Showing papers on "Stock exchange published in 1981"

The Adjustment of Stock Prices to Information About Inflation

Abstract: This paper analyzes the reaction of stock prices to the new information about inflation. Based on daily returns to the Standard and Poor's composite portfolio from 1953–78, it seems that the stock market reacts negatively to the announcement of unexpected inflation in the Consumer Price Index (C.P.I.), although the magnitude of the reaction is small. It is interesting to note that the stock market seems to react at the time of announcement of the C.P.I., approximately one month after the price data are collected by the Bureau of Labor Statistics.

The Relative Information Content of the Release of Financial Results Data by Firms

Abstract: Firms listed on the Stock Exchange in the United Kingdom release information on their annual results in three stages. Initially, a preliminary announcement (PA) is made to the Stock Exchange and to the financial media. The preliminary announcement usually contains information on net profits before and after tax, earnings per share, dividend per share, and sales turnover. Second, some weeks after the release of the PA, firms release their Annual Report and Accounts (ARA); these are mailed to individual shareholders as well as being released to the Stock Exchange and the financial media. Third, a few weeks after the release of the ARA, firms have their Annual General Meetings (AGM). Previous research in the United States has shown that preliminary announcements and annual reports and accounts have an information content for both investors' and lenders and creditors.2 In contrast to the PA and ARA, however, there have been few studies relating to the information content of the Annual General Meeting. The purpose of this paper is to add to the accounting-capital markets literature by examining

The Rise (and Retreat) of a Market: English Joint Stock Shares in the Eighteenth Century

Abstract: The market for joint stock shares in eighteenth-century England is often portrayed as an underdeveloped and flawed mechanism for resource allocation, which in turn is cited to explain the paucity of shares actually traded. This article questions that interpretation, both by inquiring whether the requisite institutions for a functional market were present, and by constructing a new time series of eighteenth-century share prices and exposing them to a test of the efficient markets hypothesis. Because the stock exchange is found to exhibit most of the conventionally defined characteristics of an effective market, the article concludes by outlining the case for skepticism with respect to a common theme in economic history: the idea that the purported superiority of market resource allocation over alternative non-market forms (in the absence of rigidities due to underdevelopment or government interference) is an unambiguous conclusion in every historical context.

Potential Corporate Takeovers and Market Efficiency: A Note

Abstract: THIS PAPER PROPOSES TO test the efficiency of the stock market reaction to public disclosure of partial corporate acquisitions. No previous studies have examined the efficiency of the stock market with respect to the announcement of partial acquisitions. If the returns to stockholders of the acquired companies are abnormal beyond the announcement month, then the failure of share prices to incorporate the information on the share purchases would be inconsistent with the semistrong form of the Efficient Market Hypothesis. The portfolio method of Hong, Kaplan, and Mandelker [9], used to test the returns for statistical significance, gave no indication that the returns were abnormal after the announcement months. Partial acquisitions are announced informally in the financial press and formally in Schedule 13-D. Schedule 13-D must be filed with the U.S. Securities and Exchange Commission (SEC) by the acquirer of more than 5 percent of a class of common stock, within ten days of the open market cash purchase. Because purchases reported in the 13-Ds are often followed by merger proposals, such purchases may also reflect potential corporate takeovers.1 In this paper the return behavior of the common stocks of 86 partly acquired New York Stock Exchange corporations has been examined.2 The presentation will proceed as follows. In Section I, this study is compared with previous studies of mergers and tender offers. In Section II the data and methodology are described and in Section III, the results. Finally, in Section IV, the results will be summarized and conclusions drawn.

Inflation and Stock Market Returns:Some Australian Evidence*

Abstract: This paper analyzes the relationship between Australian stock returns and inflation over the period 1965-79. The effects of inflation in a ‘rational investor’ valuation framework are discussed. Empirical tests suggest that nominal stock returns and inflation are related in a significantly negative fashion, implying that stocks have been extremely poor inflationary hedges for the investor over the period. In addition, Granger-Sims tests of causality indicate a mainly unidirectional relationship between inflation and stock returns, with price level charges leading the equity index in time.

Opening prices on the New York Stock Exchange

Abstract: The prices of opening transactions on the New York Stock Exchange are determined quite differently from prices of subsequent transactions. This paper tests the null hypothesis that opening prices are as representative of contemporaneous equilibrium stock values as subsequent intra-day transactions prices. With one possible exception, there is no basis for rejecting this hypothesis, despite the very different trading mechanisms used in opening trades and intra-day trades.

The market model and The Johannesburg Stock Exchange

Abstract: The mining sector and the industrial sector each comprise a significant proportion of the total market capitalisation of The Johannesburg Stock Exchange. The factors affecting the fortunes of these two sectors can be quite different over extended periods of time and this should be taken into account in “market model” analyses of share price behaviour. This is quite easily done via multiple regression analysis. Although portfolio analysis based on the resulting share risk parameters is slightly more complicated than that conventionally performed, its results are intuitively acceptable and perhaps of greater value in practical applications.

Perspectives on Productivity

Abstract: In its last issue of 1979, the Wall Street Journal reported the following statement of William Batten, chairman of the New York Stock Exchange: “In 1960, the typical American worker in manufacturing annually produced as much as four Japanese workers or two French or German workers Today, the American’s output is matched by 1½ Japanese and by 1¼ Germans or Frenchmen If the trend continues, all three will be outproducing us by the end of the next decade”

Money supply announcement and stock prices

Abstract: The following paper on the effect of weekly money supply announcements on a stock market index was prepared in January 1980 using data for the period from January 1976 through December 1979. The Journal accepted it for publication, after revision, in July 1980. Since January 1980, however, a number of significant changes have occurred. While these changes do not diminish the conclusion that stock prices do respond significantly to money supply announcements, I am unable to replicate the same empirical tests for 1980 and 1981 for two reasons. First, in early 1980, the Federal Reserve changed the definitions of money to MlA, MlB, and M2. M1A approximately corresponds to the old M1, but no analogs exist for M1B and the new M2. One reason for the changed definitions was the authorization for nationwide NOW accounts that became effective December 31, 1980. These transactions accounts at all financial institutions are included in the new M1B. Second, the empirical tests employed in the paper rely on the regular Thursday announcement of the money supply. In February 1980, the Federal Reserve changed the time of the weekly money supply announcement from Thursday to Friday afternoons. Thus the “announcement” effect cannot occur until the markets open on Monday. Other events over the weekend may mitigate or exacerbate Monday opening price changes such that detection of the money supply announcement effect is more difficult, if not impossible. Even though these changes preclude a similar test of the effects of money supply announcements, casual evidence suggests that financial markets have become even more sensitive to these announcements. In response to this heightened sensitivity, the Federal Reserve is considering changes in the way the money supply is reported, for example releasing only data based on a several-week moving average. Whether or not market reaction to money supply announcements is rational, that reaction does exist.

Investment game board and apparatus

Abstract: A stock exchange game is disclosed. A circular playing board is divided into forty spaces at the outer periphery with some spaces representing companies, color coded states of the economy, taxes due, collect dividends, etc. Each company space has a stock price window. There is one state of the economy window. An information board is rotatably mounted under the playing board. The information board has color coded states of the economy and corresponding color coded stock prices. When a state of the economy aligns with the respective window in the playing board, related stock prices align with their respective company windows in the playing board. Players move tokens around the board in response to dice rolls. The state of the economy changes and in turn the stock prices of the companies change when a player lands on an economy condition space. This information board is rotated accordingly and the stock prices change. Stocks are bought and sold during the game. The player with the most money at the end of a predetermined time is the winner.

Uncertainty and the Theory of Tax Incidence in a Stock Market Economy

Abstract: Commencing with Harberger's [1962] classic paper, a number of studies2 have analyzed the incidence of taxation in the context of a deterministic, two-sector, two-factor general equilibrium model. Recently, R. N. Batra [1975] and R. A. Ratti and P. Shome [1977a, 1977b] have reexamined the robustness of these deterministic results for the case in which production uncertainty is incorporated into the model. By using "entrepreneurial" models in which the firm is assumed to maximize the expected utility of profits, they find that the incidence of taxes depends on the preferences and probability assessments of the entrepreneur, and in general, the deterministic results no longer obtain. Most firms, however, are not owned by a single individual, and Batra and Ratti and Shome do not indicate how appropriate their results are for other ownership forms. In particular, their models do not utilize any form of risksharing arrangements such as those available through the securities markets. In the presence of a stock market, it will be shown that the deterministic results of Harberger continue to hold for the firm in their economy if the firm has publiclytraded securities and acts in the best interests of its shareholders. With this shareholders' interests criterion and the Batra-Ratti-Shome model, the securities market is sufficient to separate the production decisions of the firm from the portfolio-consumption decisions of shareholders.3 In a related analysis, Baron and Forsythe [1979] focus on the role of the securities market in establishing unanimity among shareholders about the value maximization criterion for firms. Here, the emphasis is on the impact of taxes on production and factor rewards. Because of separation and the Harberger assumption that aggregate demand is unaffected by the tax rate, the equilibrium in the securities, output, and factor markets has the same qualitative properties as in a deterministic model, and the standard propositions regarding the incidence of taxation continue to hold. If we alter the Harberger assumption that there is no direct tax effect, we will show that a sufficient condition for his results to continue to hold is that all individuals exhibit nondecreasing absolute risk aversion. For expositional purposes only, the analysis will be limited to the study of the effect of the corporate income tax,

Covered Options: An Alternative Investment Strategy

Abstract: * The creation of the Chicago Board Options Exchange (CBOE) in 1973 sparked an explosive enthusiasm for stock options. Since then, four additional exchanges have begun to trade stock options: the American, Philadelphia, Midwest, and Pacific Stock Exchanges. In May 1979, the Midwest Stock Exchange trading of options was consolidated with the CBOE. Expansion in both number of exchanges trading options and securities with options traded on them was halted by a moratorium on additions to the list of stocks by the Securities and Exchange Commission (SEC) in 1977. Since the moratorium was lifted in March 1980, expansion in options trading has been continuing. The investment opportunities open to investors with the creation of organized option exchanges are as varied as the combinations that can be created using common stock and call and put options. This study focuses on the selling of covered call options and its impact on portfolio return and risk. Selling of covered call options results in two advantages to the investor. First, there is a form of insurance against loss provided by the option premium. The investor can realize a loss on stock price equal to the option premium before an actual dollar loss occurs. Also, because the option premium received can be used as a credit toward the stock purchase, the investor's equity investment is reduced. This results in greater return on his equity when profits are realized. It appears that covered call options give the investor the best of both worlds: a hedge against losses if stock prices decline, and a higher return on equity if stock prices rise. Yet these benefits are not obtained without some cost: the

An analysis of the effects of a multi-tiered stock market / BEBR No. 794

Abstract: A great deal has been written about the existence of a multi-tiered stock market while little is known about the effects [8], Elia [16,17,18,19,20,21,22], Freund [25], Farrar [23], Klemkosky [29,30], Loomis [32], Robbins [47], Rosenberg [48], Seligman [5], Smidt [55], Soldofsky [56], West and Tinic [67], and Schultz [50]). More recent discussions have considered the current nature of the tiered market (Welles [65,66], Carson-Parker [11], Ang [1], Marcial [36,37,38], Lurie [34], Janeway [27], Buhl [10], and Loomis [33]). While changes may have occurred, we believe a tiered market exists and will continue to influence trading and relative pricing (Elia [17,18,19], Marcial [37,38], and Reilly [45]). Because a multi-tiered stock market will probably continue, it becomes important to determine the effects of the tiered market on the securities and firms involved. Specifically, this paper examines common stocks in one of three market tiers (based on various measures of size), in terms of trading activity, price volatility, and financing characteristics during the 15-year period 1964–1978. The total period is divided into three subperiods representing periods of increasing trading activity by institutional investors. Specifically, the first period is generally prior to the institutional impact, the second is a transitional period, and the recent period is when institutions havebecome the dominant trading group.

Long-Term Incentives for Management, Part 4: Restricted Stock

Abstract: This latest installment in our series exploring alternatives and trends among long-term incentive plans takes up restricted stock: outright grants of company shares or stock units earned through continued company employment.

Accounting Reports and Security Analysis

Abstract: The main object of this chapter is to outline the principal determinants of the share price of a listed company. This will involve a consideration of the structure and functions of the UK Stock Exchange, in which the share price is determined on the basis of deals undertaken by investors, and an analysis of the main factors by which these prices are affected. Attention will also be paid to the information which is available to investors in making their decisions and to the manner in which this information is interpreted and utilised by them. In this respect the portfolio objectives of the investor will be seen to be especially important. Finally, the practical methods by which a company may attempt to influence its share price will be considered.

Introduction to Accounting Theory

Abstract: As explained in Chapter 1, a wide range of users of accounting information rely on periodic financial statements to assist them in making a variety of economic decisions. Whilst internal management can have access to all the detailed information contained in the company’s records, the external users have to rely on the abridged, published financial statements prepared on the basis of accepted accounting practice and conforming to the minimum disclosure requirements of the Companies Acts, the Stock Exchange and the recommendations of professional and other quasi-statutory bodies outlined in Chapter 2.

Discussion: An Analysis of the Effects of a Multi-Tiered Stock Market

Abstract: size categories (tiers) in order to document any size-related differences that may exist among these firms. Such investigations may lead to improvements in asset-pricing models as empiricists test the impacts of these differences on the actual pricing of securities. Reilly and Drzycimski (R & D) have provided evi? dence that a number of such differences exist: volatility, debt ratios, and trading volume appear not to be homogeneously distributed across firm size cate? gories nor across time, but there are some difficulties with the paper that need airing.