nep-cfn New Economics Papers
on Corporate Finance
Issue of 2012‒10‒20
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Can Venture Capital Foster Innovation in Canada? Yes, but Certain Types of Venture Capital Are Better Than Others By Tariq Fancy
  2. Is the Mongolian Equity Market Efficient? Empirical Evidence from Tests of Weak-Form Efficiency By Lim Kai Jie, Shawn; Chadha, Pavneet; Lau, Joshua; Potdar, Nishad

  1. By: Tariq Fancy (former Principal, CPP Investment Board)
    Abstract: Canada’s problem with lagging productivity growth has led policymakers to focus on boosting innovation, in part by supporting Canadian venture capital funding for business. But which types of venture capital (VC) funds are most effective in spurring innovation? This study examines that question in the Canadian context by examining the records of VC funding in generating new patent applications for the period 1996-2008. Overall, Canadian VC funding spurs innovation more effectively on a dollar-for-dollar basis than investment in research and development (R&D). The type of VC fund also matters. Private and institutional VC funds consistently foster innovation; corporate and government VC funds do reasonably well in promoting innovation; but retail, bank and other VC dollars perform poorly on that score.
    Keywords: Economic Growth and Innovation, venture capital, Canada
    JEL: G24 H2
    Date: 2012–09
  2. By: Lim Kai Jie, Shawn; Chadha, Pavneet; Lau, Joshua; Potdar, Nishad
    Abstract: This paper investigates the empirical validity of the weak-form of the Efficient Market Hypothesis in the Mongolian equity market over Jan 1999 to Jul 2012. We examine the characteristics of the market by testing the fit of returns to a normal distribution using the Jarque-Bera Test, and find strong evidence against normality. The data also exhibits positive skewness and a high level of excess kurtosis. Next, we test for the presence of autocorrelation using the Ljung-Box Q Test and the non-parametric Runs Test, and find strong evidence against the null hypothesis of no autocorrelation for both of these tests. Finally, we test the associated Random Walk Hypothesis using the Augmented Dickey- Fuller Test and the Chow-Denning Multiple Variance Ratio (MVR) Test. We reject the null hypothesis of the presence of a unit root for the Augmented Dickey-Fuller Test. In addition, we find evidence against the Random Walk Hypothesis even after adjusting for the possible presence of heteroscedasticity in the MVR Test. Since all the tests present results consistent with weak-form inefficiency, we reject the weak-form of the Efficient Market Hypothesis for the Mongolian equity market.
    Keywords: Weak-form efficient market hypothesis; Mongolian equity market; Random walk hypothesis
    JEL: G14 G1
    Date: 2012–09

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