Quarterly publication of the Multinational Finance Society     ISSN 1096-1879

Is the Source of FDI Important to Emerging Market Economies? Evidence from Japanese and U.S. FDI
(Multinational Finance Journal, 2003, vol. 7, no. 3 & 4, pp. 107–130)

Wi Saeng Kim
Hofstra University, U.S.A.
Esmeralda Lyn
Hofstra University, U.S.A.
Edward Zychowicz
Hofstra University, U.S.A.

This paper takes the position that technology transfers associated with foreign direct investment inflows (FDI) are an important determinant of economic growth in developing countries. The paper also posits that technology transfers, ceteris paribus, depend on the attributes of FDI providers, particularly as they relate to the degree of technological advancement and the behavioral aspects of the technology transfer. Japan and the U.S. are two important sources of FDI where multinational corporations domiciled in the two nations exhibit distinct variation in these attributes. Consistent with earlier research, the findings of this paper lend support for a positive role of FDI inflows from the advanced countries in increasing the economic growth of developing countries. The paper further finds some evidence that the relationship between the economic growth of the host countries and FDI inflows is stronger for U.S. originated FDI than that of Japanese originated FDI. This finding is consistent with the notion that U.S. multinational firms are more effective in generating technology transfers and spillovers to developing countries than do Japanese multinational firms (JEL F210, F430, O000). 

Keywords: emerging market economies, foreign direct investments, economic development, technology transfer.

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Use of Different Trading Environments Around Interim Earnings Announcements on the Helsinki Stock Exchange
(Multinational Finance Journal, 2003, vol. 7, no. 3 & 4, pp. 131–152)

Markku Vieru
University of Oulu, Finland

This paper tests the hypothesis that an anticipated information event affects the use of trading venues. Data from the Helsinki Stock Exchange are used where an upstairs market co–exists with a downstairs market. Trades are classified also as in-house trades and externalized trades. This paper suggests that interim earnings announcement affects where trades are executed. The results indicate that an anticipated announcement increases downstairs trading before the announcement event. Correspondingly trades in the upstairs market tend to decrease before the announcement. After the announcement upstairs trading recovers. Furthermore, the empirical findings suggest that the in-house trades in the upstairs market are positively related to the liquidity and volatility during the pre-announcement period. After the announcement the volatility association changes resulting in increased downstairs trading with high volatility. The results suggest that after the announcement trades are more information-motivated and high volatility is associated with a larger proportion of downstairs trading (JEL D23, D82, G18).

Keywords: event study, information asymmetry, accounting disclosure, thin securities markets, trading behavior.

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The Release of Nelson Mandela: Effect on the Johannesburg Securities Exchange
(Multinational Finance Journal, 2003, vol. 7, no. 3 & 4, pp. 153–175)

Costas M. Stephanou
University of South Africa, S.A
Gawie S. du Toit
University of South Africa, S.A
Marius J. Maritz
University of South Africa, S.A

What determined the value of South African assets after the unbanning of the African National Congress (ANC) and the release of Nelson Mandela? Economic or political events? This paper employs a dynamic version of the APT model for the period from 1991 to 1998 to determine whether the increase in volatility on the JSE changed the specification of the APT model as it applied to the Financial & Industrial Index of the Johannesburg Securities Exchange (JSE). The finding is that political events in late 1991, and economic events in mid 1994, changed APTM’s specification. This would indicate that during periods of profound political change, political events drive stock market prices (JEL G310).

Keywords: arbitrage pricing theory model, Johannesburg Securities Exchange, political events, economic events.

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Comparing Conditional Variance Models: Theory and Empirical Evidence
(Multinational Finance Journal, 2003, vol. 7, no. 3 & 4, pp. 177–206)

Paolo Girardello
University of Verona, Italy
Orietta Nicolis
University of Bergamo, Italy
Giovanni Tondini
University of Verona, Italy

The aim of this paper is to identify whether the GARCH or the SV based models provide the best goodness of fit to financial time-series data. To investigate the issue, three different formulations for each type (i.e., the standard model, the fat-tailed model, and the asymmetric model) are examined. The models are first compared on theoretical grounds, then estimated using the daily returns from four market indices, and finally subjected to some diagnostic tests. The results demonstrate that for the standard formulation, the SV model fits data better than the GARCH model, while the fat-tailed and the asymmetric models roughly equivalent in describing the key features of returns. The results provide a preliminary analysis for selecting the best model with which to forecast the volatility of financial returns (JEL G0,G1).

Keywords: GARCH models, stochastic volatility models, QML estimation, financial time series

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The Role of Financial Instruments in Integrated Catastrophic Flood Management
(Multinational Finance Journal, 2003, vol. 7, no. 3 & 4, pp. 207–230)

Tatiana Ermolieva
International Institute for Applied Systems Analysis, Austria
Yuri Ermoliev
International Institute for Applied Systems Analysis, Austria
Guenther Fischer
International Institute for Applied Systems Analysis, Austria
Istvan Galambos
VITUKI Consult, Hungary

The main goal of this paper is to develop a flood management model that takes into account the specifics of catastrophic risk management: highly mutually dependent losses, the lack of information, the need for long-term perspectives and explicit analyses of spatial and temporal heterogeneities of various agents such as individuals, governments, and insurers. We use modified data from a pilot region of the Upper Tisza river, Hungary, to illustrate the evaluation of a public multipillar flood loss-spreading program involving partial compensation to flood victims by the central government, the pooling of risks through a mandatory public catastrophe insurance on the basis of location-specific exposures, and the demand for a contingent ex-ante credit to reinsure the insurance’s liabilities. GIS-based catastrophe models and stochastic optimization methods are used to guide policy analysis with respect to location-specific risk exposures. We use economically sound risk indicators leading to convex stochastic optimization problems strongly connected with nonconvex insolvency constraint, VaR and CVaR (JEL G22, G28, C61).

Keywords: flood risk, catastrophe modeling, insurance, stochastic optimization, insolvency, contingent credit, CvaR.

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