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Articles 1 - 19 of 19
Full-Text Articles in Business
Investing When Volatility Fluctuates, Leping Wang
Investing When Volatility Fluctuates, Leping Wang
Research Collection Lee Kong Chian School Of Business
No abstract provided.
Penny Pricing And The Components Of Spread And Depth Changes, David K. Ding, K.H. Chuang, C. Chearoenwong
Penny Pricing And The Components Of Spread And Depth Changes, David K. Ding, K.H. Chuang, C. Chearoenwong
Research Collection Lee Kong Chian School Of Business
Recent studies show that decimal pricing led to significant reductions in the spread and depth on the NYSE. In this paper, we examine how the observed changes in the spread and depth can be attributed to different factors. We show that stocks with higher proportions of one-tick spreads and odd-sixteenth quotes, and more frequent trading before decimalization experienced larger declines in the spread and depth afterwards. We interpret this result as evidence of reduced binding constraints and increased price competition under decimal pricing. We also find that decimal pricing led to nontrivial changes in select stock attributes, and that these …
The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading: An Intraday Analysis, Chiraphol N. Chiyachantana, Christine X. Jiang, Nareerat Taechapiroontong, Robert A. Wood
The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading: An Intraday Analysis, Chiraphol N. Chiyachantana, Christine X. Jiang, Nareerat Taechapiroontong, Robert A. Wood
Research Collection Lee Kong Chian School Of Business
This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre‐announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre‐announcement period and more active trading of retail investors after earnings …
International Joint Ventures And Political Risk, Sundaram Janakiramanan, Lamba Asjeet S.
International Joint Ventures And Political Risk, Sundaram Janakiramanan, Lamba Asjeet S.
Research Collection Lee Kong Chian School Of Business
In recent years, a number of researchers have examined the existence and source of shareholder wealth effects around announcements of international joint ventures. The results of these studies are mixed with no clear answers as to when and why investors attach value to firms using joint ventures to enter overseas markets. In this context, we examine the shareholder wealth effects for 92 international joint venture announcements made by Australian firms during June 1988 - December 1997. We find that, on average, shareholders of firms announcing joint ventures realize an abnormal return of +1.65% over the two-day announcement period of days …
Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo
Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo
Research Collection Lee Kong Chian School Of Business
Using CRSP stock and mutual fund data, we find strong evidence for reversals at the style level (e.g., large value, small growth, etc.). There are significant excess and risk-adjusted returns for stocks in styles characterized by the worst past returns and net inflows. We also find evidence for momentum and positive feedback trading at the style level. These value and momentum effects are driven neither by fundamental risk nor by stock-level reversals and momentum. Taken together, the results are consistent with the style-level positive feedback trading model of Barberis and Shleifer (2003).
The Contribution Of A Satellite Market To Price Discovery: Evidence From The Singapore Exchange, Vicentiu Covrig, David K. Ding, Buen Sin Low
The Contribution Of A Satellite Market To Price Discovery: Evidence From The Singapore Exchange, Vicentiu Covrig, David K. Ding, Buen Sin Low
Research Collection Lee Kong Chian School Of Business
The Singapore Exchange (SGX), a small satellite market, successfully competes with a large home market, the Osaka Securities Exchange (OSE), in trading the Nikkei 225 futures index. In this paper, we investigate the contribution of the SGX to price discovery and shed light on the reasons for its continued success. Evidence is provided from information revelation and price discovery of three competing but informationally linked markets of the Nikkei 225 index - domestic spot (Tokyo Stock Exchange), domestic futures (OSE), and foreign futures (SGX), which represents the satellite market. Overall, the futures market contributes 77% to price discovery, with the …
Prospect Theory, Analyst Forecast, And Stock Returns, David K. Ding, Charlie Charoenwong, Raymond Seetoh
Prospect Theory, Analyst Forecast, And Stock Returns, David K. Ding, Charlie Charoenwong, Raymond Seetoh
Research Collection Lee Kong Chian School Of Business
This paper documents how prospect theory can be used to explain stock returns and analysts' forecast behavior. Positive earnings surprises are associated with increases in abnormal returns but negative earnings surprises have only a limited negative impact on returns. We find that analysts display asymmetric behavior towards positive and negative earnings growth. Analysts' forecasts are found to be accurate during periods of positive earnings growth, but overly optimistic during periods of negative earnings growth. Our findings have implications for the structuring of investment products, as well as the role of market timing in their introduction.
Investing In Hedge Funds: Risks, Returns And Performance Measurement, Francis Koh, Winston T. H. Koh, David K. C. Lee, Kok Fai Phoon
Investing In Hedge Funds: Risks, Returns And Performance Measurement, Francis Koh, Winston T. H. Koh, David K. C. Lee, Kok Fai Phoon
Research Collection Lee Kong Chian School Of Business
Hedge funds are collective investment vehicles that are often established with a special legal status that allows their investment managers a free hand to use derivatives, short sell, and exploit leverage to raise returns and cushion risk. We review various issues relating to the investment in hedge funds, which have become popular with high net-worth individuals and institutional investors, as well as discuss their empirical risk and return profiles. The concerns regarding the empirical measurements are highlighted, and meaningful analytical methods are proposed to provide greater risk transparency in performance reporting. We also discuss the development of the hedge fund …
House Prices And Fundamental Value, John Krainer, Chi Shen Wei
House Prices And Fundamental Value, John Krainer, Chi Shen Wei
Research Collection Lee Kong Chian School Of Business
The performance of the residential housing market over the last ten years has been remarkable. According to the Office of Federal Housing Enterprise Oversight (OFHEO), house prices have appreciated at an annual rate of 5.4% on average (68.9% over the whole time period). Perhaps even more remarkable is that the performance was strong even when economic activity overall was weak. Average annual appreciation rates have been 7.4% (26% in total) since the collapse of the Nasdaq in 2000 and 7.1% (20% in total) since 2001:Q1, the beginning of the 2001 recession. In contrast, since the start of the 2001 recession, …
Risk, Return And Risk Aversion: A Behavioral Rendition, Hian Ann, Christopher Ting
Risk, Return And Risk Aversion: A Behavioral Rendition, Hian Ann, Christopher Ting
Research Collection Lee Kong Chian School Of Business
Behavioral finance and classical finance based on utility maximization appear to be mutually exclusive schools of thought. Despite the fundamental difference, we show that behavioral finance also has a linear relation between risk and return. This relation is obtained without the assumptions of market equilibrium, rational expectations, a specific utility function and the market portfolio. In the behavioral approach, the pricing error of CAPM is not an error. It is attributable to the higher-order moments of return. Empirical tests suggest that the relative risk aversion coefficient is positive and time-varying. Moreover, it correlates negatively with both volatility and return.
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, …
The Economy And Demand For Finance Ph.D.S: 1989-2001, David K. Ding, Sheng-Syan Chen
The Economy And Demand For Finance Ph.D.S: 1989-2001, David K. Ding, Sheng-Syan Chen
Research Collection Lee Kong Chian School Of Business
We investigate the demand for new finance Ph.D.s from 1989 to 2001. Three categories of schools (Top 20, Top 21-50, and Other Finance Departments) are explored and the differences between private and public institutions are reported. The demand for assistant professors is the greatest and most institutions require an earned Ph.D. While most do not specify the position type, there is some evidence that tenure-tracked ones are on the rise. The most desired areas of expertise are corporate/business finance, investments, and bank management/financial markets and institutions. The total demand is positively related to the Gross Domestic Product and Dow Jones.
Information Contents Of Trade And Quote Imbalances, And The Hypothesis Of Reverse Liquidity, Hian Ann, Christopher Ting
Information Contents Of Trade And Quote Imbalances, And The Hypothesis Of Reverse Liquidity, Hian Ann, Christopher Ting
Research Collection Lee Kong Chian School Of Business
In this paper, we study the information contents of imbalances in trades and quotes emanated from an exchange resembling the one envisioned by Black (1971). We find dollar volume is more informative than number in measuring daily trading and quoting activities. Our measure of quote imbalance permits an investigation on the information asymmetry between market and limit orders. In case illegal insider trading does not occur regularly, we present a hypothesis of reverse liquidity as an alternative interpretation for our empirical findings. It could be that market-order traders charge an implicit liquidity premium for fulfilling the contrarian trading demand of …
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Using a novel and detailed custody trades dataset, this paper analyzes the trading behavior of institutions. Extant studies have examined the effects of past performance on trading by retail investors, day traders, and futures floor traders. Yet very little work has been done on institutions. We find that unlike other investors, institutions take on more risk following an increase in net profit and loss. However, the responses to a gain and loss are highly asymmetric. Institutions aggressively reduce risk in the wake of losses, but only mildly increase risk in the wake of gains. This asymmetry is more pronounced for …
Analysis Of Limit Order Book And Order Flow, Charlie Charoenwong, Nuttawat Visaltanachoti, David K. Ding
Analysis Of Limit Order Book And Order Flow, Charlie Charoenwong, Nuttawat Visaltanachoti, David K. Ding
Research Collection Lee Kong Chian School Of Business
This paper extensively employs the order and trade data to analyze the shape of limit order book and the behavior of strategic order submission. The order book of stocks exhibits weakly convex pattern on the bid side due to wide price spreads away from the market. This characteristic of liquidity is particularly strong for the small stocks with large minimum tick size. In addition, the same order type occurs more frequently after the event had occurred than it would unconditionally. This diagonal effect is not fully explained by the order splitting. Moreover, the determinants driving order aggressiveness include bid-ask spread, …
Transaction-Data Analysis Of Marked Durations And Their Implications For Market Microstructure, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitchell Warachka
Transaction-Data Analysis Of Marked Durations And Their Implications For Market Microstructure, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitchell Warachka
Research Collection Lee Kong Chian School Of Business
We propose an Autoregressive Conditional Marked Duration (ACMD) model for the analysis of irregularly spaced transaction data. Based on the Autoregressive Conditional Duration (ACD) model, the ACMD model assigns marks to characterize events such as tick movements and trade directions (buy/sell). Applying the ACMD model to tick movements, we study the influence of trade frequency, direction and size on price dynamics, volatility and the permanent and transitory price impacts of trade. We also apply the ACMD model to analyze trade-direction data and estimate the probability of informed trading (PIN). We find that trade frequency has a critical role in price …
Equity Style Returns And Institutional Investor Flows, Kenneth A. Froot, Melvyn Teo
Equity Style Returns And Institutional Investor Flows, Kenneth A. Froot, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
This paper explores institutional investor trades in stocks grouped by style and the relationship of these trades with equity market returns. It aggregates transactions drawn from a large universe of approximately $6 trillion of institutional funds. To analyze style behavior, we assign equities to deciles in each of five style dimensions: size, value/growth, cyclical/defensive, sector, and country. We find, first, strong evidence that investors organize and trade stocks across style-driven lines. This appears true for groupings both strongly and weakly related to fundamentals (e.g., industry orcountry groupings versus size or value/growth deciles). Second, the positive linkage between flows and returns …
Price Rounding And Bid-Ask Spreads Before And After The Decimalization, Yan He, Chunchi Wu
Price Rounding And Bid-Ask Spreads Before And After The Decimalization, Yan He, Chunchi Wu
Research Collection Lee Kong Chian School Of Business
We investigate price rounding before and after the pilot decimalization on the NYSE. We find that although rounding exists in transaction, bid, and ask prices in both the pre- and postdecimalization periods, it becomes less salient after the decimalization. The cross-sectional relationship between rounding and trading variables is similar before and after the decimalization, and so is the relationship between execution costs and rounding when trading variables are held constant. More importantly, the quoted and effective bid–ask spreads decrease after decimal trading, and this decrease can be ascribed to the decrease in rounding frequency after controlling for the changes in …
Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler
Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler
Research Collection Lee Kong Chian School Of Business
We test competing theoretical perspectives explaining likely shareholder returns from material investment decisions announced by privatizing telecommunications firms (telecoms) with varying levels of residual state ownership. A principal-agent perspective suggests that decrease in residual state ownership in privatizing telecoms leads to more positive shareholder returns. Over time, this effect increases. An alternative credible privatization perspective suggests that retention of substantial (though not controlling) residual state ownership leads to more positive shareholder returns, but only in the short run. Over time this ownership effect fades quickly. We examine empirical support for these competing perspectives with an event study analyzing cumulative abnormal …