Finance and Financial Management Commons^™

Do U.S. And International Stock Returns Depend On The Presidential Election Cycle Year?, Paul Peragine

Financial Analyst

This paper aims to determine if U.S. and international stock returns are dependent on the U.S. four-year Presidential election cycle (PEC). Additionally, it expands on past literature by confirming past results and extending them to the present. It implements an economic integration variable, which is a measure of how correlated a country is economically to the U.S. The markets that are highly integrated with the U.S. follow a very similar pattern to that of the U.S. PEC, while weakly integrated countries are less likely to follow the U.S. return cycle. A Chow test confirms that economic integration status influences a …

Kalman Filter Vs Alternative Modeling Techniques And Applied Investment Strategies, Heather E. Dempsey

Doctoral Dissertations (DBA)

This thesis examines the efficacy of alternative modeling techniques to predict stock market returns modeled with time-varying coefficients with the goal of developing and implementing a trading strategy that yields excess returns. First, we determine the modeling technique with the smallest forecast error using historical predictors: the differenced dividend-price ratio, lagged S&P 500 returns, and the change in implied volatility. The candidate modeling techniques include both constant and recursive ordinary least squares (OLS) regression methods and diverges from previous return forecast literature with the comparison of a state-space model (SSM) cast as a VAR(1) process to each OLS technique. The …

Do Short Sellers Use Textual Information? Evidence From Annual Reports, Hung Wan Kot, Frank Weikai Li, Ming Liu, K.C. John Wei

Research Collection Lee Kong Chian School Of Business

We examine short-sellers’ use of textual information in annual reports for shorting activities. We find that more uncertainty and negative words in annual reports are associated with greater abnormal shorting volume. Short selling motivated by textual information negatively predicts stock price reaction around the filing date of 10-K reports. We further provide some evidence that textual information used by short-sellers are related to revisions of analysts’ earnings forecasts, changes in firm fundamentals, and increasing crash risk subsequently. Our results suggest that textual information in annual reports forms an important part of short-sellers’ information advantage.

Consumer Sentiment And Indonesia’S Stock Returns, Deepa Bannigidadmath

Research outputs 2014 to 2021

© Buletin Ekonomi Moneter dan Perbankan 2020. All Rights Reserved. This paper examines whether consumer sentiment predicts the excess returns of the aggregate market and nine industries from the Indonesia equity market. We discover evidence of predictability for three industries; however, the magnitude of predictability are heterogeneous. Some sectors are predictable during expansions, whereas others are only predictable during recessions. There is no evidence of the reversal of the impact of consumer sentiment on stock returns. We conduct several robustness tests that include (i) estimating a predictive regression model with a feasible quasi-generalized least squares–based estimator and (ii) accounting for …

Stock Returns And Investor Sentiment: Textual Analysis And Social Media, Zachary Mcgurk, Adam Nowak, Joshua C. Hall

Economics Faculty Working Papers Series

The behavioral finance literature has found that investor sentiment has predictive ability for equity returns. This differs from standard finance theory, which provides no role for investor sentiment. We examine the relationship between investor sentiment and stock returns by employing textual analysis on social media posts. We find that our investor sentiment measure has a positive and significant effect on abnormal stock returns. These findings are consistent across a number of different models and specifications, providing further evidence against non-behavioral theories.

Sentiment And Stock Returns: Anticipating A Major Sporting Event, Brian C. Payne, Jiri Tresl, Geoffrey C. Friesen

Department of Finance: Faculty Publications

This study documents the effect of the Super Bowl on the stock returns of firms that are geographically associated with the competing teams. We find significant upward return drift in the 9 trading days leading up to the Super Bowl, a pattern consistent with investors trading in anticipation of the game itself. The ‘‘anticipatory behavior’’ among investors leads to widespread pregame returns, which is not documented in prior studies. These pre-event abnormal returns are positive and statistically and economically significant for all firms, and the size of pre-event returns varies according to each team’s favored status. In addition, firms associated …

Two Essays On Short Selling, Zhaobo Zhu

Finance Theses & Dissertations

This dissertation provides some new evidence that the information contained in short selling is informative about future returns, confirming the role of short sellers in the price discovery process.

The first essay examines the cross-sectional relation between the change in short interest and expected stock returns. NYSE/AMEX stocks with large decreases (increases) in short interest over past medium-term horizon experience significant and positive (negative) abnormal returns. Moreover, the positive abnormal returns are larger in absolute value and are more persistent than negative abnormal returns. The return spread between bottom and top deciles is economically and statistically significant and persistent. The …

Interest Rate Sensitivity And Stock Returns, Mohsin R. Khan, Zahid Mahmood

Business Review

This paper investigates the sensitivity of interest rate to stock return of financial institutions traded at Karachi Stock Exchange. Two Index Model of Stone and Bernell(1974) have been used to test the proposition of the present study. Three different portfolios of financial institutions have been examined against sensitivity of actual and unanticipated interest rates. Repo rate/Policy rate instead of t-bill rate is used for the proxy of interest rate. The data is collected from twenty nine financial institutions covering the time period from 2004 to 2011. Unit root test, co integration and error correction mechanism have been checked before proceeding …

Cost Efficiency Estimations And The Equity Returns For The Us Public Solar Energy Firms In 1990–2008, Chris Kuo

Faculty Publications and Presentations

This paper provides a direct estimate of the cost efficiencies of firms in the US solar energy industry. It suggests that the cost efficiency in the industry is associated with the risk-bearing behaviour of firms. Less efficient firms maintain low price-cost margins and high labour–capital ratios in order to compete with their efficient peers. The study then establishes the linkage between cost efficiency and stock returns. It shows that the change in cost efficiency, rather than cost efficiency itself, possesses a stronger explanatory power for stock returns. A buy-and-hold strategy for stock portfolios of different efficiency levels is then analysed. …

The Impact Of Financial And Trade Openness On Economic Growth And Stock Returns: The Case Of Africa, Tibebe Abebe Assefa

Theses and Dissertations - UTB/UTPA

The debate on whether financial development and stock market help growth is ongoing. In the context of Africa where there exists a strong need and potential for growth, it is important to revisit the topic in order to address the problem of economic underdevelopment. In this dissertation, we focus on seventeen African countries with two main objectives: First, to investigate the relationship between financial and trade openness, and economic growth. Second, we investigate the association of African real stock index returns with financial and trade openness. For all analysis, we use Fixed Effect Models (FEM) and System Generalized Method of …

The Effect Of Kurtosis On The Cross-Section Of Stock Returns, Abdullah Al Masud

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

In this study, I show an effect of the statistical fourth moment on stock returns. In the mean-variance framework, rational investors follow two strategies: optimize the mean{variance of return and diversify the portfolio. Regarding the first approach, investors intend to generate the maximum level of return while facing a constant level of risk (or, the standard deviation) of return. It is possible that firm specific risk can be concentrated in the portfolio. However, diversification of the assets can eliminate that (idiosyncratic) risk from the portfolio. After a long period of time, in a diversified portfolio the shape of the return …

Determinants Of Dow Jones Returns, Cory Sloan

Honors Projects

As of 2010, there was $14 trillion invested in the New York Stock Exchange (NYSE) and $55 trillion invested in stock markets worldwide. In this study, we use the Arbitrage Pricing Theory (APT) to identify the main determinants of the returns of the stocks that compose the Dow Jones for the period 1990-2011. We test several hypotheses on the relationship between firm specific variables such as Dividend Yield, Earnings Yield, Book-Market ratio, previous returns and the stock returns. We also document the relationship between several macroeconomic factors including T-bill rate, Default Spread, Term Spread, Unemployment, Real GDP and Inflation and …

Essays On The Dynamics Of Stock Returns In Emerging Markets: Roles Of Volatility And Sentiment In Turkey, Sidika Gülfem Bayram

Theses and Dissertations - UTB/UTPA

Emerging stock markets play an important role in portfolio diversification. Accurate depiction of their status is essential for potential investment assessment. This dissertation focuses on two important aspects of emerging markets using Istanbul Stock Exchange (“ISE”) as an example: modeling stock return volatility as a measure of risk and exploring potential interaction between stock returns and consumer/business sentiments. ISE is selected as it has no entry restrictions and offers great investment potential with 65% foreign participation.

The first essay focuses on stock return volatility. Potential asymmetric behavior is investigated by looking into how the ISE National-100 Index prices evolve over …

Abnormal Stock Returns, For The Event Firm And Its Rivals, Following The Event Firm's Large One-Day Stock Price Drop, Susana Yu, Dean Leistikow

Department of Accounting and Finance Faculty Scholarship and Creative Works

Purpose – The purpose of this paper is to examine intra-industry contagion and the following apparent violations of the efficient market hypothesis around large one-day price decline events in individual stocks. Design/methodology/approach – The paper examines daily stock returns around one-day price declines of 10 percent or more for event stocks and their rivals. Using techniques similar to those used in Bremer and Sweeney and Cox and Peterson, the paper includes event stocks whose prices are at least $10 per share prior to the event to reduce the possible price reversal induced by bid-ask price bounce. As is typical for …

Investor Diversification And The Pricing Of Idiosyncratic Risk, Fangjian Fu

Research Collection Lee Kong Chian School Of Business

Theories predict that, due to investor under-diversification, idiosyncratic risk is positively priced in expected stock returns. Empirical studies based on various methodologies yield mixed evidence. This study circumvents the debate on methodological issues and traces the pricing of idiosyncratic risk to its economic source – investor under-diversification. Assuming that institutional investors tend to hold more diversified portfolios and thus care little about idiosyncratic risk relative to individual investors, we find that the positive relation between idiosyncratic risk and stock returns is significantly stronger (weaker) in stocks that are held and traded more by individual (institutional) investors. In addition, the pricing …

The Impact Of Inflation Targeting Regime On The Relationship Between Stock Returns And Inflation: International Evidence, Unro Lee

Eberhardt School of Business Faculty Articles

Twenty six industrialized and emerging countries have adopted inflation targeting monetary policy since 1990 to combat persistently high inflation rate. This policy accords either the government and/or the central bank the authority to assign an explicit numerical target for inflation rate and implement an appropriate monetary policy to achieve its goal. This study investigates whether the adoption of inflation targeting strategy has affected the relationship between stock returns and inflation rate. Specifically, this study tests a hypothesis that, in an economy where inflation targeting has been adopted as a new monetary policy strategy, real stock returns should be sensitive to …

The Effects Of Etf Splits On Returns, Liquidity, And Individual Investors, Susana Yu, Gwendolyn Webb

Department of Accounting and Finance Faculty Scholarship and Creative Works

Purpose – The purpose of this paper is to extend the literature on the effects of stock splits from mutual funds splits and the QQQ split to 20 exchange traded funds (ETFs) that span a wide variety of indexes. The split sample is compared to a non-split control sample with similar characteristics between 2000 and 2006. The objectives of this study are to investigate whether the results are different between the split sample and the control sample; and whether these results are similar to other investment vehicles in the existing literature. Design/methodology/approach – The paper examines stock excess returns, total …

The Effect Of Survey-Based Sentiment Measures On The Predictability And Volatility Of Stock Returns Conditioned On The Payout Yield And Issue Yield, Darryl Philip Samsell

Theses and Dissertations in Business Administration

Survey-based sentiment indexes from the American Association of Individual Investors, Investors' Intelligence, and the Yale University International Center for Finance show strong in-sample monthly return predictability and are strong factors in explaining the cross-sectional variation in monthly returns and in explaining the excess volatility in returns beyond that explained by cash flow fundamentals proxied by the payout yield and the issue yield from Boudoukh, et al. (2007). These finding are robust to the use of numerous methods of sentiment variable computation. Sentiment is a more significant factor during the period from January 1997 to December 2005 when U.S. stock valuations …

Volatility Spillovers Between Stock Prices And Exchange Rates: Empiral Evidence From Six Apec Economies, Lucia Morales, Mary O'Donnell

Conference papers

This paper set out to examine the volatility linkages between stock returns and exchange rates in a number of East Asian markets. Overall, our main results indicate that since the Asian financial crises, there exists significant scope for investors and portfolio managers to diversify their assets between stocks and currencies in these markets. In particular, the lack of volatility spillovers between stock markets and exchange rates, and between exchange rates and stock markets in all countries, except Taiwan in the post crises period indicates that there is scope for investors to diversify their investments and to benefit from potential gains …

The Relationship Between The Value Effect And Industry Affiliation, John C. Banko, C. Mitchell Conover, Gerald R. Jensen

Finance Faculty Publications

We examine industry affiliation and the relationship between stock returns and book‐to‐market equity (the value effect). The robustness of the value effect is supported as a significant value premium is shown to exist in 15 of 21 industries. Both industry and firm‐level value effects are identified; however, the firm‐level effect is the more prominent of the two. Further, the value effect is shown to be strongest in value industries and weakest in growth industries. Finally, we show evidence consistent with the claim that the value premium is due to investors requiring higher returns from firms in distressed conditions.

Capital Structure Dynamics And Stock Returns, Jie Cai, Zhe Zhang

Research Collection Lee Kong Chian School Of Business

Many finance theories predict that the capital structure affects firm value, which implies that the changes in leverage have an impact on stock returns. Most of the existing literature however has been focusing on the determinants of the capital structure. Using a sample of U.S. public firms during 1975-2002, we document a significantly negative effect of leverage changes on next-quarter stock returns. This effect remains significant after controlling for other firm characteristics such as ROE, book-to-market, firm size, and past returns. We propose and test several hypotheses to explain the observed effect. We find that the negative effect is stronger …

Stock Returns And Noise Trading: Domestic And International Evidence, Rahul Verma

Theses and Dissertations - UTB/UTPA

In recent years there has been a growing debate on the possible linkages between the behavioral aspects of investors and stock prices. The financial economics have become more receptive to imperfect rational explanations and in this regard, investor psychology has emerged as a major determinant of stock prices. Under this approach, the central task is to examine how stock prices are related not only to risks, but also to the noise (Hirshleifer, 2001). After decades of study, the sources of risk premium in purely rational dynamic models are well understood; while, dynamic psychology based asset pricing theories are still in …

Can Fundamental Value Predict Stock Returns? An Empirical Assessment Of The Feltham -Ohlson Model, Colin Anthony Pillay

Doctoral Dissertations

In valuation research, two modeling approaches that have become prominent are those based on the Residual Income Model (RIM) and those based on the G. Feltham-James A. Ohlson framework. Ohlson (1995) develops a valuation model which links a firm's fundamental value to the book value of equity, earnings and other relevant information. Feltham and Ohlson (1995) extend the Ohlson (1995) model to incorporate growth and conservative accounting.

This study provides an evaluation of the Feltham-Ohlson (1995) model assuming market inefficiency. Analyst forecast data are obtained from the international I/B/E/S files. Financial information and share prices are obtained from the Compustat …