Showing papers on "Market capitalization published in 1990"

Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms

Abstract: Hidden capital exists whenever the accounting measure of a firm's net worth diverges from its economic value. Such unbooked capital has on-balance-sheet and off-balancesheet sources. This paper develops a model to estimate both forms of hidden capital and to test hypotheses about their determinants. In effect, the analysis expands the twoindex model by endogenizing the market and interest-rate sensitivities of any stock and decomposing each sensitivity into on-balance-sheet and off-balance-sheet elements. For a sample of banks during 1975-1985, the model finds considerable variation in both forms of hidden capital. To THE EXTENT THAT an accounting representation of a firm's net worth diverges from its economic value, the firm is said to have hidden capital. Two sources of hidden capital exist: accountants' misvaluations of portfolio positions that accounting principles designate as on-balance-sheet items and the systematic neglect of off-balance-sheet sources of value that these principles do not permit to be formally booked. This paper develops a model for estimating both types of hidden capital. The model makes direct use of accounting information on the bookable positions of a firm and separates bookable from unbookable sources of value. We use regression analysis to partition the market value of a firm's stock (i.e., its market capitalization, MV) into two components: recorded capital reserves and unrecorded (or hidden) net worth. Hidden capital is, in turn, allocated between values that are unbooked but bookable through asset turnover or writedowns on a historical-cost balance sheet under Generally Accepted Accounting Principles (GAAP) and values which GAAP currently designates as an unbookable offbalance-sheet item. We estimate the net unbooked value of on-balance-sheet positions by estimating an intermediate variation ratio, k. This variable expresses the ratio of the market value to the book value of the collected components of a firm's bookable

Property share valuation

Abstract: Discusses the distinctions between property investment/development companies and property developer/trading companies, and notes the differences in valuation methodology Explains that the valuation of property investment/development company shares is based on estimated net asset value (NAV), and the process by which the shares may be traded on the stock market at a discount or a premium to this Identifies the factors which influence the discount or premium to NAV and suggests a framework whereby the shares may be evaluated in a more explicit manner

Stock Repurchases and Excess Returns: An Empirical Examination

Abstract: The excess returns associated with repurchase announcements are viewed largely as a reaction to management's statement that the firm's shares are underpriced; management's signal provides new information that enhances the firm's market value. Although earlier studies have found the excess return to be closely related to the premium set by managment, other factors play a part in determining both the market reaction and the premium level set by management. Among these factors ar relative market capitalization, holdings by institutions, immediate alternative uses for cash, level of insider control, recent stock price performance, relative size of the tender offer, and the resultant change in the firm's capital structure.

Foreign competition in U.S. banking markets

Abstract: Foreign penetration of U.S. wholesale banking already exceeds that of most other industry groups; unless market capitalization ratios for U.S. banks go up—or down for foreign banks—this trend is likely to continue.

Stock market dispersion and real economic activity: evidence from quarterly data

Abstract: We conduct an empirical investigation into the effects that stock market dispersion has on real economic activity. The results from fairly standard reduced-form equations suggest that, controlling for the effects of monetary and fiscal policy, stock market dispersion leads to a significant increase in unemployment and a decline in real GNP and investment. We also report results from including our stock market measure and a Lilien-type employment dispersion measure [see Lilien (1982)] in several VAR systems in which unemployment is used as the indicator of real economic activity. The performance of the employment-based measure turns out to be very sensitive to the ordering of the variables in the system. The stock market dispersion measure always explains a larger fraction of the variance of unemployment than does the employment dispersion measure, and the fraction explained is not sensitive to the ordering of the variables. Even after the inclusion of an interest rate variable and the Standard & Poor's 500 in the VAR system, stock market dispersion accounts for between 26% and 33% of the variance of unemployment at long horizons. Prakash Loungani Economic Research Federal Reserve Bank of Chicago 230 S. LaSalle St. Chicago, IL 60690 312-322-8203 Mark Rush Department of Economics University of Florida Gainesville, FL 32611 904-392-0318 William Tave Department of Economics Brown University Providence, RI 02912 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Takeovers and Stock Price Volatility

Abstract: There is now a large literature documenting the statistical relation between stock prices and dividends at the aggregate level. A robust finding is that stock prices are too volatile to be explained by subsequent changes in dividends. Observations of large market swings, like the crash of October 1987 and the minicrash of October 1989, encourage the popular perception that stock prices are excessively volatile. While these observations have provoked a great deal of analysis, there has been little discussion of the possible link between excess stock price volatility and the fact that changes in the control of large corporations often take place via market acquisition of the outstanding shares. These transactions - takeovers - are often associated with dramatic increases in the price of the shares of the firm being acquired; these are called “takeover premia.” In fact, some commentators argue that movements in the stock market in the 198Os, including the large market declines of October 1987 and October 1989, were linked to changes in takeover activity. In this article we explore the possible link between takeover activity and stock price volatility.