Market capitalization

About: Market capitalization is a research topic. Over the lifetime, 3583 publications have been published within this topic receiving 77288 citations. The topic is also known as: market cap & market value.

The New Game in Town: Competitive Effects of IPOs

Abstract: We analyze the effect of initial public offerings (IPOs) on industry competitors and provide evidence that companies experience negative stock price reactions to com pleted IPOs in their industry and positive stock price reactions to their withdrawal. Following a successful IPO in their industry, they show significant deterioration in their operating performance. These results are consistent with the existence of IPO related competitive advantages through the loosening of financial constraints, finan cial intermediary certification, and the presence of knowledge capital. These aspects of competitiveness are significant in explaining the cross-section of underperformance as well as survival probabilities for competing firms. An extensive literature analyzes the performance of companies around their initial public offerings (IPOs). This literature focuses on returns on the first day of trading, as well as on returns and operating performance for the 5-year period after the IPO. For example, Ibbotson and Jaffe (1975) document a positive initial return for newly issued companies, while Ritter (1991) analyzes the long run stock price performance of IPOs and Jain and Kini (1994) consider firms' post-IPO operating performance. Our article adds a new dimension to this literature by considering not only the stock market and operating performance of the issuing company, but also the impact of the IPO on the performance of industry competitors. The competitive effects of IPOs have important implications for various agents including investors, industry competitors, and issuing firms. Issuing companies comprise a relatively small portion of portfolio value; in this arti cle's sample, for instance, existing and publicly traded firms comprise 97.5% of the total post-IPO market capitalization of industries in which IPOs occur, while IPO firms comprise only 2.5%. It is therefore important for investors to know how an IPO affects the operating and stock market performance of

Stock returns, dividend yields, and taxes

Abstract: Using an improved measure of a common stock's annualized dividend yield, we document that risk-adjusted NYSE stock returns increase in dividend yield during the period from 1963 to 1994. This relation between return and yield is robust to various specifications of multifactor asset pricing models that incorporate the Fama–French factors. The magnitude of the yield effect is too large to be explained by a “tax penalty” on dividend income and is not explained by previously documented anomalies. Interestingly, the effect is primarily driven by smaller market capitalization stocks and zero-yield stocks.

Terrorism and the Stock Market

Abstract: This paper examines the stock price impact of terrorist attacks. Using an official list of terrorism-related incidents compiled by the Counterterrorism Office of the U.S. Department of State, we identify 75 attacks between 1995 and 2002 in which publicly traded firms are targets. An event-study analysis around the day of the attacks uncovers evidence of a statistically significant negative stock price reaction of -0.83%, which corresponds to an average loss per firm per attack of $401 million in firm market capitalization. A cross sectional analysis of the abnormal returns indicates that the impact of terrorist attacks differs according to the home country of the target firm and the country in which the incident occurred. Attacks in countries that are wealthier and more democratic are associated with larger negative share price reactions. Most interestingly, we find that human capital losses, such as kidnappings of company executives, are associated with larger negative stock price reactions than physical losses, such as bombings of facilities or buildings. We discuss the implications of these findings for existing research on terrorism and for current policy debates regarding terrorism re-insurance programs.

Does Risk Seeking Drive Stock Prices? A Stochastic Dominance Analysis of Aggregate Investor Preferences and Beliefs

Abstract: We use various stochastic dominance criteria that account for (local) risk seeking to analyze market portfolio efficiency relative to benchmark portfolios formed on market capitalization, book-to-market equity ratio and price momentum. Our results suggest that reverse S-shaped utility functions with risk aversion for losses and risk seeking for gains can explain stock returns. The results are also consistent with a reverse S-shaped pattern of subjective probability transformation. The low average yield on big caps, growth stocks, and past losers may reflect investors' twin desire for downside protection in bear markets and upside potential in bull markets. Copyright 2005, Oxford University Press.

The Italian Stock Market: Efficiency and Calendar Anomalies

Abstract: After describing the various concepts of efficiency (information, valuation, full-insurance and functional) with special reference to the Italian stock market, the paper analyzes the impact of particular dates and periods of the civil year and stock exchange calendars on stock price changes to test the existence of information inefficiencies. The analysis is based on the Milan Stock Exchange's "MIB storico" stock index with reference to the period 2 January 1975 - 22 August 1989. The events tested for systematic anomalies include weekend and public holidays, the end of the calendar and stock exchange months, and the end of the year. The results obtained are in line with those found for the US market, with evidence of anomalous changes, though not all are stable over time.