A Critical Look at a Classic Paper: Fama’s “The Behavior of Stock Prices”
Emilio VENEZIAN
Professor Emeritus
Rutgers, the State University of New Jersey
In 1965 Eugene Fama published “The behavior of stock market prices”, Journal of Business, vol. 38, 34-105. That paper consists of basically two parts. In the first part Fama argued that the distribution of the rate of return is Pareto-stable with characteristic exponent less than 2, therefore having infinite variance. In the second part he argued that the daily returns of individual stocks were serially independent. The issues, however, are somewhat more complicated than two parts I mentioned would imply.
This presentation begins with a discussion of the analysis of the characteristic exponent and pointing out some of the shortcomings, then turns to the analysis of serial correlation and point out some of the shortcomings in that section. Neither of the claims is well supported, even if we neglect the fact that recorded prices for transactions are not continuous. After that, an important interaction is considered: one of the methods of estimating the characteristic exponents is, according to Fama, biased if the sample has serial autocorrelation in the sample, but Fama’s conclusion that there is no significant autocorrelation is based, in part, on his assessment that if the sample has infinite variance then the usual tests for autocorrelation fail. Results presented in the paper suggest that the sample autocorrelation is actually biasing the estimates of characteristic exponent downward, at least for that one method of estimation.
Finally I will deal with an issue on which Fama presents very little information but one that is crucial to the whole paper: are the series of rates of return stationary? The little evidence on stationarity presented in the paper suggests rather strongly the one series on which data are presented was not stationary. Fama presented this as a representative example, so that suggests that a basic assumption in the analysis, that the series are stationary, does not hold over the period of time represented in Fama’s data.
This presentation begins with a discussion of the analysis of the characteristic exponent and pointing out some of the shortcomings, then turns to the analysis of serial correlation and point out some of the shortcomings in that section. Neither of the claims is well supported, even if we neglect the fact that recorded prices for transactions are not continuous. After that, an important interaction is considered: one of the methods of estimating the characteristic exponents is, according to Fama, biased if the sample has serial autocorrelation in the sample, but Fama’s conclusion that there is no significant autocorrelation is based, in part, on his assessment that if the sample has infinite variance then the usual tests for autocorrelation fail. Results presented in the paper suggest that the sample autocorrelation is actually biasing the estimates of characteristic exponent downward, at least for that one method of estimation.
Finally I will deal with an issue on which Fama presents very little information but one that is crucial to the whole paper: are the series of rates of return stationary? The little evidence on stationarity presented in the paper suggests rather strongly the one series on which data are presented was not stationary. Fama presented this as a representative example, so that suggests that a basic assumption in the analysis, that the series are stationary, does not hold over the period of time represented in Fama’s data.
An Empirical Study of the Real Estate Prices with Spatial Correlation of Shopping District
Daniel Chan-wei Tsai
Hsien-Chueh Peter Yang
Ming-Che Wu
Tsung-Hao Chen
Jia-Yan Wu
Chin Chieh Wu
Department of Business Administration, National Pingtung University of Science and Technology 91201, Ping-Tung, Taiwan
Department of Risk Management and Insurance, National Kaohsiung First University of Science and Technology, Kaohsiung, Taiwan
Department of Banking and Risk Management, Overseas Chinese University, Taichung, Taiwan
Department of Business Administration, Shu-Te University, Yen Chau, Kaohsiung, Taiwan
Department of Logistics Management, Shu-Te University, Yen Chau, Kaohsiung, Taiwan
* Corresponding author: thchen@stu.edu.tw
Keywords: Shopping District, Spatial Correlation, Rank Test, The Price of Real Estate
ABSTRACTThe purpose of this study is to evaluate the difference of the prices of real estate in the three groups. There are 256 data chose form Taichung city and 121 data chose form Kaohsiung city.
The classification depends on:
(1) The distance from shopping district is 500m.
(2) The distance from shopping district is 500m to 1000m.
(3) The distance from shopping district is 1000m to 1500m.
The data were analyzed using Kruskal-Wallis one-way analysis of variance by rank, Wilcoxon rank sum test and Spearman’s rank correlation coefficient.
Our results show that:
(1) The prices of real estate in Taichung city is significantly different among the three classification and the rank sum test in statistic also significantly in two groups of three classification.
(2) The prices of real estate in Kaohsiung city is not significantly among three classification.
(3) The spatial correlation exists in Kaohsiung city and Taichung city.
The classification depends on:
(1) The distance from shopping district is 500m.
(2) The distance from shopping district is 500m to 1000m.
(3) The distance from shopping district is 1000m to 1500m.
The data were analyzed using Kruskal-Wallis one-way analysis of variance by rank, Wilcoxon rank sum test and Spearman’s rank correlation coefficient.
Our results show that:
(1) The prices of real estate in Taichung city is significantly different among the three classification and the rank sum test in statistic also significantly in two groups of three classification.
(2) The prices of real estate in Kaohsiung city is not significantly among three classification.
(3) The spatial correlation exists in Kaohsiung city and Taichung city.
Forecast Future Economic Growth: Evidence from the Taiwan Stock Market
Sheng-Tang HUANG
Assistant Professor of Department of Finance, Nanya Institute of Technology, Taiwan, R.O.C
TEL: +886-3-4361070 ext5509
E-Mail: tom@nanya.edu.tw
Keywords: Risk Factor, Economic Growth, Book-to-Market, Size, Momentum
ABSTRACTWe try to examine whether the four-factor model proposed by Carhart (1997) i.e., market premium (MKT), book-to-market premium (HML), and size premium (SMB) and momentum factor (WML) is able to forecast future economic conditions. Using data in Taiwan, we show that only WML has a significant ability in predicting future economic growth, and its predictive ability is not subsumed by business cycle variables. Overall, our results do not support a risk-based explanation for the performance of HML and SMB, suggesting that HML and SMB are not proxies for investment opportunities.
The Adjustment of Capital Structure of Firms in the Steel Industry of Taiwan
Hsien-Hung H. YEH
Wen-Ying CHENG
Sheng-Jung LI
Associate Professor of Department of Business Administration, National Pingtung University of Science and Technology, Taiwan
Assistant Professor of Department of Finance and Risk Management, Shu-Te University, Taiwan
TEL: +886-8-7703202
E-Mail: hhyeh@mail.npust.edu.tw
Keywords: Capital Structure, Partial Adjustment Model, Steel Industry
ABSTRACTRecent studies have found that firms may deviate from their target capital structure over time but adjust toward the target in the long term. However, little attention has been so far given to address the issue in the steel industry. This paper takes the financial constraint of over-leverage and under-leverage into account to investigate the adjustment of capital structure of firms in the steel industry of Taiwan. Controlling for the possible impact of financial crisis, this study was conducted at years of economic trough and peak during the period of 1981-1996. Empirical results show that, first, firms with the financial constraint of over-leverage finance less debt than do firms with the financial constraint of under-leverage relative to the target capital structure. Second, the adjustment of debt ratios is statistically significant and positively related to economic growth but negatively related to macroeconomic conditions. Finally, firms adjusted very slowly toward their target debt ratios.
Residual Income Valuation Models under Depreciation and Inflation Condition
Chao-Hui YEH
Ti-Ling WANG
I-Shou University
Kao Yuan University
TEL: +886-7-6577711 ext5914
E-Mail: chy@isu.edu.tw
Keywords: Valuation Model, Depreciation, Inflation Price
ABSTRACTExisting practical evidence suggests that residual income valuation models based on historical cost accounting considerably undervalue equity price. One possible reason is the use of historical cost accounting under inflationary conditions. In this paper, we use a residual income framework to search theoretically how historical cost accounting figures need to be adjusted for inflation in forecasting and valuation. We show that residual income models are likely to produce severe under valuations if inflation is not correctly taken into account.
This paper provides a conceptually useful foundation for the study of net income, book values, and dividends as to how these variables relate to equity value with and without inflation condition. The discussion makes the case that the analysis is also of empirical interest. This paper systemized overview of the Ohlson 1995(O95) literatures. The paper considers situations in which price equal capitalized forward net income add growth in net income and book values. Accounting, or the financial reporting model, has its own rules, and these make their presence felt all the time. The CSR has a role to interlock the book values and net income.
Finally, this paper studies two simple ideas. First, one can use residual income valuation model to predict stock value. Second, mathematical zero-sum series equality provides the analytical starting point and ensures analytical simplicity. These two ideas combine to yield many closed form valuation models. Without violating the PVED precept, one obtains explicit and basic models relating market value to book value and income with and without inflation condition.
This paper provides a conceptually useful foundation for the study of net income, book values, and dividends as to how these variables relate to equity value with and without inflation condition. The discussion makes the case that the analysis is also of empirical interest. This paper systemized overview of the Ohlson 1995(O95) literatures. The paper considers situations in which price equal capitalized forward net income add growth in net income and book values. Accounting, or the financial reporting model, has its own rules, and these make their presence felt all the time. The CSR has a role to interlock the book values and net income.
Finally, this paper studies two simple ideas. First, one can use residual income valuation model to predict stock value. Second, mathematical zero-sum series equality provides the analytical starting point and ensures analytical simplicity. These two ideas combine to yield many closed form valuation models. Without violating the PVED precept, one obtains explicit and basic models relating market value to book value and income with and without inflation condition.
A Study of Grey VAR on Dynamic Structure between Economic Indices and Stock Market Indices-An Example of Hong Kong
Alex Kung-Hsiung CHANG
Pin-Yao CHEN
Professor and graduate student of Department of Business Administration, National Pingtung University of Science and Technology, Taiwan, R.O.C
TEL: +886-8-7740374
E-Mail: bear419@mail.npust.edu.tw
Keywords: Hong Kong’s Economic Indices, The Hang Seng Index, GM(1,1), Grey Vector Autoregression Model (GVAR)
ABSTRACTThis study takes the Hang Seng Index and the four belonging indices from Hong Kong stock market and Hong Kong marcro-economic indices as examples. The monthly closing stock indices and marcro-economic from January 2000 to January 2010 were sampled, which were adopted from the census and statistics department; Government of the Hong Kong Special Administrative Region and the Global Financial Database. We applied GM(1,1) on VAR into a GVAR to realize the dynamic structure between economic indices and Hong Kong stock market indices.
According to the empirical results, I found that interest rates, CPI’s, foreign reserves, M1’s, M2’s and M3’s have a Granger causality relationship with stock market indices respectively. Based on the AIC rule, stock market indices are a leading index to economic indices for eight months. By using Granger causality, decomposition variance and the impact response analysis, we realized the existence of the dynamic structure between economic indices and stock market indices in Hong Kong. And we discovered this dynamic structure is interacted and matched frequently at the state in Hong Kong economic.
According to the empirical results, I found that interest rates, CPI’s, foreign reserves, M1’s, M2’s and M3’s have a Granger causality relationship with stock market indices respectively. Based on the AIC rule, stock market indices are a leading index to economic indices for eight months. By using Granger causality, decomposition variance and the impact response analysis, we realized the existence of the dynamic structure between economic indices and stock market indices in Hong Kong. And we discovered this dynamic structure is interacted and matched frequently at the state in Hong Kong economic.
Some Problems in the Calculation of Cohort Life Tables
Emilio VENEZIAN
Professor Emeritus
Rutgers, the State University of New Jersey
© Emilio Venezian 2011
Please do not cite, quote, or otherwise distribute the information without prior written consent. Invitations to present and discuss the findings are, of course, welcome.
Some problems in the calculation of cohort life tables
by
Emilio Venezian
Keywords: Bias, Cohort, Life Table, Longevity, Mortality
ABSTRACTThis paper presents some simple models of the relationship between age and cohort mortality to explore the way in which standard methods of computing life tables might distort reality. The results show that substantial distortions occur even in infinite populations because some of the assumptions are valid only in the limit of zero mortality. In some cases, a simple correction can be applied to the usual result to obtain a much better approximation to the underlying mortality schedule. The analysis also suggests that the habit of using the mid-point of the age range as representative of the age of a group will distort the relations at high ages and mortalities, therefore leading to a confounding of cohort effects and secular time effects in studies that attempt to explain or predict changes in mortality based on these factors.
The Linkage of Macroeconomic Indicators and Stock Market Performance in Relation to Major Economic Events: The Case of Taiwan
Rern-Jay HUNG
Cheng-Chieh LIN
Associate Professor, Graduate Institute of Finance, National Pingtung University of Science and Technology
E-Mail: bruce@mail.npust.edu.tw
Graduate Institute of Finance, National Pingtung University of Science and Technology
E-Mail: r0912106767@hotmail.com
Keywords: Macroeconomic Indicators, Stock Market Performance, Granger Causality
ABSTRACTThis research focused on the linkages between macroeconomic indicators and stock returns in Taiwan in relation to those important economic events. This study selected five macroeconomic indicators including CPI, industrial production index, exchange rate, interest rate and money supply in addition to the Taiwan Weighted Stock Index. In addition, this study added some important economic events of 1997 financial crisis, Expo 2010 Shanghai China and ECFA between Taiwan and China as dummy variables to examine the impact on these events on stock returns. The monthly data series of the six variables for the period of January 1996 to December 2010 were collected. The empirical results show that the five macroeconomic indicators and the Taiwan Weighted Stock Index are all cointegrated. There exist positive long term relation between stock market performance and industrial production, interest rate and money supply; while negative relation between stock market performance and CPI and exchange rate. The finding of positive relation between stock market performance and money supply is not consistent with that of Mookerjee and Yu (1997) and the findings of negative relation between stock market performance and CPI and exchange rate are not consistent with the empirical results of Ratanapakorn and Sharma (2007). The results of Granger Causality show that the macroeconomic indicators can not help predict the stock performance in Taiwan, which is consistent to the findings of Ali et al. (2010).
Information Disclosure and Forecast Accuracy
Wen-Hsi Lydia HSU
Yuan-Pai HSU
Assistant Professor of Department of Business Administration, National Pingtung University of Science and Technology, Taiwan, R.O.C
TEL: +886-8-7703202 ext7698
E-Mail: hsuw@mail.npust.edu.tw
Project Assistant Professor, Graduate Institute of Public Administration, National Dong Hwa University, Taiwan, R.O.C
TEL: +886-2-27945506
E-Mail: yphsu@mail.ndhu.edu.tw
Keywords: Information Disclosure, Forecast Accuracy, Initial Public Offerings, Prospectus
ABSTRACTThis study examines the relationship between information disclosure and forecast accuracy. Prospective financial information disclosed in prospectuses for initial public offerings is examined according to Financial Reporting Standard No. 29. Disclosure Levels of prospective financial information are further categorised into three groups, namely, total disclosure items recommended by FRS-29 (TSR), total disclosure items not recommended by FRS-29 (TSV) and overall disclosure items recommended and not recommended by FRS-29 (TSRV). The three groups of disclosure levels are then investigated for their significant relationships with forecast accuracy.
The results show that the disclosure level of prospective financial information, measured by total disclosure items recommended by FRS-29, has a significantly negative relationship with forecast accuracy. It indicates that IPOs with more disclosure of prospective financial information tend to have lower forecast errors, while IPOs with less disclosure of prospective financial information tend to have higher forecast errors. When level of disclosure is measured by items not recommended by FRS-29 and is measured by overall disclosure items, both recommended and not recommended by FRS-29, level of disclosure does not have a significant relationship with forecast accuracy.
The results show that the disclosure level of prospective financial information, measured by total disclosure items recommended by FRS-29, has a significantly negative relationship with forecast accuracy. It indicates that IPOs with more disclosure of prospective financial information tend to have lower forecast errors, while IPOs with less disclosure of prospective financial information tend to have higher forecast errors. When level of disclosure is measured by items not recommended by FRS-29 and is measured by overall disclosure items, both recommended and not recommended by FRS-29, level of disclosure does not have a significant relationship with forecast accuracy.
Does the Yield Curve Movements Explain the Equity Returns of Financial Instrument?
Chien Yun CHANG
Chen-Yu CHEN
Jian-Hsin CHOU
Assistant Professor, Department of Finance, Hsiuping University of Science and Technology
Assistant Professor, Department of Finance, Chang Jung Christian University
Professor, Department of Risk Management and Insurance, National Kaohsiung First University of Science and Technology
Keywords: Nelson and Siegel Model, Term Structure of Interest Rates, Financial Institutions
ABSTRACTA time-series and cross-sectional analysis is employed to investigate the change of term structure on the common stocks of financial institutions listed in Taiwan Stock Exchange. In the research methodology, the two factors model proposed by Stone is used to test the sensitivity for both the market risk and interest rate risk factors on the equity returns of financial institutions stocks. In addition, the four orthogonal parameters embedded in Nelson and Siegel are used to be the proxies of interest rate risk. The empirical results conclude that the relationships between the abnormal return of the weighted stock index and stock returns of financial institutions are significantly negative. However, it indicates a positive relationship between the abnormal return of the financial sector index and the stock returns of financial institutions. The paper also shows that there is a significantly positive relationship between the level parameter and the equity returns of financial institutions. However, the change of slope parameter has little impact on the equity returns of financial institutions. As the curvature parameter, it indicates a negative relationship with the equity returns of financial institutions. Finally, the time decay parameter, it generally appears a negative relationship with the equity returns of financial institutions.
Does Executive Compensation Induce Managers to Task Idiosyncratic Risk?
Hsien-Ming CHEN
Chu-hsiung LIN
Li-Hsun WANG
Assistant Professor of Department of Finance, Chang Jung Christian University
Professor of Department of Risk Management and Insurance, National Kaohsiung First University Science and Technology
Assistant Professor of Department of International Business Administration, Wenzao Ursuline College of Languages
Keywords: Executive Compensation, Salary Structure, Idiosyncratic Risk, Panel Data Model
ABSTRACTDiffer to prior studies focus on whether the executive compensation can improve firms’ performance and shareholders’ wealth, this paper employ the listed firms in NASDAQ, NYSE and AMEX to investigates the link between executive compensation and idiosyncratic risk. This study attempts to figure out how executive compensation impact on firms’ idiosyncratic risk by panel regression. This study finds bonus is not significant factors on idiosyncratic risk. Our results show that the salary is significantly negative with idiosyncratic risk, which means that higher salary can not induce managers to task higher idiosyncratic risk for improving firms’ performance. However, long-term incentive and total executive compensation are significantly positive with idiosyncratic risk, which means that higher long-term incentive and total executive compensation can induce managers to task higher idiosyncratic risk for improving firms’ performance.
iFAIRS: 2011 Issue
A Dynamic Study on Strategy Competition Models of Fashion Industry in Taiwan
Sam Chin-Feng WANG
Taipei Young Men Business Club
Keywords: fashion-industry, strategic group, supply chain of fashion-industry
ABSTRACTAccording to relative economic indexes, 2010 of Taiwan is a boom age. However, in 2010 the numbers of stores of fashion-industry of retailing are also reduced. The editor try to explain the phenomenon that some strategic groups are growing and some are narrowing. By investigating the supply chain of fashion-industry, the PLC of fashion clothing, and the evolution of channel, the editor conclude three strategic models which catch the opportunity. At last, some suggestions are presented.
An Application of the Game Theory on the Sun-Tzu Art of War-An Example of Business Negotiation
Hsin Hong YEH
Pingtung, Young Men Business Club
ABSTRACTA Research and Development of Two Sets of Water-saving Toilet
Tung Chou HSIAO
Taichung Young Men Business Club
Alex Kung-Hsiung CHANG
Pingtung Young Men Business Club
E-Mail: yuc@yuctw.com
Keywords: Water Resource, Water-Saving Urinal
ABSTRACTDuring to global climate change and human development and over consumption, water resources dwindled in past years. Taiwan has a serious shortage problem in water resources. It’s an important issue how to save water and create water-saving facilities.
This article describes two sets of new water-saving urinals: the first one is the “female-specific water-saving urinal”; the other is the “dual-use water-saving urinal for male and female”. By using two water-saving urinals, water consumption could be reduced five-sixth, which can save 520.84 million tons of water in a single year in Taiwan.
This article describes two sets of new water-saving urinals: the first one is the “female-specific water-saving urinal”; the other is the “dual-use water-saving urinal for male and female”. By using two water-saving urinals, water consumption could be reduced five-sixth, which can save 520.84 million tons of water in a single year in Taiwan.
A Performance-Related Research of Contract Employment and Human Resource Management
Lien Hsiang PAN
Dean, School of International Economy and Trade, GuangXi University of Foreign Language
Chuan Cai YE
Dean, School of Accounting, GuangXi University of Foreign Language
Keywords: Contract employment, Perception of organization equity, Work performance
ABSTRACTThe objective of this research is to study the relationship between the equity cognitive of contract employment and job performance. Compare the differences of different background variability and research the background variability and equity cognitive of organization to job performance. Researcher collects the literature based on theoretical assumptions to build the research framework; survey 154 samples that based on contract employment and employer from one high tech company in Shenzhen.
The results showed:
1. The differences of different background variability for equity cognitive of organization and job performance are significant.
2. The correlation of equity cognitive of organization and job performance are significant.
3. Background variability and equity cognitive of organization are significant to job performance.
The results of this study show that emphasize the designing management system of system equity and mutual equity will help to raise the entire job performance for contract employment.
The results showed:
1. The differences of different background variability for equity cognitive of organization and job performance are significant.
2. The correlation of equity cognitive of organization and job performance are significant.
3. Background variability and equity cognitive of organization are significant to job performance.
The results of this study show that emphasize the designing management system of system equity and mutual equity will help to raise the entire job performance for contract employment.
Narrative Strategy Story and Strategic Management
Daniel Chan-Wei TSAI
Department of Business Administration, National Pingtung University of Science and Technology 91201, Ping-Tung, Taiwan
E-Mail: tsaidaniel@mail.npust.edu.tw
Tsung-Hao CHEN
Department of Business Administration, Shu-Te University, Yen Chau, Kaohsiung, Taiwan Department of Logistics Management, Shu-Te University, Yen Chau, Kaohsiung, Taiwan
E-Mail: chen.tsuhao@msa.hinet.net
In this paper, we profound the perspective of Narrative Strategy Story from social science to explain Strategic Selection and Strategic Change of the firms, and we employ a Case-Oriented Comparative Method for examining how the proposed model can be analyze strategic choices and change of four Taiwanese firms. Finally, empirical and managerial implications about narrative strategy story are drawn from this research.
Exploring the Gap between Supply and Demand of Organic Agriculture Industry based on Firms’ and Consumers’ Perspective
Rong-Da Liang
Assistant Professor of Department of Marketing Logistics Management, National Penghu University of Science and Technology
Keywords: Organic Agriculture, Firm’s Perspective, Consumer’s Perspective, Gap Analysis
ABSTRACTThe development of agriculture was the basis of consumer’s daily life; it also includes the functions of production, daily life, and ecology. Hence, agriculture industry was important element to enhance the quality of Taiwan’s sociality and humanity. However, the GDP ratio of agriculture industry was decrease every year. Therefore, doing precise consumer behavior research with different food type or helping business managers to create a deliberate market segmentation mechanism could understand consumer’s need deeply. These results could be the foundation to create appropriate production or marketing strategies for agriculture industry. This study adopts interview method to examine twelve firms and twenty consumers simultaneously. The interview results indicated that consumers need clearly knowledge and information, such as the identify knowledge for organic food and the basis information between firms and consumers. However, organic food website firms (about 60%) only provide marketing activities information, complexity organic food information, or unfair exchange model (e.g., unfair payment mechanism) in their website. Therefore, entrepreneur and consumer do not create comprehensive interactive model.
Rationality Analysis of Taiwanese Residential Construction Industry
Henry H.Y. HSIEH
Assistant Professor, Business Administration Department, National Pingtung University of Science and Technology
E-Mail: henry@npust.edu.tw
Yu.Ching CHEN
MBA, Business Administration Department, National Pingtung University of Science and Technology
Keywords: Residential Construction, Individual Rationality, Group Irrationality, Oversupply, Vacancy
ABSTRACTThe completions of Taiwanese residential construction industry were volatile in the 1990s. The residential completions in 1993 increased 215% comparing with that in 1990, intriguingly the demand in terms of population growth increased merely 2.91% (Hsieh 2002; Hsieh &Forster, 2007; Hsieh & Forster, 2004). Accordingly the performance and behavior of construction Industry are not completely affected by demand side. They could be influenced by individual and group factors of developer or builder. In today’s turmoil and dynamic economic environment scrutinizing the developer’s behavior being rational or irrational is important for government and construction Industry. The research basing on the rationale of SCP model examines the influence of factors in supply side and demand side imposing residential construction and developer’s behavior (Residential approvals). The residential approvals of 23 cities and counties in Taiwan during 1999-2009 totaling 253 samples are examined. A simple multi-regression model is constructed to analyze the influence of demand and supply side factors on residential approvals. The results indicate that significant individual rationality which differs from general impression of irrationality of herding and pursuing construction. The positive and significant relation between the approvals and developer loans, economic growth, land price indicates rational decision of developer. Significantly the approvals burgeoned while vacancies being high, indicating that developers were able to ignore structural vacancies and focus on concurrent market demands continuing residential development. The individual rationality can be seen in the synchronizing growth of infrastructure improvement of high speed railway and approvals. However a negative direction of approval with global financial crisis, population density implies the risk aversion of developers. Empirical evidence suggests that developer makes decision by data, analysis, judgment and cognition, not by following other’s behavior, which is essential to rational behavior. Under dynamic model investigated by Two Stage Least Square method (2SLS), the results reveal individual rationality as well.
Individual rationality does not commit group rationality. In the most scenarios it results in group irrationality due to synchronizing activity in particular oversupply and high vacancies in Taiwan. The consequences seem unavoidable and worsening given that individual developer making decision rational. Group irrationality incurs redundancy and inefficiency. Developer should differentiate, widen respective, and innovation such green building, design, segmenting market, without continuing emulating each other and creating indifferences.
Individual rationality does not commit group rationality. In the most scenarios it results in group irrationality due to synchronizing activity in particular oversupply and high vacancies in Taiwan. The consequences seem unavoidable and worsening given that individual developer making decision rational. Group irrationality incurs redundancy and inefficiency. Developer should differentiate, widen respective, and innovation such green building, design, segmenting market, without continuing emulating each other and creating indifferences.
A Study of the Chapter Opening–and–Closing and the Chapter Reacting in the Guigu Zi on Corporation Strategic Marketing–An Application of the Game Theory
Alex K.H. CHANG
Professor National Pingtung University of Sci. & Tech
Hsiu-Mei TSAI
Pingtung, Young Men Business Club
Keywords: Guigu Zi Theory, Strategic Marketing, Game Theory
ABSTRACTThis thesis aims to explore the study on business strategic marketing based upon the Chapters Opening-and-Closing and Reaction by Guigu Zi as well as the combination of application of the Game Theory. The application of Sturdiness-and- Softness Method in the Chapter Opening-and-Closing by Guigu Zi with respect to pricing strategies was shown in this study. Applying the Game Theory illustrated the coordination of games for the predicament of prisoners. In the same vein, Defense- and-Management Method was employed in product strategies. In this way, the use of the Game Theory was aimed at the game of dilemma of the one-sided prisoners. In addition, the Release-and-Seizure as well as Bilateral Understanding Methods in the Chapter Reaction were capitalized on in promotion and outlet strategies. Accordingly, the application of the Game Theory was intended for welfare and beach games.
The study analyzed the key variables of success in corporation strategic marketing, and combined the theoretical inference of the western Game Theory by directing pragmatic cases into the theoretical perspectives of the ancient Chinese classical book, Guigu Zi to further prove that the elucidated perspectives in Guigu Zi theory were theoretically close to the results of this research. We, consequently, discovered that not only could these viewpoints be employed in business affairs but they, by incorporating the Game Theory, could provide an array of systematic ways to aid people in simulating analyses, developing strategies, and could be applied in business management.
The study analyzed the key variables of success in corporation strategic marketing, and combined the theoretical inference of the western Game Theory by directing pragmatic cases into the theoretical perspectives of the ancient Chinese classical book, Guigu Zi to further prove that the elucidated perspectives in Guigu Zi theory were theoretically close to the results of this research. We, consequently, discovered that not only could these viewpoints be employed in business affairs but they, by incorporating the Game Theory, could provide an array of systematic ways to aid people in simulating analyses, developing strategies, and could be applied in business management.
Exploring the Influencing Factors on Customer Loyalty in Pharmaceutical Industry
David C.L. SHEN
Associate Professor of Department of Business Administration, National Pingtung University of Science and Technology, Taiwan, R.O.C.
Chin-Ho LIU
Master of Executive Master of Business Administration, National Pingtung University of Science and Technology, Taiwan, R.O.C.
Keywords: Service Quality, Brand Traits, Expertise Capabilities, Relationship Quality, Customer Loyalty
ABSTRACTThe output value of Taiwan’s pharmaceutical industry in 2009 is NT$ 61.91 billion, while in the same year the National Health Insurance drug payment is amounted to NT$ 132.3 billion. Taiwan domestic pharmaceutical manufacturers who provided 70% of total drug consumption which accounted for only 25% of the total drug payment amount; in contrast, no matter their drug patent are expired or not, foreign pharmaceutical manufacturers accounted for more than 75% of total NIH drug payment amount. Over the years, due to the limited resources, Taiwan domestic pharmaceutical manufacturers can hardly achieve significant breakthrough in the pharmaceutical technology. The NIH System’s payment scheme reduces their investment motivation. Thus, the majority of them are producing generic drugs, which can not be differentiated and result in price competition. As a result, the companies who want to survive in this fierce market must actively seek to maintain good relations with customers by producing high quality products and establishing customer loyalty.
This study integrated service quality, brand traits and expertise capabilities as the independent variables to explore their impacts on relationship quality and further more on customer loyalty.
The samples were drawn from medical centers, regional hospitals, district hospitals and clinics. 377 effective respondences were collected by 80 salespersons. This study adopted Structural Equation Modeling (SEM) as the statistical analysis method to test the hypotheses and examine the structural model.
The major conclusions include:
(1) The pharmaceutical manufacturers’ service quality, brand traits and expertise capabilities have a significantly positive impact on relationship quality.
(2) The relationship quality has a significantly positive impact on customer loyalty.
This study integrated service quality, brand traits and expertise capabilities as the independent variables to explore their impacts on relationship quality and further more on customer loyalty.
The samples were drawn from medical centers, regional hospitals, district hospitals and clinics. 377 effective respondences were collected by 80 salespersons. This study adopted Structural Equation Modeling (SEM) as the statistical analysis method to test the hypotheses and examine the structural model.
The major conclusions include:
(1) The pharmaceutical manufacturers’ service quality, brand traits and expertise capabilities have a significantly positive impact on relationship quality.
(2) The relationship quality has a significantly positive impact on customer loyalty.
Gauging Credit Risk of Bank Loans Based on Modified Merton Model
Su-Lien LU
Associate Professor of Finance, National Pingtung University of Science and Technology
Jing-Wen WANG
Doctoral student of Finance, National Kaohsiung First University of Science and Technology
Keywords: Credit Risk, Default Probability, Basel Capital Accord
ABSTRACTRisk management and credit risk analysis has been the focus of extensive research recently. According to Basel Capital Accord, bank regulators have to develop an effective credit review process used to measure the credit risk of their loans. In this paper, we propose the modified Merton model to estimate default probability of bank loans. The methodology is utilized bank loans of First Commercial Bank in Taiwan.
First, we estimate unconditional and conditional default probabilities by the modified Merton model. Then, we compare differences between unconditional and conditional default probabilities. The unconditional default probability is estimated whereas ignoring the influence of macroeconomic variables. On the other hand, the conditional default probability includes macroeconomic variables. Therefore, the conditional default probability is more flexible than unconditional default probability for measuring credit risk.
There are several conclusions in this study. First, we find that estimated default probability is higher than NPL ratio. We conjecture that NPL ratio is ex-post concept. However, the estimated default probability is ex-ante perspective here. Second, we find that conditional default probability is close to business cycle. However, unconditional default probabilities may lag the business cycle. Third, the conditional default probability is more accurate in investigating credit risk. Finally, the estimated procedures are easy to follow and implement. Consequently, we expect that these findings have meaningful implications for the credit risk management in Taiwan. We also hope that this paper helps financial institutions to face the Basel Capital Accord.
First, we estimate unconditional and conditional default probabilities by the modified Merton model. Then, we compare differences between unconditional and conditional default probabilities. The unconditional default probability is estimated whereas ignoring the influence of macroeconomic variables. On the other hand, the conditional default probability includes macroeconomic variables. Therefore, the conditional default probability is more flexible than unconditional default probability for measuring credit risk.
There are several conclusions in this study. First, we find that estimated default probability is higher than NPL ratio. We conjecture that NPL ratio is ex-post concept. However, the estimated default probability is ex-ante perspective here. Second, we find that conditional default probability is close to business cycle. However, unconditional default probabilities may lag the business cycle. Third, the conditional default probability is more accurate in investigating credit risk. Finally, the estimated procedures are easy to follow and implement. Consequently, we expect that these findings have meaningful implications for the credit risk management in Taiwan. We also hope that this paper helps financial institutions to face the Basel Capital Accord.
The Study of the Relationships Among Cyclists’ Recreation Motivation, Demographic, and Specialization
Rong-Da LIANG
Assistant Professor of Department of Marketing Logistics Management, National Penghu University of Science and Technology
Keywords: Cyclist, Recreation Motivation, Demographic, Specialization
ABSTRACTThe rapidly development of bicycle industry fosters the manufacturers to pay more attention to the function design of bicycle and to keep in step with the changeable leisure needs of cyclists. Therefore, it is necessary for the bicycle industry to examine the cyclists’ behavior, their requirements to bicycle. This trend has become an important research aspect in leisure sports field. With an aim to investigate the relationships among cyclist’s demographic, recreation motivation and specialization, this study is expected to design the marketing promotion strategy that is closer to the demand of cyclists. This study thus designed the precise questionnaire and survey method. Three trained research assistants will ask to distribute questionnaire to 500 cyclists beside the bicycle path of Taipei city.
The statistics results indicated that:
(1) Recreation motivation positive and negative influences specialization.
(2) Different cyclists’ demographic characteristics have significantly difference of recreation motivation and specialization.
This study is expected to examine the above-mentioned variables to help industries to deeply analyze consumers’ riding behavior and demands.
The statistics results indicated that:
(1) Recreation motivation positive and negative influences specialization.
(2) Different cyclists’ demographic characteristics have significantly difference of recreation motivation and specialization.
This study is expected to examine the above-mentioned variables to help industries to deeply analyze consumers’ riding behavior and demands.
Interest Rate Structure and Risk Analysis of e-Huei
Min-Sun HORNG
Wei-Chuan HSIA
Assistant professor and graduated student of Department of Risk Management and Insurance, National Kaohsiung First University of Science and Technology
TEL: +886-7-6011000 ext3021
E-Mail: horngms@ccms.nkfust.edu.tw
Keywords: e-Huei; Hui Discount; Quantile Regression
ABSTRACTThis paper introduces the framework of e-Huei. The interest rate of e-Huei is determined by the foundation of cash-flow models of all members and based on zero-sum game. In contrast to prior literature, we collect the data from e-Huei and compute its yield rates, then observe the fluctuation of the yield rates under changes in different factors.
Empirical results show that the yield rates of e-Huei increase when Hui discounts and TAIEX increase, respectively, decrease when the spar rates increase, the Huei discounts increase when the number of members in an e-Huei increases. The yield rates may increase or decrease when the number of members increases in different quantile regressions. There is no clear relationship between yield rates and whether a bidder exists.
Empirical results show that the yield rates of e-Huei increase when Hui discounts and TAIEX increase, respectively, decrease when the spar rates increase, the Huei discounts increase when the number of members in an e-Huei increases. The yield rates may increase or decrease when the number of members increases in different quantile regressions. There is no clear relationship between yield rates and whether a bidder exists.