Showing papers on "Stock exchange published in 1992"

Stock Prices and Volume

Abstract: The authors undertake a comprehensive investigation of price and volume co-movement using daily New York Stock Exchange data from 1928 to 1987. They adjust the data to take into account well-known calendar effects and long-run trends. To describe the process, they use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume. Four empirical regularities are found: (1) positive correlation between conditional volatility and volume; (2) large price movements are followed by high volume; (3) conditioning on lagged volume substantially attenuates the "leverage" effect, and (4) after conditioning on lagged volume, there is a positive risk-return relation. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Industrial Structure and the Comparative Behavior of International Stock Market Indices

Abstract: Stock Price Indices are compared across countries in an attempt to explain why they exhibit such disparate behavior. Three separate explanatory influences are empirically documented. First, part of the behavior can be attributed to a technical aspect of index construction; some indices are more diversified than others. Second, each country's industrial structure plays a major role in explaining stock price behavior. Third, for the majority of countries, a portion of national equity index behavior can be ascribed to exchange rate behavior. Exchange rates explain a significant portion of common currency denominated national index returns, although the amount explained by exchange rates is less than the amount explained by industrial structure for most countries.

The Structure and Performance of the Money Management Industry

Abstract: IN 1990 TOTAL FINANCIAL assets in U.S. capital markets amounted to $13.7 trillion, of which $3.4 trillion was equities, and the rest were bonds, government securities, tax-exempt securities, and mortgages. These financial assets were held by two principal types of investors: individuals and institutions. The New York Stock Exchange defines an institution as a firm that employs professionals to manage money for the benefit of others (firms or individuals). At the end of 1990, $6.1 trillion of the total U.S. financial assets was held by institutions. Both the amount of institutional assets and the fraction of the total they represent have increased sharply over the past 30 years. In 1950, for example, institutional assets comprised $107 billion out of a $500 billion total, or 21 percent compared with 45 percent in 1990.1 The growth of institutional ownership of equities has paralleled their growth in the ownership of other financial assets. In 1955 institutions owned 23 percent of equities compared with 77 percent owned by individuals; in

An Empirical Analysis of Stock Prices in Major Asian Markets and the United States

Abstract: This study uses unit root and cointegration tests to examine the relationships among the stock markets in Hong Kong, South Korea, Singapore, Taiwan, Japan, and the United States. All the stock prices are analyzed both individually and collectively to test for international market efficiency. Unit roots in stock prices are found. Pairwise and higher-order cointegration tests indicate that there is no evidence of cointegration among the stock prices. The findings suggest that the stock prices in major Asian markets and the United States are weak-form efficient individually and collectively in the long run. It also implies that international diversification among the markets is effective.

Environmental Factors Influencing Accounting Disclosure Requirements of Global Stock Exchanges

Abstract: The globalization of capital markets has resulted in a great deal of attention being focused on problems created by accounting diversity in different countries. A number of studies have documented variations in accounting disclosure and reporting practices and standards in different countries. Diverse environmental factors have been cited in the literature to explain differences in disclosure levels between countries. This paper examines the relationship between environmental factors and the accounting disclosure requirements of stock exchanges in different countries. A cross-national disclosure model is developed to investigate the relationship of selected environmental factors and stock exchange disclosure requirements of 35 stock exchanges in different countries. Five environmental factors are used to explain the variation observed in disclosure requirements of the different stock exchanges. The five factors examined are: degree of economic development, type of economy, size of the equity market, activity on the equity market, and dispersion of stock ownership in the equity market. The overall results obtained from the cross-sectional regression indicate that the level of disclosure requirements of stock exchanges is related to the selected environmental factors in different countries. Of die five factors examined, however, only size of the equity market is found to be a significant explanatory variable.

Voluntary disclosure of financial segment data: new zealand evidence

Abstract: This paper reports on the voluntary financial disclosure of segment data by New Zealand companies and relates the extent of quantified segment disclosure to firm-specific characteristics. The extent of voluntary segment disclosure varies across a sample of 29 firms listed on the New Zealand Stock Exchange. The extent of quantified segment disclosure is significantly related to firm size, financial leverage, but not to assets in place, earnings volatility or a the importance of foreign funding to the firm.

Additional Evidence on Integration in the Canadian Stock Market

Abstract: This paper reexamines the integration of the Canadian and U.S. stock markets in the 1977-86 period that is relatively free from capital controls. The study employs both the CAPM and the APT frameworks. Under both models, the evidence is consistent with segmentation in the 1977-81 subperiod, but supports integration in the 1982-86 subperiod. Using the APT framework, we also find that the Canadian stocks interlisted on the U.S. exchanges and NASDAQ are priced in an integrated market and segmentation is predominant for the non-interlisted Canadian stocks. IN A STUDY USING an international CAPM framework, Jorion and Schwartz (1986) find strong evidence of segmentation in the pricing of Canadian stocks relative to a North American market comprising the Canadian and U.S. stock markets. The rejection of integration holds for Canadian stocks that are interlisted on the U.S. stock exchanges and NASDAQ as well as for domestic Canadian stocks that are listed only on the Canadian stock exchanges. Their results are surprising since the Canadian and U.S. economies are highly integrated and the structure and regulation of security markets in the two countries are similar. As well, the Canadian stocks interlisted on the U.S. stock exchanges list under the same regulation as the domestic U.S. stocks. Thus, ex ante, we would expect the Canadian and U.S. stock markets to be integrated, especially for the interlisted stocks.1 This study reexamines the integration in the Canadian market employing both the CAPM and the APT frameworks. Since tests of market integration are joint tests of a specified model and market integration, a relevant question is whether the two models produce different inferences pertaining to the integration issue. In addition, we explore this issue in a period that is

Selection of auditor firms by companies in the new issue market

Abstract: Some empirical evidence on the question of product differentiation in the market for audits is presented. Using agency cost and signalling frameworks we posit that there will be a demand for varying levels of audit quality. Because audit quality is not directly observable to investors we postulate that quality will be proxied by the auditor's brand name reputation. Big Eight auditors are categorized as being high quality producers. Using data on companies newly listing on the New Zealand Stock Exchange we test the derived models of auditor choice. Auditor choice is a dummy variable (0,1) partitioned on the basis of non Big Eight and Big Eight accounting firms. The results provide support for the idea of product differentiation in the market for audits.

Financial Disclosure Levels and Foreign Stock Exchange Listing Decisions

Abstract: Firms are increasingly listing their shares on foreign stock exchanges. However, not all exchanges have had equal appeal. Anecdotal evidence suggests that when firms are making foreign listing decisions, they are influenced by financial disclosure requirements. As a result, regulatory authorities around the globe are weighing increasing demands for foreign capital and investment opportunities against the desire to protect domestic investors from possibly misleading foreign financial disclosures. The competitiveness of domestic stock exchanges often hangs in the balance. This study examines a key question in this debate: whether firms' choices regarding alternative foreign stock exchange listings are influenced by financial disclosure levels. Examined are the listings of 302 internationally traded firms with at least one foreign listing, on one of nine major exchanges, as of year-end 1987. Also examined are changes in listings between 1981 and 1987, an important design feature since these changes are more likely to have been influenced by differences across countries in financial disclosure levels during this period. Financial disclosure levels are obtained from a survey of 142 experts actively involved in the foreign listing process. Test results based on the cross-section of listings at year-end 1987 are consistent with the hypothesis that exchange choices are influenced by financial disclosure levels. However, they do not lend support to a second hypothesis suggesting that this effect should operate only for firms whose domestic disclosure levels are lower than those of a given foreign exchange. Tests based on changes in listings between 1981 and 1987 support both hypotheses. Overall, the results lend credence to concerns expressed by regulatory authorities and exchange officials that stringent disclosure levels could reduce access to foreign capital and foreign investment opportunities.

The Structure of European Stock Returns

Abstract: (1992). The Structure of European Stock Returns. Financial Analysts Journal: Vol. 48, No. 4, pp. 15-26.

The Structure and Performance of the Money Management Industry

Abstract: IN 1990 TOTAL FINANCIAL assets in U.S. capital markets amounted to $13.7 trillion, of which $3.4 trillion was equities, and the rest were bonds, government securities, tax-exempt securities, and mortgages. These financial assets were held by two principal types of investors: individuals and institutions. The New York Stock Exchange defines an institution as a firm that employs professionals to manage money for the benefit of others (firms or individuals). At the end of 1990, $6.1 trillion of the total U.S. financial assets was held by institutions. Both the amount of institutional assets and the fraction of the total they represent have increased sharply over the past 30 years. In 1950, for example, institutional assets comprised $107 billion out of a $500 billion total, or 21 percent compared with 45 percent in 1990.1 The growth of institutional ownership of equities has paralleled their growth in the ownership of other financial assets. In 1955 institutions owned 23 percent of equities compared with 77 percent owned by individuals; in

Financial Disclosure Levels and Foreign Stock Exchange Listing Decisions

Abstract: Firms are increasingly listing their shares on foreign stock exchanges. However, not all exchanges have had equal appeal. Anecdotal evidence suggests that when firms are making foreign listing decisions, they are influenced by financial disclosure requirements. As a result, regulatory authorities around the globe are weighing increasing demands for foreign capital and investment opportunities against the desire to protect domestic investors from possibly misleading foreign financial disclosures. The competitiveness of domestic stock exchanges often hangs in the balance. This study examines a key question in this debate: whether firms' choices regarding alternative foreign stock exchange listings are influenced by financial disclosure levels. Examined are the listings of 302 internationally traded firms with at least one foreign listing, on one of nine major exchanges, as of year‐end 1987. Also examined are changes in listings between 1981 and 1987, an important design feature since these changes are more likely to have been influenced by differences across countries in financial disclosure levels during this period. Financial disclosure levels are obtained from a survey of 142 experts actively involved in the foreign listing process. Test results based on the cross‐section of listings at year‐end 1987 are consistent with the hypothesis that exchange choices are influenced by financial disclosure levels. However, they do not lend support to a second hypothesis suggesting that this effect should operate only for firms whose domestic disclosure levels are lower than those of a given foreign exchange. Tests based on changes in listings between 1981 and 1987 support both hypotheses. Overall, the results lend credence to concerns expressed by regulatory authorities and exchange officials that stringent disclosure levels could reduce access to foreign capital and foreign investment opportunities. Copyright © 1992, Wiley Blackwell. All rights reserved

Margin Requirements, Speculative Trading, and Stock Price Fluctuations: The Case of Japan

Abstract: An increase in margin requirements in the First Section of the Tokyo Stock Exchange is followed by a decline in margin borrowing, trading volume, the proportion of trading performed through margin accounts, the growth in stock prices, and the conditional volatility of daily returns. The nonmarginable Second Section stocks show a smaller change in volatility and only a delayed weak price response. The hypothesis that margin requirements restrict the behavior of destabilizing speculators can explain these correlations but cannot explain the observation that individuals, the most active users of margin funds, appear to be good market timers.

The Accuracy of Profits Forecasts in Initial Public Offering Prospectuses

Abstract: The paper examines the accuracy of profits forecasts contained in prospectuses of companies newly listing on the New Zealand Stock Exchange. Accuracy is measured by forecast errors, absolute forecast errors and squared forecast errors. The level of forecast accuracy appears to be poor in comparison to studies conducted elsewhere. An attempt to model the errors as a function of firm specific characteristics and of Big Eight/non-Big Eight auditor choice proved to be of little value. The forecasting errors were found to be unrelated to the stock price premium upon listing.

A Comparison of Transaction Costs Between Competitive Market Maker and Specialist Market Structures

Abstract: This study compares bid-ask spreads for equity options in two market structures: the American Stock Exchange specialist structure and the Chicago Board Options Exchange competitive market maker structure. When trading volume is low, the specialist structure is associated with significantly smaller spreads. As volume rises, this difference appears to diminish. These results are consistent with those of S. Grossman and M. Miller (1988). Copyright 1992 by University of Chicago Press.

Dual-class shares: a review

Abstract: The majority of firms traded in the World's three largest stock exchanges (London, New York, and Tokyo) follow the one share/one vote principle. However, in other countries, dual classes of shares are common place. For example, 50 percent of the publicly-traded Dutch firms have non-voting equity, and approximately 75 percent of the publicly-traded Danish, Finnish, and Swedish firms have shares that differ in their voting rights. This paper reviews the arguments as to why firms create dual classes of shares, their effect on firm value, and the relative prices of shares that differ only in their voting rights. Copyright 1992 by Oxford University Press.

Intraweek and intraday seasonalities in stock market risk premia: Cash and futures

Abstract: The unique nature of the settlement procedures on the London Stock Exchange are utilised to directly investigate intraweek and intraday seasonalities in ex post risk premia (rather than total returns) and compare them with the corresponding intraweek and intraday seasonalities in the index futures market. Seasonalities in the occurrence of extreme price changes are also examined. The results reported are based on about 4 years of hourly cash and futures data. The analysis is conducted using both parametric and non-parametric methods. The observed empirical regularities have implications for explanations of seasonality based on market microstructure, timing of news, and psychological behavioural patterns. It is also found that the stock market has not efficiently accounted for the interest costs inherent in its own settlement procedures.

Transaction costs, technology transfer, and in-house R&D: A study of the Indian private corporate sector

Abstract: This paper deals with the determinants of in-house R&D, and the impact of technology transfer on R&D expenditures for a sample of firms belonging to the Indian private corporate sector listed with the stock exchanges in India. Using the transactions costs frame work it considers two modes of technology transfer, the first through the market, namely armslength purchases against lump sum payments and the second through foreign direct investments. The results indicate a complementary relationship between import of technology and R&D.

Order Flow, Trading Costs and Corporate Acquisition Announcements

Abstract: The bid-ask spread is an important element of investors' transactions costs. Theoretical papers decompose the spread into adverse selection, inventory cost, and order processing cost components. The order processing cost component compensates the stock exchange specialist for providing immediacy to buyers and sellers. The inventory cost component compensates the specialist for the risk of holding an inventory of a stock. The inventory component is larger for high-priced stocks, stocks which trade infrequently, and stocks with a relatively uncertain value. This study focuses on the adverse selection component of the spread, which compensates the specialist for losses to traders who have inside information. Prior theoretical work suggests that the adverse selection component will be larger, the greater the proportion of traders who have private information. The specialist will widen the spread in response to a perceived increase in the probability that the next trader is privately informed. Prior studies also suggest that privately informed traders will generally trade larger amounts than uninformed traders. Consequently, trade size should impart information about the probability that a trader is privately informed.

Equity Risk Premia, Corporate Profit Forecasts, and Investor Sentiment around the Stock Crash of October 1987

Abstract: This paper confirms that changes in consensus corporate profit forecasts and interest rates were completely unable to explain the rise and subsequent collapse of stock prices during 1987. The equity risk premium would have had to fall and then rise by about 4 percentage points to explain the behavior of stock prices around the crash on the basis of standard valuation models. Such shifts did not occur during the 1990-91 stock market cycle. There was, however, an unusually wide divergence of future profit forecasts before the crash, a phenomenon that may have left the market vulnerable to shifting investing sentiment. Copyright 1992 by University of Chicago Press.

An assessment of risk and return: some empirical findings from the Hong Kong stock exchange

Abstract: The study presents the results of the empirical tests on the relationships between stock returns and various measures of risk in the Hong Kong Equity Market over the period 1980–89. On the whole, the application of the capital asset pricing model in Hong Kong appears weak when monthly data are used. The market risk is only priced for the year 1984–85. The stability is examined further using a different-sized portfolio and the two findings are found to be consistent

An analysis of the January effect of united states, Taiwan and South Korean stock returns

Abstract: By using the ARCH approach of testing the time-varying risk premium, this paper examines the presence of the January effect in the Taiwanese and South Korean stock markets. Implications on the Tax-Loss-Selling hypothesis and the Liquidity Constraint hypothesis are also discussed.

Explaining the NYSE Listing Choices of NASDAQ Firms

Abstract: Traditionally, financial theory has offered little guidance to managers who must choose whether to list their stock on an exchange or allow it to continue trading over-the-counter. Recent developments in market microstructure theory allow a more careful analysis of the exchange listing decision. Market microstructure theory implies that firms list their stocks on exchanges to reduce transaction costs to their investors. A major component of the cost of trading common stocks is the bid-ask spread. Several differences exist between the trading arrangements, or microstructure, of the New York Stock Exchange and NASDAQ that may contribute to differences in bid-ask spreads for a given stock depending on where it is traded.

Stock Market Over-reaction: The South African Evidence

Abstract: It has been suggested that stock markets over-react and that investors pay too much attention to recent “dramatic” news. If over-reaction does occur and prices overshoot then there should be a subsequent revision in the opposite direction. This paper outlines empirical research into the over-reaction hypothesis on the Johannesburg Stock Exchange using data over the period July 1974 to June 1989 for two hundred and four relatively well traded securities.The results are consistent with the over-reaction hypothesis and indicate substantial weak form inefficiencies in the South African stock market in the long-term. The performance of portfolios of shares formed on the basis of prior return data can be predicted and, on average, portfolios of prior ‘losers’ outperformed prior ‘winners’ by about twenty percent over the three years after portfolio formation. Finally, comparison between the empirical results and a similar study for the New York Stock Exchange calls into some question the hypothesis that ...

Seasonalities in NYSE Bid‐Ask Spreads and Stock Returns in January

Abstract: Using end-of-month bid-ask spreads for 540 NYSE stocks over the period 1982-1987, we document a seasonal pattern in which both relative and absolute spreads decline from the end of December to the end of the following January. Cross-sectional regressions do not, however, provide evidence of a significant correlation between changes in spreads at the turn of the year and January stock returns. Either there is no cause and effect relation between the coincidental seasonals in bid-ask spreads and January returns for NYSE stocks or the data are too "noisy" to reveal any relation. BID-ASK SPREADS HATVE played, and continue to play, an important role in explanations of the January effect in stock returns. For example, Roll (1983) argues persuasively that high January returns are the result of tax-loss selling pressure that occurs throughout the year which is released right after the beginning of the new tax year. Once the selling pressure is released, stocks rise in price which results in high January returns. However, these predictable excess January returns cannot be exploited fully by arbitrageurs because of round-trip transactions costs in the form of the bid-ask spread. This inhibitor to arbitrage is especially great for "small" or "low-priced" stocks, where, historically, high January returns have been most pronounced. Stoll and Whaley (1983) take a different tack. They do not focus on January returns, per se, but argue that the excess returns on small stocks are a result of higher proportional bid-ask spreads in low-priced stocks. In their view, the bid-ask spread itself is the "cause" of the higher returns on small stocks. That is, because of the higher proportional cost of transacting in small stocks, investors demand a higher rate of return. In response, Keim (1983) and Schultz (1983) point out that small stock excess returns are concentrated in January and a seasonal in stock returns cannot be explained by the bid-ask spread unless there is a seasonal in the bid-ask spread as well. Schultz (1983) compares bid-ask spreads in December with those in June (plus round-trip commissions) for a sample of 40 small capitalization New York Stock Exchange (NYSE) stocks and finds no signifi

Daily stock market volatility: 1928–1989

Abstract: This paper examines the daily return variability of the SP these results were not entirely due to 1987, as returns in 1988 and 1989 had large measures of both skewness and kurtosis. The frequency of extreme-return events increased in the 1980s, but was still dramatically less than the 1920s and 30s. When extreme negative days occurred in the 1980s the losses tended to be more severe than in the previous four decades. Extreme-return days are preceded by significant losses and are inte...