The stock–bond comovements and cross-market trading

We propose an asset pricing model with heterogeneous agents allocating capital to the stock and bond markets to optimize their portfolios, utilizing the dynamic interaction between the two markets. While some agents focus on the stock market and have more expertise in it, the others specialize in the bond market. Based on their comparative advantages in a particular market, heterogeneous agents constantly revise their investment portfolios by taking into account the time-varying stock–bond return comovements and the changing market conditions. Agents׳ collective investment behavior shapes the stock–bond interlinkage, which feedbacks on their subsequent capital allocations. Using monthly US stock and bond data from January 1990 to June 2014, we estimate the vector autoregression model with threshold and Markov switching mechanisms. We find evidence in support of flight-to-quality and show that it is mainly driven by the technical traders who actively sell stocks and buy bonds during periods of high market uncertainty.     

Does Mad Money make the market go mad?

Empirical studies of numerous popular investment advisory services find statistically significant abnormal returns at the time of their broadcast or published investment recommendations. Our analysis of returns and trading volume around stock recommendations aired on charismatic host Jim Cramer's Mad Money program reveals statistical evidence of response to both his buy and sell opinions, with most of the full-day return following an on-air buy recommendation captured by that day's opening price. Trading strategy analysis suggests that individuals with limited funds should be wary of short-term trading to exploit the show's suggestions, while professional investors may be able to exploit buy picks with a contra strategy.     

Why do reits engage in open-market repurchases?

We investigate why real estate investment trusts (REITs) still engage in open-market repurchases given the unique 95 percent payout requirement. We provide evidence that the motivations for REITs to repurchase stocks are different from those of unregulated firms found by the existing literature. Instead of using funds from operations, REITs appear to finance stock repurchases by issuing new debt and/or selling assets and investments. Unlike ordinary corporations, REITs stock repurchases are not motivated by cash distribution, capital structure, and undervalued equity. However, REITs are more likely to buy back stocks when employees own a higher level of stock options. Also, we find that REITs are more likely to buy back stocks when they have a higher institutional ownership and/or inside ownership.     

计算机在股票定价方法方面的应用——以中国石化(600028)为例

股票买卖的定价问题,是关系到股票投资者投资效益的最直接、最关键、最根本性的问题。本文的目的就是提供一种能指导股票投资者如何在最好的时机买卖股票的好方法。本文的研究课题是运用计算机的快速计算功能为股票二级市场上的任何股票作出合理买卖定价的方法问题,从中国石化股票2012、2013年的大量历史资料入手,采用数据挖掘技术运用计算机中的电子表格进行大量股票价格数据的运算,找出股票价格的变化规律性,制定出股票买卖定价模型,并通过后期实际验证,得出这种定价方法的合理性和可行性的结论。     

An investigation of causality between insider transactions and stock returns

Prior research shows that corporate insiders engage in profitable transactions by trading securities of their own firms. The main purpose of this study is to examine whether insider transactions and stock returns have causality relationships at the firm level for a sample of 2,521 firms during the period 1988 to 1998. We find a large impact of stock returns on subsequent insider transactions at both the aggregate and firm levels. The impact appears to be negative which suggests that insiders buy after stock price decreases and sell after stock price increases. Our findings on the predictive content of insider transactions for subsequent stock returns are primarily consistent with prior literature. We observe a positive but weak relationship between insider transactions and future stock returns.     

<Emphasis Type="BoldItalic">Mad Money</Emphasis> stock recommendations: market reaction and performance

We examine the stock recommendations of Jim Cramer televised on CNBC’s Mad Money, and document significant market reactions (i.e., announcement returns and volume) to Cramer’s recommendations, particularly for small capitalization stocks. The following findings indicate that the announcement returns are primarily due to price pressure from uninformed trading as opposed to the recommendations providing new value related information: announcement returns reverse following buy recommendations; bid-ask spreads temporarily decline; and there is no evidence of positive longer-term abnormal returns. One implication, when considered in combination with other works, is that investors should be cautious in following stock recommendations announced in the mass-media.     

The effect of stabilization fund to rescue stock market based on expected return-capita circulation equation

This paper builds an expected return-capital circulation equation to explore the impact of using the stabilization fund to rescue the stock market when it crashes. We find that the stock stabilization fund buying the underlying stocks can restrain the sharp decline of the stock index, but it is also easy to promote the fluctuation in prices of small-cap stocks. Therefore, we suggest that the government in use of stock stabilization fund to take control of the stock market crash should not only buy underlying stocks in the index but also pay attention to prevent implicit stock disaster in the market.     

Quoted spreads and trade imbalance dynamics in the European Treasury bond market

Using high-frequency transaction data for the three largest European markets (France, Germany and Italy), this paper documents the existence of an asymmetric relationship between market liquidity and trading imbalances: when quoted spreads rise (fall) and liquidity falls (increases) buy (sell) orders tend to prevail. Risk-averse market-makers, with inventory-depletion risk being their main concern, tend to quote wider (narrower) spreads when they think bond appreciation is more (less) likely to occur. It is also found that the probability of being in a specific regime is related to observable bond market characteristics, stock market volatility, macroeconomic releases and liquidity management operations of the monetary authorities.     

A SHARP model of bid–ask spread forecasts

This paper proposes an accurate, parsimonious and fast-to-estimate forecasting model for integer-valued time series with long memory and seasonality. The modelling is achieved through an autoregressive Poisson process with a predictable stochastic intensity that is determined by two factors: a seasonal intraday pattern and a heterogeneous autoregressive component. We call the model SHARP, which is an acronym for seasonal heterogeneous autoregressive Poisson. We also present a mixed-data sampling extension of the model, which adopts the historical information flow more efficiently and provides the best (among all the models considered) forecasting performances, empirically, for the bid–ask spreads of NYSE equity stocks. We conclude by showing how bid–ask spread forecasts based on the SHARP model can be exploited in order to reduce the total cost incurred by a trader who is willing to buy or sell a given amount of an equity stock.     

Cross-sectional variation in the stock market reaction to bond rating changes

Previous research has found that the stock market reacts negatively to bond rating downgrades and that downgrades tend to follow periods of negative returns, indicating that at least some downgrades are partially predictable. Hypothesizing that the reaction to a downgrade depends on both the implications for cash flows and the degree of surprise, we explore how the reaction to downgrade announcements varies across bond issues. We find that the equity market reacts much more negatively to bond rating downgrades to and within the speculative bond category than to downgrades within the investment grade category. Within the speculative category, the reaction is stronger, the lower the old and new ratings are. The reaction to multiple-level downgrades is not very different from that to single-level downgrades. The market reaction is also stronger if the firm has experienced negative pre-downgrade abnormal returns. Our evidence indicates that downgrades are viewed by the market as providing information on likely future earnings before interest charges, not just likely future interest charges. It is also consistent with Billett's (1996) hypothesis that low rated debt makes a firm less attractive as a takeover target.     

Asymmetric information and inside management trading in the Chinese market

Insider trading incentives have been widely examined in stock markets, but mainly in developed countries. Given the fact that the volatility of stock exchange markets in emerging economies is typically even higher, there is a need for research to explore the extent to which information asymmetry plays a role in management trading incentives in emerging economies. To address this research need, this study examines management trading incentives in relation to investment efficiency in Chinese listed firms on the main board and on the small- to medium-enterprises (SME) board in the period 2006 to 2017. We find that executives buy shares when firms’ investments are more efficient. The frequency of management buying also increases with investment efficiency. However, managers do not sell their shares according to firms’ investment efficiency. Moreover, executives of firms listed on the main board trade more on the asymmetric information of investment efficiency than those on the SME board.     

The impact of numerical superstition on the final digit of stock price

This paper investigates the extent to which the frequency distribution of the rightmost digit of stock prices is influenced by numerical superstitions. To identify the moderating variables that strengthen the superstition for numbers, we take into account factors including the amount of information, change of tick size, Chinese festivals, and bear market effect. Furthermore, we examine whether the frequency of lucky (unlucky) numbers as the final digit of prices decreases (increases) for firms with higher trading by institutional investors. The results indicate that investors in the Taiwan Stock Exchange tend to avoid number 4. Our results also find that the effects of numerical superstitions on the frequency of the final digit decrease when the amount of information increases. Investors appear to be more likely to avoid unlucky number 4 in the following four conditions: when the tick size becomes smaller, when it is one week before Chinese New Year, when it is the seventh month in the lunar calendar, and when it is in a bear market. We further document that institutional investors are not affected by numerical superstition. Moreover, our results support the notion that informed traders buy and sell more (less) actively the stocks with a lower (higher) frequency of prices ending with 4.     

Why do employees hold their vested stocks while they can sell them?

We proposed an integrated model of risk-balancing arguments and the emergence of psychological ownership to investigate employees' propensity of holding awarded stocks under a broad-based stock incentive plan. Analysis was conducted using a sample of 391 employees of a semiconductor foundry located in Taiwan. The results provided strong indication that psychological ownership motivation contribute to explain employees' willingness to hold vested stocks from broad-based stock plans. This study provide stimulating insight into the psychological mechanisms through which the individual's risk-aversion and wealth effects influence employees' intentions to hold vested stocks and further extends our understanding on how broad-based stock plans can develop an employees sense of ownership.     

证券分析师业绩预测和投资评级准确性实证分析

文章以国内证券分析师业的业绩预测和投资评级为研究对象,从投资评级的准确性、投资建议赢利性、业绩预测误差及其来源等几个方面进行了实证分析。研究结果表明,证券分析师的投资建议无论在短期还是中长期均不能产生显著的超额收益,业绩预测误差是导致投资评级失误的原因之一,而业绩预测误差主要源于分析师对公司层面信息的错误判断。     

Limited attention,salient anchor,and the modified MAX effect: Evidence from Taiwan’s stock market

The literature documents that investors overweighing the right-tail probability pursue positively skewed assets, leading to lottery-like stocks overpriced. We find that the lottery anomaly primarily exists among stocks further away from their 52-week high prices. After attention-grabbing events with gambling features, inattentive retail investors become aware of certain stocks’ gambling traits and then net buy more lottery-like stocks, which further promotes the lottery anomaly. However, when such stocks are near their 52-week high price, retail investors tend to place little weight on the likelihood that the stock price will rise beyond the 52-week high, thereby reducing the skewness preference. Overall, our findings suggest that the perception of the 52-week high price as a price ceiling influences skewness preference, and that investor attention is the main determinant of whether anchoring bias affects skewness preference.     

The determinants of momentum in the United Kingdom

This study examines the effects of size, analyst coverage, and book-to-market in explaining momentum profits in UK stocks. We document a pattern of momentum in UK stocks and find that momentum profits are negatively related to firm size, analyst coverage, and book-to-market. We find that book-to-market is more important than coverage and coverage is more important than size in explaining momentum profits. We examine the book-to-market effect closely and find that a value premium exists for past stock losers, but a growth discount exists for past stock winners. Finally, the results of this study provide mixed support for the information diffusion hypothesis of Hong and Stein (1999).     

Capital Markets

The efficiency of security market is necessary for the harmonious growth of capital market, and more particularly in an emerging economy. This paper looks at the case of the Thai stock market, and uses statistical tests based on stratified samples of stocks on weekly data over a four year period. The tests check the normality of the price lag and the correlations over a 6 period lag. As a conclusion, the tests indicate* that only few stocks conform to the weakform efficiency market hypothesis. The authors make specific recommendations to improve the efficiency of the market as a whole.     

Large price movements and short-lived changes in spreads,volume, and selling pressure

In this paper we examine changes in dollar and relative bid-ask spreads of stocks following large price movements. We investigate large increases and decreases separately and link our results to current market microstructure theories on trading activities and spreads. We also look at changes in volume and selling pressure to interpret the changes in trading activity. Our results show that the market reacts differently to price increases and decreases. For large price decreases, trading increases on the sell side even when spreads have increased. For large price increases, trading increases on the buy side during a period of higher spreads. However, the increases in dollar spreads and price pressure are most pronounced at the end of trading day. Our results are consistent with microstructure models that link trading activities and costs to the level of asymmetric information.     

Pricing the hedging factor in the cross-section of stock returns

We investigate the role of investors’ net hedging strategy (factor) in predicting stock returns and pricing the cross-section of individual stocks and equity portfolios. We estimate stock exposure to changes in the hedging factor and show that the hedging premium is driven by outperformance of stocks with large positive net hedging betas, which explains their higher average returns. We find the positive hedging premium indicates risk-averse investors demand extra compensation to hold stocks with higher equity risk premiums, and they are themselves willing to pay higher prices for stocks with positive hedging betas.     

IPO and Aftermarket Performance of Single‐Listed Chinese ADRs

This paper analyzes the post‐IPO and long‐run aftermarket performances of single‐listed Chinese ADRs during the 2004–2010 period. Single‐listed ADRs are traded daily in major exchanges in the United States, but their underlying shares are not traded in the issuer's home market. Our results show that over the short‐run, buy‐and‐hold abnormal returns of single‐listed Chinese ADRs following their IPO are not significantly different from the typical post‐IPO performance of stocks in U.S. exchanges, including that of traditional dual‐listed Chinese ADRs. Nevertheless, over the longer horizon, the excess returns of a portfolio composed solely of single‐listed Chinese ADRs outperform a portfolio of dual‐listed Chinese ADRs, but underperform a benchmark portfolio composed of U.S. firms matched on the basis of their IPO date. We also find that the portfolio formed solely of single‐listed Chinese ADRs exhibits significantly distinct loadings on the common portfolio factors from the portfolio formed of dual‐listed Chinese ADRs and from the benchmark portfolio of U.S. stocks.