This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidityadjusted capital asset pricing model, a security s required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with the market return and liquidity. In addition, a persistent negative shock to a security s liquidity results in low contemporaneous returns and high predicted future returns. The model provides a unified framework for understanding the various channels through which liquidity risk may affect asset prices. Our empirical results shed light on the total and relative economic significance of these channels and provide evidence of flight to liquidity. r 2005 Elsevier B.V. All rights reserved.

Market Liquidity: Asset Pricing with Liquidity Risk

A. L. Kroeber and Clyde Kluckhohn, "culture: A critical review of concepts and definitions"

There is a distinct lack of research into the relationship between corporate governance and corporate social responsibility (CSR) in the banking sector This paper fills the gap in the literature by examining the impact of corporate governance, with particular reference to the role of board of directors, on the quality of CSR disclosure in US listed banks’ annual reports after the US sub-prime mortgage crisis Using a sample of large US commercial banks for the period 2009–2011 and controlling for audit committee characteristics, board meeting frequency, and banks’ profitability, size and risk, we find evidence that board independence and board size, the two board characteristics usually associated with the protection of shareholder interests, are positively related to CSR disclosure This indicates that, with regard to CSR disclosure, more independent boards of directors and larger boards are the internal corporate governance mechanisms which promote both shareholders’ and other stakeholders’ interests Contrary to our expectations, CEO duality also impacts positively on CSR disclosure From an agency-theoretical viewpoint, this suggests that powerful CEOs may promote transparency about banks’ CSR activities for their private benefits While this could indicate that powerful CEOs are under particular pressure to appease stakeholders’ concerns that they might abuse their power by providing a high degree of CSR disclosure, it could also be a sign of managerial risk aversion or managers’ private reputational concerns

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Corporate Governance and Corporate Social Responsibility Disclosure: Evidence from the US Banking Sector

Forecasting stock exchange rates is an important financial problem that is receiving increasing attention. During the last few years, a number of neural network models and hybrid models have been proposed for obtaining accurate prediction results, in an attempt to outperform the traditional linear and nonlinear approaches. This paper evaluates the effectiveness of neural network models which are known to be dynamic and effective in stock-market predictions. The models analysed are multi-layer perceptron (MLP), dynamic artificial neural network (DAN2) and the hybrid neural networks which use generalized autoregressive conditional heteroscedasticity (GARCH) to extract new input variables. The comparison for each model is done in two view points: Mean Square Error (MSE) and Mean Absolute Deviate (MAD) using real exchange daily rate values of NASDAQ Stock Exchange index.

Using artificial neural network models in stock market index prediction

Are Investors Reluctant to Realize Their Losses

We use a new data set to study the determinants of the performance of open-end actively managed equity mutual funds in 27 countries. We find that mutual funds underperform the market overall. The results show important differences in the determinants of fund performance in the U.S. and elsewhere in the world. The U.S. evidence of diminishing returns to scale is not an universal truth as the performance of funds located outside the U.S. and funds that invest overseas is not negatively affected by scale. Our findings suggest that the adverse scale effects in the U.S. are related to liquidity constraints faced by funds that, by virtue of their style, have to invest in small and domestic stocks. Country characteristics also explain fund performance. Funds located in countries with liquid stock markets and strong legal institutions display better performance.

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The Determinants of Mutual Fund Performance: A Cross-Country Study

We use a new dataset to study how mutual fund flows depend on past performance across 28 countries. We show that there are marked differences in the flow-performance relationship across countries, suggesting that US findings concerning its shape do not apply universally. We find that mutual fund investors sell losers more and buy winners less in more developed countries. This is because investors in more developed countries are more sophisticated and face lower costs of participating in the mutual fund industry. Higher country-level convexity is positively associated with higher levels of risk taking by fund managers.

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The flow-performance relationship around the world

Gruber (1996) and Zheng (1999) report that investors channel money toward mutual funds that subsequently perform well. Sapp and Tiwari (2004) find that this “smart money” effect no longer holds after controlling for stock return momentum. While prior work uses quarterly U.S. data, we employ a British data set of monthly fund inflows and outflows differentiated between individual and institutional investors. We document a robust smart money effect in the United Kingdom. The effect is caused by buying (but not selling) decisions of both individuals and institutions. Using monthly data available post-1991 we show that money is comparably smart in the United States. CAN INVESTORS IDENTIFY SUPERIOR MUTUAL FUNDS? The first studies to address this question (Gruber (1996), Zheng (1999)) find that, indeed, funds that receive greater net money flows subsequently outperform their less popular peers. This pattern was termed the “smart money” effect. More recent research, however, finds that after fund performance is adjusted for the momentum factor in stock returns, greater net flows no longer lead to better performance (Sapp and Tiwari (2004)). In this paper, we reexamine the smart money issue with U.K. data. Owing to data constraints, all of the above studies work with aggregate money flows to funds: All investors are aggregated, and sales are offset by repurchases. Furthermore, not having access to exact net flows, these papers approximate

https://www.fep.up.pt/conferencias/pfn2006/Conference%20Papers/534.pdf

Which Money Is Smart? Mutual Fund Buys and Sells of Individual and Institutional Investors

We use a new data set to study the determinants of the performance of open-end actively managed equity mutual funds in 27 countries. We find that mutual funds underperform the market overall. The results show important differences in the determinants of fund performance in the USA and elsewhere in the world. The US evidence of diminishing returns to scale is not a universal truth as the performance of funds located outside the USA and funds that invest overseas is not negatively affected by scale. Our findings suggest that the adverse scale effects in the USA are related to liquidity constraints faced by funds that, by virtue of their style, have to invest in small and domestic stocks. Country characteristics also explain fund performance. Funds located in countries with liquid stock markets and strong legal institutions display better performance.

/pdf/the-determinants-of-mutual-fund-performance-a-cross-country-46ym4yc4qm.pdf

Previous papers that test whether sentiment is useful for predicting volatility ignore whether lagged returns information might also be useful for this purpose. By doing so, these papers potentially overestimate the role of sentiment in predicting volatility. In this paper we test whether sentiment is useful for volatility forecasting purposes. We find that most of our sentiment measures are caused by returns and volatility rather than vice versa. In addition, we find that lagged returns cause volatility. All sentiment variables have extremely limited forecasting power once returns are included as a forecasting variable.

Aneel Keswani

Papers

The Determinants of Mutual Fund Performance: A Cross-Country Study

The flow-performance relationship around the world

Which Money Is Smart? Mutual Fund Buys and Sells of Individual and Institutional Investors

The Determinants of Mutual Fund Performance: A Cross-Country Study

The Relationships between Sentiment, Returns and Volatility