scholarly journals Abnormal Returns or Mismeasured Risk? Network Effects and Risk Spillover in Stock Returns

2019 ◽  
Vol 12 (2) ◽  
pp. 50 ◽  
Author(s):  
Arnab Bhattacharjee ◽  
Sudipto Roy
Keyword(s):  
Stock Returns ◽  
Network Effects ◽  
Cross Correlation ◽  
Factor Model ◽  
Empirical Work ◽  
Abnormal Returns ◽  
Recent Event ◽  
Dow Jones Industrial Average ◽  
Abnormal Stock Returns ◽  
Short Event

Recent event study literature has highlighted abnormal stock returns, particularly in short event windows. A common explanation is the cross-correlation of stock returns that are often enhanced during periods of sharp market movements. This suggests the misspecification of the underlying factor model, typically the Fama-French model. By drawing upon recent panel data literature with cross-section dependence, we argue that the Fame-French factor model can be enriched by allowing explicitly for network effects between stock returns. We show that recent empirical work is consistent with the above interpretation, and we advance some hypotheses along which new structural models for stock returns may be developed. Applied to data on stock returns for the 30 Dow Jones Industrial Average (DJIA) stocks, our framework provides exciting new insights.

Studying the Effect of Changing the Managing Director on the Abnormal Returns of Shares of Companies Listed on the Iraqi Stock Exchange

2021 ◽  
Vol 39 (11) ◽  
Author(s):  
Hussein Hasan ◽  
Hudaa Nadhim Khalbas ◽  
Farqad Mohammed Bakr AL Saadi
Keyword(s):  
Stock Returns ◽  
Significant Relationship ◽  
Stock Prices ◽  
Market Reaction ◽  
Stock Exchange ◽  
Hypothesis Test ◽  
Abnormal Returns ◽  
The Other ◽  
Other Hand ◽  
Abnormal Stock Returns

The aim of this research is to study the market reaction to the change of the managing director and how this change affects the abnormal returns of the shares. The research is based on the information published by the companies listed on the Iraq Stock Exchange, and 35 companies were selected for the period from 2015 to 2019. The results of the hypothesis test for this study show that there is a negative and significant relationship between the change of the managing director and abnormal stock returns. On the other hand, investors undervalue stock prices when changing CEOs. As a result, the stock returns are less than expected.

How Sports Sponsorship Influences a Sponsor’s Financial Performance: A Case Study from the Korea Baseball Organization

2021 ◽  
Vol 30 (4) ◽  
Author(s):  
Hyun-Min Kim ◽  
Woon-Kyung Song ◽  
Sanghak Lee
Keyword(s):  
Financial Performance ◽  
Stock Returns ◽  
Abnormal Returns ◽  
Positive Influence ◽  
Cumulative Abnormal Returns ◽  
Abnormal Stock Returns ◽  
Korea Baseball Organization ◽  
Positive Effect ◽  
Insight Into

This study aims to examine the effects of sponsorship on the sponsor’s financial performance. Th is study investigates return on sponsorship (ROS) with a quantitative analysis. Nexen Tire’s title sponsorship agreement with the Heroes baseball club in the Korea Baseball Organization (KBO) in 2010 is studied. The positive effect of sponsorship on the sponsor’s Tobin’s q is confirmed by comparing the non-sponsorship period (2000‒2009) with the sponsorship period (2010‒2018). It is also shown from an event study that the sponsor experiences negative abnormal stock returns on the news of the sponsorship agreement, though this was not found to be statistically significant. Still, when the sponsee enters the postseason, positive cumulative abnormal returns are observed, particularly significant 10 days before the postseason games. Th is study confirms the positive influence of sponsorship on the sponsor’s financial performance and, with evidence from South Korea, provides insight into Asian markets in need of research. Th e results suggest that 10 days before a postseason game would be an ideal time to leverage marketing and activate a sponsorship strategy.

scholarly journals Editorial for Applied Econometrics

2020 ◽  
Vol 13 (9) ◽  
pp. 187
Author(s):  
Chia-Lin Chang
Keyword(s):  
Economic Growth ◽  
Stock Returns ◽  
Financial Management ◽  
Network Effects ◽  
Abnormal Returns ◽  
Earnings Forecasts ◽  
Applied Econometrics ◽  
Management Control ◽  
Middle Income ◽  
Gaussian Regression

This Editorial evaluates 14 invaluable and interesting articles in the Special Issue “Applied Econometrics” for the Journal of Risk and Financial Management (JRFM). The topics covered include recovering historical inflation data from postage stamps prices, FHA loans in foreclosure proceedings through distinguishing sources of interdependence in competing risks, information in earnings forecasts, nonlinear time series modeling, a systemic approach to management control through determining factors, economic freedom and FDI versus economic growth, efficient cash use of the Taiwan dollar, financial health prediction in companies from post-Communist countries, influence of misery index on U.S. Presidential political elections, multivariate student versus Gaussian regression models in finance, financial derivatives markets and economic development, income inequality and economic growth in middle-income countries, abnormal returns, mis-measured risk, network effects, and risk spillovers in stock returns.

scholarly journals 2002 German Federal Elections and Associated Energy Policy: How Were Energy Corporations Financially Affected?

2009 ◽  
Vol 229 (5) ◽  
Author(s):  
Ulrich Oberndorfer ◽  
Andreas Ziegler
Keyword(s):  
Stock Returns ◽  
Energy Policy ◽  
Factor Model ◽  
Negative Impact ◽  
Social Democrats ◽  
Study Approach ◽  
Abnormal Stock Returns ◽  
Major Shift ◽  
The Government ◽  
Policy Direction

SummaryThis paper analyzes the effect of the 2002 German federal elections to the Lower House of Parliament (Bundestag) on the financial performance of German energy corporations.We consider the last minute victory of the government coalition consisting of Social Democrats and the Green party which was generally associated with a major shift in energy policy towards the promotion of renewable energies and a phasing out of nuclear energy. Our event study approach is based on the application of the Fama-French three-factor model to estimate abnormal stock returns. The results of the empirical analysis imply neither for traditional utilities nor for renewable energy corporations any robust positive or negative impact of the elections and therefore of the general energy policy direction of the government in the next legislative period.

Dividend Buying: Linking Dividend Announcements and Ex-Dividend Day Effects

1995 ◽  
Vol 10 (3) ◽  
pp. 421-435 ◽  
Author(s):  
Helen M. Bowers ◽  
Donald Fehrs
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Short Term ◽  
Return Variance ◽  
Dividend Announcements ◽  
Abnormal Volume ◽  
Abnormal Stock Returns ◽  
Short Term Investment

We provide a plausible explanation for earlier findings that positive abnormal stock returns associated with dividend announcements persist for several days and that abnormal volume and stock returns commence several days before a stock's ex-dividend day. This study links these two sets of findings to the short-term investment strategy of dividend buying by relating the abnormal returns and trading volume to individual stock characteristics favored by dividend buyers, namely the stock's return variance and dividend yield. We conclude that dividend buying is at least partially responsible for the abnormal returns and volume found between dividend announcement and ex-dividend days.

A THRESHOLD MODEL APPROACH TO ESTIMATING THE ABNORMAL STOCK RETURNS

2013 ◽  
Vol 08 (01) ◽  
pp. 1350001
Author(s):  
TERENCE TAI-LEUNG CHONG ◽  
WING HEI MAK ◽  
ISABEL KIT-MING YAN
Keyword(s):  
Stock Returns ◽  
Firm Size ◽  
Threshold Model ◽  
Empirical Studies ◽  
Abnormal Returns ◽  
Threshold Effects ◽  
Market Values ◽  
Abnormal Stock Returns ◽  
Equity Ratio ◽  
Book To Market Ratio

The classical capital asset pricing model postulates a linear relationship between stock returns and stock risks. However, a number of subsequent empirical studies have revealed some anomalies in this relationship, especially for firms with small size and high book-to-market values. A possible explanation for the anomalies is the existence of threshold effects in the proxies of stock risks. However, conventional threshold models only allow for one threshold variable, which limits their applicability in this context. In this paper, we address this issue by applying the econometric technique developed by Bai et al. (2012). We estimate the joint threshold effects of firm size and book-to-market equity ratio on the stock returns using a sample of 5,271 US firms. The test results yield clear evidence for the existence of threshold effects in both firm features. We find that abnormal returns exist when the firm size falls below 52.04 million USD and the book-to-market ratio exceeds 0.4085.

Investor reactions to restatements conditional on disclosure of internal control weaknesses

2018 ◽  
Vol 19 (3) ◽  
pp. 423-439 ◽  
Author(s):  
Yiwen Li ◽  
You-il Park ◽  
Jinyoung Wynn
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Internal Control ◽  
Private Information ◽  
Abnormal Returns ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Financial Restatements ◽  
Abnormal Stock Returns ◽  
Internal Control Weaknesses

Purpose The purpose of this paper is to investigate investor reactions to financial restatements conditional on disclosures of internal control weaknesses under Section 404 of the Sarbanes-Oxley Act. Design/methodology/approach The research uses cumulative abnormal stock returns (CARs) as a proxy for investor reactions. Restatements and internal control reports are available on audit analytics. Multivariate regression analyses were used for testing. Findings Using a sample of restating firms whose original misstatements are linked to underlying internal control weaknesses, the research finds that cumulative abnormal returns for firms disclosing internal control weaknesses in a timely manner is negative in a three-day window around the restatement announcements. The finding indicates that restatements with early disclosure of internal control weaknesses provide more persuasive evidence of the ineffectiveness of a firm’s internal control over financial reporting, rather than early disclosure lowering the information asymmetry between a firm and investors. Research limitations/implications This study employs CARs to examine the market reaction to restatements conditional on disclosure of internal control weaknesses. Practical implications Further study on reactions by creditors who have access to private information on firms could extend the implications of the finding. Originality/value The study contributes to the existing research by documenting that early disclosure of material weaknesses in internal control affects investors’ reactions to financial restatements.

scholarly journals Corporate Governance, Shareholder Rights, and Shareholder Rights Plans: Poison, Placebo, or Prescription?

2008 ◽  
Vol 43 (2) ◽  
pp. 381-400 ◽  
Author(s):  
Gary L. Caton ◽  
Jeremy Goh
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Firm Value ◽  
Abnormal Returns ◽  
Governance Structure ◽  
Shareholder Rights ◽  
Corporate Governance Structure ◽  
Earnings Growth ◽  
Forecast Revisions ◽  
Abnormal Stock Returns

AbstractWe examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.

scholarly journals Performance of Kenyan Listed Companies Pre and Post Chief Executive Officer Dismissal, Retirement and Resignation Events

2019 ◽  
Vol 14 (2) ◽  
pp. 180
Author(s):  
James N. Ndegwa
Keyword(s):  
Stock Returns ◽  
Significant Influence ◽  
Abnormal Returns ◽  
Chief Executive ◽  
Market Model ◽  
Return On Assets ◽  
Listed Firms ◽  
Paired Samples ◽  
Significant Difference ◽  
Abnormal Stock Returns

In the decade between years 2001 – 2011 Kenya experienced change of CEOs of listed firms through dismissal, resignation and retirement which created a need to establish whether CEO departure events had a significant influence on stock returns and profitability of the affected firms. In this research 9 CEO departure events 3 dismissal, 3 retirement and 3 resignation events were analyzed. Abnormal stock returns were computed by employing the market model and profitability of the affected listed firms was measured by employing return on assets (ROA). Paired samples t-test was employed to examine whether there was a significant difference in the abnormal returns and profitability (ROA) during pre and post CEO departure period. The findings indicated that there was no significant difference in abnormal stock returns and profitability in the pre and post CEO departure events. The findings implied that NSE investors were not excited by change of CEOs and that the NSE is semi strong form efficient.

scholarly journals How Main Street Drives Wall Street: Customer (Dis)satisfaction, Short Sellers, and Abnormal Returns

2020 ◽  
Vol 57 (6) ◽  
pp. 1055-1075
Author(s):  
Ashwin Malshe ◽  
Anatoli Colicev ◽  
Vikas Mittal
Keyword(s):  
Customer Satisfaction ◽  
Stock Returns ◽  
Abnormal Returns ◽  
Capital Intensity ◽  
Trading Behavior ◽  
Short Sellers ◽  
Unit Increase ◽  
Abnormal Stock Returns ◽  
Customer Dissatisfaction ◽  
The Impact

Although previous studies have established a direct link between customer-based metrics and stock returns, research is unclear on the mediated nature of their association. The authors examine the association of customer satisfaction and abnormal stock returns, as mediated by the trading behavior of short sellers. Using quarterly data from 273 firms over 2007–2017, the authors find that short interest—a measure of short seller activity—mediates the impact of customer satisfaction and dissatisfaction on abnormal stock returns. Customer dissatisfaction has a more pronounced effect on short selling compared with customer satisfaction. In addition, customer satisfaction and dissatisfaction are more relevant for firms with low capital intensity and firms that face lower competitive intensity. The results show that a one-unit increase in customer satisfaction is associated with a .56 percentage point increase in abnormal returns, while a one-unit increase in customer dissatisfaction is associated with a 1.34 percentage point decrease in abnormal returns.

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