The Puzzle in Post-Listing Common Stock Returns

Prior studies indicate that common stocks tend to earn negative returns immediately following listing on the NYSE. The authors document the phenomenon in detail and investigate a number of possible explanations. No full explanation is discovered, although several are ruled out.     

The Long-Run Stock Returns Following Bond Ratings Changes

Using essentially all Moody's bond ratings changes between 1970 and 1997, we find no reliable abnormal returns following upgrades. However, we find negative abnormal returns on the magnitude of 10 to 14 percent in the first year following downgrades. Additional results reveal that this underperformance is especially pronounced for small, low-credit-quality firms. Also, downgrades underperform in nearly all years in the sample, and a large part of the abnormal returns occur at subsequent earnings announcements. Thus, the evidence suggests that the poor returns result from an underreaction to the announcement of downgrades, rather than from lower systematic risk.     

Improved Methods for Tests of Long-Run Abnormal Stock Returns

We analyze tests for long-run abnormal returns and document that two approaches yield well-specified test statistics in random samples. The first uses a traditional event study framework and buy-and-hold abnormal returns calculated using carefully constructed reference portfolios. Inference is based on either a skewness-adjusted t -statistic or the empirically generated distribution of long-run abnormal returns. The second approach is based on calculation of mean monthly abnormal returns using calendar-time portfolios and a time-series t -statistic. Though both approaches perform well in random samples, misspecification in nonrandom samples is pervasive. Thus, analysis of long-run abnormal returns is treacherous.     

The Information Content Of Calls Of Debt: Evidence From Long-Run Stock Returns

We examine the long‐run performance of the common stock of firms following calls of both straight and convertible debt from 1945 to 1995. Using a sample of 718 calls of straight debt, we find an average abnormal return in the five years following the call of between 0.16% and 0.34% per month, which compounds to an economically and statistically significant 11% to 22% over the five‐year period. This evidence of overperformance following calls shows a distinct symmetry between the straight debt and equity markets. Issues of debt and equity are both followed by long‐term underperformance, whereas stock repurchases and debt calls are both followed by long‐run overperformance. For our sample of 713 calls of convertible debt, we find little systematic evidence of abnormal performance following the call. Some researchers suggest that calls of convertible debt provide negative signals to the market. Our results provide no support for this claim. In contrast, our evidence of marginal positive long‐run returns provides weak support for the model that calls of convertible debt signal the realization of profitable investment options, and for the price pressure hypothesis.     

Endogenous Events and Long-Run Returns

We analyze event abnormal returns when returns predict events.In fixed samples, we show that the expected abnormal returnis negative and becomes more negative as the holding periodincreases. Asymptotically, abnormal returns converge to zeroprovided that the process of the number of events is stationary.Nonstationarity in the process of the number of events is neededto generate a large negative bias. We present theory and simulationsfor the specific case of a lognormal model to characterize themagnitude of the small-sample bias. We illustrate the theoryby analyzing long-term returns after initial public offerings(IPOs) and seasoned equity offerings (SEOs).     

The Cross-Section of Expected Stock Returns

Two easily measured variables, size and book-to-market equity, combine to capture the cross-sectional variation in average stock returns associated with market β, size, leverage, book-to-market equity, and earnings-price ratios. Moreover, when the tests allow for variation in β that is unrelated to size, the relation between market β and average return is flat, even when β is the only explanatory variable.     

The Cross-Section of Stock Returns on The Shanghai Stock Exchange

This study explores the cross-sectional stock return behavior on the A-share market of the Shanghai Stock Exchange (SSE), which is segmented from world's other equity markets. We estimate the effects of beta, firm size, book-to-market equity ratio and a variable unique to the Chinese stock markets, the proportion of firm's floating (tradable) equity over total equity on SSE stocks over the period 1993–2002. We find that smaller firms and value stocks perform better. Systematic risk is negatively significant in down markets. The proportion of floating equity has no direct effect on stock returns. JEL Classification: G14, G15     

The Predictability of Short-Horizon Stock Returns

This examines the predictability of short-horizon stock returnsin the UK. We show that the subsequent return reversal of previousextreme performers is unlikely to be caused by either lead-lageffects or inventory imbalances, the most likely explanationbeing market overreaction. A market or trading based explanationis reinforced by the finding that these return reversals areasymmetric, being less significant after bad news. Further,we find that the lower transacting stocks exhibit the strongerreturn reversals, in direct contrast to both the existing USevidence and the implication that liquidity effects can explainthe return reversals. JEL Classification: G10, G11, G12     

Stock Market Development and Long-Run Growth

Is the financial system important for economic growth? One lineof research argues that it is not; another line stresses theimportance of the financial system in mobilizing savings, allocatingcapital, exerting corporate control, and easing risk management.Moreover, some theories provide a conceptual basis for the beliefthat larger, more efficient stock markets boost economic growth.This article examines whether there is a strong empirical associationbetween stock market development and long-run economic growth.Cross-country growth regressions suggest that the predeterminedcomponent of stock market development is positively and robustlyassociated with long-run economic growth.     

Long-Run Diversification Potential in Emerging Stock Markets

In this paper we use cointegration tests to examine the long-run diversification potential of 13 emerging capital markets. The Johansen [18] and Johansen and Juselius [19] cointegration procedures are applied to the U.S. and 13 emerging capital markets in three geographical regions of the world. None of the three regions examined possesses cointegrated markets. The lack of cointegration indicates that the correlation between returns from each market is independent of the investment horizon Return correlations using weekly data correspond to the long-run investment horizon correlation. Correlations among the returns from these countries are low on average and occasionally negative. The apparent independence of markets within these three emerging regions suggests that diversification across these countries is effective.     

Initial and Long-Run IPO Returns in Central and Eastern Europe

ABSTRACT

This article provides original evidence on IPO underpricing and long-run underperformance in Central and Eastern Europe (CEE) and compares results to the European Union’s developed capital markets from 2000 to 2009. Using both index-adjusted and CAPM-adjusted returns, we find significant underpricing that is significantly higher than underpricing of comparable IPOs in the European Union’s developed capital markets. We show that the CEE’s initial IPO returns also exhibit significantly higher volatility. In line with the asymmetric information theory, we indicate that smaller IPOs in the CEE region have greater underpricing than the larger IPOs. Contrary to the literature, we unambiguously confirm long-run underperformance toward the benchmarks. In some model specifications, we also find that IPO long-run underperformance in the CEE region is less present than in the European Union’s developed capital markets.     

Financially Constrained Stock Returns

We study the effect of financial constraints on risk and expected returns by extending the investment-based asset pricing framework to incorporate retained earnings, debt, costly equity, and collateral constraints on debt capacity. Quantitative results show that more financially constrained firms are riskier and earn higher expected stock returns than less financially constrained firms. Intuitively, by preventing firms from financing all desired investments, collateral constraints restrict the flexibility of firms in smoothing dividend streams in the face of aggregate shocks. The inflexibility mechanism also gives rise to a convex relation between market leverage and expected stock returns.     

Heteroskedasticity in Stock Returns

We use predictions of aggregate stock return variances from daily data to estimate time-varying monthly variances for size-ranked portfolios. We propose and estimate a single factor model of heteroskedasticity for portfolio returns. This model implies time-varying betas. Implications of heteroskedasticity and time-varying betas for tests of the capital asset pricing model (CAPM) are then documented. Accounting for heteroskedasticity increases the evidence that risk-adjusted returns are related to firm size. We also estimate a constant correlation model. Portfolio volatilities predicted by this model are similar to those predicted by more complex multivariate generalized-autoregressive-conditional-heteroskedasticity (GARCH) procedures.     

赢富数据信息披露对股票收益的影响

本文基于赢富数据所披露的交易信息数据,将样本区间分为六个时间段,比较各个阶段投资者通过利用赢富数据买卖集中度获得收益的能力,来研究股票市场信息环境变化对股票收益的影响.实证结果表明,当股票买入集中度较大时,在初始的五个阶段,市场信息不对称程度的下降降低了股票的信息风险,导致股票收益下降;而在第六个阶段,期望信息风险的增加导致股票的收益较前一阶段有较大提高.而当股票具有较高的卖出集中度时,随着市场信息披露程度的提高,市场对利空信息反映更加敏感.     

Stock Returns and Open-Market Stock Repurchase Announcements

Recent studies document stock price underreactions and overreactions. This evidence is extended by studying open-market stock repurchase announcements. Repurchase announcements were chosen for the study because of the uncertainty regarding the appropriate interpretation of the repurchase announcement. Cross-section regression models are used to test the relation between the reaction to the repurchase announcement and returns in subsequent periods. The results indicate that the market overreacts to repurchase announcements that are deemed to be “good news” by the market. Neither reversal nor drift is observed following repurchase announcements considered to be “bad news” by the market. The results are robust and are not driven by a few influential observations, beta shifts, or bid-ask bounce.     

The Determinants of Conditional Autocorrelation in Stock Returns

We investigate whether return volatility, trading volume, return asymmetry, business cycles, and day‐of‐the‐week are potential determinants of conditional autocorrelation in stock returns. Our primary focus is on the role of feedback trading and the interplay of return volatility. We present empirical evidence using conditional autocorrelation estimates generated from multivariate generalized autoregressive conditional heteroskedasticity (M‐GARCH) models for individual U.S. stock and index data. In addition to return volatility, we find that trading volume and market returns are important in explaining the time‐varying patterns of return autocorrelation.     

On Stock Market Returns and Returns on Investment

This article presents general conditions under which it is possible to obtain asset pricing relations from the intertemporal optimal investment decision of the firm. Under the assumption of linear homogeneous production and adjustment cost functions (the Hayashi (1982) conditions), it is possible to establish, state by state, the equality between the return on investment and the market return of the financial claims issued by the firm. This result proves to be, in essence, robust to the consideration of very general constraints on investment and the inclusion of taxes.     

Debt Structure Adjustments and Long-Run Stock Price Performance

We examine the long-run implications of debt structure adjustments using a sample of U.S. bond IPOs from 1971 to 1994. Bond IPOs result in simultaneous and pronounced changes in both debt maturity and debt ownership structures. We document that firms engaging in debt IPOs substantially underperform their size-and-book-to-market-matched benchmarks by 33.39 and 55.99% over the 3- and 5-year post-offer periods. Our results are strikingly similar to those reported for equity offers but contrast the evidence for seasoned debt offers. We find evidence that debt IPOs are timed to coincide with the market having the highest expectations concerning firms' prospects. A negative relation is documented between debt maturity and future growth opportunities. In part, the underperformance can be attributed to significantly reduced growth opportunities following the offering. Post-offer underperformance is more pronounced for (a) longer maturity issues and (b) firms that do not experience an increase in bank monitoring. Journal of Economic Literature Classification Numbers: G12, G24, G30, D82.     

Stock Returns,Expected Returns,and Real Activity

Measuring the total return variation explained by shocks to expected cash flows, time-varying expected returns, and shocks to expected returns is one way to judge the rationality of stock prices. Variables that proxy for expected returns and expected-return shocks capture 30% of the variance of annual NYSE value-weighted returns. Growth rates of production, used to proxy for shocks to expected cash flows, explain 43% of the return variance. Whether the combined explanatory power of the variables—about 58% of the variance of annual returns—is good or bad news about market efficiency is left for the reader to judge.