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Articles 1 - 7 of 7
Full-Text Articles in Finance and Financial Management
Geographic Links And Predictable Returns, Zuben Jin, Frank Weikai Li
Geographic Links And Predictable Returns, Zuben Jin, Frank Weikai Li
Research Collection Lee Kong Chian School Of Business
Using establishment-level data of U.S. public firms, we construct a novel measure of geographic linkage between firms. We show that the returns of geography-linked firms have strong predictive power for focal firm returns and fundamentals. This effect is distinct from other cross-firm return predictability and is not easily attributable to risk-based explanations. It is more pronounced for focal firms that receive lower investor attention, are more costly to arbitrage, and during high sentiment periods. The cross-firm information spillovers and return predictability are also stronger for geographic peers with economic linkages and with positive information. Our results are broadly consistent with …
Security Analysts And Capital Market Anomalies, Li Guo, Frank Weikai Li, K.C. John Wei
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.
Competition Of The Informed: Does The Presence Of Short Sellers Affect Insider Selling?, Massimo Massa, Wenlan Qian, Weibiao Xu, Hong Zhang
Competition Of The Informed: Does The Presence Of Short Sellers Affect Insider Selling?, Massimo Massa, Wenlan Qian, Weibiao Xu, Hong Zhang
Research Collection Lee Kong Chian School Of Business
We study how the presence of short sellers affects the incentives of the insiders to trade on negative information. We show it induces insiders to sell more (shares from their existing stakes) and trade faster to preempt the potential competition from short sellers. An experiment and instrumental variable analysis confirm this causal relationship. The effects are stronger for "opportunistic" (i.e., more informed) insider trades and when short sellers' attention is high. Return predictability of insider sales only occurs in stocks with high short-selling potential, suggesting that short sellers indirectly enhance the speed of information dissemination by accelerating trading by insiders. …
The Persistence Of Long-Run Abnormal Returns Following Stock Repurchases And Offerings, Fangjian Fu, Sheng Huang
The Persistence Of Long-Run Abnormal Returns Following Stock Repurchases And Offerings, Fangjian Fu, Sheng Huang
Research Collection Lee Kong Chian School Of Business
The long-run abnormal returns following both stock repurchases and seasoned equity offerings disappear for the events in 2003–2012. The disappearance is associated with the changing market environment: increased institutional investment, decreased trading costs, improved liquidity, and enhanced regulations on corporate governance and information disclosure. In response to the more efficient pricing of stocks, firms become less opportunistic in stock repurchases and offerings. Recent events of stock repurchases and offerings are motivated more by business-operating reasons than to exploit mispricing. Both external market factors and internal firm factors contribute to the disappearance of the postevent abnormal returns. Our findings on the …
Have Capital Market Anomalies Attenuated In The Recent Era Of High Liquidity And Trading Activity?, Tarun Chordia, Avanidhar Subrahmanyam, Qing Tong
Have Capital Market Anomalies Attenuated In The Recent Era Of High Liquidity And Trading Activity?, Tarun Chordia, Avanidhar Subrahmanyam, Qing Tong
Research Collection Lee Kong Chian School Of Business
We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on prominent anomalies have approximately halved after decimalization. We provide evidence that hedge fund assets under management, short interest and aggregate share turnover have led to the decline in anomaly-based trading strategy profits in recent years. Overall, our work indicates that policies to stimulate liquidity and ameliorate trading costs improve capital market efficiency.
The Persistence Of Long-Run Abnormal Returns: Evidence From Stock Repurchases And Offerings, Fangjian Fu, Sheng Huang, Hu Lin
The Persistence Of Long-Run Abnormal Returns: Evidence From Stock Repurchases And Offerings, Fangjian Fu, Sheng Huang, Hu Lin
Research Collection Lee Kong Chian School Of Business
Prior studies have documented that stock returns are abnormally high during the years following share repurchases and abnormally low following seasoned equity offerings, relative to various benchmarks of expected returns. While we confirm this evidence in the event data as of 2002, we do not find robust long-run abnormal returns following either stock repurchases or issuances after 2002. Institutional ownership of event stocks has increased substantially in the recent decade, which helps to explain the disappearance of the abnormal performance following corporate stock transactions. The evidence seems consistent with the improved stock market efficiency in recent years, accompanied by reduced …
Testing Market Efficiency Using Statistical Arbitrage With Applications To Momentum And Value Strategies, Steve Hogan, Robert Jarrow, Melvyn Teo, Mitchell Warachka
Testing Market Efficiency Using Statistical Arbitrage With Applications To Momentum And Value Strategies, Steve Hogan, Robert Jarrow, Melvyn Teo, Mitchell Warachka
Research Collection Lee Kong Chian School Of Business
This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the joint hypothesis dilemma of traditional market efficiency tests because its definition is independent of any equilibrium model and its existence is incompatible with market efficiency. We provide a methodology to test for statistical arbitrage and then empirically investigate whether momentum and value trading strategies constitute statistical arbitrage opportunities. Despite adjusting for transaction costs, the influence of small stocks, margin requirements, liquidity buffers for the marking-to-market of short-sales, and higher borrowing rates, …