Lilian Ng | York University (original) (raw)
Papers by Lilian Ng
SSRN Electronic Journal, 2020
This study examines whether labor plays a role in corporate governance by deterring opportunistic... more This study examines whether labor plays a role in corporate governance by deterring opportunistic insider behavior. Results suggest that firms with organized labor experience statistically significant declines in opportunistic insider trading activity and profitability. We show three economic mechanisms that explain labor's disciplinary effect on opportunistic insider trading behavior: employee welfare, activist union-affiliated institutional investors, and media and political support. Further analyses suggest that labor's corporate governance reduces the incidence of illegal insider trading, enhances firm productivity and performance, and lowers insider trades' return predictability.
Asia-Pacific Journal of Financial Studies, 2019
This paper provides the first direct evidence of the impact of enforcing insider regulations on t... more This paper provides the first direct evidence of the impact of enforcing insider regulations on the informativeness of insider trades and stock price efficiency across 44 countries with varying levels of insider trading regulations. Results suggest that insider purchases earn abnormal profits, especially in countries with active enforcement of insider trading regulations. We further show that while insiders trade less before earnings announcements in countries with active enforcement, their stock prices react more to earnings news than those in countries without active enforcement. Overall, our results support the view that effective insider trading regulation promotes price efficiency.
Asia-Pacific journal of financial studies, Apr 1, 2020
Market integration is a canonical topic in international finance. The question of whether and to ... more Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literatures in this field. Given this vast body of research, this survey shall only focus on the theoretical and empirical studies on one aspect of market integrationequity market integration. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their usefulness as well as limitations. Finally, the survey provides a few future directions for this line of research.
Journal of Empirical Finance, Mar 1, 2021
Abstract We propose a new approach to identifying drivers of economic and financial integration, ... more Abstract We propose a new approach to identifying drivers of economic and financial integration, separately, and across emerging and developed countries. Our advanced machine learning technique allows for nonlinear relationships, corrects for over-fitting, and is less prone to noise. It also can tackle a large number of highly correlated explanatory variables and controls for multicollinearity. Results suggest that general economic growth, increasing international trade, and contained population growth have helped emerging countries catch up to the level of the economic integration of developed countries. However, slow financial development and a high level of investment riskiness have hindered the speed of emerging countries’ financial integration. Furthermore, the results suggest that integration is a gradual process and is not driven by cyclical or transitory events.
Social Science Research Network, 2018
This study introduces new measures of global economic and financial integration that are based on... more This study introduces new measures of global economic and financial integration that are based on forward-looking firm-level cash flow forecasts. Evidence suggests that economic and financial integration have been increasing across all countries since the start of the 1989-2015 period, but have fallen after the global financial crisis. Emerging markets still lag behind developed countries in financial integration, but their level of economic integration has converged to that of developed countries toward the end of the sample period. Finally, the results show that integration moves at a gradual pace, primarily fueled by fundamental economic drivers rather than by short-term occurrences.
Asia-Pacific Journal of Financial Studies, 2020
Market integration is a canonical topic in international finance. The question of whether and to ... more Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literatures in this field. Given this vast body of research, this survey shall only focus on the theoretical and empirical studies on one aspect of market integrationequity market integration. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their usefulness as well as limitations. Finally, the survey provides a few future directions for this line of research.
Journal of Financial and Quantitative Analysis, 2020
We propose a simple metric to measure two aspects of market integration, namely, economic integra... more We propose a simple metric to measure two aspects of market integration, namely, economic integration (defined as a common cash-flow dynamic) and financial integration (defined as a common risk-pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. Although the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years; their level of economic integration has reached that of DEV countries.
Journal of Empirical Finance, 1998
Using the Johansen cointegration technique, we find empirical evidence of long run comovements be... more Using the Johansen cointegration technique, we find empirical evidence of long run comovements between five national stock market indexes and measures of aggregate real activity including the real oil price, real consumption, real money, and real output. Real returns on these indexes are typically related to transitory deviations from the long run relationship and to changes in the macroeconomic variables. Further, the constraints implied by the cointegration results yield some incremental information on stock return variation that is not already contained in dividend yields, interest rate spreads, and future GNP growth rates.
This paper employs a new approach, based on analyst forecasts, to measuring the extent of financi... more This paper employs a new approach, based on analyst forecasts, to measuring the extent of financial and economic integration across 46 developed countries and emerging markets and also determines their underlying drivers. Results show robust evidence that financial integration dominates economic integration over the short horizon, but that economic integration becomes more dominant for longer horizons of at least one year. We find that developed markets are both more economically and financially integrated than emerging markets and that their degrees of integration have more than doubled over the past 20 years. Emerging markets, on the other hand, have experienced a significantly much slower pace of real economic integration with the world markets, possibly attributing to their slow advancement in fostering greater trade openness, growth, and transparent information environments that drive the extent of their real economic integration.
Capital Markets: Asset Pricing & Valuation eJournal, 2021
This paper exploits newly available information on firms' direct (own production) and indirec... more This paper exploits newly available information on firms' direct (own production) and indirect (supplier-generated) carbon emission intensities and transaction-level imports to conduct an in-depth analysis of whether and how U.S. firms address climate change. We find robust evidence that U.S. firms' imports amplify the substitutional relationship between their direct and indirect carbon emissions, suggesting that these firms outsource part of their pollution to suppliers overseas. Our key evidence is further substantiated by quasi-natural experiments associated with demand and supply shocks to emissions. We also show that firms, management, and directors with desires to maintain high environmental standings and environmentally-conscious customers and investors play a role in corporate environmental policies. Finally, firms with more imported emissions tend to have higher reputational risks and larger future stock returns but are less incentivized to develop clean technologies.
GARCH models propose that volatility is time varying and persistent. As a parsimonious statistica... more GARCH models propose that volatility is time varying and persistent. As a parsimonious statistical description of the process driving returns in many financial markets, these models have been very successful. However, GARCH lacks a substantiated economic motivation. This paper provides new and more definitive evidence on the mixture of distributions hypothesis, a prominent potential economic explanation. The mixture hypothesis posits that autocorrelation in the time-varying rate of information arrival leads to the volatility dependencies captured by GARCH models. Previous investigations of this hypothesis have been inconclusive. This paper makes use of a more theoretically appealing risk specification, more appropriate measures of the rate of information arrival, and higher frequency data from the currency futures market. The results show that the mixture hypothesis explains substantial portions of contracts' unique risks, but systematic GARCH remains. Judging by the findings in voluminous recent literature, Generalized Autoregressive Conditional Heteroscedasticity (GARCH) is ubiquitous? Its key characteristics-autocorrelated volatility and contiguous periods of volatility and quiescence-as well as associated characteristics such as excess kurtosis, are exhibited by a wide variety of financial time series, including stock, futures and foreign exchange returns. The excellent review paper by Bollerslev et al. (1992) provides many examples and citations. As a parsimonious statistical description of the process driving returns in many financial markets, GARCH modeling is a great success. The lack of a substantiated economic motivation for GARCH in returns is thus lamentable. This paper provides new and more definitive evidence on one prominent potential economic explanation, the mixture of distributions explanation. Various authors, including Diebold (1986), Diebold and Nerlove (1989), and Gallant et al. (1991) have suggested that autocorrelation in the
Page 1. Electronic copy available at: http://ssrn.com/abstract=1965021 Foreign Investor Heterogen... more Page 1. Electronic copy available at: http://ssrn.com/abstract=1965021 Foreign Investor Heterogeneity and Stock Liquidity Around the World Lilian Ng, Fei Wu, Jing Yu, and Bohui Zhang??? This Version: November 2011 ???Ng ...
Asia-Pacific Journal of Financial Studies, 2020
Market integration is a canonical topic in international finance. The question of whether and to ... more Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literatures in this field. Given this vast body of research, this survey shall only focus on the theoretical and empirical studies on one aspect of market integration-equity market integration. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their usefulness as well as limitations. Finally, the survey provides a few future directions for this line of research.
We propose a simple metric to measure two aspects of market integration, namely economic integrat... more We propose a simple metric to measure two aspects of market integration, namely economic integration (defined as a common cash flow dynamic) and financial integration (defined as a common risk pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. While the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years -- their level of economic integration has reached that of DEV countries.
SSRN Electronic Journal, 2020
This study examines whether labor plays a role in corporate governance by deterring opportunistic... more This study examines whether labor plays a role in corporate governance by deterring opportunistic insider behavior. Results suggest that firms with organized labor experience statistically significant declines in opportunistic insider trading activity and profitability. We show three economic mechanisms that explain labor's disciplinary effect on opportunistic insider trading behavior: employee welfare, activist union-affiliated institutional investors, and media and political support. Further analyses suggest that labor's corporate governance reduces the incidence of illegal insider trading, enhances firm productivity and performance, and lowers insider trades' return predictability.
Asia-Pacific Journal of Financial Studies, 2019
This paper provides the first direct evidence of the impact of enforcing insider regulations on t... more This paper provides the first direct evidence of the impact of enforcing insider regulations on the informativeness of insider trades and stock price efficiency across 44 countries with varying levels of insider trading regulations. Results suggest that insider purchases earn abnormal profits, especially in countries with active enforcement of insider trading regulations. We further show that while insiders trade less before earnings announcements in countries with active enforcement, their stock prices react more to earnings news than those in countries without active enforcement. Overall, our results support the view that effective insider trading regulation promotes price efficiency.
Asia-Pacific journal of financial studies, Apr 1, 2020
Market integration is a canonical topic in international finance. The question of whether and to ... more Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literatures in this field. Given this vast body of research, this survey shall only focus on the theoretical and empirical studies on one aspect of market integrationequity market integration. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their usefulness as well as limitations. Finally, the survey provides a few future directions for this line of research.
Journal of Empirical Finance, Mar 1, 2021
Abstract We propose a new approach to identifying drivers of economic and financial integration, ... more Abstract We propose a new approach to identifying drivers of economic and financial integration, separately, and across emerging and developed countries. Our advanced machine learning technique allows for nonlinear relationships, corrects for over-fitting, and is less prone to noise. It also can tackle a large number of highly correlated explanatory variables and controls for multicollinearity. Results suggest that general economic growth, increasing international trade, and contained population growth have helped emerging countries catch up to the level of the economic integration of developed countries. However, slow financial development and a high level of investment riskiness have hindered the speed of emerging countries’ financial integration. Furthermore, the results suggest that integration is a gradual process and is not driven by cyclical or transitory events.
Social Science Research Network, 2018
This study introduces new measures of global economic and financial integration that are based on... more This study introduces new measures of global economic and financial integration that are based on forward-looking firm-level cash flow forecasts. Evidence suggests that economic and financial integration have been increasing across all countries since the start of the 1989-2015 period, but have fallen after the global financial crisis. Emerging markets still lag behind developed countries in financial integration, but their level of economic integration has converged to that of developed countries toward the end of the sample period. Finally, the results show that integration moves at a gradual pace, primarily fueled by fundamental economic drivers rather than by short-term occurrences.
Asia-Pacific Journal of Financial Studies, 2020
Market integration is a canonical topic in international finance. The question of whether and to ... more Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literatures in this field. Given this vast body of research, this survey shall only focus on the theoretical and empirical studies on one aspect of market integrationequity market integration. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their usefulness as well as limitations. Finally, the survey provides a few future directions for this line of research.
Journal of Financial and Quantitative Analysis, 2020
We propose a simple metric to measure two aspects of market integration, namely, economic integra... more We propose a simple metric to measure two aspects of market integration, namely, economic integration (defined as a common cash-flow dynamic) and financial integration (defined as a common risk-pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. Although the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years; their level of economic integration has reached that of DEV countries.
Journal of Empirical Finance, 1998
Using the Johansen cointegration technique, we find empirical evidence of long run comovements be... more Using the Johansen cointegration technique, we find empirical evidence of long run comovements between five national stock market indexes and measures of aggregate real activity including the real oil price, real consumption, real money, and real output. Real returns on these indexes are typically related to transitory deviations from the long run relationship and to changes in the macroeconomic variables. Further, the constraints implied by the cointegration results yield some incremental information on stock return variation that is not already contained in dividend yields, interest rate spreads, and future GNP growth rates.
This paper employs a new approach, based on analyst forecasts, to measuring the extent of financi... more This paper employs a new approach, based on analyst forecasts, to measuring the extent of financial and economic integration across 46 developed countries and emerging markets and also determines their underlying drivers. Results show robust evidence that financial integration dominates economic integration over the short horizon, but that economic integration becomes more dominant for longer horizons of at least one year. We find that developed markets are both more economically and financially integrated than emerging markets and that their degrees of integration have more than doubled over the past 20 years. Emerging markets, on the other hand, have experienced a significantly much slower pace of real economic integration with the world markets, possibly attributing to their slow advancement in fostering greater trade openness, growth, and transparent information environments that drive the extent of their real economic integration.
Capital Markets: Asset Pricing & Valuation eJournal, 2021
This paper exploits newly available information on firms' direct (own production) and indirec... more This paper exploits newly available information on firms' direct (own production) and indirect (supplier-generated) carbon emission intensities and transaction-level imports to conduct an in-depth analysis of whether and how U.S. firms address climate change. We find robust evidence that U.S. firms' imports amplify the substitutional relationship between their direct and indirect carbon emissions, suggesting that these firms outsource part of their pollution to suppliers overseas. Our key evidence is further substantiated by quasi-natural experiments associated with demand and supply shocks to emissions. We also show that firms, management, and directors with desires to maintain high environmental standings and environmentally-conscious customers and investors play a role in corporate environmental policies. Finally, firms with more imported emissions tend to have higher reputational risks and larger future stock returns but are less incentivized to develop clean technologies.
GARCH models propose that volatility is time varying and persistent. As a parsimonious statistica... more GARCH models propose that volatility is time varying and persistent. As a parsimonious statistical description of the process driving returns in many financial markets, these models have been very successful. However, GARCH lacks a substantiated economic motivation. This paper provides new and more definitive evidence on the mixture of distributions hypothesis, a prominent potential economic explanation. The mixture hypothesis posits that autocorrelation in the time-varying rate of information arrival leads to the volatility dependencies captured by GARCH models. Previous investigations of this hypothesis have been inconclusive. This paper makes use of a more theoretically appealing risk specification, more appropriate measures of the rate of information arrival, and higher frequency data from the currency futures market. The results show that the mixture hypothesis explains substantial portions of contracts' unique risks, but systematic GARCH remains. Judging by the findings in voluminous recent literature, Generalized Autoregressive Conditional Heteroscedasticity (GARCH) is ubiquitous? Its key characteristics-autocorrelated volatility and contiguous periods of volatility and quiescence-as well as associated characteristics such as excess kurtosis, are exhibited by a wide variety of financial time series, including stock, futures and foreign exchange returns. The excellent review paper by Bollerslev et al. (1992) provides many examples and citations. As a parsimonious statistical description of the process driving returns in many financial markets, GARCH modeling is a great success. The lack of a substantiated economic motivation for GARCH in returns is thus lamentable. This paper provides new and more definitive evidence on one prominent potential economic explanation, the mixture of distributions explanation. Various authors, including Diebold (1986), Diebold and Nerlove (1989), and Gallant et al. (1991) have suggested that autocorrelation in the
Page 1. Electronic copy available at: http://ssrn.com/abstract=1965021 Foreign Investor Heterogen... more Page 1. Electronic copy available at: http://ssrn.com/abstract=1965021 Foreign Investor Heterogeneity and Stock Liquidity Around the World Lilian Ng, Fei Wu, Jing Yu, and Bohui Zhang??? This Version: November 2011 ???Ng ...
Asia-Pacific Journal of Financial Studies, 2020
Market integration is a canonical topic in international finance. The question of whether and to ... more Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literatures in this field. Given this vast body of research, this survey shall only focus on the theoretical and empirical studies on one aspect of market integration-equity market integration. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their usefulness as well as limitations. Finally, the survey provides a few future directions for this line of research.
We propose a simple metric to measure two aspects of market integration, namely economic integrat... more We propose a simple metric to measure two aspects of market integration, namely economic integration (defined as a common cash flow dynamic) and financial integration (defined as a common risk pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. While the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years -- their level of economic integration has reached that of DEV countries.