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Vol. 9, Number 2, June 2012

Bank Mergers and Competition in Japan
Kang H. Park
Southeast Missouri State University, United States of America
 
Abstract Ɩ Full Text
Using H-statistic of the Panzar-Rosse model, this paper examines commercial bank merger waves in Japan and their effect on competition in the Japanese banking market during 1983-2006. The H-statistic is estimated separately for three different time periods, the boom, the burst and the recovery. This paper concludes that the bank mergers that took place in Japan have not led to a higher level of market power except during the period of financial crisis around the time of bubble burst. Recent mergers in the Japan’s banking sector do not seem to harm the competition level in the banking market. An increase in individual bank’s market share and an increase in overall market concentration have not materialized in higher net interest margin in Japan.
Keywords: Bank consolidation, market competition, Japanese banks, bubbles, korea, japan, china
JEL Classification: G21, L10
 

 
The Impact of Underlying Market Closure on Futures Market Liquidity: Evidence from China
Wang Chun Wei and Alex Frino
University of Sydney, Australia
 
Abstract Ɩ Full Text
This study investigates the trading activity of Chinese stock index futures, recently introduced at the open and close of the underlying trading. We document the impact of the underlying spot on the futures market liquidity as well as volatility as discussed in earlier works on market closure theory. Our empirical results support previous literature on the impact of the underlying, particularly during the open session, as a contagion effect, which is clearly at play. We find significant U-shaped patterns in liquidity factors and intraday volatility during open and close trades in the morning.
 
Keywords: Market microstructure, market closure theory, liquidity, Chinese futures market
JEL Classification: G14, G15
 

 
Building Approvals as a Leading Indicator of Property Sector Investment
Harry M Karamujic
The University of Melbourne, Australia
 
Abstract Ɩ Full Text
Overall, building approvals for new houses (BANHs) are viewed by most economic analysts/commentators as a leading indicator of property investment due to the importance of this sector to the whole economy and employment. This study seeks shed some additional light on modelling this seasonal behaviour of BANHs by: (i) establishing the presence of seasonality in Victorian BANHs; (ii) ascertaining it as to whether is deterministic or stochastic; (iii) estimating out-of-sample forecasting capabilities of the modelling specification; and (iv) speculating on possible interpretation of results. The study utilises a structural time series model of Harvey. Factors corresponding to June, April, December and November are found to be significant at five per cent level. The observed seasonality could be attributed to both the summer holidays and the end of financial year seasonal effects. Irrespective of partially incomplete nature of this research, the findings should be appealing to, among others, researchers, all levels of Government, construction industry and banking industry.
 
Keywords: Property investment, structural time series modelling, building approvals for new houses, summer holiday seasonal effect, end of financial year seasonal effect
JEL Classification: R30, R38
 

 
The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
Liu, Lixian and Timofei Bogomolov
University of South Australia
 
Abstract Ɩ Full Text
Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained after consideration the issues concerning transaction costs and time value of money. By using the identical assets such as Chinese ADRs and their underlying securities traded in different markets in Hong Kong in HK dollar and in New York in US dollar and by constructing a very simple arbitrage trading strategy, this study demonstrates that arbitrage profits are still available with monthly return ranging from 0.5 per cent to 3.8 per cent after considering transaction costs and non-overlap trading time issues. This is a new study to verify this behaviour of an emerging market’s ADRs traded two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations.
 
Keywords: Arbitrage, transaction costs, ADRs, financial markets, trading strategy
JEL Classification: G10, G19, C18
 

 
Banking Competition and Efficiency in Jordan: A Note
Khaldoun Al-Qaisi
Amman Arab University, Jordan
 
Abstract Ɩ Full Text
The financial economics literature contains numerous research papers which examine issues that concern the banking industry. One of these issues is banking competition. Indeed, this issue is important because of its complications to financial stability and the growth of the borrowing firms. The purpose of this paper is to assess the competitive behavior of the Jordanian banking sector during the period ranging from 1999 to 2008 using the non-structural test developed by Panzar and Rosse. In more specific terms, this paper examines the overall competitive condition during the period 1999 – 2008 and how it has evolved over time. Based on the empirical findings, it is expected that a number of policy recommendations may be provided. The objective of these recommendations is to enhance the regulation of the banking sector in Jordan and improve their performance.
 
Keywords: Financial economics, banking competition, Jordanian banking sector, financial stability, economic growth
JEL Classification: G21, G32, E44, E51

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