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Articles 181 - 210 of 393

Full-Text Articles in Portfolio and Security Analysis

Can Us Economic Variables Predict Chinese Stock Market?, Jeremy Goh, Fuwei Jiang, Jun Tu, Yuchen Wang Nov 2012

Can Us Economic Variables Predict Chinese Stock Market?, Jeremy Goh, Fuwei Jiang, Jun Tu, Yuchen Wang

Research Collection Lee Kong Chian School Of Business

In the last few decades, we observed a significant increase in global economic activities and these activities may have an impact on both China's economy and stock market. Given the potential impact, we empirically examine whether US economic variables are leading indicators of the Chinese stock market. Prior to China joining the World Trade Organization (WTO) in the end of 2001, we find no statistical relationship between US economic variables and the Chinese stock market returns. However, we find US economic variables have statistically significant predictive power for periods after China's admission into the WTO. In addition, we show that …

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The Labor Supply And Welfare Effects Of Early Access To Medicare Through Social Security Disability Insurance, Kim Nov 2012

The Labor Supply And Welfare Effects Of Early Access To Medicare Through Social Security Disability Insurance, Kim

Research Collection School Of Economics

Social Security Disability Insurance (SSDI) beneficiaries receive a cash benefit and become eligible for health insurance from Medicare two years after their enrollment. Disabled workers who leave the labor force typically lose health insurance from their employers, and they face significant medical expenditure risk as a result of their disability. Therefore, access to Medicare makes SSDI an especially attractive alternative to remaining employed for workers with disabilities. My research is the first to analyze the importance of medical expenditure risk and Medicare in analysis of SSDI, and it addresses the following questions: (1) How does access to Medicare via SSDI …

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How Do Institutional Investors Trade When Firms Are Buying Back Shares?, Sheng Huang, Zhe (Joe) Zhang Oct 2012

How Do Institutional Investors Trade When Firms Are Buying Back Shares?, Sheng Huang, Zhe (Joe) Zhang

Research Collection Lee Kong Chian School Of Business

We study how institutional investors trade when firms buy back shares. We find that aggregate institutional ownership decline following share repurchase announcements. While some institutions sell shares passively to meet the firm demand for the market to clear, the overall institutional sell-off only accounts for 27% of shares bought back contemporaneously by firms. Many firms experience a net inflow of institutional investment. The decrease in institutional shareholding is greater in firms that experience weaker recent stock performance, display more information uncertainty, have higher institutional ownership, and conduct ill-timed/motivated repurchases that are not endorsed by institutions. And most of the sell-off …

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Analysts' Industry Expertise, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach Oct 2012

Analysts' Industry Expertise, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach

Research Collection Lee Kong Chian School Of Business

Industry expertise is an important aspect of sell-side research. We explore this aspect using a novel dataset of industry recommendations, which are often issued by strategy analysts. We study sell-side analysts' ability to rank industries relative to each other (across-industry expertise), and how it relates to analysts' ability to rank firms in a particular industry (within-industry expertise). We find that analysts express more optimism towards industries with higher levels of investment, past profitability, and past returns. Analysts exhibit across-industry expertise, as portfolios based on industry recommendations generate abnormal returns over both short and long horizons, beyond what would be explained …

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Do Analysts Understand The Valuation Implications Of Accounting Conservatism When Forecasting Target Prices?, Jae Bum Kim, Alexander Nekrasov, Pervin Shroff, Andreas Simon Sep 2012

Do Analysts Understand The Valuation Implications Of Accounting Conservatism When Forecasting Target Prices?, Jae Bum Kim, Alexander Nekrasov, Pervin Shroff, Andreas Simon

Research Collection School Of Accountancy

Conservatism in earnings does not have a direct impact on the present value of future cash flows. This paper examines whether financial analysts correctly undo the effect of accounting conservatism incorporated in their own earnings forecasts in arriving at their target price forecasts. Based on prior findings, we consider alternative valuation models/heuristics that may be used by analysts to estimate target prices, e.g. the forward P/E and the PEG ratio. Our evidence suggests that analysts fail to fully undo the effect of accounting conservatism embedded in their forecasts of earnings and earnings growth when estimating their target price forecasts. More …

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Do Analysts Understand The Valuation Implications Of Accounting Conservatism When Forecasting Target Prices?, Jae Bum Kim, Alexander Nekrasov, Pervin K. Shroff, Andreas Simon Aug 2012

Do Analysts Understand The Valuation Implications Of Accounting Conservatism When Forecasting Target Prices?, Jae Bum Kim, Alexander Nekrasov, Pervin K. Shroff, Andreas Simon

Research Collection School Of Accountancy

Conservatism in earnings does not have a direct impact on the present value of future cash flows. This paper examines whether financial analysts correctly undo the effect of accounting conservatism incorporated in their own earnings forecasts in arriving at their target price forecasts. Based on prior findings, we consider alternative valuation models/heuristics that may be used by analysts to estimate target prices, e.g. the forward P/E and the PEG ratio. Our evidence suggests that analysts fail to fully undo the effect of accounting conservatism embedded in their forecasts of earnings and earnings growth when estimating their target price forecasts. More …

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Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitch Warachka Jul 2012

Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitch Warachka

Research Collection Lee Kong Chian School Of Business

The gambler's fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings announcement drift is strong and significant. In contrast, the drift is negligible following thetermination of a streak. Indeed, streaks explain about half of the post-earnings announcement drift in our sample. Our results are robust to more general definitions of trends than streaks and a battery of control variables including the magnitude ofearnings surprises and their autocorrelation. Overall, post-earnings announcement drift …

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On-Line Portfolio Selection With Moving Average Reversion, Bin Li, Steven C. H. Hoi Jul 2012

On-Line Portfolio Selection With Moving Average Reversion, Bin Li, Steven C. H. Hoi

Research Collection School Of Computing and Information Systems

On-line portfolio selection has attracted increasing interests in machine learning and AI communities recently. Empirical evidences show that stock's high and low prices are temporary and stock price relatives are likely to follow the mean reversion phenomenon. While the existing mean reversion strategies are shown to achieve good empirical performance on many real datasets, they often make the single-period mean reversion assumption, which is not always satisfied in some real datasets, leading to poor performance when the assumption does not hold. To overcome the limitation, this article proposes a multiple-period mean reversion, or so-called Moving Average Reversion (MAR), and a …

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Pamr: Passive-Aggressive Mean Reversion Strategy For Portfolio Selection, Bin Li, Peilin Zhao, Steven C. H. Hoi, Vivekanand Gopalkrishnan May 2012

Pamr: Passive-Aggressive Mean Reversion Strategy For Portfolio Selection, Bin Li, Peilin Zhao, Steven C. H. Hoi, Vivekanand Gopalkrishnan

Research Collection School Of Computing and Information Systems

This project proposes a novel online portfolio selection strategy named ``Passive Aggressive Mean Reversion" (PAMR). Unlike traditional trend following approaches, the proposed approach relies upon the mean reversion relation of financial markets. Equipped with online passive aggressive learning technique from machine learning, the proposed portfolio selection strategy can effectively exploit the mean reversion property of markets. By analyzing PAMR's update scheme, we find that it nicely trades off between portfolio return and volatility risk and reflects the mean reversion trading principle. We also present several variants of PAMR algorithm, including a mixture algorithm which mixes PAMR and other strategies. We …

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Hedge Funds And Analyst Conflict Of Interest, Sung Gon Chung, Melvyn Teo Mar 2012

Hedge Funds And Analyst Conflict Of Interest, Sung Gon Chung, Melvyn Teo

Research Collection School Of Accountancy

Are sell-side analysts reluctant to go against the investment views of their hedge fund clients? We show that analysts tend to upgrade stocks recently bought and downgrade stocks recently sold by hedge funds. Relative to other buy and strong buy recommendations, similar recommendations on stocks predominantly held by hedge funds parlay into poorer three-month and six-month stock returns. Hedge funds concurrently offload their stock holdings when analysts issue flattering reports. In line with an agency based explanation, our results are more pronounced for important brokerage clients such as high dollar turnover hedge funds and hedge funds who are prime brokerage …

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An Improved Test For Statistical Arbitrage, Robert Jarrow, Melvyn Teo, Yiu Kuen Tse, Mitch Warachka Feb 2012

An Improved Test For Statistical Arbitrage, Robert Jarrow, Melvyn Teo, Yiu Kuen Tse, Mitch Warachka

Research Collection Lee Kong Chian School Of Business

We improve upon the power of the statistical arbitrage test in Hogan, Jarrow, Teo, and Warachka (2004). Our methodology also allows for the evaluation of return anomalies under weaker assumptions. We then compare strategies based on their convergence rates to arbitrage and identify strategies whose probability of a loss declines to zero most rapidly. These strategies are preferred by investors with finite horizons or limited capital. After controlling for market frictions and examining convergence rates to arbitrage, we find that momentum and value strategies offer the most desirable trading opportunities.

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Technical Analysis: An Asian Perspective, Siqin Liaw Jan 2012

Technical Analysis: An Asian Perspective, Siqin Liaw

Dissertations and Theses Collection (Open Access)

Technical analysis, namely the moving average rule and the channel rule, is applied to the currency of an Asian managed floating exchange rate regime (USD/SGD) to see if opportunities for profitable trading exist. Instead of using only daily or monthly data, higher frequency time frames of 10, 15, 30 and 60 minutes are analyzed. Profitable strategies (if any) will be broken down and analyzed within smaller time frames to see if the profits are specifically in sample.

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Testing Overreaction And Under-Reaction In The Commodity Futures Market, Jingyu Dai Jan 2012

Testing Overreaction And Under-Reaction In The Commodity Futures Market, Jingyu Dai

Dissertations and Theses Collection (Open Access)

Results from previous studies testing for under-reaction and overreaction in the commodity futures market are mixed and inconclusive. Using a data of more than 20 categories of future contacts ranging from agricultural, metal and energy, we have found significant evidence of under-reaction in food and agricultural commodities but not in the energy and metal sector. It is also found that those relatively inactive commodity future contracts tend to have a stronger tendency to under-react than commodity future contracts are very actively traded. The result also agrees with the behavioral hypothesis that under-reaction is caused by gradual incorporation of information among …

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Frog In The Pan: Continuous Information And Momentum, Zhi Da, G. Gurun, Mitchell Craig Warachka Jan 2012

Frog In The Pan: Continuous Information And Momentum, Zhi Da, G. Gurun, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

We develop and test a frog-in-the-pan hypothesis that predicts investors are less attentive to information arriving continuously in small amounts than to information with the same cumulative stock price implications arriving in large amounts at discrete timepoints. Intuitively, we hypothesize that a series of gradual frequent changes attracts less attention than infrequent dramatic changes. Consistent with our frog-in-the-pan hypothesis, we find strong evidence that continuous information induces stronger and more persistent return continuation. Over a six-month holding period, momentum decreases monotonically from 8.86% for stocks with continuous information during their formation period to 2.91% for stocks with discrete information. Higher …

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Mutual Fund Size, Fund Family Size And Mutual Fund Performance: The Role Of Regulatory Changes, Sanjeev Bhojra, Young Jun Cho, Nir Yehuda Jan 2012

Mutual Fund Size, Fund Family Size And Mutual Fund Performance: The Role Of Regulatory Changes, Sanjeev Bhojra, Young Jun Cho, Nir Yehuda

Research Collection School Of Accountancy

We examine whether the previously documented positive association between fund family size and fund performance is affected by significant regulatory changes (i.e., Regulation Fair Disclosure (Reg FD), the Global Settlement (GS), and increased scrutiny as a result of trading scandals) that have occurred in the last decade. Using Reg FD as a beginning point for these structural changes, we find that, while fund family size was positively associated with fund performance in the period prior to the regulatory changes, this advantage is significantly weaker in the period subsequent to the regulatory changes. Consistent with the weakened advantage of fund family …

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A Multiechelon Inventory Problem With Secondary Market Sales, Alexandar Angelus Dec 2011

A Multiechelon Inventory Problem With Secondary Market Sales, Alexandar Angelus

Research Collection Lee Kong Chian School Of Business

We consider a finite-horizon, multiechelon inventory system in which the surplus of stock can be sold (i.e., disposed) in the secondary markets at each stage in the system. What are called nested echelon order-up-to policies are shown to be optimal for jointly managing inventory replenishments and secondary market sales. Under a general restriction on model parameters, we establish that it is optimal not to both sell off excess stock and replenish inventory. Secondary market sales complicate the structure of the system, so that the classical Clark and Scarf echelon reformulation no longer allows for the decomposition of the objective function …

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Charting Your Financial Goals, Benedict Koh Dec 2011

Charting Your Financial Goals, Benedict Koh

Research Collection Lee Kong Chian School Of Business

Every one of us has financial goals but not many of us know how to go about achieving them. We often lack investment knowledge or expertise to design an investment plan that optimises our savings. Consequently, we adopt the default approach of leaving all our savings in bank deposits. By doing so, we have already made an asset allocation decision, one that is very conservative. Over time, we soon realise that this conservative investment plan is simply not working as our savings are not compounding fast enough to keep up with inflation. We need to invest more wisely so that …

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The Effect Of Information Quality On Liquidity Risk, Jeffrey Ng Nov 2011

The Effect Of Information Quality On Liquidity Risk, Jeffrey Ng

Research Collection School Of Accountancy

I investigate whether information quality affects the cost of equity capital through liquidity risk. Liquidity risk is the sensitivity of stock returns to unexpected changes in market liquidity; recent asset pricing literature has emphasized the importance of this systematic risk. I find that higher information quality is associated with lower liquidity risk and that the reduction in cost of capital due to this association is economically significant. I also find that the negative association between information quality and liquidity risk is stronger in times of large shocks to market liquidity.

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What Is Behind The Asset Growth And Investment Growth Anomalies?, Fangjian Fu Oct 2011

What Is Behind The Asset Growth And Investment Growth Anomalies?, Fangjian Fu

Research Collection Lee Kong Chian School Of Business

Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that shrink their assets or investments subsequently earn higher returns than firms that expand their assets or investments. I show that the superior returns of the low asset and investment growth portfolios are due to the omission of delisting returns in CRSP monthly stock return file and that the poor returns of the high asset and investment growth portfolios are largely driven by the subsample of firms that have issued large amounts of debt or equity in the previous year. Controlling for the effects of the …

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Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitchell Craig Warachka Aug 2011

Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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Size And Return: A New Perspective, Fangjian Fu, Wei Yang Jul 2011

Size And Return: A New Perspective, Fangjian Fu, Wei Yang

Research Collection Lee Kong Chian School Of Business

We document robust empirical evidence that, after controlling for idiosyncratic volatility, large stocks earn significantly higher returns than small stocks. Our empirical results indicate that idiosyncratic volatility is positively related to return, but negatively related to size. Hence, failure to control for idiosyncratic volatility generates a downward omitted variable bias and leads to the widely documented negative relation between size and return. We explain the two contrasting size-return relations, with and without the control for idiosyncratic volatility, in a parsimonious equilibrium model that incorporates three empirical regularities: some individual investors are under-diversified; small stocks have higher idiosyncratic volatilities than large …

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Unregulated Stock Markets In Second Life, Robert Bloomfield, Young Jun Cho Jul 2011

Unregulated Stock Markets In Second Life, Robert Bloomfield, Young Jun Cho

Research Collection School Of Accountancy

SLCapex is a stock exchange owned and operated by “residents” of the online virtual world Second Life. Despite its almost complete lack of regulation and legal protections against fraud or insider trading, issuers were able to raise approximately US$145,000 from investors, which grew to US$900,000 in market value before plummeting, resulting in overall investor returns of −71%. Investors in large issuances lost more than investors in small issuances, and small investors experienced more severe losses relative to large investors when more money was at stake, indicating that the market did a poor job of protecting investors from issuers and of …

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Leverage Change, Debt Overhang, And Stock Prices, Jie Cai, Zhe Zhang Jun 2011

Leverage Change, Debt Overhang, And Stock Prices, Jie Cai, Zhe Zhang

Research Collection Lee Kong Chian School Of Business

We document a significant and negative effect of the change in a firm's leverage ratio on its stock prices. We find that the negative effect is stronger for firms that have higher leverage ratios, higher likelihood of default, and face more severe financial constraints. Moreover, firms with an increase in leverage ratio tend to have less future investment. These findings are consistent with Myers' (1977) debt overhang theory that an increase in leverage may lead to future underinvestment, thus reducing a firm's value.

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Adverse Selection And Corporate Governance, Charlie Charoenwong, David K. Ding, Vasan Siraprapasiri Jun 2011

Adverse Selection And Corporate Governance, Charlie Charoenwong, David K. Ding, Vasan Siraprapasiri

Research Collection Lee Kong Chian School Of Business

This paper examines the impact of corporate governance on the adverse selection component of the bid-ask spread of stocks listed on the Singapore Exchange. These companies have been identified by Credit Lyonnais Securities Asia (CSLA) with the highest level of corporate governance among 25 emerging markets. We measure corporate governance by several criteria: discipline, transparency, independence, accountability, responsibilities, fairness, and social awareness. The results show that corporate governance has an inverse relationship with adverse selection. However, only the transparency dimension exhibits a significant inverse relationship with adverse selection. In addition, Government-Linked Companies (GLCs) are shown to have a smaller adverse …

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An Analysis Of Japanese Earnings Forecast Revisions With Application To Seasoned Equity Offerings, Gary L. Caton, Justin S. P. Chan, Jeremy C. Goh, Sheng Yung Yang Jun 2011

An Analysis Of Japanese Earnings Forecast Revisions With Application To Seasoned Equity Offerings, Gary L. Caton, Justin S. P. Chan, Jeremy C. Goh, Sheng Yung Yang

Research Collection Lee Kong Chian School Of Business

Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings forecast data. We find that forecast revisions exhibit a downward trend over time as the actual earnings announcement date approaches, and are serially correlated with three significant lags. Using these characteristics we develop a model to estimate abnormal forecast revisions, and illustrate the model's use with a sample of Japanese companies announcing seasoned equity offerings (SEOs). In contrast to results obtained by studies using American data, our findings indicate significant positive upward revisions when Japanese firms announce an SEO.

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Valuation Of Risky Projects And Other Illiquid Investments Using Portfolio Selection Models, Janne Gustafsson, Bert De Reyck, Zeger Degraeve, Ahti Salo Jun 2011

Valuation Of Risky Projects And Other Illiquid Investments Using Portfolio Selection Models, Janne Gustafsson, Bert De Reyck, Zeger Degraeve, Ahti Salo

Research Collection Lee Kong Chian School Of Business

We develop a portfolio selection framework for the valuation of projects and other illiquid investments for an investor who can invest in a portfolio of private, illiquid investment opportunities as well as in securities in financial markets, but who cannot necessarily replicate project cash flows using financial instruments. We demonstrate how project values can be solved using an inverse optimization procedure and prove several general analytical properties for project values. We also provide an illustrative example on the modeling and pricing of multiperiod projects that are characterized by managerial flexibility.

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Earnings Management Surrounding Seasoned Bond Offerings: Do Managers Mislead Ratings Agencies And The Bond Market, Gary L. Gaton, Chiraphol New Chiyachantana, Choong Tze Chua, Jeremy Goh Jun 2011

Earnings Management Surrounding Seasoned Bond Offerings: Do Managers Mislead Ratings Agencies And The Bond Market, Gary L. Gaton, Chiraphol New Chiyachantana, Choong Tze Chua, Jeremy Goh

Research Collection Lee Kong Chian School Of Business

We study earnings management (EM) efforts surrounding seasoned bond offerings using discretionary current accruals. We find that issuers tend to inflate earnings performance prior to an offering. In order for EM efforts to effectively mislead ratings agencies and the bond market, they must lead to inflated bond ratings and decreased offering yields. Regression results indicate the opposite; aggressive EM efforts are associated with lower initial ratings and higher offering yields. We also find a statistically lower proportion of subsequent downgrades for firms with the most aggressive EM efforts, which is inconsistent with these firms’ inflated initial ratings. While some firms …

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Investor Heterogeneity, Investor-Management Agreement And Open Market Share Repurchase, Sheng Huang, Anjan V. Thakor Jun 2011

Investor Heterogeneity, Investor-Management Agreement And Open Market Share Repurchase, Sheng Huang, Anjan V. Thakor

Research Collection Lee Kong Chian School Of Business

This paper develops and tests a new theoretical explanation for why a firm conducts open-market 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 more likely to disagree with the manager tender their shares. This model leads to the following predictions: first, a firm is more likely to buy back shares when the level of investor-management agreement is low, and second, the level of agreement improves following a repurchase. Our empirical tests provide strong support for these predictions. The results are robust to …

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The Disparity Between Long-Term And Short-Term Forecasted Earnings Growth, Zhi Da, Mitchell Craig Warachka May 2011

The Disparity Between Long-Term And Short-Term Forecasted Earnings Growth, Zhi Da, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and long-term analyst forecast errors. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or far below their implied short-term forecasts for earnings growth have negative and positive subsequent risk-adjusted returns along with downward and upward revisions in long-term forecasted earnings growth, respectively. Additional results indicate that investor inattention toward firm-level changes in long-term earnings growth is responsible for these risk-adjusted returns.

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How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Xuan Duong, Stanimir Markov, Eng Joo Tan May 2011

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

Research Collection Lee Kong Chian School Of Business

In a competitive information market, a single information source can only dominate other sources individually, not collectively. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar's (2008) [How much new information is there in earnings?, Journal of Accounting Research, 2008, 46(5), pp. 975–1016] R 2 metric: the proportion of the variation in annual returns explained by the four quarterly earnings announcement returns. We find that the earnings announcement days' R 2 is 11% – higher than the corresponding R 2 of days with dividend announcements, management forecasts, preannouncements, and 10-K and 10-Q filings and …

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