Showing papers on "Stock (geology) published in 2009"
TL;DR: In this paper, the authors investigated the relationship between stocks, bonds and gold and found that gold is a hedge against stocks on average and a safe haven in extreme stock market conditions.
Abstract: Is gold a hedge against sudden changes in stock and bond returns, or does it instead have a subtly different property, that of being a safe haven? This paper addresses these two interlinked questions. A safe haven is defined as a security that is uncorrelated with stocks and bonds in case of a market crash. This is counterpoised against a hedge, defined as a security that is uncorrelated with stocks or bonds on average. We study constant and time-varying relationships between stocks, bonds and gold in order to investigate the existence of a hedge and a safe haven. The empirical analysis examines US, UK and German stock and bond returns and their relationship with gold returns. We find that gold is a hedge against stocks on average and a safe haven in extreme stock market conditions. This finding suggests that the existence of a safe haven enhances the stability and resiliency of financial markets since it reduces investors' losses at times when a reduction is needed the most. A portfolio analysis further shows that the safe haven property is extremely short-lived so that an investor buying gold one day after a shock loses money.
1,255 citations
TL;DR: For example, this paper found that sin stocks are less held by norm-constrained institutions such as pension plans as compared to mutual or hedge funds that are natural arbitrageurs, and they receive less coverage from analysts than do stocks of otherwise comparable characteristics.
1,227 citations
TL;DR: The authors investigated the cross-sectional relation between media coverage and expected stock returns and found that stocks with no media coverage earn higher returns than stocks with high media coverage even after controlling for well-known risk factors.
Abstract: By reaching a broad population of investors, mass media can alleviate informational frictions and affect security pricing even if it does not supply genuine news. We investigate this hypothesis by studying the cross-sectional relation between media coverage and expected stock returns. We find that stocks with no media coverage earn higher returns than stocks with high media coverage even after controlling for well-known risk factors. These results are more pronounced among small stocks and stocks with high individual ownership, low analyst following, and high idiosyncratic volatility. Our findings suggest that the breadth of information dissemination affects stock returns.
1,083 citations
TL;DR: This paper surveys more than 100 related published articles that focus on neural and neuro-fuzzy techniques derived and applied to forecast stock markets to show that soft computing techniques are widely accepted to studying and evaluating stock market behavior.
Abstract: The key to successful stock market forecasting is achieving best results with minimum required input data. Given stock market model uncertainty, soft computing techniques are viable candidates to capture stock market nonlinear relations returning significant forecasting results with not necessarily prior knowledge of input data statistical distributions. This paper surveys more than 100 related published articles that focus on neural and neuro-fuzzy techniques derived and applied to forecast stock markets. Classifications are made in terms of input data, forecasting methodology, performance evaluation and performance measures used. Through the surveyed papers, it is shown that soft computing techniques are widely accepted to studying and evaluating stock market behavior.
714 citations
TL;DR: In this article, a catering theory describing how stock market mispricing might influence individual firms’ investment decisions was proposed, and a positive relation between abnormal investment and discretionary accruals was found, which indicated that firms with high abnormal investment subsequently have low stock returns.
Abstract: We test a catering theory describing how stock market mispricing might influence individual firms’ investment decisions. We use discretionary accruals as our proxy for mispricing. We find a positive relation between abnormal investment and discretionary accruals; that abnormal investment is more sensitive to discretionary accruals for firms with higher RD that firms with high abnormal investment subsequently have low stock returns; and that the larger the relative price premium, the stronger the abnormal return predictability. We show that patterns in abnormal returns are stronger for firms with higher R&D intensity or share turnover. (JEL G14, G31) In this paper, we study whether mispricing in the stock market has consequences for firm investment policy. We test a “catering” channel, through which deviations from fundamentals may affect investment decisions directly. If the market misprices firms according to their level of investment, managers may try to boost short-run share prices by catering to current sentiment. Firms with ample cash or debt capacity may have an incentive to waste resources in negative NPV projects when their stock price is overpriced and to forgo positive investment opportunities when their stock price is undervalued. Managers with shorter shareholder horizons, and those whose assets are more difficult to value, should cater more.
685 citations
TL;DR: The authors examined consumer confidence as a proxy for individual investor sentiment and found that when sentiment is high, future stock returns tend to be lower and vice versa, and employed a cross-sectional perspective and provided evidence that the impact of sentiment on stock returns is higher for countries which have less market integrity and which are culturally more prone to herd-like behavior and overreaction.
658 citations
TL;DR: The authors analyzed the long-run relationship between the world price of crude oil and international stock markets over 1971:1-2008:3 using a cointegrated vector error correction model with additional regressors.
650 citations
TL;DR: In this paper, the authors examined the relationship between institutions' investment horizons and their informational roles in the stock market and found that short-term institutions' trading is also positively related to future earnings surprises.
Abstract: We show that the positive relation between institutional ownership and future stock returns documented in Gompers and Metrick (2001) is driven by shortterm institutions. Furthermore, short-term institutions’ trading forecasts future stock returns. This predictability does not reverse in the long run and is stronger for small and growth stocks. Short-term institutions’ trading is also positively related to future earnings surprises. By contrast, long-term institutions’ trading does not forecast future returns, nor is it related to future earnings news. Our results are consistent with the view that short-term institutions are better informed and they trade actively to exploit their informational advantage. (JEL G12, G14, G20) This article examines the relation between institutions’ investment horizons and their informational roles in the stock market. Although a large body of literature has studied the behavior of institutional trading and its impact on asset prices and returns, 1 the informational role of institutional investors remains an open question. Gompers and Metrick (2001) document a positive relation between institutional ownership and future stock returns. However, they attribute this relation to temporal demand shocks rather than institutions’ informational advantage. Nofsinger and Sias (1999) find that changes in institutional ownership forecast next year’s returns, suggesting that institutional trading contains information about future returns. In contrast, Cai and Zheng (2004) find that institutional trading
560 citations
TL;DR: This paper examined international stock return comovements using country-industry and country-style portfolios as the base portfolios and established that parsimonious risk-based factor models capture the data covariance structure better than the popular Heston-Rouwenhorst (1994) model.
Abstract: We examine international stock return comovements using country-industry and country-style portfolios as the base portfolios. We first establish that parsimonious risk-based factor models capture the data covariance structure better than the popular Heston‐Rouwenhorst (1994) model. We then establish the following stylized facts regarding stock return comovements. First, there is no evidence for an upward trend in return correlations, except for the European stock markets. Second, the increasing importance of industry factors relative to country factors was a short-lived phenomenon. Third, large growth stocks are more correlated across countries than are small value stocks, and the difference has increased over time.
528 citations
TL;DR: In this article, the authors estimate the long-run relationship between total factor productivity and human capital and find that human capital turns out to have the strongest impact on productivity, while RD is positively affected by RD only for R&D stock.
496 citations
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TL;DR: In this article, the authors investigate the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden and find evidence that households rebalance towards a higher risky share as they become richer.
Abstract: This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We found some evidence that households rebalance towards a higher risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well, and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern which is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly, and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks.
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TL;DR: In this paper, the authors test whether individuals have value-relevant information about local stocks (where "local" is defined as being headquartered near where an investor lives) and conclude that individuals do not help incorporate information into stock prices.
Abstract: The paper tests whether individuals have value-relevant information about local stocks (where "local" is de ned as being headquartered near where an investor lives). Our methodology uses two types of calendar-time portfolios|one based on holdings and one based on transactions. Portfolios of local holdings do not generate abnormal performance (alphas are zero). When studying transactions, purchases of local stocks signi cantly underperform sales of local stocks. The underperformance remains when focusing on stocks with potentially high-levels of information asymmetries. We conclude that individuals do not help incorporate information into stock prices. Our conclusions directly contradict existing studies.
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TL;DR: Wang et al. as mentioned in this paper investigated whether investor sentiment affects the cross-section of stock returns in China A-share market and found that the sensitivity of stock return to sentiment changes is different.
Abstract: We investigate whether investor sentiment affects the cross-section of stock returns in China A-share market.The evidence shows that the sensitivity of stock returns to sentiment changes is different. When an index of investor sentiment takes high values,low tangible assets,high Debt-asset ratio,and non-dividend-paying stocks earn relatively higher returns,when sentiment is low,the aforementioned categories of stocks earn relatively lower returns.When sentiment is high,low-price,unprofitable and high book-market ratio stocks earn relatively higher returns and vice versa,but which is insignificant.The capitalization, volatility and institutional ownership appear to have no significant cross-section effect of investor sentiment on its characteristic Portfolio return.
TL;DR: In this article, the authors examined the long run and causal relationship between stock market development and economic growth for seven countries in sub-Saharan Africa using the autoregressive distributed lag (ARDL) bounds test.
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TL;DR: In this paper, the authors derive and test q-theory implications for cross-sectional stock returns under constant returns to scale, stock returns equal levered investment returns, which are tied directly to firm characteristics.
Abstract: We derive and test q-theory implications for cross-sectional stock returns Under constant returns to scale, stock returns equal levered investment returns, which are tied directly to firm characteristics When we use GMM to match average levered investment returns to average observed stock returns, the model captures the average stock returns of portfolios sorted by earnings surprises, book-to-market equity, and capital investment When we try to match expected returns and return variances simultaneously, the variances predicted in the model are largely comparable to those observed in the data However, the resulting expected return errors are large
TL;DR: In this paper, the authors analyzed the effects of oil price shocks on stock returns in Norway, an oil-exporting country, highlighting the transmission channels of oil prices for macroeconomic behavior.
Abstract: This paper analyses the effects of oil price shocks on stock returns in Norway, an oil-exporting country, highlighting the transmission channels of oil prices for macroeconomic behaviour. To capture the interaction between the different variables, stock returns are incorporated into a structural VAR model. I find that following a 10% increase in oil prices, stock returns increase by 2.5%, after which the effect gradually dies out. The results are robust to different (linear and non-linear) transformations of oil prices. The effects on the other variables are more modest. However, all variables indicate that the Norwegian economy responds to higher oil prices by increasing aggregate wealth and demand. The results also emphasize the role of other shocks; monetary policy shocks in particular, as important driving forces behind stock price variability in the short term.
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TL;DR: For example, this paper found that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns, indicating that institutional trades, particularly sells, appear to generate short-term losses, but longerterm profits.
Abstract: Many questions about institutional trading can only be answered if one tracks high-frequency changes in institutional ownership. In the United States, however, institutions are only required to report behavior from the "tape", the Transactions and Quotes database of the New York Stock Exchange, using a sophisticated method that best predicts quarterly 13-F data from trades of different sizes. We find that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns. Institutional trades, particularly sells, appear to generate short-term losses--possibly reflecting institutional demand for liquidity--but longer-term profits. One source of these profits is that institutions anticipate both earnings surprises and post-earnings-announcement drift. These results are different from those obtained using a standard size cutoff rule for institutional trades.
TL;DR: In this article, the authors investigate the dynamics of individual portfolios in a unique data set containing the disaggregated wealth of all households in Sweden and find evidence that households rebalance toward a greater risky share as they become richer.
Abstract: This paper investigates the dynamics of individual portfolios in a unique data set containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one-half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We find some evidence that households rebalance toward a greater risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well, and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern that is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one-sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly, and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks.
TL;DR: The authors developed a general equilibrium model in which stock prices of innovative firms exhibit "bubbles" during technological revolutions and found empirical support for the model's predictions in 1830−1861 and 1992−2005 when the railroad and Internet technologies spread in the United States.
Abstract: We develop a general equilibrium model in which stock prices of innovative firms exhibit "bubbles" during technological revolutions. In the model, the average productivity of a new technology is uncertain and subject to learning. During technological revolutions, the nature of this uncertainty changes from idiosyncratic to systematic. The resulting bubbles in stock prices are observable ex post but unpredictable ex ante, and they are most pronounced for technologies characterized by high uncertainty and fast adoption. We find empirical support for the model's predictions in 1830―1861 and 1992―2005 when the railroad and Internet technologies spread in the United States.
TL;DR: Christiano et al. as mentioned in this paper used structural vector autoregressive (VAR) to estimate the interdependence between US monetary policy and the S&P 500 using a combination of short-run and long-run restrictions.
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TL;DR: In this article, the authors examined several implications of these theories using a unique data sample from a market with stringent short-sales constraints and perfectly segmented dual-class shares and found that trading caused by investorsi¯ speculative motives can help explain a significant fraction of the price difference between the dualclass shares.
Abstract: The market dynamics of technology stocks in the late 1990s have stimulated a growing body of theory that analyzes the joint effects of short-sales constraints and heterogeneous beliefs on stock prices and trading volume. This paper examines several implications of these theories using a unique data sample from a market with stringent short-sales constraints and perfectly segmented dual-class shares. The identical rights of the dual-class shares allow us to control for stock fundamentals. We find that trading caused by investorsi¯ speculative motives can help explain a significant fraction of the price difference between the dual-class shares.
TL;DR: In this article, the authors investigate the relation between a country's first-time enforcement of insider trading laws and stock price informativeness using data from 48 countries over 1980--2003.
Abstract: We investigate the relation between a country's first-time enforcement of insider trading laws and stock price informativeness using data from 48 countries over 1980--2003. Enforcement of insider trading laws improves price informativeness, as measured by firm-specific stock return variation, but this increase is concentrated in developed markets. In emerging market countries, price informativeness changes insignificantly after the enforcement, as the important contribution of insiders in impounding information into stock prices largely disappears. The enforcement does not achieve the goal of improving price informativeness in countries with poor legal institutions. It does turn some private information into public information, thereby reducing the cost of equity in emerging markets. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.
TL;DR: Real case studies using data from emerging and well developed stock markets to train and evaluate the proposed neuro-fuzzy system illustrate that compared to the ''buy and hold'' strategy and several other reported methods, the proposed approach and the forecasting trade accuracy are by far superior.
Abstract: A neuro-fuzzy system composed of an Adaptive Neuro Fuzzy Inference System (ANFIS) controller used to control the stock market process model, also identified using an adaptive neuro-fuzzy technique, is derived and evaluated for a variety of stocks. Obtained results challenge the weak form of the Efficient Market Hypothesis (EMH) by demonstrating much improved and better predictions, compared to other approaches, of short-term stock market trends, and in particular the next day's trend of chosen stocks. The ANFIS controller and the stock market process model inputs are chosen based on a comparative study of fifteen different combinations of past stock prices performed to determine the stock market process model inputs that return the best stock trend prediction for the next day in terms of the minimum Root Mean Square Error (RMSE). Gaussian-2 shaped membership functions are chosen over bell shaped Gaussian and triangular ones to fuzzify the system inputs due to the lowest RMSE. Real case studies using data from emerging and well developed stock markets - the Athens and the New York Stock Exchange (NYSE) - to train and evaluate the proposed system illustrate that compared to the ''buy and hold'' strategy and several other reported methods, the proposed approach and the forecasting trade accuracy are by far superior.
TL;DR: In this article, the authors derive and test q-theory implications for cross-sectional stock returns and find that under constant returns to scale, stock returns equal levered investment returns, which are tied directly to firm characteristics.
Abstract: We derive and test q‐theory implications for cross‐sectional stock returns. Under constant returns to scale, stock returns equal levered investment returns, which are tied directly to firm characteristics. When we use generalized method of moments to match average levered investment returns to average observed stock returns, the model captures the average stock returns of portfolios sorted by earnings surprises, book‐to‐market equity, and capital investment. When we try to match expected returns and return variances simultaneously, the variances predicted in the model are largely comparable to those observed in the data. However, the resulting expected return errors are large.
TL;DR: The authors found that fixed effects related to the location of firms' headquarters explain variation in broad-based option grants after controlling for industry effects and firm characteristics traditionally known to affect option granting.
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TL;DR: After controlling for competition, NWOM's long-term financial harm becomes more destructive in magnitude, kicks in more quickly, and haunts investors longer, supporting the idea that historical underperformance in stock prices may breed more harmful future buzz in a “vicious” cycle of NWOM.
Abstract: This paper seeks to quantify the long-term financial impact of negative word of mouth (NWOM), an issue that has long challenged extant research. We do so with real-world data on firm security prices. The developed time-series models innovatively uncover (1) short- and long-term effects of NWOM on cash flows, stock returns, and stock volatilities, and (2) NWOM’s “wear-in” effects (i.e., it takes a number of months before the stock price impact of NWOM reaches the peak point) and “wear-out” effects (i.e., it takes several months after the peak before the stock price impact of NWOM dies out completely). In addition, the results related to endogeneity and feedbackeffects from the stock market are also interesting, supporting the idea that historical underperformance in stock prices may breed more harmful future buzz in a “vicious” cycle of NWOM. After controlling for competition, NWOM’s long-term financial harm becomes more destructive in magnitude, kicks in more quickly, and haunts investors longer. Overall, these findings offer some unique implications for buzz management, time-series models quantifying the financial impact of word of mouth, and the marketing-finance interface.
TL;DR: In this article, the authors infer daily institutional trading behavior from the tape, the Transactions and Quotes database of the New York Stock Exchange, using a sophisticated method that best predicts quarterly 13-F data from trades of different sizes.
TL;DR: In this paper, the authors examine the information transmission role of stock recommendation revisions by sell-side security analysts and find that the revisions are usually information-free for investors and are associated with economically insignificant mean price reactions and often piggyback on recent news, events, long-term momentum, and short-run contrarian return predictors.
TL;DR: In this article, the authors developed a two-regime EGARCH model to examine the relationship between crude oil shocks and stock markets and found that rises in oil price has a significant role in determining both the volatility of stock returns and the probability of transition across regimes.
TL;DR: In this article, the authors studied time-series properties and the determinants of the options/stock trading volume ratio (O/S) using a comprehensive cross-section and time series of data on equities and their listed options.
Abstract: Relatively little is known about the trading volume in derivatives relative to the volume in underlying stocks. We study time-series properties and the determinants of the options/stock trading volume ratio (O/S) using a comprehensive cross-section and time-series of data on equities and their listed options. O/S is related to many intuitive determinants such as delta and trading costs, and it also varies with institutional holdings, analyst following, and analyst forecast dispersion. O/S is higher around earnings announcements (suggesting increased trading in the options market), and higher O/S predicts lower abnormal returns after the earnings announcement, suggesting that options trading improves market efficiency.