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Articles 1 - 14 of 14
Full-Text Articles in Finance and Financial Management
Can Cognitive Error Explain The Ipo Partial Adjustment Phenomenon?, Steven D. Dolvin
Can Cognitive Error Explain The Ipo Partial Adjustment Phenomenon?, Steven D. Dolvin
Steven D. Dolvin
Chapter 5 of: Klein, E. (2005). Stock exchanges, IPO's and mutual funds. New York: Nova Science Publishers.
Market Structure, Changing Incentives, And Underwriter Certification, Steven Dolvin
Market Structure, Changing Incentives, And Underwriter Certification, Steven Dolvin
Steven D. Dolvin
Early studies find that higher quality underwriters are associated with lower underpricing; however, more recent evidence suggests the opposite relation. By controlling for influences associated with the changing market structure of the underwriter industry, I provide a potential explanation for this conflict, that is, that higher quality underwriters do certify initial public offerings, resulting in lower underpricing. However, effects associated with increasing market shares tend to offset certification benefits, particularly for issues underwritten by the largest investment banks.
Ipo Underpricing: The Owner’S Perspective, Steven Dolvin
Ipo Underpricing: The Owner’S Perspective, Steven Dolvin
Steven D. Dolvin
Most corporate finance textbooks include a chapter on raising capital, giving particular attention to initial public offerings (IPOs). For IPOs, underpricing is defined as the percentage change from the offer price to the closing price on the first trading day. Textbooks universally treat underpricing as the indirect cost of issuance; however, this fails to account for the share issuance decision. Because owners do not typically sell all (or even most) of their shares, underpricing overstates the wealth lost by preexisting owners. I provide simple, real-life examples for instructors to use in courses such as corporate finance, entrepreneurship, or alternative investments.
The Influence Of Simulation Performance On Student Interest, Steven Dolvin, Mark Pyles
The Influence Of Simulation Performance On Student Interest, Steven Dolvin, Mark Pyles
Steven D. Dolvin
Previous studies examine the potential benefits of using classroom games and simulations, finding that their use generally increases knowledge and interest level. However, few (if any) of these studies examine whether performance in such simulations is relevant to these outcomes. Particularly in investments, where trading simulations are common, the performance relative to peers and the market can be objectively determined based on portfolio return. Thus, we extend the existing literature by studying the impact of portfolio performance on knowledge level and interest in the profession. We find that simulation performance has no significant influence on the students' feelings with regard …
Herding Behavior In Student Managed Investment Funds, Craig Caldwell, Steven Dolvin
Herding Behavior In Student Managed Investment Funds, Craig Caldwell, Steven Dolvin
Steven D. Dolvin
Student Managed Investment Funds (SMIFs) have grown in number; unfortunately, there has been little research on the efficacy of these funds. We fill this gap by exploring the potential consequences of student investment management. We find that investment decisions are often impacted by herding behavior, which results in underperformance. We further examine characteristics that influence the likelihood of herding, finding that pre-existing knowledge of the company under consideration, as well as amplified time constraints, increase the probability that herding occurs. In contrast, we find that increased education, both general and targeted behavioral education, reduces the likelihood (and impact) of herding.
Business Week Board Rankings And Subsequent Stock Returns, Steven Dolvin
Business Week Board Rankings And Subsequent Stock Returns, Steven Dolvin
Steven D. Dolvin
Recent corporate bankruptcies have placed renewed focus on the role of a firm's board of directors; therefore, I study rankings of the best and worst boards of directors as published by Business Week. Similar to prior studies examining survey data, I find that the portion of the rankings determined via investment manager survey is biased by the "halo effect." However, I also find that the rankings as a whole, and particularly the portion calculated via quantitative analysis, do provide information that can be used in a trading strategy capable of generating positive abnormal returns, thereby implying that board strength does …
The Influence Of University Financial Education On Asset Allocation, Steven Dolvin, John Gonas, Mark Pyles
The Influence Of University Financial Education On Asset Allocation, Steven Dolvin, John Gonas, Mark Pyles
Steven D. Dolvin
Using survey data from students at three universities, we examine the influence of an Investments Analysis course on student perception of the ideal asset allocation for a retirement portfolio. Consistent with previous studies that examine financial education in the workplace, a critical outcome of university investment education is the apparent alleviation of a conservative bias that is typically prevalent among uninformed investors. This change results in an increasing willingness to take larger stock positions, which produces higher expected returns and larger portfolio betas. Most importantly, however, the net effect is more efficient portfolios, particularly for those students who begin with …
Can Venture Capitalists Tame The Wolves? An Analysis Of Fraudulent Underwriters, Ipo Characteristics, And Vc Certification, Steven Dolvin
Can Venture Capitalists Tame The Wolves? An Analysis Of Fraudulent Underwriters, Ipo Characteristics, And Vc Certification, Steven Dolvin
Steven D. Dolvin
A recent hit movie, The Wolf of Wall Street, highlighted the fraudulent activity of the investment bank Stratton Oakmont. Unfortunately, this was not the only such financial firm convicted of illegal behavior during the 1990s; there were at least 34 Initial Public Offering (IPO) underwriters that were the subject of SEC enforcement during this period. I examine the characteristics of IPOs underwritten by these investment banks, particularly as they compare to other IPOs. I find that IPOs underwritten by sanctioned investment banks (particularly those that were less active in the IPO market) were significantly different with respect to both firm …
Analysts Get Sad Too: The Effects Of Seasonal Affective Disorder On Stock Analysts’ Earnings Estimates, Steven Dolvin, Mark Pyles, Qun Wu
Analysts Get Sad Too: The Effects Of Seasonal Affective Disorder On Stock Analysts’ Earnings Estimates, Steven Dolvin, Mark Pyles, Qun Wu
Steven D. Dolvin
Previous research finds that stock analysts exhibit both optimistic and pessimistic biases in their earnings forecasts, with the net result being a consistent but declining overestimation of forecasted earnings. We extend this research by examining the potential effect of seasonal affective disorder (SAD), a documented psychological condition that produces heightened pessimism and risk aversion during the fall and winter months, on stock analysts' earnings estimates. Our results suggest that analysts are generally optimistic in their forecasts but significantly less so during SAD months. We also find this relation to be most pronounced for analysts located in northern states, who should …
The Efficacy Of Trading Based On Moving Average Indicators, Steven Dolvin
The Efficacy Of Trading Based On Moving Average Indicators, Steven Dolvin
Steven D. Dolvin
The debate over market efficiency continues to rage, yet it is difficult to argue with published evidence surrounding the efficacy of momentum trading based on moving average indicators. While prior studies find that a comparison of the market price to the 200-day simple moving average provides a profitable trading strategy, such studies overlook many other popular price comparisons and calculation methodologies. Thus, I explore different trading rules, comparing strategies based on combinations of market price, 50-day, 100-day, and 200-day moving averages. In addition, I calculate moving averages using three alternative methods: simple, linear, and exponential. I find that a comparison …
Venture Capitalist Certification Of Ipos, Steven Dolvin
Venture Capitalist Certification Of Ipos, Steven Dolvin
Steven D. Dolvin
This article analyses a set of 4606 IPOs from the 1986 to 2000 period, specifically focusing on the certification effect associated with venture capital backing. It concludes that venture capitalists, particularly those of higher quality, are associated with lower issuance costs (both direct and indirect), increased upward price adjustments, and shorter lockup periods, all of which are consistent with a valuable certification role. In addition, it is found that even lower quality venture capitalists perform a certification role; however, it is specific to a set of penny stock (i.e. high information asymmetry) IPOs.
Seasonal Affective Disorder And Ipo Underpricing: Implications For Young Firms, Steven Dolvin, Stephanie Fernhaber
Seasonal Affective Disorder And Ipo Underpricing: Implications For Young Firms, Steven Dolvin, Stephanie Fernhaber
Steven D. Dolvin
A critical event in the life of a firm is when it undergoes an initial public offering (IPO). Drawing on the Seasonal Affective Disorder (SAD) literature, which evidences a psychological condition that produces heightened pessimism and risk aversion during the fall and winter months, this study focuses on understanding the potential implications of SAD for young firms. Our results confirm the influence of SAD on IPO underpricing and demonstrate that younger firms experience even higher underpricing during periods most heavily associated with SAD. However, we find that using a higher-quality underwriter or changing the share retention decision can mitigate this …
An Update On The Performance Of Actively Managed Etfs, Steven Dolvin
An Update On The Performance Of Actively Managed Etfs, Steven Dolvin
Steven D. Dolvin
Actively managed ETFs are a relatively recent introduction to the investing landscape, and understanding their performance against passive funds is becoming increasingly important. Consistent with preliminary studies, I find that active funds are more volatile than their passive counterparts and do not provide an absolute return advantage. Thus, active ETFs are generally not good substitutes for existing passively managed funds. However, in contrast to prior studies, I find that performance metrics based on relative risk (e.g., Information and Treynor ratios) suggest that active funds may be good additions to existing portfolios for their diversification benefits. I also find that these …
Underpricing, Overhang, And The Cost Of Going Public To Preexisting Shareholders, Steven Dolvin, Bradford Jordan
Underpricing, Overhang, And The Cost Of Going Public To Preexisting Shareholders, Steven Dolvin, Bradford Jordan
Steven D. Dolvin
IPO underpricing has been extensively studied; however, its impact on the wealth of preexisting shareholders has not been closely examined. We address the question of whether or not periods of high underpricing adversely affect preexisting shareholders. We find that high levels of underpricing are associated with increased share retention, which effectively offsets much of the potential cost. Overall, we find that the percentage of shareholder wealth lost is surprisingly stable over time, unlike underpricing itself. We also find that many factors known to be related to underpricing are not significant determinants of the cost of going public to preexisting owners.