STOCK MARKET REACTION TO GOOD AND BAD INFLATION NEWS

This article shows that differentiating between good and bad inflation news is important to understanding how inflation affects stock market returns. Summing positive and negative inflation shocks as in previous studies tends to wash out or mute the effects of inflation news on stock returns. More specifically, we find that, depending on the economic state, positive and negative inflation shocks can produce a variety of stock market reactions. We conclude that the effect of inflation on stock returns is conditional on whether investors perceive inflation shocks as good or bad news in different economic states.     

COMMON STOCK RETURNS,EXPECTED INFLATION,AND THE RATIONAL EXPECTATIONS HYPOTHESIS

This paper provides empirical evidence that expected inflation has a cross-sectional impact on common stock returns. The study differs from others in that (a) the relation between stock returns and expected inflation is investigated in a two-factor asset pricing model, where the factors are the return on an equally weighted stock portfolio and the expected rate of inflation; (b) the estimation of the expected rate of inflation is based on the rational expectations hypothesis of Muth; and (c) a non-linear seemingly unrelated regression technique is employed to determine consistent and asymptotically efficient estimates. The joint hypothesis of the two-factor asset pricing model and rational expectations is not rejected in this study. It is found that the return on common stocks is significantly affected by expected inflation. Also stocks whose returns are positively correlated with expected inflation have lower expected returns.     

中国股市需要“停车修理”

A股为何会回到"1时代"?导致当前中国股市信心不足的原因:其一,800多家等待IPO的企业和再融资让市场异常恐惧,这些等待IPO的企业继续在发审委排队,按照目前的发行速度,至少需要5年,如此下去不但给市场带来巨大的扩容压力,也会让市场的资源配置功能彻底丧失。如果资本市场不能有效支持实体经济,真正的优质企业无法上市融资,投资者买不到好股票,市场必然会进入恶性调整。其二,限售股解禁、减持的压力让股市资金供需严重失衡,因为股权分置改革带来的"成本分置"后遗症需要很多资金来填补"全流通",来缓解大小非、大小限的套现压     

INFORMED TRADING RISK AND BID-ASK SPREAD CHANGES AROUND OPEN MARKET STOCK REPURCHASES IN THE NASDAQ MARKET

Microstructure theory contends that dealers' bid-ask spreads should vary intertemporally with changes in the asymmetric information component of the spread. Corporate theory suggests that stock repurchase announcements signal management's private information to the securities markets. An examination of dealers' spread behavior around firms' open market repurchases in the NASDAQ market reveals a decline in spreads adjusted for dealers' inventory-holding and order-processing costs. This decline is attributed to a reduction in informed trading risk associated with the open market repurchase announcements.     

STOCK MARKET REACTION TO ANTICIPATED VERSUS SURPRISE RATING CHANGES

I examine whether bond rating changes can be anticipated by investors and test whether the stock price reaction to the eventual change varies as a result. All else equal, the market reaction to changes that could have been easily predicted should be significantly smaller than the reaction to changes that are largely a surprise. Although rating upgrades prove difficult to predict, approximately 20% of downgrades can be correctly predicted using a relatively small number of publicly available variables. There is no significant difference between the stock price reaction to anticipated versus unanticipated rating changes.     

MODELS OF STOCK MARKET PREDICTABILITY

I briefly review the success of past studies purporting to explain equity valuations and predict future equity returns. The Campbell‐Shiller mean reversion models are contrasted with an expanded version of the so‐called Federal Reserve model. At least from 1970 to 2003, Federal Reserve–type models did somewhat better at predicting long‐horizon returns than did a mean reversion model based on dividend yields and price‐earnings multiples. However, timing investment strategies based on any of these prediction models do no better than a buy‐and‐hold strategy. Although some predictability of returns exists, there is no evidence of any systematic inefficiency that would enable investors to earn excess returns.