Showing papers on "Stock (geology) published in 1970"

New listings and their price behavior

Abstract: DURING THE LAST DECADE, there have been a large number of new listings on the New York and American Stock Exchanges. These listings are felt by many to be quite beneficial both to the company and to its stockholders.1 Not only is the stock said to be more marketable, but the company is said to benefit significantly from the prestige associated with being a listed company as well as from the free publicity. Because of these benefits, the idea has evolved that investors respond favorably to the listing of a stock traded previously in the over-the-counter market. More specifically, it is contended that a stock should rise in price, relative to the market, after the announcement to list and should continue to rise through the time it is listed and first traded on the exchange, after which, assumedly, it would sell off to a certain extent. Supposedly, the latter behavior is due to profit taking by traders who bought the stock prior to listing in expectation of an upward move in price.2 Overall, however, the effect of listing is regarded as bullish; it is believed to represent something of value to investors.' Consequently, the market price of the stock is said to rise from the price that prevailed previously in the over-the-counter market, all other things the same. The purpose of this paner is to submit the hypothesis cited above to empirical testing, using data from 1960 to 1967. If, in fact, the described pattern of stock-price behavior is significant, there exists in the market an opportunity

An Ordering Model for Recoverable Stock Items

Abstract: A recoverable stock item is one which after use is repaired and used again. This article presents a minimum investment model for ordering new stock when the units available through repair do not satisfy total demand. Simulation is utilized to measure the effect of the required approximations.

Conserving the urban housing stock, a set of case studies on the impact of government policy.

Abstract: Massachusetts Institute of Technology. Dept. of Urban Studies and Planning. Thesis. 1970. Ph.D.

Expected Growth, Required Return, and the Variability of Stock Prices

Abstract: Stocks differ in the variability of their prices; thus, as the level of stock market prices swings periodically, one observes a change in structure as the prices of more volatile issues change relative to those of a more stable character. Here we attempt to empirically establish some of the differentiating characteristics of these volatile issues. In doing so we add to the empirical and analytical work of Fritzemeier [4], Clendenin [2], Latane' [7], Malkiel [8], and Heins and Allison [6]. Only the last of these efforts used regression techniques. The major theoretical argument tested is that, ceteris paribus, price variability increases as the spread between the rates of stockholders' required return, k , and dividend growth, g , decreases. This conclusion is drawn from a brief analysis of the Williams formula for stock valuation [9]. Our major effort is directed to a test of the hypothesis through cross-section regression analysis of a sample of 475 industrial companies. In addition to our major purpose of clarifying and supporting empirically some theoretical arguments regarding stock price variability, we believe that our study is of interest because it conflicts with the primary result of Clendenin and of Heins and

A Statistical Method for Setting Stops in Stock Trading

Abstract: This paper applies the exponential distribution to stock price reactions to determine, at three confidence levels, the critical percentage price reaction beyond which a reaction constitutes a strong likelihood of a major reversal or halt in the stock's present general price trend. We show that these critical values can be used to determine stop losses, so that a trader's position is closed when the probability of a major reversal or halt against his position is large, and an open position is kept open when the probability that the reaction is a major one is small or moderate. The distribution fit on ten stocks on daily and weekly bases for over a year's duration each, tested using the chi-squared statistic, was found to be good. Further, three stops, corresponding to three confidence levels of the distribution were tested for each stock against a subsequent six-month period of price action. The percentage of successful tests of these stops for each of the stocks corresponded very closely to expected results ascertained by using data from the previous period.

Retirement of non‐callable preferred stock

Abstract: CONSIDERABLE RESEARCH has been undertaken in recent years on the subject of corporate stock reacquisition. Much of the literature resulting from this research has concerned itself with common stock reacquisition.1 Other articles have dealt with the decline in the amount of non-convertible preferred stock outstanding and the desirability of retiring preferred stock.2 This paper will discuss the retirement of preferred shares having a provision making them non-callable by the corporation. Despite the existence of a non-callable feature, corporations in recent years have been able to accomplish the seemingly impossible task of eliminating these preferreds from their capital structures by making exchange offers for them. However, no comprehensive study has been performed dealing with the precise manner in which these retirements have been accomplished. The first part of this study will examine the recent history of the noncallable preferred stocks listed on the New York Stock Exchange and the American Stock Exchange. A fifteen-year period starting with 1953 will be used for this analysis. The number of issues of non-callable preferred stock outstanding will be traced each year for this fifteen-year period, along with the number of shares outstanding and their approximate market value. The next section will deal with those companies that have succeeded in completely eliminating these securities from their capital structures. The terms of the actual exchange offers will be analyzed to determine the premium over current market value which was offered in addition to any added income a preferred shareholder would realize by accepting the offer. The third part will develop a model to aid in the determination of the effects of retiring a non-callable preferred on the net income of the corporation and on the position of the holder of the stock.

Use of the computer in the stock selection process

Abstract: Because computers are being used with increasing frequency in the stock selection process, this study was under­ taken to examine how they are being utilized and their effects on this important endeavor. Such specific procedures as screening, correlation, simulation, and discounted cash flow were first examined. Next the computer-assisted stock selection systems of COMPUSTAT, an IBM program, LAFFFl, SCAN, and FFL, along with their advantages and disadvantages, were presented. The uses of computers in fundamental and technical approaches to stock selection were investigated, and it ap­ pears that sorie fundamentalists may have shifted to the technical viewpoint. However, some fundamentalists feel that the computer will be of greater aid to them as they can now pursue in greater depth the relationships between the economy and earnings of specific companies and industries. Because the majority of data which analysts use is secured from accounting records, some of the problem areas of accounting and their impact on investing were discussed. These areas were the reporting of extraordinary items, al­ location of income taxes, the investment tax credit,

Neutralization of the Money Stock

Abstract: Majiagement at Purdue University. tm Emariuel Melichar, “Comments on the ‘St. Louis Position,’” this Review (August 1969), pp. 9-14. 2 Patric flendershott, The Neutralized Money Stock: An Unbiased Measure of Federal Reserve Policy Actions (Richard D. Irwin, Inc., 1-lomewood, Illinois, 1968). 3 Michael Keran, “Reply,” this Review (August 1969), pp. 15-18. tHe also mistakenly criticizes Melichar for using the neutralized money stock as a measure of the impact of all monetary influences on the economy. There is no basis for Kerails criticism. Meliehar states explicitly in numerous places in his paper that the neutralized money stock is used as a measure of monetary policy actions only (see particularly pp. 11-12). Further, Melichar’s use of a policy, rather than a total monetary, measure is appropriate because Bowsher and Kalish, in the paper that induced Melichar’s response, ~vere quite straighfforward in their identification of changes in the rate of change in the money stock with changes in Federal Reserve policy actions. See “Does Slower Monetary Expansion Discriminate Against Housing?,” this Review (June 1968), pp. 5-6. tm Leonail Andersen, “Additional Empirical Evidence on the Reverse-Causation Argument,” this Review (August 1969), pp. 19-23.

A Theoretical and Empirical Study of Stock Purchase Warrants and Convertible Bonds.

Abstract: The action of individual securities is characterized by the unexpected. Fortunes are frequently created by investing in unwanted instruments and lost by committing funds to issues in strong demand. Stock purchase warrants and convertible bonds also offer unusual and even erratic performance. This study focuses on the ingredients of fair value in these instruments and develops'models to assist-in appraising the merits of both warrants and convertible bonds. ' An evaluation model for warrants is created by normalizing basic components-of warrants in terms-of their exercise prices. The price of the common stock is divided by the exercise price, and this ratio is used in predicting normal prices for warrants. Time to expiration is viewed as an important element in valuing individual warrants, and six time categories are created. A mathematical relationship between the common stock and the warrant price is calculated by using a statistical technique frequently referred to as a "power function." The model's predictive efficiency is tested by com­ paring its attractively priced warrants to average warrants. Results show the warrant model to select warrants offering greater upside and downside leverage. Average warrants are-shown'to provide a higher rate of return over the test i period from 1960 through 1969 than those selected by the warrant model. Bear markets in the first and last years of the study lowered the model's performance. Downside leverage in 19 69 resulted in huge percentage losses for warrants selected by the model. The warrant model appears versatile in that it tends to signal generally inflated markets. Percentage­ wise, few warrants are deemed attractively priced prior to ■ bear markets. Avoidance of bear markets is shown to signifi­ cantly increase the overall return from these securities. An evaluation model is created for convertible bonds. Straight debt value is ascribed as offering the foundation for the model, and it is used to normalize con­ version value and conversion feature value. The resultant conversion value ratio is used in predicting the value of the conversion feature. Time to expiration of convertible features is given special attention by structuring three separate time categories. A fourth category is created for long-term conversion features and straight debt values less than $700. Mathematical equations are developed for each category and are used in predicting normal prices for these instruments. xii The convertible bond model is tested by comparing its-performance to that of one hundred convertible bond ob­ servations. The model is shown to select thirty-four of the observations for purchase. Twenty-eight of them appreci ate in value while only six decline. Model selections are found to be decidedly superior to average convertibles. Moreover, the model seems to provide a device for signaling generally overpriced markets. Special trading tactics are employed for warrants and convertible bonds. The models are used to locate candi­ dates for arbitrage-hedge techniques. Actual transactions are simulated. Warrants are found well suited for arbitrage hedge tactics, but convertible bonds are currently not well suited for these techniques. The study concludes by discussing other uses of empirically designed models. For example, issuing companies may find the models useful in quantifying the trade off between higher prices for warrants and greater flexibility of the convertible feature. It is concluded that refine­ ments and updating of the designed models should be under­ taken as data become available.