Showing papers on "Stock (geology) published in 1985"
Posted Content•
TL;DR: In this paper, the authors show that the state of the term structure of interest rates predicts stock returns and that stock returns tend to be low when the short term nominal interest rate is high.
Abstract: It is well known that in the postwar period stockreturns have tended to be low when the short term nominal interest rate is high. In this paper I show that more generally the state of the term structure of interest rates predicts stock returns. Risk premia on stocks appear to move closely together with those on 20-year Treasury bonds, while risk premia on Treasury bills move somewhat independently. Average returns on 20-year bonds have been very low relative to average returns on stocks. I use these observations to test some simple asset pricing models. First I consider latent variable models in which betas are constant and risk premia vary with expected returns on a small number of unobservable hedge portfolios. The data strongly reject a single-latent-variable model.The last part of the paper examines the relationship between conditional means and variances of returns on bills, bonds and stocks. Bill returns tend to be high when their conditional variance is high, but there is a perverse negative relationship between stock returns and their conditional variance. A model is estimated which assumes that asset returns are determined by their time-varying betas with a fixed-weight "benchmark" portfolio of bills, bonds and stocks, whose return is proportional to its conditional variance. This portfolio is estimated to place almost all its weight on bills, indicating that uncertainty about nominal interest rates is important in pricing both short- and long-term assets.
1,915 citations
TL;DR: This paper examined the daily stock market returns for four foreign countries and found that the lowest mean returns for the Japanese and Australian stock markets occur on Tuesday, and that the seasonal patterns in foreign stock markets are independent of those previously reported in the U.S. The results strongly support the proposition that the weekly seasonal effect is a general, worldwide phenomenon rather than the result of a special type of institutional arrangement.
Abstract: This paper examines the daily stock market returns for four foreign countries. We find a so-called "week-end effect" in each country. In addition, the lowest mean returns for the Japanese and Australian stock markets occur on Tuesday. The remainder of the paper answers four questions. Are seasonal patterns in foreign stock markets independent of those previously reported in the U.S.? Do Japan and Australia exhibit a seasonal one day out of phase due to different time zones? Do settlement procedures across countries bias week-end effects? Does the seasonal pattern in foreign exchange offset the week-end effect in stocks for Americans investing overseas? SOME OF THE MOST ANOMALOUS empirical findings in finance are associated with the sample distributions of daily common stock returns. Cross [1], French [2], Gibbons and Hess [3], and Keim and Stambaugh [4] have documented that the average return on Friday is abnormally high, and the average return on Monday is abnormally low. To our knowledge, this so-called "day-of-the-week effect" or "week-end effect" has yet to be explained. Because this anomaly has been reported primarily for U.S. stock returns, it is appropriate to investigate whether similar results occur for other countries. Positive findings would strongly support the proposition that the weekly seasonal effect is a general, world-wide phenomenon rather than the result of a special type of institutional arrangement in the U.S. To shed more light on this proposition, our paper examines stock market returns in the U.K., Japan, Canada, and Australia. Since we find a week-end effect in each country, we can examine a set of interesting questions. For example, are these seasonals independent of the previously reported seasonal in the U.S.? Due to different time zones, do Far Eastern countries exhibit a seasonal one day out of phase? Do different settlement procedures across countries influence weekend effects? Does the seasonal in foreign exchange fluctuations (see McFarland, Pettit, and Sung [7] and Levi [6]) offset the week-end effect in stock market returns for Americans investing overseas?
778 citations
TL;DR: In this article, the authors examined the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources, e.g., the Wall Street Journal, are used to choose announcement dates.
Abstract: This article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources, e.g., the Wall Street Journal, are used to choose announcement dates. Twenty major changes in regulatory constraint since 1887 are considered. Tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation. The evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change.
525 citations
TL;DR: The authors examined the daily response of stock prices to announcements about the money supply, inflation, real economic activity, and the discount rate, and found that only the unexpected part of any announcement, the surprise, moves stock prices.
Abstract: This paper examines the daily response of stock prices to announcements about the money supply, inflation, real economic activity, and the discountrate. Except for the discount rate, survey data on market participants' expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement, the surprise,moves stock prices. The empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices. There is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days. There is also only weak evidence of stock price responses to surprises beyond the announcement day.(This abstract was borrowed from another version of this item.)
398 citations
TL;DR: In this paper, the authors show that the abnormal stock returns experienced by bidder firms, from the time of the announcement of a merger bid through the stockholder approval date, are positively related to the percentage of own-company stock held by the senior management of the bidder.
354 citations
TL;DR: In this article, it was shown that between 1977 and 1982 when Icahn, Irwin Jacobs, Carl Lindner, David Murdock, Victor Posner, and Charles Bluhdorn purchased stock in a given firm, stock prices on average increased significantly.
336 citations
TL;DR: The authors analyzes the empirical behavior of stock-return volatilities prior to and subsequent to the ex-dates of stock splits and finds that there is an approximately 30% "arbitrary" increase in the return standard deviations following the ex date.
292 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
Book•
01 Jan 1985
TL;DR: More than 5,000 terms related to stocks, bonds, mutual funds, banking, tax laws, and transactions in various financial markets are presented alphabetically with descriptions in this article.
Abstract: More than 5,000 terms related to stocks, bonds, mutual funds, banking, tax laws, and transactions in the various financial markets are presented alphabetically with descriptions. Readers will also find a helpful list of financial abbreviations and acronyms, as well as illustrative diagrams and charts. Here's a valuable short-entry dictionary for business students, as well as for office reference and the home bookshelves of private investors.
253 citations
TL;DR: In this article, the authors examined the day-to-day stock market returns for Japan and found that Japanese stock returns in January are significantly above the returns during the rest of the year.
Abstract: Stock markets in the United States and foreign countries exhibit a strong weekly seasonal,1 an empirical regularity for which no theoretical explanation has been found. One's belief in this phenomenon would be strengthened if it is known to also occur in capital markets separated from those in the United States by distance, institutional arrangements, and culture. This paper extends the results found in [5] and more closely examines the day to day stock market returns for Japan. While we find a weekly seasonal in Japan, its nature is significantly different in a statistical sense from the American one. For example, the lowest mean return in Japan occurs on Tuesday?not Monday, as in the United States. Thus, while the "day of the week" effect for American stocks has been casually called the "weekend" effect, it should not be referred to in this way for Japanese stocks. The next part of the paper examines causes for the unique Japanese seasonal. We investigate whether the results in Japan are associated with those in the United States, and, in particular, consider whether the low Tuesday return in Japan and the low Monday return in the United States are due to time zone differ? ences. The settlement process and the measurement error problem also are treated. We next consider the relationship between foreign exchange returns and stock market returns. The seasonal in daily foreign exchange returns does not "offset" the seasonal in daily stock market returns. Thus, both Japanese and American investors confront a day of the week effect in the Japanese stock mar? ket. Our data also allow us to investigate the "turn ofthe year" effect. Japanese stock returns in January are significantly above the returns during the rest of the year. However, unlike some reports using U.S. data (see [12] and [13]), we find no interaction in Japan between the Monday effect and the January effect.
247 citations
TL;DR: In this paper, the authors examined the gains and losses to senior managers and shareholders of twenty-nine large conglomerates from 1970 through 1975, and found that the average manager's annual gains from changes in stock returns far exceeded his remuneration, and that top managers of companies where stock returns decreased left their positions more frequently than did the officers of the other companies.
Book•
01 Jan 1985
TL;DR: Technical analysis is the art of observing how investors have regularly responded to events in the past and using that knowledge to accurately forecast how they will respond in the future Traders can then take advantage of this knowledge to buy when prices were near their bottoms and sell when prices are close to their highs as mentioned in this paper.
Abstract: Recommended for professional certification by the Market Technician's Association, this is the Original - and Still Number One - Technical Analysis Answer Book "Technical Analysis Explained, 4th Edition", is today's best resource for making smarter, more informed investment decisions This straight-talking guidebook details how individual investors can forecast price movements with the same accuracy as Wall Street's most highly paid professionals, and provides all the information you will need to both understand and implement the time-honored, profit-driven tools of technical analysisCompletely revised and updated for the technologies and trading styles of 21st century markets, it features: technical indicators to predict and profit from regularly occurring market turning points; psychological strategies for intuitively knowing where investors will seek profits - and arriving there first!; and, methods to increase your forecasting accuracy, using today's most advanced trading techniquesCritical acclaim for previous editions include: "One of the best books on technical analysis to come out since Edwards and Magee's classic text in 1948Belongs on the shelf of every serious trader and technical analyst " - "Futures" ""Technical Analysis Explained" [is] widely regarded as the standard work for this generation of chartists" - "Forbes"Traders and investors are creatures of habit who react - and often overreact - in predictable ways to rising or falling stock prices, breaking business news, and cyclical financial reports Technical analysis is the art of observing how investors have regularly responded to events in the past and using that knowledge to accurately forecast how they will respond in the future Traders can then take advantage of that knowledge to buy when prices are near their bottoms and sell when prices are close to their highs Since its original publication in 1980, and through two updated editions, Martin Pring's "Technical Analysis Explained" has showed tens of thousands of investors, including many professionals, how to increase their trading and investing profits by understanding, interpreting, and forecasting movements in markets and individual stocksIncorporating up-to-the-minute trading tools and technologies with the book's long-successful techniques and strategies, this comprehensively revised fourth edition provides new chapters on: candlesticks and one- and two-bar price reversals, especially valuable for intraday and swing traders; expanded material on momentum - including brand new interpretive techniques from the Directional Movement System and Chaunde Momentum Oscillator to the Relative Momentum Index and the Parabolic; expanded material on volume, with greater emphasis on volume momentum along with new indicators such as the Demand Index and Chaikin Money Flow; relative strength, an increasingly important and until now underappreciated arm of technical analysis; application of technical analysis to contrary opinion theory, expanding the book's coverage of the psychological aspects of trading and investing Technical analysis is a tool, nothing more, yet few tools carry its potential for dramatically increasing a user's trading success and long-term wealth Let Martin Pring's landmark "Technical Analysis Explained" provide you with a step-by-step program for incorporating technical analysis into your overall trading strategy and increasing your predictive accuracy and potential profit with every trade you make
TL;DR: In this paper, it is shown that the natural estimators of the variance and all of the higher order moments of the rate of returns are biased and an approximate set of correction factors is derived and a procedure is outlined to show how the correction can be made.
Abstract: Stock prices on the organized exchanges are restricted to be divisible by 1/8. Therefore, the "true" price usually differs from the observed price. This paper examines the biases resulting from the discreteness of observed stock prices. It is shown that the natural estimators of the variance and all of the higher order moments of the rate of returns are biased. An approximate set of correction factors is derived and a procedure is outlined to show how the correction can be made. The natural estimators of the "beta" and of the variance of the market portfolio, on the other hand, are "nearly" unbiased. THE BEHAVIOR OF STOCK PRICES has been an issue of interest to the financial economist for many years. This interest resulted in a growing number of empirical studies which attempt to estimate this behavior (e.g., Blattberg and Gonedes [2], Fama [6], Fama and Roll [7, 8], Barnea and Downes [1]). To date, stock price behavior is estimated under the assumption that the observed trading price is the "true" equilibrium price. However, observed stock prices and stock price changes on the organized exchanges are restricted to multiples of 1/8 of a dollar.1 Therefore, if the "true" distribution of stock prices is continuous, an observed trading price can be different from the "true" price. This paper examines the biases in estimating the moments of stock price changes caused by the discreteness of observed stock prices. The major focus of the paper is in noting this problem, providing a model which explains the source of these biases, and quantifying their size. Section I demonstrates that due to the discrete nature of observed stock prices the natural estimators for the variance and for the higher order moments of the rate of returns are biased upward. This bias is larger for stocks with lower prices and smaller standard deviation. For instance, assuming that the standard deviation, a, is 0.001, the stock price is one dollar, the "true" probability distribution of stock prices is lognormal, and the observed prices are as close as possible to the "true" prices, then the natural estimator of r has expectation 0.01400; hence, it is biased upward by 1300%. Significant biases have important implications in option pricing. We derive an approximate set of correction factors which can be applied to the
TL;DR: The relationship between commercial catch-rates and population density upon which many stock assessment models depend assumes that stock area (A) is constant and independent of population abundance as mentioned in this paper, which is not the case.
Abstract: The relationship between commercial catch-rates and population density upon which many stock assessment models depend assumes that stock area (A) is constant and independent of population abundance...
TL;DR: The authors investigated the relation between stock returns, real activity, inflation, and money supply changes using a vector autoregressive moving average (VARMA) model and found that stock returns are positively related to expected future real activity.
Abstract: Previous research has documented a negative relation between common stock returns and inflation. Recently, Fama [3] and Geske and Roll [6] have argued that this relation results from a more fundamental one between real activity and expected inflation. Stock returns, they argue, signal changes in real activity, which in turn affect expected inflation. However, unlike Fama, Geske and Roll argue that changes in real activity result in changes in money supply growth, which in turn affect expected inflation. Empirical tests have analyzed separately each link in the proposed causal chain. In this article, we investigate simultaneously the relations among stock returns, real activity, inflation, and money supply changes using a vector autoregressive moving average (VARMA) model. Our empirical results strongly support Geske and Roll's reversed causality model. THERE HAVE BEEN MANY attempts to explain the negative relations observed between stock returns and expected inflation, changes in expected inflation, and unexpected inflation.1 These phenomena, documented by Fama and Schwert [5], are troublesome because they appear contrary both to Fisher's theory that nominal asset returns are positively--related to expected inflation, and to received wisdom that common stocks are hedges against expected as well as unexpected inflation. Fama [3] suggests an explanation for the observed negative relation between stock returns and inflation based on money demand theory. An increase in anticipated real activity leads, he argues, to an increase in the demand for real money balances. Given the level of nominal money, the increased demand for real money balances must be accommodated by a fall in the price level. Because stock returns are assumed to be positively related to expected future real activity, a negative relation between inflation and stock returns is induced. However, this negative relation is merely a proxy for the more fundamental relation between anticipated real activity and stock returns. Therefore, Fama argues that the observed relation between stock returns and inflation is spurious. As noted by Fama and others, this line of reasoning cannot explain completely the negative relation between stock returns and inflation. Fama finds that measures of unexpected inflation are significant determinants of monthly stock returns in regressions where anticipated real activity is included as an explanatory variable. In addition, the explanatory power of expected inflation is eliminated
TL;DR: In this article, the authors investigated the behavior of stock prices for a group of well established and newly emerging LDC securities markets and found the probability distributions to be consistent with a lognormal distribution with some securities exhibiting non-stationary variance.
Abstract: The paper investigates the behavior of stock prices for a group of well established and newly emerging LDC securities markets. The results suggest the probability distributions to be consistent with a lognormal distribution with some securities exhibiting non-stationary variance. LDC markets, even though not as efficient as major DC markets, are quite comparable to the smaller European markets and the behavior of security prices as reported in this study appears to be generalizable for the heavily traded segments of LDC markets.
TL;DR: The authors examined the effect of current and expected interest rate changes on bank equity values and attempted to reconcile the conflicting findings of previous research regarding this issue and found that bank stock returns appear to be sensitive to an interest rate forecast error.
Abstract: This study examines the effect of current and expected interest rate changes on bank equity values and attempts to reconcile the conflicting findings of previous research regarding this issue. A multiple index market model of bank security returns is specified and estimated. The results confirm the existence of an interest rate effect on bank stocks that is not explained by returns on the market portfolio. In addition, bank stock returns appear to be sensitive to an interest rate forecast error.
TL;DR: In this article, the authors present tests designed to determine whether the weekly pattern in stock returns continues after the introduction of futures trading on stock indexes and whether the pattern carries over to the futures market using data for the SP500.
Abstract: This paper presents tests designed to determine whether the weekly pattern in stock returns continues after the introduction of futures trading on stock indexes and whether the pattern carries over to the futures market Using data for the SP500, I find that the "Monday effect" does persist in the cash market, but there is no evidence of a similar pattern in the futures market AMONG THE GROWING ARRAY of market anomalies, one of the most widely documented, but least understood, is the day-of-the-week effect Detailed research by French [2], Gibbons and Hess [3], Lakonishok and Levi [6], and Keim and Stambaugh [5] clearly shows that the mean return on Monday is less than that
TL;DR: Since few salmon fisheries operate on single stocks, stock recruitment analyses will usually underestimate the optimum escapement and overestimate the optimum harvest rate when mixed stocks are treated as a single stock.
Abstract: When several stocks of differing productivities are fished together and combined for stock recruitment analysis, the estimated productivity and size of the stock depends strongly on the previous exploitation history. As a mixed stock is harvested harder, it appears smaller in total size but more productive per individual. I analysed the mechanism behind this change. Passive feedback management policies perform well on mixed stocks, when starting from unexploited conditions. When starting from an overexploited condition, passive feedback management will fail to allow the less productive stocks to recover and will maintain overexploitation. This is also true in the presence of straying between stocks. Since few salmon fisheries operate on single stocks, stock recruitment analyses will usually underestimate the optimum escapement and overestimate the optimum harvest rate when mixed stocks are treated as a single stock. These conclusions will be true for any mixed stock fishery with different productivities o...
TL;DR: In this article, the empirical evidence presented below supports the hypothesis that settlement/clearing procedures are not a major determinant of this weekly pattern of stock market returns, and furthermore, it is shown that check clearing delays are not the main determinant.
Abstract: IN A RECENT NOTE in this Journal, Lakonishok and Levi [3] (hereafter LL) offer a partial explanation for the intraweek pattern of daily stock market returns observed by French [1], Gibbons and Hess [2], and others. Their hypothesis that the weekend effect-abnormally high returns to common stocks on Fridays and negative returns to common stocks on Mondays-can be explairned by settlement procedures and check clearing delays is an intriguing conjecture. However, the empirical evidence presented below supports the hypothesis that settlement/ clearing procedures are not a major determinant of this weekly pattern of stock market returns.
TL;DR: In this paper, the authors test whether the negative relationship between real stock returns and inflation in the United States is in fact proxying for a positive relationship between stock return and real activity variables in six major industrial countries over 1966-1979.
TL;DR: This article examined whether the information implied by simultaneous levels of option and stock prices (specifically, the implied standard deviation of returns) reflects other contemporaneously available information and found that implied standard deviations clearly reflect the contemporaneous dispersion in analysts' forecasts incrementally, i.e., beyond the information contained in the historical time series of returns.
Abstract: This study examines whether the information implied by simultaneous levels of option and stock prices (specifically, the implied standard deviation of returns) reflects other contemporaneously available information. The independent contemporaneous measure considered is the observed dispersion (across several financial analysts), at a point in time, in the forecasts of earnings per share for a given firm. The results indicate that implied standard deviations clearly reflect the contemporaneous dispersion in analysts' forecasts incrementally, i.e., beyond the information contained in the historical time series of returns. VARIOUS TESTS OF THE Black-Scholes option pricing model have appeared in the literature. The basic formulation posits the price of a call option to be a function of the simultaneous market price of the underlying stock, the instantaneous variance of the stock's rate of return, the exercise price and time to maturity of the option, and the risk-free interest rate. Studies by Black and Scholes [2], Galai [8], Chiras and Manaster [4], and Macbeth and Merville [12] used the formula to explain the observed prices of options to a successful degree. In these tests, all the information needed by the formula was directly observable, except the instantaneous stock return variance, which was measured as the time series variance of historical stock returns. Manaster and Rendleman [14] inverted the procedure to calculate implied stock prices (and implied standard deviations of stock returns simultaneously) and showed that such "implied prices contain information regarding equilibrium (future) stock prices that is not fully reflected in observed stock prices." Another set of studies (see Latane and Rendleman [11], Chiras and Manaster [4], Schmalensee and Trippi [16], among others) examined the properties of the implied instantaneous variance (or standard deviation) of stock returns that falls out of the formula when the values of all remaining variables are supplied. In a test of the predictive ability of such implied standard deviations (ISD's), Chiras and Manaster [4] found that for predicting future actual time series standard deviations (FSD's) of stock returns, the ISD's were superior predictors relative
Posted Content•
TL;DR: In this article, one explanation for this secular rise in price relates to the virtual mining of the standing stock of old growth (mature) timber and its positive effect on real stumpage prices.
Abstract: Timber is unique among natural resources in that its price shows a long-term increasing trend relative to the price of other goods (Ruttan and Callahan 1962; Manthy 1978). Adams and Haynes (1980), in the best known forest econometric model, project this trend to continue. One explanation for this secular rise in price relates to the virtual mining of the standing stock of old growth (mature) timber and its positive effect on real stumpage prices. Hotelling's (1931) theory of the mine postulates that as a stock of nonrenewable re-
TL;DR: This article reviewed and evaluated the most important existing criticisms of policy strategies that feature adherence to money stock targets and analyzed four main categories of criticism (and counterargumerits) are analyzed, including the claim that accurate money stock control is infeasible while the second contends that such control can only be obtained along with extreme volatility of interest rates.
Abstract: The purpose of this paper is to review and evaluate the most important existing criticisms of policy strategies that feature adherence to money stock targets. Four main categories of criticism (and counterargumerits) are analyzed. The first of these involves the claim that accurate money stock control is infeasible while the second contends that such control can only be obtained along with extreme volatility of interest rates. The third emphasizes difficulties resulting from technical change and deregulation, and the fourth concerns strategic issues of rules vs. discretion, activist vs. non-activist policy, and the logical function of intermediate targets.
Posted Content•
TL;DR: This article evaluated a variety of approaches and specifications proposed in previous money demand studies to explain the behavior of the narrowly defined money stock from the mid 1970's through 1983, and found that the empirical results cast doubt on the appropriateness of the conventional money demand specification in both the pre and post 1974 periods.
Abstract: The performance of empirical money demand equations over the past decade raises serious questions about money demand predictability. A variety of specifications were presented to explain past episodes of apparent money demand instability, but their success in predicting future money demand is limited in most instances. In particular, the unprecedented decline in the velocity of Ml during 1982 and 1983 was not captured fullyby any of the previously-modified conventional specifications. This paper evaluates a variety of the approaches and specifications proposed inprevious money demand studies to explain the behavior of the narrowly defined money stock from the mid 1970's through 1983. The empirical results cast doubt on the appropriateness of the conventional money demand specification in both the pre- and post- 1974 periods.
TL;DR: The impression material thickness in impressions made using both the highly advocated custom acrylic resin tray and in the highly used manufactured stock tray was examined and the custom tray was indicated.
Abstract: This study did not examine the accuracy of the resultant impressions. Rather, the impression material thickness in impressions made using both the highly advocated custom acrylic resin tray and in the highly used manufactured stock tray was examined. Comparison between the material thickness at the prepared tooth area revealed a mean difference in material thickness of less than 1 mm. The question of the significance of this difference remains to be answered. If the difference is not significant in the success of the impression and the resultant casting, then there are several advantages in using the manufactured stock tray; the first is economy. The average cost of a custom acrylic full arch impression tray is $3.65, compared with an average cost of slightly over $0.30 for the stock tray. 8 The second advantage is the convenience factor. Making a custom tray requires planning, study models, laboratory time, curing interval, and finishing time. In contrast, the stock tray can be selected, adapted, and used in a single visit for both anticipated and unanticipated situations. If the difference in material thickness is significant, the custom tray is indicated. However, attention to detail in making and inserting the tray in the mouth must be observed to maximize the benefits of the custom tray.
TL;DR: In this paper, the authors re-examine the liquidity effects of stock splits and stock dividends by assessing both short and long-term effects on trading liquidity (i.e., proportional trading volume and percentage bid-ask spreads).
Abstract: Currently, there is a limited amount of empirical evidence suggesting that stock splits are associated with a decline in trading liquidity. This evidence directly contrasts with managements' professed intentions for undertaking a split. The evidence to date, however, is of a short-run nature. This study reexamines the liquidity effects of stock splits and stock dividends by assessing both their short- and long-term effects on trading liquidity (i.e., proportional trading volume and percentage bid-ask spreads). The results suggest that stock dividends are associated with decreased proportional trading volume in both the short term and long term, but stock splits are not. The results also indicate that neither stock splits nor stock dividends have an effect on percentage bid-ask spreads.
TL;DR: In this paper, the authors conclude that the support found in other studies is likely to be the result of spurious correlation between returns of stocks selected as tax-loss selling candidates and the January returns of these stocks.
Abstract: Recent empirical studies have found evidence that supports the tax loss selling explanation of seasonal effects in stock returns. Using other test procedures, the present authors conclude that the support found in other studies is likely to be the result of spurious correlation between returns of stocks selected as tax-loss selling candidates and the January returns of these stocks.
TL;DR: In this article, a direct regression test of the present value model is developed as an alternative to the variance bounds test, and the test is extended to handle the case in which the percentage changes in dividends, earnings, and stock prices are covariance stationary.
Abstract: The variance bounds tests of the present value model of stock prices are re-examined in this paper. A direct test of the model based on ordinary least squares estimation of a simple regression equation is proposed as an alternative and it is shown that this regression approach has several advantages over the variance bounds tests. This test is easily adapted to the important case in which the percentage changes in real dividends and real stock prices are stationary processes. The tests are applied to quarterly data for the Standard & Poor's Index of 500 Common Stocks and the results are much more conclusive than those obtained by previous tests. S HILLER (1981a and 1981b) and LeRoy and Porter (1981) have tested the present value model of stock prices by examining the implicit restrictions of this model on the variation of stock prices. Their results suggest that actual stock prices vary too much to be consistent with this model. If we examine their results closely, we find that Shiller does not construct formal statistical tests of the model and that most of the tests in LeRoy and Porter are not statistically significant because the standard errors of the variance estimates are quite large. In addition, some critics have argued that the time series used are not stationary, even after the removal of a time trend, and that the variance estimates are unreliable. This argument has been made by Kleidon (1982,1984) and by Marsh and Merton (1983,1984). An alternative would be to model the percentage changes in dividends, earnings, and stock prices as covariance stationary time series. Shiller (1981a) considers this alternative specification, but notes that it does not lead to tractable variance bounds for stock prices. In this paper, a direct regression test of the present value model is developed as an alternative to the variance bounds test, and the test is extended to handle the case in which the percentage changes in dividends, earnings, and stock prices are covariance stationary. The present value model of stock prices has the following form: