Sheng-yung Yang - Academia.edu (original) (raw)

Papers by Sheng-yung Yang

Research paper thumbnail of Is China's equity market a systematic risk for international asset pricing models?

Investment Management & Financial Innovations, 2013

Yang (2013). Is China's equity market a systematic risk for international asset pricing models?. ... more Yang (2013). Is China's equity market a systematic risk for international asset pricing models?. Investment Management and Financial Innovations, 10(2-1) RELEASED ON Thursday,

Research paper thumbnail of Inter-day return and volatility dynamics between Japanese ADRs and their underlying securities

Applied Financial Economics, 2007

In this study, we apply a more refined statistical procedure to test the dependencies and directi... more In this study, we apply a more refined statistical procedure to test the dependencies and direction of inter-day spillover effects between the ADRs and their underlying shares on two nonsynchronous international markets. The empirical results provide evidence of contemporaneous return and volatility spillovers from Tokyo to New York, and vice versa. In the lagged spillover test, the evidence also suggests that the dominant market (home market) adjusts to the information from the satellite market (foreign market) in an efficient manner. In contrast, the satellite market reacts to the information from the dominant market with a delay.

Research paper thumbnail of Foreign exchange risk premiums and time-varying equity market risks

International Journal of Risk Assessment and Management, 2003

This paper investigates the relationship between the excess returns of foreign exchanges and the ... more This paper investigates the relationship between the excess returns of foreign exchanges and the conditional volatility of domestic and foreign equity markets, based on a wide range of foreign currency market data. Utilising a VAR-GARCH-in-mean process to generate conditional variances, we find evidence to support the time varying, risk-premium hypothesis. Moreover, our evidence shows that the volatility evolution of stock returns displays not only a clustering phenomenon, but also a significant spillover effect. Given the fact that the correlation structure across markets is significant and time varying, investors and portfolio managers should continually assess this information and rebalance their portfolios over time to achieve optimal diversification.

Research paper thumbnail of Foreign Exchange Risk Premiums and Relative Asset Return Differentials

This paper examines several risk premium hypotheses by constructing a model that links the exchan... more This paper examines several risk premium hypotheses by constructing a model that links the exchange risk premium to risk factors associated with international commodity trading and equity transactions across countries. Then, a series of specification test are performed to distinguish among the forward premium, real interest rate differential, and equity premium differential hypotheses. Empirically, we employ a much larger data set in the sense that the data contains 16 countries and more up-dated and longer observation. The results show that the risk premium is negatively correlated with real interest rate differential and positively related to the equity premium differential.

Research paper thumbnail of Valuation of Double Trigger Catastrophe Options with Counterparty Risk

SSRN Electronic Journal, 2000

... Valuation of Double Trigger Catastrophe Options with Counterparty Risk I-Ming Jiang, a Sheng-... more ... Valuation of Double Trigger Catastrophe Options with Counterparty Risk I-Ming Jiang, a Sheng-Yung Yang, b Yu-Hong Liu, c Alan T. Wang d ... business, but rather lie in defaults of other companies, such as Lehman Brothers, Fannie Mae and Freddie Mac. ...

Research paper thumbnail of Dynamic Herding by Mutual Funds Under Financial Crises: Evidence from Taiwan Stock Markets

SSRN Electronic Journal, 2000

ABSTRACT This paper intends to investigate herding behavior of mutual funds in Taiwan stock marke... more ABSTRACT This paper intends to investigate herding behavior of mutual funds in Taiwan stock markets, especially as facing the Asian financial crisis in 1997 and the subprime debt crisis in 2008. Furthermore, it identifies fund managers’ optimal choices of trading strategies as they are facing the shallow-dish characteristics in Taiwan stock market. The empirical results reveal that fund managers do herd as they are picking up their portfolios. They try to balance their trades between following their previous trading and others in the tranquil periods. However, their propensity to herd is relatively low during the period of financial crises, indicating a more conservative trading strategy in the turbulent periods. Instead of pursuing stocks with high speculative intensity, mutual fund managers adhere to the prudent rule to trade. However, the trading styles are not robust during the period of 1997 Asian financial crisis.

Research paper thumbnail of Information transmission between sovereign debt CDS and other financial factors – The case of Latin America

The North American Journal of Economics and Finance, 2013

ABSTRACT This paper extends previous research by investigating the intertemporal causality relati... more ABSTRACT This paper extends previous research by investigating the intertemporal causality relationships between daily Latin America sovereign credit default swap (CDS) returns and other financial sovereign debt spread determinants. The empirical results indicate that information in sovereign CDS can both lead and lag these financial determinants. Specifically, country financial variables, including exchange rates and lending spreads, and global financial variables including 10-U.S. Treasury yields, VIX and TED spreads, are important determinants for future sovereign CDS price movements. The findings provide investment implications for international financial markets.

Research paper thumbnail of International Asset Excess Returns and Multivariate Conditional Volatilities

Review of Quantitative Finance and Accounting, 2005

This paper constructs a multivariate model in relating multi-asset excess returns to their condit... more This paper constructs a multivariate model in relating multi-asset excess returns to their conditional variances. Applying weekly data to investigate the foreign-exchange risk premium, the evidence from a multivariate GARCH model shows that the foreign-exchange excess returns are significantly correlated with economic fundamentals such as the real interest-rate differential, long-short interest-rate spread differential, and equity-premium differential. The evidence also suggests that foreign-exchange excess returns are not independent of the conditional variances of these fundamental variables, supporting the time-varying risk-premium hypothesis.

Research paper thumbnail of Response Asymmetries in Asian Stock Markets

Review of Pacific Basin Financial Markets and Policies, 2005

ABSTRACT This paper examines autocorrelation and cross-autocorrelation patterns for selected Asia... more ABSTRACT This paper examines autocorrelation and cross-autocorrelation patterns for selected Asian stock returns. Special attention is given to examination of Asian stock returns and the impact on them of the past information. By employing a class of asymmetric specification of conditional mean and conditional variance models, we find the autocorrelation coefficient to be negative for the Japanese market and positive for the rest of the Asian markets studied. Our findings suggest that the Asian markets respond sensitively to the US market, especially on the down side. The asymmetric effects are found to be present in both mean and variance equations. The evidence is consistent with behavior in which investors in Asian markets tend to react more significantly to negative stock news originating from US sources than they do to positive news.

Research paper thumbnail of A Simplified Firm Value-Based Risky Discount Bond Pricing Model

Review of Pacific Basin Financial Markets and Policies, 2007

ABSTRACT This paper proposes a simplified risky discount bond pricing model based on Longstaff an... more ABSTRACT This paper proposes a simplified risky discount bond pricing model based on Longstaff and Schwartz (1995). The advantage of this model is that it yields a closed form solution for probability of default. Also, a practical feature with our model is that computing durations and other risk management tools become computationally less expensive, while the appealing properties in the LS model are preserved. The numerical comparisons show that the differences in credit spreads between this model and Longstaff and Schwartz are within a few basis points for fairly general parameter values. Moreover, the computational time is shown remarkably reduced by the simplified model. Sensitivity analysis of credit spread with respect to different parameter values is presented.

Research paper thumbnail of Foreign institutional industrial herding in Taiwan stock market

Managerial Finance, 2012

Purpose -The purpose of this paper is to: investigate whether the foreign institutional investors... more Purpose -The purpose of this paper is to: investigate whether the foreign institutional investors in Taiwan herd towards the stocks in the same industry; identify the causes of industrial herding; analyze whether herding behavior impacts future industrial returns; and trace the changing pattern of industrial herding, especially during the 2007-2008 financial crisis. Design/methodology/approach -This paper applies Sias' herding measure to identify foreign institutional industrial herding behavior. Moreover, to identify the causes and impacts of herding, the authors use regression models to analyze the relationship between foreign institutional demand for stocks in some particular industries and industrial returns, controlling industrial market capitalization, the number of firms in the industry and industrial speculative intensity. The above methods are applied to the full sample period, as well as two sub-periods, respectively, to trace the time-varying trading behavior. Findings -First, on average, foreign institutional investors herd in the Taiwan securities market. They follow each other into and out of the same industries. Second, they were momentum traders in the tranquil period from 2002 to 2006 and contrarian traders in the period of 2007-2008 financial crisis. Third, such herding behavior has positive impacts on future industrial returns both in the tranquil period as well as in turbulent time. The authors thus conclude that foreign institutional investors demonstrated contrarian trading strategies to stabilize future industrial returns in the financial crisis period; they buy past losers to support the prices and sell past winners to suppress the price volatility. Originality/value -This paper investigates foreign institutional herding behavior in an emerging market, Taiwan on the micro setting of industrial base. It identifies the causes and impacts of foreign institutional industrial herding from the outlook of information-base versus non-information-base trading. It also traces time-varying herding behavior, especially during the 2007-2008 financial crisis. This paper provides useful information to investors participating in emerging markets like Taiwan.

Research paper thumbnail of An analysis of Japanese earnings forecast revisions with application to seasoned equity offerings

International Review of Economics & Finance, 2011

Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings fore... more Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings forecast data. We find that forecast revisions exhibit a downward trend over time as the actual earnings announcement date approaches, and are serially correlated with three significant lags. Using these characteristics we develop a model to estimate abnormal forecast revisions, and illustrate the model's use with a sample of Japanese companies announcing seasoned equity offerings (SEOs). In contrast to results obtained by studies using American data, our findings indicate significant positive upward revisions when Japanese firms announce an SEO.

Research paper thumbnail of Foreign exchange risk premiums and time-varying equity market risks

International Journal of Risk Assessment and Management, 2003

This paper investigates the relationship between the excess returns of foreign exchanges and the ... more This paper investigates the relationship between the excess returns of foreign exchanges and the conditional volatility of domestic and foreign equity markets, based on a wide range of foreign currency market data. Utilising a VAR-GARCH-in-mean process to generate conditional variances, we find evidence to support the time varying, risk-premium hypothesis. Moreover, our evidence shows that the volatility evolution of stock returns displays not only a clustering phenomenon, but also a significant spillover effect. Given the fact that the correlation structure across markets is significant and time varying, investors and portfolio managers should continually assess this information and rebalance their portfolios over time to achieve optimal diversification.

Research paper thumbnail of How do securities dealers trade in the Taiwan stock market? Evidence from the financial crisis of 2008

International Journal of Management Practice, 2013

ABSTRACT Securities dealers in Taiwan are granted trading advantages and expected to act as marke... more ABSTRACT Securities dealers in Taiwan are granted trading advantages and expected to act as market makers to provide liquidity. However, since there are no designated dealers in Taiwan, securities dealers have no obligation to balance the market orders in any case. This paper investigates whether securities dealers act as proprietary traders to trade for their own interests or as market makers to fulfil market efficiency. The evidence shows securities dealers do act as market makers. Moreover, market making is the predominant cause of securities dealers' herding in Taiwan. However, during the 2008 financial crisis, they cannot help fend for themselves by acting as proprietary traders rather than liquidity providers. Even after the crisis, they do not reverse their roles to be market makers. Instead, they serve as contrarian traders selling stocks with positive past returns. This result signifies the necessity of having designated dealers in Taiwan stock market.

Research paper thumbnail of Dynamic stock–bond return correlations and financial market uncertainty

Review of Quantitative Finance and Accounting, 2014

This paper investigates the dynamic correlations of stock-bond returns for six advanced markets. ... more This paper investigates the dynamic correlations of stock-bond returns for six advanced markets. Statistics suggest that stock-bond relations are time-varying and display smooth transitional changes. The stock-bond correlations are negatively correlated with stock market uncertainty as measured by the conditional variance and the implied volatility of the S&P 500 index. However, stock-bond relations are positively related to bond market uncertainty as measured by the conditional variance of bond returns. The evidence also shows that stock-bond correlations are significantly influenced by default risk and the London interbank offered rate-T-bill rate spread in the crisis period.

Research paper thumbnail of Is China's equity market a systematic risk for international asset pricing models?

Investment Management & Financial Innovations, 2013

Yang (2013). Is China's equity market a systematic risk for international asset pricing models?. ... more Yang (2013). Is China's equity market a systematic risk for international asset pricing models?. Investment Management and Financial Innovations, 10(2-1) RELEASED ON Thursday,

Research paper thumbnail of Inter-day return and volatility dynamics between Japanese ADRs and their underlying securities

Applied Financial Economics, 2007

In this study, we apply a more refined statistical procedure to test the dependencies and directi... more In this study, we apply a more refined statistical procedure to test the dependencies and direction of inter-day spillover effects between the ADRs and their underlying shares on two nonsynchronous international markets. The empirical results provide evidence of contemporaneous return and volatility spillovers from Tokyo to New York, and vice versa. In the lagged spillover test, the evidence also suggests that the dominant market (home market) adjusts to the information from the satellite market (foreign market) in an efficient manner. In contrast, the satellite market reacts to the information from the dominant market with a delay.

Research paper thumbnail of Foreign exchange risk premiums and time-varying equity market risks

International Journal of Risk Assessment and Management, 2003

This paper investigates the relationship between the excess returns of foreign exchanges and the ... more This paper investigates the relationship between the excess returns of foreign exchanges and the conditional volatility of domestic and foreign equity markets, based on a wide range of foreign currency market data. Utilising a VAR-GARCH-in-mean process to generate conditional variances, we find evidence to support the time varying, risk-premium hypothesis. Moreover, our evidence shows that the volatility evolution of stock returns displays not only a clustering phenomenon, but also a significant spillover effect. Given the fact that the correlation structure across markets is significant and time varying, investors and portfolio managers should continually assess this information and rebalance their portfolios over time to achieve optimal diversification.

Research paper thumbnail of Foreign Exchange Risk Premiums and Relative Asset Return Differentials

This paper examines several risk premium hypotheses by constructing a model that links the exchan... more This paper examines several risk premium hypotheses by constructing a model that links the exchange risk premium to risk factors associated with international commodity trading and equity transactions across countries. Then, a series of specification test are performed to distinguish among the forward premium, real interest rate differential, and equity premium differential hypotheses. Empirically, we employ a much larger data set in the sense that the data contains 16 countries and more up-dated and longer observation. The results show that the risk premium is negatively correlated with real interest rate differential and positively related to the equity premium differential.

Research paper thumbnail of Valuation of Double Trigger Catastrophe Options with Counterparty Risk

SSRN Electronic Journal, 2000

... Valuation of Double Trigger Catastrophe Options with Counterparty Risk I-Ming Jiang, a Sheng-... more ... Valuation of Double Trigger Catastrophe Options with Counterparty Risk I-Ming Jiang, a Sheng-Yung Yang, b Yu-Hong Liu, c Alan T. Wang d ... business, but rather lie in defaults of other companies, such as Lehman Brothers, Fannie Mae and Freddie Mac. ...

Research paper thumbnail of Dynamic Herding by Mutual Funds Under Financial Crises: Evidence from Taiwan Stock Markets

SSRN Electronic Journal, 2000

ABSTRACT This paper intends to investigate herding behavior of mutual funds in Taiwan stock marke... more ABSTRACT This paper intends to investigate herding behavior of mutual funds in Taiwan stock markets, especially as facing the Asian financial crisis in 1997 and the subprime debt crisis in 2008. Furthermore, it identifies fund managers’ optimal choices of trading strategies as they are facing the shallow-dish characteristics in Taiwan stock market. The empirical results reveal that fund managers do herd as they are picking up their portfolios. They try to balance their trades between following their previous trading and others in the tranquil periods. However, their propensity to herd is relatively low during the period of financial crises, indicating a more conservative trading strategy in the turbulent periods. Instead of pursuing stocks with high speculative intensity, mutual fund managers adhere to the prudent rule to trade. However, the trading styles are not robust during the period of 1997 Asian financial crisis.

Research paper thumbnail of Information transmission between sovereign debt CDS and other financial factors – The case of Latin America

The North American Journal of Economics and Finance, 2013

ABSTRACT This paper extends previous research by investigating the intertemporal causality relati... more ABSTRACT This paper extends previous research by investigating the intertemporal causality relationships between daily Latin America sovereign credit default swap (CDS) returns and other financial sovereign debt spread determinants. The empirical results indicate that information in sovereign CDS can both lead and lag these financial determinants. Specifically, country financial variables, including exchange rates and lending spreads, and global financial variables including 10-U.S. Treasury yields, VIX and TED spreads, are important determinants for future sovereign CDS price movements. The findings provide investment implications for international financial markets.

Research paper thumbnail of International Asset Excess Returns and Multivariate Conditional Volatilities

Review of Quantitative Finance and Accounting, 2005

This paper constructs a multivariate model in relating multi-asset excess returns to their condit... more This paper constructs a multivariate model in relating multi-asset excess returns to their conditional variances. Applying weekly data to investigate the foreign-exchange risk premium, the evidence from a multivariate GARCH model shows that the foreign-exchange excess returns are significantly correlated with economic fundamentals such as the real interest-rate differential, long-short interest-rate spread differential, and equity-premium differential. The evidence also suggests that foreign-exchange excess returns are not independent of the conditional variances of these fundamental variables, supporting the time-varying risk-premium hypothesis.

Research paper thumbnail of Response Asymmetries in Asian Stock Markets

Review of Pacific Basin Financial Markets and Policies, 2005

ABSTRACT This paper examines autocorrelation and cross-autocorrelation patterns for selected Asia... more ABSTRACT This paper examines autocorrelation and cross-autocorrelation patterns for selected Asian stock returns. Special attention is given to examination of Asian stock returns and the impact on them of the past information. By employing a class of asymmetric specification of conditional mean and conditional variance models, we find the autocorrelation coefficient to be negative for the Japanese market and positive for the rest of the Asian markets studied. Our findings suggest that the Asian markets respond sensitively to the US market, especially on the down side. The asymmetric effects are found to be present in both mean and variance equations. The evidence is consistent with behavior in which investors in Asian markets tend to react more significantly to negative stock news originating from US sources than they do to positive news.

Research paper thumbnail of A Simplified Firm Value-Based Risky Discount Bond Pricing Model

Review of Pacific Basin Financial Markets and Policies, 2007

ABSTRACT This paper proposes a simplified risky discount bond pricing model based on Longstaff an... more ABSTRACT This paper proposes a simplified risky discount bond pricing model based on Longstaff and Schwartz (1995). The advantage of this model is that it yields a closed form solution for probability of default. Also, a practical feature with our model is that computing durations and other risk management tools become computationally less expensive, while the appealing properties in the LS model are preserved. The numerical comparisons show that the differences in credit spreads between this model and Longstaff and Schwartz are within a few basis points for fairly general parameter values. Moreover, the computational time is shown remarkably reduced by the simplified model. Sensitivity analysis of credit spread with respect to different parameter values is presented.

Research paper thumbnail of Foreign institutional industrial herding in Taiwan stock market

Managerial Finance, 2012

Purpose -The purpose of this paper is to: investigate whether the foreign institutional investors... more Purpose -The purpose of this paper is to: investigate whether the foreign institutional investors in Taiwan herd towards the stocks in the same industry; identify the causes of industrial herding; analyze whether herding behavior impacts future industrial returns; and trace the changing pattern of industrial herding, especially during the 2007-2008 financial crisis. Design/methodology/approach -This paper applies Sias' herding measure to identify foreign institutional industrial herding behavior. Moreover, to identify the causes and impacts of herding, the authors use regression models to analyze the relationship between foreign institutional demand for stocks in some particular industries and industrial returns, controlling industrial market capitalization, the number of firms in the industry and industrial speculative intensity. The above methods are applied to the full sample period, as well as two sub-periods, respectively, to trace the time-varying trading behavior. Findings -First, on average, foreign institutional investors herd in the Taiwan securities market. They follow each other into and out of the same industries. Second, they were momentum traders in the tranquil period from 2002 to 2006 and contrarian traders in the period of 2007-2008 financial crisis. Third, such herding behavior has positive impacts on future industrial returns both in the tranquil period as well as in turbulent time. The authors thus conclude that foreign institutional investors demonstrated contrarian trading strategies to stabilize future industrial returns in the financial crisis period; they buy past losers to support the prices and sell past winners to suppress the price volatility. Originality/value -This paper investigates foreign institutional herding behavior in an emerging market, Taiwan on the micro setting of industrial base. It identifies the causes and impacts of foreign institutional industrial herding from the outlook of information-base versus non-information-base trading. It also traces time-varying herding behavior, especially during the 2007-2008 financial crisis. This paper provides useful information to investors participating in emerging markets like Taiwan.

Research paper thumbnail of An analysis of Japanese earnings forecast revisions with application to seasoned equity offerings

International Review of Economics & Finance, 2011

Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings fore... more Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings forecast data. We find that forecast revisions exhibit a downward trend over time as the actual earnings announcement date approaches, and are serially correlated with three significant lags. Using these characteristics we develop a model to estimate abnormal forecast revisions, and illustrate the model's use with a sample of Japanese companies announcing seasoned equity offerings (SEOs). In contrast to results obtained by studies using American data, our findings indicate significant positive upward revisions when Japanese firms announce an SEO.

Research paper thumbnail of Foreign exchange risk premiums and time-varying equity market risks

International Journal of Risk Assessment and Management, 2003

This paper investigates the relationship between the excess returns of foreign exchanges and the ... more This paper investigates the relationship between the excess returns of foreign exchanges and the conditional volatility of domestic and foreign equity markets, based on a wide range of foreign currency market data. Utilising a VAR-GARCH-in-mean process to generate conditional variances, we find evidence to support the time varying, risk-premium hypothesis. Moreover, our evidence shows that the volatility evolution of stock returns displays not only a clustering phenomenon, but also a significant spillover effect. Given the fact that the correlation structure across markets is significant and time varying, investors and portfolio managers should continually assess this information and rebalance their portfolios over time to achieve optimal diversification.

Research paper thumbnail of How do securities dealers trade in the Taiwan stock market? Evidence from the financial crisis of 2008

International Journal of Management Practice, 2013

ABSTRACT Securities dealers in Taiwan are granted trading advantages and expected to act as marke... more ABSTRACT Securities dealers in Taiwan are granted trading advantages and expected to act as market makers to provide liquidity. However, since there are no designated dealers in Taiwan, securities dealers have no obligation to balance the market orders in any case. This paper investigates whether securities dealers act as proprietary traders to trade for their own interests or as market makers to fulfil market efficiency. The evidence shows securities dealers do act as market makers. Moreover, market making is the predominant cause of securities dealers' herding in Taiwan. However, during the 2008 financial crisis, they cannot help fend for themselves by acting as proprietary traders rather than liquidity providers. Even after the crisis, they do not reverse their roles to be market makers. Instead, they serve as contrarian traders selling stocks with positive past returns. This result signifies the necessity of having designated dealers in Taiwan stock market.

Research paper thumbnail of Dynamic stock–bond return correlations and financial market uncertainty

Review of Quantitative Finance and Accounting, 2014

This paper investigates the dynamic correlations of stock-bond returns for six advanced markets. ... more This paper investigates the dynamic correlations of stock-bond returns for six advanced markets. Statistics suggest that stock-bond relations are time-varying and display smooth transitional changes. The stock-bond correlations are negatively correlated with stock market uncertainty as measured by the conditional variance and the implied volatility of the S&P 500 index. However, stock-bond relations are positively related to bond market uncertainty as measured by the conditional variance of bond returns. The evidence also shows that stock-bond correlations are significantly influenced by default risk and the London interbank offered rate-T-bill rate spread in the crisis period.