CONTACT INFORMATION
Office:	315 Kalkin  FIND OFFICE
Phone:	656-0515
E-Mail:	kcchiang@bsad.uvm.edu
Office Hours:	MW 10:45-11:45 a.m.; TR 9:00-10:00 a.m. or by appointment

• BSAD 180 - Managerial Finance
  Section A, 110 Kalkin 9:30-10:45 MW - ON-LINE SYLLABUS
  Section Z1, 110 Kalkin 9:30-10:45 MW - ON-LINE SYLLABUS
   
• BSAD 282 - Security Valuation and Portfolio Management
  Section A, 110 Kalkin 5:00-6:15 MW - ON-LINE SYLLABUS
  Section Z1, 110 Kalkin 5:00-6:15 MW

Publication History

Journal Article, Academic Journal

• Chiang, K. C.; Zhou, T. - "Do Aggressive Funds Reallocate Their Portfolios Aggressively" (Refereed) - Accounting and Finance - 2009 [View publication] [Show/Hide Abstract]
  Abstract: This study examines pairs of asset allocation mutual funds that are controlled for all informational attributes, except for the level of risk aversion. Standard mean-variance models of portfolio choice suggest that the percentage rebalancing of common stocks in aggressive funds would be the same as that in conservative funds. However, the study finds the rebalancing of common stocks in aggressive funds to be disproportionally less intense.
  
• Chiang, K. C. - "On the Comovement of REIT Prices" (Refereed) - Journal of Real Estate Research - 2009 [Show/Hide Abstract]
  Abstract: This study examines the comovement of equity real estate investment trust (REIT) prices in both the vintage (1980-1991) and the new (1992-2004) REIT eras. The results indicate that the comovement structure of equity REITs evolves over time. Specifically, the comovement of equity REIT prices within the same property type has strengthened during the new REIT era, 1992-2004. The results also indicate that, all else being equal, a high institutional participation, a low insider ownership, and a large market capitalization are associated with a high within-property-type price synchronicity. Overall, the evidence is consistent with two notions: (1) that increasing participation by institutional investors in the new REIT era facilitates the pricing of systematic, property-type common information on firm-level prices, and (2) that REITs??? information openness to institutional investing plays a role in this strengthened pricing relationship of property-type common information to firm-level prices.
  
• Chiang, K. C.; Lee, M. - "The Role of Correlated Trading in Setting REIT Prices" (Refereed) - Journal of Real Estate Finance and Economics - 2009 [Show/Hide Abstract]
  Abstract: This study investigates the role of correlated trading by individuals in setting equity real estate investment trust (REIT) prices. Consistent with existing literature, this study finds that there is a common element in correlated trades that drives both traditional closed-end fund prices and REIT prices. Perhaps more important, we find evidence suggesting that (1) the effects of correlated trading on REIT prices are stronger for those REITs that are hypothesized to be preferred by individual investors, and (2) this linkage is stronger when the REIT market is hot and exuberant; i.e., when the average share turnover in the REIT market is high.
  
• Chiang, K. C.; Chiu, B.; Lee, M.; Lee, M. - "Time-Varying Real Estate Sensitivities of Mortgage REITs" (Refereed) - Applied Economics Letters - 2009
• Chiang, K. C. - "Discovering REIT Price Discovery: A New Data Setting" (Refereed) - Journal of Real Estate Finance and Economics - 2009 - no. DOI: 10.1007/s11146-007-9098-7 , [View publication] [Show/Hide Abstract]
  Abstract: This study decomposes real estate investment trust (REIT) returns into two components: (1) real returns, and (2) public returns. The real returns are based on the changes in the private, appraisal-based net asset values of REITs, whereas the public returns are measured by the variations in REITs' premiums/discounts. This study then investigates the price discovery of REIT prices. The results indicate that lagged public returns are useful in predicting real returns. In addition, the study documents concurrent factor exposures for public returns and lagged factor exposures for private returns under a variety of asset pricing models. Overall, the results are consistent with the notion that public markets are more efficient in processing information.
  
• Chiang, K. C.; Kozhevnikov, K.; Lee, M.; Wisen, C. H. - "Further Evidence on the Performance of Funds of Funds: The Case of Real Estate Mutual Funds" (Refereed) - Real Estate Economics - 2008 - v. 36, no. 1, pp. 47-61 [View publication] [Show/Hide Abstract]
  Abstract: Fund of Funds (FOFs) are created when investment companies acquire shares of other investment companies. The Securities and Exchange Commission (SEC) has recently proposed several rules under the Investment Company Act of 1940 that would expand the ability of FOFs to acquire shares of other funds and the proposal would improve the transparency of disclosures relating to expenses and fees. Although the additional layer of fees incurred by FOFs has a negative effect on returns, there is empirical evidence that real estate FOFs have generated superior performance net of fees and risk adjustments. This study resolves the apparent contradiction and it finds that the performance of real estate FOFs is consistent with the predominant view that most mutual funds do not outperform their benchmarks.
  
• Lee, M. L.; Lee, M. T.; Chiang, K. C. - "Real Estate Risk Exposure of Equity Real Estate Investment Trusts" (Refereed) - Journal of Real Estate Finance and Economics - 2008 - v. 36, no. 2, pp. 161-185 [View publication] [Show/Hide Abstract]
  Abstract: This study examines the linkage between equity real estate investment trust (REIT) returns and the private real estate factor. The results reveal a tighter connection between REIT and the private real estate market starting from 1993. In addition, large-cap REITs seem to behave more like real estate than do small-cap REITs. Overall, the results are consistent with three notions: (1) that institutional investors provide information-gathering services (Bradrinath, Kale, and Noe, 1995), (2) that a more sophisticated investor base improves information flow, and (3) that a high degree of participation from institutional investors strengthens the linkage between REIT returns and the underlying real estate factor (Ziering, Winograd, and McIntosh, 1997).
  
• Chiang, K. C.; Kung, A.; Zhou, T. - "Country-Specific Risk and Returns" (Refereed) - Journal of Business and Economic Perspectives - 2007 - pp. 28-38
• Chiang, K. C.; Wisen , C.; Zhou, T. - "Emerging Market Bonds as an Asset Class: Mean-Variance Spanning" (Refereed) - Journal of Investing - 2007 [Show/Hide Abstract]
  Abstract: Emerging market bonds improve the efficient frontier of a mixed-asset portfolio. The improvement is based on the application of mean-variance spanning tests on returns that are free from survivorship bias. The results indicate that emerging market bonds span a portfolio comprised of U.S. stocks, U.S. bonds, international equity, and international bonds from developed markets. Mean-variance optimizations suggest that a typical fund sponsor might consider overweighting its allocation towards emerging market bonds.
  
• Zhou, T.; Chiang, K. C. - "Motivations behind the Acquisitions of Mutual Funds" (Refereed) - Corporate Finance Review - 2007 - v. 12, no. 2, pp. 19-26 [View publication] [Show/Hide Abstract]
  Abstract: This paper studies the motivations behind mutual fund acquisitions. Results indicate that, consistent with the existing corporate mergers and acquisitions literature, a desire to achieve economics of scale in the form of costs reduction in distribution and internal operation drives mutual fund acquisitions. In addition, acquisitions are partly driven by a desire to acquire respectful performance record and managerial talent.
  
• Zhou , X.; Chiang, K. C.; Wisen, C. - "Mutual Fund Acquisitions and the Wealth of Target Shareholders" (Refereed) - Journal of American Academy of Business - 2007 - pp. 33-38
• Zhou, X.; Chiang, K. C. - "Mutual Fund Postacquisition Management Retention and Its Performance Implications" (Refereed) - Corporate Finance Review - 2007 - v. 11, no. 6, pp. 28-34
• Chiang, K. C.; Kozhevnikov , K.; Wisen, C. H. - "Non-Fundamentals and Value Returns" (Refereed) - Applied Financial Economics - 2007 - v. 17, no. 13, pp. 1075-1083 [View publication] [Show/Hide Abstract]
  Abstract: The study examines additions to and deletions from the Russell Value Index and the Russell 2000 Growth Index. The study documents stronger comovement in value reconstitutions relative to growth reconstitutions. This result is consistent with the hypothesis that nonfundamental comovement is related to the common factor in value stock returns. The mechanism of causality is difficult to determine, however; trade demand, firm characteristics and information diffusion are presented as potential sources that could explain why comovement of small to mid-cap value stocks is greater than the comovement of small to mid-cap growth stocks.
  
• Lee, M.; Lee, M.; Chiang, K. C. - "Spanning Tests on Asian Real Estate Securities" (Refereed) - Journal of Financial Review - 2007 - pp. 1-20
• Chiang, K. C.; Lee, M. - "Spanning Tests on Public and Private Real Estate" (Refereed) - Journal of Real Estate Portfolio Management - 2007 - v. 13, no. 1, pp. 7-15 [Show/Hide Abstract]
  Abstract: This study uses mean-variance spanning tests to examine the roles of public and private real estate in mixed-asset portfolios. The results suggest that the usefulness of including equity real estate investment trusts (REITs) in improving investment opportunity sets is sensitive to the specification of benchmark assets. In contrast, private real estate yields diversification benefits in various specifications of benchmark assets. The results imply that, when private real estate is already in a mixed-asset portfolio, there is limited room for equity REITs. Equity REITs are substitutes for private real estate in a mixed-asset portfolio when direct investing in private real estate is not feasible because of liquidity, transaction costs, and economies of scale. This result explains why large fund sponsors tend to allocate more to private real estate than to public real estate.
  
• Lee, M.; Lee, M.; Chiang, K. C. - "Structural Breaks and Cross-Continental Real Estate Securities Diversification: Evidence from Spanning Tests" (Refereed) - Pacific Rim Property Research Journal - 2007 - pp. 510-535
• Wisen, C. H.; Chiang, K. C. - "Explaining the Initial Returns of Mutual Funds" (Refereed) - Journal of Investing - 2006 - pp. 53-67 [Show/Hide Abstract]
  Abstract: Mutual funds that were less than five years old represented approximately 38% of the open-end mutual fund population as of December 31, 1999. The primary research question examines whether the initial returns of mutual funds are biased. The implication of the analysis is that inferences about the management ability of small-cap growth, mid-cap growth, and high-yield bond fund managers are more likely to be overstated for new funds than seasoned funds. The bias associated with new mutual fund returns is shown to be positively related to the size of the fund family and the number of brokerage companies that sell the family's funds. The most likely sources of the new fund return bias estimated during the period 1994???1999 include incubation, favoritism, and higher termination rates of new funds relative to seasoned funds.
  
• Chiang, K. C.; Kozhevnikov, K.; Lee, M.; Wisen, C. H. - "REIT Mimicking Portfolio Analysis" (Refereed) - International Real Estate Review - 2006 - v. 9, no. 1, pp. 95-111 [Show/Hide Abstract]
  Abstract: It is well known that expected returns vary by industry (Lyon et al., 1999), and that REIT-based mimicking portfolios may capture the information in real estate investment trust (REIT) prices (Downs, 2000). This study performs REIT-based mimicking portfolio analysis. The results indicate that when the Capital Asset Pricing Model and the Fama-French (1993) three-factor model are used to evaluate the performance of a REIT portfolio, the probability for making Type I error exceeds its significance level. Performance tests are better specified when mimicking portfolios are constructed with the firms from the REIT industry. In addition, the market beta of REIT portfolios appears to converge to the market beta of the NCREIF Index when REIT-based mimicking portfolios are included into the specificaiton. The result is consistent with the notion that there is a strong linkage between REIT returns and the underlying real estate factor (Ziering et al., 1997).
  
• Chiang, K. C.; Frankfurter, G. M.; Kosedag , A.; Wood, B. - "The Perception of Dividends by Professional Investors" (Refereed) - Managerial Finance - 2006 - v. 32, no. 1, pp. 60-81 [Show/Hide Abstract]
  Abstract: Purpose: To study the perception of dividends by the professional investor, for whom mutual fund managers are a proxy. The main line of research in dividends is based on using market data that are fit, ex post, to a cherished hypothesis. It is believed, however, that such data cannot measure motivation which is the underlying force behind generating market data. An understanding of motivation will give us more insight into the dividend paradox (why shareholders love dividends) than just the surface reality one can glean from market data. Design/methodology/approach: Using a survey instrument, the method of analysis (not methodology) is factor analysis and hierarchical grouping that uncovers three distinct groups of professional investors re their attitude towards dividend. This categorization clearly shows that the dividends are perceived differently by the groups found here. Thus, research in dividends cannot follow a traditional route in which the phenomenon is treated as universal, or something similar to a natural occurrence. Findings: Three groups from the more traditional: the more growth-oriented, aggressive; and a middle-of-the-road group are posited. Although there are some uniformly accepted tenets across the groups, nevertheless, the more traditional group attributes far more importance to dividends than the growth-oriented group. The latter group perceives dividends as something needed to pacify the shareholder. It is also concluded that none of the academic hypotheses contrived to explain dividend behavior can be supported by empirical evidence. The interesting result is, nevertheless, that the ex post group performance is not significantly different between each possible pairing of the three groups. Research limitations/implications: As all empirical research goes, results cannot be all-conclusive, because of time and participation in the sample. This fact alone should not grind to a halt all empirical work. This work is part of a segment of three different studies examining the perception of dividends by corporate managers, and across countries. The next logical step is obviously studying the perception of dividends by the non-professional investor. Originality/value: This kind of work was almost never done. This is a first, because unfortunately traditional research that dominates most finance journals does not believe that motivation counts. First, because it satisfies one's desire to better understand the dividend puzzle. But it should be of interest to all who want to study the dividend decision in the firm, and why shareholders love dividends, something entirely not rational as far as economic rationality goes.
  
• Chiang, K. C.; Kung, A. W. - "Bidding Dynamics in Multi-Unit Auctions: Empirical Evidence from Online Auctions of Certificates of Deposit" (Refereed) - Journal of Financial Intermediation - 2005 - v. 14, no. 2, pp. 239-252 [View publication] [Show/Hide Abstract]
  Abstract: This study examines online multi-unit, discriminatory, ascending auctions of certificates of deposit. We find evidence suggesting that the most aggressive bids are likely to occur at the beginning and the end of the auctions. The opening of the auction serves an important role in price discovery. In addition, in multi-unit auctions last-minute bidding is a conditional strategy, and is used only when bidding is intense. Furthermore, we provide evidence suggesting that revenues are increasing in the depth of the market, in the concentration of early bids, and in bank participation relative to the size of the principal.
  
• Chiang, K. C.; Frankfurter, G. M.; Kosedag, A. - "Exploratory Analyses of Dividend Re-Investment Plans and Some Comparisons" (Refereed) - International Review of Financial Analysis - 2005 - v. 14, no. 5, pp. 570-586 [View publication]
• Chiang, K. C.; Lee , M.; Wisen, C. H. - "On the Time Series Properties of Real Estate Investment Trust Beta" (Refereed) - Real Estate Economics - 2005 - v. 33, pp. 381-396 [View publication] [Show/Hide Abstract]
  Abstract: The relation between real estate investment trust (REIT) returns and stock market returns is of significant importance to investors, practitioners and academics. The temporal properties of this relationship have a critical impact on the usefulness of REIT risk estimates and portfolio allocations to this asset class. Recent studies have suggested a decline in the market betas of equity real estate investment trusts (EREITs). This study applies a rigorous statistical test of the hypothesis that the market betas of EREITs have remained unchanged during the 1972 through 2002 time period. There is weak evidence of a downward trend in EREIT betas using a single-factor model; however, the hypothesis is not rejected when using a three-factor model.
  
• Frankfurter, G. M.; Kosedag, A.; Chiang, K. C.; Collison, D.; Power, D. M.; Schmidt, H.; So, R. - "A Comparative Analysis of Perception of Dividends by Financial Managers" (Refereed) - Research in International Business and Finance - 2004 - pp. 73-113 [View publication] [Show/Hide Abstract]
  Abstract: This paper is a report about the perception of dividends by CFO's. The research encompasses five countries, on three continents, and covers three types of economies. Our cross-sectional study is concerned with both inter- and intra-societal differences that may or may not exist regarding the perception of dividends by those who are in charge of making such decisions in the firm. Using a survey instrument, we find that both similarities and dissimilarities exist inter-and intra-culturally. Perhaps the most important conclusion we reach is that dividend reserach must take a different track than it has been following so far.
  
• Chiang, K. C.; Lee, M.; Wisen, C. H. - "Another Look at the Asymmetric REIT-Beta Puzzle" (Refereed) - Journal of Real Estate Research - 2004 - v. 26, no. 1, pp. 26-42 [View publication] [Show/Hide Abstract]
  Abstract: The diversification benefit provided by real estate investment trusts (REITs) is of great importance to investors, practitioners, and academics. This benefit critically relies upon the correlation properties between REIT returns and the factors used to explain REIT returns. Recent studies have documented an asymmetry of the market-beta of equity REITs based on high and low GDP growth states as well as in positive and negative monthly market excess returns. The asymmetry has been labeled a puzzle because attempts to explain the asymmetry have failed and because it persists after controlling for a number of known effects. This study helps to resolve this puzzle by including the Fama-French (1993) book-to-market factor into a model that controls for size and market returns.
  
• Chiang, K. C.; Harikumar, T. - "Offering Price Clusters and Underpricing in the US Primary Market" (Refereed) - Applied Financial Economics - 2004 - v. 14, no. 11, pp. 809-822 [Show/Hide Abstract]
  Abstract: This study extends the microstructure literature by examining the offering prices in the United States Initial Public Offering (IPO) market for the presence of clusters. It is found that the use of whole prices is more frequent in the IPO market than in secondary stock markets. Offering prices in the IPO market exhibit a dominant clustering at whole fives and tens (5s and 0s) that cannot be adequately explained by existing hypotheses. Unlike other studies on IPO underpricing, this study examines the impact of offering price clusters on the degree of underpricing. It is documented that whole-priced IPOs are underpriced more relative to fractional-priced IPOs. It is found that the negotiations hypothesis and the implicit collusion hypothesis are not adequate explanations and leave this puzzle to be resolved by future research.
  
• Lee, M.; Chiang, K. C. - "Substitutability between Equity REITs and Mortgage REITs" (Refereed) - Journal of Real Estate Research - 2004 - v. 26, no. 1, pp. 95-113 [Show/Hide Abstract]
  Abstract: This study extends Seck's (1996) approach to investigate the degree of substitutability between equity real estate investment trusts (EREITs) and mortgage real estate investment trusts (MREITs). The variance ratio test and the variance decomposition of forecast errors yield results indicating the existence of informational commonality between EREITs and MREITs. The findings indicate that the two types of REITs are substitutable. A direct implication is that investors who believe they have superior forecasting ability will be indifferent to invest in either type of REIT. Another implication is that REITs can be treated as a single asset class in constructing a diversified multi-asset portfolio.
  
• Chiang, K. C.; Kozhevnikov , K.; Wisen, C. H. - "The Ranking Properties of the Morningstar Risk-Adjusted Rating" (Refereed) - Journal of Investing - 2003 - pp. 90-98 [View publication] [Show/Hide Abstract]
  Abstract: The study examines the ranking properties of the Morningstar risk-adjusted rating (RAR). We find that the RAR and the excess return from the CAPM regression yield similar star ratings. In contrast, we document systematic differences between the star ratings produced by the RAR and the excess return estimated from the Fama-French [1993] three factor model. Approximately 77% of domestic equity funds with a ten-year five-star Morningstar rating do not maintain their five stars under the null hypothesis of the Fama-French three factor model. The study concludes that the sole reliance upon the Morningstar star rating to select U.S. equity funds may not result in an optimal allocation across style categories for a multi-fund portfolio.
  
• Chiang, K. C.; Leonhard, C. - "International Diversification: the Within- and Between-Region Effects" (Refereed) - Journal of Investing - 2002 - v. 16, no. 1, pp. 51-68 [Show/Hide Abstract]
  Abstract: We use a recently developed decomposition method to study the variance composition of 18 major national indices over the period 1974-2001. We find that over the sample period country-specific volatility has increased and, accordingly, the benefits of international diversification have remained substantial. We also find evidence in second moments of returns suggesting that international equity markets, as a whole, have not been more financially integrated over the sample. However, promoting economic integration is not without financial implications. By focusing on 10 European Union country indices, we find that the benefits of regional diversification within the EU have shrunk and the financial links among EU member states have been considerably strengthen over the sample period. All these imply that the between-region effects of international diversification have been growing over time, and international diversification is most effective when investors overcome their geographic proximity biases and invest in other regions.
  
• Chiang, K. C.; Lee, M. - "REITs in the Decentralized Investment Industry" (Refereed) - Journal of Property Investment and Finance - 2002 - v. 20, no. 6, pp. 496-512 [View publication] [Show/Hide Abstract]
  Abstract: Existing Studies provide conflicting results regarding whether real estate investment trusts (REITs) effectively optimize and diversity institutional portfolios. based on the style analysis of Sharpe, we extend Liang and McIntosh's study with a more complete set of asset classes over a longer sample period. We provide additional evidence suggesting that practicing analysts should include REITs as an asset class to optimize their portfolios. Specifically, our results show that the price behavior of REITs is unique and cannot be satisfactorily duplicated by combining equity, fixed-income securities, and unsecuritized real estate. The time series of the styles on REITs indicates that it is difficult to ex ante produce returns on REITs without diversifying into REITs.
  
• Chiang, K. C.; Frankfurter, G. M.; McGoun, E. G. - "Practical Views of Risk-Taking" (Refereed) - Journal of Investing - 2001 - pp. 30-40