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- Liquidity (4)
- Asset pricing (2)
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- Analyst Forecasts (1)
- Asset allocation (1)
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- Behavioral Explanations of Trading Volume and Short-Horizon Price Patterns: An Investigation of Seven Asia-Pacific Markets (1)
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- Informed trading (1)
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Articles 1 - 24 of 24
Full-Text Articles in Business
Style Investing And Institutional Investors, Kenneth Froot, Melvyn Teo
Style Investing And Institutional Investors, Kenneth Froot, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
This paper explores the importance and price implications of style investing by institutional investors in the stock market. To analyze styles, we assign stocks to deciles or segments across three style dimensions: size, value/growth, and sector. We find strong evidence that institutional investors reallocate across style groupings more intensively than across random stock groupings. In addition, we show that own segment style inflows and returns positively forecast future stock returns, while distant segment style inflows and returns forecast negatively. We argue that behavioral theories play a role in explaining these results.
Market Segmentation, Liquidity Spillover, And Closed-End Country Fund Discounts, Sai Pang (Justin) Chan, Ravi Jain, Yihong Xia
Market Segmentation, Liquidity Spillover, And Closed-End Country Fund Discounts, Sai Pang (Justin) Chan, Ravi Jain, Yihong Xia
Research Collection Lee Kong Chian School Of Business
In a segmented international capital market, the illiquidity of a country fund in the market in which its shares are traded affects only the share price of the fund (S), while the illiquidity of its underlying assets in the market in which these are traded affects only the fund net asset value (NAV). In an integrated market, illiquidity in one market can easily spill over to another and affect both the fund share price and its underlying asset value. It follows that the closed-end country fund premium, P[reverse not equivalent]ln(S)-ln(NAV), is negatively (positively) affected by the fund (underlying asset) illiquidity …
Ceo Characteristics, Ceo-Firm Match And Corporate Refocus Value, Sheng Huang
Ceo Characteristics, Ceo-Firm Match And Corporate Refocus Value, Sheng Huang
Research Collection Lee Kong Chian School Of Business
This paper investigates how CEO characteristics affect firm value through divestiture. Using a novel dataset tracking CEO’s career path, from which CEO’s talent and expertise are reasonably inferred, I find when CEOs have differing abilities across divisions of conglomerates, they more likely divest divisions that they are less qualified to manage, and focus on divisions of better match with their talents and expertise. The better match of their talents with firms’ retained assets is the source of value creation from refocusing divestiture. Divestitures that increase corporate focus but not improve the talent-asset match do not create value in long run. …
Home Biased Analysts In Emerging Markets, Sandy Lai, Melvyn Teo
Home Biased Analysts In Emerging Markets, Sandy Lai, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
We find that local analyst recommendations are systematically more optimistic than foreign analyst recommendations in emerging markets. The effects of this novel home bias among local analysts overwhelm any information asymmetry between foreign and local analysts. Consequently, local analyst upgrades underperform foreign analyst upgrades, while local analyst downgrades outperform foreign analyst downgrades. Neither foreign investors, local institutions, nor retail investors appear to be fully cognizant of this bias. Trade reactions suggest that foreign investors overestimate the bias in foreign analyst recommendations while local institutions underestimate the bias in local analyst recommendations. These results are pervasive across countries, time periods, and …
Momentum And Informed Trading, A. Hameed, Dong Hong, Mitchell Craig Warachka
Momentum And Informed Trading, A. Hameed, Dong Hong, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
Consistent with the predictions of Wang (1994), we document that firm-specific informed trading is an important determinant of price momentum. The stronger return continuation in stocks with more informed trading cannot be explained by cross-sectional differences in uncertainty proxies such as analyst forecast dispersion, analyst coverage, idiosyncratic return volatility, and size. The relationship between informed trading and return continuation is also not attributable to cross-sectional differences in liquidity. Instead, our evidence emphasizes the role of price discovery in generating short-term price momentum.
Being Naive About Naive Diversification: Can Investment Theory Be Consistently Useful?, Jun Tu, Guofu Zhou
Being Naive About Naive Diversification: Can Investment Theory Be Consistently Useful?, Jun Tu, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
The modern portfolio theory pioneered by Markowitz (1952) is widely used in practice and taught in MBA texts. DeMiguel, Garlappi and Uppal (2007), however, show that, due to estimation errors, existing theory-based portfolio strategies are not as good as we once thought, and the estimation window needed for them to beat the naive $1/N$ strategy (that invests equally across N risky assets) is 'around 3000 months for a portfolio with 25 assets and about 6000 months for a portfolio with 50 assets.' In this paper, we modify the modern portfolio theory to account for estimation errors, so that the theory …
The Disparity Between Long-Term And Short-Term Forecasted Earnings Growth, Zhi Da, Mitchell Craig Warachka
The Disparity Between Long-Term And Short-Term Forecasted Earnings Growth, Zhi Da, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and revisions in long-term forecasted earnings growth. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or far below their implied short-term forecasts for earnings growth have negative and positive subsequent risk-adjusted returns, respectively. Despite the importance of conditioning on short-term forecasted earnings growth, these returns are not driven by earnings momentum. Instead, consistent with investors having limited attention, predictable revisions in long-term analyst forecasts appear to induce return predictability.
Earnings Asymmetric Timeliness And Shareholder Distributions, Richard M. Frankel, Yan Sun, Rong Wang
Earnings Asymmetric Timeliness And Shareholder Distributions, Richard M. Frankel, Yan Sun, Rong Wang
Research Collection Lee Kong Chian School Of Business
We study whether more asymmetrically timely earnings constrain payouts to shareholders in the presence of bad news. Our goal is to provide evidence on the ex post contracting benefits of accounting conservatism. We distinguish between cash flow asymmetric timeliness and accrual asymmetric timeliness to examine how each relates to asymmetric sensitivity of shareholder payouts. We find that only the asymmetric timeliness of cash flows is significantly related to the asymmetric sensitivity of shareholder payouts. Other measures of conservatism (earnings skewness and accumulated nonoperating accruals) are also not significantly related to the sensitivity of shareholder payouts given bad news. These results …
A Tale Of Two Prices: Liquidity And Asset Prices In Multiple Markets, Justin Sai Pang Chan, Dong Hong, Marti G. Subrahmanyam
A Tale Of Two Prices: Liquidity And Asset Prices In Multiple Markets, Justin Sai Pang Chan, Dong Hong, Marti G. Subrahmanyam
Research Collection Lee Kong Chian School Of Business
This paper investigates the liquidity effect in asset pricing by studying the liquidity-premium relationship of an American depositary receipt (ADR) and its underlying share. Using the [Amihud, Yakov, 2002. Illiquidity and stock returns: cross-section and time series effects. Journal of Financial Markets 5, 31-56] measure, the turnover ratio and trading infrequency as proxies for liquidity, we show that a higher ADR premium is associated with higher ADR liquidity and lower home share liquidity, in terms of changes in these variables. We find that the liquidity effects remain strong after we control for firm size and a number of country characteristics, …
Corporate Governance, Shareholder Rights, And Shareholder Rights Plans: Poison, Placebo, Or Prescription?, Gary L. Caton, Jeremy C. Goh
Corporate Governance, Shareholder Rights, And Shareholder Rights Plans: Poison, Placebo, Or Prescription?, Gary L. Caton, Jeremy C. Goh
Research Collection Lee Kong Chian School Of Business
We examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.
Behavioral Explanations Of Trading Volume And Short-Horizon Price Patterns: An Investigation Of Seven Asia-Pacific Markets, David K. Ding, Thomas H. Mclnish, Udomsak Wongchoti
Behavioral Explanations Of Trading Volume And Short-Horizon Price Patterns: An Investigation Of Seven Asia-Pacific Markets, David K. Ding, Thomas H. Mclnish, Udomsak Wongchoti
Research Collection Lee Kong Chian School Of Business
We investigate whether behavioral postulations offer any implicit explanation of the country-varying relation between trading volume and price pattern among short-horizon winners/losers in seven Pacific-Basin markets during the period 1990 to 2000. Our findings lend credence to the Lee and Swaminathan [Lee, C. and Swaminathan, B., 2000. Price momentum and trading volume, Journal of Finance 55, 2017-2069.] Momentum Life Cycle explanation that high (low) volume winners (losers) are more likely to experience price reversals, whereas high (low) volume losers (winners), price momentum, in the subsequent period. This observation is especially pronounced in Hong Kong. Other models such as those based …
Leverage Change, Debt Capacity, And Stock Prices, Jie Cai, Zhe (Joe) Zhang
Leverage Change, Debt Capacity, And Stock Prices, Jie Cai, Zhe (Joe) Zhang
Research Collection Lee Kong Chian School Of Business
We document a significantly negative effect of the change in a firm’s leverage ratio on its stock prices. This effect cannot be explained by popular asset pricing factors or firm characteristics. We find that the negative effect is stronger for firms with limited debt capacity. Moreover, firms with an increase in leverage ratio tend to have less future investment, even after controlling for growth option and target leverage. These findings are consistent with a dynamic view of the pecking-order theory that an increase in leverage reduces firms’ safe debt capacity and may lead to future underinvestment, thus reducing firm value. …
Which Shorts Are Informed?, Ekkehart Boehmer, Charles M. Jones, Xiaoyan Zhang
Which Shorts Are Informed?, Ekkehart Boehmer, Charles M. Jones, Xiaoyan Zhang
Research Collection Lee Kong Chian School Of Business
We construct a long daily panel of short sales using proprietary NYSE order data. From 2000 to 2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that shorting constraints are not widespread. As a group, these short sellers are well informed. Heavily shorted stocks underperform lightly shorted stocks by a risk-adjusted average of 1.16% over the following 20 trading days (15.6% annualized). Institutional nonprogram short sales are the most informative; stocks heavily shorted by institutions underperform by 1.43% the next month (19.6% annualized). The results indicate that, on average, short sellers are important contributors to efficient stock prices.
The Impact Of Investor Protection Law On Takeovers: The Case Of Leveraged Buyouts, Jerry Cao, Douglas J. Cumming, Jeremy Goh, Meijun Qian, Xiaoming Wang
The Impact Of Investor Protection Law On Takeovers: The Case Of Leveraged Buyouts, Jerry Cao, Douglas J. Cumming, Jeremy Goh, Meijun Qian, Xiaoming Wang
Research Collection Lee Kong Chian School Of Business
This paper examines the impact of investor protection on the value creation of LBOs. We find that target shareholders’ wealth gain is higher in countries with better investor protection. The impact of investor protection on takeover premium is larger for LBO than non-LBO transactions. We also find evidence suggesting that club LBOs are not priced lower than non-club deals after accounting for endogeneity problem. These results suggest that investor protection law may act as an important safeguard for minority shareholders in LBO transactions.
Liquidity Distribution In The Limit Order Book On The Stock Exchange Of Thailand, Nuttawat Visaltanachoti, Charlie Charoenwong, David K. Ding
Liquidity Distribution In The Limit Order Book On The Stock Exchange Of Thailand, Nuttawat Visaltanachoti, Charlie Charoenwong, David K. Ding
Research Collection Lee Kong Chian School Of Business
The liquidity distribution, or the shape of the limit order book, influences trading behavior and choice of order submission by public liquidity suppliers. The present study seeks to discover whether liquidity providers are concerned about being picked off by informed traders, and whether they are less willing to supply liquidity at the market or demand higher price spreads. The results show that liquidity at the market is a small portion of total liquidity, and that firm size, minimum tick size, volatility, and trading volume play significant roles in determining the liquidity distribution within an order book.
Investment Patterns In Singapore's Central Provident Fund System, Benedict S. K. Koh, Olivia S. Mitchell, Toto Tanuwidjaja, Joelle Fong
Investment Patterns In Singapore's Central Provident Fund System, Benedict S. K. Koh, Olivia S. Mitchell, Toto Tanuwidjaja, Joelle Fong
Research Collection Lee Kong Chian School Of Business
Rising elderly life expectancies imply the need to accumulate sufficient savings for retirement. This paper investigates the role of recent changes in the investment menu of the Singaporean Central Provident Fund (CPF) system. Our research explores the investment patterns of CPF participants and articulates their implications for policymakers. We find that most investors use their money for housing purchase and default the remainder to the CPF investment pool. The bulk of non-housing saving sits in bank accounts paying a low return. A fraction of workers does elect outside investment products, with high-income earners and males taking more risk than low-income …
Short-Horizon Contrarian And Momentum Strategies In Asian Markets: An Integrated Analysis, Thomas H. Mcinish, David K. Ding, Chong Soo Pyun, Udomsak Wongchoti
Short-Horizon Contrarian And Momentum Strategies In Asian Markets: An Integrated Analysis, Thomas H. Mcinish, David K. Ding, Chong Soo Pyun, Udomsak Wongchoti
Research Collection Lee Kong Chian School Of Business
In this paper, we test the profitability of short-term contrarian and momentum strategies, which take into account the effects of trading activity, size/value characteristics, and asymmetric investor responses to news regarding stock markets in Japan, Taiwan, Korea, Hong Kong, Malaysia, Thailand, and Singapore during 1990–2000. Except for the Taiwanese and Korean markets, “winner” (“loser”) portfolios experience subsequent reversal (momentum) of stock prices. Among actively traded stocks, significant contrarian profits can be obtained from only “winner” portfolios in Japan, while sizeable momentum profits from “loser portfolios” in both Japan and Hong Kong.
Further Evidence On The Approximation Of Confidence Intervals For Sharpe Style Weights: The Case Of Australian Listed Managed Funds, Kok Fai Phoon, John Watson, Jayasinghe Wickramanayake
Further Evidence On The Approximation Of Confidence Intervals For Sharpe Style Weights: The Case Of Australian Listed Managed Funds, Kok Fai Phoon, John Watson, Jayasinghe Wickramanayake
Research Collection Lee Kong Chian School Of Business
No abstract provided.
The Effect Of Rivals When Firms Emerge From Bankruptcy, Gary L. Caton, Jeffrey Donaldson, Jeremy Goh
The Effect Of Rivals When Firms Emerge From Bankruptcy, Gary L. Caton, Jeffrey Donaldson, Jeremy Goh
Research Collection Lee Kong Chian School Of Business
Studies on the announcement effects of bankruptcy filings have found that when a firm files for Chapter 11 bankruptcy protection its shareholders suffer significant losses. A recent paper extends these findings by investigating the announcement effect on rival companies, while another examines the equity performance of firms emerging from bankruptcy. We combine these two lines of inquiry by examining the effect on rivals when a firm emerges from the protection of Chapter 11. We find both significant negative stock market returns and significant negative revisions in analysts’ earnings forecasts for rivals of successfully reorganized companies.
Project Options Valuation With Net Present Value And Decision Tree Analysis, Bert De Reyck, Zeger Degraeve, Roger Vandenborre
Project Options Valuation With Net Present Value And Decision Tree Analysis, Bert De Reyck, Zeger Degraeve, Roger Vandenborre
Research Collection Lee Kong Chian School Of Business
Real options analysis (ROA) has been developed to correctly value projects with inherent flexibility, including the possibility to abandon, defer, expand, contract or switch to a different project. ROA allows computing the correct discount rate using the replicating portfolio technique or risk-neutral probability method. We propose an alternative approach for valuing Real Options based on the certainty-equivalent version of the net present value formula, which eliminates the need to identify market-priced twin securities. In addition, our approach can be extended to the case of multinomial trees, a useful tool for modeling uncertainty in projects. We introduce within decision tree analysis …
Cost Structures In Defined Contribution Systems: The Case Of Singapore's Central Provident Fund, Benedict S. K. Koh, Olivia S. Mitchell, Joelle H. Y. Fong
Cost Structures In Defined Contribution Systems: The Case Of Singapore's Central Provident Fund, Benedict S. K. Koh, Olivia S. Mitchell, Joelle H. Y. Fong
Research Collection Lee Kong Chian School Of Business
Retirement systems are increasingly asked to do an ever-better job of enhancing the performance of pension investments. The Singaporean Central Provident Fund permits pension system participants to keep their money in a government-run investment pool, or if they wish, they may select professionally managed unit trusts for their retirement accumulations. Opting for investment choice also exposes members to additional investment costs not charged by the government-managed account. This paper explores the charges levied by the private fund managers and we show that foreign ownership, active style of management and equity/balanced funds tend to be most expensive. We conclude with a …
An Efficient Method For Maximum Likelihood Estimation Of A Stochastic Volatility Model, Junying, Shirley Huang, Jun Yu
An Efficient Method For Maximum Likelihood Estimation Of A Stochastic Volatility Model, Junying, Shirley Huang, Jun Yu
Research Collection Lee Kong Chian School Of Business
In this paper an efficient, simulation-based, maximumlikelihood (ML) method is proposed for estimating Taylor’sstochastic volatility (SV) model. The new method isbased on the second order Taylor approximation to the integrand.The approximation enables us to transfer the numericalproblem in the Laplace approximation and that inimportance sampling into the problem of inverting two highdimensional symmetric tri-diagonal matrices. A result recentlydeveloped in the linear algebra literature shows thatsuch an inversion has an analytic form, greatly facilitatingthe computations of the likelihood function of the SVmodel. In addition to provide parameter estimation, the newmethod offers an efficient way to filter, smooth, and forecastlatent log-volatility. The …
Estimating The Dynamics Of Mutual Fund Alphas And Betas, Harry Mamaysky, Matthew Spiegel, Hong Zhang
Estimating The Dynamics Of Mutual Fund Alphas And Betas, Harry Mamaysky, Matthew Spiegel, Hong Zhang
Research Collection Lee Kong Chian School Of Business
This article develops a Kalman filter model to track dynamic mutual fund factor loadings. It then uses the estimates to analyze whether managers with market-timing ability can be identified ex ante. The primary findings are as follows: (i) Ordinary least squares (OLS) timing models produce false positives (nonzero alphas) at too high a rate with either daily or monthly data. In contrast, the Kalman filter model produces them at approximately the correct rate with monthly data; (ii) In monthly data, though the OLS models fail to detect any timing among fund managers, the Kalman filter does; (iii) The alpha and …
Firm Diversification And Earnings Management: Evidence From Seasoned Equity Offerings, Chee Yeow Lim, Tiong Yang Thong, David K. Ding
Firm Diversification And Earnings Management: Evidence From Seasoned Equity Offerings, Chee Yeow Lim, Tiong Yang Thong, David K. Ding
Research Collection Lee Kong Chian School Of Business
Popular press suggests that diversified firms are more aggressive in managing earnings than non-diversified firms. We examine this claim in the seasoned equity offering (SEO) setting, where firms have been shown to have the incentive to manage earnings upwards. Using the cross-sectional modified Jones [(1991) J Accounting Res 29:193–228] model to measure discretionary current accruals, we find that discretionary current accruals are higher among diversified firms than in non-diversified ones. Our evidence is consistent with the view that the extent of firm diversification is directly related to the degree of earnings management. We further show that diversified issuers with high …