اهرم مالی شرکت های بزرگ و قیمت گذاری دارایی در بازار هنگ کنگ

Our earlier paper [see Ho, R. Y.-W., Strange, R., & Piesse, J. (2006). On the conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market. Journal of International Financial Markets, Institutions and Money, 16, 124–199] reported evidence supporting significant conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market. This study attempts to extend our earlier work by examining the pricing of beta in the presence of another commonly hypothesized risk factor, namely financial leverage, conditional on market situations, i.e. whether the market is up or down. Evidence indicates that market leverage (but not book leverage) exhibits conditional pricing relationship with returns. The study yields important results on a non-US market, which lend strong support to the conditional relationship hypotheses originally developed by Pettengill, Sundaram, and Mathur [(1995). The conditional relation between beta and returns. Journal of Financial and Quantitative Analysis, 30, 101–116; and (2002). Payment for risk: Constant beta vs. dual-beta models. The Financial Review, 27, 123–136] for the US market. The findings enrich our understanding of capital market behaviour, and should prove helpful to corporate managers and investors in their financial decision making.

Empirical tests of the CAPM to date have invariably employed ex post realized returns over a long historical period as a proxy for the ex ante expected returns for a future holding period, and hence the validity of the CAPM might not have been properly examined (see classic studies by Fama and MacBeth (1973) and Fama and French (1992) as examples of key works using ex post realized return data over long historical periods to test the CAPM; and see also Roll's (1977) and Roll and Ross’ (1994) critique on the testability of the CAPM in general given the difficulties in identifying the ex ante efficient market portfolio). These prior studies attempted to test for an unconditional, systematic and positive trade-off between average returns and beta, and failed to take into account the fact that the relationship between realized returns and beta is conditional on the relationship between realized market returns and the risk-free rate. The results of these studies using realized returns but ignoring the conditional relationship might be biased against finding a systematic relationship, due to aggregation of positive and negative excess market return periods. Following the pioneering work of Pettengill, Sundaram, & Mathur (1995) and Pettengill, Sundaram, & Mathur (2002) in the US, we examined in an earlier paper the conditional relationships between returns and beta, size, and book-to-market equity in the Hong Kong market (see Ho, Strange, & Piesse, hereafter “HSP”, 2006). Similar to Pettengill, Sundaram, & Mathur (1995) and Pettengill, Sundaram, & Mathur (2002), HSP (2006) reported strong evidence in support of the hypotheses that beta, size, and book-to-market equity proxy for risks that are systematically priced by the market, but are conditional on market situations, i.e. whether the market is up or down. Similar results supporting the conditional pricing of beta were also reported in other non-US markets, e.g. Fletcher (1997), Isakow (1999), Hodoshima, Garza-Gomex, and Kunimura (2000), and Elsas, El-Shaer, and Theissen (2003) in the UK, Swiss, Japanese, and German markets, respectively. The findings from these studies enrich significantly our knowledge of capital market behavior, which in turn has far-reaching implications for financial decisions. The vast majority of these studies focused their work on conditional pricing of beta only. PSM (2002) and HSP (2006), on the other hand, enquired into the systematic pricing effects of other risk variables (namely size, and book-to-market equity) in addition to beta. However, it seems that the leverage effect of Bhandari (1988), conditional on market situations, is lacking in the literature. This study therefore extends our earlier work (see HSP, 2006) to look into the conditional pricing of beta and financial leverage in the Hong Kong market, based essentially on the same data set and methodology. If the CAPM is valid, beta should have captured the financial risk arising from financial leverage, and hence leverage should not explain stock returns in tests that include beta. Bhandari (1988) found that market leverage (total asset to market equity) but not book leverage (total asset to book equity) helped explain the cross-section of average returns in the US in tests that included size and beta: higher leverage is associated with higher returns than that predicted by the CAPM, and vice versa. This result is also supported by Fama and French (1992) in the US. If the securities market is efficient, and if the CAPM is mis-specified, then asset attributes other than beta, such as financial leverage, should contribute to explain cross-sectional variations in returns and be priced by the market. In the following sections, the data, methodology, empirical results and their interpretation, and conclusion are discussed in turn.

This is the first comprehensive study to examine empirically the conditional pricing of beta and financial leverage in the Hong Kong stock market. Specifically, it was found that, for all markets, market leverage (but not beta and book leverage) was priced by the market. However, when the whole market period is partitioned into up and down markets, a highly significant systematic, positive (negative) relationship exists between realized returns and beta during up (down) markets: this supports the results reported earlier by Pettengill, Sundaram, & Mathur (1995) and Pettengill, Sundaram, & Mathur (2002), Fletcher (1997), Isakow (1999), Hodoshima et al. (2000), Elsas et al. (2003), and HSP (2006). A similar systematic, conditional relationship between returns and market leverage (but not book leverage) is also observed: a highly significant systematic, positive relationship during up markets, but the pricing effect appears negligible in down markets due to changing values of the risk variable as market conditions change. Therefore, in the Hong Kong market, market leverage (in addition to beta, size, and book-to-market equity as reported by HSP, 2006) proxies for risks and is correspondingly compensated. This paper adds value to the literature. First, like PSM (2002) and HSP (2006), the present study improves upon PSM (1995)'s methodology and produces more significant findings, which give better insights into capital market behavior. Second, statistics suggest that, in addition to beta, size and book-to-market equity, market leverage is systematically priced by the market, both unconditional and conditional on market situations. The evidence supports the generally accepted hypothesis that market leverage is the relevant variable in financial decisions, and rejects the use of book leverage in decision making though it is widely used in practice by corporate managers and investors for the sake of ease and simplicity. The findings should therefore prove valuable to both corporate managers and investors in their financial decisions. Finally, this study produces further strong evidence supporting the conditional pricing hypotheses, first developed in the US by Pettengill, Sundaram, & Mathur (1995) and Pettengill, Sundaram, & Mathur (2002), but using data from a non-US source. The practitioner relevance of the findings is two-fold: the value of the extended pricing hypothesis and the irrelevance of book leverage in financial decisions. First, as is well known, the CAPM has been widely used in industry for decision-making. However, the findings of this study suggest that the CAPM might be mis-specified so that the single beta factor may fail to capture fully all risk factors affecting asset returns. In the Hong Kong market, in addition to the beta factor of the CAPM, size, book-to-market equity, and market leverage (as hypothesized and supported by this study) proxy for risks and are rewarded. This enriches significantly our knowledge of capital market behavior, which in turn enables both corporate managers and investors to make better financial decisions, in not only domestic but also international settings. In corporate financial decisions, the objective of value creation or maximization for shareholders points to the practical importance of the findings from this study. The extended pricing model incorporating all relevant risk factors helps determine more fairly the appropriate risk-adjusted cost of capital, a key variable in computing the corporate value added by managerial decisions. This is helpful in a range of corporate financial decisions, such as capital investment decisions, capital structure decisions, dividend decisions, and mergers and acquisitions decisions. In addition, investors (both individual and institutional) and portfolio managers will find the extended pricing hypothesis valuable in their investment decisions and management. For instance, the pricing equation incorporating all relevant risk factors helps to determine fairly the risk exposure and hence the intrinsic value of the securities: this is the essence of fundamental security analysis and selection. In portfolio construction and revision, on the other hand, portfolio risks and their relationships with portfolio returns will be more accurately assessed and monitored. Also, the findings play a significant role in portfolio performance evaluation when ex post portfolio returns are more appropriately adjusted for risks. Apart from the value of the extended pricing model in financial decisions, the second relevance of the findings to the practitioners is that market leverage but not book leverage (as an indicator of financial risk) should be used in financial analyses and decisions, although book leverage has been commonly used in practice for the sake of ease and simplicity.