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(2006)Journal ArticlePublished star ratings for managed funds, issued by independent agencies, are increasing in popularity, coverage in the academic literature, and influence as measured by the market share and money inflow dominance of rated funds. Hypothesising that fund ratings serve as a proxy for a fund's reputation, this article examines the managed fund inflow effect of the awarding of an initial rating by ASSIRT, Australia's largest fund rating agency. Retail equity funds record significant unexpected size changes at the announcement of the initial rating and over a one-year post-rating analysis period. Wholesale fund sizes take over six months to show the inflow effects of a ratings initiation. Cash and fixed interest funds exhibit volatile size changes whose pattern does not bear a significant relationship to the initial rating phenomenon. Finally, fund management expense ratios remain stable after the rating.
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(2003)Journal ArticleThis study examines how the termination of superannuation investment mandates contributes to the departure of top fund managers in companies delegated the portfolio management role. Terminations of superannuation plan mandates increase the probability of a fund company changing the responsible fund manager. Objective-adjusted returns are also significant managerial turnover considerations. These results illustrate that significant losses of superannuation fund clients act as an external control mechanism in the investment management industry that complements internal managerial performance measures.
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(2004)Journal ArticleThis study investigates the alleged disintermediation of banks’ traditional deposit-taking in favour of investment management activities. Using data on Australian bank-affiliated funds and a nine-year record of the parent banks’ liability balances, this study finds that managed funds do not displace bank liabilities. Prudential capital adequacy requirements dissuade banks from using in-house managed investments as indirect conduits for raising funds in the same manner as deposit-taking.
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(2005)Journal ArticleWe examine the impact of several factors on the selection of portfolio managers for Australian pension plan mandates. Performance measures do not affect the probability of a mandate allocation. Pension sponsors tend to choose managers with top-quartile five-year performance who have recently beaten a market benchmark. Management expenses have a negative impact on a manager’s chances. A surprising result is sponsors’ tolerance for high portfolio trading costs. Mandates are spread across manager investment styles. The style and institutional attributes of preferred managers suggest trustees’ reputation and prudential concerns matter, particularly for the aggregate annual mandate allocations.
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(2006)Journal ArticlePurpose – This paper aims to examine mutual fund investors' response to mergers of Australian mutual fund companies. Design/methodology/approach – Two matching-control techniques are employed to analyse the impact of mergers on excess money in and out of open and closed funds involved in the transactions. The paper employs cross-sectional regression analyses to examine the impact of mergers on different types of parties to mergers. Findings – The results suggest that mergers are not accompanied by increased money flows. Instead investors withdraw from the target funds prior to and after the merger. Funds belonging to specialist mutual fund companies record more gains in assets under management than declines following mergers, and that money inflow gains at competing funds induce reductions of management expense ratios at target funds. Research limitations/implications – This paper studies mergers in only one industry in a single country. Future studies may extend to other industries and economies. Originality/value – This paper extends prior research on the flow effects of mergers at individual fund level by considering the issue at the corporate level.
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(2006)Journal ArticleWe investigate the effects of the Reserve Bank of Australia's foreign exchange interventions on the USD/AUD market and 90-day and 10-year interest rate futures markets for the period July 1986–December 2003. Using recently released revised and updated intervention data, we investigate contemporaneous and disaggregated intervention influences and find significant evidence for (i) intervention effectiveness in moderating the contemporaneous exchange rate movements especially if interventions were cumulative and large, (ii) exchange rate volatility reducing effect with a day's lag, (iii) undesirable interest rate movements following interventions in some periods compromising monetary policy effectiveness, and (iv) a volatility reducing effect of cumulative interventions in the 90-day rate, and a volatility increasing effect of large interventions in both the 90-day and 10-year rate futures. These findings are a unique and significant contribution to the prevailing literature as they demonstrate that the RBA's interventions matter not only for the foreign exchange market but also for the debt markets.
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(2006)Journal ArticleIn this paper, we examine the integration of European government bond markets using daily returns over the 1998–2003 period with a set of complementary techniques to assess the time varying level of financial integration. We find evidence of strong contemporaneous and dynamic linkages between Euro zone bond markets with that of Germany. However, there is much weaker evidence outside of the Euro zone for the three accession markets of Czech Republic, Hungary and Poland, and the UK. In general, the degree of integration for these markets is weak and stable, with little evidence of further deepening despite the increased political integration associated with further enlargement of the European Union (EU).
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(2006)Journal ArticleWe test the effectiveness of Bank of Japan (BOJ)'s foreign exchange interventions on conditional first and second moments of exchange rate returns and traded volumes, using a bivariate EGARCH model of the Yen/USD market from 5-13-1991 to 3-16-2004. We also estimate a friction model of BOJ's intervention reaction function based on reducing short-term market disorderliness and supplementing domestic monetary policy. Important finding of this study are that: (i) we find ineffectiveness of BOJ interventions in influencing exchange rate trends pre-1995, in general, but effectiveness post-1995; (ii) FED intervention amplified the effectiveness of the BOJ transactions; (iii) interventions amplified market volatility and volumes through a 'learning by trading' process; (iv) BOJ's interventions were based on 'leaning against the wind' motivations on the exchange rate trend and volumes; and (v) BOJ interventions were vigorously used in support of domestic monetary policy objectives post-1995. Though some of our findings confirm recent studies, our analysis goes deeper to provide new findings with important implications for central banks and foreign exchange market participants.
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(2006)Journal ArticleThis paper examines the dynamic relationship between daily stock and government bond returns of selected countries over the past decade to infer the state and progress of inter-financial market integration. We proceed to empirically investigate the influence of the European Monetary Union (EMU) on time variations in inter-stock-bond market integration/segmentation dynamics using a two-step procedure: First, we document the downward trends in time-varying conditional correlations between stock and bond market returns in European countries, Japan and the US. Second, we investigate the causality and determinants of this interdependent relationship, in particular, whether the various macroeconomic convergence criteria associated with the EMU have played a significant role. We find that real economic integration and the reduction in currency risk have generally had the desired effect on financial integration but monetary policy integration may have created uncertain investor sentiments on the economic future of the EMU, thereby stimulating a flight to quality phenomenon. (c) 2005 Elsevier B.V. All rights reserved.
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(2005)Journal ArticleThis paper investigates the nature of the stock market linkages in the advanced Asia-Pacific stock markets of Australia, Hong Kong, Japan and Singapore with the US and the information leadership of the US and Japan in the region since the early 1990s. It has been found that both the contemporaneous return and volatility linkages were significant and tended to be more intense after the 1997 Asian crisis period. However, the investigation of the dynamic information spillover effects in terms of returns, volatility and trading volume from the US and Japan did not produce such time-varying influence. In general, significant dynamic information spillover effects from the US were found in all the Asia-Pacific markets, but the Japanese information flows were relatively weak and the effects were country specific. J. Japanese Int. Economies 19 (3) (2005) 338-365. School of Banking and Finance, The University of New South Wales, Sydney, NSW 2052, Australia. (c) 2004 Elsevier Inc. All rights reserved.