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Sunday Papers

The Sunday Paper – Intergovernmental Fiscal Reform in China

What’s wrong with this picture? Well, it’s kind of obvious; China isn’t spending enough on social security. In the paper highlighted this week from the IMF, Philippe Wingender explains one of the main problems China has to address is clarify who pays for what in terms of central versus local government? China has perhaps the […]

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Sunday Papers

The Sunday Paper – Board Directors With Foreign Experience and Stock Price Crash Risk: Evidence From China

Academics have increasingly had a ‘thing’ for stock price crash risk. My guess is because the event has a nice definition working back to the causes is now easier due to better data than before? So, for example, we now know that younger and/or more confident CEOs lead to stock price crashes. So too do […]

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Sunday Papers

The Sunday Paper – Mind the (current account) gap

How to cure trade imbalances? The paper highlighted today is from January this year and penned by Bank of England staffers Mark Joy, Noëmie Lisack, Simon Lloyd, Dennis Reinhardt, Rana Sajedi and Simon Whitaker. It makes an important contribution to the question. They note that trade imbalances have only been a hot topic in recent […]

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Sunday Papers

The Sunday Paper – Female Board Chairpersons, Firm Performance, and Corporate Governance: Evidence from China

The paper highlighted this week is a first. It shows, conclusively, when women are given real control in a company they are better managers than men. Prior studies have looked mainly at Western models and tried to describe an arc between women on the board or in a CEO/CFO position and performance. Those studies have […]

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Sunday Papers

The Sunday Paper – ‘Belt and Road’: The ‘China Dream’?

What’s missing from this picture of the broad outline of China’s Belt and Road Initiative (BRI)? A significant part of the world whose leadership believe trade is mostly a one-sided deal and in which in any agreement there are ‘winners’ and ‘losers’.  This view, that would shame even the smallest of small town medieval European […]

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Sunday Papers

The Sunday Paper – Size and Value in China

In seeking to contrast explanatory variables for stock price movements in the U.S. and China the authors of the paper highlighted this week turn up some extremely valuable perspectives on China stocks for investors. Jianan Lu, Robert F. Strambaugh and Yu Yuan, all affiliated with the Wharton Business School, wanted to see if ground breaking […]

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Sunday Papers

The Sunday Paper – De-Politicization and Innovation: A Study Based on Chinese A-Share Companies

There’s long been a debate about, particularly in developing markets, whether or not political connections help or hinder the development of the corporate sector? On the one hand it’s been established politically connected entities have better access to credit and a generally lower cost of capital. On the other hand its also been found companies […]

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Sunday Papers

The Sunday Paper – What Can Social Media Tell About IPO Performance in China?

Sort of what we intuitively know; the larger the noise around an IPO the better it’s likely to do. What this paper adds is by taking a new approach to quantifying ‘noise’ it can predict more accurately other short and long term trading characteristics. Kun Chen from the Southern University of Science in Shenzhen and […]

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Sunday Papers

The Sunday Paper – Credit Booms – Is China Different?

Another IMF Working Paper. I noted last week,  summarizing the one highlighted then, how IMF recommendations on China have a habit of ending up as official domestic policy. So these papers are especially worth paying attention to. In this one, from January this year, IMF staffers Sally Chen and Joon Shik Kang begin by reminding […]

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Sunday Papers

The Sunday Paper – Resolving China’s Zombies: Tackling Debt and Raising Productivity

The IMF and China have enjoyed a cozy relationship for some time; the former providing strategic road-maps the latter seem to like following. Papers from the IMF therefore on the subject of China should be read closely because they’re often policy-action harbingers The Working Paper highlighted today was published last November and it’s authorship gives […]

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Sunday Papers

The Sunday Paper- Do ETFs Increase Volatility?

Itzhak Ben-David of The Ohio State University and NBER, Francesco Franzoni from USI Lugano and the Swiss Finance Institute and Rabih Moussawi from the Villanova University and WRDS, University of Pennsylvania set about the question in a Fisher College of Business working paper last updated in November 2017. By looking at before and after effects […]

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Sunday Papers

The Sunday Paper – Is There a Housing Bubble in China?

Well, is there? The authors of the paper highlighted this week, Tianhao Zhi et al, from the Business School of the Sun Yat Sen University, start with trying to pin a definitive tail on the donkey in terms of defining what a ‘bubble’ is. They believe property markets can have two types of bubble. The […]

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Sunday Papers

The Sunday Paper – What Causes the Partial Reforms Equilibrium of Mega-SOEs in China? – A Nash Bargaining Approach

The math in this paper will be beyond most mortals; but the conclusion is straightforward if depressing. The authors, Huangnan Shen Jim from the School of Oriental and African Studies in London et al, wanted to re-visit the old chestnut of why China’s SOEs remain so powerful and so un-reformed. They believe the answer lies […]

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Sunday Papers

The Sunday Paper – Why China Won’t Rescue North Korea: What to Expect If Things Fall Apart

Writing in the January-February edition of Foreign Affairs Oriana Skylar Mastro, assistant professor of security studies at Georgetown University, updates some old thinking about China’s perceived attitude to it’s fractious ‘ally’ N. Korea. There are three major misconceptions about Beijing’s position. First, China and North Korea are not ‘allies’ in any meaningful sense today. Second, […]

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Sunday Papers

The Sunday Paper – Research Paper on Hong Kong ETF Market and Topical Issues in the ETF Space

You need to be afraid of ETFs. They are, most likely, the soil in which the seeds of the next financial crisis (there’s always another one) are being planted. How do I know this? I don’t for sure; but they look very like other financial innovations that started out (and, in fairness, after convulsion came […]

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Sunday Papers

The Sunday Paper – Publicity and Auditor Behavior: The Case of Hurun Rich List in China

Sometimes I come across a paper that in seeking to highlight one issue is helpful to me as an investor in inadvertently shedding light on another. The paper this week, from Donghui Wu and Qing Ye of the Chinese University (H.K.) and Sun Yat Sen University (Guangzhou) respectively is a good example. The researchers wanted […]

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Thoughts

Can China Stocks Proceed To A Bull-Market in 2018?

“Sometimes, a question is easier to answer if it’s inverted.” Me (channeling Chazza Munger). China stocks rose in 2017, but weren’t in a ‘bull-market’; they were continuing a recovery from a crushing begun in August 2015 that reached its maximum intensity in January 2016. As we head into 2018 it seems reasonable to ask; is […]

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Sunday Papers

The Sunday Paper – To Be or Not to Be? — An Empirical Study on Dual-Class Share Structure of US Listed Chinese Companies

I object to Dual-Class Share Structure* (DCSS) companies as they violate the natural justice of the One Share One Vote (OSOV) principle. I believe they give management an extra mechanism to treat minorities unfairly and ultimately the share prices of companies with these structures will trade at a discount to peers with OSOV structures. These […]

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Sunday Papers

The Sunday Paper – Is Investor Sentiment a Reliable Predictor in China?

There seems to be a consensus among academics, based on work done on the U.S. stock market, that investor sentiment is a good long-term forward reverse-indicator for stock markets. Which makes intuitive sense. Maximum-bullish is often a very good time to bring chips in; maximum bearish usually a good time to get them back on […]

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Sunday Papers

The Sunday Paper – When Is the Root of All Evil Not Money? The Impact of Load on Operational Risk at a Commercial Bank

Banks face three types of risk. The biggest is credit which accounts for the bulk of it, but there are also market and operational risks. When setting aside capital they must allocate for each. Because of it’s impact much work has been done on credit risk but, probably because banks are especially unwilling to share […]