Impact of Earnings,Dividends and Cash Flows on Stock Returns: Case of Taiwan's Stock Market

The study uses Taiwan's stock market, a newly developed market with different characteristics from that of the U.S., as an experimental case to examine the influences of the market's characteristics on the relationship between stock returns and fundamental accounting information, such as earnings, dividends and cash flows. The testing period is from 1990 to 1994, right after the promulgation of Taiwan's accounting standard for statement of cash flows in 1989.Similar to the findings of U.S. studies, the study shows that earnings data is key information for investors. Unlike the U.S. results, however, both operating income and non-operating income are positively related to stock returns. The usefulness of non-operating income to explain stock returns is due mainly to its recurrent characteristic in Taiwan. The market views non-operating income, mostly from disposal of real-estate and short-term equity investments, as a complementary factor to operating income. It is a possible common phenomenon in a booming economy. Unlike from the results of U.S. studies, Taiwan's stock returns are strongly associated with stock dividends. Cash dividends, however, are relatively less important information to the market. The fast booming economy as well as Taiwan's free tax rate on capital gains are the explanations for the different findings. The results also support McNicholes and Dravid's (1990) and etc. results that stock dividends may act as a signal for favorable future earnings. Examining the association between stock returns and cash flow information, the results indicate that stock returns are positively associated with cash flows from both operating and financing activities. The phenomenon implies that the market appreciates not only the cash inflows from operating activities, but also cash inflows from new issues of bonds or stocks for further expansion. It is consistent to Taiwan's booming economy. The finding also supports Ross (1977) and Leland and Pyles' (1977) signaling hypothesis.The study concludes that the relationships between stock returns and fundamental variables are subject to the market's characteristics. The case of the Taiwan stock market shows that usefulness of accounting information depends upon the different roles of the information in the tested market. The results of the study also indicate that directly applying the U.S. experiences without any adjustment may cause incorrect conclusions for empirical studies.     

Excess Cash and Stock Returns

I document a positive relationship between corporate excess cash holdings and future stock returns. The difference in returns of portfolios of high and low excess cash firms amounts to 5% annually or 6% after standard three-factor risk adjustment. Firms with more excess cash have higher market betas and earn lower returns during market downturns. High excess cash companies invest considerably more in the future than do their low cash peers, but do not experience stronger future profitability. On the whole, this evidence is consistent with the notion that excess cash holdings proxy for risky growth options.     

Liquidity,Skewness and Stock Returns: Evidence from Chinese Stock Market

In this paper, a capital asset pricing model (CAPM) incorporating liquidity and skewness factors is proposed and tested by using the Chinese stock market data. The empirical results indicate that, under various market conditions, the liquidity-adjusted three-moment CAPM provides a better fit to the realized returns of various stock portfolios. Overall, this research reveals that illiquidity cost, liquidity risk and as well as skewness have important impacts on asset pricing in the Chinese stock market.     

Stock Market Returns and Consumption

This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume of 23% for the bottom 50% of the wealth distribution and about 3% for the top 30% of the wealth distribution. Household consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution. Our findings are consistent with households treating capital gains and dividends as separate sources of income.     

Cash Flow, Consumption Risk, and the Cross-section of Stock Returns

I link an asset's risk premium to two characteristics of its underlying cash flow: covariance and duration. Using empirically novel estimates of both cash flow characteristics based exclusively on accounting earnings and aggregate consumption data, I examine their dynamic interaction in a two-factor cash flow model and find that they are able to explain up to 82% of the cross-sectional variation in the average returns on size, book-to-market, and long-term reversal-sorted portfolios for the period 1964 to 2002. This finding highlights the importance of fundamental cash flow characteristics in determining the risk exposure of an asset.     

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.     

The Weekly Pattern in Stock Returns: Cash versus Futures: A Note

This paper presents tests designed to determine whether the weekly pattern in stock returns continues after the introduction of futures trading on stock indexes and whether the pattern carries over to the futures market. Using data for the SP500, I find that the “Monday effect” does persist in the cash market, but there is no evidence of a similar pattern in the futures market.     

Earnings Yields,Market Values,and Stock Returns

Earlier evidence concerning the relation between stock returns and the effects of size and earnings to price ratio (E/P) is not clear-cut. This paper re-examines these two effects with (a) a substantially longer sample period, 1951–1986, (b) data that are reasonably free of survivor biases, (c) both portfolio and seemingly unrelated regression tests, and (d) an emphasis on the important differences between January and other months. Over the entire period, the earnings yield effect is significant in both January and the other eleven months. Conversely, the size effect is significantly negative only in January. We also find evidence of consistently high returns for firms of all sizes with negative earnings.     

Stock Market Returns and Inflation Forecasts

This study uses data from the Livingston survey of expectations to examine the Fisher hypothesis as a model relating expected stock returns and expected inflation. We show that the Fisher hypothesis holds much better for ex ante expectations than ex post realizations.     

2011银行间市场资金面透析与预判

2011年年初以来,国内银行间市场资金面波动幅度较大,总体上经过了一个紧缩、略微宽松、再次紧缩的过程。从反映资金紧张状况的市场资金利率指标看,年初的时候,上海银行间同业拆借利率3个月SHIBOR为4.52%,7天回购利率(FR007)为3.26%,1天回购利率(FR001)为2.7%,均处于较为适中水平。但是,在春节前后,受数次提高法定准备金率累积效应和机构紧缩预期影响,市场资金利率攀升至多年少见的高位,2月初,3个月SHIBOR高达5.7%,7天和1     

The Effect of US Stock Market Uncertainty on Emerging Market Returns

We investigate the effects of US stock market uncertainty (VIX) on the stock returns in Latin America and aggregate emerging markets before, during, and after the financial crisis. We find that increases in VIX lead to significant immediate and delayed declines in emerging market returns in all periods. However, changes in VIX explained a greater percentage of changes in emerging market returns during the financial crisis than in other periods. The higher US stock market uncertainty exerts a much stronger depressing effect on emerging market returns than their own-lagged and regional returns. Our risk transmission model suggests that a heightened US stock market uncertainty lowers emerging market returns by both reducing the mean returns and raising the variance of returns. The VIX fears raise the volatility of emerging market returns through generalized autoregressive conditional heteroskedasticity (GARCH)-type volatility transmission processes.     

On Stock Market Returns and Monetary Policy

Financial economists have long debated whether monetary policy is neutral. This article addresses this question by examining how stock return data respond to monetary policy shocks. Monetary policy is measured by innovations in the federal funds rate and nonborrowed reserves, by narrative indicators, and by an event study of Federal Reserve policy changes. In every case the evidence indicates that expansionary policy increases ex-post stock returns. Results from estimating a multi-factor model also indicate that exposure to monetary policy increases an asset's ex-ante return.     

Stock Market Returns and Economic Fundamentals in an Emerging Market: The Case of Korea

This paper investigates the feedback relationship between stock market returnsand economic fundamentals in an emerging market. Starting from an intertemporalconsumption-based CAPM (CCAPM), we obtain a restricted VAR model for stockreturns and macroeconomic variables. We then apply this model to Korea and findstatistically significant departures from the restrictions implied by CCAPM.Consequently, an unrestricted VAR model is used to analyze the variations of expectedand unexpected returns in the Korean stock market. It is shown that the expectedmarket returns vary with a set of macroeconomic variables, and that thepredictable component is substantial. Reflecting richer dynamics in the data,relative to the usual single equation modeling in the literature, the estimatedVAR model shows considerable predictive ability for both real economic activityand real returns. Using the model for a variance decomposition of unexpectedreturns, we find that, although we cannot directly observe the market's revisionof expected future dividend growth, we can estimate a large part of therevision with the news in the expected industry output growth from our VAR model.Finally, we also find that economic fundamentals can explain only a smallportion of the variation in unexpected returns in the Korean stock market.     

Cash Flows and Discount Rates,Industry and Country Effects and Co‐Movement in Stock Returns

We apply the Campbell decomposition to industry‐by‐country, national, global industry, and world stock index returns using 1995–2003 data. World, global industry, and country factors are all important for each of the two key components of stock returns: news about future dividends and news about future discount rates. Furthermore, the world component of future discount rates is more important than the idiosyncratic component, while the reverse is true for news about future dividends. Our results are broadly consistent with co‐movement in future discount rates arising from perceptions of common elements of risk in international equity markets.     

成交量和回报率对信息扰动的市场反应研究——以中国A股市场为例

用BVAR和BMAR模型及脉冲—响应分析方法来考察中国股票市场上成交量和回报率对信息扰动的动态反应情况得出,公共扰动和永久性扰动是回报率的主要决定因素,而非公共扰动和暂时性扰动则是成交量的主要决定因素。但是公共扰动和永久性扰动对成交量有明显影响;非公共扰动和暂时性扰动对回报率有明显影响。     

The Effect of Managerial Ownership on the Short- and Long-run Response to Cash Distributions

We examine both the short‐run and long‐run responses to the following corporate cash flow transactions: dividend increases and decreases, dividend initiations, and tender offer repurchases. Our focus is the short‐run and long‐run effects of managerial ownership. We hypothesize that ownership plays an important role in explaining the announcement effects for these events, owing to signaling effects and the reduction of agency problems. Our short‐run results accord well with the earlier work on announcement effects for these events and show that firms with high insider ownership exhibit higher excess returns. Our long‐term results indicate a drift over a three‐year period following the announcement, with the excess returns for the high insider‐ownership group becoming more pronounced.     

投资者分歧、异常交易量和股票横截面收益率预测——基于中国股票市场的经验证据

本文定义月度异常交易量为本月与上个月交易金额的比值,发现中国市场月度收益率与滞后一个月的异常交易量显著负相关。在控制了公司规模、账面市值比、流动性以及动量效应等指标后仍然具有显著的解释作用。进一步研究表明,在出现高异常交易量后的12个月内,换手率和特质性波动率都有大幅上升。本文认为,交易量上升代表着市场分歧程度和受关注程度的增加,在卖空约束下会使得股票价值高估,从而造成未来收益率下降。