Vol.2  No.2   2012
Commodities prices index as a variable determining the consumer inflation rate and the monetary policy: Recent evidences for the Brazilian economy through a VAR analysis
Ricardo Ramalhete Moreira
[01-09]  [PDF]

This work investigates the nature of the Brazilian consumer inflation rate for the period from January/2005 to June/2011, through implementing the Vector Autoregressive method. It was verified that the Brazilian consumer inflation rate change is basically determined with time lags (Granger sense) by the commodities prices fluctuations, instead of by domestic activity dynamics. Hence, this work found statistical significance for the hypothesis of supply shocks as the main cause on the country’s consumer inflation trajectory and, as a consequence, on the monetary policy decisions in the Brazil’s inflation targeting regime; on the other hand, evidences for rejecting the hypothesis of demand shocks were also observed. In their turn, these evidences confirm that the domestic monetary policy is under the trade-offs effects situation.

An Analysis of Relationship between Macroeconomic Variables and Metropolitan Housing Market in Iran in the Framework of a Dynamic Panel Data Model
Masoud Sadeghi, Shahram Moeeni, Sara Mardiha and Vahid Golmaghani Asl
[10-20]  [PDF]

Considerable portion of housing sector from gross domestic product indicates relationship between housing sector and macroeconomics. This paper focuses on consumption demand of housing and variables that can affect it and represents a theoretical framework for changes of housing prices regarding variables such as income per capita, liquidity and land per capita, the present paper studies effectiveness manner of these variables on housing prices in metropolitans in Iran. The relationship among housing sector and above variables is evaluated in this paper using a dynamic panel data model and data of three cities of Tehran, Isfahan and Mashhad. Finally, it has been shown that changes of (urban) income per capita and liquidity can affect metropolitan housing prices by applying one-phase systematic Arellano-Bond GMM method in model estimation. Moreover, land supply limitation and decreasing process of urban land per capita in the selected metropolises have been effective on increasing process of urban housing prices given to population changes.

Sajid Gul, Muhammad Sajid, Farman Afzal, Muhammad Bilal Khan and Sumra Mughal
[21-25]  [PDF]

In this research article we have analyzed the role of Foreign Direct Investment and trade on growth of Pakistan economy by estimating the simple least square method. The variables included in this study are; GDP growth rate, GNP growth rate, FDI, trade of goods and services, employment, exchange rate, consumer price index, openness factor, BOP, GDP deflator, and GNP deflator. The data used in this paper is secondary, since it relates economic indicators; it is easily gathered from state bank of Pakistan, Pakistan economic survey and board of investment. The time period used in this research article is from 1990-2008 and all the data are on annual basis. Foreign direct investment and growth of economy have strong positive association, which is the most important finding of the study. Further we found that FDI and GDP have a strong positive association. The relationship between FDI and inflation is positive; however this association is not very strong.

Banking Relationship’s Number, Firm Credit and Corporate Performance in Tunisia
[26-36]  [PDF]

The aim of this paper is to investigate the impact of bank relationships on firm credit and performance for selected Tunisian companies. We used an econometric model based on panel data analysis relative to 394 Tunisian firms from different sectors and with different characteristics for the period of 2001-2008. In our model, credit is the total credit of company and performance is measured by return on equity and return on assets which are considered the best indicators of firm’s profit. Our empirical results show that the Tunisian companies having several banking relations have more funds but they are less powerful than those with exclusive relations.

Sovereign Debt Crisis in the Euro Zone and its impact on the BRICS’s Stock Index Returns and Volatility
[37-46]  [PDF]

The present study attempts to analyze the impact of Sovereign Debt-related policy announcements and developments in the Euro Zone on the returns and volatility patterns of the BRICS stock markets in order to suggest suitable investment opportunities and strategies for the global investors. Share price index data of five leading stock exchanges of the BRICS nations have been collected and the data bifurcated into two periods. Period 1 has data for ten months considered a ‘normal period’ and period 2 has data for twenty two months considered the ‘post-sovereign debt crisis period’. Kolmogorov Smirnov and Shapiro-Wilk’s tests ensured the normality of returns for the entire sample period. The results indicated that no BRICS stock market had registered negative returns during the overall study period of 32 months. The mean index returns of all the five stock markets have dropped during the post-sovereign debt crisis period. It is of interest to note that the Student’s ‘t’ test applied to examine the significance of differences, if any, in the mean returns during the pre and post sovereign debt crisis periods revealed that the differences were not statistically significant at 5% level of significance. The overall conclusion is that BRICS markets, the fastest emerging economic super powers in the world, assure promising growth and profit-making opportunities. It is, therefore, suggested that with the right portfolio mix, funds and timing, investors can reap rich benefits from these emerging markets.

The nature of the relationship between debt and managerial entrenchment
Kammoun Chafik and Boujelbène Younes
[47-54]  [PDF]

This study seeks to explain the debt structure, as well as the mechanisms of control and incentives in the relationship between debt and managerial entrenchment, the results in theoretical work shows the role of debt in the control of the behaviour of managers find that firms with higher managerial entrenchment have lower level of debt. Specifically, firms with CEO who chairs the board, lower proportion of outside directors and higher CEO tenure, have lower debt. Finally, we also found the impact of control mechanisms on the nature of the relationship between debt and managerial entrenchment.

“The Relationship between Dividend Policy and Shareholder’s Wealth” (Evidence from Pakistan)
Sajid Gul, Muhammad Sajid, Nasir Razzaq, Muhammad Farrukh Iqbal and Muhammad Bilal Khan
[55-59]  [PDF]

The article examined the influence of dividend policy on shareholder’s wealth of 75 companies listed in “Karachi Stock Exchange”, for duration of six years from 2005 to 2010 using multiple regression and stepwise regression. We have used shareholder’s wealth as a dependent variable which is measured as market price per share, whereas the explanatory variable dividend policy is measured as dividend per share. Furthermore we also used, Lagged Price earnings ratio, Retained Earnings and Lagged Market Value of equity as explanatory variables. Data has been collected from company’s annual reports, Karachi Stock Market and State Bank of Pakistan. We have found that the difference in average market value (AMV) relative to book value of equity (BVE) is highly significant between dividend paying companies and non-paying companies. Retained earnings have insignificant influence on market value of equity. There is significant influence of dividend policy on wealth of shareholder’s, as far as the dividend paying companies are concerned. Lagged Price earnings ratio did not appear to have any significant influence on dependent variable, whereas lagged market value of equity has a significant impact on market price per share.

Mean-Variance and Mean-Gini Analyses to Portfolio Optimization in Malaysian Stock Market
[60-64]  [PDF]

The mean-variance (MV) model is commonly used in portfolio optimization for comparing uncertain prospects. This model however relies strictly on the assumptions that the returns of assets follow normal distribution or the investor’s utility function is quadratic. In reality these two conditions do not hold. The mean-Gini (MG) model has been proposed to overcome the limitations of the mean-variance model. In this paper, portfolio compositions and performances employing the MV and MG models utilizing data from the Malaysian share market are compared. Results of this study show that the MG portfolio outperforms the MV portfolio. MG model is not restricted to normal distributions and quadratic utility function enabling investors to construct second degree stochastic dominance (SSD) efficient portfolios thus MG model is a better alternative model for risk-averse investors.