Showing papers in "Financial Analysts Journal in 1993"
TL;DR: In this paper, the investment performance of socially responsible mutual funds is analyzed and the authors suggest that doing well while doing good is not a good investment strategy for socially responsible fund managers.
Abstract: (1993). Doing Well While Doing Good? The Investment Performance of Socially Responsible Mutual Funds. Financial Analysts Journal: Vol. 49, No. 6, pp. 62-66.
775 citations
TL;DR: In this article, the International Value and Growth Stock Returns (IVGSR) is used to measure the performance of a stock market stock in terms of its international value and growth.
Abstract: (1993). International Value and Growth Stock Returns. Financial Analysts Journal: Vol. 49, No. 1, pp. 27-36.
431 citations
TL;DR: In this article, statistical models for financial volatility have been used to predict the volatility of financial stocks. But the model is not suitable for the stock market and it cannot predict stock market volatility.
Abstract: (1993). Statistical Models for Financial Volatility. Financial Analysts Journal: Vol. 49, No. 1, pp. 72-78.
180 citations
TL;DR: In this article, the lessons for international asset allocation are discussed and lessons for International Asset Allocation are discussed. But they do not discuss how to allocate these lessons to different countries.
Abstract: (1993). Lessons for International Asset Allocation. Financial Analysts Journal: Vol. 49, No. 2, pp. 63-77.
179 citations
TL;DR: In this article, the authors argue that a tax on transactions would increase the cost of capital, reduce market liquidity and bring down security values, and as the tax would change the relative costs of holding and issuing different classes of securities, it might be expected to change capital structures and investment portfolios, too.
Abstract: Many major developed countries, including Germany, Japan and the United Kingdom, have some form of tax on securities transactions. The Clinton administration recently considered imposing fees of from 14? on transactions in futures contracts. Past budgets have considered fees of from 6? to 15?. Proponents of a securities transaction tax in the U.S. argue that it would tap into a significant source of revenues and would, in addition, act to reduce "excess" volatility in securities markets by discouraging speculative and "noise" trading. Some have argued that it would also increase investors' expected holding periods, hence encourage corporate managers to build for the long term. Opponents argue that any benefits from such a tax would be overwhelmed by its costs. They point out that a tax on transactions would increase the cost of capital, reduce market liquidity and bring down security values. Furthermore, as the tax would change the relative costs of holding and issuing different classes of securities, it might be expected to change capital structures and investment portfolios, too. At its worst, a securities transaction tax could drive trading in some securities to overseas markets not burdened by taxation. The economic and societal distortions resulting from taxation and avoidance would likely be large.
165 citations
TL;DR: This research uses a particular pattern-recognition algorithm to learn the relationships between a company's stock return one year forward and the most recent four years offinancial data for the company and its industry, as well as data for seven macroeconomic variables.
Abstract: (1993). Using Artificial Neural Networks to Pick Stocks. Financial Analysts Journal: Vol. 49, No. 4, pp. 21-27.
147 citations
TL;DR: In this article, the authors show that estimates based on past data are inaccurate, partly because of the many ways in which people can estimate expected return on individual securities or on a portfolio.
Abstract: If we want to estimate expected return on individual securities or on a portfolio, we need theory. Estimates based on past data are inaccurate, partly because of the many ways in which people can "...
139 citations
TL;DR: In this article, Commodities in Asset Allocation: A Real-Asset Alternative to Real Estate? Financial Analysts Journal: Vol. 49, No. 3, pp. 20-29.
Abstract: (1993). Commodities in Asset Allocation: A Real-Asset Alternative to Real Estate? Financial Analysts Journal: Vol. 49, No. 3, pp. 20-29.
130 citations
TL;DR: In this paper, the authors present a study of Mutual Fund Performance, 1962-1991, with a focus on mutual fund performance, focusing on the performance of mutual fund investment managers.
Abstract: (1993). On Studies of Mutual Fund Performance, 1962–1991. Financial Analysts Journal: Vol. 49, No. 1, pp. 42-50.
128 citations
TL;DR: In this article, the authors discuss Soft Dollars and the Brokerage Industry, and present an analysis of the relationship between soft dollars and the brokerage industry, including the role of brokerages.
Abstract: (1993). Soft Dollars and the Brokerage Industry. Financial Analysts Journal: Vol. 49, No. 2, pp. 36-44.
112 citations
TL;DR: This paper constructed a binomial interest rate tree that models the random evolution offuture interest rates and used the volatility-dependent one-period forward rates produced by this tree to discount the cash flows of any bond in order to arive at bond value.
Abstract: To value such a bond, one must consider the volatility of interest rates, as their volatility will affect the possibility of the call option being exercised One can do so by constructing a binomial interest rate tree that models the random evolution offuture interest rates. The volatility-dependent one-periodforward rates produced by this tree can be used to discount the cash flows of any bond in order to arive at bond value.
TL;DR: In this paper, the term structure forecasted economic growth in terms of term length and its relationship with economic growth. But, the analysis was limited to the United States and not applicable to other countries.
Abstract: (1993). Term Structure Forecasts Economic Growth. Financial Analysts Journal: Vol. 49, No. 3, pp. 6-8.
TL;DR: In this paper, the case of corporate spinoffs is discussed. But the authors focus on the case where institutional demand and security price pressure are not the same as in the present paper.
Abstract: (1993). Institutional Demand and Security Price Pressure: The Case of Corporate Spinoffs. Financial Analysts Journal: Vol. 49, No. 5, pp. 53-62.
TL;DR: In this paper, differences in the risks and returns of NYSE and NASD stocks are discussed. But the focus is on the NASD stock market and not the NYSE stock market.
Abstract: (1993). Differences in the Risks and Returns of NYSE and NASD Stocks. Financial Analysts Journal: Vol. 49, No. 1, pp. 37-41.
TL;DR: For example, this paper found that the market assigns a multiple of zero to the amortization of the transition asset, which is the only component of a transition asset that is assigned a higher multiple than the other components.
Abstract: When pricing common shares, investors do not assign the same earnings multiple to all components of pension cost. And these multiples differ from the multiple assigned to earnings before pension expense. In particular, both return on plan assets and the interest cost components tend to be assigned higher multiples than earnings before pension expense. Moreover, the market appears to assign a multiple of zero to the amortization of the transition asset. Earnings analysis obviously constitutes more than just the "bottom line"; careful analysis of earnings components and of the relative importance assigned to those components is also involved.
TL;DR: In this paper, the authors show that the fundamental analysis of Japanese stock returns can be used to predict the Japanese stock market's future performance, including the stock market performance in Tokyo stock market.
Abstract: (1993). Can Fundamentals Predict Japanese Stock Returns? Financial Analysts Journal: Vol. 49, No. 4, pp. 63-69.
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TL;DR: In the CAPM model, a security's return is split into a part that is perfectly correlated with a market portfolio and a residual that is uncorrelated with the market as mentioned in this paper.
Abstract: Beta splits a security's return into a part that is perfectly correlated with a market portfolio and a residual that is uncorrelated with the market. Beta is used to analyze performance, control risk, make conditionalforecasts and set expected returns. It is primarily beta's role in the Capital Asset Pricing Model (CAPM), which says expected residual returns should be zero, that makes beta controversial.
TL;DR: In this article, ethics, fairness, and efficiency in financial markets are discussed, and the authors propose a set of principles for fair and efficient financial markets, which they call Ethics, Fairness and Efficiency in Financial Markets.
Abstract: (1993). Ethics, Fairness and Efficiency in Financial Markets. Financial Analysts Journal: Vol. 49, No. 6, pp. 21-29.
TL;DR: In this paper, the Merits of Active Currency Risk Management: Evidence from International Bond Portfolios is presented. But the authors focus on the use of active currency risk management in investment portfolios.
Abstract: (1993). The Merits of Active Currency Risk Management: Evidence from International Bond Portfolios. Financial Analysts Journal: Vol. 49, No. 5, pp. 63-70.
TL;DR: In this article, the authors propose a method to resolve the equity duration paradox, which they call Resolving the Equity Duration Paradox (RVDP), by resolving the duration paradox.
Abstract: (1993). Resolving the Equity Duration Paradox. Financial Analysts Journal: Vol. 49, No. 1, pp. 51-64.
TL;DR: The role of ethics in the financial community today seems to be limited to its role in financial-economic theory as mentioned in this paper, which is illogical and ambiguous because it may actually sanction unethical behavior if such behavior can be shown to lead to material gain.
Abstract: The role of ethics in the financial community today seems to be limited to its role in financial-economic theory. Contemporary financial economists view ethics in the context of objective wealth maximization. In this context, ethics functions primarily as a constraint on behavior. This view is both illogical and ambiguous. It is illogical because it may actually sanction unethical behavior if such behavior can be shown to lead to material gain. It is ambiguous because, throughout he 2000-year history of moral philosophy, ethics has generally been viewed as a behavioral motivation, not as a constraint. If a conception of ethics as the fundamental objective in all human endeavor is disseminated in the financial community, there is real hope that ethics will be accepted as both logically consistent and desirable.
TL;DR: In this article, the authors attempted to combine expectational equity factors within one graphic framework and found that the result may be helpful for stock selection, as well as lending insight into manager style, performance and transaction costs.
Abstract: Earnings surprise, earnings torpedo and earnings estimate revision are some of the expectational strategies that have become part of the portfolio manager's tool kit during the last decade. Although there has been much written on individual investment strategies relating to earnings expectations and stock performance, there appears to have been little written on how these various expectational topics fit together. This paper attempts to combine expectational equity factors within one graphic framework. The result may be helpful for stock selection, as well as lending insight into manager style, performance and transaction costs. The Earnings Expectations Life Cycle The Earnings Expectations Life Cycle illustrated in Figure A depicts how expectations for a stock change through time.' Most stocks probably travel such a path, although they don't necessarily stop at each point on the cycle. Each stock hypothetically travels at its own speed, and some might bounce repeatedly between two or three points before continuing around the cycle. In addition, stocks may not repeat the cycle because of merger, acquisition or bankruptcy. The different stages on the Earnings Expectations Life Cycle are discussed below.
TL;DR: In this paper, a statistical analysis of the relationship between the stock-based and appraisal-based series finds that the lagged returns of the real estate stocks help explain the behavior of the current-period appraisal series.
Abstract: The continued growth of the equity REIT market depends critically on investors' belief that the stock market provides fair and accurate valuations of real estate. An index of real estate stocks traded on the New York and American stock exchanges reflects changes in real estate market fundamentals in a more timely fashion than a widely used appraisal-based system. The index includes equity real estate investment trusts (REITs), real estate operating companies not organized in trust form, land subdividers and commercial developers, and general contractors. A statistical examination of the relation between the stock-based and appraisal-based series finds that the lagged returns of the real estate stocks help explain the behavior of the current-period appraisal series. The stock market apparently impounds information about changes in real estate values in a more timely manner than appraisal-based series constrained by infrequent property appraisals. oth practitioners and academics have become increasingly interested in the risks and returns of real estate ownership. In the absence of a centralized exchange to record sales, appraisal-based data such as the Russell-NCREIF Property Index (RNPI) are often used to analyze real estate returns. Such appraisal-based series are imperfect proxies for actual market conditions, however, largely because property valuations occur infrequently (quarterly at best), so appraisal-based series contain stale prices.1 This shortcoming has been highlighted recently by the failure of appraisal-based return indexes to capture either the timing or the magnitude of the recent dramatic downturn in commercial real estate markets. This article presents and analyzes the return behavior of a stock-market-based index of real estate performance. The index is composed of real-estate-related equities traded on the New York and American stock exchanges (NYSE and Amex). The firms in the index include owner-operators of existing properties as well as developers. Previous real estate research has primarily examined the returns of equity real estate investment trusts (REITs). That work generated two findings of particular relevance to this article. First, there is no significant contemporaneous correlation between equity REIT and appraisal series returns. Second, equity REIT returns are significantly positively correlated with broader stock market returns such as the SP real estate stock prices more accurately captured the industry downturn in the late 1980s than the well-known RNPI series. Despite the lack of a contemporaneous relation between appraisal and stock series, we conclude that there is an important connection between the two. This conclusion is based on a statistically and economically significant relation between lagged real estate stock returns and current-period returns on the appraisalbased RNPI. The evidence indicates that the two series incorporate similar information about real estate fundamentals, but the stock-based index does so in a more timely manner.
TL;DR: In this article, the Triple Witching Hour has been investigated in financial analysis and it is shown that the triple witching hour has a negative correlation with the stock market's performance.
Abstract: (1993). Whatever Happened to the Triple Witching Hour? Financial Analysts Journal: Vol. 49, No. 3, pp. 66-72.
TL;DR: This paper applied the recently developed Lo test, which does not rely on standard regression techniques and is robust to short-term dependence, provided statistical support for the hypothesis that stock market returns follow a random walk.
Abstract: Stock market returns may follow biased time paths that standard statistical tests cannot distinguish from random behavior. Rescaled range analysis can be used to detect long-term, nonperiodic cycles in stock market returns. If this technique is not applied correctly, however, then it can be influenced by short-term biases, leading to the erroneous conclusion that the stock market has long-term memory. Applying the recently developed Lo test, which does not rely on standard regression techniques and is robust to short-term dependence, provides statistical support for the hypothesis that stock market returns follow a random walk.
TL;DR: The book-to-market ratio is a function of current and lagged changes in market value as mentioned in this paper, and the coefficients of correlations between book and market values decline smoothly toward zero as the lag increases.
Abstract: The book-to-market ratio is a function of current and lagged changes in market value. The coefficients of correlations between book and market values decline smoothly toward zero as the lag increases. The magnitude and length of the lags are greater, the longer-lived a firm's assets. To understand current book-to-market ratios, one must consider movements in the market value of common equity over the past six years. In other words, market values of common equity lead the book value of common equity by as much as six years. This is striking evidence of the timeliness (or lack thereof) of book values based on historical cost accounting.
TL;DR: The demand for new financial instruments is driven by the needs of borrowers and investors based on their asset/liability management situation, regulatory constraints (if any), financial accounting considerations, and tax considerations.
Abstract: "New financial instruments are not created simply because someone on Wall Street believes that it would be 'fun' to introduce an instrument with more 'bells and whistles' than existing instruments. The demand for new instruments is driven by the needs of borrowers and investors based on their asset/liability management situation, regulatory constraints (if any), financial accounting considerations, and tax considerations."' Frank J. Fabozzi and Franco Modigliani
TL;DR: In this paper, the authors evaluate the performance of the Protective Put Strategy in terms of the number of put executions and the amount of put-put pairs put into each put session.
Abstract: (1993). Evaluating the Performance of the Protective Put Strategy. Financial Analysts Journal: Vol. 49, No. 4, pp. 46-56, 69.
TL;DR: In this paper, the authors argue that long-short equity strategies are superior to short equity strategies, and they conclude that long short strategies perform better than short strategies in many scenarios, including financial markets.
Abstract: (1993). Are Long-Short Equity Strategies Superior? Financial Analysts Journal: Vol. 49, No. 6, pp. 44-49.
TL;DR: In this paper, economic news and intraday volatility in international bond markets are discussed. But they do not consider the effect of foreign exchange rates on the performance of the bond market.
Abstract: (1993). Economic News and Intraday Volatility in International Bond Markets. Financial Analysts Journal: Vol. 49, No. 3, pp. 81-86, 65.