Investigation of Equity Markets to Ascertain Stability in the Current Financial Landscape - Example

Running Head: Investigation of equity markets to ascertain stability in the current financial landscape characterized corporate collapses and ethics. By Name: Institution: Instructor: Module: Date: PART A: Investigating equity Markets Introduction Prices of stocks and trading volumes play a vital part in market fluctuations of equity markets. This paper will consider ensembles of six stock price indices and the statistical properties of trading volumes. The DataStream presented in this paper are from a reliable financial investment firm, taken from the closing stock prices for each index for a 3 year period from 2007 to 2009, the total stock prices and trade volumes is approximately 5 * 546. In the second section of this paper, the case of Bernard Madoff is used to investigate poor policies and practices on corporate ethics (Watson & Head, 2006). Purpose/objective This paper aims to appreciate the nature of equity markets in the contexts which financial markets operate, including knowledge of the institutional framework which is vital for understanding of the role, operation and function of markets and financial institutions. Background The key drivers for value in financial firms depend on returns and growth of equity which in turn is depended on equity cash flow. Hence the need for calculating benchmark cost of equity, return on equity and economic equity returns. Evaluation of equity market indices is important because investors rely on this information. They are more concerned with earning a higher return rate. Rate of return is calculated from stocks quarterly divided plus price change in the same period divided by closing price of stocks previous quarter (Watson & Head, 2006). Historically, measurement of stock prices stretches back to beyond 40 years. Since invention of Capita Asset Pricing Model (CAPM) from the modern portfolio theory, the measurement has been based on expected return and risk. There exists extensive academic literature on both performance benchmarks and asset-pricing models. It is strange however that there occur varied results from studies based on similar benchmarks and methodologies. Development of Modern Portfolio Theory and asset pricing theory CAPM brought semblance of consensus in capital markets theoretical framework. 1. Markowitz (1952, cited Watson & Head, 2006).postulated the application of Standard deviation to measure risk. According to this measure, a higher standard deviation means the funds volatility is also higher. 2. The Sharpe index is devised from Standard deviation returns as a reward to variability and is calculated based on excess return and standard deviation. The higher the Sharpe ration, the better is the stock’s historical risk adjusted performance. Thus portfolios with Sharpe index greater than one perform better compared to market benchmark (Watson & Head, 2006). 3. The Jensen’s alpha as an alternative reward risk measure is based on different concepts of risk. It uses only systematic risk to scale returns from a portfolio. The alpha measures deviation of portfolio’s return from its equilibrium. A higher alpha means that fund is performing better, and its market rating or ranking is higher. 4. Empirical evidence, answers the questions about how funds add value by being ranked higher in the market. Asset pricing theories postulate existence of cross-sectional differences in expected returns and the linearly relationship to their betas or covariance’s of securities with marginal utility, which is a function of a set of economic risk factors (Forsythe, 2008). This paper tests efficiency in the selected six equity markets based on factor models, 1. According to workhorse model expected excess returns of assets are linearly dependent on excess market returns. The empirical estimation of systematic asset risks is by regressing excess returns of a state against composite excess returns from other equity markets. 2. A variant of multifactor model was adopted which links performance of stock market to a set of documented macroeconomic factors. Oil prices are postulated to have a great impact on market performance. 3 test for any possible relationship between squared values and expected excess returns for world excess returns and lagged local excess returns. 4. Time specific events possibility could also exert impact on the behavior of expected returns, thus study of event study analysis is necessary. Hinich and Serlitis (2005), offers an effective and superior analysis of the six equity markets with limited information. Dummy variable or Hinich factors indicates is given equity index falls within nonlinearity episode. DJW index returns will be used in this paper as the proxy for world market returns. Based on this variant, it is assumed that equity market results in this sample have no risks in exchange rates (Hinich &Patterson, 2005). In general investment risk is defined in terms of return volatility along with the time trends of asset allocation. Managing the total portfolio volatility of a blend of either international or domestic stocks is vital to gain a higher return per unit risk exposure than an all-stock portfolio. This is followed by management of volatility against the benchmark in order for the stock portfolio to move along stock market tracks. Annual standard deviation helps in tracking the equity markets. Standard deviation is a statistical measure of relative volatility. In this sample annual SD for 2007 was .., 2008, and expected 2009…the risk dimension in equity market depends on company size. Equity market indices are commonly capital weighted, for example $20 billion stocks should contribute to an index return 10 times that of $2 billion stock (Forsythe, 2008). Equity Markets The first market segment to examine is Australia, where dominant investors are State Street Global Advisors, Barclays Global Investors, and BHP Paribas; Australian ETFs appears to be highly tax efficient for any investor interested in a benchmark in return for investment. At a glance they rarely experience embedded tax problems for management of unit trusts and are somehow transparent, thus disclosure does not raise issues as is the case for unlisted trust funds. However, it is arguable whether the fund’s attractiveness is due to the additional non-tax issues or is just better investment proposition (Watson & Head, 2006). Tax efficiencies vary greatly in equity markets and it depends on flexibility and structure for intervention. Discussion on International global equity market imbalances centers on 1. Current state of essential features of the global imbalances, 2. Causes of the imbalances, and 3. Emergence of consensus responses to policies. This paper examines the long-term and cointegrating causal relationships of equity market indices in equity markets of Shanghai, Hong Kong, Singapore, USA, India and Australia between the periods of 02/072007 to 31/07/2009 taking into account of the prevailing global financial crisis. Secondly, the paper also analysis the corporate collapse and ethics by investigating the case of Bernard Madoff, and its contribution to the current global imbalances (Watson & Head, 2006). The second equity market is the Chinese markets exhibit causal linkages in equity markets, perhaps due to the nature of economic integration among ethnically homogenous states like Hong Kong, China and Singapore. The background existence of equity market in this states is build on economic complementation, with China providing labor and land for setting up manufacturing firms at low costs while Hong Kong and Singapore provide technical expertise and capital. The financial markets of these states developed and interacted as early as 1990s and they have accelerated faster in recent years (Gang, 2008). China was the first to list its H-share Tisngdao beer on Hong Kong Stock Exchange in 1993. In recent years, China dominates with Red-chips and H-shares presence of 28 to 38 respectively. For example, China mobile represents approximately 16% of the total equity market of Hang Seng index. As recent as May 2006, China set up qualified domestic institutional investor policy which allowed domestic investors to invest in foreign equities and create avenue for foreign capital to access its bond and A-share market. As a result of listings in foreign markets and deregulation of investments by local firms, interaction between global and Chinese markets has increased progressively (Gang, 2008). Chinese mainland markets have gradually been influenced by Singapore and Hong Kong and other foreign markets, with Singapore and Hong Kong markets leading in the emerging markets while the US market greatly influences most of equity markets across the globe. However, little evidence exists for cointegration between Chinese mainland markets other world markets. Singapore and Hong Kong index prices to establish correlation in an isolated equity market segment, additional indices were added at a time for all the six set of market indices. The results are shown in (Fig.2). From the results, there is evidence of correlations in equity market responses to negative effects of global imbalance at 5% confidence level, which then disappears towards 2009.This results are consistent with those compiled in previous research. However, in the event of extending global financial crisis through 2009, the matrix cointegration of the equity markets contradicts results of 2008. Hence there is no evidence for correlations beyond this period among all markets excluding US. This possible explanation is because of the plausible Chinese policy of opening up its financial markets to external investors and relaxation of control for domestic firm’s exploration of overseas investments (Huang, Yang, & Hu, 2000a). Next, after gaining its independence from the British government in 1947, India has continued to exercise the colonial legacy of British India’s financial institutions, inheriting a complete institutional and legal infrastructure. It is home to the first of Asia’s earliest functioning stock market which was established in Bombay in 1875 and a central banking system that was created in 1935. India adopted a kind of ‘mixed economy’ model, where the state controlled all stages of economic organization, like production, distribution and overall planning. However, at present private sector investments have grown into a significant share of Indian economy (Huang & Yang, 2000b). India and China have emerged as the two most dynamic economic powers in Asia for the past two decades. Their equity markets have leveraged a deep influence on the global economy and there is evidence from present statistics that they possess potential of leading the world in economic advancements and are subsequently most often referred to as the engine of the world economy. India’s economic derivatives started only in the year 2000, yet it has already achieved a developed market status in terms of trading scale. Indian banks have either already applied or are in the process of conforming to the growth. India’s strength in equity markets stems from initiation of a world-class regulatory institution such as SEBI, which for the past 15 years adopted state-of-the-art market surveillance. It also has a policy frame work that safeguards mechanisms to ensure there is safety and integrity of its markets and thus attracting a huge portfolio investment in each year (Huang et al, 2000a). Data and Methodology The Data was obtained from DataStream form monthly stock closing price of the Dow Jones Industrials, Hang Seng, Straits Times, India Bse, Asx ordinaries and Shanghai Se Composite from 2007 to 2009 the indices of stocks are adjusted by exchange rates so that they are denominated in US dollar. To begin with, this paper examines the time series properties of the six stock indices. This paper is interested in application of multivariate analysis to establish cointergration relationship between price indices of Australia, India, Singapore, Hong Kong, Shanghai and that of US Dow Jones (Huang & Yang, 2000b). Data collected from the five equity markets in Chinese states as well as U.S. Australia and India and Descriptive statistics were conducted to analyze trends of market response in the current global imbalance, previous published results in articles were used for comparison. Table 1 presents descriptive statistics of this sample to assess extend of equity market responses to global imbalances. Reports show returns in all markets are slowly improving but with different trends following volatility between US and Asian market segments. Excess Kurtosis, Skewness and normality tests on the sample data remains at similar levels (Cheng, Jahan-Parvar, & Rothman, 2009b). Tracking of equity market single index performance is determination from daily returns. The daily returns are theoretically calculated based on capital asset pricing model (CAPM). The CAPM works on assumption that investors have fully diversified portfolios. The model accounts for assets response to non-diversifiable risk, also referred to as market risk or systematic risk and is represented by beta quantity (β), as well as the assets sensitivity to expected return or risk-free asset (French, 2003). This is represented by the following formula: E (ri) = Rf + βi (E (rm) - Rf) Empirical Analysis for measuring Market Expectations Mean measures the Average Return and is given as the average return or arithmetic mean calculated by summing the returns from 2007 to 2009 for equity index then dividing the total by the period number. Where N = Number of period and R I is the Return for period I N Average Return = ( S R I) ¸ N I=1 Standard Deviation is the measure of uncertainty or dispersal of the random variable which in this case is the daily investment returns and represents degree of variation on returns around average or mean return. Therefore, higher volatility stocks of investment returns result from a higher the standard deviation. This is why standard deviation is often used to measure investment risk.   N M R = ( S R I) ¸ N I=1 Where R I = Return for period I, M R = Mean of return set R, N = Number of Periods N Standard Deviation = ( S (R I - M R) 2 ¸ (N - 1)) ½ I = 1 Annualized Standard Deviation is the measure of yearly index trends, and is computed as follows, Annualized Standard Deviation = Monthly Standard Deviation ´ (12) ½ Sharpe Ratio, designed by William Sharpe, is the measure of risk against returns. Where, return as the numerator is defined as the incremental average return of an investment over the risk free rate. While risk as the denominator is the standard deviation on the investment returns.   N M R = ( S R I) ¸ N I=1 N SD = ( S (R I - M R) 2 ¸ (N - 1)) ½ I = 1 Sharpe Ratio = (M R - R RF) ¸ SD  Where R I = Return for period I, M R = Mean of return set R, N = Number of Periods, SD = Period Standard Deviation, R RF = Period Risk Free Return, Annualized Sharpe Ratio or Annualized Sharpe = Monthly Sharpe ´ (12) ½ Skewness is the characterization of asymmetry distribution around its mean. if skewness is positive then it indicates a distribution which is asymmetrical a tail extends towards more positive values. On the other hand, negative skewness indicates a distribution with an asymmetric tail extending toward more negative values. Where N = Number of Periods, R I = Return for period I, M R = Mean of return set R, SD = Period Standard Deviation N M R = ( S R I) ¸ N I=1 N SD = ( S (R I - M R) 2 ¸ (N - 1)) ½ I = 1 N Skewness = (N ¸ ((N-1) (N-2))) ( S (R I – M R) ¸ SD) ) 3 Kurtosis characterizes the relativity in the flatness or peakness of a distribution in comparison to the normal distribution. Positive kurtosis shows a relatively peaked distribution. While, negative kurtosis shows a relatively flat distribution. Where N = Number of Periods, R I = Return for period I, M R = Mean of return set R, SD = Period Standard Deviation N M R = ( S R I) ¸ N I=1 N SD = ( S (R I - M R) 2 ¸ (N - 1)) ½ I = 1 N Kurtosis = {(N (N+1) ¸ ((N-1) (N-2)(N-3))) (S (R I – M R) ¸ SD))4} - (3(N-1)2 ¸ ((N-2)(N-3))) Beta is the slope of a regression line and measures the risk of a specific in relation to the whole market It actual describes sensitivity of investments in world market trends. in this sample Dow Jones was assigned a beat Value of 1.0 as the independent variable. N N Beta = (S (R I - M R ) (RD I - M RD) ) ¸ (S (R I - M R ) 2 ) I=1 I=1  Alpha value is the measure added value on a specific investment and is the Y intercept on the regression line. Given as Alpha = M RD - Beta ´ M R (Watson & Head, 2006). Beta and Alpha values form linear regression used to track daily returns through indirect measures. It compares systematic risks associated to each equity index relative to the systematic risk of other markets. Therefore it is called the index of responsiveness of daily returns in-comparison to the rest of the markets. The market return is the computed average daily returns for each index over the three year period. The daily returns are then annualized by multiplying with 365(Watson & Head, 2006). The goal of this paper is to establish evidence of static international CAPM efficiency and if these markets are segmented or integrated in global equity markets (Watson & Head, 2006). Table 1: shows the sample statistics on daily excess returns ASX Ords Shanghai SE India BSE Straits Times Hang Seng Dow Jones Mean 4984.846 3384.97 14309.03 2678.216 20641.65 10924.06 Standard Error 49.2477 53.79349 146.5506 29.41841 219.0505 96.35206 Standard Deviation 1149.699 1255.822 3421.259 686.7796 5113.784 2249.362 Sample Variance 1321808 1577088 11705011 471666.2 26150790 5059628 Kurtosis -1.46964 -1.10976 -0.93955 -1.31945 -1.08906 -1.52207 Skewness -0.05767 0.506292 -0.14936 -0.22549 -0.06849 -0.25025 Sum 2716741 1844809 7798419 1459628 11249698 5953610 Figure 1. Shows summary of descriptive statistics performed on the six indices for the period 2007 to 2009 The Hang Seng index has higher rate of return, but has also a larger SD, therefore there is need for Relative variability analysis to compare them by using coefficient of variation Notes: excess returns series was computed from subtractions of daily 60 day mark of US T-bill rate from log differences of market returns for each index, latest observation was on July 31st,2009. Figure 2. Shows the annualized trends for each stock index, and performance against Dow Jones Industrial index Figure 3 Shows share volume by percentage against all the indices Figure 4 Show the yearly Volatility on the price indices Results and discusion From the results it is useful to understand that in different countries the existence of a current account surplus or deficit is inevitable among economies at any given time. In particular, one of the arguments in favor of global integration is that capital flow is mainly from developed economies to recipient developing countries characterized by capital starvation. This implies that there would be likelihood of current account deficits in the Developing economies. This results to persistence of large current account surplus and large current account deficits and, particularly in large and systemically important economies giving rise to fears of disruptive unwinding and unsustainably (Gang, 2008). According to Statistics summary, the excess returns series presented in Table 1 show, 1. sample mean for the excess returns for equity market show a higher magnitude compared to DJW hence superior market performance, 2.there is no excess series returns with a heavy unconditional skewness. 3. The equity markets show a highly leptokurtosis but non- Gaussian series. These indicators reveal relatively isolated decline in equity markets worldwide during the financial crisis. However, greater Kurtosis values in Chinese equity market segment indicate a relatively less impact on the indices price in the same period. The consistence of this results agree with studies showing volatility return of upcoming markets which is normally higher compared to established markets and it is time dependent. Correlation matrix is represented in table 1. bottom panel show correlation of indices at the beginning the financial crisis while the lower panel shows corresponding correlations during the crisis period. This is in agreement with expected correlations among the different equity indices returns to positive (Huang & Yang, 2000b). Correlation coefficients in all market segments, when paired in the two periods 2007 to 2008 and 2008 to 2009, reveal a substantial increase in the trading patterns. However, limited improvements are noticed in correlation coefficients between Australia and US markets than their Asian counterparts. For example the correlation coefficient for Chinese markets are themselves higher than the remaining market segments in the same period, increasing by approximately 0.69 at the beginning and 0.94 in 2008 to 2009 duration. Therefore, this paper examined the behavior of equity markets in Asia and Australia, against US, by applying a variety of variants on CAPM. Empirical assessment of return dynamics and risks for the markets is comprehensive and justified by the strong growth and role the markets currently play. However, a major area of concern in this paper is integration of these markets to rest of world capital markets (Gang, 2008). results of static Markov-switching and international CAPM analysis supports this conclusion. Trade-off in Shanghai, Hong Kong, and Singapore show no risk in trade-of, as exhibited by results of Markov-switching inter-temporal CAPM model estimates of their indices which is not significantly greater than zero. While Australia and India markets are strongly segmented from world capital markets. The sample analysis reveals two markets whose index pricing falls slightly 10% in annualized trading. Interestingly, the factor variables for the other markets suggest that they are CAPM-inefficient, it is worthy noting that the oil price greatly affects market returns for the given indices (Watson & Head, 2006). PART B: Corporate Collapse and ethics. Incidences of corporate mismanagement have been on the rise in recent years, characterized by corporate collapses. There is no doubt that the causes result from lack of ethical conduct from auditors and directors. These incidences have caused financial shocks and hiccups faced by numerous stakeholders and brought disrepute to accounting as a profession. The proliferation of unethical behavior poses a serious problem that requires urgent remedy and raised question as to whether, hasher penalties should be imposed to criminals responsible for corporate failures and who fails to conduct themselves ethically. Otherwise, how will the unethical practices be curtailed? (Tarranty, 2005). If members of public are given chance to response to such misconduct, they would prefer such criminals to be dealt with in similar manner as other serious crimes. This is because the unethical conduct of such auditors and directors affects vast numbers of innocent lives. It is not surprising that such actions attract harsh sentiments and government institutions tasked to protect its citizens should criminalize such actions and impose even harsh penalties (Tarranty, 2005). In Australia, recent statistics from Australian Institute of Criminology (Tarranty, 2005), estimates that the losses as a result fraud alone is the range of $5.8 billion a year in Australian corporations. The widespread exposure of such scandals and media coverage attraction lead to frequent outcry by members of public condemning legal system and accounting profession for their lapses in safeguarding their investments. Judiciary and government agencies failures to impose harsh punishments and prevention of such situation from arising form the basis of discussion in this section. This paper also questions the notion of how imposing harsher penalties to auditors and directors will help in curbing proliferation of unethical conducts. It takes recent example of Bernard Madoff case to justify evidence in corporate collapses and exonerates what could be the better way to handle such unethical behaviors (Tarranty, 2005). Harsher penalties in public the domain refers to imprisonment of perpetrators of corporate fraud and scandals in order to serve as a deterrent measure to other potential criminals from engaging in similar conduct. In general, sentencing of architects for mega scandals like Maddof’s ponzi scheme in itself is a powerful tool to evaluated decisions made by judges and justification of public criticism. Secondly, alternative measures according to Professor Roman Tomasic are the inadequate corporate auditing and regulations practices, which are to blame for such increases in frauds (Tarranty, 2005). Madoff’s Scandal According to his pleas, Madoff asserts that he stopped trading on S&D 500- stock index, in mid 1990’s, all he engaged in since then was a crafted means of fabricated sales by making purchases of blue-chip stocks and offering attractive packages and contracts on them. It the eventual setup, correlated indices of out-of money calls are put on the calls, then sales from the calls are designated to increase rate of returns allowing an upward stock portfolio movement to the strike price. In a nutshell, the ‘puts’ which are at large funded by the ‘calls’ sales limits the portfolios downside fall. This raises the question of how Madoff single-handedly coordinated these mega activities (Adamson, 2008). Adamson (2008) argues how it was possible for biggest banks with, elaborate sequence of conducting due diligence and sophisticated teams in risk management in the world were blinded by Bernard Madoff’s greatest fraud occurring in a financial system ever. Through his firm Bernard L. Madoff Investments, he defrauded investors like corporate institutions and banks that fund nonprofit and charitable organizations over $50 billion. The immediate consequence of this mega scandal is its adverse effects on charitable organizations who are struggling to cope with provision of education facilities after investors lost the billions (Adamson, 2008). Consequently, Industry regulators are equally to blame for failing to investigate and preempt such a massive scandal. This has brought a lot of focus on financial and corporate industry in term of ethics, where regulators claim that such frauds can only be avoided by enforcing new laws to prevent future occurrences. This blame game starts at the institutional level for failing to conduct individual reviews and due diligence, with highly regarded institutions like Banco Santander, Royal Bank of Scotland, and HSBC falling in Madoff’s hedge fund. Despite the fact that hedge firms are not regulated, their managers regulated under Securities and Exchange Commission (SEC). The question arises as to why Madoff having been registered by SEC for so many years, his books for secretive and small investment-adviser services were never audited. Thirdly, many investors to Madoff’s ponzi scheme did so through third parties. The thirty parties failed to practice their own due diligence processes stipulated. it is questionable whether the procedures were deliberately not followed, flawed or insufficient to indentify the scandal perpetrated by Madoff (Adamson, 2008). However, Investors are also to blame for making it easier for hedge funds and alternative investments avenues to thrive outside their observation. This is normally justified by investors lining up for financial reward from financial markets upward ride but fail to get leverage on how hedge funds are spending their funds in beating the market. Because hedge funds are not under public scrutiny and lacks legislation for disclosures, most managers can not reveal such information to investors (Tarranty, 2005). Madoff was a well known personality, having served as Chairman NASDAQ Board and his Bernard Madoff Investment Securities LLC being around for long time from 1960s was seen to have built a reputation of consistent market returns. The scandal committed by Madoff, left many investors contemplating on another serious lesson in risk management, corporate governance and transparency. Although laws protecting investors exist, regulation agencies are lack resources and have no time to enforce the laws or perhaps just neglect their roles. In United Kingdom, new regulations for hedge funds have been set up and adopted by Financial Services Authority (FSA) (Adamson, 2008). In conclusion, Bernard Modoff’s mega scandal has enlightened extend of crimes committed by individuals can contributor to global imbalances. From this point of view, the judicial system and its guiding principles of balanced sentencing should be reviewed. Perpetrators of mega scandals should not be offered room for denunciations and rehabilitation but face harsher penalties like one handed to Bernard Madoff. Secondly, Corporate Audit practices and regulation should be empowered and given adequate resources and remuneration to their staff to curb proliferation of frauds. From the Madoff’s Ponzi scheme, one can easily accept that authorities and agencies failed to prevent escalation of the scandals through collaboration and other corrupt practices. Therefore there is need to empower and create enforceability in regulation and auditing departments. Thirdly, creating awareness and openness of hedge funds to investors will curb blind investments and lessen individual liabilities. On overall, ethical conduct and practices in finance, accounting and business professions is of paramount importance both to investors and to performance and trust in equity markets. Hence every measure should be taken to make sure ethical conduct permeates through all aspects of these professions. This would be the best way of curbing corporate collapses and steering confidence and strength of equity markets (Tarranty, 2005). Conclusion In Part A of this paper there was a general understanding of governance and financing arrangements structures of equity market indices, through appreciation of how evidence and theory drawn from financial data can be combined to assess the effectiveness and efficiency capital markets, for example, decision making on the financial structure and sources of finance. From this information, it’s possible to secure capital markets for investors and safeguard world economy against imbalances. Part B, gives an account of how corporate mismanagement and poor ethics on pricing of corporate securities has enormous effects on equity markets through investigation of Bernard Madoff‘s ponzi scheme. Maddoff scandal should serve as a lesson to both individual and corporate investors on awareness and control of their investments. It also increases awareness on corporate governance structures and mechanisms in financial planning at local and international finance dimensions (Watson & Head, 2006). References Adamson, R. (2008). Madoff Madness: Another Lesson in Corporate Governance and Risk Management Retrieved September 25, 2009 from Cheng, A., Jahan-Parvar, M.R., & Rothman, P. (2009a). An Empirical Investigation of Stock Market Behavior in the Middle East and North Africa. Retrieved September 25, 2009 from Cheng, A., Jahan-Parvar, M.R., & Rothman, P. (2009b). Daily returns are the log differences of computed total market return indices. Retrieved September 26, 2009 from Forsythe, G. (2008).Constructing a Diversified Stock Portfolio. Retrieved September 26, 2009 from Stock article French, C.W. (2003). The Treynor Capital Asset Pricing Model. Journal of Investment Management, 1(2), pp. 60-72. Gang, T.G. (2008). Equity Market Price Interactions between China and the Other Markets within the Chinese States Equity Markets. Multinational Finance Journal. Retrieved September 25, 2009 from Hinich, M. J., Patterson, D. M., (2005). Money Measurement and Computation. Palgrave, London, Ch. Detecting Epochs of Transient Dependence in White Noise. Pp. 61-75 Huang, B.N., Yang, C. W., & Hu, J. W. (2000a). Causality and cointegration of stock markets among the United States, Japan and the South China Growth Triangle. International Review of Financial Analysis. (9). Pp.281-297 Huang, B.-N., & Yang, C. W. (2000b). Financial markets integration and segmentation under regional economic blocs: A dynamic conditional correlation approach. Advances in Pacific Basin Business, Economics, and Finance. (4).pp.233-50. Tarranty, J. E. (2005). How could the incidence of unethical behaviour in the accounting, finance and business professions be curtailed? CPA Australia. Retrieved September 26, 2009 from Watson, D., & Head, A. (2006). Corporate Finance: Principles and Practice. Financial Times/Prentice Hall, p213. Read More