Showing papers on "Stock exchange published in 2010"
Journal Article•
TL;DR: In this paper, the authors extend Lazaridis and Tryfonidis's findings regarding the relationship between working capital management and profitability and find statistically significant relationship between the cash conversion cycle and profitability, measured through gross operating profit.
Abstract: The paper seeks to extend Lazaridis and Tryfonidis’s findings regarding the relationship between working capital management and profitability. A sample of 88 American firms listed on New York Stock Exchange for a period of 3 years from 2005 to 2007 was selected. We found statistically significant relationship between the cash conversion cycle and profitability, measured through gross operating profit. It follows that managers can create profits for their companies by handling correctly the cash conversion cycle and by keeping accounts receivables at an optimal level. The study contributes to the literature on the relationship between the working capital management and the firm’s profitability.
577 citations
TL;DR: In this article, a continuous-time stochastic model for the dynamics of a limit order book is proposed, which can be estimated easily from data, and its analytical tractability allows for fast computation of various quantities of interest without resorting to simulation.
Abstract: We propose a continuous-time stochastic model for the dynamics of a limit order book. The model strikes a balance between three desirable features: it can be estimated easily from data, it captures key empirical properties of order book dynamics, and its analytical tractability allows for fast computation of various quantities of interest without resorting to simulation. We describe a simple parameter estimation procedure based on high-frequency observations of the order book and illustrate the results on data from the Tokyo Stock Exchange. Using simple matrix computations and Laplace transform methods, we are able to efficiently compute probabilities of various events, conditional on the state of the order book: an increase in the midprice, execution of an order at the bid before the ask quote moves, and execution of both a buy and a sell order at the best quotes before the price moves. Using high-frequency data, we show that our model can effectively capture the short-term dynamics of a limit order book. We also evaluate the performance of a simple trading strategy based on our results.
396 citations
TL;DR: In this paper, the impact of oil prices on Vietnam's stock market has been investigated and the authors find that stock prices, oil prices and nominal exchange rates are cointegrated, and oil prices have a positive and statistically significant impact on stock prices.
386 citations
TL;DR: In this paper, the authors investigated the relationship between corporate social responsibility and firm financial performance in developing countries by investigating the Istanbul Stock Exchange (ISE) 100 index companies and their social responsibility policy and financial indicators.
Abstract: Purpose – Corporate social responsibility is important and fundamental to the sustainable operations of corporations. Similarly financial performance is undoubtedly fundamental to the continuing operating of any corporation. This paper aims to investigate the relationship between corporate social responsibility and firm financial performance.Design/methodology/approach – The main part of this paper is based upon an exploration of the relationship between corporate social responsibility and financial performance in developing countries. The authors do this by investigating the Istanbul Stock Exchange (ISE) 100 index companies and their social responsibility policy and financial indicators. The relationship between CSR and financial performance is empirically examined between 2005 and 2007 with different approaches and measurement methods. The authors show that some causality is related to lagging between periods for financial performance and CSR. Based upon previous empirical studies, this study conducts t...
373 citations
TL;DR: This paper attempts to model and predict the return on stock price index of the Istanbul Stock Exchange (ISE) with ANFIS and reveals that the model successfully forecasts the monthly return of ISE National 100 Index with an accuracy rate of 98.3%.
Abstract: Stock market prediction is important and of great interest because successful prediction of stock prices may promise attractive benefits. These tasks are highly complicated and very difficult. In this paper, we investigate the predictability of stock market return with Adaptive Network-Based Fuzzy Inference System (ANFIS). The objective of this study is to determine whether an ANFIS algorithm is capable of accurately predicting stock market return. We attempt to model and predict the return on stock price index of the Istanbul Stock Exchange (ISE) with ANFIS. We use six macroeconomic variables and three indices as input variables. The experimental results reveal that the model successfully forecasts the monthly return of ISE National 100 Index with an accuracy rate of 98.3%. ANFIS provides a promising alternative for stock market prediction. ANFIS can be a useful tool for economists and practitioners dealing with the forecasting of the stock price index return.
357 citations
TL;DR: In this article, a winner-take-all approach is used to determine if two nodes are connected by an edge, and the results from this work clearly suggest that the variation of stock prices are strongly influenced by a relatively small number of stocks.
337 citations
TL;DR: The empirical part of this study is performed on a specific financial system, namely the set of 300 highly capitalized stocks traded at the New York Stock Exchange, in the time period 2001–2003, and finds that stocks belonging to the financial sector are the most influential stocks affecting the correlation profile of the system.
Abstract: What are the dominant stocks which drive the correlations present among stocks traded in a stock market? Can a correlation analysis provide an answer to this question? In the past, correlation based networks have been proposed as a tool to uncover the underlying backbone of the market. Correlation based networks represent the stocks and their relationships, which are then investigated using different network theory methodologies. Here we introduce a new concept to tackle the above question—the partial correlation network. Partial correlation is a measure of how the correlation between two variables, e.g., stock returns, is affected by a third variable. By using it we define a proxy of stock influence, which is then used to construct partial correlation networks. The empirical part of this study is performed on a specific financial system, namely the set of 300 highly capitalized stocks traded at the New York Stock Exchange, in the time period 2001–2003. By constructing the partial correlation network, unlike the case of standard correlation based networks, we find that stocks belonging to the financial sector and, in particular, to the investment services sub-sector, are the most influential stocks affecting the correlation profile of the system. Using a moving window analysis, we find that the strong influence of the financial stocks is conserved across time for the investigated trading period. Our findings shed a new light on the underlying mechanisms and driving forces controlling the correlation profile observed in a financial market.
329 citations
Dissertation•
13 Oct 2010
TL;DR: In this paper, the authors examined the volatility of common stocks of the Athens Stock Exchange at the market, industry and firm level and found that all three measures show a countercyclical behaviour relative to GDP growth.
Abstract: This paper examines the volatility of common stocks of the Athens Stock Exchange at the market, industry and firm level. Over the period from 1988 to 2009 there has been a considerable increase in firm-level volatility relative to the market volatility, which implies that it takes increasingly more stocks to diversify away idiosyncratic risk. All volatility series move together and they are trended upwards. All three volatility measures show a countercyclical behaviour relative to GDP growth, and they all help to forecast GDP. Correlations among individual stocks have increased over the sample period, yet the explanatory power of the market model for a typical stock is still relatively low. All three volatility series rise during times of low returns. Factors that may be responsible for these findings are suggested.
324 citations
TL;DR: Li et al. as discussed by the authors investigated whether good governance structures help constrain management's opportunistic behaviors (in the form of transfer pricing manipulations) in one of the world's most dynamic economies and found that firms with a board that has a higher percentage of independent directors or a lower percentage of "parent" directors (i.e., directors who are representatives of the parent companies of the listed firms), or have different people occupying the chair and CEO positions, or have financial experts on their audit committees, are less likely to engage in transfer pricing manipulation.
308 citations
TL;DR: In this paper, the authors argue that a more informative stock price today means higher return synchronicity in the future, and they find empirical support for their theoretical predictions in three settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).
Abstract: This paper argues that, contrary to the conventional wisdom, stock return synchronicity (or R2) can increase when transparency improves. In a simple model, we show that, in more transparent environments, stock prices should be more informative about future events. Consequently, when the events actually happen in the future, there should be less “surprise” (i.e., less new information is impounded into the stock price). Thus a more informative stock price today means higher return synchronicity in the future. We find empirical support for our theoretical predictions in 3 settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).
297 citations
TL;DR: In this article, a noisy rational expectations model is used to analyze how competition in firms' product markets influence their behavior in equity markets, and whether product market imperfections spread to equity markets.
Abstract: How does competition in firms’ product markets influence their behavior in equity markets? Do product market imperfections spread to equity markets? We examine these questions in a noisy rational expectations model in which firms operate under monopolistic competition while their shares trade in perfectly competitive markets. Firms use their monopoly power to pass on shocks to customers, thereby insulating their profits. This encourages stock trading, expedites the capitalization of private information into stock prices and improves the allocation of capital. Several implications are derived and tested. HOW DOES COMPETITION in firms’ product markets influence their behavior in equity markets? Do product market imperfections spread to equity markets? These questions are increasingly of interest as product markets are becoming more competitive in many countries thanks to the relaxation of impediments to trade and barriers to entry. 1 In this paper, we analyze these questions using a noisy rational expectations model in which firms operate under monopolistic competition while their shares trade in perfectly competitive markets. The model is guided by recent empirical work showing that stock returns are affected by the intensity of product market competition. Gaspar and Massa (2005) and Irvine and Pontiff (2009) document that more competitive firms have more volatile idiosyncratic returns, and Hou and Robinson (2006) show that such firms earn higher risk-adjusted returns. The model is also guided by a direct examination of the data. Our starting point is the finding in Gaspar and Massa (2005) that analysts’ earnings forecasts about firms operating in more competitive industries are more dispersed. Since differences in opinions
TL;DR: In this paper, the authors show that related-party sales of goods and services could be used opportunistically to manage earnings upwards in the pre-IPO period, i.e., exploiting economic resources from minority shareholders for the benefit of the parent company.
TL;DR: This paper investigated the relationship between corporate governance quality and dividend policy in Canada based on the agency theory predictions, and found that firms with stronger corporate governance have higher dividend payouts, which is consistent with the outcome model of dividend policy.
Abstract: We investigate the relationship between corporate governance quality and dividend policy in Canada Based on the agency theory predictions, we consider the effect of two conflicting hypotheses about the effect of corporate governance on dividend payouts: the outcome and substitution hypotheses The effectiveness of firm-level governance mechanisms is assessed through the Globe & Mail annual corporate governance index and four sub-categories scores (board composition, shareholding and compensation issues, shareholder rights issues and corporate governance disclosure policy) Using a sample of 714 firm-years listed on the Toronto Stock Exchange over the period 2002-2005, our results show that firms with stronger corporate governance have higher dividend payouts Among the four components of the corporate governance index, we document that board composition and shareholder rights’ policy are positively related to payout ratios We also find a positive association between firm size, the level of free cash flows and dividend payouts Finally, we document a negative relationship between firm risk, US cross-listing and dividend payouts Taken together our results are consistent with the outcome model of dividend policy
TL;DR: The authors investigated whether a higher oil price pushes the stock market into bear territory, by using time-varying transition-probability Markov-switching models and examined different measures of oil price shocks.
TL;DR: In this paper, two alternative methods of estimation, namely, fully modified OLS (FMOLS) and generalized method of moments (GMM), were applied to analyse the determinants of the capital structure of Indian firms using a panel of 1169 non-financial firms listed in either the Bombay Stock Exchange or the National Stock Exchange.
01 Jan 2010
TL;DR: In this paper, the impact of working capital management on firm's performance in Pakistan for the period 1998 to 2007 was analyzed and the results indicated that the cash conversion cycle, net trade cycle and inventory turnover in days are significantly affecting the performance of the firms.
Abstract: Working capital management plays a significant role in better performance of manufacturing firms. This paper analyzes the impact of working capital management on firm’s performance in Pakistan for the period 1998 to 2007. For this purpose, balanced panel data of 204 manufacturing firms is used which are listed on Karachi Stock Exchange. The results indicate that the cash conversion cycle, net trade cycle and inventory turnover in days are significantly affecting the performance of the firms. The manufacturing firms are in general facing problems with their collection and payment policies. Moreover, the financial leverage, sales growth and firm size also have significant effect on the firm’s profitability. The study also concludes that firms in Pakistan are following conservative working capital management policy and the firms are needed to concentrate and improve their collection and payment policy. The effective policies must be formulated for the individual components of working capital. Furthermore, efficient Management and financing of working capital (current assets and current liabilities) can increase the operating profitability of manufacturing firms. For efficient working capital management, specialized persons in the fields of finance should be hired by the firms for expert advice on working capital management in the manufacturing sector.
TL;DR: In this article, the effect of board size, foreign ownership, firm size, profitability, and leverage on corporate social responsibility (CSR) reporting and the possible effect of CSR reporting on a firm's future performance was investigated.
Abstract: Purpose – The purpose of this paper is to investigate the effect of board size, foreign ownership, firm size, profitability, and leverage on corporate social responsibility (CSR) reporting and the possible effect of CSR reporting on a firm's future performance.Design/methodology/approach – Annual reports were analyzed by content analysis method and multiple regression was used to test hypotheses.Findings – Evidence was found that board size has a positive and non‐linear (quadratic and concave) relationship with CSR. This result confirms predictions that a larger board will be able to exercise better monitoring, but that too large a board will make the monitoring process ineffective. Firm size has a positive effect on CSR. This suggests that larger firms have more resources to devote to social activities and a larger asset base over which to spread the costs of social responsibility. They also face more pressure to disclose their social activities for various groups in society. Profitability and leverage, ...
Posted Content•
TL;DR: In this paper, the search volume on Google not only serves as an intuitive proxy for overall recognition in a firm, but also captures the attention of stock market investors, and the results suggest that an increase in search queries is associated with a rise in trading activity and stock liquidity.
Abstract: We show that the search volume on Google not only serves as an intuitive proxy for overall recognition in a firm, but also captures the attention of stock market investors. Our results suggest that an increase in search queries is associated with a rise in trading activity and stock liquidity. We attribute the improved liquidity to a reduction in asymmetric information costs and conclude that the search volume primarily measures the recognition of uninformed investors. Moreover we find evidence that an increase in search volume is associated with temporarily higher future returns, which reinforces our previous finding.
TL;DR: In this article, the authors examine the stock trading of institutional investors whose portfolios also hold loans and find that institutional participants in loan renegotiations subsequently trade in the stock of the same company and outperform trades by other managers and trades in other stocks by approximately 5.4% in annualized terms.
Abstract: One of the most important developments in the corporate loan market over the past decade has been the growing participation of institutional investors. As lenders, institutional investors routinely receive private information about borrowers. However, most of these investors also trade in public securities. This leads to a controversial question: Do institutional investors use private information acquired in the loan market to trade in public securities? This paper examines the stock trading of institutional investors whose portfolios also hold loans. Using SEC filings of loan amendments, we identify institutional investors with access to private information disclosed during loan amendments. We then look at abnormal returns on subsequent stock trades. We find that institutional participants in loan renegotiations subsequently trade in the stock of the same company and outperform trades by other managers and trades in other stocks by approximately 5.4% in annualized terms.
TL;DR: Lin et al. as discussed by the authors used the log-periodic power law (LPPL) model to analyze two bubbles and subsequent market crashes in two important indexes in Chinese stock markets between May 2005 and July 2009.
Abstract: By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding of investors and traders and (iii) the mathematical and statistical physics of bifurcations and phase transitions, the log-periodic power law (LPPL) model has been developed as a flexible tool to detect bubbles. The LPPL model considers the faster-than-exponential (power law with finite-time singularity) increase in asset prices decorated by accelerating oscillations as the main diagnostic of bubbles. It embodies a positive feedback loop of higher return anticipations competing with negative feedback spirals of crash expectations. We use the LPPL model in one of its incarnations to analyze two bubbles and subsequent market crashes in two important indexes in the Chinese stock markets between May 2005 and July 2009. Both the Shanghai stock exchange composite index (US ticker symbol SSEC) and Shenzhen stock exchange component index (SZSC) exhibited such behavior in two distinct time periods: (1) from mid-2005, bursting in October 2007 and (2) from November 2008, bursting in the beginning of August 2009. We successfully predicted time windows for both crashes in advance ( Sornette, 2007 ; Bastiaensen et al., 2009 ) with the same methods used to successfully predict the peak in mid-2006 of the US housing bubble ( Zhou and Sornette, 2006b ) and the peak in July 2008 of the global oil bubble ( Sornette et al., 2009 ). The more recent bubble in the Chinese indexes was detected and its end or change of regime was predicted independently by two groups with similar results, showing that the model has been well-documented and can be replicated by industrial practitioners. Here we present a more detailed analysis of the individual Chinese index predictions and of the methods used to make and test them. We complement the detection of log-periodic behavior with Lomb spectral analysis of detrended residuals and ( H , q ) -derivative of logarithmic indexes for both bubbles. We perform unit-root tests on the residuals from the log-periodic power law model to confirm the Ornstein–Uhlenbeck property of bounded residuals, in agreement with the consistent model of ‘explosive’ financial bubbles ( Lin et al., 2009 ).
TL;DR: In this paper, the effect of board size on firms disclosing more, rather than less, strategic and tactical intellectual capital resources using the top 26 of the 52 firms ranked by the Nairobi Stock Exchange for market capitalization in 2002 and in 2003.
Abstract: Purpose – The purpose of this paper is to examine the effect of board size on firms disclosing more, rather than less, strategic and tactical intellectual capital resources using the top 26 of the 52 firms ranked by the Nairobi Stock Exchange for market capitalization in 2002 and in 2003 This study identifies intellectual capital disclosure by three separate categories: internal capital, external capital, and human capital Hence, this study examines the influence of board size on six disclosure outcomesDesign/methodology/approach – The study develops hypotheses using the resource dependency theory Using content analysis for data generation, this study classifies firms that disclose more versus those that disclose less, using the mean for all firms for each disclosure outcomeFindings – Using logistic regression, the study examines the influence of board size on each disclosure outcome and finds that firms disclosing more tactical internal capital and more strategic human capital have larger boardsPra
Posted Content•
TL;DR: A hybrid forecasting model, using multi-technical indicators to predict stock price trends, is proposed, superior to the two listed forecasting models (RST and GAs) in terms of accuracy, and the stock return evaluations have revealed that the profits produced by the proposed model are higher than the three listed models.
TL;DR: This paper uses stock returns at different times along with their valuation ratios from the stocks of Bombay Stock Exchange for the fiscal year 2007-2008 to select stocks from the clusters to build a portfolio, minimizing portfolio risk and compare the returns with that of the benchmark index.
Abstract: In this paper a data mining approach for classification of stocks into clusters is presented. After classification, the stocks could be selected from these groups for building a portfolio. It meets the criterion of minimizing the risk by diversification of a portfolio. The clustering approach categorizes stocks on certain investment criteria. We have used stock returns at different times along with their valuation ratios from the stocks of Bombay Stock Exchange for the fiscal year 2007-2008. Results of our analysis show that K-means cluster analysis builds the most compact clusters as compared to SOM and Fuzzy C-means for stock classification data. We then select stocks from the clusters to build a portfolio, minimizing portfolio risk and compare the returns with that of the benchmark index, i.e. Sensex.
TL;DR: In this article, the authors examined whether value relevance increased following the introduction of IFRS, using a sample of 3,721 companies listed on five European stock exchanges: Frankfurt, Madrid, Paris, London, and Milan.
Abstract: Since 2005, European-listed companies have been required to prepare their consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) We examine whether value relevance increased following the introduction of IFRS, using a sample of 3,721 companies listed on five European stock exchanges: Frankfurt, Madrid, Paris, London, and Milan We find mixed evidence of an increase in value relevance However, the influence of earnings on share price increased following the introduction of IFRS in Germany, France, and the United Kingdom, while the influence of book value of equity decreased (except for the United Kingdom)
Posted Content•
TL;DR: In this paper, the authors provide a review of the literature on the link between stock market volatility and aggregate demand, focusing on the implications of the so-called uncertainty hypothesis according to which it is primarily the uncertainty associated with stock market fluctuations that influences aggregate demand.
Abstract: In this paper we provide a review of the literature on the link between stock market volatility and aggregate demand. In particular, we focus on the implications of the so-called uncertainty hypothesis according to which it is primarily the uncertainty associated with stock market fluctuations that influences aggregate demand. Empirical studies find that stock market volatility indeed feeds back into the real economy.
TL;DR: In this article, the differences in the relative importance of two sources of systemic risk (world and Eurozone) on Government bond returns, in two groups of countries in EU-15, were compared.
Abstract: In this study we adopt the CAPM-based model of Bekaert and Harvey (1995) to compare the differences in the relative importance of two sources of systemic risk (world and Eurozone) on Government bond returns, in two groups of countries in EU-15. Results show that euro markets are less vulnerable to the influence of world risk factors, and more vulnerable to EMU risk factors. However, they are only partially integrated. For their part, the markets of the countries that decided to stay out of the Monetary Union present a higher vulnerability to external risk factors.
TL;DR: The authors examined the integration and causality of interdependencies among seven major East Asian stock exchanges before, during, and after the 1997-1998 Asian financial crisis and found that Hong Kong and Singapore respond significantly to shocks in most other East Asian markets, including Shanghai and Shenzhen, during this crisis.
TL;DR: The authors found that the stock price reaction upon departure is negatively related to the firm's prior performance and to the CEO's prior pay, and that better prior performance, higher prior pay and a more negative stock market reaction are associated with worse postdeparture firm performance.
Abstract: Do chief executive officers (CEOs) really matter? Do cross-sectional differences in firm performance and CEO pay reflect differences in CEO ability? Examining CEO departures over 1992--2002, we first find that the stock price reaction upon departure is negatively related to the firm's prior performance and to the CEO's prior pay. Second, the CEO's subsequent labor market success is greater if the firm's predeparture performance is better, the prior pay is higher, and the stock market's reaction is more negative. Finally, better prior performance, higher prior pay, and a more negative stock market reaction are associated with worse postdeparture firm performance. Collectively, these results reject the view that differences in firm performance stem entirely from non-CEO factors such as the firms' assets, other employees, or “luck,” and that CEO pay is unrelated to the CEO's contribution to firm value.
TL;DR: In this article, the role of stock markets as a channel through which foreign capital flows could promote economic growth in recipient developed and developing countries was investigated, and the results indicated that stock markets might be a significant channel or leading institutional factor through which capital flows affect economic growth.