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Articles 1 - 13 of 13
Full-Text Articles in Business
Legal Risk And Insider Trading, Marcin Kacperczyk, Emiliano Sebastian Pagnotta
Legal Risk And Insider Trading, Marcin Kacperczyk, Emiliano Sebastian Pagnotta
Research Collection Lee Kong Chian School Of Business
Do illegal insiders internalize legal risk? We address this question with hand-collected data from 530 SEC (the U.S. Securities and Exchange Commission) investigations. Using two plausibly exogenous shocks to expected penalties, we show that insiders trade less aggressively and earlier and concentrate on tips of greater value when facing a higher risk. The results match the predictions of a model where an insider internalizes the impact of trades on prices and the likelihood of prosecution and anticipates penalties in proportion to trade profits. Our findings lend support to the effectiveness of U.S. regulations' deterrence and the long-standing hypothesis that insider …
Reproducibility In Management Science, MiloˇS Fišar, Ben Greiner, Christoph Huber, Elena Katok, Ali I. Ozkes, Hannah H. Chang
Reproducibility In Management Science, MiloˇS Fišar, Ben Greiner, Christoph Huber, Elena Katok, Ali I. Ozkes, Hannah H. Chang
Research Collection Lee Kong Chian School Of Business
With the help of more than 700 reviewers, we assess the reproducibility of nearly 500 articles published in the journal Management Science before and after the introduction of a new Data and Code Disclosure policy in 2019. When considering only articles for which data accessibility and hardware and software requirements were not an obstacle for reviewers, the results of more than 95% of articles under the new disclosure policy could be fully or largely computationally reproduced. However, for 29% of articles, at least part of the data set was not accessible to the reviewer. Considering all articles in our sample …
In Search Of Cryptocurrency Failure, Donglian Ma, Jun Tu, Zhaobo Zhu
In Search Of Cryptocurrency Failure, Donglian Ma, Jun Tu, Zhaobo Zhu
Research Collection Lee Kong Chian School Of Business
This paper explores the determinants of cryptocurrency failure and the pricing of crypto failure risk. We document different significant market- and characteristic-based predictors for coin and token failures. The introduction of Bitcoin futures and the outbreak of COVID19 affect the importance of many predictors. Investors require extra return for bearing high failure risk of crypto assets. The return difference across high and low failure risk crypto assets is not explained by the market, size and momentum factors in the cryptocurrency market. Finally, investors benefit from diversifying into high failure risk crypto assets that is little correlated with the stock market.
How Commonality Persists? (Through Investors' Sentiment And Attention), Chyng Wen Tee, Raja Velu, Zhaoque Zhou
How Commonality Persists? (Through Investors' Sentiment And Attention), Chyng Wen Tee, Raja Velu, Zhaoque Zhou
Research Collection Lee Kong Chian School Of Business
Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors via a reduced-rank regression. We provide empirical evidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attention measures themselvesexhibit a nonlinear mutual relationship, …
Are Bond Returns Predictable With Real-Time Macro Data?, Dashan Huang, Fuwei Jiang, Kunpeng Li, Guoshi Tong, Guofu Zhou
Are Bond Returns Predictable With Real-Time Macro Data?, Dashan Huang, Fuwei Jiang, Kunpeng Li, Guoshi Tong, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
We investigate the predictability of bond returns using real-time macro variables and consider the possibility of a nonlinear predictive relationship and the presence of weak factors. To address these issues, we propose a scaled sufficient forecasting (sSUFF) method and analyze its asymptotic properties. Using both the existing and the new method, we find empirically that real-time macro variables have significant forecasting power both in-sample and out-of-sample. Moreover, they generate sizable economic values, and their predictability is not spanned by the yield curve. We also observe that the forecasted bond returns are countercyclical, and the magnitude of predictability is stronger during …
Does Abstract Thinking Facilitate Information Processing? Evidence From Financial Analysts, Frank Weikai Li, Rong Wang, Yang Yu, Gloria Yang Yu
Does Abstract Thinking Facilitate Information Processing? Evidence From Financial Analysts, Frank Weikai Li, Rong Wang, Yang Yu, Gloria Yang Yu
Research Collection Lee Kong Chian School Of Business
We study whether abstract thinking – an essential cognitive trait established by psychological and neuroscientific studies – facilitates analysts’ information processing. Exploiting analysts’ questions during earnings calls, we construct an Abstract Thinking Index (ATI) that measures their tendency to involve abstract words, logical reasoning, broader topics, and future outlooks. We find that abstract thinking improves analysts’ forecast accuracy and recommendation informativeness. Consistent with abstract thinking featuring identifying central characteristics and comprehending intangible things, ATI has stronger effects for firms with fundamentals co-moving more with peers and less tangible information. Additional analyses suggest that ATI captures analysts’ cognitive traits rather than …
What Drives The Value Of Financial Analysts’ Advice? The Role Of Earnings And Growth Forecasts, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
What Drives The Value Of Financial Analysts’ Advice? The Role Of Earnings And Growth Forecasts, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
We offer a parsimonious index at the individual analyst level to measure the extent to which an analyst relies on earnings and long-term growth forecasts in producing her advice. Using this index, we evaluate the contribution of earnings and growth forecasts to the investment value of analysts’ stock recommendations. We find that the fraction of analysts’ advice attributed to forecasts varies considerably across analysts and sectors. The investment value of recommendations is higher for analysts who rely less on their forecasts and more on other sources of information when forming investment advice. Investors recognize the superiority of recommendations from analysts …
Seeking Better Sharpe Ratio Via Bayesian Optimization, Peng Liu
Seeking Better Sharpe Ratio Via Bayesian Optimization, Peng Liu
Research Collection Lee Kong Chian School Of Business
Developing an excellent quantitative trading strategy to obtain a high Sharpe ratio requires optimizing several parameters at the same time. Example parameters include the window length of a moving average sequence, the choice of trading instruments, and the thresholds used to generate trading signals. Simultaneously optimizing all these parameters to seek a high Sharpe ratio is a daunting and time-consuming task, partly because of the unknown mechanism determining the Sharpe ratio. This article proposes using Bayesian optimization to systematically search for the optimal parameter configuration that leads to a high Sharpe ratio. The author shows that the proposed intelligent search …
Liquidity Constraints, Consumption, And Debt Repayment: Evidence From Macroprudential Policy In Turkey, Sumit Agarwal, Muris Hadzic, Changcheng Song, Yildirim Yildiray
Liquidity Constraints, Consumption, And Debt Repayment: Evidence From Macroprudential Policy In Turkey, Sumit Agarwal, Muris Hadzic, Changcheng Song, Yildirim Yildiray
Research Collection Lee Kong Chian School Of Business
Using account-level credit card data from a large Turkish bank, we study the impact of a unique credit card policy that increases minimum payment on consumption and debt repayment. We show that the policy reduces credit card spending and debt, boosts existing debt repayment, and reduces credit card delinquency. The credit card debt of affected consumers falls on average by 50% two years into the policy’s implementation. An increase in minimum payment has a stronger effect than does a decrease of a similar magnitude. We build a benchmark life cycle model with soft liquidity constraint to explain the reduction in …
Exchange-Traded Funds And Real Investment, Constantinos Antoniou, Frank Weikai Li, Xuewen Liu, Avanidhar Subrahmanyam, Chengzhu Sun
Exchange-Traded Funds And Real Investment, Constantinos Antoniou, Frank Weikai Li, Xuewen Liu, Avanidhar Subrahmanyam, Chengzhu Sun
Research Collection Lee Kong Chian School Of Business
We investigate the link between exchange-traded funds and real investment. Cross-sectionally, higher ETF ownership is associated with an increased sensitivity of real investment to Tobin's q and a heightened ability of stock returns to forecast future earnings. Inclusion of stocks in industry ETFs enhances investment-q sensitivity and implies greater incorporation of earnings information into prices prior to public releases. Greater nonmarket ETF ownership leads to increased (reduced) reliance of real investment on own (peers') stock prices. Overall, the evidence is consistent with ETFs positively affecting real investment efficiency via greater flows of information.
The Financialization Of Cryptocurrencies, Lei Huang, Tse-Chun Lin, Fangzhou Lu, Jian Sun
The Financialization Of Cryptocurrencies, Lei Huang, Tse-Chun Lin, Fangzhou Lu, Jian Sun
Research Collection Lee Kong Chian School Of Business
We show that change in Grayscale Bitcoin Trust premium is the single most significant predictor of Bitcoin daily return. This sentiment measure is similar to the closed-end fund discount measure as in Baker and Wurgler (2006), but more likely to reflect the excess demand from traditional investors than from blockchain specialists. Although there is a substantial variation in Bitcoin price quotes worldwide, this Grayscale premium and discount predict Bitcoin daily return for the most liquid Bitcoin exchanges. Using K-means clustering and LDA analysis, we find that this predictability is especially significant when there is a large variation in bullish and …
Impact Of Geographical Diversification And Limited Attention On Private Equity Fund Returns, Victor Ong
Impact Of Geographical Diversification And Limited Attention On Private Equity Fund Returns, Victor Ong
Research Collection Lee Kong Chian School Of Business
This article analyzes the effect of geographical diversification on global private equity (PE) fund returns. We find that there is a negative correlation between geographical diversification and PE fund returns. To establish the causality between geographical diversification and PE fund returns, we employ an instrumental variable analysis where the instrument used is the stock market capitalization of the host country where the PE fund is based. Our results apply to Net IRR, TVPI and DPI as dependent variables used to proxy for PE fund returns in the main regression model. A one standard deviation increase in geographical diversification results in …
Presidential Economic Approval Rating And The Cross-Section Of Stock Returns, Zilin Chen, Zhi Da, Dashan Huang, Liyao Wang
Presidential Economic Approval Rating And The Cross-Section Of Stock Returns, Zilin Chen, Zhi Da, Dashan Huang, Liyao Wang
Research Collection Lee Kong Chian School Of Business
We construct a monthly presidential economic approval rating (PEAR) index from 1981 to 2019, by averaging ratings on the president’s handling of the economy across various national polls. In the cross-section, stocks with high betas to changes in the PEAR index significantly under-perform those with low betas by 1.00% per month in the future, on a risk-adjusted basis. The low PEAR beta premium persists up to one year, and is present in various sub-samples and even in other G7 countries. PEAR beta dynamically reveals a firm’s perceived alignment to the incumbent president’s economic policies and investors seem to misprice such …