This paper provides an empirical analysis of the performance of 45 international closed-end funds and compares alternate measures of performance using the sample of funds and 35 national market indices. The empirical evidence indicates that the risk-adjusted performance of the shares or the net asset values of the funds match the performance of their respective local market indices, as well as the world market index and do not exhibit superior timing ability. These findings are robust to conditioning on information.

This paper explores the determinants of financial development by focusing on the role played by barriers to the diffusion of financial technology. These barriers are measured using human genetic distance from the technology frontier. The results based on cross-sectional data for 123 countries suggest that genetic distance to the global frontier has an economically and statistically significant effect on financial development, in that countries that are genetically far from the technology leader tend to have lower levels of financial development. Genetic distance is found to have the largest effect, even after controlling for other determinants of financial development established in the literature. These findings indicate that cultural barriers to the diffusion of financial technology across borders impact financial development by influencing the follower countries’ ability to adopt and adapt innovations from the frontier.

While the literature concerned with the predictability of stock returns is huge, surprisingly little is known when it comes to role of the choice of estimator of the predictive regression. Ideally, the choice of estimator should be rooted in the salient features of the data. In case of predictive regressions of returns there are at least three such features; (i) returns are heteroskedastic, (ii) predictors are persistent, and (iii) regression errors are correlated with predictor innovations. In this paper we examine if the accounting of these features in the estimation process has any bearing on our ability to forecast future returns. The results suggest that it does.

This paper examines the degree to which cash flow availability influences firm investment in six OECD countries. In particular, we are interested in the extent to which the reliance on internal funds is affected by firm size, since there is general agreement that smaller firms have less access to external capital markets and, thus, should be more affected by the availability of internal funds. Earlier work has concluded that the documented positive relationship between cash flow and investment is evidence of the existence of financial constraints. We first examine all firms, regardless of size, in each country, and we find that the amount of corporate investment is affected by internal resources in all six countries; that is, internal financing affects firm investment. We then repeat the analysis segmenting the sample using three measures of firm size. Contrary to our a priori expectations, we find that the cash flow-investment sensitivity is generally highest in the large firm size group and smallest in the small firm size group. We deduce that the explanations for these findings are grounded in managerial agency considerations, and in the greater flexibility enjoyed by large firms in timing their investments. Thus, we conclude that the degree of sensitivity of a firm's investments to its cash flows cannot be interpreted as an accurate measure of its access to capital markets (as do Kaplan, S., Zingales, L., 1997. The Quarterly Journal of Economics 169–215), since small firms are known to have less access to external markets.

Empirical studies on whether investments are sensitive to cash flows in imperfect markets often report conflicting results and have been criticized on conceptual and methodological grounds. Our study mitigates some of these problems using a research design that relates changes in investment–cash flow sensitivity to changes in the bid-ask spread measure of information asymmetry surrounding (i) implementation of the Sarbanes-Oxley (SOX) Act and (ii) deregulation of firms in the Transportation, Telecommunication, and Petroleum and Natural Gas industries. Consistent with our hypotheses, we find that information asymmetry decreases following SOX and that there is a corresponding decrease in the investment–cash flow sensitivity, pre- to post-SOX. Further, greater decreases in information asymmetry following SOX are associated with greater decreases in investment–cash flow sensitivity. The results for the deregulation sample are also consistent with our hypothesis, wherein we observe an increase in information asymmetry and corresponding increase in the investment–cash flow sensitivity following deregulation.

In this paper, we examine the relationship between oil price and firm returns for 560 US firms listed on the NYSE. First, we find that oil price affects returns of firms differently depending on their sectoral location. Second, we find strong evidence of lagged effect of oil price on firm returns. Third, we test whether oil price affects firm returns based on different regimes and find that in five out of the 14 sectors this is indeed the case. Finally, we unravel that oil price affects firm returns differently based on firm size, implying strong evidence of size effects.

In this paper, we examine convergence of stock markets. Our empirical exercise is based on 11 different panels, which together consist of 120 countries. The richness of the dataset allows us to disaggregate countries into panels, such as high income, middle income, low income, OECD, CSI, and developing country panels. In addition, we construct regional panels, such as those representing the Arab States, East Asia and the Pacific, South Asia, Latin America and the Caribbean, and Sub-Saharan Africa. Our main finding is that, based on the conditional convergence model, convergence of stock market capitalization and stocks traded is found for four panels, namely the high and low-income panels, the OECD panel, and the Sub-Saharan African panel. The speed of convergence is high, in most cases between 20% and 30%.

In this paper we study whether the commodity futures market predicts the commodity spot market. Using historical daily data on four commodities—oil, gold, platinum, and silver—we find that they do. We then show how investors can use this information on the futures market to devise trading strategies and make profits. In particular, dynamic trading strategies based on a mean–variance investor framework produce somewhat different results compared with those based on technical trading rules. Dynamic trading strategies suggest that all commodities are profitable and profits are dependent on structural breaks. The most recent global financial crisis marked a period in which commodity profits were the weakest.

Using bank-level data from India, we examine the impact of ownership on the reaction of banks to monetary policy, and also test whether the reaction of different types of banks to monetary policy changes is different in easy and tight policy regimes. Our results suggest that there are considerable differences in the reactions of different types of banks to monetary policy initiatives of the central bank, and that the bank lending channel of monetary policy is likely to be much more effective in a tight money period than in an easy money period. We also find differences in impact of monetary policy changes on less risky short-term and more risky medium-term lending. We discuss the policy implications of the findings.