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Articles 151 - 180 of 393

Full-Text Articles in Portfolio and Security Analysis

Asset Allocation In The Chinese Stock Market: The Role Of Return Predictability, Jian Chen, Fuwei Jiang, Jun Tu Jan 2015

Asset Allocation In The Chinese Stock Market: The Role Of Return Predictability, Jian Chen, Fuwei Jiang, Jun Tu

Research Collection Lee Kong Chian School Of Business

In this article the authors investigate asset allocation in the Chinese stock market from the perspective of incorporating return predictability. Based on a host of return predictors, they find significant out-of-sample return predictability in the Chinese stock market. They then examine the performance of active portfolio strategies—such as aggregate market timing as well as industry, size, and value-rotation strategies—designed to profitably exploit return predictability. Strong evidence is found by the authors that these portfolio strategies incorporating return predictability can deliver superior performance—up to 600 basis points per annum and almost double the Sharpe ratios—compared with the passive buy-and-hold benchmarks that …

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Semi-Universal Portfolios With Transaction Costs, Dingjiang Huang, Yan Zhu, Bin Li, Shuigeng Zhou, Steven C. H. Hoi Jan 2015

Semi-Universal Portfolios With Transaction Costs, Dingjiang Huang, Yan Zhu, Bin Li, Shuigeng Zhou, Steven C. H. Hoi

Research Collection School Of Computing and Information Systems

Online portfolio selection (PS) has been extensively studied in artificial intelligence and machine learning communities in recent years. An important practical issue of online PS is transaction cost, which is unavoidable and nontrivial in real financial trading markets. Most existing strategies, such as universal portfolio (UP) based strategies, often rebalance their target portfolio vectors at every investment period, and thus the total transaction cost increases rapidly and the final cumulative wealth degrades severely. To overcome the limitation, in this paper we investigate new investment strategies that rebalances its portfolio only at some selected instants. Specifically, we design a novel on-line …

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Corporate Social Performance, Analyst Stock Recommendations, And Firm Future Returns, Xueming Luo, Heli Wang, Sascha Raithel, Qinqin Zheng Jan 2015

Corporate Social Performance, Analyst Stock Recommendations, And Firm Future Returns, Xueming Luo, Heli Wang, Sascha Raithel, Qinqin Zheng

Research Collection Lee Kong Chian School Of Business

This study posits that security analysts heed corporate social performance information and factor it into their recommendations to general investors. In particular, as corporate social performance is often uncertain and ambiguous to general investors, analysts may serve as the informational pathway connecting corporate social performance to firm stock returns. Thus, we argue that analyst recommendations mediate the relationship between corporate social performance and firm stock returns. On the basis of not only a qualitative study with literature searches and interviews of stock analysts but also a quantitative study with two longitudinal samples of large firms, we find support for these …

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Limited Attention, Marital Events, And Hedge Funds, Yan Lu, Sugata Ray, Melvyn Teo Jan 2015

Limited Attention, Marital Events, And Hedge Funds, Yan Lu, Sugata Ray, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We explore the impact of limited attention on investment performance by analyzing the returns of hedge fund managers who are distracted by personal events such as marriage and divorce. We find that marriages and divorces are associated with significantly lower fund alpha, during the six-month period surrounding the event and for up to two years after the event. Relative to the pre-event window, fund alpha falls by an annualized 8.50 percent during a marriage and 7.39 percent during a divorce. Busy fund managers who manage larger funds and engage in high tempo investment strategies are more affected by marriage. Fund …

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Analyst Price Target Expected Returns And Option Implied Risk, Turan G. Bali, Jianfeng Hu, Scott Murray Dec 2014

Analyst Price Target Expected Returns And Option Implied Risk, Turan G. Bali, Jianfeng Hu, Scott Murray

Research Collection Lee Kong Chian School Of Business

Motivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic …

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The Risk-Relevance Of Securitizations During The Recent Financial Crisis, Yiwei Dou, Yanju Liu, Gordon Richardson, Dushyantkumar Vyas Jun 2014

The Risk-Relevance Of Securitizations During The Recent Financial Crisis, Yiwei Dou, Yanju Liu, Gordon Richardson, Dushyantkumar Vyas

Research Collection School Of Accountancy

We investigate changes in the risk-relevance of securitized subprime, other nonconforming, and commercial mortgages for sponsor-originators during the recent financial crisis. Using the volatility of realized stock returns, option-implied volatility, and credit spreads, we observe a pronounced increase in the risk-relevance of subprime securitizations as early as 2006. Furthermore, reflecting the evolution of the financial crisis in waves, we find that investors recognized the increased credit risk of other nonconforming and commercial mortgage securitizations as the financial crisis progressed. Additional analyses show that risk-relevance varies cross-sectionally with structural characteristics such as monoline credit-enhancement and the presence of special servicers for …

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Industry-Based Style Investing, Russell Jame, Qing Tong Jun 2014

Industry-Based Style Investing, Russell Jame, Qing Tong

Research Collection Lee Kong Chian School Of Business

Motivated by the style investing model of Barberis and Shleifer (2003), we examine the industry-wide investment decisions of retail investors. We find that retail investor industry demand is highly correlated and strongly related to past industry returns. Moreover, industries heavily bought by retail investors over the past year significantly underperform industries heavily sold over the subsequent year. Similarly, stocks in industries heavily bought by retail investors underperform stocks in industries heavily sold, even after controlling for firm-level demand. Our results suggest that industry-wide categorization influences the investment decisions of retail investors and has a significant impact on asset prices.

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Is Sin Always A Sin? The Interaction Effect Of Social Norms And Financial Incentives On Market Participants’ Behavior, Yanju Liu, Hai Lu, Kevin Veenstra May 2014

Is Sin Always A Sin? The Interaction Effect Of Social Norms And Financial Incentives On Market Participants’ Behavior, Yanju Liu, Hai Lu, Kevin Veenstra

Research Collection School Of Accountancy

Using alcohol, tobacco, and gaming consumption data and people’s attitudes toward these sin products to proxy for social norm acceptance levels, we show a strong interaction effect between social norms and financial incentives, which significantly influence the behavior of market participants. Specifically, institutional investors’ shareholdings and analyst coverage of sin companies increase with the degree of social norm acceptance. The association between shareholdings/coverage and social norm acceptance is less pronounced for firms with higher future expected performance. Our results show that social norms and financial incentives have a powerful interaction effect in determining the behavior of market participants, suggesting that …

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Does Option Trading Convey Stock Price Information?, Jianfeng Hu Mar 2014

Does Option Trading Convey Stock Price Information?, Jianfeng Hu

Research Collection Lee Kong Chian School Of Business

After executing option orders, options market makers turn to the stock market to hedge away the underlying stock exposure. As a result, the stock exposure imbalance in option transactions translates into an imbalance in stock transactions. This paper decomposes the total stock order imbalance into an imbalance induced by option transactions and an imbalance independent of options. The analysis shows that the option-induced imbalance significantly predicts future stock returns in the cross section, but the imbalance independent of options only has a transitory price impact. Further investigation suggests that options order flow contains important information about the underlying stock value.

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Forecasting The Equity Risk Premium: The Role Of Technical Indicators, Christopher J. Neely, David E. Rapach, Jun Tu, Guofu Zhou Mar 2014

Forecasting The Equity Risk Premium: The Role Of Technical Indicators, Christopher J. Neely, David E. Rapach, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

Academic research relies extensively on macroeconomic variables to forecast the U.S. equity risk premium, with relatively little attention paid to the technical indicators widely employed by practitioners. Our paper fills this gap by comparing the predictive ability of technical indicators with that of macroeconomic variables. Technical indicators display statistically and economically significant in-sample and out-of-sample predictive power, matching or exceeding that of macroeconomic variables. Furthermore, technical indicators and macroeconomic variables provide complementary information over the business cycle: technical indicators better detect the typical decline in the equity risk premium near business-cycle peaks, whereas macroeconomic variables more readily pick up the …

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The Price Discovery Puzzle In Offshore Yuan Trading: Different Contributions For Different Contracts, David K. Ding, Yiuman Tse, Michael R. Williams Feb 2014

The Price Discovery Puzzle In Offshore Yuan Trading: Different Contributions For Different Contracts, David K. Ding, Yiuman Tse, Michael R. Williams

Research Collection Lee Kong Chian School Of Business

The People's Bank of China (PBC) lifted yuan trading restrictions in July of 2010 that led to offshore yuan spot trading in Hong Kong. Based on causality analyses, we find that price discovery is absent between the onshore and offshore spot markets. However, we document the presence of price discovery between onshore spot and offshore nondeliverable forward (NDF) rates. These seemingly inconsistent results present a puzzle wherein one offshore market appears to be more informationally integrated with the onshore market than another. We conclude that price discovery differences in the offshore markets stem from the offshore spot and forward contracts …

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The Limits Of The Market-Wide Limits Of Arbitrage: Insights From The Dynamics Of 100 Anomalies, Hieiko Jacobs Jan 2014

The Limits Of The Market-Wide Limits Of Arbitrage: Insights From The Dynamics Of 100 Anomalies, Hieiko Jacobs

Research Collection BNP Paribas Hedge Fund Centre

Are anomalies strongest when limits of arbitrage are widely considered to be greatest? We empirically explore this theoretically deducted prediction. We first identify, categorize, and replicate 100 anomalies in the cross-section of expected equity returns. We then comprehensively study their dynamic interaction with popular proxies for time-varying market-level arbitrage conditions. Our findings reveal a surprisingly weak role of commonly employed measures of market-wide arbitrage risks and constraints. Even though this “big picture” evidence is by no means conclusive, our findings might potentially be best interpreted as supporting the growing literature which uncovers some shortcomings of the limits to arbitrage argument.

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Be Smart: Focus On Processes And Diversify, Singapore Management University Jan 2014

Be Smart: Focus On Processes And Diversify, Singapore Management University

Perspectives@SMU

Hedge fund managers have plenty to think about today as China transitions to a consumption-driven economy, bank financing dries up, and Washington lurches along a rocky road.

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Online Portfolio Selection: A Survey, Bin Li, Steven C. H. Hoi Jan 2014

Online Portfolio Selection: A Survey, Bin Li, Steven C. H. Hoi

Research Collection School Of Computing and Information Systems

Online portfolio selection is a fundamental problem in computational finance, which has been extensively studied across several research communities, including finance, statistics, artificial intelligence, machine learning, and data mining. This article aims to provide a comprehensive survey and a structural understanding of online portfolio selection techniques published in the literature. From an online machine learning perspective, we first formulate online portfolio selection as a sequential decision problem, and then we survey a variety of state-of-the-art approaches, which are grouped into several major categories, including benchmarks, Follow-the-Winner approaches, Follow-the-Loser approaches, Pattern-Matching--based approaches, and Meta-Learning Algorithms. In addition to the problem formulation …

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Institutional Presence, Johan Sulaeman, Chi Shen Wei Dec 2013

Institutional Presence, Johan Sulaeman, Chi Shen Wei

Research Collection Lee Kong Chian School Of Business

We propose an Institutional Presence (IP) measure to capture the latent role of non-owner institutional investors who nevertheless may be observing a firm. We employ this measure to examine whether the ‘presence’ of institutional investors reduces information asymmetry in the market. Firms in areas with high institutional presence experience higher liquidity, faster information incorporation, lower costs of equity capital, and less financing frictions relative to firms in low IP areas. The results hold after controlling for firm and geographical characteristics including institutional ownership and urban locality. Our findings indicate that being in the presence of institutional investors brings tangible benefits.

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Institutional Trading Frictions, Chiraphol New Chiyachantana, Pankaj K. Jain Nov 2013

Institutional Trading Frictions, Chiraphol New Chiyachantana, Pankaj K. Jain

Research Collection Lee Kong Chian School Of Business

We propose and empirically examine a comprehensive measure of institutional trading frictions to include the dimensions of price impact, quantity of execution, return dynamics, speed of execution or order splitting, and trading commissions. Our empirical analysis reveals that various hidden components of institutional trading frictions such as adverse selection and clean-up costs are persistent and could add significantly to previously measured directly observable components of transaction costs. Our simultaneous system of equations accounts for the endogeniety in institutional order aggressiveness based on potentially superior information as well as order splitting strategies in the implementation stage to reduce transaction costs. Order …

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Stock Liquidity And The Pricing Of Earnings: A Comparison Of China’S Floating And Non-Floating Shares, Lou Fang, Jiwei Wang, Hongqi Yuan Oct 2013

Stock Liquidity And The Pricing Of Earnings: A Comparison Of China’S Floating And Non-Floating Shares, Lou Fang, Jiwei Wang, Hongqi Yuan

Research Collection School Of Accountancy

The reform to convert non-floating shares to floating in China provides a setting in which shares are subject to different liquidity constraint. We show that the severity of this constraint is inversely related to the extent to which earnings information is reflected in the share prices. Specifically, before the reform, the transfer prices of non-floating shares reflect much less earnings information than the market prices of floating shares. After the reform, however, both types of transfer reflect more earnings information, although the weights are still less than that found in the market prices. Thus, China's unique setting shows that share …

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Investor Heterogeneity, Investor-Management Disagreement And Share Repurchases, Sheng Huang, Anjan V. Thakor Oct 2013

Investor Heterogeneity, Investor-Management Disagreement And Share Repurchases, Sheng Huang, Anjan V. Thakor

Research Collection Lee Kong Chian School Of Business

This paper develops and tests a new theoretical explanation for stock repurchases. Investors may disagree with the manager about the firm's investment projects. A repurchase causes a change in the investor base as investors who are most likely to disagree with the manager tender their shares. Therefore, a firm is more likely to buy back shares when the level of investor-management agreement is lower, and agreement improves as a consequence. Moreover, dispersion of opinion among investors cannot explain repurchase activity once the stock price and investor-management agreement are controlled for. Overall, the evidence is consistent with firms strategically using repurchases …

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Ias 39 Reclassification Choice And Analyst Earnings Forecast Properties, Chee Yeow Lim, Chu Yeong Lim, Gerald J. Lobo Sep 2013

Ias 39 Reclassification Choice And Analyst Earnings Forecast Properties, Chee Yeow Lim, Chu Yeong Lim, Gerald J. Lobo

Research Collection School Of Accountancy

In October 2008, the International Accounting Standards Board amended IAS 39 to allow banks to retroactively reclassify financial assets that previously were measured at fair value to amortized cost. By reclassifying financial assets, a bank can potentially avoid recognizing the unrealized fair value losses and thereby increase its income and regulatory capital during a market downturn. We examine the implications of the reclassification decision by banks for the properties of financial analyst earnings forecasts during 2008–2009, when economic conditions were highly volatile. We find that the reclassification choice during the financial crisis reduced analyst forecast accuracy and increased forecast dispersion. …

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The Intangibles Of M&A Deals, Singapore Management University Jun 2013

The Intangibles Of M&A Deals, Singapore Management University

Perspectives@SMU

You have worked hard to buy over a company; you have to work harder now to avoid seeing its value disappear

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Shackling Short Sellers: The 2008 Shorting Ban, Ekkehart Boehmer, Charles M. Jones, Xiaoyan Zhang Jun 2013

Shackling Short Sellers: The 2008 Shorting Ban, Ekkehart Boehmer, Charles M. Jones, Xiaoyan Zhang

Research Collection Lee Kong Chian School Of Business

In September 2008, the U.S. Securities and Exchange Commission (SEC) temporarily banned most short sales in nearly 1,000 financial stocks. We examine the ban's effect on market quality, shorting activity, the aggressiveness of short sellers, and stock prices. The ban's effects are concentrated in larger stocks; there is little effect on firms in the lower half of the size distribution. Although shorting activity drops by about 77% in large-cap stocks, stock prices appear unaffected by the ban. All but the smallest quartile of firms subject to the ban suffer a severe degradation in market quality.

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Stock Picking, Industry Picking And Market Timing In Sell-Side Research, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach Jun 2013

Stock Picking, Industry Picking And Market Timing In Sell-Side Research, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach

Research Collection Lee Kong Chian School Of Business

Sell-side analysts employ different benchmarks when defining their stock recommendations. For example, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector (“industry benchmarkers”), while for other brokers it means the stock is expected to outperform the market (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We use these benchmarks to analyze the role of stock picking, industry picking and market timing in contributing to the performance of stock recommendations. We are able to do so given that different benchmarks suggest the use of different sets of abilities. Analysis of the …

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Examining The Informational Role Of Analysts’ Forecasts And Its Impact On The Relation Between Earnings Surprises And Investors’ Responses, Joonho Lee, Kevin Ow Yong, Clement Michael Jun 2013

Examining The Informational Role Of Analysts’ Forecasts And Its Impact On The Relation Between Earnings Surprises And Investors’ Responses, Joonho Lee, Kevin Ow Yong, Clement Michael

Research Collection School Of Accountancy

Prior research documents the existence of two distinct post-earnings-announcement-drifts. Interestingly, investors seem to underreact more toward analyst-based earnings surprises than toward seasonal random walk earnings surprises. In this paper, we measure the extent of investors’ delayed reaction relative to the total market response to the earnings surprises. Using this measure, we find that investors react proportionately faster and more thoroughly to analyst-based earnings surprises than to random walk earnings surprises, suggesting that analyst-based earnings surprises are relatively less related with a delayed investor reaction compared with random walk earnings surprises. We also find that as the informativeness of analyst earnings …

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How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Duong, Stanimir Markov, Eng Joo Tan May 2013

How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Duong, Stanimir Markov, Eng Joo Tan

Research Collection Lee Kong Chian School Of Business

In a competitive information market, no single information source is likely to dominate all other sources collectively, but a single source can dominate all or most other sources individually. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar’s R2 metric: the proportion of the variation in annual returns explained by earnings announcement returns. We find that earnings announcement R2 is 11% -- higher than the corresponding R2 of returns on days with dividend announcements, management forecasts, preannouncements, 10-K and 10-Q filings and amendments. Only the four largest realized absolute daily returns in a year match …

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Uncovering Hedge Fund Skill From The Portfolio Holdings They Hide, Vikas Agarwal, Wei Jiang, Yuehua Tang, Baozhong Yang Apr 2013

Uncovering Hedge Fund Skill From The Portfolio Holdings They Hide, Vikas Agarwal, Wei Jiang, Yuehua Tang, Baozhong Yang

Research Collection Lee Kong Chian School Of Business

This paper studies the “confidential holdings” of institutional investors, especially hedge funds, where the quarter-end equity holdings are disclosed with a delay through amendments to Form 13F and are usually excluded from the standard databases. Funds managing large risky portfolios with nonconventional strategies seek confidentiality more frequently. Stocks in these holdings are disproportionately associated with information-sensitive events or share characteristics indicating greater information asymmetry. Confidential holdings exhibit superior performance up to 12 months, and tend to take longer to build. Together the evidence supports private information and the associated price impact as the dominant motives for confidentiality.

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Short Selling And The Price Discovery Process, Ekkehart Boehmer, Juan Julie Wu Feb 2013

Short Selling And The Price Discovery Process, Ekkehart Boehmer, Juan Julie Wu

Research Collection Lee Kong Chian School Of Business

We show that stock prices are more accurate when short sellers are more active. First, in a large panel of NYSE-listed stocks, intraday informational efficiency of prices improves with greater shorting flow. Second, at monthly and annual horizons, more shorting flow accelerates the incorporation of public information into prices. Third, greater shorting flow reduces post-earnings-announcement drift for negative earnings surprises. Fourth, short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values. These results are robust to various econometric specifications, and their magnitude is economically meaningful.

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Stochastic Dominance Analysis Of Cta Funds, Hooi Hooi Lean, Kok Fai Phoon, Wing Keung Wong Jan 2013

Stochastic Dominance Analysis Of Cta Funds, Hooi Hooi Lean, Kok Fai Phoon, Wing Keung Wong

Research Collection Lee Kong Chian School Of Business

In this paper, we employ the stochastic dominance (SD) approach to rank the performance of commodity trading advisors (CTA) funds. An advantage of this approach is that it alleviates the problems that can arise if CTA returns are not normally distributed by utilizing the entire returns distribution. We find both first-order and higher-order SD relationships amongst the CTA funds and conclude that investors are better off investing in the first-order dominant funds to maximize their expected utilities and expected wealth. However, for higher-order dominant CTAs, risk-averse investors can maximize their expected utilities but not their expected wealth. In addition to …

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Three Essays On Mutual Fund Ratings, Wee Seng Ng Jan 2013

Three Essays On Mutual Fund Ratings, Wee Seng Ng

Dissertations and Theses Collection (Open Access)

The incessant growth of the mutual fund industry has made the task of selecting mutual funds an increasingly challenging one. Unsophisticated investors turn to low-cost and readily available ratings to guide their investment decisions. Unsurprisingly, mutual fund ratings are hugely popular and influential. Anecdotal evidence and academic findings both suggest that investors gravitate towards top-rated funds. Rating is a double-edged sword. Although the use of rating simplifies the otherwise onerous job of evaluating mutual fund performance, it can lead to adverse consequences. Investors who invest only in top-rated funds are inadvertently assuming that good ratings indicate good future performance. However, …

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The Effect Of Information Disclosure On Information Asymmetry, Chiraphol New Chiyachantana, Neeranuch Nuengwang, Nareerat Taechapiroontong, Pakpoom Thanarung Jan 2013

The Effect Of Information Disclosure On Information Asymmetry, Chiraphol New Chiyachantana, Neeranuch Nuengwang, Nareerat Taechapiroontong, Pakpoom Thanarung

Research Collection Lee Kong Chian School Of Business

This study investigates the relation among information disclosure, firm characteristics and information asymmetry. The authors find evidence consistent with the notion that increasing corporate disclosure and transparency reduces the asymmetric information between informed and uninformed investors. The findings indicate a strong relation between firm characteristics and level of information disclosure. Larger firms, firms with high growth opportunity and superior performance are associated with higher level of information disclosure. With respect to type of information, large firms, firms with superior operating performance, high growth opportunity are likely to disclose the investment and structural change as well as legal and miscellaneous information. …

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Intraday Price Discovery In Emerging Equity Market: Analysis Of Set50 Index, Set 50 Index Futures And Thaidex Set50 (Tdex), Chiraphol New Chiyachantana, Julaluck Choochuay, Tanakorn Likitapiwat Dec 2012

Intraday Price Discovery In Emerging Equity Market: Analysis Of Set50 Index, Set 50 Index Futures And Thaidex Set50 (Tdex), Chiraphol New Chiyachantana, Julaluck Choochuay, Tanakorn Likitapiwat

Research Collection Lee Kong Chian School Of Business

This study employs Vector Error Correction Model (VECM), information share and conditional information share methods to investigate price discovery in SET50 Index (cash index), SET50 Index Futures (futures index) and ThaiDex SET50 (exchange traded fund). Our findings indicate that there exists a long run relationship among three markets and a multi-market trading of derivatives markets and its underlying asset helps improve price efficiency. With respect to the degree of price formation process, SET50 Index Futures contributes most in price discovery process, followed by SET50 Index and ThaiDex SET50.

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