Informed trading around merger and acquisition announcements: Evidence from the UK equity and options markets

This paper offers new evidence on informed trading around merger and acquisition announcements from the UK equity and options market. The analysis suggests that in about 25–33% of events there is abnormal option trading volume during the month that precedes the announcement. Such evidence is found in both call and put option volumes, is robust to different “estimation” and “event window” lengths, to different sub‐samples, and to liquidity considerations. These results support the argument that informed investors will transact in both the options and the stock market, and are comparable to results reported by the FSA in the cash market. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:703–726, 2011     

What's in a change in an industrial bond rating?

Bond quality rating changes (BQRC) for industrial bonds are analyzed using both univariate statistical methods and discriminant analysis to find significant variables and their relationship with the changes. The single most important explanatory variable is found to be the rate of return on assets (ROA), followed by the trend in the return on assets (ROATREND). The univariate analysis found six of the seven proposed explanatory variables significant beyond the 0.01 level. The two-group discriminant analysis model achieved a correct classification rate of over 77%. The paper shows how the results of the two-group discriminant analysis can be used for a three-way prediction (upgrade, downgrade, or no change of bond ratings). The results of this study show that models based on financial statement data can predict rating changes with good accuracy and therefore may be a useful tool for rating agencies, at least as an initial screening device.     

Recent SEC prosecution and insider trading on forthcoming merger announcements

While trading on nonpublic information is illegal, the enforcement of this law has been elusive, particularly in the area of trading in advance of merger announcements. We examine the impact of insider trading on daily stock price changes for firms identified by the SEC in the Antoniu-Newman insider trading case. Using residual analysis, the abnormal returns occuring prior to the announcement are calculated and compared with a sample of 188 typical merger candidates not identified in the Antoniu-Newman case to determine whether or not there was an unusually large market reaction prior to the forthcoming merger announcement on the subset of merger candidates involved in the court procedure.     

中国股票市场行为与投资者情绪

The relationship among stock returns, market volatilities and individual investor sentiment is an important topic in behavioral economics and finance. This paper uses a unique data set—China’s newly opened stock trading accounts to test the relationships among stock returns, volatilities and individual investor sentiment in the Chinese stock market. It is found that there is a positive relationship between shifts in sentiment and stock returns, and that shifts in sentiment are negatively correlated with market volatility, that is to say, volatility increases (decreases) when investors become more bearish (bullish).      

Corporate usage of financial derivatives,information asymmetry,and insider trading

This article investigates whether financial derivative usage by Australian corporations constitutes information asymmetry when proxied by profitable trading in the firms' securities by insiders. The findings show that insiders who trade in companies that employ derivatives make larger purchase returns compared to insiders in nonuser firms with regard to trading identity, trading intensity, variability of usage, volume of trading, and industry effects. A plausible explanation is that asymmetry is driven by derivative traders who undertake noisy transactions in firms where risk outcomes were previously transparent. Excess returns are confined to purchase transactions consistent with insiders primarily selling for noninformation reasons. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:25–47, 2010     

投资者行为与股市异象研究评述

长期以来,新古典金融理论一直忽视投资者行为这个要素,将人设定为理性人,并将投资者决策视为纯理性的决策.行为金融学的研究则试图将心理学与金融学结合起来,通过研究投资者决策过程采揭示股市异象的动因.本文试图梳理行为金融学关于股市异象的相关研究,并对投资者行为的主要模型进行了比较和总结,最后对我国投资者行为与股市异象研究的现状进行了评述,借此对行为金融学未来的发展进行了展望.     

Marketing and investor behavior: Insights,introspections, and indications

This article introduces three exemplary articles that speak to novel, current, and important issues in marketing and investor behavior. One proposes a novel measure of quality using warranties, another examines the context of common ownership, and another provides a sweeping review of the marketing-finance interface. In addition to introducing these articles in the special section, we examine the major topics and their impact in a quarter-century of research on the marketing-finance interface encompassing 373 articles. We identify ten major topics from which the topic stock performance had the highest coverage (19%). The remaining nine topics are covered roughly equally. The topic with the highest average number of citations is marketing spending followed by new products & innovations. We also identify an increasing number of articles over the last quarter-century that underlines the importance of the research on the marketing-finance interface. Finally, we put forward opportunities for the future of marketing-finance interface fusing novel data sources with decisive firm value outcomes.     

Macroeconomic announcements,intraday covariance structure and asymmetry in the interest rate futures returns

The effects of scheduled macroeconomic announcements on the real-time intraday return volatilities, covariances, and correlations between the Eurodollar futures and the U.S. Treasury bond futures markets are studied. These announcements are responsible for most of the observed intraday jumps in volatilities, covariances, and correlations. The details of the linkage are intriguing and include announcements timing effect. Further study on intraday asymmetric volatility and correlation-in-volatility indicates that news announcements magnify asymmetric volatility and shed light on why correlations tend to be high when volatilities are high. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:815–844, 2008     

Predicting default probabilities and implementing trading strategies for emerging markets bond portfolios

In this paper, we address two main issues: the computation of default probability implicit in emerging markets bond prices and the impact on portfolio risks and returns of expected changes in default probability. Using a reduced-form model, weekly estimates of default probabilities for U.S. Dollar denominated Global bonds of 12 emerging markets are extrapolated for the sample period 1997–2001. The estimation of a logit type econometric model shows that weekly changes of the default probabilities can be explained by means of some capital markets factors. Recursively estimating the logit model using rolling windows of data, out-of-sample forecasts for the dynamics of default probabilities are generated and used to form portfolios of bonds. The practical application provides interesting results, both in terms of testing the ability of a naive trading strategy based on model forecasts to outperform a “customized benchmark”, and in terms of the model ability to actively manage the portfolio risk (evaluated in terms of VaR) with respect to a constant proportion allocation.     

A note on the association between systematic risk and common stock and bond rating classifications

Relative risk classifications for both common stock and bonds are provided by several financial services, based upon their analysis of the financial and operating data of the issuer. Systematic risk, on the other hand, is a quantitative measure of relative risk based upon market-generated data. Using several multivariable statistical techniques and a sample of 443 listed companies, this note provides empirical evidence of the association between 1) systematic risk and common stock rankings, 2) systematic risk and bond ratings, 3) two popular common stock ranking classification systems, and 4) common stock rankings and bond ratings.     

Information asymmetry and small business in online auction market

This paper explores how seller reputation affects auction prices using detailed Taiwanese data. Our empirical results show that returns to reputation are nonlinear and differ considerably across different reputation scores. Marginal returns to scores drop sharply after the first reputation quartile, indicating that building up sellers’ reputation is extremely important, especially in the early stage. Our study reveals that the mechanism of seller reputations is effective in mitigating asymmetric information in online auctions.     

Information assimilation and stock return synchronicity: Evidence from an investor relations management platform

In this paper, we employ a unique information assimilation measure for listed firms in China based on their communications with investors through an online platform designated by the China Securities Regulatory Commission (CSRC). We examine whether a firm's efforts in enhancing investors’ information assimilation, such as providing more quality clarifications and explanations, helps facilitate the incorporation of firm-specific information in stock prices and reduces stock return synchronicity. We find robust evidence that more quality-clarifying communications contribute to lower stock return synchronicity after controlling for other information sources, and the decrease in synchronicity is mostly due to increased firm-specific information rather than noise. The causal relationship is established using a stacking DID approach and a PSM method. In a further analysis, we find that more quality communications can strengthen investors’ reaction to good news and smooth their reaction to bad news. Our study provides direct evidence that enhanced information assimilation benefits firms by entrenching more firm-specific information into stock prices.     

Emotional Information Management: Concept development and measurement in public service announcements

Research on emotion as information in persuasive communication and ad response has created a need for a measure of individual abilities in the management of emotional information. Previous measures (e.g., emotional intelligence measures) lack adequate validity and reliability for use in persuasion and advertising contexts. Four studies iteratively refine a parsimonious Emotional Information Management scale that corresponds to theoretical dimensions of the construct and interrelationships between those dimensions—recognition of emotion, regulatory processes of optimistic utilization and management of emotions, as well as cognitive and emotional empathy. Reliability and construct validity are demonstrated, and scale norms are established. Although gender does not affect recognition of emotions or cognitive empathy, females exhibit greater emotional empathy ability, whereas males exhibit greater emotion regulation ability. Measuring emotional information management should contribute to greater understanding of responses to emotion‐laden or emotion‐eliciting persuasive communication (e.g., public service announcements). ©2010 Wiley Periodicals, Inc.     

Abnormal trading volume and autoregressive behavior in weekly stock returns in the Saudi stock market

This paper examines the relationship between the abnormal change in trading volume of both individual stocks and portfolios and short-term price autoregressive behavior in the Saudi stock market (SSM). Our objective is to investigate the informational role that trading volume plays in predicting the direction of short-term returns. We evaluate whether the abnormal change in lagged, contemporaneous, and lead turnovers affects serial correlation in returns. Specifically, we examine if and when the change in volume produces momentum (positive correlation) or reversal (negative autocorrelation) in consecutive weekly stock returns.We find a reversal in weekly stock returns when conditioned on the change in lagged volume in the SSM. Our results are consistent for the whole sample, the two sub-sample periods, and the large- and small-firm portfolios. The results are consistent with Campbell, Grossman, and Wang [Campbell, J. Y., S. J. Grossman, and J. Wang, 1993, Trading volume and serial correlation in stock returns, Quarterly Journal of Economics, 108, 905–939], who present a model in which risk-averse market makers accommodate the selling pressure of liquidity or non-informational traders. We also find that reversal is more pronounced with the loser portfolio as specified by filter-based methodology. The overall result of this paper is also consistent with the empirical findings of Conrad, Hameed, and Niden [Conrad, J., A. Hameed, and C. Niden, 1994, Volume and autocovariances in short-horizon individual security returns, Journal of Finance 49, 1305–1329.] and Gebka [Gebka, B., 2005, Dynamic volume-return relationship: evidence from an emerging market, Applied Financial Economics, 15, 1019–1029] in which they report price reversal for stock with high trading volume.     

Information asymmetry, pricing strategy and firm's performance in the retailer- multi-channel manufacturer supply chain

In this research paper, we assume a retailer-multi-channel manufacturer (with online and traditional retail channels) supply chain where both the multi-channel manufacturer and the retailer have private information about the state of consumer demand. In this setting, we examine the effect of an information sharing strategy on both firms' performance. Our results show that the multi-channel manufacturer always benefits from an information sharing strategy. When the product is highly compatible with the online channel, information sharing becomes much more valuable to the multi-channel manufacturer. On the other hand, the retailer's performance is not impacted by an information sharing strategy. Thus, a bargaining model is utilized to implement profit sharing for the multi-channel manufacturer and retailer so that an information sharing equilibrium can be reached. Based on our results, we derive optimal market strategies and identify probable paths of future research.     

Information technology and consumer behavior in travel and tourism: Insights from travel planning using the internet

Sustaining business success hinges upon a firm׳s ability to understand and capitalize on consumer behavior trends. Synthesizing information from a variety of sources, this paper discusses the nature of use of the Internet by American travelers. In general, the adoption of the Internet has reached a level of saturation and some traditional channels such as online travel agencies (OTAs) continue to dominate travel planning. While traditional means of Internet use for travel planning appears to be widespread across all customer segments, higher-order Internet uses (i.e., social media) are now prevalent among some segments, particularly among travelers of Generation Y. Also, there seems to be an important bifurcation in the traveler population in that the traditional online consumers remain unchanged with their pattern of use of online tools while sizable groups are adopting emergent information sources and transaction channels. This article details the particulars of these trends and offers managerial implications and future research directions.