Business Commons^™

Bio-Bust: Investigating Biotech Stock Factors Contributing To Abnormal Returns In The Wake Of Silicon Valley Bank's Failure, Spencer Kent

CMC Senior Theses

Following the unprecedented collapse of Silicon Valley Bank (SVB) in March 2023, this study explores abnormal stock price reactions within the biotechnology sector. As the chosen financial institution for countless Silicon Valley-type technology and healthcare firms, SVB's failure had a profound impact on small to mid-sized biotech companies. Analyzing a dataset of 180 biotech firms during a two-day event window over SVB’s collapse, I investigate whether exposure to SVB, or other factors, was the primary contributor to negative abnormal stock price reactions, considering variables such as the percentage of cash held at SVB, whether a firm maintained an active SVB …

Ai-Nvesting: An Empirical Analysis With Sector Categorization And Prompt Complexity Considerations Assessing The Predictive Power Of Chatgpt In Stock Market Forecasting, Ian J. Larson

CMC Senior Theses

Abstract

This paper investigates whether ChatGPT has any predictive power when it comes to the stock market. Since its public release in December 2022, OpenAI’s ChatGPT has become a popular tool for millions of users across the world. With new use cases being found every day, I explore whether the system has any utility at predicting where stock prices will go. Using a 10-year study window, I prompt ChatGPT to give U.S. equity picks on a one-year holding period basis, segregating its picks into 3 different category sizes across 8 directed prompts. I examine the 24 equal weight portfolios of …

Ceo Characteristics That Lead To Extreme Outperformance: A Statistical Analysis Of William Thorndike’S “The Outsiders”, William Turner

CMC Senior Theses

What makes a high-performing CEO? What CEOs should you invest in? These are the questions that the Board of Directors, headhunters, academics, and investors all seek the answer to. This paper explores the answer to this question by examining CEO performance at the extremes. Inspired by the work of William N. Thorndike’s “The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success,” this study expands upon his methodology, employing a statistical approach to analyze a broader dataset of CEOs over the past thirty years. Using a logit model of hyper-outperforming versus hyper-underperforming CEOs, it assesses the …

Activism Aftershocks: Looking Beyond The Short-Term Stock Surges Caused By Activist Hedge Fund Campaign Announcements, Zara Vakath

CMC Senior Theses

It is well known that firms targeted by activist hedge funds experience positive abnormal stock returns during the campaign announcement window. However, the link between these short-term returns and the impact to long-term target firm performance has not been established. In this study, I find essentially no link between the positive announcement window returns and long-term performance improvements, using a variety of different methods. I examine performance changes over time and also relative to a matched sample of firms that have not been targeted by activist hedge funds. Additionally, I assess the correlation between the magnitude of short-term abnormal stock …

The Threat Of Activist Intervention: A Determinant Of 8-K Disclosure For Industrial Companies, Audrey Guilloteau

CMC Senior Theses

In the face of an activist threat, management may be inclined to provide additional disclosure to discourage potential intervention. This paper constructs an empirical model to measure the threat of activism and voluntary disclosure using a data set of 92 industrials focused activist events from 2008 to 2019. Propensity score matching is used to identify close peer firms that experience a threat of activism at the time a campaign is announced. Results from a difference in differences analysis indicate that firms targeted by hedge fund activists provide additional disclosure in the two-year period following the campaign announcement, as seen through …

Zoom In, Class Out: An Event Study On Publicly Traded Ed Tech Firm Valuations During Covid-19, Matiss Ozols

CMC Senior Theses

This paper examines how publicly traded Ed Tech firms reacted to negative announcements regarding COVID-19. Using an event study method, I document how an international portfolio of Ed Tech firms react across multiple event windows. The results show that Ed Tech firms reacted positively to the announcement of the first US death and negatively to the World Health Organization’s declaration that COVID-19 was a pandemic. Additionally, differences in geographical location did not impact cumulative abnormal returns across event windows. Finally, firm-specific characteristics such as volatility and financial leverage had little or no significance on stock returns.

The Fall Of The 10-K Report: Measuring The Impact Of Accounting Ratios On Financial Performance, Matthew Daruty

CMC Senior Theses

The annual 10-K report has historically been the most important aspect in assessing the position of a publicly held company. However, as the flow of information has increased with the dawn of new technologies, less and less attention has been paid to these audited financial statements. In order to assess if investors are still reacting to the information contained in the annual report, this paper examines the relationship between accounting ratios and stock price in banks traded on United States stock exchanges. By examining accounting ratios instead of simply looking at Earnings Per Share, new information was revealed regarding what …

M&A Performance: Market’S Initial Reaction As An Unbiased Indicator Of Post-Acquisition Performance, Nikolaos Papageorgiou

CMC Senior Theses

This paper investigates the reliability of the stock market’s initial reaction to M&A announcements as a predictor of actual post-acquisition performance. The two prevailing methods for evaluating M&A performance are event studies (stock market-based measures) and accounting-based measures. The present study combines these two performance evaluation approaches in a single empirical examination. Both the post-merger buy-and-hold abnormal returns and changes in ROA are used as actual post-acquisition performance variables. The acquirer’s cumulative abnormal return (CAR) around the announcement is used as the market predictor variable. An econometric model is employed to test the predictive power of the announcement-period CAR on …

Are Cds Auctions The Tail Wagging The Dog? An Empirical Study Of Corporate Bond Return Volatility At The Time Of Default, Jennifer Mace

CMC Senior Theses

Over the past decade, numerous engineered credit events and cases of market participants manipulating bond prices to influence Credit Default Swap (CDS) auction payouts have occurred. These cases have become increasingly common, and the CFTC has stated they may constitute market manipulation and undermine not only the CDS market but also the credit derivative and default markets. Although there is a plethora of news and media coverage on publicized cases, there is no previous empirical research on evidence of these practices. This paper is motivated by the desire to determine if there is indirect evidence of bond price manipulation around …

Returns To Buying Winners And Selling Losers: A Look At Cryptocurrencies, Daniel Walker

CMC Senior Theses

This paper is, to my knowledge, one of the first ever to examine the effectiveness of price momentum trading strategies applied to cryptocurrencies. Using aggregate OHLCV (Open, High, Low, Close, Volume) data on cryptocurrency pairs from Poloniex, Bittrex, and Bitfinex, I apply Jegadeesh and Titman’s classic -month/-month momentum trading strategy, reporting annual returns with and without incorporating trading fees. Portfolios are resampled daily, weekly, and monthly, testing lookback and holding periods ranging from one day to one year. The results show that trading cryptocurrencies using momentum strategies derives returns that rapidly increase the more often portfolios are resampled, with the …

The Effect Of Ceo Gender, Age, And Salary On Firm Value, Brandon H. D'Ewart

CMC Senior Theses

This paper investigates the academic conclusions on how CEO gender and salary affect firm value, while at the same time adding data on how CEO age affects firm value. Via an event study of S&P 500 CEO changes from 2000 to 2006 I confirm the current academic findings and discover that CEOs promoted during their 40s negatively influence firm value, while CEOs in older age brackets show a positive abnormal return on firm value. With this validation and addition to the existing data, firms and investors can more effectively assess proper candidates for the position of CEO and allocate resources …

Life Planning For Nfl Players, Ryan Pedersen

CMC Senior Theses

With players in the National Football League (NFL) making what seems to be the most money out of any entry-level position, it might come as a shock to many people to hear that so many players end up in financial distress afterwards. Sports Illustrated has put this number at 78% of players filing for bankruptcy or are in serious financial trouble within only two years of leaving the league (Torre).

The problems that the players run into are their short careers, which average 3 ½ years, their poor financial decisions and their very optimistic approach to life. The 3 ½ …

Effect Of Lockup Agreements On Buyout Backed Initial Public Offerings, Grant B. Heffernan

CMC Senior Theses

Using a sample of 279 buyout backed firms, I examined the effect of lockup agreements on the firm’s stock returns. I found there to be a negative .8 percent cumulative abnormal return for the three-day period surrounding lockup expiration. Consistent with my hypothesis the CAR for the three-day period surrounding lockup expiration was less negative for buyout backed IPOs compared to venture capital backed IPOs. In addition, I found there to be an abnormal 24.24 percent increase in trading volume for the three days surrounding lockup expiration.