bluuebunny/crossref_metadata_2025_split huggingface dataset:
Bid‐Ask Spread Estimation For A Correlated Value Innovation Process
Authors: Bhardwaj Ravinder K. , Moore William T. 
Published: March 2005

AbstractPrevious studies of bid‐ask spread estimators based on serial covariance in returns document high proportions of positive serial covariances and therefore negative spread estimates. These findings may be due to the effects of time‐variation in expected returns. Although purging the effects of time‐varying expected returns yields more reasonable results, the bid‐ask spread estimates from daily and weekly returns are still materially different. We present a method that avoids the need for removing the effects of time‐varying expected returns by using a spread estimator developed directly for a correlated value innovation process. The new spread estimator not only yields more reasonable estimates of the bid‐ask spread than the Roll (1984) model, but the spread estimates from daily and weekly returns are almost equal.
Earnings Forecasts and the Information Contained in Spinoff Announcements
Authors: Best Ronald W. , Best Roger J. , Agapos A. M. 
Published: March 2005

AbstractThis study examines spinoff announcements in conjunction with financial analysts’ forecasts of earnings. The analysis shows that spinoff announcement abnormal returns are significantly related to the firm's information environment as proxieci by financial analysts’ earnings prediction errors. The findings also indicate that analysts significantly increase their short‐term earnings forecasts in response to spinoffs, but do not significantly revise their long‐term earnings forecasts. However, the earnings revisions are not significantly different across prediction error groups, which confirms that spinoff‐related abnormal returns cannot be attributed solely to expected performance gains.
The Impact of Asymmetric Information on Proxy Outcomes: An Empirical Test
Authors: Mensah Sam 
Published: March 2005

AbstractIf a manager‐shareholder is better informed about the true value of a firm's shares than outside shareholders, then the management of an undervalued firm is hypothesized to use its incumbent advantage to win proxy contests to maintain control and to benefit from share revaluations induced by the positive signal value of the contest. Using insider trades as indicators of management's beliefs, this study finds an association between insider beliefs and proxy contest outcomes. In particular, when insider trades over a five‐to‐six month period preceding the proxy date are net purchases, the odds in favor of management winning are significantly higher.
Optimal Asset Allocation Over the Business Cycle
Authors: Brocato Joe , Steed Steve 
Published: March 2005

AbstractUtilizing a broadly diversified portfolio of nine equity and debt assets, we show our portfolio's in‐sample Markowitz return/risk profile considerably improved by keying asset proportions to cyclical changes in economic activity. For comparative purposes, we use the same assets in a hypothetical buy‐and‐hold benchmark portfolio. We find the variance/covariance structure of our portfolio to be considerably altered by the phase of the business cycle, with the diversification benefits enjoyed during expansions substantially diluted during recessions. Thus, cyclical reallocation appears to be more important in maintaining Markowitz efficiency during recessions vis‐a‐vis expansions. In the latter case we find expansion reallocation producing a 3.53% increase in our portfolio's return‐to‐risk ratio (relative to a buy‐and‐hold position), while for recessions optimal reallocation leads to a 79.14% increase.
An Examination of Blume and Vasicek Betas
Authors: Lally Martin 
Published: March 2005

AbstractThis paper examines the Vasicek and Blume methods for correcting OLS betas. The primary conclusions are that typical applications of Vasicek's method seem to mistakenly equate the prior distribution with the cross‐sectional distribution of estimated rather than true betas, that Blume's implicit forecast of any tendency for true betas to regress towards one may not be desirable, that preliminary partitioning of firms into industry type groups (as is typical for Vasicek) is desirable, and that conversion of OLS equity betas to asset betas before applying the correction process is also desirable.
Golden Parachutes, Board and Committee Composition, and Shareholder Wealth
Authors: Davidson Wallace N. , Pilger Theodore , Szakmary Andrew 
Published: March 2005

AbstractTakeover defense mechanisms have become common for many modern corporations. In this research, we examine one potential takeover defense mechanism, golden parachutes. In particular, the relationship between the board of directors (and the board committees) and the question of whether the parachutes are aligned with shareholder interests or are a means of entrenching management, is studied.Results show that the composition of the board of directors’ compensation committee influences the market's perceived outcome of golden parachute adoption. When insiders and affiliated outsiders dominate the board's compensation committee, negative returns are more likely to occur than when independent outsiders control the committee.
A Futures Duration‐Convexity Hedging Method
Authors: Daigler Robert T. , Copper Mark 
Published: March 2005

AbstractA duration‐based hedge ratio is the conventional method to hedge against price changes of a fixed‐income instrument. However, the relationship between bond prices and interest rates is nonlinear, creating a convexity effect. Moreover, term structure changes often are nonparallel in nature, which causes imperfect hedges for the duration‐based hedging model. One solution to these problems is to dynamically change the duration‐based hedge ratio; however, this procedure is costly and is not effective when jumps in prices occur. A superior solution is to develop a two‐instrument hedge ratio that simultaneously hedges both duration and convexity effects. This paper first presents such a two‐instrument hedge ratio and then we examine its effectiveness. The simulation results show that this duration‐convexity hedge ratio is vastly superior to alternative hedge ratio methods for both simple and complex changes in the term structure.
Economically significant stock market forecasts
Authors: Peláez Rolando F. 
Published: March 2005

AbstractIt has been known for some time that a small, but statistically significant portion of the monthly variation in excess returns on the S&P 500‐stock index is predictable using ex ante information. This paper presents a model whose out‐of‐sample forecasts have economic significance. Specifically, a switching rule conditioned on out‐of‐sample forecasts of stock excess returns, produces investment outcomes that mean‐variance dominate the buy‐and‐hold. The switching strategy yields superior risk‐adjusted returns as judged by the composite performance measures of Treynor, Sharpe, and Jensen.
Do Beta Pricing Models Explain January Mean Reversion in Stock Returns?
Authors: Gangopadhyay Partha , Sen Jishnu 
Published: March 2005

AbstractJegadeesh (1991) finds evidence of January mean reversion in stock returns. In this paper we attempt to distinguish between two competing economic explanations of January mean reversion in returns: (1) mispricing in irrational markets versus (2) predictable time variation in security risk premia. Excess portfolio returns are decomposed into “explained” and “unexplained” components using the Fama‐French (1993) pricing model. The explained excess returns exhibit January mean reversion. The unexplained excess returns are not mean reverting. Mean reversion is therefore consistent with rational pricing in the framework of the Fama‐French model. Mean reversion can be attributed to the component of return related to a relative distress factor (SMB). A comparison with the Chen, Roll, and Ross (1986) macroeconomic factors reveals that mean reversion is due to the components related to SMB and bond default premium.
Economic Exchange Rate Exposure of U.S.‐Based MNCs Operating in Europe
Authors: Martin Anna D. , Madura Jeff , Akhigbe Aigbe 
Published: March 2005

AbstractThis study focuses on the economic exchange rate exposure of 168 U.S.‐based multinational corporations (MNCs) with foreign operations primarily in Europe. The sampling plan and other refinements may improve the estimation of exposure and detection of relevant determinants. Operating characteristics that represent economic exposure are evaluated for their ability, to explain cross‐sectional differences in exposure. More specifically, the degree of imbalance, which is a proxy for matching cash inflows and outflows, and proportion of export sales are able to explain differential exposure. Furthermore, shifts in the degree of imbalance and proportion of export sales are found to significantly explain shifts in exposure.
Futures Commitments and Commodity Price Jumps
Authors: Chatrath Arjun , Song Frank 
Published: March 2005

AbstractWe examine the relationship between the commitments of three of the largest groups of futures traders and the abnormal price movements in five agricultural commodities. The general evidence suggests that the commitments of futures traders have been increasing over time, whereas the frequency of price jumps have not. Regression results indicate a negative relationship between price jumps and the commitments of speculators and small traders. There is also evidence of a negative relationship between the number of speculators and cash market volatility, consistent with a host of speculation‐based theories.
Symposium on Market Microstructure: A Review of Empirical Research
Authors: Coughenour Jay , Shastri Kuldeep 
Published: March 2005

AbstractThis paper provides a review of empirical research in four topics within the area of market microstructure. Specifically, the paper provides an overview of issues related to (a) the estimation of the components of the bid‐ask spread, (b) the effects of order flow characteristics and regulations on market liquidity, (c) the differences and similarities between the NYSE and the Nasdaq and (d) the interaction between the options and underlying stock markets.
The Cross‐Sectional Relationship Between Trading Costs and Lead/Lag Effects in Stock & Option Markets
Authors: O'Connor Matthew L. 
Published: March 2005

AbstractPrior empirical research has failed to settle the question of lead/lag effects between stock and option markets. This study investigates the relation between cross‐sectional differences in trading costs and intraday lead/lag effects in stock and option markets. The data for the study comprise 19 firms sampled at five‐minute intervals over a two‐month period. Consistent with a trading cost hypothesis, results indicate overall stock market leading behavior. However, the lead appears to be related to option market trading costs. This study uses an error correction model framework to investigate the lead/lag effects. This approach provides information on both the long run equilibrating process as well as the short term interactions between stock and option markets. Information regarding the long run equilibrating process is important to the overall understanding of lead/lag effects and cannot be determined from time series models of differenced data. Specific criteria for assessing lead/lag effects in cointegrated series are also proposed. One advantage of these new criteria is their ability to identify leading behavior in the presence of feedback. All models are estimated with quote data and are constructed to eliminate overnight effects. Hence, the results are robust to previously identified distortions due to closing, overnight, and potential non‐trading effects. However, caution should be employed in generalizing the results as the study covers a two‐month trading period for a limited number of firms.
Bank Growth Choices and Changes in Market Performance
Authors: Cyree Ken B. , Wansley James W. , Black Harold A. 
Published: March 2005

AbstractChanges in bank market performance are compared for banks that choose not to grow, to branch, bank acquire, product expand, or some combination. Using the change in market value‐to‐book value ratios, banks that include acquiring other banks as part of their growth strategy have significant positive changes in performance. Positive performance by bank acquirers is in contrast to many studies, but prior research has not reviewed other growth activities in a single model, nor used market‐based measures to review performance over longer time periods following bank expansion.
Stock‐Price Effects of Internet Buy‐Sell Recommendations: The Motley Fool Case
Authors: Hirschey Mark , Richardson Vernon J. , Scholz Susan 
Published: March 2005

AbstractThe Motley Fool has attracted significant notoriety for stock market buy‐sell advice on the Internet. Across five different investment portfolios, Motley Fool buy recommendations appear to generate an average 1.62% rise in stock prices on the announcement day (0), and 2.40% returns over the announcement period (−1, +1). Sell recommendations seem to cause a −1.49% announcement day return, and a −3.33% announcement period return. Small cap growth stock buy recommendations for The Motley Fool's flagship Rule Breaker Portfolio are associated with returns of 3.66% on the announcement day, and a 6.15% return over the announcement period. These findings suggest herd‐like behavior among Internet investors, and that such announcements are more newsworthy than second‐hand buy‐sell recommendations published in traditional print and electronic media.
On Testing the Random‐Walk Hypothesis: A Model‐Comparison Approach
Authors: Darrat Ali F. , Zhong Maosen 
Published: March 2005

AbstractThe main intention of this paper is to investigate, with new daily data, whether prices in the two Chinese stock exchanges (Shanghai and Shenzhen) follow a random‐walk process as required by market efficiency. We use two different approaches, the standard variance‐ratio test of Lo and MacKinlay (1988) and a model‐comparison test that compares the ex post forecasts from a NAÏVE model with those obtained from several alternative models: ARIMA, GARCH and the Artificial Neural Network (ANN). To evaluate ex post forecasts, we utilize several procedures including RMSE, MAE, Theil's U, and encompassing tests. In contrast to the variance‐ratio test, results from the model‐comparison approach are quite decisive in rejecting the random‐walk hypothesis in both Chinese stock markets. Moreover, our results provide strong support for the ANN as a potentially useful device for predicting stock prices in emerging markets.
Asset Maturity, Debt Covenants, and Debt Maturity Choice
Authors: Goswami Gautam 
Published: March 2005

AbstractThe existing research on debt‐maturity under asymmetric information has focused on the impact of differential information regarding asset quality on the debt maturity decision. This research has generally indicated the optimality of short‐term debt financing as a vehicle of mitigating the adverse selection problem. In this paper, I consider the impact of information asymmetry regarding the maturity structure of cash flows on the debt maturity decision. In this context, long‐term debt is generally the form of debt financing most effective in alleviating the adverse selection problem. I also show that costs of adverse selection may induce some mismatching of debt maturity and asset maturity in the presence of significant transaction costs.
Multiple Bids, Management Opposition, and the Market for Corporate Control
Authors: Lefanowicz Craig E. , Robinson John R. 
Published: March 2005

AbstractWe use regression analysis to disentangle the wealth effect for acquired firm shareholders of management opposition and multiple bids (e.g., multiple bidders and bid revisions). Although multiple bidders and bid revisions occur more frequently for opposed acquisitions, opposition is not associated with incremental acquisition returns for acquisitions with multiple bidders. We also find that management opposition has no significant incremental effect on single bidder acquisitions unless the acquiring firm revises its initial bid. These findings indicate that rather than amplifying acqiuisition returns directly, management opposition instead serves as a negotiating tool to solicit additional bids.
The Pricing of Equity Carve‐Outs
Authors: Prezas Alexandros P. , Tarimcilar Murat , Vasudevan Gopala K. 
Published: March 2005

AbstractThis article examines the pricing of stock for 251 equity carve‐outs during the 1986–1995 period. We document a mean initial‐day return of 5.83% and a mean one‐week return of 5.43%. Among carve‐outs, the initial underpricing is lower for issues represented by high prestige investment bankers and those that have a lower offer price. In comparison with 251 initial public offering (IPO) firms matched by size and book‐to‐market ratio of equity, carveouts exhibit significantly lower initial‐day returns, but their buy‐and‐hold returns for sixmonth and one‐year periods are not significantly different from IPOs. The IPO firms have a three‐year return of 28.82% which is significantly higher than the 21.07% return for the carve‐out firms.
Aggregate Dividend Behavior and Permanent Earnings Hypothesis
Authors: Pan Ming‐Shiun 
Published: March 2005

AbstractThe study examines the aggregate dividend behavior of U.S. corporations based on the permanent earnings hypothesis. Using annual data of aggregate earnings and dividends from 1871–1993, I find that although managers change dividends proportional to permanent earnings changes, they make revisions with a larger percentage change in dividends than in permanent earnings. The results from the post‐war data show that firms follow a partial adjustment policy with a long‐term dividend payout target in mind and make revisions with a delay. The quarterly data analysis yields results similar to those of the post‐war annual data.
Selectivity and Market Timing Performance of Fidelity Sector Mutual Funds
Authors: Dellva Wilfred L. , DeMaskey Andrea L. , Smith Colleen A. 
Published: March 2005

AbstractIn this paper, we test the selectivity and timing performance of the Fidelity sector mutual funds during the 1989–1998 time period. We use the S&P 500, the Dow Jones Industry Group Total Return Indexes, and the Dow Jones Subgroup Total Return Indexes as benchmarks. When we use the Dow Jones Industry benchmarks, our results indicate that many sector fund managers have positive selectivity but negative timing ability. We also find that the results are sensitive to our choice of benchmark and timing model.
Is Volatility Risk for the British Pound Priced in U.S. Options Markets?
Authors: Sarwar Ghulam 
Published: March 2005

AbstractThis paper estimates the premium for volatility risk for European currency options written on British pounds. The average annualized premium for volatility risk is neither statistically different from zero nor invariant to the option's moneyness. However, the risk premium is positively and nonproportionaly related to the level of volatility, except for out‐of‐the‐money options. Finding a zero premium for volatility risk does not undermine the assumption of a zero‐price volatility risk in many extant stochastic‐volatility option pricing models and the option pricing formulas in those models.
Further Evidence on Mean Reversion in Index Basis Changes
Authors: He Yan , Wu Chunchi 
Published: March 2005

AbstractWe provide further evidence on the stochastic behavior of the futures minus cash index basis. In addition to infrequent trading, we identify index aggregation as an additional source of mean reversion in basis changes. An aggregation of individual stocks in the index portfolio produces a moving average component that induces a negative autocorrelation in basis changes. Our empirical results show that index price and basis changes often contain a moving average component. After the effects of infrequent trading and index aggregation are purged, we find that the autocorrelation of the adjusted index basis changes is significantly reduced.
Evidence and Implications of Increases in Trading Volume Around Exchange Listings
Authors: Tandon Kishore , Webb Gwendolyn P. 
Published: March 2005

AbstractAfter controlling for market volume trends and differences in volume measurement between the Nasdaq and the exchanges, we find that mean trading volumes increase significantly for Nasdaq stocks that list on the Amex or the NYSE. Furthermore, stocks with low (high) pre‐listing volume tend to realize the largest volume increases (decreases) as well as the best (worst) post‐listing performance. Our results support the hypothesis that stocks with high past trading volumes tend to experience lower future returns, and shed new light on the nature and possible causes of poor post‐listing stock performance.
Internal Finance and Corporate Investment
Authors: Kholdy Shady , Sohrabian Ahmad 
Published: March 2005

AbstractThis paper examines Pecking Order/Free Cash Flow behavior in small ($25–$50 million), medium ($100–250 million), and large ($1000 million and over) firms. The purpose is to proffer an explanation for the important role of cash flow on the investment expenditure of firms that is more complete than the commonly given accounts. The Pecking order theory (PO) emphasizes the value‐enhancing influence of cash flow, while the free cash flow hypothesis (FCF) underscores its value‐destroying effect. Using the vector error correction model, we find that although the overall behavior of small firms support the pecking order theory, the cash flow of these firms does not have any causal effect on their investment. We further find evidence of free cash flow theory in large firms.
Market Quote and Spread Component Cost Behavior Around Trading Halts for Stocks Interlisted on the Montreal and Toronto Stock Exchanges
Authors: Kryzanowski Lawrence , Nemiroff Howard 
Published: March 2005

AbstractWe use intraday quotes and transactions on halted securities that interlisted on the Toronto Stock Exchange and Montreal Exchange to decompose the spreads and examine quote depths. Our results show that order‐processing costs differ for trading halts at the open compared to halts during the rest of the trading day. We find that the adverse‐selection cost component of the spread is higher around trading halts and highest at the trading halt. We also find that print‐media articles that appear within the four‐day window centered on the halt have no impact on the time‐series behavior of the spread cost.
Sources of Capital Market Segmentation: Empirical Evidence from Finland
Authors: Vaihekoski Mika , Nummelin Kim 
Published: March 2005

AbstractBecause Finland has experienced profound economic changes and financial deregulation since the mid‐1980s, we use it as a laboratory to explore issues related to time‐varying global equity market integration. Using a Finnish perspective, we construct two different portfolios of Finnish firms and a conditional one‐factor international asset pricing model. We examine whether the segmentation varies over time and across assets. We use time‐series variables for changing market integration (lagged foreign equity ownership, difference between Finnish and German short‐term interest rates, and a portfolio‐specific liquidity measure) and crosssectional variables (size and book‐to‐market ratios and industry sector) to show variation in integration.