bluuebunny/crossref_metadata_2025_split huggingface dataset:
Simulating and Forecasting Utility Stock Returns: Arbitrage Pricing Theory vs. Capital Asset Pricing Model
Authors: Bubnys Edward L. 
Published: March 2005

AbstractJust when the capital asset pricing model (CAPM) has become accepted by public utility regulators as a method for estimating a utility's screening rate, academic criticism of the model's theoretical and empirical shortcomings has led to empirical testing of the alternative arbitrage pricing theory (APT). This paper expands on recent APT‐CAPM performance comparisons by simulating returns of public utility stocks using versions of both models, as was done by Bower, Bower, and Logue in a 1984 paper. In addition, the models are used for ex‐post forecasting of returns in a subsequent time period. The Litzenberger‐Ramaswamy method is used to correct for errors‐in‐variables in the CAPM cross‐sectional equation. This allows for estimating the security market line using firm betas. The same methodology is used in the APT stages. Three different criteria—the Theil inequality, the sources of mean square error, and Chen's estimated weights of expected return‐are used to compare CAPM and APT simulation and forecasting of the equity screening rates. Tested on a sample of 128 public utility companies, results show that neither model is clearly dominant. There is a tendency for reversal of performance. The model that is superior for simulating returns tends to be inferior for forecasting them, and vice‐versa.
Sinking Funds and the Agency Costs of Corporate Debt
Authors: Kao Chihwa , Wu Chunchi 
Published: March 2005

AbstractThis paper examines whether a firm's sinking fund decision is affected by agency costs. The paper argues that sinking funds can be an effective device to resolve the problems of information asymmetry, risk incentives, and suboptimal investments. Empirical tests are provided. Results show that firms with certain characteristics related to agency problems tend to adopt a sinking fund provision in the bond indenture.
Scope Economies in Banking: The Hybrid Box‐Cox Function
Authors: Cebenoyan A. Sinan 
Published: March 2005

AbstractThis paper provides evidence on scope economies in banking using the Box‐Cox hybrid functional form on five products and two inputs. A factor demand equation augmented system of equations in estimated using the iterative Zellner technique. Strict Willig‐type scope estimates indicate that there are scope diseconomies in the sample of banks in the Functional Cost Analysis (FCA) Program data for 1983.
Stock Repurchases and Excess Returns: An Empirical Examination
Authors: Pugh William , Jahera John S. 
Published: March 2005

AbstractThe excess returns associated with repurchase announcements are viewed largely as a reaction to management's statement that the firm's shares are underpriced; management's signal provides new information that enhances the firm's market value. Although earlier studies have found the excess return to be closely related to the premium set by managment, other factors play a part in determining both the market reaction and the premium level set by management. Among these factors ar relative market capitalization, holdings by institutions, immediate alternative uses for cash, level of insider control, recent stock price performance, relative size of the tender offer, and the resultant change in the firm's capital structure.
Learning Portfolio Management by Experience: University Student Investment Funds
Authors: Lawrence Edward C. 
Published: March 2005

AbstractIn this age of greater cooperation between academia and industry, it is surprising to find a general lack of awareness by both parties as to the progress being made to closely integrate financial theory with practice. This paper is intended to bring colleagues in universities and business up to date in an area where considerable success has been achieved, namely, investments and portfolio management. Through a survey of universities across the country, a comprehensive list of programs that allow students to manage portfolios of real dollars has been compiled. It is hoped that sharing the results of this survey will encourage further cooperation in establishing new innovative programs in all areas of business.
A Comprehensive Test of Futures Market Disequilibrium
Authors: Lukac Louis P. , Brorsen B. Wade 
Published: March 2005

AbstractWhether or not trading with technical analysis is profitable is a controversial topic. This study seeks to add to our knowledge about this controversy by providing a comprehensive test of the profitability of technical trading systems. Trading is simulated for 23 trading systems on 30 futures markets for 11 years. All but two trading systems had significant gross returns. Thus, the results strongly reject the random walk model and suggest that disequilibrium models more appropriately describe daily futures prices. Although returns were less than expected by many users of these systems, several systems did generate returns significantly above transaction costs. The result for net returns are not conclusive, but they suggest there may be causes of disequilibrium beyond transaction costs. No conclusion is made about market efficiency since possible causes of disequilibrium beyond transaction costs exist.
The Valuation of Semiannual Bonds between Interest Payment Dates: A Correction
Authors: Tse K. S. Maurice , White Mark A. 
Published: March 2005

AbstractThis note provides a correction to Taylor's 1988 work on the valuation of semiannual coupon bonds between interest payment dates. It shows that the discrepancy in values between Taylor's model and the standard Wall Street pricing formula is much smaller than indicated by Taylor and is unlikely to generate opportunities for arbitrage profits.
The Opportunity Cost of a Mean‐Variance Efficient Choice
Authors: Tew Bernard V. , Reid Donald W. , Witt Craig A. 
Published: March 2005

AbstractThe mean‐variance criterion is one of the most frequently used methods for selecting investment portfolios. Yet, because it is an approximation of an investor's maximum expected utility choice, some theoreticians and practitioners have criticized the approach. This paper examines the investment loss that different investors experience by accepting a mean‐variance efficient portfolio. Simulated security returns with extreme distributional characteristics are used to determine the extent of an investor's loss. The results indicate that even under very unreasonable investment distributional assumptions, an investor's loss by accepting a mean‐variance efficient choice rarely exceeds a small fraction of one percent per invested dollar.
Bond Yields, Ratings, and Financial Information: Evidence from Public Utility Issues
Authors: Reiter Sara A. , Ziebart David A. 
Published: March 2005

AbstractThis study investigates the relative roles of bond ratings and financial information in the setting of bond yields. Structural equation modeling techniques are used to learn whether ratings determine yields or whether both ratings and yields are determined by a concurrent set of economic and financial factors. Tests of alternative structural model configurations provide evidence regarding the associations between bond ratings, financial information, and bond yields. Both ratings and financial information are found to play an important role in determining bond yields. In addition, yields are consistent with the higher rating in cases of split ratings.
Valuation Effects of New Securities Issuance by Bank Holding Companies: New Evidence
Authors: Horvitz Paul M. , Lee Insup , Robertson Kerry L. 
Published: March 2005

AbstractThis study examines the announcement impact of bank holding company (BHC) security offerings on shareholder wealth. The results from this study regarding the effects of preferred stock, convertible debt, and straight debt issuances are largely consistent with previous studies. However, in contrast to previous studies pertaining to both BHCs and nonfinancial firms, this study does not find statistically significant negative announcement effects of common stock issues. This particular finding is consistent with the argument that an increase in the capital ratio may have a positive impact on common stock prices of BHCs under certain circumstances.
A Brief Review of Catastrophe Theory and a Test in a Corporate Failure Context
Authors: Gregory‐Allen Russell B. , Henderson Glenn V. 
Published: March 2005

AbstractCatastrophe theory (CT) is a mathematical theory that attempts to describe a system exhibiting discontinuous behavior under continuous stimuli. Although CT has been used to describe corporate bankruptcy, this is an application that has not been tested. This paper reviews CT and provides such a test. We construct a time series of stock returns on companies that have filed for Chapter 11. Under certain, frequently occurring conditions, CT would predict a structural shift in firm stock returns as the data of filing is approached. Results confirm that such a shift does occur and in a way consistent with the CT prediction. Our findings both support the use of CT to describe corporate bankruptcy and raise questions about some techniques frequently used to study bankruptcies.
Optimal Asset Abandonment and Replacement: Tax and Inflation Considerations
Authors: Chen Son‐Nan 
Published: March 2005

AbstractThe tax and inflation effects on the abandonment and replacement policies are examined for capital assets. The tax effect is shown to defer abandonment for some classes of assets while the asset duration is shortened for others depending on the characteristic of the marginal rates of return of extending asset life. Moreover, inflation may increase or decrease the asset duration depending on the rates of inflation growth of asset nominal cash flows and abandonment value and depending on the relative benefit of asset abandonment. In addition, the Fisher hypothesis of constant real returns relative to anticipated inflation is also examined in the case of asset abandonment and replacement. The results derived for a single cycle of replacement carry over to the replacement policy in an infinite cycle of replacement.
Cross‐Hedging: Basis Risk and Choice of the Optimal Hedging Vehicle
Authors: Castelino Mark G. , Francis Jack C. , Wolf Avner 
Published: March 2005

AbstractThe basis between a futures contract and its underlying instrument is an important measure of the cost of using the futures contract to hedge. In a cross‐hedge, the relative size of the basis of alternative hedging vehicles often plays a decisive role in the selection of the optimal hedging vehicle. After adjusting hedge ratios for basis risk, a genuine risk‐cost trade‐off is seen in hedging 90‐day certificates of deposit with either the Treasury bill contract or the Eurodollar contract. The Eurodollar contract was not uniformly superior as generally believed.
The Impact of Bid‐Ask Prices on Market Anomalies
Authors: Branch Ben , Echevarria David P. 
Published: March 2005

AbstractA substantial body of literature on security market anomalies has evolved since the articulation of the efficient markets hypothesis. These anomalies include the size, January, and weekend effects. The evidence of such anomalies has been based upon returns computed from closing prices. Although readily available, analysis of closing prices may not reflect returns obtainable by public traders utilizing market orders to execute trades. We have demonstrated elsewhere that returns computed from closing prices are biased upward compared with returns that would have resulted from using market orders. This study reexamines the evidence on two market anomalies using returns generated in a manner more consistent with the actual returns available to actual market participants.
The Differential Impact of Federal Reserve Margin Requirements on Stock Return Volatility
Authors: Kumar Raman , Ferris Stephen P. , Chance Don M. 
Published: March 2005

AbstractThis study examines the effect of changes in margin requirements on stock price volatility. We examine the possibility that the impact of margin requirements varies with a stock's degree of speculative interest. Using four alternative measures of speculative interest, we divide our sample into ten portfolios. We find no consistent evidence of a relationship between margin requirements and changes in volatility for any portfolio. The inconsistent and often contradictory results produced by these changes question its usefulness by Federal Reserve decision makers.
Optimal Refunding Strategies, Transaction Costs, and the Market Value of Corporate Debt
Authors: Ling David C. 
Published: March 2005

AbstractThe primary purpose of this paper is to consider both qualitatively and quantitatively the effects of refunding transaction costs and interest rate uncertainty on optimal refunding strategies and the market value of corporate debt. A dynamic model of corporate bond refunding with transaction costs is developed that simultaneously solves for the optimal refunding strategy, the value of the refunding call option, the value of the bond liability to the firm, and the market (investor) value of the fixed‐rate contract. We provide examples in which the price of the callable bond does exceed the call price, and we examine whether or not typical levels of refunding costs are sufficient to explain the magnitude and duration of frequently observed premiums on callable corporate bonds.
Partially Anticipated Convertible Calls
Authors: Lin Ji‐Chai , Chen K. C. 
Published: March 2005

AbstractThis paper derives estimators that measure the impact of foregoing an opportunity to call convertible debt and the call announcement effect on the value of the firm. The results indicate that positive abnormal returns are associated with foregoing a call, and returns are negative upon the announcement of the call. These results are consistent with Harris and Raviv's hypothesis that managers with favorable information delay their calls and will call the debt if and only if their information is unfavorable.
The Impact of Value Line Special Situations Recommendations on Stock Prices: Evidence From the Over‐the‐Counter Market
Authors: Pawlukiewicz James E. , Preece Dianna C. 
Published: March 2005

AbstractThe value to investors of the information provided by the Value Line Investment Service has been the subject of discussion for many years. This paper examines the information content of the recommendations made by the Value Line Special Situations Service to buy (sell) specific stock issues. The advice given by Value Line generates significant abnormal returns to shareholders near its release date. However, when the price response over longer periods is considered, the effect of the recommendations appears to be transitory. Further, there appears to be no difference in the overall price response between listed and over‐the‐counter securities.
The Asset Price Theory of Shareholder Revaluations: Tests with the Tax Reforms of the 1980s
Authors: Downs Thomas W. , Demirgures Cuneyt 
Published: March 2005

AbstractA tax reform providing incentives for fixed investment may increase shareholder wealth because after‐tax cash flows on planned investment increase. Alternatively, shareholder wealth may decline because existing assets receive disadvantageous tax treatment relative to new ones and equities are largely claims on existing assets. This study tests the alternative hypothesis by predicting in a simulation model the revaluation of existing assets resulting from the 1981 and 1986 tax acts and then by comparing the predictions to stock returns data. The results reject the hypothesis that cumulative excess returns accruing because of tax reform equal the revaluation on existing assets.
An Empirical Test of Investment Restrictions and Efficiency in the High‐Yield Debt Market
Authors: Hawley Delvin D. , Walker M. Mark 
Published: March 2005

AbstractThe results of this study indicate that bondholders earn significant abnormal returns following upgrades from speculative to investment grade. In contrast, major downgrades and upgrades from investment grade to highquality have no effect on bondholder wealth. These results support the conclusion that investment constraints for institutional investors inhibit the price of speculativegrade bonds from rising to reflect decreases in default risk until the rating change actually occurs.
An Empirical Analysis of Stock Prices in Major Asian Markets and the United States
Authors: Chan Kam C. , Gup Benton E. , Pan Ming‐Shiun 
Published: March 2005

AbstractThis study uses unit root and cointegration tests to examine the relationships among the stock markets in Hong Kong, South Korea, Singapore, Taiwan, Japan, and the United States. All the stock prices are analyzed both individually and collectively to test for international market efficiency. Unit roots in stock prices are found. Pairwise and higher‐order cointegration tests indicate that there is no evidence of cointegration among the stock prices. The findings suggest that the stock prices in major Asian markets and the United States are weak‐form efficient individually and collectively in the long run. It also implies that international diversification among the markets is effective.
An Empirical Comparison of Alternative Methods for the Estimation of the Degree of Operating Leverage
Authors: Dugan Michael T. , Shriver Keith A. 
Published: March 2005

AbstractMuch diversity exists in the approaches used to estimate the degree of operating leverage in empirical financial research. This study analyzes and compares two techniques for the estimation of the degree of operating leverage coefficients for a sample of 245 firms in seven different industries over two alternative estimation periods. The results indicate that the O'Brien and Vanderheiden estimation technique differs significantly from the Mandelker and Rhee estimation technique. Furthermore, the O'Brien and Vanderheiden estimates appear to be more consistent with the classical ex ante model of degree of operating leverage coefficients. These results may facilitate future research on the estimation of the degree of operating leverage and on the relationship between operating leverage and systematic risk.
Agency Theory and Entry Barriers in Banking
Authors: Rose Peter S. 
Published: March 2005

AbstractAgency theory suggests that, in imperfect labor and capital markets, managers will seek to maximize their own utility at the expense of corporate shareholders. Indicators of such managerial behavior may include expense preferencing in which some factor costs are elevated above optimal levels needed for efficient production or avoidance of optimal risk positions that maximize wealth opportunities for stockholders. This study of more than 6400 banks finds that recent reductions in legal entry barriers have generated results generally consistent with agency theory with a lowering of noninterest operating expenses, increased employee productivity, increased acceptance of portfolio risk, and greater dividend rates to shareholders.
An Empirical Examination of Investment Banking Reputation Measures
Authors: Carter Richard B. , Dark Frederick H. 
Published: March 2005

AbstractThis paper empirically examines the explanatory power of investment banking reputation measures. One of these measures, a nineteen‐tier indicator of underwriter reputation, is determined by the relative position of the underwriter's name within the tombstone announcements of security offerings. An alternative measure assigns four ranks according to the investment banking bracket of the underwriter. This “bracket” measure is considerably easier to create than the “tombstone” measure. We employ both measures in identical initial public offering empirical models and assess their relative performance. In all of the models tested, the tombstone measure appears to be superior. Moreover, we find that, unlike the bracket measure, the tombstone reputation indicator significantly explains the initial returns to initial public offerings even when a measure of ex post uncertainty is included in the model.
Management Resistance to Takeover Bids and Shareholder Response
Authors: Sinha Sidharth 
Published: March 2005

AbstractThis paper presents a model of management resistance to takeover bids in which there is both a managershareholder conflict of interest due to perquisite consumption and information asymmetry. The optimal response of shareholders to such resistance is then analysed. The paper highlights the role of information asymmetry and perquisite consumption in explaining the empirical evidence on takeovers and the institutional features of golden parachutes and greenmail.
The Choice Among Long‐Term Financing Instruments for Public Utilities
Authors: Chen Chao , Fanara Philip 
Published: March 2005

AbstractThis study examines the decision of regulated utilities to raise new financing via common stock, debt, or preferred stock offerings. We develop several logit models to test how a set of relevant variables affects the issuing choice. These variables include the level of insider ownership, regulatory climates, measures of aggregate market conditions, bankruptcy risk, deviations from the long‐and short‐term target ratios, asset composition, etc. In addition, this paper tests whether the cross‐sectional level of debt ratio is related to some of these same factors. Our findings indicate that U.S. electric utilities are not influenced by market timing when making a choice among long‐term financing instruments. However, our results do show that ownership structure variables, such as the number of directors and officers, seem to have a significant negative influence upon the choice of common stock, thus lending support to Friend and Lang's finding. In addition, capital structure seems to matter for utilities.
Risk‐Adjusted Day‐of‐the‐Week, Day‐of‐the‐Month, and Month‐of‐the‐Year Effects on Stock Indexes and Stock Index Futures
Authors: Khaksari Shahriar , Bubnys Edward L. 
Published: March 2005

AbstractThis study uses risk‐adjusted returns based on the Sharpe Performance Measure to evaluate the presence of three anomalies in two stock index futures, the futures of a smaller firm synthetic index, and their respective underlying spot indexes. The three anomalies are the day‐of‐the‐week, the month‐of‐the‐year, and the day‐of‐the‐month effects. Using the nonparametric Kruskal‐Wallis test, we find more evidence of day‐of‐the‐week and day‐of‐the‐month effects in futures index price behavior than in their underlying spot indexes. The January effect is found to be more pronounced for spot indexes than for stock index futures contracts. It is also more pronounced in the smaller firm synthetic index. Our results tend to disagree with efficient market proponents.
Do More Risk‐Averse Investors Have Lower Net Worth and Income?
Authors: McInish Thomas H. , Ramaswami Sridhar N. , Srivastava Rajendra K. 
Published: March 2005

AbstractThis study examines the relationship between attitude toward risk and both net worth and income. The data are obtained from a financial diary kept by a national, scientifically selected sample of more than 3000 households. Results show that both net worth and income are negatively related to risk aversion.
Dividend Signalling Equilibria: Quantitative Evidence From The Brussels Stock Exchange
Authors: Beer Francisca M. 
Published: March 2005

AbstractThe objective of this research is to document the market reaction to dividend changes on the Brussels Stock Exchange and to relate it to information releases by the firms. The results show important differences between Belgian investors' behavior and U.S. investors' behavior. On the Brussels Stock Exchange, when companies use dividends as the usual way to remunerate stockholders, the market reaction to unexpected dividend changes is weak and statistically insignificant. The market reaction to dividend initiations is also quite insignificant. However, when companies both release information regarding their activities (commercial, financial, or social information) and initiate dividends, the market reaction is comparable to what has been documented in previous U.S. studies.