Portfolio and Security Analysis Commons^™

Equity Fund Monthly Report, December 2019, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

A Learning Curve Of The Market: Chasing Alpha Of Socially Responsible Firms, Zhichuan Li, Jun Wang, Dylan Minor, Chongyu Dang

Business Publications

This paper explores stock market reactions to corporate social performance. We find that a value-weighted portfolio based on the list of “100 Best CSR companies in the world”, published by Reputation Institute, yields statistically significant annual abnormal returns of 1.63% and 1.26%, by controlling for Carhart four factors and Fama-French five factors, respectively (2.39% and 1.84% respectively for an equal-weighted portfolio). Moreover, such abnormal returns decrease as time goes, especially after the inaugural publication of the CSR lists in 2013. The paper also indicates that companies with better social performance are more likely to have positive earnings surprises, and that …

Fixed Income Fund Report, December 2019, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Chasing Private Information, Marcin Kacperczyk, Emiliano Sebastian Pagnotta

Research Collection Lee Kong Chian School Of Business

Using over 5,000 trades unequivocally based on nonpublic information about firm fundamentals, we find that asymmetric information proxies display abnormal values on days with informed trading. Volatility and volume are abnormally high, whereas illiquidity is low, in equity and option markets. Daily returns reflect the sign of private signals, but bid-ask spreads are lower when informed investors trade. Market makers' learning under event uncertainty and limit orders help explain these findings. The cross-section of information duration indicates that traders select days with high uninformed volume. Evidence from the U.S. SEC Whistleblower Reward Program and the FINRA involvement addresses selection concerns.

Center Of Volume Mass: Does Options Trading Predict Stock Returns?, Gennaro Bernile, Fei Gao, Jianfeng Hu

Research Collection Lee Kong Chian School Of Business

We examine whether the distribution of trades along the set of strike prices of option contracts on the same stock contains information about underlying price discovery. We show that option traders' demand for delta exposure drives the volume-weighted average strike-spot price ratio (VWKS). In turn, we find that VWKS predicts underlying returns and anticipates the flow of fundamental information about the stock. The return predictability is greater but not limited to stocks with higher information asymmetries and arbitrage costs, and becomes stronger ahead of value relevant news. Overall, options trading appears to play an important informational role for underlying markets.

Regulations And Brain Drain: Evidence From Wall Street Star Analysts’ Career Choices, Yuyan Guan, Congcong Li, Hai Lu, Franco Wong

Research Collection School Of Accountancy

The Global Settlement, along with related regulations in the early 2000s, prohibits the use of investment banking revenue to fund equity research and compensate equity analysts. We find that all-star analysts from investment banks are more likely to exit the profession or move to the buy side after the regulations. The departed star analysts’ earnings revisions and stock recommendations are more informative than those of the remaining analysts who followed the same companies. To the extent that star analysts are superior to their nonstar counterparts in terms of research ability and ability to inform the market, the exit of star …

Behavioral Agent-Based Framework For Interacting Financial Markets, Heba M. Ezzat Dr.

Business Administration

Purpose – This paper aims at developing a behavioral agent-based model for interacting financial markets. Additionally, the effect of imposing Tobin taxes on market dynamics is explored. Design/methodology/approach – The agent-based approach is followed to capture the highly complex, dynamic nature of financial markets. The model represents the interaction between two different financial markets located in two countries. The artificial markets are populated with heterogeneous, boundedly rational agents. There are two types of agents populating the markets; market makers and traders. Each time step, traders decide on which market to participate in and which trading strategy to follow. Traders can …

Do Institutional Investors Exploit Market Anomalies? New Evidence From Alternative Mutual Funds, Xin Gao, Ying-Chih Wang

WCBT Faculty Publications

This paper investigates the anomaly trading behavior of a sample of mutual funds mimicking hedge fund strategies, namely alternative mutual funds (AMFs), based on both of their long and short equity positions. We document that AMFs trade on anomalies by buying underpriced stocks and short-selling overpriced peers. While AMFs’ buys and sells based on their long positions do not generate superior performance, their short-selling and covering activity based on their short positions significantly negatively predicts future abnormal returns. However, this predictability is mainly attributed to size and the nine anomaly characteristics considered. Overall, the results suggest that AMFs are sophisticated …

Market Risk And Market-Implied Inflation Expectations, Lucjan T. Orlowski, Carolyne Cebrian Soper

WCBT Faculty Publications

We examine interactions between market risk and market-implied inflation expectations. We argue that these interactions are asymmetric and varied in time. Specifically, market risk becomes elevated by expectations of either very low or high expected inflation. Market risk does not react to expectations of moderate, stable inflation. In our analysis, market risk is proxied by VIX and market-implied inflation expectations are reflected by five- and ten-year breakeven inflation. We use daily data for 5 and 10 year breakeven inflation and VIX for the sample period January 3, 2003 – January 24, 2019 for empirical testing. We employ asymptotic VAR, multiple …

The Value Perspective: The Case Of Warren Buffet And His Investment Behavior Towards Apple, Walmart And Amazon, Shanhong Wu, Kermit Kuehn, Jing Jiang

WCBT Faculty Publications

In this paper, we use metrics of Ben Graham’s value investing principle to examine the actions taken by Warren Buffet toward three prominent stocks: Amazon, Apple and Walmart. We find that decisions of investment/dis-investment and not-investment by Buffet toward the stocks are largely in line with Graham’s view on value investing. This paper provides in-depth analysis of value for three stocks and relates to research on the book-to-market anomaly in the finance literature.

The Trend In Short Selling And The Cross Section Of Stock Returns, Zhaobo Zhu, Xinrui Duan, Jun Tu

Research Collection Lee Kong Chian School Of Business

This paper documents that stocks with a decreasing (increasing) trend in their short selling as proxied by the long-term change in short interest experience significant and positive (negative) abnormal returns. Moreover, the positive abnormal returns have larger absolute values and are more persistent. The return predictability of the trend in short selling is not subsumed by the level of short interest and other well-known determinants of stock returns. Investor sentiment does not affect the profitability of the trend strategy. Our results suggest that market participants underreact to public information on short interest and that short sellers are sophisticated investors.

Relative Strength Over Investment Horizons And Stock Returns, Zhaobo Zhu, Xinrui Duan, Jun Tu

Research Collection Lee Kong Chian School Of Business

In this article, the authors propose a simple and novel measure of relative strength over investment horizons that synthesizes short- and intermediate-term price information. The relative-strength measure compares the short-term price trend with the intermediate-term price trend. The relative strength strategy generates substantial profits, which are greater than a simple sum of traditional short-term reversal and momentum profits. The superior performance of the relative strength strategy is evident after risk adjustments for various factor models and is robust across subperiods and different market conditions. These findings seem consistent with investor conservatism and the idea that investors are slow to adjust …

When Family Trusts Affect The Value Of Firms, Singapore Management University

Perspectives@SMU

Share transfer restriction may induce family shirking problems, make family conflicts difficult to resolve, and distort firm decisions

The Ursinus College Investment Management Company Newsletter, Fall 2019, Scott Deacle

Investment Management Company Newsletter

Inside this issue:

What's New?

Women-in-Finance Program

What are "They" Saying?

New York Field Trip

2019 Fund Performance

Supporters

Trust And Local Bias, Chi Shen Wei, Lei Zhang

Research Collection Lee Kong Chian School Of Business

This paper examines the effect of social trust on local bias. Our evidence suggests that institutional investors located in high-trust regions of the United States exhibit lower local bias. Moreover, we find that high-trust investors are better diversified, suggesting that trust helps accomplish greater diversification. The results are not due to firm, demographic, or local economic characteristics. Additional analysis reveals that the documented informational advantage in local holdings exists only in low-trust regions. We show that this finding is consistent with a trust explanation.

The Flash Crash: A Cautionary Tale About Highly Fragmented Markets, Albert J. Menkveld, Bart Zhou Yueshen

Research Collection Lee Kong Chian School Of Business

A breakdown of cross-market arbitrage activity could make markets more fragile and result in price crashes. We provide suggestive evidence for this novel channel based on a high-frequency analysis of the most salient crash in recent history: The Flash Crash. We further show that such an event can be extremely costly for a large seller trading in a particular venue as the seller effectively relies on local liquidity supply only. These findings highlight the vulnerability of today's highly fragmented markets.

Regulating Retirement: Understanding The Impact Of New Best Interest And Fiduciary Standards On Retail Investors, Michael Lichtmacher

St. Mary's Law Journal

Abstract forthcoming

How Do Interest Rates Affect Market Capitalization Growth Rates In The Us?, Philip Carolin

Undergraduate Economic Review

This paper investigates how interest rates affect the market capitalization growth rate of individual companies in the US. The research will distinguish itself from previous literature as it analyzes company and macroeconomic data after the 2008 recession. This is particularly interesting as interest rates have been historically low in this time period. Previous research suggests that since the Great Recession the effects of interest rate changes have decreased. On the contrary I will argue that the effects of interest rates still appear to be significant and substantial when explaining the market capitalization growth rate.

Fixed Income Fund Report, September 2019, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Text Sophistication And Sophisticated Investors, Juha Joenvaara, Jari Karppinen, Song Wee Melvyn Teo, Cristian Ioan Tiu

Research Collection Lee Kong Chian School Of Business

We show that two novel measures of text sophistication, applied to hedge fund strategy descriptions, encapsulate incremental information about funds. Consistent with the linguistics literature, hedge funds with lexically diverse strategy descriptions outperform, eschew tail risk, and encounter fewer regulatory problems. In line with the literature, hedge funds with syntactically complex strategy descriptions report more regulatory violations and trigger more severe infractions. Fund investors recognize the dichotomy and direct flows accordingly, but not enough to erode away the alphas of lexically diverse funds. Our findings suggest that text sophistication measures provide texture on the cognitive ability and trustworthiness of sophisticated …

Swaption Portfolio Risk Management: Optimal Model Selection In Different Interest Rate Regimes, Poh Ling Neo, Chyng Wen Tee

Research Collection Lee Kong Chian School Of Business

We formulate a risk-based swaption portfolio management framework for profit-and-loss (P&L) explanation. We analyze the implication of using the right volatility backbone in the pricing model from a hedging perspective, and demonstrate the importance of incorporating stability and robustness measure as part of the calibration process for optimal model selection. We also derive a displaced-diffusion stochastic volatility (DDSV) model with a closed-form analytical expression to handle negative interest rates. Finally, we show that our framework is able to identify the optimal pricing model, which leads to superior P&L explanation and hedging performance.

The Information Content Of Sudden Insider Silence, Claire Yurong Hong, Frank Weikai Li

Research Collection Lee Kong Chian School Of Business

We present evidence of investors underreacting to the absence of events in financialmarkets. Routine-based insiders strategically choose to be silent when they possessprivate information not yet reflected in stock prices. Consistent with our hypothesis,insider silence following routine sell (buy) predict positive (negative) future return aswell as fundamentals. The return predictability of insider silence is stronger amongfirms with poor information environment and facing higher arbitrage costs, and alarge fraction of abnormal returns concentrates on future earnings announcements. Along-short strategy that exploits insiders’ strategic silence behavior generates abnormalreturns of 6% to 10% annually

Lifeguard: "Providing Safety In An Unsafe World", Lincoln Bent, Morgan Gafford, Will Ransdell

Governor's Scholars Program Poster Presentations

A poster presented by Lincoln Bent, Morgan Gafford and Will Ransdell for the class Business, Accounting and Entrepreneurship: Proposed Business Plans.

International Welfare Spillovers Of National Pension Schemes, James Staveley-O'Carroll, Olena Staveley-O'Carroll

Economics Department Working Papers

We employ a two-country overlapping-generations model to explore the international dimension of household portfolio choices induced by the asymmetric provision of government-run pensions. We study the resulting patterns of risk-sharing and the corresponding welfare effects on both home and foreign agents. Introducing the defined benefits pay-as-you-go system at home increases the welfare of all other agents at the expense of the home workers and improves the degree of intergenerational risk sharing abroad. Conversely, a defined contributions system leads to welfare losses of both home cohorts accompanied by gains abroad, but does increase the extent of intergenerational risk sharing at home.

Momentum And Reversal: The Role Of Short Selling, Zhaobo Zhu, Xinrui Duan, Licheng Sun, Jun Tu

Research Collection Lee Kong Chian School Of Business

This paper investigates the relation between short selling and momentum. We document that a consistent momentum strategy that buys lightly shorted winners and sells heavily shorted losers exhibits strong short-term momentum and no long-term reversal. In contrast, an inconsistent momentum strategy that buys heavily shorted winners and sells lightly shorted losers experiences weak short-term momentum and persistent long-term reversal. Our results are robust after controlling for firm characteristics, proxy for short-sale constraints, and investor sentiment, as well as an exogenous shock (the Taxpayer Relief Act of 1997). These findings present a new challenge to existing theories of momentum that rely …

Equity Fund Monthly Report, June 2019, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Fixed Income Fund Report, June 2019, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Are Bond Ratings Informative? Evidence From Regulatory Regime Changes, Louis H. Ederington, Jeremy C. Goh, Yen Teik Lee, Lisa Zongfei Yang

Research Collection Lee Kong Chian School Of Business

The Dodd–Frank Act (Section 939B) enacted in 2010 repealed the exemption of credit rating agencies (CRAs) from Regulation Fair Disclosure. Testing whether CRAs continue to provide new information to the market after the repeal, the authors find that the significant prerepeal stock price responses to rating changes disappear after the regime change. Bond price reactions, however, remain significant. These results are even more significant at the investment–speculative boundary. Evidence suggests that CRAs served as a conduit for transmitting private information before the repeal and that the continued bond price reactions are likely due to regulations favoring higher-rated bonds.

Volatility Interruptions, Idiosyncratic Risk, And Stock Return, Saad A. Alsunbul

LSU New Orleans Theses and Dissertations

The objective of this paper is to examine the impact of implementing the static and dynamic volatility interruption rule on idiosyncratic volatility and stock returns in Nasdaq Stockholm. Using EGARCH and GARCH models to estimate the conditional idiosyncratic volatility, we find that the conditional idiosyncratic volatility and stock returns increase as stock prices hit the upper static or dynamic volatility interruption limits. Conversely, we find that the conditional idiosyncratic volatility and stock returns decrease as stock prices hit the lower static or dynamic volatility interruption limit. We also find that the conditional idiosyncratic volatility is higher when stock prices reach …

Predictive Distributions Via Filtered Historical Simulation For Financial Risk Management, Tyson Clark

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

Filtered historical simulation with an underlying GARCH process can be used as a valuable tool in VaR analysis, as it derives risk estimates that are sensitive to the distributional properties of the historical data of the produced predictive density. I examine the applications to risk analysis that filtered historical simulation can provide, as well as an interpretation of the predictive density as a poor man’s Bayesian posterior distribution. The predictive density allows us to make associated probabilistic statements regarding the results for VaR analysis, giving greater measurement of risk and the ability to maintain the optimal level of risk per …