Learning from peers' stock prices and corporate investment

Peers' valuation matters for firms' investment: a one standard deviation increase in peers' valuation is associated with a 5.9% increase in corporate investment. This association is stronger when a firm's stock price informativeness is lower or when its managers appear less informed. Also, the sensitivity of a firm's investment to its stock price is lower when its peers' stock price informativeness is higher or when demands for its products and its peers' products are more correlated. Furthermore, the sensitivity of firms' investment to their peers' valuation drops significantly after going public. These findings are uniquely predicted by a model in which managers learn information from their peers' valuation.     

The effect of market segmentation on stock prices: The China syndrome

China has an A-share market that is open only to local investors and a B-share market that is open only to foreign investors. Contrary to what has been observed in other markets with a similar segmented structure, the China B shares trade at a discount relative to the A shares. We show that the phenomenon can still be explained by basic economic principles. Specifically, the existence of the H-share and the “red-chip” markets in Hong Kong provide good substitutes for the B-share market. We find that when more H shares and red chips are listed in Hong Kong, the B-share discount becomes larger. This is consistent with the model of differential demand elasticity proposed by Stulz and Wasserfallen (Stulz, R., Wasserfallen, W., 1995. Review of Financial Studies 8, 1019–1057).     

Firm value and investment policy around stock for stock mergers

We study a sample of publicly traded firms that expand by acquiring other firms in pure, stock-for-stock mergers. After these mergers, we find that the diversification premium decreases for the acquiring firm due to having added a target firm trading at a discount. Furthermore, the acquiring firm experiences a decrease in investment opportunities and a decrease in leverage. This is an effect confined only to non-diversifying mergers. Our results indicate that the acquirer’s investment efficiency at the firm level remains unchanged after the merger.     

New empirical evidence on the investment success of momentum strategies based on relative stock prices

This paper provides significant extensions and tests of momentum trading strategies based on relative prices that were first explored by George and Hwang (2004). We develop new momentum strategies based on the ratio of the current stock price to each of five different reference points in past prices: 52-week high, 52-week median, 52-week low, half-year high, and 2-year high. We measure their investment performance on the basis of the Fama and French 3-Factor and Momentum Model (Carhart four-factor model), and further employ the technique of nested trading strategies to measure incremental performance. The strategy based on the ratio of current stock price to its 52-week high price is the most profitable, and its performance is robust when tested over a wide range of financial and economic factors. Our results provide strong new evidence of the investment merits of a momentum trading strategy based on the 52-week high price ratio, and add new weight to challenges to the hypothesis that the stock market is efficient in the semi-strong sense.     

Investment analysis and the adjustment of stock prices to common information

In this article we are concerned with the effect of the numberof investment analysts following a firm on the speed of adjustmentof the firm's stock price to new information that has commoneffects across firms. It is found that returns on portfoliosof firms that are followed by many analysts tend to lead thoseof firms that are followed by fewer analysts, even when thefirms are of approximately the same size. Many analyst firmsalso tend to respond more rapidly to market returns than dofew analyst firms, adjusting for firm size. This relation, however,is nonlinear, and the marginal effect of the number of analystson the speed of price adjustment increases with the number ofanalysts.     

The effects of changes in index composition on stock prices and volume: Evidence from the Istanbul stock exchange

Previous evidence has shown that stocks included in (excluded from) an index exhibit significant positive (negative) abnormal returns on the announcement day, and that trading volume is affected by the event. This study examines the price and volume effects on stocks associated with the changes in the value-weighted index composition of two indices, of the ISE, where the index funds and index derivatives do not exist. Consistent with previous evidence, stocks included in (excluded from) the index tend to generate positive (negative) abnormal returns in ISE. Volume and volume volatility are also significantly affected. Our results seem to support the hypotheses of price-pressure, imperfect substitute and attention due to the lack of index-funds and derivatives market in Turkey.     

The weekend effect on the distribution of stock prices: Implications for option pricing

Evidence of weekend effects on the distribution of security returns suggests that returns are generated by a process operating closer to trading time rather than calendar time. In contrast, accumulation of interest over the weekend follows a calendar-time process. Since both the variance of returns and the interest rate are important parameters of the Black-Scholes option pricing model, this paper suggests that the model be stated to account for this by utilizing a trading-time variance and a calendar-time interest rate. Empirical evidence indicates that this allows the model to better explain market option prices.     

The stock market and investment

Changes in stock prices have substantial explanatory power forU.S. investment, especially for long-term samples, and evenin the presence of cash flow variables. The stock market dramaticallyout-performs a standard q-variable because the market-equitycomponent of this variable is only a rough proxy for stock marketvalue. Although the stock market did not predict accuratelyafter the crash of October 1987, the errors were not statisticallysignificant. Parallel relationship for Canada raise the puzzlethat Canadian investment appears to react more to the U.S. stockmarket than to the Canadian market.     

The statistical evolution of prices on the Istanbul stock exchange

This study documents the statistical properties of the stock returns on the Istanbul Stock Exchange (ISE) for the January 1988 to December 1999 period and tries to assess the evolution of the underlying stochastic structure over this time period. It also investigates empirically the relative efficiency of the ISE to test whether the rapid development of this market over the last decade caused it to become a relatively more efficient market. This is accomplished through a number of parametric and non-parametric tests of the random walk hypothesis using daily, weekly and monthly observations of the value-weighted ISE-100 index series. The emphasis is more on the evolution of the price process than on static tests of a random walk model as such. The findings indicate that the price mechanism in the ISE has evolved into a more informationally efficient process in little more than a decade of existence.     

Options as a predictor of common stock price changes

Since rather novel techniques such as neural nets allow investigation of nonlinear model specification previously untested, it may be that traditional models of price formation underperform through misspecification rather than market efficiency. This paper explores whether a multilayer backpropagation model offers exploitable profit opportunities for some limited period. Using an intradaytransaction dataset obtained from the European Options Exchange (Amsterdam), We attempted to predict the return on Philips. Two neural nets are contrasted to ordinary linear regression analysis on the basis of three benchmarks (MSE, and net realized returns). An adaptively trained 33-14-1 architecture scored best on all criteria and yielded an annualized 11% return following a simple one-period trading strategy.     

传闻消息对我国上市公司股价影响的实证分析

本文通过有关我国上市公司的传闻消息对上市公司股价影响的实证分析,得出在消息公布日前2天以及后3天的时间段里,传闻消息对股价有正影响,从而给投机者带来了非正常收益,但是从长期来看,传闻消息不会给投资者带来任何非正常收益。另外,通过对各类传闻消息对股价影响的进一步分析,发现在诸类传闻消息中,主力类传闻对上市公司股价的影响最为显著,能给投机者带来很大的非正常收益。     

Spectral analysis of stock market prices

The purpose of this article is to apply spectral analysis to six European Stock markets (Germany, France, Italy, The Netherlands, Belgium and the United Kingdom) and the New York Stock Exchange, over the period 1969–1976. For neither series do the estimates suggest deviations from randomness. However, a simple filter rule shows that substantial profits could have been made by a trader in the six European markets. This demonstrates that for testing market efficiency, spectral analysis is far from the best and the conclusion tends to support the hypothesis of ‘white-noise’ in imperfect markets. Cospectral analysis shows the lead and lag relations between the various stock markets under study.     

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates

This paper uses Bayesian methods to analyze unit root and cointegration properties of two different finance data sets. Avoiding the use of subjective prior information, the paper surveys and utilizes several different objective Bayesian methodologies in an investigation of common stochastic trends in international stock markets and in spot and forward exchange rates for several different countries.     

The investment value of the value premium

Value investment strategies are premised on research that value stocks outperform growth stocks. However, the research findings are dependent on the portfolio classification method that is used to sort stocks using the attributes of size and book-to-market ratios. Different stock markets contain different distributions of stocks, and in many markets, illiquidity concerns combined with a lack of investment scale, effectively create barriers to practical portfolio formations that align with the research. This study conducts a case study on one such market (Australia) and demonstrates that different methods of portfolio formation lead to different conclusions. For example, previous studies in Australia find evidence of the value premium only being present in the largest stocks, in contrast to the results from the US market. However, we find a value premium that is systematic across all size categories and generally increases inversely with size. Further, we find the well-documented size premium largely disappears once portfolios are formed that better represent feasible investment sets and once ‘penny dreadfuls’ are removed. Finally, asset pricing tests support the existence of a value premium in Australian stock returns when a more appropriate portfolio formation method is employed.     

Unraveling a puzzle: the case of value line timeliness rank upgrades

We examine a sample of Value Line’s timeliness rank upgrades that occur immediately following earnings announcements and find that pre-event price momentum has significant incremental explanatory power for post-event drift, after controlling for the level of earnings surprise. Therefore, the stock price drift following Value Line’s timeliness upgrades cannot be viewed as driven only by the post-earnings announcement drift phenomenon. Instead, these findings indicate that, among other factors, Value Line has been exploiting the price momentum effect for decades. Black (Financ. Anal. J. 29:10–14, 1973) clearly stated that it does indeed do this, but his assertion has not yet been verified as an explanation of the puzzling drift that follows Value Line rank upgrades.     

Sentiment and stock prices: The case of aviation disasters

Behavioral economic studies reveal that negative sentiment driven by bad mood and anxiety affects investment decisions and may hence affect asset pricing. In this study we examine the effect of aviation disasters on stock prices. We find evidence of a significant negative event effect with an average market loss of more than $60 billion per aviation disaster, whereas the estimated actual loss is no more than $1 billion. In two days a price reversal occurs. We find the effect to be greater in small and riskier stocks and in firms belonging to less stable industries. This event effect is also accompanied by an increase in the perceived risk: implied volatility increases after aviation disasters without an increase in actual volatility.     

投资物价再度升温汇率股价攀高震荡——2008年宏观经济金融形势分析与预测

2007年固定资产投资同比增速虽有所下降,但在地方政府换届、企业盈利增长等因素的推动下,2008年固定资产投资将再度升温.虽然目前尚未出现全面通货膨胀,但2008年物价上涨压力不容忽视,通货膨胀威胁增大.2007年以来人民币对美元汇率升值加速,但对欧元和日元却相对贬值,导致人民币实际有效汇率升值有限,2008年人民币升值步伐会有所加快,但不会迅速地大幅度升值,汇率水平将呈现攀高震荡格局.2007年股票市场在持续攀高之后出现大幅震荡,预计2008年股票市场牛市格局不会变,股价震荡可能加大.     

The long-run relationship between stock prices and goods prices: New evidence from panel cointegration

We examine the long-run relationship between stock prices and goods prices to gauge whether stock market investment can hedge against inflation. Data from 16 OECD countries over the period 1970–2006 are used. We account for different inflation regimes with the use of sub-sample regressions, while maintaining the power of tests in small sample sizes by combining time-series data across our sample countries in a panel unit root and panel cointegration econometric framework. The evidence supports a positive long-run relationship between goods prices and stock prices with the estimated goods price coefficient being in line with the generalized Fisher hypothesis.     

The ex-dividend-day behavior of stock prices: the case of Japan

We provide a comprehensive empirical analysis of stock pricebehavior around the ex-dividend day in Japan. We find that pricesrise on the ex-day and that dividend-related tax effects appearto be secondary. Returns around ex-dividend days are dominatedby the proximity of many ex-days to the fiscal year end. Excessreturns of 1 percent, which are independent of any dividend-relatedconsiderations, are higher than round-trip transaction costson medium-sized transactions. Prices seem to imply selling pressurebefore and buying pressure at the start of the new fiscal year.These trading patterns appear to be motivated by intercorporatemanipulative trading around the end of the firms' fiscal year,which are unrelated to dividends.     

Determination of stock closing prices and hedging performance with stock indices futures

This paper examines the impact of the determination of stock closing prices on futures price efficiency and hedging effectiveness with stock indices futures. The empirical results indicate that the increase in the length of the batching period of the stock closing call improves price efficiency in the futures closing prices and then enhances hedging performance in terms of the hedging risks. Additionally, from a utility‐maximization point of view, hedging performance does not improve after the introduction of the 5 min stock closing call, which can be explained by an improvement in price efficiency at the futures market close.