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Articles 1231 - 1260 of 1293

Full-Text Articles in Finance and Financial Management

Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo Nov 2004

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).

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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 Nov 2004

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 …

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Prospect Theory, Analyst Forecast, And Stock Returns, David K. Ding, Charlie Charoenwong, Raymond Seetoh Oct 2004

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.

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Investing In Hedge Funds: Risks, Returns And Performance Measurement, Francis Koh, Winston T. H. Koh, David K. C. Lee, Kok Fai Phoon Oct 2004

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 …

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The Contribution Of A Satellite Market To Price Discovery: Evidence From The Singapore Exchange, Vicentiu Covrig, David K. Ding, Buen Sin Low Oct 2004

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 …

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House Prices And Fundamental Value, John Krainer, Chi Shen Wei Oct 2004

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, …

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The Economy And Demand For Finance Ph.D.S: 1989-2001, David K. Ding, Sheng-Syan Chen Sep 2004

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.

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Testing Market Efficiency Using Statistical Arbitrage With Applications To Momentum And Value Strategies, Steve Hogan, Robert Jarrow, Melvyn Teo, Mitchell Warachka Sep 2004

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, …

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Risk, Return And Risk Aversion: A Behavioral Rendition, Hian Ann, Christopher Ting Sep 2004

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.

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Information Contents Of Trade And Quote Imbalances, And The Hypothesis Of Reverse Liquidity, Hian Ann, Christopher Ting Sep 2004

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 …

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How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo Aug 2004

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 …

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Analysis Of Limit Order Book And Order Flow, Charlie Charoenwong, Nuttawat Visaltanachoti, David K. Ding Jul 2004

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, …

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Transaction-Data Analysis Of Marked Durations And Their Implications For Market Microstructure, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitchell Warachka Mar 2004

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 …

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Equity Style Returns And Institutional Investor Flows, Kenneth A. Froot, Melvyn Teo Mar 2004

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 …

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Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler Jan 2004

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 …

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Price Rounding And Bid-Ask Spreads Before And After The Decimalization, Yan He, Chunchi Wu Jan 2004

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 …

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Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell Nov 2003

Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell

Research Collection Lee Kong Chian School Of Business

There is ample evidence that past performance affects the trading decisions of individual investors. This paper looks at this issue using a detailed database of currency trading decisions of institutional investors. Past performance manifestly affects currency risk-taking in this group, but the sign and magnitude of the effect runs counter to much of the existing theory and evidence. There is no evidence whatsoever of disposition effects; rather, the dominant characteristic is aggressive risk reduction in the wake of losses. This effect is more prominent later in the year, and among older and more experienced funds. A modified version of the …

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Incorporating Diversification Into Risk Management, Mitchell Craig Warachka, A. Purnanandam, Y. Zhao, W.T. Ziemba Oct 2003

Incorporating Diversification Into Risk Management, Mitchell Craig Warachka, A. Purnanandam, Y. Zhao, W.T. Ziemba

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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Stock Exchange Governance And Market Quality, Chandrasekhar Krishnamurti, John M. Sequeira, Fangjian Fu Sep 2003

Stock Exchange Governance And Market Quality, Chandrasekhar Krishnamurti, John M. Sequeira, Fangjian Fu

Research Collection Lee Kong Chian School Of Business

We show that organization structure of a stock exchange matters by utilizing the unique setting prevailing in India. India has two major stock markets, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). These two exchanges adopt similar trading systems, trade essentially identical stocks, and follow the same trading hours. However, these exchanges have different organizational structures: BSE is mutualized whereas NSE is demutualized. Using the Hasbrouck [Review of Financial Studies 6 (1993) 191] measure of market quality we show that NSE provides a better quality market than BSE. This result is consistent with the work of Domowitz …

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Does Underwriter Reputation Affect The Performance Of Ipo Stocks?, Chunchi Wu, Sheen Liu, Junbo Wang Sep 2003

Does Underwriter Reputation Affect The Performance Of Ipo Stocks?, Chunchi Wu, Sheen Liu, Junbo Wang

Research Collection Lee Kong Chian School Of Business

In this paper we examine the relationship between performance of the Chinese IPO firms and the reputation of investment bankers underwriting their stocks. Similar to previous studies on well-developed stock markets, we find that the initial return on the first day of trading is strongly positive for Chinese IPO stocks due to underpricing. This initial return is negatively related to the underwriter's reputation, suggesting that the better the reputation of the underwriter, the less underpricing and hence, the lower the initial return of the IPO stock. Extending the analysis to a ten-day window after the first trading day, we find …

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Trading Your Neighbor's Etfs: Competition Or Fragmentation?, Beatrice Boehmer, Ekkehart Boehmer Sep 2003

Trading Your Neighbor's Etfs: Competition Or Fragmentation?, Beatrice Boehmer, Ekkehart Boehmer

Research Collection Lee Kong Chian School Of Business

On July 31, 2001, for the first time in its history, the New York Stock Exchange (NYSE) began trading three unlisted securities. The DIA, SPY, and QQQ are the most actively traded Exchange Traded Funds (ETFs) and are listed on the American Stock Exchange. On April 15, 2002 another 27 ETFs followed. These two events provide a unique experiment for studying the impact of a new entrant on market quality. In contrast to recently revived concerns about the adverse impact of market fragmentation, we document that the NYSE entry leads to a dramatic improvement in liquidity that we attribute to …

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Asymptotic Dynamics And Value-At-Risk Of Large Diversified Portfolios In A Jump-Diffusion Market, Kian Guan Lim, Xiaoqing Liu, Kai Chong Tsui Sep 2003

Asymptotic Dynamics And Value-At-Risk Of Large Diversified Portfolios In A Jump-Diffusion Market, Kian Guan Lim, Xiaoqing Liu, Kai Chong Tsui

Research Collection Lee Kong Chian School Of Business

This paper studies the modelling of large diversi ed portfolios in a nancial market with jump-di usion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk minimizing portfolios, and market indices. Reduced-form dynamics driven jointly by one Brownian Motion and one Poisson process are derived for the asymptotics of such portfolios. We prove that derivatives written on a portfolio can be priced by treating the asymptotic dynamics as the underlying process if the number of assets in the portfolio is su ciently large. Analytical and Monte Carlo Value-at-Risk (VaR) can be computed for the portfolios based on their …

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Estimating Credit Risk Premia, Kian Guan Lim Sep 2003

Estimating Credit Risk Premia, Kian Guan Lim

Research Collection Lee Kong Chian School Of Business

This paper investigates the nature of the credit risk premium adjustments in the Jarrow-Lando-Turnbull model of credit risk spreads. The adjustments relate the equivalent martingale measures to the empirical measures of unconditional transition probabilities. We provide a modi ed version of the risk adjustment that allows a linear partition of the credit spread into an unconditional default component, a recovery component, and the risk premium adjustment. The risk adjustments are related to conditional default risk, illiquidity risk, and other factors not related to recovery e ects. The log-transform of these risk adjustments can be speci ed as linear regressions on …

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Operationalizing Technology Improvements In Product Development Decision-Making, Shantanu Bhattacharya, V. Krishnan, Vijay Mahajan Aug 2003

Operationalizing Technology Improvements In Product Development Decision-Making, Shantanu Bhattacharya, V. Krishnan, Vijay Mahajan

Research Collection Lee Kong Chian School Of Business

Achieving competitive advantage and price premiums in many technology-based markets requires the incorporation of current technology in new products. To do so, firms in hyper-competitive environments increasingly plan and design their products concurrent with the independent development and validation of underlying technologies. Simultaneous validation of a core technology has important implications for a company's product positioning and launch sequence decisions making these traditional marketing decisions relevant to operations managers. Prior research has shown that to minimize cannibalization in the absence of such improvements in technology, a firm should not launch low-end products before high-end products. However, concurrent evolution of technology …

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Maturity Effect On Bid-Ask Spreads Of Otc Currency Options, Beng Soon Chong, David K. Ding, Kok Hui Tan Jul 2003

Maturity Effect On Bid-Ask Spreads Of Otc Currency Options, Beng Soon Chong, David K. Ding, Kok Hui Tan

Research Collection Lee Kong Chian School Of Business

The paper ascertains the relation between bid-ask spreads and the contract maturity of OTC currency options. Contrary to previous findings in the futures market, spreads of currency options are found to be negatively related to the contract's term-to-maturity. The negative relation persists even after controlling for the effects of price risks, competition, and trading activity. The pronounced differences in the term-to-maturity results are attributable to the market risk effect and differences in the market structure of options and futures markets.

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The Quality Of Analysts Earnings Forecasts During The Asian Crisis: Evidence From Singapore, Roger Loh, Mujtaba Mian Jun 2003

The Quality Of Analysts Earnings Forecasts During The Asian Crisis: Evidence From Singapore, Roger Loh, Mujtaba Mian

Research Collection Lee Kong Chian School Of Business

Examines the efficiency of security analysts' earnings forecasts in Singapore. Regression of actual earnings change on forecasted change; Extremism in forecasted change; Impact of business crisis on the quality of earnings forecasts.

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Asian Hedge Funds: Return Persistence, Style, And Fund Characteristics, Francis Koh, Winston T. H. Koh, Melvyn Teo Jun 2003

Asian Hedge Funds: Return Persistence, Style, And Fund Characteristics, Francis Koh, Winston T. H. Koh, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

This study explores the return persistence properties, styles, and fund characteristics of hedge funds that mainly invest in Asia. We examine, for the first time, a high resolution hedge fund dataset which includes monthly return information as well as detailed fund characteristics data. We find that the returns of Asian hedge funds persist most strongly at monthly horizons to quarterly horizons. This persistence weakens considerably when we lengthen the measurement period beyond a quarter, and does not appear to be due to the imputation of fees or to systematic risk as measured by a simple factor model. Further, we show …

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Dividend Omissions And Intraindustry Information Transfers, Gary L. Caton, Jeremy Goh, Ninon Kohers Mar 2003

Dividend Omissions And Intraindustry Information Transfers, Gary L. Caton, Jeremy Goh, Ninon Kohers

Research Collection Lee Kong Chian School Of Business

We examine potential information transfers from companies that announce dividend omissions to their industry rivals. Specifically, we examine the abnormal stock returns and abnormal earnings forecast revisions of rivals after a company makes a dividend-omission announcement. Our results show negative and significant abnormal stock returns and negative and significant abnormal forecast revisions for rival companies in response to the announcement, and a significant and positive relation between the two. We conclude that a dividend-omission announcement transmits unfavorable information across the announcing company's industry that affects cash flow expectations and ultimately stock prices.

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Stimulating Firm-Specific Investment Through Risk Management, Heli Wang, Jay B. Barney, Jeffrey J. Reuer Feb 2003

Stimulating Firm-Specific Investment Through Risk Management, Heli Wang, Jay B. Barney, Jeffrey J. Reuer

Research Collection Lee Kong Chian School Of Business

This article suggests a rationale for firm risk management that has been largely ignored in financial economics literature. It presents an argument for harnessing the influence of a company’s stakeholders who, whether as employees, suppliers or customers, make a valuable investment specific to the company. Such investments are crucial for a firm’s competitive advantage, yet because they are firm-specific and therefore cannot be transformed or transferred, stakeholders are often concerned about the risks involved in making them. A company’s efforts to manage risk can therefore persuade stakeholders to make even greater firm-specific investments, bringing benefits to shareholders and stakeholders alike.

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The Effect Of Taxes On The Pricing Of Defaultable Debt, Kian Guan Lim, Fenghua Song, Mitchell Craig Warachka Jan 2003

The Effect Of Taxes On The Pricing Of Defaultable Debt, Kian Guan Lim, Fenghua Song, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

Empirical studies have documented the dependence of corporate credit spreads on default risk, equity premiums, and taxes. However, taxes have previously not been incorporated into reduced-form credit risk models. Therefore, we first extend the existing literature by considering a default intensity that depends on taxes as well as the default-free short rate and a market index. Consequently, we establish a theoretical basis to explain previous empirical findings regarding the significant impact of taxation on defaultable bond prices. Unlike previous models, tax implications for defaultable debt cannot be constructed from a sum of tax effects on zero coupon bonds. Our empirical …

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