Portfolio and Security Analysis Commons^™

Off-Shore Borrowing And Guarantees By Banks: Implication For Portfolio Management., C. C. Edordu

Bullion

The subject I have been asked to reflect on is important and somewhat provocative given the potential significance of foreign capital in the development process and the implied doubt the topic raises about the capacity of banks to manage their portfolios on accessing external finance. With regard to financing tenors, it is pertinent to point out that the tenor of liabilities of most banks in Nigeria and Africa is short. The paper has focused on the various discussions about the conditions for good governance, which raises questions about the structure and functioning of the state, its relationship to society and …

Persistence In Style-Adjusted Mutual Fund Returns, Melvyn Teo, Sung-Jun Woo

Research Collection Lee Kong Chian School Of Business

The literature on mutual fund persistence took a hit with the finding that one-year stock momentum and expense ratios account for most of the persistence in mutual fund performance (Carhart, 1992; Carhart, 1997). However, since equity mutual funds are grouped into styles (e.g., large value, small growth, mid-cap growth, etc.) and are often confined to trading stocks within their style, one should measure fund performance relative to style when investigating managerial ability. Using CRSP mutual fund data and a methodology similar to Carhart (1997), we find that differences in style-adjusted fund returns persist for up to six years. Neither one-year …

The Effectiveness Of Institutional Activism, Gary L. Caton, Jeremy Goh, Jeffrey Donaldson

Research Collection Lee Kong Chian School Of Business

Researchers examined earnings-forecast revisions and stock returns after release of the Focus List of poorly performing companies by the Council of Institutional Investors. Using Tobin's q as a measure of a company's ability to improve performance, researchers found significant and positive abnormal forecast revisions and post-release stock returns for companies with q greater than one. Findings support the proposition that institutional activism is effective for underperforming companies - but only those companies with the ability to respond to the challenge to improve performance.

Is A Convertible Bond Call Really Bad News?, Louis H. Ederington, Jeremy C. Goh

Research Collection Lee Kong Chian School Of Business

The article tests and rejects the hypothesis that managers call in-the-money convertibles when they view a decline in the value of the firm as likely. Inconsistent with this view, it finds that insiders generally buy equity before conversion-forcing calls. Also, analysts tend to raise their earnings forecasts following a call. There is no evidence that earnings analysts interpret a conversion-forcing call as bad news. Indeed there is evidence that, relative to firms in general, analysts are revising their earnings forecasts upward in the months surrounding conversion-forcing calls. The article concludes that an announcement of a conversion-forcing call of a firm's …

An Experimental Study Of Circuit Breakers: The Effects Of Mandated Market Closures And Temporary Halts On Market Behavior, Lucy Ackert, Bryan K. Church, Narayanan Jayaraman

Faculty and Research Publications

This paper analyzes the effect of circuit breakers on price behavior, trading volume, and profit-making ability in a market setting. We conduct nine experimental asset markets to compare behavior across three regulatory regimes: market closure, temporary halt, and no interruption. We find that the presence of a circuit breaker rule does not affect the magnitude of the absolute deviation in price from fundamental value or trading profit. The primary driver of price behavior is information. By comparison, trading activity is significantly affected by the presence of a circuit breaker. Market participants advance trades when a trading interruption is imminent.

An Empirical Examination Of The Price-Dividend Relation With Dividend Management, Lucy F. Ackert, William C. Hunter

Faculty and Research Publications

Some recent empirical evidence suggests that stock prices are not properly modeled as the present discounted value of expected dividends. In this paper, we estimate a present value model of stock price that is capable of explaining the observed long-term trends in stock prices. The model recognizes that firm managers control cash dividend payments. The model estimates indicate that stock price movements may be explained by managerial behavior.

Market Interdependence; Gold Bullion, S&P500, Mining Company Adr’S And Underlying Security Markets, Roberto Curci, Robert A. Clark, Cynthia J. Brown

Scholarship and Professional Work - Business

The internationalization of equity markets appears to be associated with a level of interdependence and transmission of stock price movements across national markets. This study examines the responses of international and ADR securities common stimulus. The study analyzes the equity price behavior of companies engaged in the production of such companies which are cross-listed in U.S. equity markets through ADRs and in underlying economic markets.

Strategic Asset Allocation For Individual Investors: The Impact Of The Present Value Of Social Security Benefits, Steve Fraser, William Jennings, David King

Management Faculty Research and Publications

This paper demonstrates the dramatic effect of social security wealth on individuals’ asset allocation. We first discuss why social security wealth should be included in portfolio asset-mix decisions. We then draw parallels between social security benefits and inflation-indexed treasury bonds to help quantify the present value of social security benefits. Finally, we show the portfolio impact of including social security wealth under several asset-mix decision rules. Excluding social security wealth from the asset mix decision results in sub-optimal portfolios. Including social security wealth provides an incentive for including more stock in the asset mix.