scholarly journals The Impact of Financial Leverage on the Variance of Stock Returns

2019 ◽  
Vol 7 (1) ◽  
pp. 14 ◽  
Author(s):  
David Aharon ◽  
Yossi Yagil
Keyword(s):  
Stock Returns ◽  
Coefficient Of Determination ◽  
Accurate Approximation ◽  
Financial Leverage ◽  
Industrial Firms ◽  
Theoretical Relationship ◽  
Personal Taxes ◽  
The Impact ◽  
The Relationship

This paper investigates the direct theoretical relationship between the variance of stock returns (σ2E) and financial leverage (L) considering both corporate and personal taxes. Using a dataset of U.S. industrial firms, we examine the variance of stock returns as a function of the firm’s financial leverage. We demonstrate that (1) the variance of stock returns is positively related to the firm’s financial leverage, (2) the relationship between the variance of stock returns and financial leverage is positive when corporate and personal taxes are also considered, and (3) with regard to the relationship between the variance of stock returns and financial leverage, using market measures of the latter tends to generate a higher coefficient of determination and a more accurate approximation of the theoretical relationship between financial leverage and the variance of stock returns.

scholarly journals The Impact of Investor Sentiment on Return of Different Industries in Pakistan

2017 ◽  
pp. 1-23
Author(s):  
Sumayya Chughtai Et al.,
Keyword(s):  
Stock Returns ◽  
Principle Component Analysis ◽  
Negative Relationship ◽  
Investor Sentiment ◽  
Differential Impact ◽  
Future Period ◽  
Market Sentiment ◽  
Available Information ◽  
The Impact ◽  
The Relationship

We classify stocks in different industries to measure industrial sentiment based on principle component analysis in order to examine whether investor sentiment exerts a differential impact on stock returns across different industries. After having constructed industry-level sentiment indices we construct a composite investor sentiment index. Our results suggest that investor sentiment negatively affects current as well as future stock returns in Pakistan over the examined period. However, we find that the influence of investor sentiment varies substantially across different industries. We also find that the market sentiment index has a negative relationship with both current and future stock returns. We also show that the direction of the relationship between return and sentiment remains same for the current and future period. This indicates that investors overreact to the available information and mispricing exists for a prolonged time. Our results confirm that sentiment driven mispricing persists for upcoming time and stock markets are not fully efficient to adjust instantaneously.

The Impact of Economic Sentiment, Consumer, Producer and Investor's Confidence Indices on Stock Returns of the Listed Companies in FTSE-20 in Greece

2018 ◽  
pp. 162-209
Author(s):  
Constantine Cantzos ◽  
Petros Kalantonis ◽  
Aristidis Papagrigoriou ◽  
Stefanos Theotokas
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Macroeconomic Variables ◽  
Production Index ◽  
Behavioral Indicators ◽  
Portfolio Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
The Relationship

This chapter examines the relationship between stock returns of companies listed in the FTSE-20 on the Athens Exchange and behavioral indicators. The research is based on the behavioral APT model, which examines stock returns' risk factors through the involvement of macroeconomic variables and behavioral indicators. The data is the closing price of 17 shares listed in the FTSE-20 index, a number of macroeconomic variables, and a series of behavioral indicators for the period of January 2001-December 2014. Regressions were conducted with dependent variable stock returns of a portfolio invested equally in these 17 stocks. In addition, the research tests the existence of long-run and short-run equilibrium and causality. The change in the industrial production index along with the risk premium have a positive and significant impact on the portfolio returns. Johansen's test showed that there is a long-run equilibrium between stock returns, macroeconomic variables, and behavioral indicators. The VECM and VAR models showed that there is not long and short-run causality, not even Granger causality. No similar research has been conducted in Greece, thus it fills a literature gap.

scholarly journals Leverage and firm investment: the role of information asymmetry and growth

2019 ◽  
Vol 27 (1) ◽  
pp. 56-73 ◽  
Author(s):  
Albert Danso ◽  
Theophilus Lartey ◽  
Samuel Fosu ◽  
Samuel Owusu-Agyei ◽  
Moshfique Uddin
Keyword(s):  
Information Asymmetry ◽  
High Growth ◽  
Firm Investment ◽  
Financial Leverage ◽  
Content Type ◽  
Growth Firms ◽  
The Impact ◽  
The Relationship ◽  
Role Of Information

PurposeThis paper aims to demonstrate how financial leverage impacts firm investment and the extent to which this relationship is conditional on the level of information asymmetry as well as growth.Design/methodology/approachThe paper relies on data from 2,403 Indian firms during the period 1995-2014, generating a total of 19,544 firm-year observations. Analysis is conducted by using various panel econometric techniques.FindingsDrawing insights from agency theories, the paper uncovers that financial leverage is negatively and significantly related to firm investment. It is also observed that the impact of financial leverage on firm investment is significant for high information asymmetric firms. Finally, the paper shows that the relationship between leverage and firm investment is significant for low-growth firms. However, no significant relationship is found between leverage and investment for high-growth firms.Originality/valueThis paper provides fresh evidence on the leverage–investment nexus and, to the authors’ knowledge, it the first paper to examine the extent to which this leverage–investment relationship is driven by the level of information asymmetry.

scholarly journals The Linkage between Sentiments and Stock Market Dynamics New Evidence from Iran

2020 ◽  
Vol 9 (2) ◽  
pp. 29
Author(s):  
Heshmatollah Asgari ◽  
Hamed Najafi
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Screening Method ◽  
Market Price ◽  
Investor Sentiment ◽  
Financial Assets ◽  
Causality Test ◽  
Research Criteria ◽  
The Impact ◽  
The Relationship

In recent years, the issue of financial behaviour and the impact of investors’ sentiments on their decision making have become such a popular issue. The sentiments of financial activists affect the market price of financial assets and particularly stocks, and therefore it is included in the new pricing models of capital assets. In this article, we seek the effect of investors’ sentiments on the dynamics of the Iranian stock market (TSE). To do this, among the companies accepted in the stock market we select 120, considering the research criteria and screening method, we examined TSE specifics throughout 2010-2018 using regression analysis and causality test. Our results show that firstly investors’ sentiments have a direct effect on the stock returns and there is a bilateral relationship between them. Secondly, inflation has the opposite effect and economic growth has a direct and positive effect on the relationship between investor sentiment and stock returns. Finally, government spending has no significant effect on the relationship between investor sentiment and stock returns.

An Examination of the Relationship between Volatility and Expected Returns in the BRVM Stock Market

2018 ◽  
Vol 3 (5) ◽  
pp. 7-11 ◽  
Author(s):  
Godwin Olasehinde-Williams
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
West African ◽  
Expected Returns ◽  
Economic Agents ◽  
The Impact ◽  
The Relationship

Financial theory suggests that volatility affects average stock returns positively. It is claimed that markets reward economic agents for the risk they assume with higher returns. This study uses an ARMA (1, 2)-GARCH (1, 1)-M technique to examine the impact of volatility on BRVM stock returns in the integrated regional West African stock market. A positive but insignificant relationship was found between volatility and stock returns. The study concludes that there is no significant feedback from volatility to average returns in the stock market. Our findings indicate that investors are not compensated for taking risks in the regional stock market.

Can Earnings Innovations Explain The Inverse Relationship Between Unanticipated Inflation And Stock Returns?

2011 ◽  
Vol 9 (2) ◽  
pp. 10 ◽  
Author(s):  
Jon A. Hooks
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Inverse Relationship ◽  
Explanatory Power ◽  
Earnings Forecast ◽  
Capitalization Rate ◽  
Relationship Of ◽  
The Impact ◽  
The Relationship ◽  
Unanticipated Inflation

Hooks (1991) argues that the explanatory power of unanticipated inflation in stock return models appears to result from the relationship of unanticipated inflation with the earnings capitalization rate and not the impact inflation has on the level or growth rate of earnings. Here we extend this line of investigation by examining the relationship between unanticipated inflation and the earnings innovation extracted from a univariate earnings forecast. We show that unanticipated inflation has no significant relationship with innovations in conventional earnings. However, we find that unanticipated inflation has a significant positive relationship with the magnitude of the earnings innovation during the 1955-85 period when earnings are adjusted to account for the effects of inflation on firms assets and liabilities.

Decision-making criteria in tactical make-or-buy issues: an empirical analysis

2015 ◽  
Vol 10 (1) ◽  
pp. 2-20 ◽  
Author(s):  
Socrates John Moschuris
Keyword(s):  
Decision Making ◽  
Cost Savings ◽  
Industrial Firms ◽  
Content Type ◽  
Independent Variables ◽  
Stratified Sample ◽  
Return Envelope ◽  
The Impact ◽  
The Relationship ◽  
Decision Making Criteria

Purpose – The purpose of this paper is to seek to contribute to the assessment of the impact of a number of decision-making criteria in resolving tactical make-or-buy issues in enterprises operating in Greece. Moreover, it sheds light on the relationship between the impact of each criterion and a number of independent variables. Design/methodology/approach – Initially, depth interviews were made with purchasing managers in ten industrial firms operating in Greece. The findings of these interviews and the review of the pertinent literature provided the basis for the questionnaire design. Then, a copy of the questionnaire and a prepaid self-addressed return envelope were mailed to a stratified sample of 300 industrial firms operating in Greece. By the end of this process, 85 questionnaires were received, representing a 28.3 percent response rate. Findings – Cost and quality appear to be the criteria with the most impact, which indicates that companies usually resolve tactical make-or-buy issues in order to achieve short-term cost savings or operational advantage. The emphasis placed upon the other criteria tends to vary with the situation under which the particular make-or-buy issue is resolved. Originality/value – It develops a more precise assessment of the impact of each make-or-buy decision-making criterion and investigates the relationship between this impact and a number of independent variables.

scholarly journals PENGARUH KEPEMIMPINAN KEPALA UPT PUSKESMAS TERHADAP KINERJA PEGAWAI PUSKESMAS CIAWI KECAMATAN CIAWI KABUPATEN BOGOR

2017 ◽  
Vol 3 (1) ◽  
pp. 31
Author(s):  
Irvan Maulana ◽  
Rita Rahmawati ◽  
Euis Salbiah
Keyword(s):  
Local Government ◽  
Significance Test ◽  
Coefficient Of Determination ◽  
Leadership Performance ◽  
Positive Correlation ◽  
Government Clinic ◽  
Key Word ◽  
The Impact ◽  
The Relationship ◽  
Research Show

The main objective of this research is to know the impact of leadership and employees performance at Ciawi Local Government Clinic of Bogor Municipality.Associative method is research method used to know the relationship or impact between two or more variables. The population of this research is 37 employees. To determine the number of minimum sample, Slovin formula is used. Based on the formula, 27 employees taken as sample. To analyze data, Weight Mean Score and Rank Spearman Correlation are used for hypothetical testing purpose. In this context, H0:ρ = 0, means that there is no positive correlation between leadership and employees performance, and Ha: ρ ≠ 0, means that there is positive correlation between leadership and employees performance.The result of this research show that leadership function by Head of Local Government Clinic is in “pretty good” criteria with mean score of 2,916 (out of 5) and “pretty good” criteria in all of indicator in this variable. Meanwhile, the variable of employees performance is also categorized as “good” criteria with mean score of 3,000 (out of 5). Futhermore, based on Rank Spearman analysis with significance test for n=27 and standar error of 10%, show that Rho 0,368 with “low” criteria. And the significance test t=2,042 > 1,70814, thus, conclusion can be taken that Ho is rejected and Ha is accepted. This mean that there is positive correlation between leadership and employees performance with coefficient of determination 13,5%. In the other words, the research conclusion is the influence of leadership efforts by head of Local Government Clinic is 13,5% and the remaining 86,5% is determined by other factors (epsilon). Key word : Leadership, Performance, employees

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