scholarly journals A Reexamination of Earnings Persistence on the Incremental Value Relevance of Earnings Levels and Earnings Changes

2018 ◽  
Vol 8 (2) ◽  
pp. 126
Author(s):  
Simon Yang
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Value Relevance ◽  
Relevant Information ◽  
Earnings Persistence ◽  
Incremental Value ◽  
Complementary Value ◽  
The U.S

This study reexaminesthe role of earnings persistence as to understand the incremental value relevance of earnings levels and earnings changes in explaining stock returns in the stock market of U.S. The results show that earnings levels and earnings changes together provide the higher value relevant information than each earnings variable alone in explaining stock returns. An increase in earnings persistence, approximated by different time-serial and firm-specific measures, puts more (less) value relevant weight on earning changes (levels). However, the complementary value relevance between earnings levels and earnings changes is somehow weak, implying that a possibly deteriorating valuation role for earnings levels and earnings changes may occur in the recent years for the U.S. stock market.

scholarly journals IFRS and Stock Returns: An Empirical Analysis in Brazil

2016 ◽  
Vol 7 (2) ◽  
pp. 179 ◽  
Author(s):  
Rodrigo F. Malaquias ◽  
Anderson Martins Cardoso ◽  
Gabriel Alves Martins
Keyword(s):  
New York ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Relevant Information ◽  
Graphic Analysis ◽  
Accounting Numbers ◽  
Before And After ◽  
Accounting Reports ◽  
Accounting Convergence

In recent years, the convergence of accounting standards has been an issue that motivated new studies in the accounting field. It is expected that the convergence provides users, especially external users of accounting information, with comparable reports among different economies. Considering this scenario, this article was developed in order to compare the effect of accounting numbers on the stock market before and after the accounting convergence in Brazil. The sample of the study involved Brazilian listed companies at BM&FBOVESPA that had American Depository Receipts (levels II and III) at the New York Stock Exchange (NYSE). For data analysis, descriptive statistics and graphic analysis were employed in order to analyze the behavior of stock returns around the publication dates. The main results indicate that the stock market reacts to the accounting reports. Therefore, the accounting numbers contain relevant information for the decision making of investors in the stock market. Moreover, it is observed that after the accounting convergence, the stock returns of the companies seem to present lower volatility.

The Impact of Government Intervention in Banks on Corporate Borrowers’ Stock Returns

2013 ◽  
Vol 48 (5) ◽  
pp. 1635-1662 ◽  
Author(s):  
Lars Norden ◽  
Peter Roosenboom ◽  
Teng Wang
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Returns ◽  
Banking Sector ◽  
Positive Impact ◽  
Support Programs ◽  
Government Interventions ◽  
Stock Market Performance ◽  
The Impact ◽  
The U.S

AbstractWe investigate whether and how government interventions in the U.S. banking sector influence the stock market performance of corporate borrowers during the financial crisis of 2007–2009. We measure firms’ exposures to government interventions with an intervention score that is based on combined information on the firms’ structure of bank relationships and their banks’ participation in government capital support programs. We find that government capital infusions in banks have a significantly positive impact on borrowing firms’ stock returns. The effect is more pronounced for riskier and bank-dependent firms and for those that borrow from banks that are less capitalized and smaller.

scholarly journals On the hedging benefits of REITs: The role of risk aversion and market states

2021 ◽  
Vol 10 (2) ◽  
pp. 126-132
Author(s):  
Riza Demirer ◽  
Asli Yuksel ◽  
Aydin Yuksel
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Risk Reduction ◽  
Significant Risk ◽  
Time Varying ◽  
Hedging Strategy ◽  
Risk Return ◽  
Market Risks ◽  
The U.S

We propose a dynamic, forward-looking hedging strategy to manage stock market risks via positions in REITs, conditional on the level of risk aversion. Our findings show that REITs do not only offer significant risk reduction for passive portfolios, but also offer much improved risk-adjusted returns with the greatest benefits observed for Australia, Canada and the U.S. Overall, our findings suggest that time-varying risk aversion can be utilized to (i) establish effective hedges against stock market risks via positions in REITS, and (ii) improve the risk-return profile of passive portfolios.

scholarly journals The Impact of the COVID-19 Pandemic on the U.S. Economy: Evidence from the Stock Market

2020 ◽  
Vol 13 (10) ◽  
pp. 233
Author(s):  
Willem Thorbecke
Keyword(s):  
Real Estate ◽  
Stock Market ◽  
Stock Returns ◽  
Electrical Equipment ◽  
Production Equipment ◽  
Macroeconomic Factors ◽  
Specific Factors ◽  
The Impact ◽  
Macroeconomic Environment ◽  
The U.S

The coronavirus crisis has damaged the U.S. economy. This paper uses the stock returns of 125 sectors to investigate its impact. It decomposes returns into components driven by sector-specific factors and by macroeconomic factors. Idiosyncratic factors harmed industries such as airlines, aerospace, real estate, tourism, oil, brewers, retail apparel, and funerals. There are thus large swaths of the economy whose recovery depends not on the macroeconomic environment but on controlling the pandemic. Macroeconomic factors generated losses in industries such as production equipment, machinery, and electronic and electrical equipment. Thus, reviving capital goods spending requires not just an end to the pandemic but also a macroeconomic recovery.

The Advent of IFRS in Canada: Incidence on Value Relevance

2016 ◽  
Vol 15 (3) ◽  
pp. 113-130 ◽  
Author(s):  
Denis Cormier ◽  
Michel L. Magnan
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Stock Markets ◽  
Value Relevance ◽  
Financial Statements ◽  
Market Prices ◽  
Listed Firms ◽  
Ifrs Adoption ◽  
The U.S

ABSTRACT The paper focuses on Canada's enactment of IFRS for publicly accountable firms. We investigate whether IFRS meet one of their stated goals, which is to improve financial statements' relevance for stock markets. Results show that migrating from Canadian GAAP to IFRS enhances the value relevance of earnings but the effect is concentrated among firms that are cross-listed in the U.S. (and that do not report according to U.S. GAAP). The advent of IFRS enhances the value relevance of information contained in footnotes but attenuates the need for non-GAAP measures' disclosure. Stock market prices also embed more precise anticipations about future IFRS earnings. Additional analyses suggest that less earnings management accompanies IFRS adoption. Our results suggest that, for cross-listed firms, the adoption of IFRS enhanced the comparability of their financial statements and, ultimately, their value relevance.

Role of Stock Markets in Stimulating Innovation Processes

2020 ◽  
Vol 64 (11) ◽  
pp. 31-41
Author(s):  
Z. Mamedyarov
Keyword(s):  
Stock Market ◽  
Mergers And Acquisitions ◽  
Stock Markets ◽  
Financial Sector ◽  
High Tech ◽  
Over The Counter ◽  
Financing Mechanism ◽  
Start Ups ◽  
The U.S

The paper deals with the role of the stock market in innovative development, basically in case of the U. S. The author shows how the NASDAQ has provided tangible financial incentives for growth of high-tech industries, emphasizes the relationship between innovation and the financial sector, the importance of competition for capital in technological development. It is shown that the development of NASDAQ and increased competition of stock markets allowed high-tech U.S. companies to benefit from country’s strong financial sector and specialized market structures. The prerequisites for the successful emergence of biotech and ICT start-ups, as well as the venture market in the U.S. are still strongly connected with stock markets. However, the comparative analysis also revealed growing global competition from the Chinese stock markets. At the same time, in the last decade a new bubble is emerging on the U.S. stock market, which, as shown by the analysis of the median revenues of the major companies, differs from similar situations before the dot-com crisis and before the 2008–2009 crisis. Revenues of the largest companies in recent years have been growing along with their capitalization, which suggests that the bubble may take much longer to collapse than before. The author also shows the intensification of competition between stock exchanges and over-the-counter financing mechanisms for innovative companies: SME acquisitions by major corporations, intensification of mergers and acquisitions around the world. The role of mergers and acquisitions, which have become an alternative to IPOs, has become increasingly important over the past decade as a financing mechanism for innovative companies. In the last decade, the ICT-companies have dominated by market capitalization and gained sufficient market power to meet the demand for new developments and acquisitions of start-ups. This over-the-counter financing mechanism increases market uncertainty and may contribute to suboptimal solutions in the high-tech sector. However, the author found that the observed decline in U.S. IPOs is primarily affecting the ICT sector, while pharmaceutical and biotech companies continue to be actively listed.

scholarly journals The role of liquidity in asset pricing: the special case of the Portuguese Stock Market

2017 ◽  
Vol 22 (43) ◽  
pp. 191-206 ◽  
Author(s):  
María del Mar Miralles-Quirós ◽  
José Luis Miralles-Quirós ◽  
Celia Oliveira
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Emerging Market ◽  
Methodological Approach ◽  
Model Framework ◽  
Content Type ◽  
Previous Evidence

Purpose The aim of this paper is to examine the role of liquidity in asset pricing in a tiny market, such as the Portuguese. The unique setting of the Lisbon Stock Exchange with regards to changes in classification from an emerging to a developed stock market, allows an original answer to whether changes in the development of the market affect the role of liquidity in asset pricing. Design/methodology/approach The authors propose and compare two alternative implications of liquidity in asset pricing: as a desirable characteristic of stocks and as a source of systematic risk. In contrast to prior research for major stock markets, they use the proportion of zero returns which is an appropriated measure of liquidity in tiny markets and propose the separated effects of illiquidity in a capital asset pricing model framework over the whole sample period as well as in two sub-samples, depending on the change in classification of the Portuguese market, from an emerging to a developed one. Findings The overall results of the study show that individual illiquidity affects Portuguese stock returns. However, in contrast to previous evidence from other markets, they show that the most traded stocks (hence the most liquid stocks) exhibit larger returns. In addition, they show that the illiquidity effects on stock returns were higher and more significant in the period from January 1988 to November 1997, during which the Portuguese stock market was still an emerging market. Research limitations/implications These findings are relevant for investors when they make their investment decisions and for market regulators because they reflect the need of improving the competitiveness of the Portuguese stock market. Additionally, these findings are a challenge for academics because they exhibit the need for providing alternative theories for tiny markets such as the Portuguese one. Practical implications The results have important implications for individual and institutional investors who can take into account the peculiar effect of liquidity in stock returns to make proper investment decision. Originality/value The Portuguese market provides a natural experimental area to analyse the role of liquidity in asset pricing, because it is a tiny market and during the period studied it changed from an emerging to a developed stock market. Moreover, the authors have to highlight that previous evidence almost exclusively focuses on the US and major European stock markets, whereas studies for the Portuguese one are scarce. In this context, the study provides an alternative methodological approach with results that differ from those theoretically expected. Thus, these findings are a challenge for academics and open a theoretical and a practical debate.

The role of online freelance stock analysts in correcting overly pessimistic market sentiment

2018 ◽  
Vol 44 (8) ◽  
pp. 954-971
Author(s):  
Myungsun Kim ◽  
Robert Kim ◽  
Onook Oh ◽  
H. Raghav Rao
Keyword(s):  
Stock Returns ◽  
Relevant Information ◽  
Content Type ◽  
Market Sentiment ◽  
Value Stocks ◽  
Stock Market Reaction ◽  
Negative Tone ◽  
Stock Analysts ◽  
Practical Implications

Purpose The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods. Design/methodology/approach The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in SeekingAlpha.com (SA). Findings The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market sentiment periods for firms that are more susceptible to the market sentiment, hence, harder to value. The tone of the stock articles during low sentiment periods also predicts the news in the forthcoming earnings. Practical implications The findings help stock investors identify value-relevant information provided by online freelance stock analysts, particularly for hard-to-value stocks and during the low market sentiment period. Originality/value This study utilizes a unique dataset obtained from SA. This is the first paper to examine whether online analysts help investors correct potential undervaluation of hard-to-value firms during the low market sentiment period.

scholarly journals Do Financial Analysts Facilitate Investors’ Assessment Of Earnings?: Evidence From The Korean Stock Market

2016 ◽  
Vol 32 (5) ◽  
pp. 1465
Author(s):  
Sukyoon Jung ◽  
Yong-Seok Lee ◽  
Seong-jin Choi
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Emerging Market ◽  
Financial Analysts ◽  
Analyst Following ◽  
Earnings Information ◽  
Information Intermediaries ◽  
Korean Stock Market

This paper seeks to enhance our understanding of financial analysts in assisting market investors’ use of accounting earnings in the Korean stock market. We examine whether stock returns differentially reflect earnings information for firms with analyst coverage. We propose that the role of analysts as external monitors as well as information intermediaries enhances the market investors’ valuation of earnings. We find that market valuation of earnings is higher for firms with analyst following. Furthermore, market investors’ valuation of earnings increases (or decreases) with the number of analysts (or with the dispersion of analysts’ forecasts). This suggests that the beneficial effect of analysts arises through the quantity and quality of analysts’ information. This study contributes to the literature by investigating the important role of analysts in emerging market.

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