The determinants of the COVID-19 related stock price overreaction and volatility

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yiyang Val Sun ◽  
Bin Liu ◽  
Tina Prodromou
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Stock Price ◽  
Trading Volume ◽  
Cross Sectional ◽  
Content Type ◽  
Out Of Sample ◽  
Price Reactions ◽  
Stock Price Reactions ◽  
Practical Implications

Purpose This study aims to investigate which stock characteristics and corporate governance variables affect stock price overreaction and volatility during the COVID-19 pandemic period. Design/methodology/approach A set of stock characteristics and corporate governance variables which may affect price overreaction and volatility were identified following a review of the literature. A dummy variable was created for the cross-sectional analysis to take into account the unique sector effect in the consumer staples sector. Out of sample analysis was conducted to confirm the robustness of the main results. Findings The empirical results consistently show that size, dividend and trading volume determine the stock price reactions when the market is in turmoil during the pandemic period. Board size and average board tenure exhibit moderate effects on reducing the stock price reactions, but the effects become insignificant while controlling for the firm characteristics in the regressions. The results remain robust when tested out of the sample. More interestingly, a consumer staples sector effect is identified and tested. The test results show that the consumer staples sector effect mitigates the stock price reactions. Practical implications The results have practical implications for investors who aim to manage desired levels of risk in their portfolios during the pandemic. The results also provide meaningful insights to stock market speculators regarding pandemic-related speculation opportunities. Originality/value This study makes a meaningful connection between the irrational stock market anomalies and the COVID-19 pandemic.

scholarly journals Is Abnormally Large Volume a Clue?

2016 ◽  
Vol 8 (9) ◽  
pp. 226
Author(s):  
Tsung-Hsun Lu ◽  
Jun-De Lee
Keyword(s):  
Stock Market ◽  
Large Volume ◽  
Stock Prices ◽  
Stock Price ◽  
Trading Volume ◽  
Sensitive Analysis ◽  
Support Level ◽  
Out Of Sample ◽  
Sample Test ◽  
Abnormal Trading Volume

This paper investigates whether abnormal trading volume provides information about future movements in stock prices. Utilizing data from the Taiwan 50 Index from October 29, 2002 to December 31, 2013, the researchers employ trading volume rather than stock price to test the principles of resistance and support level employed by technical analysis. The empirical results suggest that abnormal trading volume provides profitable information for investors in the Taiwan stock market. An out-of-sample test and a sensitive analysis are conducted for the robustness of the results.

scholarly journals Initial bank loans, zero-leverage firms and stock market liquidity

2019 ◽  
Vol 46 (5) ◽  
pp. 1028-1051 ◽  
Author(s):  
Sijia Zhang ◽  
Andros Gregoriou
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Trading Volume ◽  
Market Liquidity ◽  
Bank Loans ◽  
Bank Loan ◽  
Market Reactions ◽  
Content Type ◽  
Bid Ask Spread ◽  
Long Run

Purpose The purpose of this paper is to examine stock market reactions and liquidity effects following the first bank loan announcement of zero-leverage firms. Design/methodology/approach The authors use an event studies methodology in both a univariate and multivariate framework. The authors also use regression analysis. Findings Using a sample of 96 zero-leverage firms listed on the FTSE 350 index over the time period of 2000–2015, the authors find evidence of a significant and permanent stock price increase as a result of the initial debt announcement. The loan announcement results in a sustained increase in trading volume and liquidity. This improvement continues to persist once the authors control for stock price and trading volume effects in both the short and long run. Furthermore, the authors examine the spread decomposition around the same period, and discover the adverse selection of the bid–ask spread is significantly related to the initial bank loan announcement. Research limitations/implications The results can be attributed to the information cost/liquidity hypothesis, suggesting that investors demand a lower premium for trading stocks with more available information. Originality/value This is the first paper to look at multiple industries, more than one loan and information asymmetry effects.

Political connection and firm value: an Indian perspective

2014 ◽  
Vol 3 (2) ◽  
pp. 170-189 ◽  
Author(s):  
Debabrata Datta ◽  
Santanu K. Ganguli
Keyword(s):  
Corporate Governance ◽  
Theoretical Model ◽  
Stock Market ◽  
Stock Prices ◽  
Empirical Test ◽  
Political Connection ◽  
Content Type ◽  
Election Results ◽  
Political Governance ◽  
Practical Implications

Purpose – The purpose of this paper is to verify existence of political connection of firms in India. For this purpose the paper first presents a theoretical model and then tests empirically the movement of stock prices during two state elections in India. Design/methodology/approach – The methodology is theoretical modelling where the paper applies the standard Cournot model of oligopoly. The paper then applies correlation and Wilcoxon Paired Rank Sum test to verify the results of the theoretical model by using data from the Indian stock market during the election results. Findings – The theoretical result states that some firms opt for political connection and some remain independent in an oligopoly. It also shows that political connection affects stock price. The empirical results find out that divergent responses of stock prices to the election results can be linked to politically connection. Research limitations/implications – The theoretical model is a simple two firm model and not generalized to n number of firms. The empirical test considers only two state elections and applies simple statistical test. The study is restricted to one country only. Practical implications – The paper has practical implications for stock market. It has implications for corporate governance and for political governance. This is important since political connection of firms has emerged as an important issue in India. Social implications – The paper is important as it addresses the issue of political connection of firms, which have ramifications for social equilibrium. In a democratic country like India any nexus between political party and firms may adversely affect not only corporate governance but also political governance. Originality/value – This paper looks at political connectedness theoretically in a federal structure, an issue not addressed so far in the literature. Second it considers not so discussed topic of market perception of political connection in India. The originality of the paper is that it presents a theory and also verifies the theoretical results with empirical test.

Gender differences in preferences for firm characteristics across different groups of investors

2016 ◽  
Vol 8 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Mohammad Tariqul Islam Khan ◽  
Siow-Hooi Tan ◽  
Lee-Lee Chong
Keyword(s):  
Gender Differences ◽  
Gender Gap ◽  
Institutional Investors ◽  
Stock Price ◽  
Trading Volume ◽  
Firm Characteristics ◽  
Content Type ◽  
Know How ◽  
Dividend Payments ◽  
Practical Implications

Purpose – This paper aims to study gender differences in preferences for firm characteristics across various groups of investors in Malaysia. Design/methodology/approach – Self-declared preferences are elicited through a survey of 520 investors comprising retail, financial professionals and institutional investors in the Malaysian stock market. Non-parametric (Mann-Whitney and Kruskal-Wallis) tests are computed to achieve the stated objective. Findings – Results reveal that female investors display higher preferences for the liquidity of a firm, dividend payments, trading volume of a firm, stock price and firm’s age than male investors across investor’s groups. Research limitations/implications – Findings imply that the gender gap in investing behaviour can be partly attributed to gender differences in preferences for firm characteristics. Practical/implications – The findings suggest that the gender gap can be mitigated by giving more priority to the choices of female investors with respect to firm characteristics. In turn, this may reduce a part of the gender gap in investing. Moreover, the findings would assist companies to understand and know how their shareholder’s preferences vary with respect to gender and investor’s groups. Originality/value – This paper provides evidence concerning the gender gap in investor’s self-declared preferences for firm characteristics across retail, financial professionals and institutional investors in Malaysia, which complements previous studies that used equity holdings data and only two groups of investors.

Investor protection and market liquidity revisited

2015 ◽  
Vol 15 (4) ◽  
pp. 517-529 ◽  
Author(s):  
Xiaofeng Shi ◽  
Michael Dempsey ◽  
Huu Nhan Duong ◽  
Petko S. Kalev
Keyword(s):  
Corporate Governance ◽  
Hong Kong ◽  
Stock Market ◽  
Common Law ◽  
Investor Protection ◽  
Civil Law ◽  
Market Liquidity ◽  
Stock Liquidity ◽  
Content Type ◽  
Practical Implications

Purpose – This paper aims to establish the relation between corporate governance – as represented by investor protection at both the legal and firm levels – and stock market liquidity. Design/methodology/approach – This paper avails of the unique features of Hong Kong- and China-based stocks that are traded on the Hong Kong Stock Exchange so as to test whether differences between “common law” and “civil law” legal environments contribute to differences in stock liquidity. In addition, by constructing an internal corporate governance index score for each firm based on board size, board independence and information on the audit and remuneration committee, we document whether firms with better corporate governance scores have narrower spreads, greater depth and higher trading volumes. Findings – Overall, results provide support for a linkage between corporate governance issues – as investor rights protection at both the environment and firm protection levels – and stock market liquidity. Research limitations/implications – This paper recognizes that investor protection constitutes a single component of the desirability of investing in a firm’s stock. Nevertheless, it does appear to constitute an important component of a stock’s attractiveness. Practical implications – The practical implications are clear, namely, that good corporate governance of firms leads to their attractiveness as investment vehicles (for both the shorter and the longer terms). Social implications – The paper has clear social implications. In particular, the paper serves to highlight that prospects for enduring wealth creation are contingent on the safeguards accorded to the equity ownership of a firm’s stock. Originality/value – The originality lies in taking advantage of the unique features of the Chinese and Hong Kong firms on the Hong Kong Exchange, so as to examine the contrasting influences of common law and civil law on stock liquidity. Thus, the authors allow for the effects of corporate governance across the two legal environments (China and Hong Kong) to be compared and contrasted while maintaining other influences unchanged across Chinese and Hong Kong shares.

scholarly journals Stock market reactions to the Japanese Sarbanes-Oxley act of 2006

2009 ◽  
Vol 7 (2) ◽  
pp. 126-136 ◽  
Author(s):  
Kosuke Seino ◽  
Fumiko Takeda
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
High Ratio ◽  
Corporate Accountability ◽  
Market Reactions ◽  
Sarbanes Oxley ◽  
Price Reactions ◽  
Stock Price Reactions ◽  
Stock Market Reactions

This article investigates stock market reactions to announcements related to the introduction of the Financial Instruments and Exchange Law or the so-called Japanese Sarbanes-Oxley Act (J-SOX), which was enacted to reinforce corporate accountability and responsibility. We find that the announcements leading to the passage of the J-SOX raised stock prices of firms listed on the First Section of the Tokyo Stock Exchange. Another finding is that firms with a high ratio of foreign shareholders or leverage experienced more positive stock price reactions. By contrast, whether the firm was audited by Big 4 audit firms did not seem to matter to investors. In addition, large firms tended to have more negative stock price reactions than small firms.

Herd behavior in the French stock market

2017 ◽  
Vol 16 (4) ◽  
pp. 497-515 ◽  
Author(s):  
Houda Litimi
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Design Methodology ◽  
Garch Model ◽  
Herd Behavior ◽  
Conditional Volatility ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type

Purpose This paper aims to investigate the herding behavior in the French stock market and its effect on the idiosyncratic conditional volatility at a sectoral level. Design/methodology/approach This sample covers all the listed companies in the French stock market, classified by sector, over four major crisis periods. The author modifies the cross-sectional absolute deviation (CSAD) model to include trading volume and investors sentiment as herding triggers. Furthermore, the author uses a modified GARCH model to investigate the effect of herding on conditional volatility. Findings Herding is present in the French market during crises, and it is present in only some sectors during the entire period. The main trigger for investors to embark into a collective herding movement differs from one sector to another. Furthermore, herding behavior has an inhibiting effect on market conditional volatility. Originality/value The author modifies the CSAD model to investigate the presence of herding in the French stock market at a sectoral level during turmoil periods. Furthermore, the particularly designed GARCH model provides new insights on the effect of herding and volume turnover on the conditional volatility.

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