The value of columnists’ stock recommendations: an event study approach

This study examines the value of stock recommendations made by columnists in three leading business magazines; Business Week, Forbes, and Fortune during the period 2000–2003. Empirical results suggest that the anomalous returns documented in prior studies on columnists are sample specific and are not representative of columnist recommendations in general. We also investigate whether columnists’ timing, content and style affect the market reaction to recommendations. We find that recommendations that contain references to management or provide merger & acquisition related rumor trigger significantly greater market reactions. Finally, our long-term performance analysis of columnist recommendations suggests that investors following columnists’ advice during the 2000–2003 period would not have consistently earned abnormal returns controlling for market risk, book-to-market, size, and momentum effects.     

Index tracking with utility enhanced weighting

Passive index investing involves investing in a fund that replicates a market index. Enhanced indexation uses the returns of an index as a reference point and aims at outperforming this index. The motivation behind enhanced indexing is that the indices and portfolios available to academics and practitioners for asset pricing and benchmarking are generally inefficient and, thus, susceptible to enhancement. In this paper we propose a novel technique based on the concept of cumulative utility area ratios and the Analytic Hierarchy Process (AHP) to construct enhanced indices from the DJIA and S&P500. Four main conclusions are forthcoming. First, the technique, called the utility enhanced tracking technique (UETT), is computationally parsimonious and applicable for all return distributions. Second, if desired, cardinality constraints are simple and computationally parsimonious. Third, the technique requires only infrequent rebalancing, monthly at the most. Finally, the UETT portfolios generate consistently higher out-of-sample utility profiles and after-cost returns for the fully enhanced portfolios as well as for the enhanced portfolios adjusted for cardinality constraints. These results are robust to varying market conditions and a range of utility functions.     

Understanding Differences in Self-Reported Expenditures between Household Scanner Data and Diary Survey Data: A Comparison of Homescan and Consumer Expenditure Survey

Household scanner data contain rich information on household demographics and transactions in actual markets over a long time period. To more fully understand the characteristics of these data, we conducted an analysis to determine whether household expenditures in the Nielsen Homescan panel are similar to the Bureau of Labor Statistic's Consumer Expenditure Diary Survey. We found that many differences in reported expenditures across the two datasets can be explained by such household demographics as female head, income, and household size, for example. The largest degrees of discrepancies across datasets occur for food categories containing more random-weight foods without universal product codes.     

Shareholders Groups,Unbundled Rights,and Corporate Democracy: A Commentary

The commentary proposes a reform in the structure of corporate ownership. This reform would legally require public companies to unbundle their common stock into separately traded voting rights and monetary rights. Arguably, this new unbundled equity structure could profoundly change group dynamics of corporate governance, benefiting shareholder groups, customers, employees, and society at large.     

Effects of gender on the performance of micro and small enterprises in Malawi

Women are increasingly venturing into ownership of micro and small enterprises, either on their own or in partnership with male entrepreneurs. Using national survey data from Malawi, this study compares the performance of enterprises owned by females with those owned by males. The results show that the relationship between gender and business performance is complex. While there are no significant differences in profit margins, female-owned enterprises tend to grow more rapidly in terms of employment than male-owned ones. Gender-based regression results also show that while there are common factors that affect the performance of both kinds of enterprise, there are also differential effects in which education is a critical factor for the success of female-owned enterprises.     

The market-adjusted investment performance of ADR IPOs and SEOs

Initial public and seasoned equity offerings of American depositary receipts (ADRs) yield significantly positive market-adjusted returns both in early trading and over the longer run. This is in sharp contrast with the long-term performance of initial public offerings and seasoned equity offerings of common stocks in general. In addition, ADRs from emerging markets outperform those originating from developed countries, and those listed on the New York Stock Exchange generate higher after-market returns than those trading on the American Stock Exchange or the National Association of Security Dealers Automated Quotation System.     

What jackpot? The optimal lottery tax

The payout rate on lotto is normally fixed. We show that such a policy is generally suboptimal from the lotto authorities' point of view. The payout rate should be allowed to vary according to the number of rollovers that have occurred. To illustrate our argument, we simulate and optimize an econometric model of the lotto market in Israel. We also consider whether it is profitable to increase the frequency of lotto from once to twice a week.     

CONVEXITY,MAGNIFICATION, AND TRANSLATION: THE EFFECT OF MANAGERIAL OPTION‐BASED COMPENSATION ON CORPORATE CASH HOLDINGS

Using the distinctions among the convexity, magnification, and translation effects, we identify the pertinent parameters and examine empirically the relation between cash holdings and option‐based managerial compensation. We show that changes in delta reduce the effects of magnification and convexity on managerial risk aversion. We also provide evidence that there is a negative relation between the option‐based incentives delta and vega and cash holdings. These results are robust when incentives are extended to include all executive board members and when the sample is broken down according to different risk characteristics.     

IMPORTANCE OF THE FUND MANAGEMENT COMPANY IN THE PERFORMANCE OF SOCIALLY RESPONSIBLE MUTUAL FUNDS

We compare the performance of a sample of U.K.‐based socially responsible investment (SRI) funds with similar conventional funds using a matched‐pair analysis based on size, age, investment universe, and fund management company (FMC). We find that both the SRI and conventional funds outperform the market index about 50% of the time, even after fees. Subsample tests show that the SRI funds in our sample perform better in the pre‐ and postfinancial crisis periods but underperform during the financial crisis period. Importantly, we find that the FMC plays a major role in the outperformance of both SRI and conventional funds.