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1
Aboody, David, Omri Even-Tov, Reuven Lehavy, and Brett Trueman. "Overnight Returns and Firm-Specific Investor Sentiment." Journal of Financial and Quantitative Analysis 53, no. 2 (March 1, 2018): 485–505. http://dx.doi.org/10.1017/s0022109017000989.
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We examine the suitability of using overnight returns to measure firm-specific investor sentiment by analyzing whether they possess characteristics expected of a sentiment measure. We document short-term overnight-return persistence, consistent with existing evidence of short-term persistence in the share demand of sentiment-influenced investors. We find that short-term persistence is stronger for harder-to-value firms, consistent with existing evidence that sentiment plays a larger role for such firms. We show that stocks with high (low) overnight returns underperform (outperform) over the longer term, consistent with prior evidence of temporary sentiment-driven mispricing. Overall, our evidence supports using overnight returns to measure firm-specific sentiment.
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S., Kannadas. "Investment behavior of short-term versus long-term individual investors of PAN India – An empirical study." Investment Management and Financial Innovations 18, no. 2 (June 1, 2021): 223–33. http://dx.doi.org/10.21511/imfi.18(2).2021.18.
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Investment activity, followed by household and external savings, often plays a decisive role in strengthening the financial status of individual investors, as it contributes to further increases in wealth. This study analyzes the investors’ investment motives and actions to find better investment strategies and to do a systematic review of the investment behavior available for both short- and long-term individual investors. The study is mainly focused on factors and priorities influencing investment decisions. The data were obtained using the questionnaire approach from 201 individual investors within the age group from 18 to 80 from different parts of India. Every individual investor’s risk-tolerant score has been calculated on the basis of the investors’ holistic behavior, namely, investors with high-risk appetite, investors with a moderate and low-risk appetite. Non-parametric tests are applied to evaluate the behavioral approach of investors that are differently correlated to these factors. T-test is used to distinguish between the population mean of short-term and long-term investors’ risk-taking ability and priority of safeguarding the principal over return preference, rather than identified investment factors. As a result of the study, the factors influencing the investors’ decisions were found: income level, market participation experience and risk-return proportions, rather than age, gender, risk-taking ability and investment priority. This study enhances the existing literature by analyzing income, risk-return proportion and investment experience factors that influence investment decisions.
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Oldham, Matthew. "Understanding How Short-Termism and a Dynamic Investor Network Affects Investor Returns: An Agent-Based Perspective." Complexity 2019 (July 3, 2019): 1–21. http://dx.doi.org/10.1155/2019/1715624.
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The unexplained and inconsistent behavior of financial markets provides the motivation to engage interdisciplinary approaches to understand its intricacies better. A proven approach is to consider investors as heterogeneous interacting agents who form information networks to inform their investment decisions. The rationale is that the topology of these networks has contributed to a better understanding of the erratic behavior of financial markets. Introducing investor heterogeneity also allows researchers to identify the characteristics of higher performing investors and the implications of investors exhibiting short-termism, a feature recognized by some as detrimental to the performance of the economy. To address these topics, an agent-based artificial stock market is implemented, where investors utilize various information sources, including advice from investors in their network, to inform their investment decisions. Over time investors update their trust in their information sources and evolve their network by connecting to outperforming investors—Oracles—and discarding poor advisers, thereby simulating the evolution of an investor network. The model’s most significant finding is uncovering how the market’s behavior is materially affected by the time-horizon of investors, with short-term behavior resulting in greater volatility in the market. Another finding is the reason why short-term investors generally outperform their long-term counterparts, particularly in more volatile environments. By providing significant insights into the formation of an investor network and its ramifications for market volatility and wealth creation (destruction), this paper provides crucial clues regarding the empirical data that needs to be collected, assessed, and tracked to ensure policymakers and investors better understand the dynamics of financial markets.
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Perez, Katarzyna. "Polish Absolute Return Funds And Stock Funds. Short And Long Term Performance Comparison." Folia Oeconomica Stetinensia 14, no. 2 (December 1, 2014): 179–97. http://dx.doi.org/10.1515/foli-2015-0016.
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Abstract In this paper I focus on analyzing whether Polish absolute return funds, which I call quasi-hedge funds, add value to a portfolio of an individual investor by reaching higher returns than Polish stock funds. I use a sample of 25 Polish absolute return investment funds to contrast their short and long term performance, measured by Sharpe, Sortino and Jensen ratios, to the short and long term performance of 20 biggest Polish stock funds and build rankings based on that performance. Later I build funds of funds (with a different number of stock funds and/or quasi-hedge funds) and check which of them is the most efficient. I find out that in both short and long term Polish quasi-hedge funds have better returns than stock funds and they add much value to the investors’ portfolios. It can be explained by the fact that they are much smaller and younger than traditional funds, so they have much higher potential to grow and reach abnormal returns.
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Kumar Inani, Sarveshwar, Harsh Pradhan, R. Prasanth Kumar, and Ajay Kumar Singal. "Do daily price extremes influence short-term investment decisions? Evidence from the Indian equity market." Investment Management and Financial Innovations 19, no. 4 (November 7, 2022): 122–31. http://dx.doi.org/10.21511/imfi.19(4).2022.10.
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For short-term investments in equity markets, investors use price points, candlestick patterns, moving averages, support and resistance levels, trendlines, price patterns, relative strength index, and moving average convergence-divergence as reference(s) for making decisions. This study investigates whether investors use daily price extremes (highest and lowest prices for the day) for making short-term investments or trading decisions in the context of the Indian equity market. Using 6,902 observations of daily data of the NIFTY 50 index since its launch, it is observed that daily price extremes (high or low) have no impact on opening returns of the next trading day. Based on the dummy regression analysis, next-day opening returns were found to be statistically significant, which implies the presence of momentum behavior. However, insignificant coefficients for high or low-price extremes of the day mean that investors do not use them as an anchor or reference point for decisions. Results are consistent over time and robust to the rising or falling markets. Further, opening returns were seen to be more volatile than closing returns in the first half of the sample, and they are less volatile in the second half, implying that markets have become more efficient in the last few years.
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Verma, Rahul, Gökçe Soydemir, and Tzu-Man Huang. "Are smart beta funds really smart? Evidence from rational and quasi-rational investor sentiment data." Review of Behavioral Finance 12, no. 2 (August 12, 2019): 97–118. http://dx.doi.org/10.1108/rbf-08-2018-0084.
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Purpose The purpose of this paper is to examine the relative effects of rational and quasi-rational sentiments of individual and institutional investors on a set of smart beta fund returns. The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals. Design/methodology/approach The results of the impulse functions generated from a multivariate model suggest that the smart beta fund returns are negatively (positively) impacted by individual (institutional) investor sentiments. Findings The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). Originality/value These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals.
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Banchit, Azilawati, Sazali Abidin, Sophyafadeth Lim, and Fareiny Morni. "Investor Sentiment, Portfolio Returns, and Macroeconomic Variables." Journal of Risk and Financial Management 13, no. 11 (October 29, 2020): 259. http://dx.doi.org/10.3390/jrfm13110259.
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Investor sentiment is an important aspect of behavioural finance, which provides explanation of anomalies to the asset’s intrinsic values. Sentiments can easily affect individual investors. Historically, Australia is regarded as rich in resources but poor in capital, and this motivates the paper to further study and compare the effects of investor sentiment on performance returns. Aggregate and cross-sectional effects, as well as predictive regression analysis to forecast the relationships, while controlling for the macroeconomic variables, are used by employing Consumer Confidence Index (CCI) and trade volume as sentiment proxies. Contrary to some studies with aggregate stock markets, it is discovered that in the short term, investor sentiment poses a positive impact with strong predictive power on the forecast of portfolio returns but not so much in the long run, which supports the classical theories of rational investors. In both Australian and New Zealand markets, the sentiment proxies also cannot predict the returns portfolios with dividends in the long/short portfolio and book-to-market ratio long/short portfolio.
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Min, Jae Hoon. "Are Korea individual investors irrational in initial public offering (IPO) market? An explanation from the winner’s curse perspective." Asian Academy of Management Journal of Accounting and Finance 18, no. 1 (July 29, 2022): 33–58. http://dx.doi.org/10.21315/aamjaf2022.18.1.2.
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Individual investors are often regarded as irrational sentiment investors whose investment behaviour is affected by psychological factors. This study measures the actual investment return of individual investors who participated in initial price offering (IPO) stock investment in the Korean market from the short-term and long-term perspective and investigates the relationship with IPO characteristics that affect the investment sentiment of individual investors. Even though the underpricing of IPO stocks on the first day of listing on average reached 31% over the past 13 years, individual investors in the Korean stock market earned very little actual return on IPO stock investment. The market-adjusted return on IPO stock investment on the first day was about −0.5%, and even if they held IPO stocks for one year after listing, it was only 3.4%. The so-called winner’s curse, in which individual investors are allocated relatively many overvalued stocks appears to be present in the Korean IPO market. The allocation of IPO stocks by individual investors depends on several factors that reflect individual investors’ sentiment, such as past performance of previous IPOs, past industrial returns, institutional investors’ investment intent, offering size, an upward revision of the offer price, and issuing firm’s financial soundness. It was found that the higher the individual allocation rate, the lower the short-term investment return on the first trading day, confirming the winner’s curse risk of individual investors. However, in the long run, a reversal of returns was observed, in which the long-term returns of IPO stocks with high individual allocation rates rose. In order to mitigate the winner’s curse risk, it is desirable to reform IPO pricing mechanisms and allocation rules in a way that reduces the asymmetry of information between institutional and individual investors and reflects the subscription demand of individual investors.
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Liu, Ying-Sing. "EFFECTS OF THE PRE-REPURCHASE SYSTEMATIC RISK ON THE RELATIONSHIP BETWEEN INVESTOR BEHAVIOR, MARKET FACTORS AND THE STOCK PRICE RESPONSES." Journal of Business Economics and Management 19, no. 4 (December 13, 2018): 673–705. http://dx.doi.org/10.3846/jbem.2018.6840.
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This study explores the pre-repurchase systematic risk will affect the abnormal returns in the open-market repurchase event period and also change the relationship between the investor sentiment, trading activity, market factors and stock price response during the event on Taiwan stock market. Based on threshold regression models, it is found that the pre-repurchase systematic risk will significantly change the relationship between investor behavior, market factors and stock price responses and the asymmetry of the relationship exists when pre-repurchase systematic risk is lower than a repartition, which supports that institutional investors and credit trading investors differ in these existing relationships. When the pre-repurchase beta is below repartition, it will be detrimental to the returns in event period. But on the contrary, the returns in the short-term shock of news exposure period present the favorable results, which may be related to the fact that there exists sentiment premium in short-term when credit trading investors’ repurchase news exposure occurs. Finally, the study is to confirm the effect of systematic risk for returns and investor sentiment, these results have not been further explored in the past, and can be used as the firm’s evalu-ation reference to the repurchase program in the future.
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Swales, Jr., George, Michael Swales, and Edward Chang. "IPO Portfolio: An Alternative Approach to Higher Returns?" Journal of Finance Issues 6, no. 1 (June 30, 2008): 207–14. http://dx.doi.org/10.58886/jfi.v6i1.2418.
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Investors in today's financial markets continue to look for ways to enhance portfolio returns. Unfortunately, investments that offer the potential for higher gains may also include increased volatility, which can diminish some investor's desirability to hold these types of securities. Many portfolio managers, seeking to increase the return on their portfolios, will selectively choose riskier securities and practice risk reduction through diversification. Initial public offerings (IPOs) may offer the investor an investment alternative to use in an effort to enhance portfolios returns. lPO research, however, shows IPO returns can be quite volatile. Combining IPOs into a single. separate portfolio may reduce overall risk, while minimizing the potential of jeopardizing the investor's total holdings. Several research questions arise. Could a portfolio of IPQ equity securities produce a rate of return comparable to a widely held index, such as the S&P 5OO? Specifically, can a diversificd portfolio of IPO stocks out-perform the S&P 500 over short-term and longer-term time periods? If so, how risky would such an IPO portfolio be, compared to the widely-followed S&P 500 index? Finally, would combining an IPO portfolio with the S&P 500 portfolio result in overall risk reduction? This research seeks answers to these questions.
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Cheng, Si, Allaudeen Hameed, Avanidhar Subrahmanyam, and Sheridan Titman. "Short-Term Reversals: The Effects of Past Returns and Institutional Exits." Journal of Financial and Quantitative Analysis 52, no. 1 (February 2017): 143–73. http://dx.doi.org/10.1017/s0022109016000958.
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Price declines over the previous quarter lead to stronger reversals across the subsequent 2 months. We explain this finding based on the dual notions that liquidity provision can influence reversals and that agents who act as de facto liquidity providers may be less active in past losers. Supporting these observations, we find that active institutions participate less in losing stocks and that the magnitude of monthly return reversals fluctuates with changes in the number of active institutional investors. Thus, we argue that fluctuations in liquidity provision with past return performance account for the link between return reversals and past returns.
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Aspadarec, Waldemar. "Quasi-hedge funds market in Poland in view of their performance persistence." Investment Management and Financial Innovations 18, no. 3 (August 6, 2021): 82–93. http://dx.doi.org/10.21511/imfi.18(3).2021.08.
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Performance persistence analysis is important as it has a decisive influence on investor allocation decisions. Investors can use quasi-hedge funds’ persistence to build effective investment strategies. Thus, the paper explores performance persistence of quasi-hedge funds operating at the Polish capital market. The methodology is based on constructing the new market performance index intended only for absolute return funds. It is validated regarding absolute returns of Polish quasi-hedge funds. The Absolute Return Index (ARI) is used to rate quasi-hedge funds’ performance persistence in assessing their fundamental purpose: to deliver consistently positive returns in all market conditions. For this, their quarterly return rates are used. All 53 funds operating for at least 36 months and representing 48.2% of the entire segment of absolute return funds are analyzed. The use of ARI allows examining quasi-hedge funds’ performance persistence in terms of market changes and the assessment of their purpose. In the short term (6 months) profitability remained persistent, while in the long term (12 months) such a hypothesis could be refuted. More than 40% of funds showed positive persistence within six months; only positive persistence occurred in the short term. 9.4% of funds repeatedly obtained negative returns, so absolute return funds’ negative performance persisted neither in the short nor long term. Closed-ended investment funds showed much stronger persistence of above-average positive returns, which additionally tended to avoid repeating negative returns in two-quarter and four-quarter series. This confirms the assumption that in this respect the Polish market is similar to the developed ones.
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Chui, Andy C. W., Avanidhar Subrahmanyam, and Sheridan Titman. "Momentum, Reversals, and Investor Clientele." Review of Finance 26, no. 2 (February 16, 2022): 217–55. http://dx.doi.org/10.1093/rof/rfac010.
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Abstract Different share classes on the same firms provide a natural experiment to explore how investor clienteles affect momentum and short-term reversals. Domestic retail investors have a greater presence in Chinese A shares and foreign institutions are relatively more prevalent in B shares. These differences result from currency conversion restrictions and mandated investment quotas. We find that only B shares exhibit momentum and earnings drift and only A shares exhibit monthly reversals. Institutional ownership strengthens momentum in B shares. These patterns accord with a setting where short-term reversals (which represent inventory risk premia) prevail in a market dominated by noise traders and momentum prevails in markets where noise traders are less prevalent relative to informed investors who underreact to fundamental signals. Overall, our findings confirm that clienteles matter in generating stock return predictability from past returns.
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Yan, Xuemin (Sterling), and Zhe Zhang. "Institutional Investors and Equity Returns: Are Short-term Institutions Better Informed?" Review of Financial Studies 22, no. 2 (January 3, 2007): 893–924. http://dx.doi.org/10.1093/revfin/hhl046.
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Holzhauer, Hunter, Xing Lu, Robert McLeod, and Jamshid Mehran. "How Long is Too Long? Volatility-Based Holding Strategies for Leveraged Bull and Bear ETFs." Journal of Finance Issues 12, no. 1 (December 31, 2013): 35–52. http://dx.doi.org/10.58886/jfi.v12i1.2294.
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Since their favorable introduction in the U.S. in 2006, leveraged bull and bear exchangetraded funds (ETFs) have provided short-term investors with the opportunity to express their directional views regarding a wide variety of indexes. However, unlike traditional unleveraged ETFs, leveraged ETFs are not intended to be used as long-term trading instruments. Instead, leveraged ETFs are designed to return a multiple of their benchmark index on a daily basis. Leveraged ETFs are structured only for short-term investors because these funds must be rebalanced each day to prevent leverage from becoming too excessive. This daily rebalancing complicates predicting long-term returns for leveraged ETFs due to both compounding and volatility. Using Morningstar return data and Chicago Board Options Exchange volatility index data, we investigate the effects of compounding and expected market volatility on specific longterm holding strategies for leveraged bull and bear ETF returns. We show that compounded leveraged returns over these holding periods are comparable to compounding the respective multiple of their underlying benchmark return with tracking error increasing over time and with leverage. Our results also show that expected market volatility has a significant effect on tracking error, after adjusting for expenses, and that this effect increases over time and with leverage. These results suggest that volatility indexes may be used by sophisticated investors to devise trading rules for long-term holding strategies for leveraged bull and bear ETFs.
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Mankuroane, Evodia, Wilme van Heerden, Sune Ferreira-Schenk, and Zandri Dickason-Koekemoer. "Psychological and Behavioural Drivers of Short-Term Investment Intentions." International Journal of Economics and Financial Issues 12, no. 4 (July 19, 2022): 19–27. http://dx.doi.org/10.32479/ijefi.13064.
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Analysing the factors that influence the short-term investment intentions of investors is critical for investment institutions. If investment institutions are informed about these factors they can create a framework to more accurately profile their clients to provide clients with the desired liquidity, maturity dates and desired risk and return expectations. Risk tolerance is one of the elements that has been used over time to profile investors, however, this paper found that other factors should also be included. Therefore, this article aimed to determine what drives investors’ short-term investment intentions following a more sociological and behavioural approach by including investor personality traits, behavioural finance biases and investors’ risk tolerance behaviour. Secondary data was obtained from a private investment firm surveying private investors in South Africa. Male investors were also more likely to invest in the short-term compared to female investors. Several personality traits, risk tolerance and a single behavioural finance bias were found to influence investor intentions to invest in the short-term. It is therefore recommended to portfolio management companies that several sociological and behavioural variables do explain whether investors will be willing to invest in short-term or more long-term investment portfolios.
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Cao, Kien, Thuy Nguyen, Hong Nguyen, and Hien Bui. "Incomplete Share Repurchase Programs in Vietnam: Completion Rates and Short-Term Returns." International Journal of Financial Studies 8, no. 3 (September 16, 2020): 57. http://dx.doi.org/10.3390/ijfs8030057.
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Stock repurchases have become a preferred method of distributing cash to stockholders. However, given the high level of information asymmetry and weak corporate governance as well as poor investor protection in Vietnam, many Vietnamese firms use stock repurchases as a tool to manipulate stock prices in the market. Using event study methodology and Tobit regression models, this study examines the stock price behaviors surrounding the event dates and the impact of earnings management activities prior to the stock repurchases on the completion of repurchase announcements in Vietnam. The results show that earnings management practices prior to stock repurchase programs, the percentage of intended buyback shares, and CEO characteristics have a significant impact on the completion of these repurchase programs. Moreover, most of the windows surrounding the event dates do not have any significant abnormal movement of the stock prices. A plausible explanation is that, due to weak corporate governance and poor investor protection, Vietnamese firms send lots of misleading signals through various corporate activities, especially stock repurchase programs. Thus, these signals have less meaning to investors.
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Zheng, Chengli, and Kuangxi Su. "Multiscale Hedging with Crude Oil Futures Based on EMD Method." Mathematical Problems in Engineering 2020 (November 2, 2020): 1–9. http://dx.doi.org/10.1155/2020/8869839.
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Studying the impact of the different components in data on hedging can provide valuable guidance to investors. However, the previous multiscale hedging studies do not examine the issue from the data itself. In this study, we use the empirical mode decomposition (EMD) method to reconstruct the crude oil futures and spot returns into three different scales: short-term, medium-term, and long-term. Then, we discuss the crude oil hedging performance under the dynamic minimum-CVaR framework at different scales. Based on the daily prices of Brent crude oil futures contract from August 18, 2005, to September 16, 2019, the empirical results show that the extracted scales comprise different information of original returns, short-term information occupies the most important position, and hedging is mainly driven by short-term information. Besides, hedging relying on long-term information has the best hedging performance. Removing some information related to short-term noise from the original returns is helpful for investors.
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Panigrahi, Ashok Kumar, Kushal Vachhani, and Suman Kalyan Chaudhury. "Trend identification with the relative strength index (RSI) technical indicator –A conceptual study." Journal of Management Research and Analysis 8, no. 4 (December 15, 2021): 159–69. http://dx.doi.org/10.18231/j.jmra.2021.033.
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We all must agree that the word "trend" is now the buzzword of the stock market. As a part of investment strategy and analysis, it is always suggested that the investors should keep an eye on medium-term and short-term changes in addition to longer-term (secular) patterns. Traders and investors use the RSI as a momentum indicator. Overbought and oversold situations are indicated by RSI values between 70 and 30. Over the past two decades, several techniques have been developed to analyze NIFTY 50 data for investment purposes. In this paper, we have estimated the returns by looking at the two trends i.e., 50-50 and 60-40. In addition to this, how to trade and back-test our strategy is also explained. Applying these two RSI strategies to the NIFTY 50 chart revealed that 50-50 offers a higher long-term return, while 60-40 provides a superior short-term return. Finally, the strategies' returns F-statistics and P-values were calculated and analyzed to determine their significance level and acceptability.
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Rozycki, John, and Inchul Suh. "Share repurchases: analyzing short-term and long-term wealth effects." Managerial Finance 45, no. 3 (March 11, 2019): 430–44. http://dx.doi.org/10.1108/mf-06-2018-0258.
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PurposeThe purpose of this paper is to examine the short-term and long-term wealth effects of two share repurchase motivations.Design/methodology/approachThe authors use a multi-period numerical model and a Monte Carlo simulation. The Monte Carlo simulation introduces uncertainty into firms’ market values and eliminates some restrictions used in the numerical model.FindingsIn the long term, firms that refrain from repurchasing overvalued shares outperform otherwise identical firms that do not exhibit such restraint. In the short term, firms that repurchase overvalued shares can outperform firms that refrain from such repurchases. Total returns are a function of misvaluation, the firm’s repurchase decision, the rate of return on invested cash and how long the shares remain misvalued. Share price volatility can influence share repurchase decisions.Research limitations/implicationsThe models are incapable of fully modeling the complexities of a dynamic economic environment.Practical implicationsManagers and investors need to be aware of the short-term and long-term effects of share repurchases. Additionally, investors can gain insight into a firm’s share repurchase motivation by observing its cash balances over time.Social implicationsShare repurchases are a zero-sum game with potentially different short-term and long-term wealth effects.Originality/valueWhen studying the wealth effects of share repurchases, it is important to consider the motivations for repurchasing shares as well as the short-term and long-term effects.
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Kim, Jungmu, and Yuen Jung Park. "Individual Investors, Average Skewness, and Market Returns." Sustainability 12, no. 20 (October 12, 2020): 8357. http://dx.doi.org/10.3390/su12208357.
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Understanding individual investors’ short-term behavior toward skewness is essential for the management and investment of corporate social responsibility because the skewness-seeking behavior of individual investors, which causes a bubble in the market, makes the market as a whole more vulnerable, and it is difficult for the market to be sustainable. In the Korean stock market, we investigated whether average skewness can predict future market returns at the market level and whether the mispricing is associated with demand for the skewness of individual noise traders. Measuring the demand for skewness by the proportion of trading money of individual investors, we found that average skewness negatively predicts future market excess return when the demand for skewness is strong. The result is robust to controlling for market variance as well as other predictors. Our finding indicates that the overall market is overpriced when individual investors excessively trade to seek huge returns in spite of a small probability.
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Khan, Muhammad Asif, Muhammad Akbar, Besma Hkiri, and Noman Khan. "Does Investor Attention Matter? Fresh evidences from Wavelet Approach." Journal of Applied Economics and Business Studies 6, no. 3 (September 30, 2022): 67–78. http://dx.doi.org/10.34260/jaebs.634.
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The COVID-19 pandemic drastically damaged business activities that not only affected conventional financial markets but also upset Islamic securities. Given the severity of the recent pandemic, this study looked at the returns of the investor attention index, Islamic bonds, and stock indexes in the occurrence of the ADS business condition index. Bivariate and multivariate wavelet analysis was employed on the daily data from January 2, 2020, to July 27, 2020. The study results indicate that before April 2020, there was a negative coherence between the investor attention index and the ADS, Islamic bonds, and stock returns. After that date, however, there is a positive relationship between the attention index and Islamic bonds. In addition, the relationship between investors’ attention and the ADS index shows both short-term and long-term correlations, but the long-term correlations are clearer. It has implications for household investors by empirically revealing the significance of Google trends for Islamic capital markets in the pre and during pandemic situation. Our results show that the way investors use the Google search engine is a key factor in how prices respond to new information.
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Kyriakou, Ioannis, Parastoo Mousavi, Jens Perch Nielsen, and Michael Scholz. "Short-Term Exuberance and Long-Term Stability: A Simultaneous Optimization of Stock Return Predictions for Short and Long Horizons." Mathematics 9, no. 6 (March 15, 2021): 620. http://dx.doi.org/10.3390/math9060620.
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The fundamental interest of investors in econometric modeling for excess stock returns usually focuses either on short- or long-term predictions to individually reduce the investment risk. In this paper, we present a new and simple model that contemporaneously accounts for short- and long-term predictions. By combining the different horizons, we exploit the lower long-term variance to further reduce the short-term variance, which is susceptible to speculative exuberance. As a consequence, the long-term pension-saver avoids an over-conservative portfolio with implied potential upside reductions given their optimal risk appetite. Different combinations of short and long horizons as well as definitions of excess returns, for example, concerning the traditional short-term interest rate but also the inflation, are easily accommodated in our model.
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Chague, Fernando, Bruno Giovannetti, and Anthony Silva. "Attention-grabbing stocks and the behavior of individual investors in Brazil." Brazilian Review of Finance 18, no. 1 (May 17, 2020): 1. http://dx.doi.org/10.12660/rbfin.v18n1.2020.81490.
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<p>This study complements the existing literature on investor attention with three empirical findings. First, we show that low-activity individual investors are net buyers of stocks appearing on the headlines of news stories that convey no meaningful information about future returns. Second, we document that this buying pressure of some individuals following purely attention-grabbing articles leads to higher short-term returns. Finally, we provide evidence that investors who are more prone to purchase stocks after irrelevant news have poorer stock-picking performance. We hypothesize that individuals tend to narrow their choice set to alternatives that attract attention. Taken together, our findings suggest that the media, just by making some firms more salient, plays an important role in the allocation of individual investors' attention in investment activities.</p>
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Rádóczy, Klaudia, and Ákos Tóth-Pajor. "Investors’ Reactions to Extreme Events in the Hungarian Stock Market." Financial and Economic Review 20, no. 3 (2021): 5–30. http://dx.doi.org/10.33893/fer.20.3.530.
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This paper examines investors’ reactions to extreme events in the Hungarian stock market. We seek to answer the research question whether following extreme events any overreaction of investors can be observed on the Budapest Stock Exchange. With a view to answering the research question, we identify extreme events based on extreme returns on the market portfolio and then – using an event study – we examine abnormal returns on winner and loser equities. After examining investors’ reactions, we inspect the performance of the contrarian strategy in the created event windows. The main result of our research is the presentation that – based on the analysis of the differences between the average cumulative abnormal returns after extreme events – investor overreactions can be observed in the Hungarian stock market. The loser portfolios relating to extreme events significantly outperform winner portfolios connected to the event. The excess return of the contrarian strategy cannot be attributed to differences in the market risk of winner and loser portfolios. The excess return of the strategy can be shown only under tighter extreme value thresholds. The clustering of the event windows with short-term reversal, high market volatility and extreme events is beneficial to the performance of the contrarian strategy. In addition, our research also shows that the purchase of loser portfolios or the development of a contrarian strategy after extreme events may generate profit for investors, since after extreme events the loser portfolios usually beat the market on a horizon of 21 days.
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Gowri B., Shantha, and Vedantam Seetha Ram. "Influence of news on rational decision making by financial market investors." Investment Management and Financial Innovations 16, no. 3 (August 30, 2019): 142–56. http://dx.doi.org/10.21511/imfi.16(3).2019.14.
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The impact of news on individual investor decision is explicit as investors need to update, adapt and forecast returns with constraints of time, uncertainty and resources to be successful. The aim is to understand and review the influence of news on individual investor’s decision making in stock markets and identify the impact of different type of news on individual investor’s decision making in stock markets, assess the behavioral reaction and investment decisions made by investors before and after there is news item, identify the linking effect on behavioral theories and biases, develop a generalized decision making conceptual model to understand the impact of news on investor’s reaction, decision and its linkages along with the behavioral bias. Theoretical basis/methodology for processing of news by investors is assumed to be based on Broadbent’s filter theory (1958) and due to cognitive informational inefficiency of investors it assesses the attention and the investor’s reaction of overreaction and underreaction, which do not comply with efficient market hypothesis theory. The reasons for its noncompliance are found by relating it with behavioral theories. The results explain how investor screens with filters and give attention to news only when it affects their portfolio or investment objective and strategies. It is concluded that investor’s decision making depends on degree of information penetration, information content, information influence, specific internal factors and generic external and on investors prevailing at that given circumstances. This gives us the solution to comprehend the investor’s reaction, decision and unresolved reversals, short- and long-term overreaction.
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McNeil, Kenneth, and Keith Johnson. "The Elephant in the Room: Helping Delaware Courts Develop Law to End Systemic Short-Term Bias in Corporate Decision-Making." Michigan Business & Entrepreneurial Law Review, no. 8.1 (2018): 1. http://dx.doi.org/10.36639/mbelr.8.1.elephant.
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Short-termism in corporate decision-making is as problematic for long-term investors as relying on a three-mile radar on a supertanker. It is totally inadequate for handling the long-term risks and opportunities faced by the modern corporation. Yet recent empirical research shows that up to 85% of the S&P 1500 have no long-term planning. This is costing pension funds and other long-term investors dearly. For instance, the small minority of companies that do long-term planning and risk management had a long-term profitability that was 81% higher than their peers during the 2001–2014 period—with less stock volatility that costs investors dearly as well. This corporate short-termism mindset is even more troubling given that at least half of the value of the companies in the S&P 1500 is generated by expectations for realization of future value. Long-term investors therefore face a long-term expectations pipeline of hoped-for returns without a plan by corporations to back it up. The tragic result: this short-termism mindset appears to have a substantial depressing impact on long-term market returns while increasing long-term risk exposure. Both have contributed to the significantly underfunded status of many pension funds today. Delaware courts, the primary referees of corporate director fiduciary duties in the United States, are so frustrated with the persistent effects of short-term pressures—including corporate fraud and compliance breaches—that they are actively encouraging investors to bring the right cases to help change the rules. This Article examines the effects of short-termism and the Delaware judiciary’s responses to it. It then shows how existing Delaware law could be extended to address the underlying causes of corporate short-term bias, rather than merely imposing punishment on the symptoms.
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Jabeen, Shaista, and Sayyid Salman Rizavi. "Short Term and Long Term Herding Prospects: Evidence from Pakistan Stock Exchange." Abasyn Journal of Social Sciences, Volume 14 issue 1 (June 30, 2021): 119–44. http://dx.doi.org/10.34091/ajss.14.1.08.
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The present research intends to examine the herd behaviour of investors in the Pakistan Stock Exchange (PSX). Herd behaviour in stock market is sometimes based on fundamental information, which causes quick price adjustments to new information and leads to efficient markets. Still, sometimes it is not dependent on fundamental information and results in price instability. Herding can be a short term phenomenon, but sometimes a longer time span can provide favourable outcomes for the occurrence of herd behaviour. Considering these diverse views, intraday, daily, weekly, and monthly stock prices of 528 companies listed in the PSX have been used to calculate stock returns. Market-wide herd measure, i.e. CSAD, has been used to compute the herd behaviour. Data has been investigated for autocorrelation, heteroscedasticity, and stationarity issues. Findings revealed that herding did not exist in PSX, but some sectors showed this behaviour. Herd behaviour was more likely to exist at a daily level. The tendency of occurrence of the herding phenomenon gradually decreases at intraday and weekly levels. However, herding cannot be taken as a long term phenomenon as just a single sector was evidenced about its existence at the monthly level. Herding is an inherent phenomenon that is very difficult to eliminate from the stock market completely. However, knowledge and information sharing can guide investors to improve this behaviour Keywords: Herd Behaviour, Behavioural Finance, Return Dispersions, Pakistan Stock Exchange, CSAD
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Cohen, Gil, and Mahmoud Qadan. "The Information Conveyed in a SPAC′s Offering." Entropy 23, no. 9 (September 15, 2021): 1215. http://dx.doi.org/10.3390/e23091215.
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The popularity of SPACs (Special Purpose Acquisition Companies) has grown dramatically in recent years as a substitute for the traditional IPO (Initial Public Offer). We modeled the average annual return for SPAC investors and found that this financial tool produced an annual return of 17.3%. We then constructed an information model that examined a SPAC′s excess returns during the 60 days after a potential merger or acquisition had been announced. We found that the announcement had a major impact on the SPAC’s share price over the 60 days, delivering on average 0.69% daily excess returns over the IPO portfolio and 31.6% cumulative excess returns for the entire period. Relative to IPOs, the cumulative excess returns of SPACs rose dramatically in the next few days after the potential merger or acquisition announcement until the 26th day. They then declined but rose again until the 48th day after the announcement. Finally, the SPAC’s structure reduced the investors’ risk. Thus, if investors buy a SPAC stock immediately after a potential merger or acquisition has been announced and hold it for 48 days, they can reap substantial short-term returns.
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Yelamanchili, Rama Krishna. "Short-term Economic Indicators, Stock Market Indexes and Indian Oil and Gas Stocks Returns." Indian Journal of Finance and Banking 4, no. 1 (January 8, 2020): 1–13. http://dx.doi.org/10.46281/ijfb.v4i1.454.
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In this paper we examine the causal relationship between short term economic indicators, stock market indexes and oil and gas stocks returns. We postulate that economic indicators positively and significantly cause and predict stock market indexes and oil and gas stock returns in short run. In addition, we posit that stock market indexes cause and predict oil and gas stock returns in short run. To test our hypotheses we chose four short-term economic indicators, two stock market indexes, and 10 oil and gas companies. Our results indicate that there is no causal relationship between both short-term economic indicators and stock market indexes, and between short-term economic indicators and oil and gas stock returns. However, we receive support to one of our hypotheses that stock market indexes cause oil and gas stock returns. This causation is contemporaneous only and we observe that stock market indexes lack short-term predictive power of oil and gas stock returns. We conclude that investors need to be vigilant in considering coincident indicators as explanatory variables to predict stock returns. We suggest that stock market indexes are helpful to predict contemporaneous returns but not future returns of oil and gas stocks.
JEL Classification: B1, C32, D4, G2.
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Kambeu, Edson, and Justine Mbudaya. "Volatility dynamics of the Botswana Stock Exchange (BSE). Good or Bad for Investors?" International Journal of Finance 7, no. 3 (August 1, 2022): 25–33. http://dx.doi.org/10.47941/ijf.965.
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Purpose: Volatility can be a risk if it results to investors generating negative returns. On the other hand, it can be an opportunity if it results in investors generating positive returns. Whether volatility generates positive returns or negative returns for investors may depend on the general volatility dynamics of a stock market. The concern is that the volatility levels of BSE stocks may not be enhancing the returns of investors. Therefore, the study investigated whether the volatility dynamics of BSE are good or bad for investors.
Methodology: Using market data from 2011 to 2013, we employ a GARCH-M (1,1) model to find out if BSE volatility dynamics are enhancing the returns of stocks listed on the stock exchange.
Findings: The results showed that the risk coefficient in the mean returns is significant but negative. This implied that the returns of stocks listed on the BSE are significantly, but negatively related to market volatility. Therefore, we concluded that the current market volatility dynamics of the BSE are not enhancing the returns of investors and are bad for investors in the short-term.
Unique contribution to theory, practice and policy: We recommend that investors use a buy and hold strategy in order to realize positive returns.
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Silmi, Silmi, Kevry Ramdany, and Yudi Mufti Prawira. "“Is The Banking Industry The Right Choice To Invest?” (Analisis Laporan Keuangan PT. Bank Central Asia, PT. Bank Rakyat Indonesia, PT. Bank Nasional Indonesia, PT. May Bank dan PT. Bank Permata Periode 2013-2017)." Jurnal Ilmiah Universitas Batanghari Jambi 20, no. 2 (July 1, 2020): 652. http://dx.doi.org/10.33087/jiubj.v20i2.987.
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Financial statements are one of the analytical tools that contain information that can be used by potential investors to make investment decisions. Prospective investors need a capable and trusted analysis to analyze the financial statements of the industry in the Bank, to determine which banks need funds for short-term investors and long-term prospective investors involve investing their capital through the purchase of shares, explained to the Bank that provides funds as expected investment returns by potential investors even more. There are 5 banks that submit comparisons and assess their ratios and performance in this study so that potential investors can invest appropriately, expecting: PT. Bank Central Asia, PT. Bank Rakyat Indonesia, PT. Bank Nasional Indonesia, PT. May Bank and PT. Bank Permata, for 5 years analysis time period. From the results of research and analysis conducted, Bank BCA is the right choice for investors for short-term investors and BRI is the right choice for potential investors for long-term investment.
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Liu, Chang, Haoming Shi, Liang Wu, and Min Guo. "THE SHORT-TERM AND LONG-TERM TRADE-OFF BETWEEN RISK AND RETURN: CHAOS VS RATIONALITY." Journal of Business Economics and Management 21, no. 1 (November 7, 2019): 23–43. http://dx.doi.org/10.3846/jbem.2019.11349.
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This paper used the composite construction method proposed by Haugen (1999) and its application by Zhao and Wang (2010) for the Chinese stock market. Utilizing the Shanghai A-share market stocks data, this paper first selected the shares listed on the Shanghai Stock Exchange during January 1, 1997 to December 31, 2017. A portfolio was then built according to the mean variance model of portfolio structure, and simulation results were analysed using the Wilcoxon Signed Rank Test. The relationship between risk and return in the long and short term was explored. Results indicated no significant relationship between the risk and return of the stock portfolio in the short run, which reflects the complexity of the Chinese stock market. However, in the long run, the risk and return of the stock portfolios are positively correlated, which means that high returns are accompanied by high risks, indicating that the stock market will eventually return to rationality. In other words, the A-share stock market will eventually return to be value-driven and the short-term speculators would be outweighed by long-term value investors.
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Hamdi, Haykel, Duc Khuong Nguyen, and Hassan Obeid. "The Short- And Long-Term Performance Of Privatization Initial Public Offerings In Europe." Journal of Applied Business Research (JABR) 29, no. 4 (June 28, 2013): 1189. http://dx.doi.org/10.19030/jabr.v29i4.7925.
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This article investigates the return behaviorof privatization initial public offerings (PIPOs) in Europe over both theshort- and long-run horizons. Using data from a sample of 162 PIPOs over theperiod 1986-2008, we show that European PIPOs outperform, in terms ofrisk-adjusted abnormal returns, a benchmark market index and a portfoliocomposed of 162 European private IPOs, regardless of the horizon of analysis.Our results are important for both investors and policymakers with respect totheir investment and privatization decisions, and also allow a betterunderstanding of the financial performance behavior of the privatizedstate-owned enterprises.
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Do, Yeonwoo, and Sunghwan Kim. "Do Higher-Rated or Enhancing ESG of Firms Enhance Their Long–Term Sustainability? Evidence from Market Returns in Korea." Sustainability 12, no. 7 (March 27, 2020): 2664. http://dx.doi.org/10.3390/su12072664.
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In this study, we investigate the effects of the level and changes in environmental, social and corporate governance (ESG) rating, an index developed to represent a firm’s long-term sustainability, on the stock market returns of Korea Composite Stock Price Index (KOSPI) listed firms over the period 2011–2018. We find that the changes in ESG ratings have statistically significant short-term effects on their abnormal returns. However, their impacts on short-term abnormal returns decrease some days after the disclosure and become negative in the third year. The results imply that investors in the Korean stock market do not view corporate social responsibility activities as a means of supporting their long-term sustainability, judging from the firm value for a long period after their rating. Rather, based on the effects of the changes on coefficient signs over the period—positive in the year and the year after, no effects in the following year, and negative in the third year and later—we can infer that the short-term oriented market sentiments of investors might worsen their long-term stock performances, thus deteriorating their sustainability and growth opportunities.
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Cheng, Lee-Young, Ming-Chang Wang, and Kung-Chi Chen. "Institutional Investment Horizons and the Stock Performance of Private Equity Placements: Evidence from the Taiwanese Listed Firms." Review of Pacific Basin Financial Markets and Policies 17, no. 02 (June 2014): 1450009. http://dx.doi.org/10.1142/s021909151450009x.
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This study examines how the investment horizon of the institutional shareholders of a firm affects the stock performance of private equity placements. The results show that firms with long-term institutional investors receive significantly positive abnormal returns around the offering announcement. Post-issue stock price underperformance is especially pronounced in firms held by short-term institutional investors. These findings suggest that private placement firms with long-term institutional investors acquire certification and monitoring-related benefits and thus reduce the information asymmetry and entrenchment costs between managers and external investors.
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Patel, Jayen. "NASDAQ Sector Returns and Market Conditions." Journal of Finance Issues 6, no. 2 (December 31, 2008): 85–94. http://dx.doi.org/10.58886/jfi.v6i2.2407.
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This study compares stock returns for NASDAQ sector indices over varying market conditions. The results reveal that, during relatively shorter periods of time, some sectors have generated statistically significantly greater mean monthly returns than those of other sectors. However, for the overall recent ten-year period 1998 through 2007, there were no statistically significant differences between any two NASDAQ sectors. These results therefore indicate that individual long-term investors should not re-allocate funds among sectors based on varying short-term market conditions.
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Nikolova, Marija Anastasovska. "Crypto Assets: A New Way of Diversifying Your Investments." European Journal of Business and Management Research 8, no. 1 (February 15, 2023): 265–73. http://dx.doi.org/10.24018/ejbmr.2023.8.1.1833.
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International investments have gained momentum since the start of this century. Many investors in the developed economies invest in the growing economies to seek prospects of higher returns. This has become evident in the last two decades, especially after the financial crisis of 2008, when investors were forced to think outside of the box in order to get proper returns for their investments. Investing has become even more challenging when investors are faced with low and even negative yields, especially in the investments on short and medium term. This is where crypto assets come in the picture. Namely, with the appearance of the blockchain technology and all of the new opportunities it brings, crypto assets appeared as a new way for investors to diversify their investments and get higher returns. Though they bring additional choices to investors, they can also be very tricky and should be taken into consideration when investing with high cautiousness, simply because the technology they are based on is relatively new and not very much regulated, thus they bring higher risk than the traditional assets and fiat currencies that are already available. Having that in mind, this paper goes over the pricing, volatility and correlation of crypto assets with other currencies. Additionally, we look at the way they are regulated so far, how accessible is the market for them and their behavior vs the traditional fiat currencies. Lastly, we come to the conclusion that crypto assets, though being more volatile and riskier than fiat currencies, do in fact bring additional return to an investor’s portfolio and should be used carefully according to the individual risk and return preferences. There is still a lot to be examined and researched about crypto assets so that they can be better utilized in the future by investors.
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Veenman, David, and Patrick Verwijmeren. "Do Investors Fully Unravel Persistent Pessimism in Analysts' Earnings Forecasts?" Accounting Review 93, no. 3 (July 1, 2017): 349–77. http://dx.doi.org/10.2308/accr-51864.
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ABSTRACT This study presents evidence suggesting that investors do not fully unravel predictable pessimism in sell-side analysts' earnings forecasts. We show that measures of prior consensus and individual analyst forecast pessimism are predictive of both the sign of firms' earnings surprises and the stock returns around earnings announcements. That is, we find that firms with a relatively high probability of forecast pessimism experience significantly higher announcement returns than those with a low probability. Importantly, we show that these findings are driven by predictable pessimism in analysts' short-term forecasts, as opposed to optimism in their longer-term forecasts. We further find that this mispricing is related to the difficulty investors have in identifying differences in expected forecast pessimism. Overall, we conclude that market prices do not fully reflect the conditional probability that a firm meets or beats earnings expectations as a result of analysts' pessimistically biased short-term forecasts. JEL Classifications: G12; G14; G20.
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Eni, Yuli, and Rudy Aryanto. "Analysis of Factors that Affect the Movement of Gold’s Price as Investment Alternatives in Indonesia." Advanced Science Letters 21, no. 4 (April 1, 2015): 878–81. http://dx.doi.org/10.1166/asl.2015.5912.
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This study examined the dominant factors that affecting the price of gold. The factors examined are London Gold price returns, the return rate of USD—INR, JCI return, inflation rate, and the return of the EURO—USD currency, which individually or simultaneously can affect the price of gold. The purpose of this study was to investigate how influence the factors that are considered to affect the fluctuation of gold prices and gold prices predicted for the next period which can be used by investors to seek alternative investment to be made. The results will provide information to investors about gold price forecast both long-term and short-term. This study uses secondary data taken from several websites. Further data have been obtained, processed using the method of Multiple Linear Regression Model and the ECM with GARCH models, using e-views 8 and SPSS 22. As for the results obtained from the processing of the data is simultaneously the influence of variable returns no London Gold price, return rate USD—CAD, JCI return, inflation rate, and the return of the EURO currency—USD, with the return of gold in Indonesia. Individually, the variable returns the London Gold price and exchange rate USD—CAD who have an influence on the return of gold prices in Indonesia.
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Ma, Guangqi, Miya Liang, and Wenlin Sun. "Effect Analysis of Carbon Information on Enterprise Value Based on Big Data." Mathematical Problems in Engineering 2022 (July 11, 2022): 1–11. http://dx.doi.org/10.1155/2022/4406064.
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An effect analysis approach of carbon information on enterprise value based on big data is proposed. This study first systematically expounds on the sources of research data and data collection methods and then comprehensively analyzes corporate carbon information disclosure status and characteristics. It also conducts an empirical study on the short-term impact of carbon information disclosure on corporate value creation and draws the following conclusions. Industry classification has an important impact on corporate carbon information disclosure in terms of the status and characteristics of corporate carbon information disclosure. Except for the financial and insurance industry, the average amount of carbon information disclosure in susceptible sectors such as the extractive industry and construction industry is relatively high. In terms of carbon information disclosure content, the carbon information disclosed by enterprises is mainly related to low-carbon technology and low-carbon product plans. Through empirical analysis of the impact of carbon information disclosure on short-term stock market performance and investor returns, it is found that the trading volume and value of stocks in the 5 trading days after the information event were higher than those in the previous 5 trading days. Still, the increase in the overall stock market value was not significant. This shows that the occurrence of carbon information disclosure events can improve the liquidity and trading activity of the stock market, trigger the stock market’s market response to carbon information disclosure, and enable investors to obtain more abnormal returns among short-term investors. It has a certain impact on short-term enterprise value creation.
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Antweiler, Werner. "LONG-TERM PREDICTION MARKETS." Journal of Prediction Markets 6, no. 3 (January 22, 2013): 43–61. http://dx.doi.org/10.5750/jpm.v6i3.592.
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Most prediction markets focus on events with a short time horizon such as forthcoming elections. Contracts are typically traded for periods measured in weeks, but rarely exceeding a year. There is great interest in using prediction markets for events with a long time horizon such as climate change outcomes. This paper develops an analytic framework for exploring the time horizon limitations of prediction markets and suggests a simple, practical solution: the market operator must invest cash holdings in a diversified financial portfolio that generates returns that reflect individual traders’ heterogeneous attitudes towards risk and return. The analytic framework identifies how the presence of an opportunity cost for investors reduces market liquidity through a participation constraint and biases the equilibrium price through an inherent money-at-risk asymmetry between long and short positions in a prediction market. This paper explores continuous outcome markets, which are relevant for science-related long-term predictions, along with familiar winner-takes-all markets.
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Eryigit, Mehmet. "Short-term performance of stocks after fraudulent financial reporting announcement." Journal of Financial Crime 26, no. 2 (April 1, 2019): 464–76. http://dx.doi.org/10.1108/jfc-11-2016-0076.
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Purpose Availability of accurate and reliable information in financial markets helps investors make well-informed decisions on capital allocations which is beneficial for long-term economic growth. In this regards, the role of auditing firms that inspect the financial statements of the publicly traded companies in sound operation of financial markets has been increasing. The Capital Market Board of Turkey (CMBT) has the task and responsibility of investigating fraudulent information disseminated by the firms whose stocks are traded in Borsa Istanbul. The investigations can lead to monetary penalties if fraud is proven and the results are published by CMBT in its weekly bulletin. The present study aims to examine the effect of announcements of financial irregularities of companies in CMBT Bulletin on the performance of the relevant company stock in the short term. Design/methodology/approach This study uses abnormal return, cumulative abnormal return and cumulative average abnormal return as metrics and parametric, as well as non-parametric tests to ascertain whether the announcements of financial irregularities in company operations have any statistically significant effect on the return of its stock. Findings The results indicate that publication of the financial penalty news by CMBT in its bulletin has almost no statistically significant influence on the performance of the relevant companies’ stock in Borsa Istanbul. The findings indicate that either the investors in this particular markets do not consider such news relevant to long-term success of the firm or the announcement does not provide any new information and penalties have been priced into the stock before the announcement in the bulletin. Originality/value In literature there is no more research about the effect of the announcements of administrative monetary penalties and crime complaints on the stock returns.
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Nakagawa, Kei, and Ryuta Sakemoto. "MACRO FACTORS IN THE RETURNS ON CRYPTOCURRENCIES." Applied Finance Letters 11 (February 6, 2023): 146–58. http://dx.doi.org/10.24135/afl.v11i.540.
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This study investigates the relationship between expected returns on cryptocurrencies and macroeconomic fundamentals. Investors employ a lot of macroeconomic indicators for their investment decision, and hence adopting a few macroeconomic indicators is not sufficient in capturing a change in economic states. Moreover, due to aggregation, macroeconomic indicators are not measured precisely. To overcome these problems, we employ a dynamic factor model and extract common factors from a large number of macroeconomic indicators. We find that the common factors are strongly linked to the cryptocurrency expected returns at a quarterly frequency, while we do not observe this relationship using macroeconomic indicators such as inflation and money supply. This suggests that macroeconomic information matters in a longer term, which contrasts with the previous literature that explores a short-term relationship. The cryptocurrency prices are not determined by macroeconomic fundamentals in a short-term period since speculators impact the prices. However, in a long-term period, the prices are more linked to macroeconomic fundamentals.
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Victor, Elsa Sapphira, and Muhammad Najib Razali. "MACROECONOMIC IMPACT ON THE EXCESS RETURNS OF ASIAN REITS." International Journal of Built Environment and Sustainability 6, no. 1-2 (April 1, 2019): 137–45. http://dx.doi.org/10.11113/ijbes.v6.n1-2.392.
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The increasing development all over the world gives the real estate industry an opportunity to thrive which includes the REITs sector. Since the establishment of J-REITs in 2001, it has been growing rapidly across Asia. The IMF report showed that Asia continues to be the main growth engine of the world and is projected to grow in years to come. However, investors still remain cautious when dealing with Asian REITs because the markets are not established yet. Previous studies have proved that Asian REITs is able to show competitive advantage in most of mixed-asset scenarios and have significant roles in improving efficient global REITs portfolio returns. Since real estate is an essential part of the economy, its returns are related to the macroeconomic factors such as inflation and GDP. Excess return is used to measure the risk-adjusted performance by measuring how much risk from the macroeconomic factors is involved in producing that return. Hence, the aim of this paper is to evaluate the macroeconomic factors impact on the excess returns of Asian REITs. The data are retrieved from previous researches. The macroeconomic factors that impacted the returns are long term interest rates, short term interest rates, inflation, gross domestic product, construction index, industrial production, money supply, exchange rates and consumption risk. The excess return is found to be a good performance measurement in order for the investors to evaluate the expected returns before making an investment decision.
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Chaudary, Samra. "Does salience matter in investment decision?" Kybernetes 48, no. 8 (September 2, 2019): 1894–912. http://dx.doi.org/10.1108/k-09-2018-0490.
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Purpose The paper takes a behavioral approach by making use of the prospect theory to unveil the impact of salience on short-term and long-term investment decisions. This paper aims to investigate the group differences for two types of investors’ groups, i.e. individual investors and professional investors. Design/methodology/approach The study uses partial least square-based structural equation modeling technique, measurement invariance test and multigroup analysis test on a unique data set of 277 active equity traders which included professional money managers and individual investors. Findings Results showed that salience has a significant positive impact on both short-term and long-term investment decisions. The impact was almost 1.5 times higher for long-term investment decision as compared to short-term decision. Furthermore, multigroup analysis revealed that the two groups (individual investors and professional investors) were statistically significantly different from each other. Research limitations/implications The study has implications for financial regulators, money managers and individual investors as it was found that individual investors suffer more with salience heuristic and may end up with sub-optimal portfolios due to inefficient diversification. Thus, investors should be cautious in fully relying on salience and avoid such bias to improve investment returns. Practical implications The study concludes with a discussion of policy and regulatory implications on how to minimize salience bias to achieve optimum and diversified portfolios. Originality/value The study has significantly contributed to the growing body of applied behavioral research in the discipline of finance.
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Jamaledin Mohseni Zonouzi, S., Gholamreza Mansourfar, and Fateme Bagherzadeh Azar. "Benefits of international portfolio diversification." International Journal of Islamic and Middle Eastern Finance and Management 7, no. 4 (November 11, 2014): 457–72. http://dx.doi.org/10.1108/imefm-02-2014-0017.
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Purpose – This paper aims to investigate opportunities of the short- and long-run international portfolio diversification (IPD) benefits by investing in the Middle Eastern oil-producing countries. Over the past decades, IPD has been the integral feature of global capital markets. Several potential benefits like increasing returns and/or reducing risk have made investors to internationalize their portfolios. Solnik’s theory (1974) approved that gains can be achieved through IPD if returns in the different markets are not perfectly correlated. This may attribute to low correlations of equity returns among different economies. In this regards, there would be a large potential of diversification benefits for investors that diversify into new emerging group of economies such as equity markets of the main oil-producing countries. These markets are often segmented and they may ensure a superior return rate for a given risk level. Design/methodology/approach – In most of the previous studies, Pearson’s correlation test is used to analyze the short-run relationship of market prices. However, recent empirical studies indicate that correlations between equity returns vary over the time. To examine the time-varying conditional correlation, this paper used the dynamic conditional correlation (DCC) model to investigate opportunities of the short-run IPD benefits. In addition, for the long-run linkage analysis, the autoregressive distributed lag (ADRL) approach introduced by Pesaran et al. (2001) is applied. Findings – It is found that, the market returns of the sampled countries are not definitely correlated in the short- and long-term. So, international portfolio investors may get the short- and long-term diversification benefits by diversifying their portfolios among the Middle Eastern equity markets, namely, Iran, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia and UAE. Originality/value – This paper departs from earlier studies by focusing on the dynamic characteristics of correlation. Two main issues are pursued in this paper. First, instead of modeling the correlation by methods like Pearson correlation coefficient that consider the constant-correlation assumption, this paper directly uses the DCC model. Second, to empirically estimate the long-run relationship among stock markets in the Middle Eastern oil-producing countries, the ARDL approach is utilized. The ARDL approach is more robust and performs well for small sample sizes than other co-integration techniques.
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Singh, Amanjot, and Manjit Singh. "Intertemporal risk-return relationship in BRIC equity markets after the US financial crisis." International Journal of Law and Management 59, no. 4 (July 10, 2017): 547–70. http://dx.doi.org/10.1108/ijlma-12-2015-0065.
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PurposeThis paper aims to attempt to capture the intertemporal/time-varying risk–return relationship in the Brazil, Russia, India and China (BRIC) equity markets after the global financial crisis (2007-2009), i.e. during a relative calm period. There has been a significant increase in advanced economies’ equity allocations to the emerging markets ever since the financial crisis. So, the present study is an attempt to account for the said relationship, thereby justifying investments made by the international investors. MethodologyThe study uses non-linear models comprising asymmetric component generalised autoregressive conditional heteroskedastic model in mean (CGARCH-M) (1,1) model, generalised impulse response functions under vector autoregressive framework and Markov regime switching in mean and standard deviation model. The span of data ranges from 1 July 2009 to 31 December 2014. FindingsThe ACGARCH-M (1,1) model reports a positive and significant risk-return relationship in the Russian and Chinese equity markets only. There is leverage and volatility feedback effect in the Russian market because falling returns further increase conditional variance making the investors to expect a risk premium in the expected returns. The impulse responses indicate that for all of the BRIC markets, the ex-ante returns respond positively to a shock in the long-term risk component, whereas the response is negative to a shock in the short-term risk component. Finally, the Markov regime switching model confirms the existence of two regimes in all of the BRIC markets, namely, Bull and Bear regimes. Both the regimes exhibit negative relationship between risk and return. Practical implicationsIt is an imperative task to comprehend the relationship shared between risk and returns for an investor. The investors in the emerging economies should understand the risk-return dynamics well ahead of time so that the returns justify the investments made under riskier environment. Originality/valueThe present study contributes to the literature in three senses. First, the data relate to a period especially after the global financial crisis (2007-2009). Second, the study has used a relatively newer version of GARCH based model [ACGARCH-M (1,1) model], generalised impulse response functions and Markov regime switching model to account for the relationship between risk and return. Finally, the study provides an insightful understanding of the risk–return relationship in the most promising emerging markets group “BRIC nations”, making the study first of its kind in all the perspectives.
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Bhana, N. "New listings share price behaviour on the Johannesburg Stock Exchange." South African Journal of Business Management 20, no. 4 (December 31, 1989): 195–203. http://dx.doi.org/10.4102/sajbm.v20i4.963.
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The objective of this paper is to determine the price behaviour of new listings on the JSE during the period 1985-1987. The results clearly indicate that those investors who acquired new issues at the initial offering price attained significant short-term benefits in the form of a new issues premium followed by an after-market performance generally supportive of an efficiently operating market. Investors who acquired new issues subsequent to the initial offering earned negative returns (adjusted for market risk as well as systematic risk) during the first year of investment. The investigation reveals that new issues with very large price increases immediately subsequent to their offering do not have returns significantly different from new issues as a whole during the period up to one year following the listing. Investors in the secondary market, on balance, overestimated the return potential and/or underestimated the risk characteristics of new listings on the JSE.
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Trichilli, Yousra, Mouna Boujelbène Abbes, and Afif Masmoudi. "Predicting the effect of Googling investor sentiment on Islamic stock market returns." International Journal of Islamic and Middle Eastern Finance and Management 13, no. 2 (February 24, 2020): 165–93. http://dx.doi.org/10.1108/imefm-07-2018-0218.
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Purpose The purpose of this paper is to evaluate the capability of the hidden Markov model using Googling investors’ sentiments to predict the dynamics of Islamic indexes’ returns in the Middle East and North Africa (MENA) financial markets from 2004 to 2018. Design/methodology/approach The authors propose a hidden Markov model based on the transition matrix to apprehend the relationship between investor’s sentiment and Islamic index returns. The proposed model facilitates capturing the uncertainties in Islamic market indexes and the possible effects of the dynamics of Islamic market on the persistence of these regimes or States. Findings The bearish state is the most persistent sentiment with the longest duration for all the MENA Islamic markets except for Jordan, Morocco and Qatar. In addition, the obtained results indicate that the effect of sentiment on predicting the future Islamic index returns is conditional on the MENA States. Besides, the estimated mean returns for each state indicates that the bullish and calm states are ideal for investing in Islamic indexes of Bahrain, Oman, Morocco, Kuwait, Saudi Arabia and United Arab Emirates. However, only the bullish state is ideal for investing Islamic indexes of Jordan, Egypt and Qatar. Research limitations/implications This paper has used data at a monthly frequency that can explain only short-term dynamics between Googling investor’s sentiment and the MENA Islamic stock market returns. Moreover, this work can be done on the stock markets while taking into account the specificity of each activity sector. Practical implications In fact, the findings of this paper are helpful for academics, analysts and practitioners, and more specifically for the Islamic MENA financial investors. Moreover, this study provides useful insights not only into the duration of the relationship between the indexes’ returns and the investors’ sentiments in the five states but also into the transition probabilities which have implications for how investors could be guided in their choice of future investment in a portfolio with Islamic indexes. Findings of this paper are important and valuable for policy-makers and investors. Thus, predicting the effect of Googling investors’ sentiment on the MENA Islamic stock market dynamics is important for portfolio diversification by domestic and international investors. Moreover, the results of this paper gave new insights into financial analysts about the dynamic relationship between Googling investors’ sentiment and Islamic stock market returns across market regimes. Therefore, the findings of this study might be useful for investors as they help them capture the unobservable dynamics of the changes in the investors’ sentiment regimes in the MENA financial markets to make successful investment decisions. Originality/value To the best of the authors’ knowledge, this paper is the first to use the hidden Markov model to examine changes in the Islamic index return dynamics across five market sentiment states, namely the depressed sentiment (S1), the bullish sentiment (S2), the bearish sentiment (S3), the calm sentiment (S4) and the bubble sentiment (S5).