Finance and Financial Management Commons^™

On Predictability In South Asian Stock Markets, Khurshid M. Kiani

Business Review

In this research I investigate persistence in monthly excess stock returns over risk free rates in two South Asian stock markets i.e. S&P CNX 500 and KSE 100 stock price indexes using non-Gaussian state space or unobservable component model with stable distributions and volatility persistence. Results from non-Gaussian state space models show that both markets encompass volatility persistence. KSE 100 has a stable characteristic exponent of 1.748, but for S&P CNX 500 index the value for the characteristic exponent is 1.999 which shows normal behavior in this market. Both markets encompass persistent signal in returns at 10% level of significance. …

Evaluating Predictive Performance Of Value-At-Risk Models In Chinese Stock Markets, Jianshe Ou

Lingnan Theses

Risk can be defined as the volatility of unexpected outcomes, generally for values of assets and liabilities. Financial risk, risk refer to possible losses in financial markets, includes markets risk, credit risk, liquidity risk, operational risk, and legal risk. This MPhil thesis is specializing on market risk, which involves the uncertainty of earnings or losses resulting from changes in market conditions such as asset prices, interest rates, and market liquidity.

The primary tool to evaluate market risk is VaR that is a method of assessing risk through standard statistical techniques. VaR is defined a measure for the worst expected loss …

Realized Daily Variance Of S&P 500 Cash Index: A Revaluation Of Stylized Facts, Shirley Huang, Qianqiu Liu, Jun Yu

Research Collection School Of Economics

In this paper the realized daily variance is obtained from intraday transaction prices of the S&P 500 cash index over the period from January 1993 to December 2004. When constructing realized daily variance, market microstructure noise is taken into account using a technique proposed by Zhang, Mykland and Ait-Sahalia (2005). The time series properties of realized daily variance are compared with those of variance estimates obtained from parametric GARCH and stochastic volatility models. Unconditional and dynamic properties concerning the realized daily variance are examined, the relationship between realized variance and returns is investigated, and the stylized facts concerning realized daily …

Modeling Transaction Data Of Trade Direction And Estimation Of Probability Of Informed Trading, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitch Warachka

Research Collection School Of Economics

This paper implements the Asymmetric AutoregressiveConditional Duration (AACD) model of Bauwens and Giot (2003) to analyzeirregularly spaced transaction data of trade direction, namely buy versus sellorders. We examine the influence of lagged transaction duration, lagged volumeand lagged trade direction on transaction duration and direction. Our resultsare applied to estimate the probability of informed trading (PIN) based on theEasley, Hvidkjaer and O’Hara (2002) framework. Unlike the Easley-Hvidkjaer-O’Hara model, which uses the daily aggregate number of buy and sellorders, the AACD model makes full use of transaction data and allows forinteractions between buy and sell orders.

Two Essays On Institutional Investors, Hoang Nguyen

Electronic Theses and Dissertations

This dissertation consists of two essays investigating the trading by institutions and its impact on the stock market. In the first essay, I investigate why changes in institutional breadth predict return. I first show that changes in breadth are positively associated with abnormal returns over the following four quarters. I then demonstrate that this return predictability can be attributed to the information about the firms' future operating performance. When I examine different types of institutions independently, I find that the predictive power varies across the population of institutions. More specifically, institutions that follow active management style are better able to …

Financial Planning Tools For A Uni Graduate, Scott Ivan Cochran

Honors Program Theses

This project will research financial planning tools for a new University of Northern Iowa (UNI) graduate. The following two research questions will be considered. First, what should graduates know about budgeting, investing, insurance, and spending? Second, what are the tax considerations related to these financial matters? The research for the project will be completed through reading articles and books from the library and recent online sources. Financial planning is important for UNI graduates because all of them will need to make many decisions related to finances over their lifetime. In the article Grads in Dark Over Finances, a poll of …

Do Secondary Shares In The Ipo Process Have A Negative Effect On Aftermarket Performance?, James C. Brau, Mingsheng Li, Jing Shi

Faculty Publications

We revisit and extend the topic of secondary share sales and revisions in IPOs. First we test to determine if secondary share sales constitute a negative signal that is captured in aftermarket performance. We find secondary share sales in general are not correlated with poorer initial or long-run performance, but selling by officers and directors is associated with poorer long-run returns. Second, we examine if secondary share revisions (1) reflect selling shareholders’ attempts to conceal private information or (2) are contingent upon whether a firm can reach its goal of raising sufficient capital. We find empirical support for a capital …

Risky Debt-Maturity Choice Under Information Asymmetry, Chunchi Wu, Sheen Liu

Research Collection Lee Kong Chian School Of Business

The traditional equilibrium models of signaling with debt-maturity require transaction costs by firms when raising new capital. In this paper, we propose a new model that has no such requirement. We demonstrate that a separating equilibrium of debt-maturity choice exists under a much more general condition, once accounting for the interactions between borrowers and lenders. The model is able to explain the observed complex financial structure. It is found that callable debt functions much like short-term debt, and serial debt similar to long-term debt. In equilibrium, high-quality firms issue short-term debt, and low-quality firms issue long-term debt.

Diversification In Banking Sector With Special Reference To Finance, Yaseen Ahmed Meenai

Business Review

Diversification in Banking Sector is relatively a new phenomenon. The aim of this article was to analyze the boom in banking sector with special reference to CONSUMER FINANCING. For this purpose, financial products - Credit cards, Home financing and Car financing - of different banks were selected and their policies were analyzed. My goal was to find the reasons behind the diversification in Banking Sector particularly in Consumer financing over the last 10 years. For this, I collect the data from different banks to analyze the factors involving in it. After analyzing the various aspects of financing strategy in banks, …

Financial Reforms And Common Stochastic Trends In International Stock Prices: A Case Study Of Pakistan, Mohammed Nishat, Ch. Muhammad Irfan

Business Review

This study uses the co-integration and error-correction techniques to examine the linkages between Pakistan and other capital markets of developed economies (US, UK, Japan, Australia and Canada); regional markets in South Asia (India, Sri Lanka), East Asia (Indonesia, South Korea, Singapore, Malaysia, Taiwan, Philippines) and EU (Austria, Belgium, Denmark, Germany, Italy and Czech) countries. The results indicate a long-run relationship between Pakistani stock market and most of the international markets during the sample period (1997 to 2004). However, the longrun linkages were comparatively stronger with developed and EU markets. The direction of linkages in most cases, are from other regional …

An Empirical Analysis Of The Financial Impact Of Supply Chain Management On Small Firms, James C. Brau, Stanley E. Fawcett, Ladd Morgan

Faculty Publications

In this article we test the value proposition hypothesis of supply chain management (SCM) by examining survey results of 570 US managers. First, we find that large firms use SCM initiatives significantly more than small firms. Second, in univariate and multivariate tests, we find that SCM leads to significant improvements in asset utilization, revenue generation, and competitive performance, regardless of firm size. These two major findings suggest that managers at small firms that are not actively engaged in SCM should reevaluate their opportunity to capture the competitive benefits of SCM that many large firms currently enjoy.

Two Essays On Lead-Lag Patterns Between Trading Volume And Stock Return In China Stock Markets, Xiaotian Zhu

Theses and Dissertations in Business Administration

This dissertation systematically investigate the lead-lag relations between the trading volume and stock return patterns in China A share and B share markets through two streams of behavioral postulations. In the first part, we summarize all the potential lead-lag patterns between trading volume and stock returns and link them to the corresponding behavioral explanations. In particular, Lee and Swaminathan's (2000) Momentum Life Cycle theory best explains the strong negative relations between lagged trading volume and subsequent return in China A share market. The strong positive relations between lagged market return and subsequent trading volume found in both China's B share …

The Effect Of Survey-Based Sentiment Measures On The Predictability And Volatility Of Stock Returns Conditioned On The Payout Yield And Issue Yield, Darryl Philip Samsell

Theses and Dissertations in Business Administration

Survey-based sentiment indexes from the American Association of Individual Investors, Investors' Intelligence, and the Yale University International Center for Finance show strong in-sample monthly return predictability and are strong factors in explaining the cross-sectional variation in monthly returns and in explaining the excess volatility in returns beyond that explained by cash flow fundamentals proxied by the payout yield and the issue yield from Boudoukh, et al. (2007). These finding are robust to the use of numerous methods of sentiment variable computation. Sentiment is a more significant factor during the period from January 1997 to December 2005 when U.S. stock valuations …

Two Essays On Corporate Spin-Offs, Yingchou Lin

Theses and Dissertations in Business Administration

This dissertation investigates two possible sources that contribute to the gains of corporate spin-offs. In the first essay, I investigate the relation between the value created by corporate spin-offs and the misvaluations of the parent firms and their spun-off divisions. I argue that spin-offs could create value even though the efficiency of the firm remains unchanged. Corporate spin-offs could be driven by the desire to correct the undervaluation of the parent firm or the spun-off unit. Thus, the gains of spin-offs should be highly correlated with the degree of misvaluation. By examining a 263 corporate spinoffs sample in the period …

The U.S. Health Care System And Labor Markets, Brigitte C. Madrian

Faculty Publications

There is no universal provider of health insurance or health care in the United States. Rather, a patchwork system of institutions exists, each covering different subgroups of the population. Certain types of health insurance are provided as a condition of employment, while other types of health insurance are more readily available when individuals are not employed or not fully employed, and still others are available regardless of employment status. The two most significant sources of health insurance coverage in the United States are employers, who collectively insure 63 percent of the non-elderly (below age 65) population, and governments, who collectively …

The U.S. Treasury Buyback Auctions: The Cost Of Retiring Illiquid Bonds, Bing Han, Francis A. Longstaff, Craig B. Merrill

Faculty Publications

We study an important recent series of buyback auctions conducted by the U.S. Treasury in retiring $67.5 billion of its illiquid off-the-run debt. The Treasury was successful in buying back large amounts of illiquid debt while suffering only a small market-impact cost. The Treasury included the most-illiquid bonds more frequently in the auctions, but tended to buy back the least-illiquid of these bonds. Although the Treasury had the option to cherry pick from among the bonds offered, we find that the Treasury was actually penalized for being spread too thinly in the buybacks.

Investing Your Lump Sum At Retirement, David F. Babbel, Craig B. Merrill

Faculty Publications

Imagine sitting down on the day of your retirement to plan your financial future. You know what your annual expenses have been and you want to maintain your current standard of living. So, you consult a recent mortality table and find that if you’ve made it to your 65th birthday, you can expect to live to 85 years old. You perform a little calculation and find that, together with your Social Security monthly payments, you have just enough savings to maintain your current standard of living and spend all of your savings and future expected earnings by the time you …

Information Sharing And Supply Chain Performance: The Role Of Connectivity And Willingness, Stanley E. Fawcett, Paul Osterhaus, Gregory M. Magnan, James C. Brau, Matthew W. Mccarter

Faculty Publications

Purpose – The purpose of this paper is to understand how information technology (IT) is used to enhance supply chain performance.

Design/methodology/approach – A large-scale survey and semi-structured interviews were used to collect industry data.

Findings – Two distinct dimensions to information sharing – connectivity and willingness – are identified and analyzed. Both dimensions are found to impact operational performance and to be critical to the development of a real information sharing capability. However, many companies are found to have placed most of their emphasis on connectivity, often overlooking the willingness construct. As a result, information sharing seldom delivers on …

Reit Stock Repurchases: Completion Rates, Long-Run Returns, And The Straddle Hypothesis, Gregory L. Adams, James C. Brau, Andrew Holmes

Faculty Publications

This study of real estate investment trusts (REITs) analyzes three possible explanations for the stock price reaction to a repurchase announcement and the subsequent repurchase behavior of managers under each hypothesis. Two of the hypotheses, the signaling hypothesis and the exchange option hypothesis, are established in the existing literature; the third hypothesis is a modification of the exchange option hypothesis. The exchange option hypothesis is extended to allow for additional flexibility in management decisions. This extended exchange option hypothesis is termed the ‘‘straddle’’ hypothesis because it provides management with both a call and put option. The empirical analyses show the …