Showing papers on "Stock exchange published in 1975"

Company Size, Listed Versus Unlisted Stocks, and the Extent of Financial Disclosure

Abstract: Even a cursory examination of an extensive sample of corporate annual reports indicates that the adequacy of disclosure varies from company to company. In quite a few cases, the variation is substantial. There are many factors which could contribute to the observed variation. One of the problem areas in corporate reporting is that little is known about the extent to which these factors affect the adequacy of disclosure in annual reports. This paper reports on a study of the relationship between a subcomponent of adequate disclosure-the extent to which selected items of information are presented in corporate annual reports-and two company characteristics. One characteristic is the size of the company, and the other is the company's listing status. Listed companies have their common stock traded on either the New York (NYSE) or American (AMEX) Stock Exchanges. Unlisted companies are represented by those companies whose stock is traded in the Over-the-Counter (OTC) market. A measure of disclosure was constructed, based on the informational desires of financial analysts, and defined in terms of 39 selected types of information which might appear in the annual report. Weights were assigned to each of the 39 items (types) of information in order to recognize differences in the relative importance of their disclosure. The weights, as well as a justification for inclusion of the items in the study, were based on the responses contained in the completed questionnaires returned by 131 financial analysts. The measure of disclosure was applied to the annual reports of 88 com-

Asset Revaluations and Stock Market Prices

Abstract: Several recently reported studies have considered whether changes in accounting methods by firms whose securities are publicaly traded have led to any discernible response in the form of shifts in share prices. (I) These studies have been framed in differing terms, and have looked at share price movements under a variety of conditions. But a common finding has been that changes in accounting methods do not appear to have had much of an effect on stock market prices. This paper presents some evidence of changes in accounting method which lead to shifts in stock prices. It describes an examination of movements in share prices of a sample of relatively large Australian public companies which announced upward asset revaluations during the period 1960-70. This examination revealed that announcements of asset revaluations were associated with substantial upward movements in stock prices, and that these shifts in stock prices were generally sustained in the post-announcement months. Furthermore, the stock market appears to digest this new information quickly into stock prices as the adjustment was almost complete at the close of the announcement month. Further analysis suggested that the observed movements in stock prices could not be attributed entirely to such additional information signals as earnings and dividend changes. Nor were the results explained by induced changes in volatility which could conceivably result from the release of revaluation information. Given that the revaluations reflected changes in the worth of assets which had predominantly taken place but had not been recorded during prior accounting periods, then the findings are consistent with claims that the failure of accounting to systematically provide contemporary information about the affairs of firms can deprive the stock market of valuable information and lead to the inequitable treatment of individual investors.

Estimation of Stable Law Parameters: Stock Price Behavior Application

Abstract: A point of considerable interest is whether the asymmetric stable laws rather than the symmetric stable laws provide for a closer representation of the behavior of security prices. Our empirical results indicate that the asymmetric laws are more appropriate than the symmetric stable laws. A new estimation procedure is used to obtain the estimates of parameters of the stable laws for 20 randomly selected stocks from the New York Stock Exchange. Estimates of the skewness parameter are explicitly obtained for the first time. The estimates are compared with those obtained under the assumption of symmetry and are also compared with the estimates provided by the method of Fama and Roll [13].

Thinness in Capital Markets: The Case of the Tel Aviv Stock Exchange

Abstract: A market is commonly called thin if a large change in price is associated with a small change in supply or demand. The concept of thinness can refer to the markets for stocks, bonds, any category of financial instrument, or even any type of good. Most frequently, thinness has been casually discussed with regard to bond markets and stock markets.

The Stock Market of 1929 Revisited: A Note

Abstract: Applying a formulation devised by Burton G. Malkiel to stock prices prior to the market crash of 1929, this study finds that descriptions of the period as a “speculative orgy” are misleading.

The Impact of Changes in Trading Location on a Security's Systematic Risk

Abstract: Listing of common stock on an exchange is believed by many to have a positive value for the firm. One implication of purported advantages has been improvement in the price of the stock when it is listed. Another advantage to an investor could be a reduction in the risk level of a security through trading location changes. The purpose of this research is to investigate the effect upon a security's risk level when its trading location is transferred to the New York Stock Exchange.

The information content of large investment holdings

Abstract: makes a purchase such that he becomes the owner of 10 per cent or more of the equity shares of a company, he must notify the company of the fact within fourteen days beginning with the day following the occurrence. The investor must disclose the percentage of shares held and any addition or reduction in this stake must also be disclosed within fourteen days after the transaction. The Stock Exchange requires companies who have a quotation to inform the Exchange of any notification received regarding an investor's 10 per cent or more holding. The object of such disclosure requirements is to give more information to the Directors of the company being invested in, their shareholders and the investing community as a whole. Knowledge of an investment holding being built up may indicate a possible takeover approach,1 or the exercise of some managerial or shareholder influence by the investor. Additionally, the acquisition of a 10 per cent stake implies confidence in the share price potential and thus the existing and potential investors may use this as one indicator in their own decision making. No empirical study of the information content of such announcements has been made and thus the usefulness of the Companies Act provisions has not been tested. The selection of the 10 per cent level for disclosure was fairly arbitrary and if investors attach substantial importance to such news it implies that some lesser disclosure level would also provide useful information. This has been supported by the press and by companies themselves and some changes in the legislation are therefore likely in any new Companies Act.2 The research reported in this paper investigates the impact of the announcement of 10 per cent holdings having been made in quoted companies. It examines the impact of the building up of stakes on share prices, the initial reaction of investors to the news of large investment holdings, the longer term investor behaviour and whether the information content of the announcements has been correctly appraised by the market.

Stock Prices and the Business Cycle

Abstract: T o what extent has the changing character of the business cycle since World War 11 affected the behavior of stock prices and the traditional relationships between stock prices and swings in business activity? Or, to put the question somewhat differently, do stock prices behave during the milder fluctuations now referred to as ”growth cycles” as they do during the wider fluctuations that typify the term “business cycles”? Indeed, what patterns have emerged from an analysis of the relationships among stock prices, bond prices, corporate profits, and business activity during the postwar years? In a recent study for the National Bureau of Economic Research, Isle Mintz identified eight growth cycles during 1948-70.’ Five of the periods of slowdown overlap the business cycle recessions of 1949, 1954,1958,1961, and 1970, beginning one or two quarters earlier but ending at about the same time. These five, of course, were the more serious episodes. The other three milder slowdowns occurred in 1951-52, 1962-63, and 1966-67, interrupting the business cycle expansions of 1949-53 and of 1961-69. A ninth slowdown began in the spring of 1973 and remained moderate in severity until the autumn of 1974. It is now clear that this slowdown will encompass a recession, making it the sixth one to do so since 1948. During the five previous slowdowns that overlapped business cycle recessions, Gross National Product in constant dollars declined, though not in every quarter, at average rates ranging from a minus l/2% per year in the mildest to minus 2l/2% per year in the sharpest. In the other three slowdowns, real GNP continued to grow, in most quarters, at rates that averaged about 2l/2% per year in 1951-52, 3%% in 1962-63, and 3% in 1966-67. During the eight intervening upswings, on the other hand, growth rates ranged from 4% to nearlv 12% and averaged 6% Der vear. As will be seen, significant changes in stock prices have been associated with even the milder slowdowns in economic growth.

The Money Supply and the Stock Market: The Demise of a Leading Indicator

Abstract: (1975). The Money Supply and the Stock Market: The Demise of a Leading Indicator. Financial Analysts Journal: Vol. 31, No. 5, pp. 18-26, 76.

Wage Rates in Pittsburgh during the Depression of 1908

Abstract: On 22 October 1907, the Knickerbocker Trust Company, the third largest trust company in New York City, closed its door and announced itself bankrupt. Panic rapidly spread. On the New York Stock Exchange chaos reigned as a loss of confidence, fed by insistent rumours of further imminent collapses, led to waves of selling, margin calls, and a rapid lowering of share prices. Heavy pressure developed upon the Trust Company of America and the Lincoln Trust Company: through the timely intervention of J. P. Morgan they survived, but lesser banking institutions throughout America, faced with long lines of depositors anxious to retrieve savings, were less fortunate. The supply of national bank notes proved insufficiently elastic to meet the massive, short-run increase in demand. Many banks, lacking adequate emergency reserves of notes and/or specie, were forced to ignore legal requirements and to suspend payments. It is true that the establishment of a New York trust company emergency fund prevented the chain of banking failures from spiralling disastrously onward, that the panic selling on the Stock Exchange was short-lived, and that the financial crises of late 1907 were confined largely to the cities – hence the manner in which the period has been written into American history as the ‘ rich man's panic ’. It is incorrect, however, to assert that its ‘ effects were not widespread ’.

Window Dressing the Interim-Earnings Report: An Empirical Assessment for Firms Initially Going Public

Abstract: Several years ago, Green wrote about some of the accounting problems in measuring interim-period earnings for seasonal businesses.' Since then, several empirical studies have examined the usefulness of interim reports in predicting annual results.2 These studies have primarily involved large, established firms whose shares are traded on the New York and other stock exchanges. Since interim-earnings reports are regularly issued by these firms, information is available on the historical relationship between interim and annual earnings (i.e., the extent of seasonality. the nature and magnitude of year-end accruals, etc.). Also, there does not seem to be any rationale for these firms to systematically window dress the specific interim-earnings report examined. Firms making their initial public offering of common stock provide financial information under somewhat different conditions. First, they are required to present in their registration statement annual-earnings reports covering only the five most recent accounting periods prior to the offering. In addition, these firms present earnings data for an interim period if more than 2 or 3 months have elapsed between the previous year end and the offering date. The earnings for this interim period are typically shown compared with earnings of the same period during the previous year. Thus, information regarding the historical relationship between interim and annual earnings for these firms is more limited than for the larger firms previously studied. Moreover, the managements of these firms seem to have a particular incentive to report a favorable earnings performance for the most recent interim period in an effort to influence the offering price or facilitate the offering. Statements regarding the importance of a significant increase in the

Corporate Stock Issue and Repurchase

Abstract: T e Spring and Autumn, 1974 issues of Financial Management carried articles [1, 4] dealing with share repurchase. Apparently there exists considerable disagreement as to both why firms repurchase their stock and the empirical methodology appropriate in evaluating share repurchase practices. Corporations have offered many reasons for issuing [7] and acquiring [3, 9] their own common stock. The reasons most often cited for a new issue are to reduce the risk associated with a highly levered firm, raise more capital for profitable investments, and take advantage of expectational differences as to price between the market and management. Major reasons suggested for repurchase are the tax advantage associated with such distributions versus dividends, the increase in leverage to increase return, and the market's underevaluation of the company's stock. All direct changes caused by the decision of management to increase or reduce the outstanding equity capitalization of the firm are explicitly considered in this study. Management has 3 alternatives. It can issue new stock, either directly or indirectly (warrants, convertibles, etc.); buy back already outstanding stock through open market purchases or tender offers; or, finally, do nothing. Only the first two alternatives are considered in this st dy. Other numerous studies include those by Ellis and Young [2] on the repurchase decision and Robichek and Myers [7] on the choice between debt and equity. The primary purpose here is to identify the characteristics of firms engaged in stock issue or repurchase activity.

Abstract–A Multivariate Analysis of Relationships between a Company's Liquidity Position and Common Stock Price

Abstract: Reports of firms with working capital problems have been widespread in recent years, particularly since the Penn Central debacle, whose failure caused a genuine confidence crisis which spread rapidly throughout all segments of the financial markets. A survey of the literature produced little evidence which had sought to determine the impact of a company's liquidity position on the market price of its common stock. This study first laid a theoretical framework for explaining possible effects of various levels of liquidity on equity values. Then, four hypotheses were investigated: 1. A corporation's liquidity position has an identifiable impact upon investors' evaluation of a common stock.

Quantitative Approaches to Forecasting Corporate Profits

Abstract: The annual value of equity stock exchange transactions and the annual value of mergers and acquisitions involve thousands of millions of pounds and thus considerable resources have been devoted to investment analysis, the discipline that sets out to value the worth of corporate enterprises. Probably the main requirement in investment analysis is the forecasting of company earnings, asset values and their growth rates. These forecasts are then used to determine the “correct” share price either by subjective means or by some equity valuation model.

The Stock Exchange Specialist and the Market Impact of Major World Events

Abstract: (1975). The Stock Exchange Specialist and the Market Impact of Major World Events. Financial Analysts Journal: Vol. 31, No. 4, pp. 27-32.

Stock Market and Financial Variables and a Theory of Takeover

Abstract: In this chapter I shall set out a theory of takeovers based upon comparisons of the financial and stock market performance of firms taken over and firms not taken over. I am not attempting to simply discriminate between the two groups on whatever basis proves statistically significant,* but rather hope to provide economic justification for the inclusion of various variables which theoretically should operate to determine the causes of takeover. Only then can meaningful conclusions with respect to the theory of the firm be drawn from the statistical testing procedures employed in chapters 3 and 4.