Size and liquidity effects in Australasian and South East Asian equity markets
Size and liquidity effects in Australasian and South East Asian equity markets
The emerging equity markets of Asia-Pacific region and the developed Australian and New Zealand equity markets play a significant role in attracting foreign direct investment (FDI) and portfolio investment as well as facilitating local economic development and enforcing high standards of governance. The markets within the region are extremely diverse in nature ranging from those that are heavily influenced and controlled by the state to those that have strong corporate governance regimes enforced by stringent well designed regulation. This paper estimates the costs of equity across major industry sectors in the equity markets of Australia, New Zealand, Indonesia, Malaysia, Singapore, Thailand, Hong Kong and China’s Shenzen and Shanghai. The Fama and French (1993) three-factor model Capital Asset Pricing Model is augmented to take account of stock size and illiquidity factors that are prominent in emerging markets. Results show that premia associated with liquidity are important for the majority of Asia-Pacific markets although in striking contrast size premia are overwhelmingly important in the two Chinese exchanges of Shenzen and Shanghai reflecting the unique level of state control exerted over these markets. Costs of equity are found to be lowest in Australia and New Zealand and considerably higher in Indonesia and Thailand where regulation concerning information disclosure and corporate governance are weaker. However the costs of equity associated across all industries for the two Chinese exchanges of Shenzen and Shanghai are the highest owing primarily to a considerable size premium driving returns and arising from state restrictions placed on listed firms and investors alike. This would provide evidence that burdensome state control exerted on markets leads to a burden of costs falling on firms seeking a listing and rendering these markets less competitive than regional neighbours.
Asian Finance Association
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
4 July 2010
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Hearn, Bruce
(2010)
Size and liquidity effects in Australasian and South East Asian equity markets.
In Asian Finance Association Annual Conference, Hong Kong, SAR China.
Asian Finance Association.
43 pp
.
Record type:
Conference or Workshop Item
(Paper)
Abstract
The emerging equity markets of Asia-Pacific region and the developed Australian and New Zealand equity markets play a significant role in attracting foreign direct investment (FDI) and portfolio investment as well as facilitating local economic development and enforcing high standards of governance. The markets within the region are extremely diverse in nature ranging from those that are heavily influenced and controlled by the state to those that have strong corporate governance regimes enforced by stringent well designed regulation. This paper estimates the costs of equity across major industry sectors in the equity markets of Australia, New Zealand, Indonesia, Malaysia, Singapore, Thailand, Hong Kong and China’s Shenzen and Shanghai. The Fama and French (1993) three-factor model Capital Asset Pricing Model is augmented to take account of stock size and illiquidity factors that are prominent in emerging markets. Results show that premia associated with liquidity are important for the majority of Asia-Pacific markets although in striking contrast size premia are overwhelmingly important in the two Chinese exchanges of Shenzen and Shanghai reflecting the unique level of state control exerted over these markets. Costs of equity are found to be lowest in Australia and New Zealand and considerably higher in Indonesia and Thailand where regulation concerning information disclosure and corporate governance are weaker. However the costs of equity associated across all industries for the two Chinese exchanges of Shenzen and Shanghai are the highest owing primarily to a considerable size premium driving returns and arising from state restrictions placed on listed firms and investors alike. This would provide evidence that burdensome state control exerted on markets leads to a burden of costs falling on firms seeking a listing and rendering these markets less competitive than regional neighbours.
Text
Australia-SE Asia Liq-CAPM AIB CONFERENCE BH
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Published date: 4 July 2010
Venue - Dates:
Asian Finance Association annual conference, Hong Kong University of Science and Technology, Hong Kong, Hong Kong, 2010-07-01 - 2010-07-05
Identifiers
Local EPrints ID: 423398
URI: http://eprints.soton.ac.uk/id/eprint/423398
PURE UUID: 39b5a174-9aab-4000-a458-b6085e69ac58
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Date deposited: 21 Sep 2018 16:30
Last modified: 16 Mar 2024 04:37
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