Business Commons^™

What Is The Riskfree Rate? A Search For The Basic Building Block, Aswath Damodaran

Journal of New Finance

In corporate finance and valuation, we start off with the presumption that the riskfree rate is given and easy to obtain and focus the bulk of our attention on estimating the risk parameters of individuals firms and risk premiums. But is the riskfree rate that simple to obtain? Both academics and practitioners have long used government security rates as riskfree rates, though there have been differences on whether to use short term or long- term rates. In this paper, we not only provide a framework for deciding whether to use short or long term rates in analysis but also a …

Insider Trading Enforcement And The Private Information Environment: Evidence From The Newman Ruling, Andrew T. Pierce

Graduate Theses and Dissertations

I exploit a shock to U.S. insider trading law to investigate whether a reduction in the enforceability of tipper-tippee insider trading restrictions leads to changes in information parity among investors and the efficiency of price discovery. The December 2014 Federal Second Circuit Court of Appeals ruling in US v. Newman constrained enforcement by restricting the types of exchanges between managers and investors that trigger tipper-tippee insider trading liability. Following Newman, I find that Second Circuit hedge funds experienced a significant increase in their stock picking ability of Second Circuit stocks in terms of preempting future earnings announcement returns and future …

Diversification Using International Exchange-Traded Funds, Alese K. Jones

Honors Theses

Exchange-Traded Funds (ETFs) are diversified portfolios of assets which trade like stocks and track a benchmark index. This manuscript looks at the diversification and return benefits a U.S. investor would receive by investing in Emerging market (EEM) and Total World (DGT) ETFs over the period of June 2003 to July 2019. We use S&P 500 ETF IVV as a proxy for U.S. market. EEM had the highest absolute return but also the highest risk. However, the U.S. ETF IVV had the greatest risk-adjusted return and the lowest tracking error. International ETFs were also highly correlated with the S&P 500. Overall, …

Is The Synthetic Stock Price Really Lower Than Actual Price?, Jianfeng Hu

Research Collection Lee Kong Chian School Of Business

Conventional wisdom suggests synthetic stock prices are lower than actual prices due to short‐sale constraints and voting premiums. This study finds that such underpricing of the synthetic midquote disappears if arbitrageurs face security borrowing costs. The synthetic spread predominantly contains the actual spread. Synthetic stock overpricing is as common as underpricing but the former is more persistent and more profitable. The difference between synthetic and actual quotes is significantly affected by options market makers' hedging costs and investors' demand for leverage.

Fixed Income Fund Report, December 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Equity Fund Monthly Report, December 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Behavioral Finance For The Individual Investor, Drake Gens

Senior Honors Theses

The Efficient Market Hypothesis (EMH) has been generally accepted in academia despite its well-researched flaws; by understanding how and when markets deviate from efficiency, investors have an opportunity to not only better understand their investing habits, but also possibly generate higher investment returns. Various market anomalies, such as the Value Effect (De Bondt & Thaler, 1985), the Monday Effect (French, 1980), and the January Effect (De Bondt and Thaler, 1958 & 1987), attest to the fact that markets experience periods of deviation from efficiency. Fiévet and Sornette (2016) finding that markets experience inefficiency during periods of significant volatility is confirmed …

What Do Short Sellers Know?, Ekkehart Boehmer, Charles M. Jones, Juan (Julie) Wu, Xiaoyan Zhang

Research Collection Lee Kong Chian School Of Business

Using NYSE short-sale order data, we investigate whether short sellers' informational advantage is related to firm earnings and analyst-related events. With a novel decomposition method, we find that while these fundamental event days constitute only 12% of sample days, they account for over 24% of the overall underperformance of heavily shorted stocks. Importantly, short sellers use both public news and private information to anticipate news regarding earnings and analysts. Shorting's predictive ability remains significant after controlling for information in analyst actions and displays no reversal patterns, indicating that short sellers know more than analysts, and the nature of their information …

Fixed Income Fund Report, November 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Investor Behavior In The Midst Of A Global Pandemic, Abigail N. Bates

Honors Projects

Investors partaking in portfolio and asset management through the stock market and other avenues do so with certain reasoning and methods in hand. Each investor may have different interests and risk tolerances that guide their choices for investment. Behavioral finance allows for an in-depth look at an investor’s actions and the influencing psychology behind it. Before this approach was popularized, early studies of finance assumed that investors were always rational in their decision making and put resources only into opportunities that would increase their utility or happiness. The behavioral finance approach takes a more comprehensive look at these behaviors and …

The Ursinus College Investment Management Company Newsletter, Fall 2020, Scott Deacle, George Psaradakis

Investment Management Company Newsletter

Inside this issue:

Letter from Jacob Kang '21

Letter from Maureen Cumpstone '79

Letter from Johnny Myers '19

At a Glance

Investment Strategies

Endowment at Work

New at UCIMCO

Women's Fund

Investment Performance

Endowment Outlook

Stock Selection Picks

Women's Fund Picks

Our Team

Supporters

How to Contribute

Discovering The Link Between Investor Attention And Trade Volume In The Philippine Stock Exchange, Patrick Allan G. Morando, Isabel Louise D. Banico, Martin Stevens C. Ng, Riggs Mattieu M. Villardo

Angelo King Institute for Economic and Business Studies (AKI)

Investors regard trade volume as a crucial technical indicator that can confirm trends, predict trend reversals, and determine liquidity (Westerhoff, 2006; Mahender et al., 2014). Trade volume is reported throughout the current trading day as often as once an hour; however, the reported hourly and end-of-the-day trade volumes are merely estimates. Actual and final trade volumes are reported the following day. Given the relative inconsistency of reported trade volumes and uncertainty of future trade volumes, investors miss the opportunity to reinforce their trading decisions through the trade volume indicator.

Financial Knowledge And Portfolio Complexity In Singapore, Benedict S. K. Koh, Olivia S. Mitchell, Susann Rohwedder

Research Collection Lee Kong Chian School Of Business

Financial literacy in Singapore has not been analyzed in much detail, despite the fact that this is one of the world’s most rapidly aging nations. Using the Singapore Life Panel®, we explore older Singaporeans’ levels of financial knowledge and compare them to those observed in the United States. We assess portfolio complexity for these older households, to examine how financial literacy is related to outcomes of interest. We show that older Singaporeans’ levels of financial literacy are comparable overall to those in the United States, even though older Singaporeans score slightly lower on some dimensions (knowledge of interest and inflation), …

Fixed Income Fund Report, October 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

A False Sense Of Security: How Congress And The Sec Are Dropping The Ball On Cryptocurrency, Tessa E. Shurr

Dickinson Law Review (2017-Present)

Today, companies use blockchain technology and digital assets for a variety of purposes. This Comment analyzes the digital token. If the Securities and Exchange Commission (SEC) views a digital token as a security, then the issuer of the digital token must comply with the registration and extensive disclosure requirements of federal securities laws.

To determine whether a digital asset is a security, the SEC relies on the test that the Supreme Court established in SEC v. W.J. Howey Co. Rather than enforcing a statute or agency rule, the SEC enforces securities laws by applying the Howey test on a fact-intensive …

Saving Active Managers From The Market, Scott Vincent

Journal of New Finance

Assets are leaving actively managed mutual funds at an unprecedented rate as investors have come to perceive that active management does not deliver value. Investor disappointment is generally attributed to the high fees and poor relative performance of the class, yet there is a deeper systemic issue at work. In the first part of this paper I argue that portfolio managers are unable to deliver value to investors because they generally do not consider the alpha-diluting opportunity costs of diversification (defined later) when constructing and managing their portfolios. In the second part of the paper I propose the introduction of …

Socially Useless? The Crucial Contribution Of Finance To Economic Life, Philip Booth, Diego Zuluaga

Journal of New Finance

The value of financial markets is under-appreciated. Financial markets perform fundamental functions which are vital in reducing transactions costs in the economy for businesses and households. Without well-functioning financial markets, business would find if much more costly to raise capital and ordinary households would find retirement, protection against everyday risks and day-to-day transactions impossible. Those who criticise financial markets ignore the breadth of their functions and focus on a narrow range of activities. However, even activities such as trading, speculation and so on have social value. The evidence that they cause social problems appears more circumstantial when put under closer …

Fixed Income Fund Report, September 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Drivers Of Research Impact: Evidence From The Top Three Finance Journals, Zhichuan Li, Chongyu Dang

Business Publications

We study the characteristics of all published papers in the top three finance journals (JF, JFE, and RFS) and how these paper characteristics affect the number of citations in Google Scholar and the Web of Science database. First, we find the characteristics in the universalist perspective remain constant while the characteristics in the constructivist and presentation perspectives increase over time. Second, some characteristics are significantly different between the high impact and the low impact papers. Third, paper quality, research method, journal placement, and paper age are the most important drivers. Last, different drivers play different roles in different journals.

Essays On Corporate Sustainability, Aditya Malateesh Kashikar

Dissertations, Theses, and Capstone Projects

The dissertation provides an extensive literature review of topics in Corporate Sustainability. It further examines two key topics: ESG Pay and ESG Investing. For ESG Pay, I examine Bloomberg’s ESG linked pay measure using the largest panel (to date). I confirm several important results from the nascent literature on ESG Pay. Firstly, I find that Country and Industry play a major role in determining ESG Pay adoption. Secondly, among firm characteristics, Big and Value firms tend to have a greater probability of adopting ESG Pay. Thirdly, higher ESG scores increase the chance of ESG Pay adoption in the subsequent year. …

The Relative Industry Specific Effects Of Covid-19 On Market Volatility And Liquidity, Callin Christensen

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

Understanding how historical events affect market volatility and liquidity can provide crucial information to financial analysts, investment professionals, and managers in the event that similar circumstances resurface. In this study, I look at how a global pandemic (COVID-19) can introduce frictions into the market and cause disrupt the generation or flow of available information, this could cause prices to deviate significantly from their equilibrium values. I also hypothesize that these inefficiencies may have a greater effect on some industries than others. My analysis seems to confirm this hypothesis. I observe that the global COVID-19 pandemic leads to statistically significant increases …

What Drives The Declining Wealth Effect Of Subsequent Share Repurchase Announcements?, David K. Ding, Hardjo Koerniadi, Chandrasekhar Krishnamurti

Research Collection Lee Kong Chian School Of Business

Recent academic studies document that open market share repurchase announcements in the United States generate significantly lower returns than those reported in earlier studies. We find that the lower announcement return is associated with an increasing number of subsequent announcements in the more recent periods. Although the announcement period return from the initial announcement is positive, subsequent announcement returns are significantly decreasing. Further, we find that the decreasing returns of subsequent announcements are attributed to firms with negative past repurchase announcement returns. Our multivariate regression test results are consistent with the notion that the decreasing subsequent repurchase announcement returns are …

Differences In The Reliability Of Fair Value Hierarchy Measurements: A Cross-Country Study, Chu Yeong Lim, Gary Pan, Kevin Ow Yong

Research Collection School Of Accountancy

Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level …

The Effects Of Mifid Ii On Sell-Side Analysts, Buy-Side Analysts, And Firms, Bingxu Fang, Ole-Kristian Hope, Zhongwei Huang, Rucsandra Moldovan

Research Collection School Of Accountancy

This paper provides early but broad empirical evidence on MiFID II, which requires investment firms to unbundle investment research from other costs they charge to clients. Employing difference-in-differences matched-sample research designs with firm fixed effects, we find a decrease in the number of sell-side analysts covering European firms after MiFID II implementation, particularly for firms that are less important to the sell-side. However, research quality improves; specifically, individual analyst forecasts are more accurate and stock recommendations garner greater market reactions. In addition, sell-side analysts seem to cater more to the buy-side after MiFID II by providing industry recommendations along with …

Fixed Income Fund Report, August 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Fixed Income Fund Report, July 2020, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Security Analysts And Capital Market Anomalies, Li Guo, Frank Weikai Li, K.C. John Wei

Research Collection Lee Kong Chian School Of Business

We examine whether analysts use information in well-known stock return anomalies when making recommendations. We find results contrary to the common view that analysts are sophisticated information intermediaries who help improve market efficiency. Specifically, when analysts make more favorable recommendations to stocks classified as overvalued, these stocks tend to have particularly large negative abnormal returns ex post. Moreover, analysts whose recommendations are more aligned with anomaly signals are more skilled and elicit greater recommendation announcement returns. Our results suggest that analysts' biased recommendations could be a source of market frictions that impede the efficient correction of mispricing.

Generalized 4/2 Factor Model, Yuyang Cheng

Electronic Thesis and Dissertation Repository

We investigate portfolio optimization, risk management, and derivative pricing for a factor stochastic model that considers the 4/2 stochastic volatility on the common/systematic factor as well as on the intrinsic factor. This setting allows us to capture stochastic volatility and stochastic covariation among assets. The model is also a generalization of existing models in the literature as it includes the mean reverting property and spillover effect to capture wider types of financial assets. At a theoretical level we identify conditions for well-defined changes of measure. A quasi-closed form solution within a 4/2 structured model is obtained for a portfolio optimization …

Risk Premium Spillovers Among Stock Markets: Evidence From Higher-Order Moments, Marinela Adriana Finta, Sofiane Aboura

Research Collection Lee Kong Chian School Of Business

We investigate the volatility and skewness risk premium spillovers among the U.S., U.K., German, and Japanese stock markets. We define risk premia as the difference between risk-neutral and realized moments. Our findings highlight that during periods of stress, cross-market and cross-moment spillovers increase and that these increases are mirrored by a decrease in within-market effects. We document strong bidirectional spillovers between volatility and skewness risk premia and emphasize the prominent role played by the volatility risk premium. Finally, we show that several announcements drive the time-varying risk premium spillovers.

Stock Market Drivers: Corporate Share Repurchases, Parker Wolf

Business and Economics Honors Papers

Such financial tools as share buybacks are coming under scrutiny by many investment experts. Evidence suggests that share repurchases foster a short-term focus in corporate managers who have a share-based compensation. Recent studies and research draw attention to the negative consequences of corporate share repurchases. While share buybacks were originally intended to create financial value for intrinsically undervalued shares, they are increasingly coming under scrutiny for enabling shareholders to increase their value of wealth at the expense of other stakeholders. With increased stock option plans for corporate executives, the association between increase in open market share buyback activity and compensation …