Short- and long-term effects of responsible investment growth on equity returns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yann Ferrat ◽  
Frédéric Daty ◽  
Radu Burlacu
Keyword(s):  
Stock Returns ◽  
Equity Returns ◽  
Investment Horizon ◽  
Long Term Effects ◽  
Cross Sectional ◽  
Content Type ◽  
Responsible Investment ◽  
Short Run ◽  
Investment Growth ◽  
The Impact

PurposeThe growth of socially responsible assets has been exponential over the last decade, they now account for almost a third of professional investments. As the growth persists, faith and conviction investors reshape the equity markets. To fully comprehend the impact of socially conscious participants on security returns, this paper attempts to provide insights on how responsible investment growth has impacted the returns of sustainable stocks. The examination is split by investment horizon to account for short and long effects.Design/methodology/approachUsing an exclusive dataset of non-financial ratings, provided by MSCI ESG research, the authors examine the cross-sectional returns of US and European sustainability-leading and lagging corporations between 2007 and 2019. Panel models robust to country, firm-year and industry effects were then employed to examine the impact of responsible investment growth on future stock returns.FindingsThe authors find evidence that the impact of responsible investment growth is dual contingent upon the timeframe considered. In the short run, sustainability-leading and lagging firms display similar stock returns. However, the spread in returns is negative over long horizons and increasing over time.Originality/valueThe examination performed in this study highlights the significant effect of responsible investment growth on future stock returns. Overall, the authors’ findings are consistent with the price pressure hypothesis in the short run and the cost of capital alteration over longer horizons.

Oil price uncertainty and equity returns

2016 ◽  
Vol 8 (1) ◽  
pp. 64-79 ◽  
Author(s):  
Aktham Maghyereh ◽  
Basel Awartani
Keyword(s):  
Stock Returns ◽  
Oil Production ◽  
Equity Returns ◽  
Oil Price ◽  
Policy Implications ◽  
Price Uncertainty ◽  
Mena Region ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

Purpose This paper aims to examine the impact of oil price uncertainty on the stock market returns of ten oil importing and exporting countries in the Middle East and North Africa (MENA) region. The sample contains both oil importing and oil exporting countries that depend heavily on oil production and exports. Design/methodology/approach This paper intuitively applies the generalized autoregressive conditional heteroskedasticity (GARCH)-in-mean vector autoregression (VAR) model using weekly data over the period January 2001-February 2014. Findings The findings indicate that oil uncertainty matters in the determination of real stock returns. There is a negative and significant relationship between oil price uncertainty and real stock returns in all countries in the sample. The influence of oil price risk is more serious in those economies that depend heavily on oil revenues to grow. Practical implications The findings have important implications. For instance, managers should be aware of the linkages between oil price uncertainty and equity returns when they use oil to hedge and diversify equities, particularly in economies where oil is important for economic growth. The policymakers in oil importing countries should encourage companies to improve efficiency in the usage of energy and to resort to alternative sources to avoid fluctuations in earnings and equity prices. In the countries that heavily depend on oil efforts should focus on diversifying the domestic economy away from oil to protect against oil price fluctuations. Originality/value To the best of our knowledge, this is the first attempt to study the influence of oil price uncertainty in the MENA region. The sample contains both oil importing and oil exporting countries that depend heavily on oil production and exports. The empirical findings of the paper have valuable policy implications for investors, market participants and policymakers.

scholarly journals Human resource management: the promise, the performance, the consequences

2016 ◽  
Vol 3 (2) ◽  
pp. 181-190 ◽  
Author(s):  
Chris Brewster ◽  
Paul N. Gooderham ◽  
Wolfgang Mayrhofer
Keyword(s):  
Firm Performance ◽  
Journal Articles ◽  
Long Term Effects ◽  
Cross Sectional ◽  
Content Type ◽  
Global Issues ◽  
The Impact ◽  
Practical Implications ◽  
Cross National

Purpose – The dominant focus of HRM research has been that of “strategic HRM”, that is a focus on the impact of HRM on firm performance. The authors argue that not only are the cumulative results of this “dominant research orthodoxy” disappointing in terms of their external validity, but also they are of limited practical value. Further, it has failed not only in terms of its narrow firm performance-oriented agenda, but also the tenets of its agenda have contributed to serious levels of employee dissatisfaction and to the failure to deal with pressing global issues. The paper aims to discuss these issues. Design/methodology/approach – In order to assess the contribution of the dominant research orthodoxy the authors analyse the 16 most cited journal articles in the field of HRM. Findings – The authors find a predominance of US-centric studies and therefore a questionable cross-national generalizability of the dominant research orthodoxy. The use of cross-sectional data means that long-term effects cannot be gauged. The authors observe a lack of consensus on how to operationalize HRM and firm performance. National context is generally absent. Practical implications – The authors show that for HRM to realize its potential for governments, media, or philanthropic agencies, HRM must abandon its restricted scope and mono-dimensional sources of inspiration. Originality/value – The authors not only point to the shortcomings of the dominant research orthodoxy within HRM, but the authors point to how HRM could become significantly more “centre-staged” by addressing the actors searching for contributions to the big questions of the world – the governments, media, and philanthropic agencies.

Asset growth and the cross-section of stock returns: evidence from Greek listed firms

2017 ◽  
Vol 55 (5) ◽  
pp. 826-841 ◽  
Author(s):  
Georgios Constantinou ◽  
Angeliki Karali ◽  
Georgios Papanastasopoulos
Keyword(s):  
Stock Returns ◽  
Emerging Market ◽  
Balance Sheet ◽  
Firm Level ◽  
Cross Sectional ◽  
Content Type ◽  
Listed Firms ◽  
Asset Growth ◽  
Book To Market Ratio ◽  
Investment Growth

Purpose The purpose of this paper is to examine whether firm-level asset investment effects in returns found for US firms occur within the Greek stock market. Design/methodology/approach The paper utilizes portfolio-level tests and cross-sectional regressions. Findings The authors find that growth in total assets is strongly negatively related to future stock returns of Greek firms. In fact, the relation remains statistically significant, even when the authors control for other strong predictors of future returns (i.e. market capitalization and book-to-market ratio). Furthermore, the authors find that a hedge trading strategy on asset growth rate consisting of a long (short) position in firms with low (high) balance sheet growth generates positive returns, confirming that investment growth has significant predictive power for future returns of Greek listed firms. Originality/value The paper adds to the literature on the generalization of asset pricing regularities attributable to accounting figures in an emerging market.

Relative efficiency, industry concentration and average stock returns

2019 ◽  
Vol 36 (1) ◽  
pp. 63-82 ◽  
Author(s):  
Giao X. Nguyen ◽  
Wikrom Prombutr ◽  
Chanwit Phengpis ◽  
Peggy E. Swanson
Keyword(s):  
Stock Returns ◽  
Positive Impact ◽  
Stochastic Frontier ◽  
Industry Concentration ◽  
Cross Sectional ◽  
Firm Efficiency ◽  
Content Type ◽  
Profit Margins ◽  
Market Shares ◽  
The Impact

Purpose Previous research has found that industry concentration and firm efficiency affect stock returns. However, it is not clear if concentration is a byproduct of efficiency and hence its effect on stock returns is driven by efficiency. This paper aims to examine the relationships between industry concentration, firm efficiency and average stock returns. Mainly, it aims to answer if the effects of industry concentration and firm efficiency on stock returns are independent and significant. Design/methodology/approach The stochastic frontier approach is used to estimate firm efficiency. The Herfindahl index is used to measure industry concentration. Regression and vector autoregressive analyses are performed to examine cross-sectional and lagged relationships between concentration, efficiency, profitability and stock returns. The characteristics-based benchmark approach is also used to investigate performance of test portfolios. Findings Industry concentration and firm efficiency have independent and significant effects on average stock returns through profit margins and market shares, which are related to firms’ profitability. Industry concentration has a greater positive impact on market shares than on profit margins, whereas firm efficiency has a greater positive impact on profit margins than on market shares. In sum, highly efficient firms in highly concentrated markets have lower distress risks and hence provide lower average stock returns. Originality/value The paper shows the linkages between industry concentration, firm efficiency, profitability and stock returns that have not been documented together in prior studies. Businesses can better understand the impact of concentration and efficiency on market shares and profit margins. Researchers may consider incorporating concentration and efficiency, both of which are meaningful microeconomic variables, into an asset pricing model. Investors can enhance their returns by having a zero-cost portfolio with long and short positions in stocks of firms with different levels of concentration and efficiency.

The cross-section of Johannesburg Securities Exchange listed equity returns (1994-2011)

2015 ◽  
Vol 32 (4) ◽  
pp. 422-444 ◽  
Author(s):  
Jakobus Daniel Van Heerden ◽  
Paul Van Rensburg
Keyword(s):  
Cross Section ◽  
Equity Returns ◽  
Research Approach ◽  
Momentum Effect ◽  
Cross Sectional ◽  
Data Set ◽  
Content Type ◽  
Specific Factors ◽  
The Cross ◽  
The Impact

Purpose – The aim of this study is to examine the impact of technical and fundamental (referred to as firm-specific) factors on the cross-sectional variation in equity returns on the Johannesburg Securities Exchange (JSE). Design/methodology/approach – To reach the objective, the study follows an empirical research approach. Cross-sectional regression analyses, factor-portfolio analyses and multifactor analyses are performed using 50 firm-specific factors for listed shares over three sample periods during 1994 to 2011. Findings – The results suggest that a strong value and momentum effect is present and robust on the JSE, while a size effect is present but varies over time. Multifactor analyses show that value and momentum factors are collectively significant in explaining the cross-section of returns. The results imply that the JSE is either not an efficient market or that current market risk models are incorrectly specified. Practical implications – The findings of the study offers practical application possibilities to investment analysts and portfolio managers. Originality/value – To the authors’ knowledge, this is the first study to use such a comprehensive data set for the specific analyses on the JSE over such a long period. All previously identified statistical biases are addressed in this study. Different approaches are applied to compare results and test for robustness for the first time.

Going European from American: does style matter?

2017 ◽  
Vol 43 (4) ◽  
pp. 471-487 ◽  
Author(s):  
Rajesh Pathak ◽  
Satish Kumar ◽  
Ranajee Ranajee
Keyword(s):  
Stock Returns ◽  
Stock Options ◽  
Equity Returns ◽  
European Options ◽  
Cross Sectional ◽  
Content Type ◽  
Put Options ◽  
Portfolio Approach ◽  
Systematic Risk Factors ◽  
Practical Implications

Purpose The purpose of this paper is to examine the cross-sectional predictive power and the information content of volatility smirks for future stock returns using single stock options. Design/methodology/approach The study uses Fama-Macbeth procedure and portfolio approach to investigate the predictability and informativeness in a setup when options settlement style is changed from American to European. Findings The study reports that the volatility smirk of European style options, unlike American style options, predict the underlying cross-sectional equity returns. Firms with steepest volatility smirk underperform firms with flatter volatility smirks, by an average of 3.28 and 4.01 per cent annually for American and European options, respectively. The results are robust to the control of idiosyncratic and systematic risk factors. Practical implications The results confirm that a trader with negative information prefers to trade out-of-the-money put options. The more pronounced results of European options designate the trader’s preference to less risky European style stock options. Results are robust and signify the delay of equity market in incorporating information impounded in the volatility smirk. Originality/value Very few studies examine smirk and returns relationship and to the best of the authors’ knowledge, no study exists that examine the unique case of change in options style and its role in affecting relationship between smirk and future returns.

Impact of upward and downward earnings management on stock returns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Asgar Ali ◽  
Manish Bansal
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Stock Return ◽  
Momentum Effect ◽  
Cross Sectional ◽  
Content Type ◽  
Uniform Sample ◽  
The Impact ◽  
Moderating Role

PurposeThe current study aims at examining the impact of upward and downward earnings management on the cross-sections of stock return. The study also examines the moderating role of cross-sectional effects on the association between earnings management and stock returns.Design/methodology/approachThe study employed univariate and bivariate-sorted portfolio-level analysis to investigate the issue. Fama–Macbeth cross-sectional regression is used to analyze the moderating role of different cross-sectional effects. The study used a sample of 3085 Bombay Stock Exchange (BSE) listed stocks spanning over 20 years from January 2000 to December 2019.FindingsThe findings suggest that investors have different perceptions toward different forms of earnings management. In other words, results exhibit that investors perceive downward earnings management as an element of risk; hence, they discount the returns at a higher rate. On the contrary, results show that upward earnings management is positively perceived by the investors; hence, they hold the stocks even at a lower rate of return. This relation is found to be consistent even after controlling the impact of marker effect, size effect, value effect and momentum effect.Originality/valueThis study is among pioneering studies that consider the direction of earnings management while examining its impact on the stock return. This study is also among the earlier attempts to examine the moderating role of four different cross-sectional effects by taking a uniform sample of stocks over the same period.

Short- and Long-Term Effects of Land Use on Reducing Personal Vehicle Miles of Travel

2015 ◽  
Vol 2500 (1) ◽  
pp. 102-109 ◽  
Author(s):  
Wenjia Zhang ◽  
Ming Zhang
Keyword(s):  
Land Use ◽  
Longitudinal Data ◽  
Travel Behavior ◽  
Empirical Studies ◽  
Long Term Effects ◽  
Cross Sectional ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Vehicle Miles Of Travel

While voluminous empirical studies have examined the impact of land use on travel behavior, few have relied on longitudinal data and an analytical approach. With data from two activity travel surveys (1997 and 2006) conducted in Austin, Texas, this paper develops a longitudinal multilevel model for estimating the change in the effect of land use on vehicle miles of travel (VMT) over time and the long-range land use effect on VMT reduction. Results suggest that the influences of land use mixture and street density on VMT would vary between 2 years. The effects of VMT reduction on land use policies by raising population and street densities are salient in the short run but insignificant in the long run, whereas those of mixed-use policies are even larger in the long run. These findings validate the importance of longitudinal data and analysis in land use–travel studies and suggest that the short-run elasticity of land use derived from cross-sectional analyses may be inappropriate for assessing the long-run effect of land use–based mobility strategies for reducing VMT.

scholarly journals Real earnings management and stock returns: moderating role of cross-sectional effects

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manish Bansal ◽  
Asgar Ali ◽  
Bhawna Choudhary
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Stock Prices ◽  
Production Costs ◽  
Real Earnings Management ◽  
Cross Sectional ◽  
Content Type ◽  
The Impact ◽  
Moderating Role

PurposeThe study aims at investigating the impact of real earnings management (REM) on the cross-sectional stock return after considering the moderating role of market effect, size effect, value effect and momentum effect.Design/methodology/approachThe study uses weekly and monthly data of 3,085 Bombay Stock Exchange listed stocks spanning over twenty years, from January 2000 to December 2019. REM is measured through metrics developed by Roychowdhury (2006), namely, abnormal levels of operating cash flows, production costs and discretionary expenditure. The study employs univariate and bivariate portfolio-level analysis.FindingsThe findings deduced from the empirical results demonstrate that investors perceive downward REM as an element of risk; hence, they discount the stock prices at a higher rate. On the contrary, results show that investors positively perceive upward REM; hence, they hold the stocks even at a lower rate of return. This anomaly is found to be robust for all kinds of considered moderations.Practical implicationsThe findings have important managerial implications as investors are found to assign different weights to different forms of REM, depending upon the perception regarding the magnitude of risk involved in different forms. Managers can accommodate this information during their short- and long-term corporate planning.Originality/valueFirst, the study is among the earlier attempts to examine the association between REM and stock returns by considering the moderating role of cross-sectional effects. Second, the study considers the direction and endogenous nature of REM while investigating the issue.

Firm websites and the risk of firm

2015 ◽  
Vol 115 (3) ◽  
pp. 504-520 ◽  
Author(s):  
Yu-Tai Chien ◽  
Hsin-Min Lu
Keyword(s):  
Information Asymmetry ◽  
Stock Returns ◽  
Information Disclosure ◽  
Web Site ◽  
Risk Measures ◽  
Cross Sectional Study ◽  
Firm Risk ◽  
Cross Sectional ◽  
Content Type ◽  
The Impact

Purpose – Websites have become an important channel for firms to communicate with their stakeholders. Higher web site traffic could represent effective information disclosure and higher investor recognition. Both may reduce the risk of firm by reducing the level of information asymmetry and facilitating a more complete market by reaching to more potential investors. The purpose of this paper is to investigate the impact of firm web site traffic to the risk of firm. Design/methodology/approach – The authors conducted a cross-sectional study on the risk and firm web site traffic data of 4,122 US public firms. Findings – After controlling for confounding factors, web site traffic is significantly negatively associated with three firm risk measures: cost of equity, return volatility, and analyst forecast dispersion. Originality/value – The results provide new insights to the economic impact of web site traffic. Compared with previous studies that mostly investigated the relationships between web site traffic and firm performance measured by stock returns or company profitability, the authors documented empirical evidence that web site traffic influences the risk of firm through the level of information asymmetry and investor recognition. This paper suggests that when valuing a firm, investors would take web site traffic into consideration. Firm managers could use firm Websites as a channel to reduce information asymmetry, and increase investor recognition that can contribute to the firm’s value through reduced risk.

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