Portfolio and Security Analysis Commons^™

Illiquidity, Stock Return And Corporate Capital Structure: Evidence From Seasoned Equity Offering, Zhao Yu

Dissertations and Theses Collection (Open Access)

The post-issue underperformance of seasoned equity offering (SEO) is generally explained by asymmetric information and deteriorating operating performance. We complement these traditional explanations with a new parameter, the liquidity, which results from the change of capital structure due to equity offering. The new issuing of equity lowers the debt to asset ratio, lowers the information asymmetry, thus increasing stock liquidity, which is in accordance with the hypotheses presented by Kyle(1985)'s model; Evidence that stocks become more liquid after SEO, thus lower the expected return, resulting to underperformance, combined with the high stock illiquidity before SEO, which coincides the high return, …

Information Role Of Analysts' Target Prices: Event And Intra-Day Analysis, Fan Chen

Dissertations and Theses Collection (Open Access)

I have documented that target prices subsumed in downgrade recommendations are the most informative while target prices in coverage reiteration are the least informative. The First Call database enables me to extend the analysis to an intraday frequency. Conducting event studies using high frequency data, is even more critical given the advent of information technology systems has dramatically changed the landscape of stock trading. The modified approach to event study is relevant to the fast-changing trading environment in today's capital market. For upgrades, there are significant positive market-adjusted returns lasting 20 minutes; for downgrades, there are significant negative market-adjusted returns …

On Stock Return Patterns Following Large Weekly Price Movements: The Case Of Hong Kong, Yue Lu

Dissertations and Theses Collection (Open Access)

In this paper, I examine the short-run and long-run performance of the largest 49 stocks in Hong Kong market which experience weekly price movements of more than ±10% between 1999 and 2007. For both decline and increase events, one-week significant reversal is documented. But such reversal in returns diminishes very quickly within two or three weeks. From a long-run perspective, I find that large price increases are followed by negative performance, which is consistent with the overreaction hypothesis. However, large price declines are also followed by negative cumulative abnormal returns, which supports the underreaction hypothesis. Such findings indicate that the …

The Announcement Effects And The Long-Run Performances Of Convertible Bond Issuances, Wei Xie

Dissertations and Theses Collection (Open Access)

We discuss several measurements of equity components in CBs and then examine the short-run announcement effects and the long-run performances surrounding CB issuances by dividing the whole sample of CBs into a debt-like portfolio, a mixed portfolio and an equity-like portfolio. At the time of the CB issuance announcements, the market reactions to different portfolios strictly follow a hierarchy predicted by the pecking order hypothesis. In the long-run subsequent to the CB issuances, the buy and hold stock returns of the equity-like portfolio significantly underperform the industry and market benchmarks and the debt-like portfolio; the operating performances of the issuers …

The Effect Of Concentrated Institutional Portfolio On Stock Returns, Hao Li Zhang

Dissertations and Theses Collection (Open Access)

This paper examines whether stock return is related to the extent of portfolio concentration on the part of institutional fund managers. There is evidence that large firms are preferred for both concentrated and well-diversified funds. Also, a trading strategy based on concentrated ownership generates positive abnormal return. This implies that informational effect (implied in an increase in concentrated capital) has significant impacts and predictability on returns. Meanwhile, we do not find diversified ownership has predictability on future stock returns.

Three Sections Of Applications Of Co-Integration: Hedge Funds, Industry And Main Global Equity Markets, Zhongjian Lin

Dissertations and Theses Collection (Open Access)

Co-integration is an econometric property of time series variables. If two or more series are themselves non-stationary (unit root process), but a linear combination of them is stationary, then the series are said to be co-integrated. If there is a co-integration among some time series, we can say there is a long-run equilibrium. That is the non-stationary time series may diverge from each other in short-run, however they would arrive at equilibrium in long-run. Therefore, we can use this methodology to test the existence of commonality of some non-stationary time series. Here we apply a semi-parametric cointegration test introduced by …

The Role Of Accounting Information In The Sentiment-Price Relation, Kun-Chih Chen

Research Collection School Of Accountancy

This study reconciles inconsistent evidence on the sentiment-price relation in prior studies by explicitly considering the effects of sentiment on both investor judgments and risk preferences. Using the uncertainty in accounting information, I am able to disentangle these two effects of sentiment and investigate the causes of the variations in the sentiment-price relation. The results show that, under low uncertainty, the effect of sentiment on risk preferences dominates in the sentiment-price relation, such that a negative effect of sentiment on price is observed. In contrast, under high uncertainty, the effect is less negative and, in fact, becomes positive. This suggests …

Venture Capital Firm's Reputation Effect On Its Start-Up Company's Long Term Operating Performance And Survivorship, Huei Siang Yap

Dissertations and Theses Collection (Open Access)

In this paper, I tested the effects of three proxies for venture capitalist(VC) reputation on its invested company's long term industry-djusted operating performances (ROA , ROE), market-to-book ratio and survival time (time to delisting) in the aftermarket. VC's market share and VC's IPO share have strong and positive association with the post-IPO long-term performance metrics, and the effects are statistically significant even after accounting for self-selection bias. For long term survivorship of start-up companies, I applied hazard analysis to the IPO company's time to delisting with accelerated failure time (AFT) model as the baseline hazard function, and found that start …

Investor Reaction To Women Directors, E. Kang, David K. Ding, C. Charoenwong

Research Collection Lee Kong Chian School Of Business

Existing studies on women directorships present equivocal results on the association between appointing women directors and firm performance. These studies tend to focus on western countries and largely ignore investors' reactions to such appointments. This paper applies the financial event study method and finds that investors generally respond positively to the appointment of women directors in Singaporean firms. Regression analyses also reveal that investors are most receptive when the women are independent directors and are least receptive when the directors assume the CEO role. This study not only tests the theory of gender diversity in an Asian context but also …

Business Aggression, Institutional Loans, And Credit Crisis: Evidence From Lending Practices In Leveraged Buyouts, Xiaping Jerry Cao, Wei-Ling Song, Joe Mason

Research Collection Lee Kong Chian School Of Business

This paper investigates the lending practices related to leverage buyouts (LBOs) market between high and low write-down institutions. The write-downs, which are a proxy for business aggression of institutions, are mainly related to credit crisis from the beginning of 2007 to August 10, 2008. We find that high (low) write-down institutions increase (decrease) loan market share dramatically during the period of 2001-2006. The increase is mainly driven by the segment of loans sold to institutional investors, such as collateralized loan obligations vehicle, hedge fund, and insurance companies. Institutional loans originated by high write-down institutions carry significantly fewer covenants and higher …

Idiosyncratic Risk And The Cross-Section Of Expected Stock Returns, Fangjian Fu

Research Collection Lee Kong Chian School Of Business

Theories such as Merton (1987, Journal of Finance) predict a positive relation between idiosyncratic risk and expected return when investors do not diversify their portfolio. Ang, Hodrick, Xing, and Zhang (2006, Journal of Finance 61, 259-299) however find that monthly stock returns are negatively related to the one-month lagged idiosyncratic volatilities. I show that idiosyncratic volatilities are time-varying and thus their findings should not be used to imply the relation between idiosyncratic risk and expected return. Using the exponential GARCH models to estimate expected idiosyncratic volatilities, I find a significantly positive relation between the estimated conditional idiosyncratic volatilities and expected …

Threat-Balancing In Vendor Transition, Cecil Eng Huang Chua, Wee-Kiat Lim, Siew Kien Sia, Christina Soh

CCX Research

While many outsourcing contracts are expiring, and vendor transition is becoming an increasing concern, little research helps organizations manage vendor transition. This paper explores vendor transition across two case sites. In one case, the outgoing vendor cooperated with the client which resulted in the client distancing itself from interactions between vendors. In the second case, the outgoing vendor was openly hostile, with the result that the client allied with the incoming vendor to manage vendor transition. These findings mirror expectations from balance of threat theory, a political science theory about interactions between nations. Balance of threat theory predicts that outgoing …

Style Investing And Institutional Investors, Kenneth Froot, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

This paper explores the importance and price implications of style investing by institutional investors in the stock market. To analyze styles, we assign stocks to deciles or segments across three style dimensions: size, value/growth, and sector. We find strong evidence that institutional investors reallocate across style groupings more intensively than across random stock groupings. In addition, we show that own segment style inflows and returns positively forecast future stock returns, while distant segment style inflows and returns forecast negatively. We argue that behavioral theories play a role in explaining these results.

Dividing Up Intelligence Education, Robert Clark, Ph.D

Journal of Strategic Security

At this year's annual conference of the International Association for Intelligence Education (IAFIE) in Monterey, CA, the keynote speaker posed the question, "How much do you need intelligence education outside the beltway?" Which led to a second question discussed during the conference: "What should such education look like?" In short, what should we be teaching in universities? What should we leave to the intelligence community as training? And what could be done in either or both settings? The first question of any educational effort is:What are we preparing students for?

Icworld: An Mmog-Based Approach To Analysis, Kimberly Gill, David Rolston, Wyatt Wong, Robert Pietrusko

Journal of Strategic Security

Intelligence analysts routinely work with "wicked" problems—critical,time-sensitive problems where analytical errors can lead to catastrophic consequences for the nation's security. In the analyst's world, important decisions are often made quickly, and are made based on consuming, understanding, and piecing together enormous volumes of data. The data is not only voluminous, but often fragmented, subjective, inaccurate and fluid.Why does multi-player on-line gaming (MMOG) technology matter to the IC? Fundamentally, there are two reasons. The first is technological: stripping away the gamelike content, MMOGs are dynamic systems that represent a physical world, where users are presented with (virtual) life-and-death challenges that can …

Short Takes: Intelligence-Service Psychology: A German Perspective, Sven Max Litzcke, Helmut Müller-Enbergs

Journal of Strategic Security

To date, four German volumes in the series "Intelligence-Service Psychology" (Nachrichtendienstpsychologie) have been published. These volumes generated interest in both the German and non-German speaking communities. It was therefore decided to translate some of the basic articles of the series into English (Litzcke, Müller-Enbergs & Ungerer, 2008), making them accessible to a wider range of readers. This article contains abbreviated versions of the articles in the book.

Research Note: Using The Iterate And Dots Databases, Peter A. Flemming, Edward Mickolus, Todd Sandler

Journal of Strategic Security

For more than three decades, Vinyard Software's two ITERATE (International Terrorism: Attributes of Terrorist Events) datasets have set the standard in events research for terrorism researchers. It has recently been supplemented by the DOTS (Data on Terrorist Subjects) biographies project, which covers all terrorists, supporters, and other individuals mentioned in the ITERATE project.

Books Received

Journal of Strategic Security

No abstract provided.

Book Reviews, Bart Bechtel, Jeffrey Ahn

Journal of Strategic Security

Fair Play: The Moral Dilemmas of Spying. By James M. Olson.

The Corporate Spy: Industrial Espionage and Counterintelligence inthe Multinational Enterprise with Case Studies (Abridged Version) by Edward M. Roche.

Strategic Security As A New Academic Discipline, Sheldon Greaves, Ph.D

Journal of Strategic Security

The creation of Henley-Putnam University was an effort to create an academic institution for the purpose of offering degree programs in intelligence management, counterterrorism, and personal protection; subjects that arguably did not exist as academic disciplines when the school was conceived. The experience of two of the co-founders of the school, Nirmalya Bhowmick and Dr. Michael Corcoran, indicated that the training of officers tasked with vital security and intelligence work was carried out by partnering young officers with a training officer to help the new officer learn on the job. The effectiveness of this training depended to a great extent …

Cover & Front Matter

Journal of Strategic Security

No abstract provided.

Market Segmentation, Liquidity Spillover, And Closed-End Country Fund Discounts, Sai Pang (Justin) Chan, Ravi Jain, Yihong Xia

Research Collection Lee Kong Chian School Of Business

In a segmented international capital market, the illiquidity of a country fund in the market in which its shares are traded affects only the share price of the fund (S), while the illiquidity of its underlying assets in the market in which these are traded affects only the fund net asset value (NAV). In an integrated market, illiquidity in one market can easily spill over to another and affect both the fund share price and its underlying asset value. It follows that the closed-end country fund premium, P[reverse not equivalent]ln(S)-ln(NAV), is negatively (positively) affected by the fund (underlying asset) illiquidity …

Performance, Bias, And Efficiency Of Foreign Exchange Correlation Forecasts, Stefano Mazzotta

Faculty Articles

This paper evaluates the performance, bias, and the efficiency of option-implied and return-based correlation measures using 12 years of daily data on foreign exchange and over-the-counter (OTC) currency option. The sample includes five years of rates for the Polish zloty and the Czech koruna with respect to the euro and the U.S. dollar. The results show that implied correlation is a good predictor of realized correlation and is, generally, unbiased and efficient.

Home Biased Analysts In Emerging Markets, Sandy Lai, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We find that local analyst recommendations are systematically more optimistic than foreign analyst recommendations in emerging markets. The effects of this novel home bias among local analysts overwhelm any information asymmetry between foreign and local analysts. Consequently, local analyst upgrades underperform foreign analyst upgrades, while local analyst downgrades outperform foreign analyst downgrades. Neither foreign investors, local institutions, nor retail investors appear to be fully cognizant of this bias. Trade reactions suggest that foreign investors overestimate the bias in foreign analyst recommendations while local institutions underestimate the bias in local analyst recommendations. These results are pervasive across countries, time periods, and …

Being Naive About Naive Diversification: Can Investment Theory Be Consistently Useful?, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

The modern portfolio theory pioneered by Markowitz (1952) is widely used in practice and taught in MBA texts. DeMiguel, Garlappi and Uppal (2007), however, show that, due to estimation errors, existing theory-based portfolio strategies are not as good as we once thought, and the estimation window needed for them to beat the naive $1/N$ strategy (that invests equally across N risky assets) is 'around 3000 months for a portfolio with 25 assets and about 6000 months for a portfolio with 50 assets.' In this paper, we modify the modern portfolio theory to account for estimation errors, so that the theory …

Momentum And Informed Trading, A. Hameed, Dong Hong, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

Consistent with the predictions of Wang (1994), we document that firm-specific informed trading is an important determinant of price momentum. The stronger return continuation in stocks with more informed trading cannot be explained by cross-sectional differences in uncertainty proxies such as analyst forecast dispersion, analyst coverage, idiosyncratic return volatility, and size. The relationship between informed trading and return continuation is also not attributable to cross-sectional differences in liquidity. Instead, our evidence emphasizes the role of price discovery in generating short-term price momentum.

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 revisions in long-term forecasted earnings growth. 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, respectively. Despite the importance of conditioning on short-term forecasted earnings growth, these returns are not driven by earnings momentum. Instead, consistent with investors having limited attention, predictable revisions in long-term analyst forecasts appear to induce return predictability.

Using Van Valens Procedure In Business Research To Assess Consistent Differences In Multidimensional Variability In Two Or More Groups, Mark L. Berenson, Kimberly Killmer Hollister

Department of Information Management and Business Analytics Faculty Scholarship and Creative Works

Much business research involves comparisons in two or more groups on many dimensions. This paper primarily focuses on demonstrating and providing guidance as to how researchers should approach a multivariate analysis in the comparison of sets of corresponding characteristics in two or more independent groups. In particular, this paper demonstrates the utility of a simple but not widely known procedure developed by Van Valen (1978) that should be employed to test for the significance of differences in overall variability in the sets of corresponding characteristics in two or more groups, a test that enjoys much statistical power in detecting significant …

Corporate Governance, Shareholder Rights, And Shareholder Rights Plans: Poison, Placebo, Or Prescription?, Gary L. Caton, Jeremy C. Goh

Research Collection Lee Kong Chian School Of Business

We examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.

The Association Between Excess Audit Fees And Audit Quality: A Us-Uk Comparison, Soongsoo Han, Tony Kang, Yong Keun Yoo

Research Collection School Of Accountancy

Prior studies that examine the association between excess audit fees and audit quality (measured by discretionary accruals) using US data fail to document a significant association. However, there is no convincing explanation for this result to date. In this study, we test a cancellation hypothesis, which suggests that the non-association might be due to the cancellation effect between the risk-effort effect and the bonding effect that excess fees capture. To the extent that excess fees capture the compensation for effort the auditor puts in for a risky client, which is not captured in the existing audit fee models (the risk-effort …