DRAWBACKS IN THE 3-FACTOR APPROACH OF FAMA AND FRENCH (2018)

This paper features a statistical analysis of the monthly three factor Fama/French return series. Rolling OLS regressions explore the relationship between the 3 factors, using data from July 1926 to June 2018, available on French’s website. The results suggest there are significant and time-varying relationships between the factors. A sub-sample from July 1990 to July 2018 is used to analyze the three series using two-stage least squares and the Hausman test to check for issues related to endogeneity. The empirical results suggest that the factors, when combined in OLS regression analysis, as suggested by Fama and French (2018), are likely to suffer from endogeneity. Ramsey’s RESET tests suggest a nonlinear relationship exists between the three series. We use two instruments to estimate the market betas, and compare them to betas estimated not using instruments. Non-parametric tests of the two sets of betas suggest significant differences. The results suggest that using these factors in linear regression analysis, as recommended by Fama and French [(2018). Choosing factors. Journal of Financial Economics, 128(2), 234–252] is problematic in that the estimated coefficients are highly sensitive to the correct model specification.

Rôle de la stabilité politique dans la promotion de l’investissement direct étranger en Afrique du Nord

La stabilité politique a connu récemment un regain d’intérêt pour la manière dont elle affecte les décisions des investisseurs étrangers dans de nombreux pays en Afrique du Nord . L’objectif de cet article est de mettre en évidence le rôle crucial qu’elle joue dans l’attractivité des investissements directs étrangers, et d’analyser l’environnement politique des pays de cette région. Ainsi, à travers une évaluation empirique des données de panel, et selon le test d’Hausman, le modèle à effets fixes demeure le plus adapté pour notre analyse. Il a, ainsi, été conclu que la stabilité politique a un lien significatif et positif avec l’attractivité des investissements directs étrangers dans les cinq pays étudiés. Recently, political stability has seen a resurgence of interest in how it affects the decisions of foreign investors in many countries in North Africa. The objective of this article is to highlight the crucial role it plays in the attractiveness of foreign direct investment, and to analyze the political environment of the countries of this region. Thus, through an empirical evaluation of the panel data, and according to the Hausman test, the fixedeffects model remains the most suitable for our analysis. It was thus concluded that political stability has a significant and positive link with the attractiveness of foreign direct investment in the five countries studied.

Approaches to Modelling Heterogeneity in Longitudinal Studies

<p>This thesis is about estimation bias of longitudinal data when there is correlation between the explanatory variable and the individual effect. In our study, we firstly introduce what is longitudinal data, then we introduce the commonly used estimation methods for the general linear model: the least squares method and maximum likelihood method. We apply these estimation methods to three simple general models which are commonly used to analyse longitudinal data. Secondly, we use frequentist and Bayesian analysis to explore the estimation bias theoretically and empirically, with an emphasis on the heterogeneity bias. This bias occurs where random effect estimation is used to analyse data with nonzero correlation between explanatory variables and the individual effect. We then empirically compare the estimated value with the true value. In this way, we demonstrate and verify the theoretical formulation which can be used to determine the size of the bias [Mundlak, 1978]. In order to avoid the estimation bias, the fixed effect estimation should be used to get the better solution under nonzero correlation situation. The Hausman test is used to confirm this. However, the bias not only occurs when we use frequentist analysis, but also exist by using the Bayesian estimation of random effect model. Finally, we follow the Mundlak [1978] idea, then define the special Bayesian model which can be used as Hausman test and as a comparable model. We also prove that it is best fit model among the random effect, fixed effect and pooled model if there is correlation between explanatory variables and individual effect. Throughout this thesis, we illustrate this ideas using examples based on real and simulated data.</p>

Approaches to Modelling Heterogeneity in Longitudinal Studies

<p>This thesis is about estimation bias of longitudinal data when there is correlation between the explanatory variable and the individual effect. In our study, we firstly introduce what is longitudinal data, then we introduce the commonly used estimation methods for the general linear model: the least squares method and maximum likelihood method. We apply these estimation methods to three simple general models which are commonly used to analyse longitudinal data. Secondly, we use frequentist and Bayesian analysis to explore the estimation bias theoretically and empirically, with an emphasis on the heterogeneity bias. This bias occurs where random effect estimation is used to analyse data with nonzero correlation between explanatory variables and the individual effect. We then empirically compare the estimated value with the true value. In this way, we demonstrate and verify the theoretical formulation which can be used to determine the size of the bias [Mundlak, 1978]. In order to avoid the estimation bias, the fixed effect estimation should be used to get the better solution under nonzero correlation situation. The Hausman test is used to confirm this. However, the bias not only occurs when we use frequentist analysis, but also exist by using the Bayesian estimation of random effect model. Finally, we follow the Mundlak [1978] idea, then define the special Bayesian model which can be used as Hausman test and as a comparable model. We also prove that it is best fit model among the random effect, fixed effect and pooled model if there is correlation between explanatory variables and individual effect. Throughout this thesis, we illustrate this ideas using examples based on real and simulated data.</p>

The Effect of Financial Literacy and Financial Inclusion on Economic Growth in Indonesia

Increasing financial literacy and inclusion become a global issue that are believed affecteconomic growth. However, in Indonesia, increasing financial literacy and inclusion inseveral provinces is not followed by the economic growth. The purpose of this research is toanalyze the effect of financial literacy and financial inclusion on economic growth inIndonesia.This study analyzed 34 provinces in Indonesia with 2 survey periods, 2016 and2019. The method of the data analysis used panel data regression with e-views 10 software.Moreover, Chow test and Hausman test are carried out to determine the best model. Theresults of the hypothesis test showed that financial literacy and financial inclusion have nosignificant effect on economic growth in Indonesia, neither partially or simultaneously. Itshowed that the financial literacy and inclusion improvement in Indonesia need to beenhanced in order to achieve inclusive growth as the main goal.

EFFECTS OF SELECTED COMPANY-SPECIFIC VARIABLES IN THE DETERMINATION OF COMPANY LEVERAGE: EVIDENCE FROM TEXTILE INDUSTRY OF BANGLADESH

The purpose of this study is to investigate the effects of profitability, liquidity, size, tangibility, and asset turnover on the leverage of the textile industry of Bangladesh. This paper analyzed 20 companies out of 56 companies listed in the Dhaka Stock Exchange. The data set is for the periods from 2016 to 2019. To find the effects on the dependent variable, the Fixed Effects Model has been used which has been selected using the Hausman test. To test heteroskedasticity, the Breusch-Pagan heteroskedasticity test has been used. The study found size, profitability, and tangibility having a significant effect. While size and tangibility have a positive impact on leverage, profitability has a negative impact. The findings are diversified in nature. The results are not all consistent with the previous studies conducted in different developing countries. So, the policymakers should have in-depth insights while making decisions.

Board Composition, Insider Ownership and Firm Performance: Evidence from Post-Shock Period of Stock Prices in Bangladesh

Purpose: This study attempts to analyze the influence of board structure (board size, board independence, CEO duality, insider ownership) on performance of Bangladeshi listed nonfinancial firms during the post-shock period of stock prices. Methodology: Putting stress on the issue of controlling for any possible endogeneity problems prevails in the effects of structure of board on corporate performance this study employed the Durbin-Wu-Hausman test as the presence of endogeneity severely makes the OLS estimates biased. Therefore, satisfying endogeneity and overidentification tests the observed data have been analyzed by 2SLS as well as OLS regression models. In an attempt to choose the consistent coefficients between OLS and 2SLS a Hausman test was applied. Findings: Results of the study suggest that a board featuring more directors improve accounting measures of performance and a board having more independent directors also significantly assist firms to enhance their market measure of performance. CEO duality is found detrimental to the accounting measures of performance. Apart from, findings support that holding more ownership by insiders leads to enhance firm performance. Thus, it provides empirical evidence to support a view of agency theory that large board, board independence, and insider ownership are good incentives to the firm to monitor and supervise managerial activities and minimize agency problems. Practical Implication: Overall, findings of the study are posing some implications for academics, practitioners, and policy makers in advancing the existing knowledge domain and formulating governance policies in the context of emerging countries like Bangladesh. Originality: The driving force of this work was to investigate how effective the corporate governance directives/notifications in regard to board independence and insider ownership was in protecting the shareholders’ interest during the post-shock period of stock prices in Bangladesh. Therefore, this study provides a robust result with regard to the impacts of reformed corporate governance notification (CGN 2012) on firm performance in Bangladesh.

Performance of Firm and Board Attributes Nexus: Using Hausman Test Analysis

With the rise of corporate failures and the conflict of interest arising from shareholders and the management, there have been growing concerns in corporate governance (CG). It is there is ponsibility of the board of director in CG is to oversee the management as well as the firm performance and to make the management accountable to shareholders. Hence this research examines the connection between firms’ performance and board features using board size, board independence in addition to board age as a proxy for board characteristics and turnover as a proxy for firm performance. A sample size of 16 consumer goods firms out of a population of 20 consumer goods firms listed in the NSE from 2016 to 2019 was used using a judgmental sampling technique. Secondary data employed was taken out from the sampled firms’ annual reports. Hausman test analysis was used to select the appropriate regression model, which is the fixed effect regression model that was utilized to analyse the connection between firms’ performance in addition to board characteristics. It is found that firm performance and board independence of the consumer services goods companies in Nigeria are significantly related.The results also confirmed that firm performance and board size of the consumer services goods companies in Nigeria are significantly related. The result indicates firm performance and board education of the consumer services goods companies in Nigeria are not significantly related. Consequently, overall lthe study concluded that firms’ performance and board characteristics are related. Also, board characteristics increase board performance which will lead to increase in firms’ performances, there by maximizing profit and ensuring efficiency. The study concluded that a company with good board characteristics would help to ensure the maximization of both the shareholders and stakeholders wealth. Hence a proper board characteristic helps to solve the problem of both agency theory and stakeholders’ theory.

Capital Adequacy A Moderating Effect of Asset Growth on Performance of Nigerian Agricultural Firms

This study examines capital adequacy and the moderating impact of asset growth on the performance of firms in the agricultural sector. 4 listed agricultural firms were examined over a period of 10 years and data were extracted from their financial statements which were analyzed through a STATA 13 tool of analysis. Regression, correlation matrix and descriptive methods of analysis were employed to present and analyze results. Other post estimation tests like skewness and kurtosis test, Variance Inflation Factor test, specification test, heteroskedasticity tests and hausman test to select between fixed effect and random effect regression model were conducted to ensure robustness of results. The fixed effect stochastic longitudinal regression analysis model was adopted as guided by the hausman test. From the findings posited by the study, liquidity structure, liquidity structure moderated by asset growth and the combined effect of firm size moderated by asset growth were found to be significantly impacting on return on asset of firms at 1% level of significance. Firm size was found not to have any significant impact on return on assets. It was therefore recommended that the management should ensure considerable excess of current assets over current liabilities at all times so that there will always be positive liquidity structure; management should ensure consistent and prudent capital acquisition to ensure larger firm size; management should ensure steady asset growth by asset revaluation and new acquisition over time; the regulatory authority in the agricultural sector should establish a firm size benchmark below which no firm should operate.

A Survey of Agglomeration Determinants in Indonesia

This study aims to analyze the determinants of agglomeration in Indonesia by including research variables, namely the Exchange Rate (ER), Agglomeration, Williamson index (IW), Regional Income (RI), Domestic Investment (DI), Length of Road (LR), and Regional Expenditures (RB). The analysis method in this research was to estimate panel data and econometric tests, including heteroscedasticity test, multicollinearity test, Chow test, Hausman test, and t-statistic test. The data were obtained from Bank Indonesia (BI), and the Central Statistics Agency (BPS) from 2010 to 2017. The results of the study showed that agglomeration in Indonesia was affected by changes in the Exchange Rate (ER), Regional Expenditure (RB), Regional Income (RI), Domestic Investment (DI), Length of Road (LR), and Williamson index (IW). An integrated policy needs to be formulated to improve economic efficiency through the development of production chains and the utilization of regional economies to encourage national economic growth. Received: 8 September 2020 / Accepted: 18 November 2020 / Published: 17 January 2021