Showing papers on "Stock exchange published in 1985"
TL;DR: In this paper, a model of stock price reactions to partially anticipated events is presented, which formalizes the intuition that stock prices reflect both the economic importance of events and the extent to which events are surprises, and is used to estimate the value of acquisition attempts made by frequently acquiring firms.
314 citations
TL;DR: Reinganum et al. as discussed by the authors explored the effects of executive succession on the stock prices of firms that traded on the New York and American stock exchanges during 1978 and 1979.
Abstract: Marc R. Reinganum This research explores the effects of executive succession on the stock prices of firms that traded on the New York and American stock exchanges during 1978 and 1979. The empirical results suggest that predictions about succession effects must be tempered by the organizational context of the change. In particular, the data indicate that one must control for the size of the firm, the origin of the successor, and the disposition of the predecessor. Empirically, the effects of these variables-do not appear to be independent of each other. Rather, the succession effects seem to be dependent on the interaction among these variables. Significant, positive succession effects were found around the time of the announcement of a change, but only for external appointments in small firms in which the departure of the former officeholder was announced along with the appointment of the new executives
286 citations
TL;DR: The analysis of Japanese stock market is useful given its relative importance, but, in addition, examination of the Japanese market may offer insights into controversies surrounding U.S. markets as discussed by the authors.
Abstract: Little attention has been paid by the academic community in the United States to the Japanese stock market and its structure. Japan has the second largest economy in the Western world, and the Tokyo Stock Exchange (TSE) is second only to the New York Stock Exchange (NYSE) in terms of aggregate market values and sales volume. Analysis of the Japanese stock market is useful given its relative importance, but, in addition, examination of the Japanese market may offer insights into controversies surrounding U.S. markets. This study focuses on two such current controversies: the January and size anomalies.
230 citations
TL;DR: In this paper, the authors examined the relationship of stock liquidity to both exchange listing and price behavior during major up and down movements in the market and suggested that the view held by at least some corporate officers that exchange listing increases stock liquidity may be erroneous.
211 citations
87 citations
TL;DR: In this article, the authors compare prices of identical assets that are traded simultaneously in two or more markets and infer threshold levels, transaction cost levels, and the efficiency of arbitrage operations, respectively.
Abstract: The integration of capital markets is usually tested with an interest rate arbitrage model even though much different financial assets must be compared This paper compares prices of identical assets that are traded simultaneously in two or more markets The range, average level, and time series pattern of the differences can be used to infer threshold levels, transaction cost levels, and the efficiency of arbitrage operations, respectivelyExamples are given for financial crises from 1745 to 1907, using prices from the London, Amsterdam, Paris, and New York stock exchanges These show European capital markets to be well integrated by mid-eighteenth century
71 citations
67 citations
TL;DR: In this article, the authors compared the effect of money supply announcements on financial asset prices in both the United States and the United Kingdom, and found that the impact of money announcements, M1 and £M3, was remarkably similar in magnitude.
Abstract: A number of papers (see, e.g., Cornell (1983) and the references contained therein) have appeared in the United States recently that examine the impact of money supply announcements on financial asset prices. Using the framework of the efficient markets hypothesis, these studies indicate that, for the United States, unanticipated increases in M1 push interest rates and the exchange rate upward and place downward pressure on stock exchange prices. A feature common to all these papers is that they utilize expectations data which are derived from surveying market participants rather than from a model (such as an ARIMA model). In an earlier paper (Smith and Goodhart 1985) we set out to compare the reaction of market prices to announcements made both in the United States and in the United Kingdom. Using the dollar/sterling exchange rate a price which by definition is common to both countries we found the impact of money announcements, M1 in the United States and £M3 in the United Kingdom, to be remarkably similar in magnitude. However, when we considered the time taken for the effect to be observed, the results differed considerably. Whereas the U. S . announcement appeared to affect the exchange rate immediately, the impact from the U.K. announcement was not felt fully until the following working day. The aim of this paper is to build on these earlier results for the United Kingdom. This is done by considering four different financial prices along with four different announcements, to ascertain the extent to which each market reacts to each announcement. Because we are interested not only in the magnitude of any announcement effects but also in the time taken for these effects to be fully realized, the equations are estimated with the changes in the various financial prices measured over a number of alternative intervals.
49 citations
40 citations
Posted Content•
TL;DR: In this paper, the authors evaluate the empirical properties of the mean-Gini (MG) and the meanextended Gini (MEG) efficient sets by comparing their performance to the mean variance (MV) portfolio selection.
Abstract: This paper evaluates the empirical properties of the mean-Gini (MG) and the mean-extended Gini (MEG) efficient sets by comparing their performance to the mean-variance (MV) portfolio selection. The analysis focuses on the similarities and differences existing between the MV, the MG, and the various MEG efficient sets. In addition, the risk parameter for which the MEG efficient set is best supported by the market data is estimated. The analysis is carried out with respect to the Tel-Aviv Stock Exchange to present empirically a new approach to portfolio selection.
Book•
23 Dec 1985
TL;DR: The Crash and its Aftermath is an excellent work of reference on the Great Contraction as mentioned in this paper, focusing on the broader structural changes which took place in the financial industry over the full period of decline from the Stock Market Crash in 1929 to the end of President Franklin D. Roosevelt's One Hundred Days in 1933.
Abstract: The Crash and Its Aftermath is an excellent work of reference on the Great Contraction. It will be useful both to people with only a passing curiosity about the Crash and to those for whom the Great Depression is a major scholarly concern. Business History From now on any serious student of the Depression will be obliged to consult this work for a sense of securities price movements, investor attitudes, and relevant contemporary sources. Journal of Economic History This is the first book to focus on the broader structural changes which took place in the financial industry over the full period of decline from the Stock Market Crash in 1929 to the end of President Franklin D. Roosevelt's One Hundred Days in 1933. The basis for many of Wigmore's comments is an analysis of 142 leading companies whose stocks constituted approximately 77 percent of the market value of all New York Stock Exchange stocks. Wigmore also examines the various bond markets and relates the money market to the bond market, monetary policy, business conditions, and the problems of the banking system. Treating each year from 1929 to 1933 separately, Wigmore shows the interrelation between the stock, bond, and money markets and events in politics, the economy, international trade and finance, and monetary policy. The Statistical Appendix of 41 tables consolidates financial statistics which have hitherto been widely dispersed, permitting in-depth study.
Posted Content•
TL;DR: In this article, the conformance of observed prices to various boundary conditions was investigated, as well as the evolution of the market over time, as the volume of trading and the number of listed options increased.
Abstract: Using option and stock transaction data for the period 1978-1979, three issues were investigated: first, the conformance of observed prices to various boundary conditions; second, the evolution of the market over time, as the volume of trading and the number of listed options increased; and third, to test the efficiency of the market. It was found that violations did occur. Using a trading rule based on the signal of observed violations, the results suggest that even after transaction costs the market was inefficient over the sample period.
TL;DR: In this paper, the authors found that a company's long-term corporate strategy influence how security analysts rate its stock, but only when the strategy is communicated to analysts through corporate advertising, executive presentations, annual reports, and similar means.
Abstract: Does a company's long‐term corporate strategy influence how security analysts rate its stock? The authors found that it does—but only when the strategy is communicated to analysts through corporate advertising, executive presentations, annual reports, and similar means.
TL;DR: In this paper, historical relationships between the stock market and the commodity futures market, as proxied by the S&P 500 and the Commodity Futures Index, suggest that the S & P may have slightly outperformed the CFI over the 1978-81 period.
Abstract: Historical relationships between the stock market and the commodity futures market, as proxied by the S&P 500 and the Commodity Futures Index, suggest that the S&P may have slightly outperformed the CFI over the 1978-81 period. In earlier years, however, the CFI clearly outperformed the S&P. Relative performances of the stock and commodities futures markets appear to be sensitive to investment horizon. Regression analysis indicates virtually no relationship between the rates of return of the two series. Risk and return, however, increase with horizon, whereas skewness and kurtosis are generally negatively related to horizon. Investors should be aware of these factors when selecting investment horizons. Investigation of the lead-lag relation between the two series confirms their independence. The S&P led the CFI by one day in 1969 and in 1972, while the two were instantaneously related in 1970. Data for 1973 through 1981 show complete independence, regardless of evaluation technique. These results suggest that commodity futures contracts may be used in conjunction with an equity portfolio to help reduce risks and enhance portfolio returns. Opportunities for profitable arbitrage between the two indexes are not likely, however.
TL;DR: In this paper, the authors investigated whether the factors identified by these studies are in fact associated with the actual stock distribution decisions of managers and found that managements issue large stock distributions (25 per cent or greater) in order to keep the per share price in an optimal range and to signal optimistic expectations to the market.
Abstract: Several studies have made inquiries of corporate managers concerning their motivations for undertaking stock splits and stock dividends. This paper investigates whether the factors identified by these studies are in fact associated with the actual stock distribution decisions of managers. The results are consistent with the view that managements issue large stock distributions (25 per cent or greater) in order to keep the per share price in an optimal range and to signal optimistic expectations to the market. Firms with relatively low per share prices were inclined to issue small stock distributions (less than 25 per cent); the signaling motivation also played a role here.
TL;DR: In this paper, a model of mint output is estimated to determine the amount of recoinage, and the money stock estimates are also improved by incorporating a constant rate of loss of coins.
Abstract: The money stock in France from 1493 to 1680 has not been well understood. Changes in the money stock have usually been represented by moving sums of annual mint output. Mint output, however, included large amounts of recoinage, resulting in double-counting. A model of mint output is estimated to determine the amount of recoinage. The money stock estimates are also improved by incorporating a constant rate of loss of coins.
TL;DR: The first systematic examination of the foreign operations of Singapore firms listed on the Stock Exchange of Singapore was carried out by as discussed by the authors, who found that nearly four out of five firms have foreign operations, and more than three out of the five have operations in countries other than Singapore and Malaysia.
Abstract: AbstrQct This paper forms the first systematic examination of the foreign o'peratiotl5 of Singapore in dustrial and commercial finns listed on the Stock Exchange of Singapore. It was found that out of a total of fifty~two such firms, nearly four out of five have" foreign operations, and more than three out of fiye have operations in countries ot her than in Singapore and Malaysia. This is a remarkably high propor (io n givenrChe opportunities available for reinvestment in a rapidly growing inrernaJ market. Whiie most of these rcrc:ign investments were in [he other countries in the Southeast .~ia region, Singapore lirms are also beginning to undertake significant foreig n investments i.r. devc:ioped :oumries. Thus, while very few Singapore firms are true multinationals. a significant proportion have extensive investme!llS in operating affiliates in foreign countries.
TL;DR: In this paper, it is shown that if the risk-adjusted returns to bondholders exceed the returns to stockholders (to reflect personal tax differences) tax-exempt investors will prefer a combination of these synthetic forward purchases and corporate bonds to purchasing stock directly.
Abstract: This paper demonstrates that the various market imperfections that have been suggested to explain observed portfolio choices and capital structures can be circumvented if securities (e.g., options) can be traded that simulate forward contracts on stock. It is shown that if the risk-adjusted returns to bondholders exceed the returns to stockholders (to reflect personal tax differences) tax-exempt investors will prefer a combination of these synthetic forward purchases and corporate bonds to purchasing stock directly. They will not, as has been suggested, include stock in their portfolios for diversification purposes when they can alternatively purchase securities that simulate forward contracts. It is also shown that firms that can sell synthetic forward positions on their own stock can essentially guarantee that sufficient funds will be available to meet their bond obligations. This gives firms the opportunity to increase their debt levels without increasing the possibility of bankruptcy and the corresponding administrative and agency costs.
TL;DR: In this article, the authors argue that the price of a stock is an aggregate opinion, the resultant of the opinions and decisions of a community of investors, which can generate the kind of statistical dependence characteristic of non-random walks.
Abstract: The fact that there are times when market movement is random and times when it is not is interpreted in terms of the hypothesis that the price of a stock is an aggregate opinion — the resultant of the opinions and decisions of a community of investors. Price, like any other opinion, will be most vulnerable to social and other sources of influence during times of uncertainty, an aggregate psychological state which can generate the kind of statistical dependence characteristic of non-random walks. Ramifications of this hypothesis are explored in a variety of stock market behaviors, such as the effect of tips, the impact of runs on trading volume during rising and falling markets, and the like.
01 Jan 1985
Abstract: Deregulation, much like regulation itself, is a rational political response to pressure from discrete economic groups that benefit from such deregulation. Such pressures explain many, if not all, of the actions and inactions of the Securities and Exchange Commission (SEC) with respect to implementing a national market system in the United States. For example, Gregg Jarrell, the chief economist at the SEC, recently relied upon such a "political support theory,"l to explain the SEC's abolition of fixed-rate commissions on the New York Stock Exchange (NYSE). The abolition of fixed-rate commissions was an early, and possibly the sole, aspect of the SEC's discharge of its responsibilities under a major piece of deregulatory legislation. The 1975 legislation called upon the Commission to implement a competitive market for securities trading by developing a national market system. Despite such deregulatory legislation, Jarrell posits that the SEC, acting as a "political support maximizing regulator,"2 only acted to abolish fixed commission rates after the market forces "had so eroded the economic rents flowing to the NYSE cartel that the Exchange drastically reduced its "political demand" for such commissions. At the same time, the political power of groups op-
TL;DR: In this paper, the authors present the results of empirical tests on a necessary condition for the diversification service hypothesis: market recognition of the multinationality of a firm and the existence of international factors.
Abstract: This paper presents the results of empirical tests on a necessary condition for the diversification service hypothesis: market recognition of the multinationality of a firm and the existence of international factors. Employing both a two- factor international market model and residual analyses, this study examines whether the US stock market considers the multinationality of a firm and inter- national events which are expected to affect the price of MNCs' stock. The residual analysis is conducted over a period which includes both fixed and floating exchange rates. Results from both analyses support the hypothesis that the US stock market does recognize the multinationality of a firm.
TL;DR: In Japan, it has long been a common practice among corporations to issue new shares at par value and offer them to shareholders without underwriting agreements as discussed by the authors, and the capital raised through this method in fiscal year 1972 amounted to ¥861 billion, accounting for more than 65 percent of the total capital raised during the year.
Abstract: In Japan, it has long been a common practice among corporations to issue new shares at par value and offer them to shareholders without underwriting agreements. However, in January 1969, Nihon Gakki (a musical instrument maker) successfully offered new shares at the market price through underwriting agreements. Other corporations followed suit and the capital raised through this method in fiscal year 1972 amounted to ¥861 billion, accounting for more than 65 percent of the total capital raised during the year. At present, over 70 percent of Japanese corporations raise new equity capital at the market price via the negotiated underwriting method. Almost all underwriters employ a “firm commitment” agreement, in which the underwriter agrees to purchase the whole issue from the firm at a particular price for resale to the public. The agreement is normally signed on the day before the issue announcement, at which time the offering price to the public is specified. As soon as the offering price is filed with the Tokyo Stock Exchange, the underwriter is precluded from selling the shares above this price. Though the offering price initially was highly discounted, between 1970 and 1980 this discount rate gradually decreased from 15 percent to 5 percent of the daily stock price (see Table 1). The final settlement with the underwriter usually takes place fourteen to nineteen days after the registration statement becomes effective. At that time, the company receives the proceeds of the sale, minus the underwriter's fee. This fee, which is usually fixed at 3.5 percent of the money to be raised, consists of a compensation fee, a managing fee, a sales fee, and a brokerage fee, none of which can be separated on the contract.
01 Dec 1985
TL;DR: In this paper, the authors examined the effect of high inflation on share prices and the level of the capital stock of non-financial corporations in the UK and pointed out that high inflation rates combined with unindexed systems of personal and corporate taxation have imposed substantially higher tax burdens on corporate source income.
Abstract: IN the literature on the welfare effects of inflation one view which has developed is that it is not inflation per se that is harmful but rather its interaction with pre-existing institutions which were not designed for an inflationary world. Particular emphasis has been given to the failure to index the tax system. The purpose of the present paper is to examine one such interaction and consider the view that high inflation rates combined with unindexed systems of personal and corporate taxation have imposed substantially higher tax burdens on corporate source income. The general background to this issue is the substantial decline in real share values over much of the 1970's and early 1980's in almost all countries where major stock exchanges exist (the one exception appears to be Japan). In the UK the Financial Times index of industrial ordinary shares (measured as an average of working days) rose by only 66.7% between 1975 and 1981 while the Retail Price Index increased by 118.9% over the same period. Given some link between share prices and investment it is possible to argue that the decline in the real value of equities will have been accompanied by a reduction in the level of the capital stock below that which would otherwise have been attained. This view has been argued most forcefully (for the US) by Feldstein (1980a, 1980b), who suggests that the long-run reduction in the real share value and capital stock of US non-financial corporations as a result of the interaction of inflation and an unindexed tax system over the 1970's is of the order of 20-30%. These conclusions have been challenged by Hendershott (1981), again for the US, who argues that on the basis of tax biases alone real share prices should have increased with the inflation rate in the short run whilst being independent of inflation in the long run. Our concern here is to examine the specific question of how changes in the fully anticipated steady state rate of inflation affect share prices and the corporate capital stock when the tax system is unindexed, and to do so with particular reference to the UK. There are many possible explanations of the decline in real equity values: there may have been a fall in pre-tax profitability; high inflation rates may have made equity a more risky investment; investors may have made valuation errors. In this paper, however, we are
TL;DR: Based on a comprehensive sample of 170 securities traded continuously on the Brussels Stock Exchange from December 1966 to December 1983, this article presented evidence which indicates that the stationarity of beta-coefficients is not as strong as reported in previous studies which were based on smaller samples.
Abstract: Based on a comprehensive sample of 170 securities traded continuously on the Brussels Stock Exchange from December 1966 to December 1983 this paper presents evidence which indicates that the stationarity of beta-coefficients is not as strong as reported in previous studies which were based on smaller samples. It is shown, however, that beta forecast can be generally improved using an adjustment method and that the improvement is highest for portfolios of increasing size.