The long-term effects of section transfers on return volatility: Intraday and overnight periods

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rodrigue Majoie Abo
Keyword(s):  
Information Disclosure ◽  
Fixed Effects ◽  
Stock Return ◽  
Control Variable ◽  
Return Volatility ◽  
Long Term Effects ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Stock Return Volatility

Purpose Studies on transfers to a more regulated section show an increase in information disclosure and stocks’ liquidity levels. Classical theories suggest that volatility should also be reduced. This study aims to analyse the long-term effects of a section transfer to a more regulated section (TSE 1/TSE 2) on stock return volatility. Design/methodology/approach This study uses an empirical framework relying on two-sample t-tests and panel regressions. These use robust standard errors and control for fixed effects, day effects and macroeconomic factors. The return variance of comparable stocks’ benchmark sample, instead of market variance, is used as a control variable. Comparable stocks operate within the same industry and do not transfer during the sample period. The authors test our results’ robustness using generalized autoregressive conditional heteroskedasticity estimates. Findings The study’s main findings show that pre-transferred stocks are more volatile than the stocks’ benchmark sample. The transfer to a more regulated section leads to a gradual decrease in the total daily stock return volatility, intraday return volatility and overnight return volatility. Originality/value To the best of my knowledge, this study is the first to empirically address the volatility change caused by the stocks’ transfer to a more regulated section. This study highlights the benefits of choosing section transfers to reduce volatility.

scholarly journals Corporate risk and the humpback of CEO narcissism

2018 ◽  
Vol 10 (3) ◽  
pp. 252-273 ◽  
Author(s):  
Tom Aabo ◽  
Nicklas Bang Eriksen
Keyword(s):  
Risk Taking ◽  
Stock Return ◽  
Return Volatility ◽  
Moderate Degree ◽  
Content Type ◽  
Stock Return Volatility ◽  
Unobtrusive Measure ◽  
Ceo Narcissism ◽  
High Level ◽  
Corporate Risk

Purpose The purpose of this paper is to investigate the association between CEO narcissism and corporate risk taking. Design/methodology/approach The authors provide a novel and unobtrusive measure of CEO narcissism based on LinkedIn profiling. The authors investigate the relationship between CEO narcissism and corporate risk taking (stock return volatility) for a sample of 475 US manufacturing firms in the period 2010-2014. Findings The authors find an inverse U-shape relationship between CEO narcissism and stock return volatility. The inverse U-shape relationship (the “humpback”) is caused by the paradoxical nature of the narcissistic personality in which the self-esteem is high but at the same time fragile with a combination of self-admiration and a constant need of having this positive self-view confirmed. The results are robust to alternative specifications of CEO narcissism and corporate risk taking. The results are economically meaningful. Thus, a moderate degree of CEO narcissism – as compared to a very low or a very high level of CEO narcissism – is associated with an increase in corporate risk taking of approximately 12 percent. Originality/value Previous literature provides multiple analyses on the association between managerial overconfidence and corporate decisions. As opposed to overconfidence, narcissism is a personality trait having both cognitive and behavioral dimensions. This paper provides a novel contribution to the growing literature on the association between managerial biases/traits and corporate decision-making.

Noisy information and stock market returns

2016 ◽  
Vol 33 (3) ◽  
pp. 338-358 ◽  
Author(s):  
Gang Li
Keyword(s):  
Growth Rate ◽  
Financial Market ◽  
Stock Return ◽  
Equity Premium ◽  
Average Risk ◽  
Return Volatility ◽  
Content Type ◽  
Stock Return Volatility ◽  
Noisy Information ◽  
The Us

Purpose This paper aims to study whether noisy public information that investors receive about the expected aggregate dividend growth rate can help better understand the large average equity premium and stock return volatility in the US financial market. Design/methodology/approach This paper considers a dynamic asset pricing model with a representative agent, who cannot observe the expected growth rate of dividends and must learn its value by using noisy information. In addition, this paper presents a simple model for noisy information calibration. Findings With a coefficient of relative risk aversion below 10 and the time impatience parameter between 0 and 1, the calibrated model is able to yield an average risk-free interest rate, equity premium and stock return volatility that are close to the stylized facts in the US financial market. Originality/value First, this paper presents a different equilibrium model with a simple “catching up with the Joneses” preference and noisy information. Second, this paper develops a simple calibration procedure to calibrate the information process to study whether the calibrated model can help explain the large average equity premium and stock return volatility in the US financial market data.

scholarly journals Foreign Ownership and Stock Return Volatility in Vietnam: the Destabilizing Role of Firm Size

2019 ◽  
Vol 10 (2) ◽  
pp. 356-377
Author(s):  
Anh Tho To ◽  
Yoshihisa Suzuki ◽  
Bao Ngoc Vuong ◽  
Quoc Tuan Tran ◽  
Khoa Do
Keyword(s):  
Stock Returns ◽  
Firm Size ◽  
Fixed Effects ◽  
Stock Return ◽  
Foreign Ownership ◽  
Alternative Measure ◽  
Return Volatility ◽  
Stock Return Volatility ◽  
One Year

This study aims to examine the relevance of foreign ownership to stock return volatility in the Vietnam stock market over ten years (2008 - 2017). After applying the fixed effects regressions and the extended instrumental variable regressions with fixed effects, we find that foreign ownership decreases the volatility of stock returns. However, the stabilizing impact of foreign ownership on stock return volatility becomes weaker in large firms since the coeffcient of the interaction term between firm size and foreign ownership turns out to be significantly positive. The estimated results remain robust when we use the future one-year volatility, other than the current one, as an alternative measure of the dependent variable.

scholarly journals The risk management role of nonexecutive directors: from capital expenditure perspective

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tho Anh To ◽  
Yoshihisa Suzuki ◽  
Hong Thu Thi Ho ◽  
Siem Thi Tran ◽  
Tuan Quoc Tran
Keyword(s):  
Stock Return ◽  
Capital Expenditure ◽  
Generalized Method Of Moments ◽  
Moderating Effect ◽  
Return Volatility ◽  
Firm Risk ◽  
Content Type ◽  
Listed Firms ◽  
Stock Return Volatility

PurposeThis study investigates the impact of board independence on firm risk of Vietnamese listed firms and the moderating effect of capital expenditure on this relationship.Design/methodology/approachThis paper applies fixed effects and dynamic generalized method of moments (GMM) models to examine hypothesized associations between the proportion of nonexecutive directors and stock return volatility, as well as the moderating effect of capital expenditure. The robustness tests are implemented by applying alternative measures of overinvestment and firm risk.FindingsThe results show that the presence of nonexecutive directors on board increases firm risk. However, the combination of nonexecutive ratio and capital expenditure ratio has a significant negative impact on firm risk. The result is also confirmed by the difference between the monitoring role of nonexecutive directors in overinvesting and underinvesting firms.Research limitations/implicationsThe results imply that Vietnamese listed firms take stock return volatility into consideration before nominating and appointing nonexecutive directors into their board, especially in overinvesting firms. From another perspective, the shift toward having a majority of nonexecutive directors on boards can play a significant role in pursuing a stable or risky business strategy.Originality/valueThis paper investigates the influences of nonexecutive directors on firm risk in the context of Vietnam.

Does domestic institutional ownership increase return volatility? The French context

2019 ◽  
Vol 61 (2) ◽  
pp. 421-433
Author(s):  
Mouna Aloui ◽  
Anis Jarboui
Keyword(s):  
Institutional Investors ◽  
Stock Markets ◽  
Stock Price ◽  
Stock Return ◽  
Price Volatility ◽  
Return Volatility ◽  
Stock Price Volatility ◽  
Content Type ◽  
Stock Return Volatility ◽  
Empirical Results

Purpose The purpose of this study is to examine the impact of domestic ownership on the stock return volatility. The authors use a detailed panel data set of 89 French companies listed on the SBF 120 over the period 2006-2013. The empirical results show that the domestic institutional investors have low stock price volatility in the French stock market. This result implies the stabilizing factor of domestic investors in France stock markets, which can be considered as one of the potential favor of growing the exhibition of domestic stock markets to institutional investors. This study employs a variety of econometric models, including feedbacks, to test the robustness of our empirical results. Design/methodology/approach To explain the relation between stock return volatility and domestic institutional investors (DIIs), the authors used two complementary methods: two-step generalized method of moments analysis as well as panel vector autoregressive framework and two-stage least squares (2SLS) method. Findings The authors’ empirical results show that the proportion of DIIs with advanced local degrees stabilizes the stock price volatility. However, firm’s size and the turnover have a positive effect on the volatility of the stock returns. This result is consistent with the hypothesis that the firm’s size and the turnover will increase price volatility during a financial crisis as a result of the deterioration of the monitoring mechanism and the reduction of the investors’ confidence in firms. Originality/value This result also indicates that the variables (the firm’s size, total sales and debt ratio) are poor corporate governance and have a role in the increased the stock return volatility.

Do institutional investors stabilize stock returns? Evidence from emerging IPO markets

2020 ◽  
Vol 32 (4) ◽  
pp. 585-600
Author(s):  
Konpanas Dumrongwong
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Stock Return ◽  
Emerging Market ◽  
Institutional Ownership ◽  
Growth Potential ◽  
Return Volatility ◽  
Content Type ◽  
Stock Return Volatility ◽  
The Relationship

Purpose The purpose of this paper is to investigate how institutional ownership is related to the stock return volatility of initial public offerings (IPOs) in an emerging market and to examine the relationship between institutional ownership and underpricing. Design/methodology/approach This paper investigates these relationships using White’s (1980) regression and 2 × 3 portfolios sorted by firm size and institutional holdings. The regression method examines the relationships across firms with different characteristics such as size, stock price, growth potential, firm age and type of investors. The data were chosen for this sample to cover the new equity issuances listed on the Thailand Stock Exchange for the period 2001–2019. Findings The empirical results suggest that institutional ownership is negatively associated with initial stock return volatility. This highlights the importance of institutional investors in maintaining stability in emerging stock markets. Additionally, it was found that institutional holding and underpricing are negatively correlated. The results are robust after controlling for potential heteroskedasticity and differences in firm characteristics. Originality/value To the best knowledge of the author, this paper is the first to study the relationship between institutional investors and volatility in Thai IPOs, and hence provides a deeper understanding of how investors influence the price formation and volatility of stock prices in emerging markets. Furthermore, besides academics, the results presented in this paper could be useful for market regulators and policymakers in designing future market regulations to efficiently stabilize equity markets.

Macroeconomic Sensitivity, Risk-Return Trade-Off and Volatility Dynamics Evidence From Developed and Developing Markets

2019 ◽  
Vol 6 (1) ◽  
pp. 1-16
Author(s):  
Faisal Khan ◽  
Hashim Khan ◽  
Saif Ur-Rehman Khan ◽  
Muhammad Jumaa ◽  
Sharif Ullah Jan
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Stock Exchange ◽  
Three Dimensions ◽  
Leverage Effect ◽  
Return Volatility ◽  
Macroeconomic Factors ◽  
Stock Return Volatility ◽  
Risk Return ◽  
The Impact

This study aims to examine the impact of macroeconomic factors on the stock return volatility along with the pricing of risk, and asymmetry and leverage effect on a comparative basis for the USA and UAE markets. Further, these three dimensions are also investigated with regard to various firm's features (such as firm's size and age). The daily data for the period 4th January 2010 to 29th December 2017 of firm stock returns from the New York Stock Exchange (NYSE), the Abu Dhabi Securities Exchange (ADSE), and the Dubai Financial Market (DFM) is considered and three time-series models were applied. The results from GARCH (1. 1) indicated that all the economic factors have significant impact on the stock return volatility in both the markets. Similarly, the study also found evidence of asymmetry & leverage effect using EGARCH in the NYSE (for all firms) and the UAE (partially). Finally, for a majority of the firms, a positive risk-return relationship is found in the UAE and a negative risk-return relationship is found in the NYSE using GARCH-in the mean. Interestingly, these results in context of both markets were different with respect to various firm features such as firm size and age. In light of these results, it is concluded that both the markets have different dynamics with regard to all three dimensions. Hence, the investors have a clear opportunity to diversify their risk and investments across developed and emerging markets.

Impact of board structure, board activities and institutional investors on the firm risk: evidence from India

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pankaj Chaudhary
Keyword(s):  
Institutional Investors ◽  
Stock Return ◽  
Stock Exchange ◽  
Independent Directors ◽  
Board Structure ◽  
Return Volatility ◽  
Method Of Moment ◽  
Content Type ◽  
Stock Return Volatility ◽  
The Impact

PurposeStock return volatility is an important aspect of financial markets which requires specific attention of researchers. This study examines the impact of board structure, board activities and institutional investors on the stock return volatility of the Indian firms.Design/methodology/approachThe author had selected the non-financial companies of the National Stock Exchange (NSE), which form the part of the NSE 500 index. Regression models had been estimated using the system generalised method of moment (GMM) framework designed by Arellano and Bover (1995) and Blundell and Bond (1998) to deal with endogeneity concerns.FindingsThe author found that the stock return volatility was affected by the institutional investors, particularly pressure-insensitive (PI) investors. Moreover, this study supported the non-linear relationship between stock return volatility and institutional investors. Unlike developed world, the author found that the independent directors were positively associated with the stock return volatility.Research limitations/implicationsIt is important for the investors and regulators to understand that the behaviour of the institutional investors depends on its class and having more independent directors will not ensure containment of the stock return volatility as suggested in previous literature reviews.Originality/valueMost of the prior studies have used simple standard deviation (SD) to compute stock return volatility. In this study, besides SD, the author used the generalised autoregressive conditional heteroskedasticity (GARCH) model to compute the stock return volatility of the firms.

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