of the indirect channel hypothesis. OBS activities from conventional banks appear to be more affected than those from Islamic banks.

Practical implications

The results of this study are expected to trigger appropriate policy response from the central banks of the respective GCC countries as well as their governments.

Originality/value

It is widely recognized that FDI inflows are of great importance to the economic development of emerging and developing countries. However, their impact on bank OBS activities has so far not been subject to accurate empirical assessment. This paper aims to fill this gap by providing an in-depth quantitative analysis of the impact of FDI flow and FDI stock separately, on bank OBS activities for both conventional and Islamic banks in GCC countries. It distinguishes between direct and indirect channels through which FDI flow and FDI stock may affect OBS activities for banks as a whole and both conventional and Islamic banks separately. It also uses both static and dynamic panel GMM estimation techniques to analyze the data.

Keywords 

Off-balance sheet activities, FDI flow and FDI stock, GCC, Static and dynamic panel GMM estimation techniques

Citation

Saif-Alyousfi, A.Y.H. (2021), "Do FDI inflows affect the off-balance sheet activities of banks in GCC economies?", China Finance Review International, Vol. 11 No. 2, pp. 201-229. https://doi.org/10.1108/CFRI-03-2020-0027

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5

The inverted U-shaped relationship between crowdfunding success and reward options and the moderating effect of price differentiation

Authors

Zhigang Cai 

Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China,and,

Pengzhu Zhang 

Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China,and,

Xiao Han 

School of Business, Qingdao University, Qingdao, China

Abstract

Purpose

The paper is to explore crowdfunding success determinants from the reward menu design aspect, distinguishing from extant studies focusing on characteristics of project creators or crowdfunding projects and funding dynamics. Both the number of reward options and price differentiation of rewards are considered.

Design/methodology/approach

The authors use the quadratic model to identify a curvilinear relationship between the number of reward options and crowdfunding success, by running regressions on data collected from one of the most influential reward-based crowdfunding platforms in China. In addition, they explore the moderating effect of price differentiation on the curvilinear relationship.

Findings

The authors find an inverted U-shape relationship between the number of reward options and the optimal number of options is around 10. In addition, they find that the curvilinear relationship is moderated by reward price differentiation.

Practical implications

This paper has managerial implications for crowdfunding project creators and platform managers. To achieve better crowdfunding outcomes, a proper number of reward options with diversified reward prices should be provided.

Originality/value

The paper contributes to the literatures in antecedents of crowdfunding success from reward menu design aspect based on theories in investment and purchasing decision making. It is different from existing studies focusing on the characteristics of project creators and crowdfunding projects or funding dynamics. It also parallels retirement contribution plan design studies by exploring the reward menu design in the crowdfunding context.

Keywords 

Crowdfunding, Reward menu design, Inverted U-Shape, Reward options, Price differentiation

Citation

Cai, Z., Zhang, P. and Han, X. (2021), "The inverted U-shaped relationship between crowdfunding success and reward options and the moderating effect of price differentiation", China Finance Review International, Vol. 11 No. 2, pp. 230-258. https://doi.org/10.1108/CFRI-11-2019-0152

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6

The impact of closing mechanism changes: evidence from the Shanghai stock market

Authors

Dan Ma 

College of Management and Economics, Tianjin University, Tianjin, China,and,

Chunfeng Wang 

College of Management and Economics, Tianjin University, Tianjin, China,and,

Zhenming Fang 

College of Management and Economics, Tianjin University, Tianjin, China,and,

Ziwei Wang 

College of Management and Economics, Tianjin University, Tianjin, China

Abstract

Purpose

The purpose of this paper is to empirically examine the impact of closing mechanism changes on market quality, investor trading behavior and market manipulation in the Shanghai stock market.

Design/methodology/approach

A dummy variable is constructed indicating whether the closing mechanism is call auction or continuous auction. Market quality is measured from aspects of liquidity, volatility and price continuity; investor trading behavior is scaled by order timing and order aggressiveness, and a price deviation indicator is the proxy of manipulation. Using panel regression, this study examines the impact of closing mechanism changes based on intraday transaction data from the Shanghai stock market.

Findings

The conclusions are as follows: First, market quality improves after the closing mechanism is reformed in terms of liquidity, volatility and price continuity. Second, order strategy changes significantly in the closing call market, and investors trade more aggressively in the continuous trading period before closing. Third, the closing call mechanism restrains the closing price manipulation and thus prompts an efficient closing price.

Originality/value

This paper examines the policy effects of closing mechanism changes from aspects of market quality, trading behavior and price manipulation, providing pieces of evidence for trading mechanism design and market supervision in emerging markets.

Keywords 

Closing mechanism, Call auction, Market quality, Investor behavior, Price manipulation

Citation

Ma, D., Wang, C., Fang, Z. and Wang, Z. (2021), "The impact of closing mechanism changes: evidence from the Shanghai stock market", China Finance Review International, Vol. 11 No. 2, pp. 259-281. https://doi.org/10.1108/CFRI-04-2020-0041

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Background

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.

The China Financial Review International aims to promote discussions and publish works on important finance and economic issues in the world. We encourage ground-breaking research related to new and niche areas in finance, such as Fintech and socially responsible investments. Critical thinking is a key area the journal emphasizes. We welcome critiques of existing literature and comparative analysis between emerging markets and developed economies.  

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The journal acts as a medium between China's finance scholars and international financial economists to share their views and investigate a wide range of issues including:

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• Financial econometrics

• International finance

• Market microstructure

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