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Full-Text Articles in Finance and Financial Management
Overreaction In The Thrift Ipo Aftermarket, Geoffrey C. Friesen, Christopher Swift
Overreaction In The Thrift Ipo Aftermarket, Geoffrey C. Friesen, Christopher Swift
Department of Finance: Faculty Publications
We study the initial returns and long-run performance of a unique sample of thrifts that have recently converted from mutual to stock form. In addition to a full claim on all IPO proceeds, new investors in a converted thrift also receive a claim on all pre-conversion market value at no cost. Thus, the average firm in our sample has a degree of underpricing automatically built into its offer price. We find that after removing the large initial returns, cumulative excess returns for the firms in our sample are positive for 12 months after the IPO. Beginning in the second year …
Price Trends And Patterns In Technical Analysis: A Theoretical And Empirical Examination, Geoffrey C. Friesen, Paul Weller, Lee Dunham
Price Trends And Patterns In Technical Analysis: A Theoretical And Empirical Examination, Geoffrey C. Friesen, Paul Weller, Lee Dunham
Department of Finance: Faculty Publications
While many technical trading rules are based upon patterns in asset prices, we lack convincing explanations of how and why these patterns arise, and why trading rules based on technical analysis are profitable. This paper provides a model that explains the success of certain trading rules that are based on patterns in past prices. We point to the importance of confirmation bias, which has been shown to play a key role in other types of decision making. Traders who acquire information and trade on the basis of that information tend to bias their interpretation of subsequent information in the direction …
The Predictive Content Of Aggregate Analyst Recommendations, John S. Howe, Emre Unlu, Xuemin (Sterling) Yan
The Predictive Content Of Aggregate Analyst Recommendations, John S. Howe, Emre Unlu, Xuemin (Sterling) Yan
Department of Finance: Faculty Publications
Using more than 350,000 sell-side analyst recommendations from January 1994 to August 2006, this paper examines the predictive content of aggregate analyst recommendations. We find that changes in aggregate analyst recommendations forecast future market excess returns after controlling for macroeconomic variables that have been shown to influence market returns. Similarly, changes in industry-aggregated analyst recommendations predict future industry returns. Changes in aggregate analyst recommendations also predict one-quarter-ahead aggregate earnings growth. Overall, our results suggest that analyst recommendations contain market- and industry-level information about future returns and earnings.
Dividend Policy, Creditor Rights, And The Agency Costs Of Debt, Paul Brockman, Emre Unlu
Dividend Policy, Creditor Rights, And The Agency Costs Of Debt, Paul Brockman, Emre Unlu
Department of Finance: Faculty Publications
We show that country-level creditor rights influence dividend policies around the world by establishing the balance of power between debt and equity claimants. Creditors demand and managers consent to a more restrictive payout policy as a substitute for weak creditor rights in an effort to minimize the firm’s agency costs of debt. Using a sample of 120,507 firm-years from 52 countries, we find that both the probability and amount of dividend payouts are significantly lower in countries with poor creditor rights. A reduction in the creditor rights index from its highest value to its lowest value implies a 41% reduction …
P/E Changes: Some New Results, Thomas S. Zorn, Donna M. Dudney, Benjamas Jirasakuldech
P/E Changes: Some New Results, Thomas S. Zorn, Donna M. Dudney, Benjamas Jirasakuldech
Department of Finance: Faculty Publications
The P/E ratio is often used as a metric to compare individual stocks and the market as a whole relative to historical valuations. We examine the factors that affect changes in the inverse of the P/E ratio (E/P) over time in the broad market (S&P 500 Index). Our model includes variables that measure investor beliefs and changes in tax rates and shows that these variables are important factors affecting the P/E ratio. We extend prior work by correcting for the presence of a long-run relation between variables included in the model. As frequently conjectured, changes in the P/E ratio have …