The Availability Heuristic and Reversals Following Large Stock Price Changes

The author explores the effect of the availability heuristic on large daily stock price changes and on subsequent stock returns. He hypothesizes that if a major positive (negative) stock price move takes place on a day when the stock market index rises (falls), then its magnitude may be amplified by the availability of positive (negative) investment outcomes. In both cases, the availability heuristic may cause price overreaction to the initial company-specific shock, resulting in subsequent price reversal. In line with the hypothesis, the author documents that both positive and negative large price moves accompanied by the same-sign contemporaneous daily market returns are followed by significant reversals on the next 2 trading days and over 5- and 20-day intervals following the event, the magnitude of the reversals increasing over longer postevent windows, while large stock price changes taking place on the days when the market index moves in the opposite direction are followed by nonsignificant price drifts. The results remain robust after accounting for additional company (size, beta, historical volatility) and event-specific (stock's return and trading volume on the event day) factors, and are stronger for small and volatile stocks.     

Market segmentation and information values of earnings announcements: Some empirical evidence from an event study on the Chinese stock market

This paper investigates the trading activities of two distinct classes of shareholders, namely, the Chinese domestic investors and the foreign investors in the segmented Chinese A- and B-share markets, respectively. We conduct an event study on the annual earnings announcements based on two different accounting standards: International accounting standards (IAS) and PRC generally accepted accounting principles (PRC GAAP). The earnings announcements based on IAS and PRC GAAP are value relevant. The investors in the B-share market react to both the IAS and PRC GAAP earnings announcements, while the investors in the A-share market pay more attention to the PRC GAAP earnings reports. In the B-share market, positive abnormal returns are associated with positive earnings surprise and negative abnormal returns go with negative earnings surprise. We find preevent abnormal trading volumes without significant price changes for the A shares, which may be due to existing information in the A-share market prior to earnings announcements. The postevent abnormal trading volumes last for a longer period in the A-share market than in the B-share market.     

限售股流通与股价效应关系的实证研究

本文运用事件研究法对限售股上市流通的股价效应进行了实证研究。研究结果袁明：限售股的上市流通带来负的股价效应;样本公司的特征及股票的交易特性显著影响股价效应;在累积超额收益率为正的样本中,累积超额收益率与净资产收益率负相关,与区间日均股票换手率、股票每股收益正相关;在累积超额收益率为负的样本中,累积超额收益率与IPO到限售流通股上市流通的时间、账面市值比、区间日均成交量负相关。     

Return patterns of South Korean stocks following large price shocks

This study tests the market efficiency of the South Korean stock market by examining returns on stocks of the constituents of the KOSPI 50 from 2000 to 2014 following large 1-month price decreases and increases. An exponential GARCH (EGARCH) event study framework is used to analyse the stock returns. The results show that large price shocks, positive and negative, are likely to be followed by positive market returns. Moreover, the results show an increase in the beta of stocks in the years following a large price shock. The overall results therefore support the Uncertain Information Hypothesis. However, beginning in 2008, return patterns more closely reflect those hypothesised by the Efficient Market Hypothesis, possibly due to increased participation by international investors. The observed returns following large price increases and decreases can be partially explained by changes in the Korean won to US dollar exchange rate and the trading behaviour of foreign investors.     

T+1 trading mechanism causes negative overnight return

The T+1 trading mechanism is unique in the Chinese stock market, thus providing a natural experimental field to study the trading mechanism and price behaviors. This paper proposes and proves that T+1 trading mechanism causes negative overnight return, the overnight return can serve as a proxy of the T+1 trading mechanism. The paper finds that the overnight return of the Chinese stock market is significantly negative, whereas those under the T+0 trading mechanism, such as China’s stock index futures, Hong Kong stocks, and major international indices, all have around 0 or positive overnight returns. T+1 trading mechanism has greater impacts on stocks with more divergent investor opinions, higher risk, more individual investor percentages, higher arbitrage restrictions, and less liquidity. The T+1 trading mechanism distorts the price generation mechanism of stocks. The paper contributes to the understanding of impact of trading mechanism on stock prices.     

When Do Opening Stock Returns Tend to be Higher?

Abstract

In this study, I make an effort to formulate a trading rule that would make use of some systematic interday patterns in individual stocks’ opening returns. I analyze intraday price data on all the stocks that were S&P 500 Index constituents during the period from 1993 to 2012. I document that if the general market direction of the previous day's opening session is controlled for, then a stock's opening return tends to be higher if, on the previous trading day, its opening return was relatively high (either positive, or higher than the same day's opening market return) and its open-to-close return was relatively low (either non-positive, or lower than or equal to the same day's open-to-close market return). Finally, for the sampling period, I construct two different investment portfolios involving a long position in the stocks on the days when, according to the findings, their opening returns are expected to be high and a short position in the stocks on the days when, according to the findings, their opening returns are expected to be low. Both portfolios are found to yield significantly positive returns, providing evidence for the practical applicability of the documented patterns in opening stock prices.     

管理者交易的市场择时能力对市场有效性的影响

管理者卖出和买入公告对股票市场具有一定的影响,以管理者卖出交易和买入交易为公告样本进行实证分析,检验公告当日及给定事件期超额收益的显著性.结果显示:卖出公告样本反对半强式有效假说,管理人能够“卖高”,获得超额收益；而买入公告样本支持半强式有效假说,管理者不能够“买低”,在公告日和事件期都不能获得超额收益.     

Impact of oil prices on firm stock return: industry-wise analysis

The study investigates the impact of oil prices on firm-level stock returns in case of Pakistan over the period 1998–2014, as this relationship is neglected by the previous literature. By using the panel data estimation, the results of full sample indicate significant positive effect of oil price changes on firm stock returns in the same period, whereas the lagged oil price changes have significant negative effect on firms’ stock return. Moreover, the industry-level analysis also confirms the similar findings; results indicate significant positive impact of oil price on firms’ stock return in full sample, textile, chemical and miscellaneous industry, while the lagged oil price changes negatively affect the stock returns of full sample and all the industries except tobacco, jute and vanaspati industries. The study confirms that rise in oil price transfers a positive signal in the stock market that boosts the firm-level stock returns in Pakistan. In contrast to the negative shocks, the stock returns are significantly affected by the positive oil price shocks.     

IPO重启首日超额收益实证研究

重启之后的中国证券市场,是否能有效地消除各种弊端,抑制首日超额收益过高等异常现象?文章选取我国IPO重启以后发行的新股作为样本,从信息的不对称、承销商的声誉、我国特殊的新股发行制度以及我国投资者的情绪四个角度对我国IPO重启首日超额收益现象进行实证分析,并力图从一级市场发行价格确定和二级市场交易价格形成两个环节来解释我国的IPO首日超额收益,提出一些建设性的参考意见,促进我国的上市公司对IPO进行合理定价,优化资本市场资源的配置。     

Changes in Investors' Market Attention and Near-Term Stock Market Returns

We use Google Search volume to track changes investors' positive and negative market attention. Our results support the hypothesis that this information reflects investors' optimistic and pessimistic anticipation and can be used to predict near-term future returns. We find that changes in negative search term volume of “market crash” and “bear market” and changes in positive search term volume “market rally” explain near-term stock returns. Changes in investors' attention are partly related to past stock market returns, implying that investors are prone to pay attention to possible price reversals. These measures of market attention are potential gauges of investor sentiment.     

噪音交易与股价过度波动:理论与中国经验分析

中国股市股票价格的波动性过大,引起这种现象的一个重要原因是噪音交易的存在和频繁发生。本文采用事件分析法,随机抽取了上海A股市场的近200种股票作为样本,通过构建正反馈交易的"涨幅组合",对噪音交易者投资的累积异常收益率进行检验。结果表明:股市过度波动与噪音交易频繁有密切的联系;噪音交易者通常要承受巨大的风险,但其投资收益率一般情况下却为负。     

New Evidence on Psychology and Stock Returns

This article provides econometric evidence on the importance of psychological considerations for aggregate stock price fluctuations. To this end, a novel measure of stock market sentiment, dubbed the Net Psychology Index (NPI), based on information contained in Bloomberg News's end-of-the-day stock market reports, is confronted with a battery of multivariate empirical analyses. Results suggest that NPI is statistically different from popular sentiment proxies within the literature. NPI exhibits predictive power, increasing stock returns in the short run with this impact dissipating in the medium term. NPI does not exhibit asymmetric effects on returns for size- and momentum-related portfolios. A trading strategy based on NPI generates a statistically significant positive monthly return. Recursive out-of-sample fit analyses report a lower standard deviation of forecasting errors for NPI-based returns models versus competing accounts.     

New Evidence of Psychological Barrier from the Oil Market

The authors examine how stock returns were affected when the oil price reached the psychological barrier of US$100 per barrel for the first time in history. Using an event study approach, 4 key results emerge. First, the authors show that a psychological barrier event in the oil market does affect stock returns. Second, they show that a psychological barrier event in the oil market is a source of return drift—a phenomenon well explained and understood with respect to nonoil news events. Third, the psychological barrier affects small/medium-sized stocks and not large stocks. Last, the authors show that successful trading strategies can be devised based on the information that the oil price psychological barrier significantly impacts the market and that it contributes to return drift.     

The determinants of exchange settlement practices and the implication of volatility smile: Evidence from the Taiwan Futures Exchange

This paper proposes that the Taiwan Futures Exchange (TAIFEX) adopts a linear extrapolation method to set the settlement price for the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) options with less liquidity and thin trading. The empirical results indicate that the settlement-price-determined implied volatility is a smile function, consistent with the pattern of the market-price-determined implied volatility. Moreover, we examine the influence of economic factors on the TAIFEX's decision regarding the parameters of implied volatility function. Compared with the economic determinants of market-force-driven volatility parameters, the TAIFEX inappropriately values the impacts of the parameters of prior days, current stock returns, distribution of stock returns, long-term measurement of the stock market trend, market transaction cost, and time to maturity.     

Abnormal returns before acquisition announcements: evidence from Europe

Acquisition announcements influence the stock price of target firms, providing an opportunity for insiders to obtain significant abnormal returns. We study the presence of positive abnormal returns before the announcement date, in target firms, quoted in Euronext markets (Belgium, France, The Netherlands and Portugal) from 2001 to 2007. We investigate whether the pre-announcement run-up of prices can be explained by rumours in the media and the percentage of capital previously owned by the bidding firm, among other factors. We examine cumulative abnormal returns in an event window of 60 days prior the acquisition announcement, with the event date adjusted for the previous disclosure of news about the acquisition, in the media. We compute a run-up index, and find that there are abnormal positive returns before the announcement date, confirming previous studies. We find that a significant part of the run-up is explained by: (i) market anticipation triggered by legitimate sources of information, namely, rumours in the media about the possibility of an acquisition bid and (ii) the percentage of capital previously owned in the target firm, by the bidding firm.     

Evidence of Stock Returns and Abnormal Trading Volume: A Threshold Quantile Regression Approach

This paper presents a capital asset pricing model‐based threshold quantile regression model with a generalized autoregressive conditional heteroscedastic specification to examine relations between excess stock returns and “abnormal trading volume”. We employ an adaptive Bayesian Markov chain Monte Carlo method with asymmetric Laplace distribution to study six daily Dow Jones Industrial stocks. The proposed model captures asymmetric risk through market beta and volume coefficients, which change discretely between regimes. Moreover, they are driven by market information and various quantile levels. This study finds that abnormal volume has significantly negative effects on excess stock returns under low quantile levels; however, there are significantly positive effects under high quantile levels. The evidence indicates that each market beta varies with different quantile levels, capturing different states of market conditions.     

Variability of realized stock returns and trading volume

Using monthly data for 2005–2014 time period, this article documents the relationship between lagged stock returns and trading volume. We show that the dispersion of stock returns in a market portfolio positively affects future trading volume. We also show that extreme negative returns lead to high future trading volume while extreme positive returns have little effect on future trading. Dividing our sample into several sub-samples based on the Standard Industrial Classification (SIC) divisions leads to similar results for most of the SIC divisions.     

An empirical analysis of the Shanghai and Shenzhen limit order books

This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Exchanges. The two major Chinese stock markets are pure order-driven trading mechanisms without market makers, and we analyze empirically both limit order books. We begin our empirical modeling using the vector autoregressive model of Hasbrouck and extend the model to incorporate other information in the limit order book. We also study the market impact on A shares, B shares and H shares, and analyze how the market impact of stocks varies cross sectionally with market capitalization, tick frequencies, and turnover. Furthermore, we find that market impact is increasing in trade size. Order imbalances predict the next day's returns, with small order imbalances having a negative effect.     

反转效应、负反馈交易与股价波动——基于面板数据的开放式基金投资策略研究

本文利用2002年至2007年基金交易数据,从不同的市场状态、公司规模、买卖股票的基金数量和行业特征等层面深入分析了我国开放式基金的交易策略、影响基金交易策略的因素以及基金交易对于股市波动的影响。实证结果表明：我国开放式基金所投资的股票在中期内并不存在动量效应,相反存在显著的反转效应,基金的投资行为也表现出明显的负反馈交易策略;与前期股票的买入比率相比,股票的收益率以及收益率的波动对基金投资策略的影响更为明显;开放式基金前期的股票交易会加剧当期的股价波动。     

Investor Reaction to Inter-corporate Business Contracting: Evidence and Explanation

We examine the stock market reaction to 1227 inter-corporate ordinary business contract announcements reported by Dow Jones between January 1, 1990 and December 31, 2001. Around contract announcement dates, we find statistically significant positive average abnormal returns and abnormal trading volume for contractors, but insignificant positive abnormal returns and negative abnormal volume for contractees. Cross-sectionally, contract announcement period returns are higher for contractors who are small relative to the contract size, have higher return volatility, larger market-to-book ratios and higher profitability. The announcement period returns of contract-awarding firms are not significant and are only marginally related to cross-sectional explanatory factors. The results are consistent with two explanatory stories: contractor quasi-rents induced by the winner's curse and information signalling about contractor production costs. The results are not consistent with perfect competition, with contracts having positive net present values for both parties, and with a version of incomplete contracting theory.