Showing papers on "Stock (geology) published in 2011"

In Search of Attention

Abstract: We propose a new and direct measure of investor attention using search frequency in Google (Search Volume Index (SVI)). In a sample of Russell 3000 stocks from 2004 to 2008, we find that SVI (1) is correlated with but different from existing proxies of investor attention; (2) captures investor attention in a more timely fashion and (3) likely measures the attention of retail investors. An increase in SVI predicts higher stock prices in the next 2 weeks and an eventual price reversal within the year. It also contributes to the large first-day return and long-run underperformance of IPO stocks.

Uncertainty about Government Policy and Stock Prices

Abstract: We analyze how changes in government policy affect stock prices. Our general equilibrium model features uncertainty about government policy and a government whose decisions have both economic and non-economic motives. The model makes numerous empirical predictions. Stock prices should fall at the announcements of policy changes, on average. The price fall should be large if uncertainty about government policy is large, and also if the policy change is preceded by a short or shallow economic downturn. Policy changes should increase volatilities and correlations among stocks. The jump risk premium associated with policy decisions should be positive, on average.

U.S. Department of Energy Commercial Reference Building Models of the National Building Stock

Abstract: The U.S. Department of Energy (DOE) Building Technologies Program has set the aggressive goal of producing marketable net-zero energy buildings by 2025. This goal will require collaboration between the DOE laboratories and the building industry. We developed standard or reference energy models for the most common commercial buildings to serve as starting points for energy efficiency research. These models represent fairly realistic buildings and typical construction practices. Fifteen commercial building types and one multifamily residential building were determined by consensus between DOE, the National Renewable Energy Laboratory, Pacific Northwest National Laboratory, and Lawrence Berkeley National Laboratory, and represent approximately two-thirds of the commercial building stock.

An Econometric Analysis of Nonsynchronous Trading

Abstract: We develop a stochastic model of nonsynchronous asset prices based on sampling with random censoring. In addition to generalizing existing models of nontrading, our framework allows the explicit calculation of the effects of infrequent trading on the time series properties of asset returns. These are empirically testable implications for the variances, autocorrelations, and cross-autocorrelations of returns to individual stocks as well as to portfolios. We construct estimators to quantify the magnitude of nontrading effects in commonly used stock returns data bases, and show the extent to which this phenomenon is responsible for the recent rejections of the random walk hypothesis.

What Factors Drive Global Stock Returns

Abstract: Using monthly returns for over 27,000 stocks from 49 countries over a three-decade period, we show that a multifactor model that includes factor-mimicking portfolios based on momentum and cash flow-to-price captures significant time series variation in global stock returns, and has lower pricing errors and fewer model rejections than the global CAPM or a popular model that uses size and book-to-market factors. We find reliable evidence that the global cash flow-to-price factor is related to a covariance risk model. In contrast, we reject the covariance risk model in favor of a characteristic model for size and book-to-market factors.

Short-Selling Bans Around the World: Evidence from the 2007-09 Crisis

Abstract: Most regulators around the world reacted to the 2007-09 crisis by imposing bans or constraints on short-selling. These were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured varying degrees of stringency. We exploit this variation in short-sales regimes to identify their effects on liquidity, price discovery and stock prices. Using panel and matching techniques, we find that bans (i) were detrimental for liquidity, especially for stocks with small capitalization and no listed options; (ii) slowed down price discovery, especially in bear markets, and (iii) failed to support prices, except possibly for U.S. financial stocks.

Price Efficiency and Short Selling

Abstract: This paper investigates the effect of short-sale constrain ts on price efficiency. We use a global dataset collected from several custodians, with over 85.7 million lending supply postings and 46.4 million lending transactions from January 2004 to June 2006. This information is available weekly for 17,015 stocks in 26 markets around the world. For each stock we estimate the supply of shares available for short-selling and the borrowing fee. Our main findings are as follows. First, shortsale constraints are associated with lower price efficiency . Stocks with limited lending supply and high borrowing fees respond more slowly to market wide shocks. Second, short-sale constraints affect the distribution of weekly stock returns. Limited le nding supply is associated with higher skewness, but not with fewer extreme negative returns. Third, stocks with limited lending supply and higher borrowing fees are associated with lower R 2 s on average. This finding challenges the claim that low R 2 s are associated with higher price efficiency.

What Factors Drive Global Stock Returns

Abstract: Using monthly returns for over 27,000 stocks from 49 countries over a three-decade period, we show that a multifactor model that includes factor-mimicking portfolios based on momentum and cash flow-to-price captures significant time-series variation in global stock returns, and has lower pricing errors and fewer model rejections than the global CAPM or a popular model that uses size and book-to-market factors. We find reliable evidence that the global cash flow-to-price factor is related to a covariance risk model. In contrast, we reject the covariance risk model in favor of a characteristic model for size and book-to-market factors. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

The evolution of stock market efficiency over time: A survey of the empirical literature

Abstract: This paper provides a systematic review of the weak-form market efficiency literature that examines return predictability from past price changes, with an exclusive focus on the stock markets. Our survey shows that the bulk of the empirical studies examine whether the stock market under study is or is not weak-form efficient in the absolute sense, assuming that the level of market efficiency remains unchanged throughout the estimation period. However, the possibility of time-varying weak-form market efficiency has received increasing attention in recent years. We categorize these emerging studies based on the research framework adopted, namely non-overlapping sub-period analysis, time-varying parameter model and rolling estimation window. An encouraging development is that the documented empirical evidence of evolving stock return predictability can be rationalized within the framework of the adaptive markets hypothesis.

All the News That's Fit to Reprint: Do Investors React to Stale Information?

Abstract: This article tests whether stock market investors appropriately distinguish between new and old information about firms. I define the staleness of a news story as its textual similarity to the previous ten stories about the same firm. I find that firms' stock returns respond less to stale news. Even so, a firm's return on the day of stale news negatively predicts its return in the following week. Individual investors trade more aggressively on news when news is stale. The subsequent return reversal is significantly larger in stocks with above-average individual investor trading activity. These results are consistent with the idea that individual investors overreact to stale information, leading to temporary movements in firms' stock prices. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Customer-Base Concentration: Implications for Firm Performance and Capital Markets

Abstract: This study investigates whether and how customer-base concentration affects supplier firm fundamentals and stock market valuation. I compile a comprehensive sample of supply chain relationships and develop a measure (CC) to capture the extent to which a supplier’s customer base is concentrated. In contrast to the conventional view of customer-base concentration as an impediment to supplier firm performance, I document a positive contemporaneous association between CC and accounting rates of return, suggesting that efficiencies accrue to suppliers with concentrated customer bases. Consistent with a cause-and-effect link between customer-base concentration and supplier firm performance, analysis of intertemporal changes demonstrates that CC increases predict efficiency gains in the form of reduced operating expenses per dollar of sales and enhanced asset utilization. Using stock returns tests, I find that investors underreact to the implications of changes in customer-base concentration for future firm fundamentals when setting stock prices. A trading strategy that exploits investors’ underreaction yields abnormal stock returns over the thirty-year period studied.

Forecasting stock indices with back propagation neural network

Abstract: Stock prices as time series are non-stationary and highly-noisy due to the fact that stock markets are affected by a variety of factors. Predicting stock price or index with the noisy data directly is usually subject to large errors. In this paper, we propose a new approach to forecasting the stock prices via the Wavelet De-noising-based Back Propagation (WDBP) neural network. An effective algorithm for predicting the stock prices is developed. The monthly closing price data with the Shanghai Composite Index from January 1993 to December 2009 are used to illustrate the application of the WDBP neural network based algorithm in predicting the stock index. To show the advantage of this new approach for stock index forecast, the WDBP neural network is compared with the single Back Propagation (BP) neural network using the real data set.

Financial Constraints, R&D Investment, and Stock Returns

Abstract: Through the interaction between financial constraints and R&D, I study two asset-pricing puzzles: mixed evidence on the financial constraints--return relation and the positive R&D-return relation. Unlike capital investment, R&D is more inflexible. A financially constrained R&D-intensive firm is more likely to suspend/discontinue R&D projects. Therefore, R&D-intensive firms' risk increases with their financial constraints. Conversely, constrained firms' risk increases with their R&D intensity. I find a robust empirical relation between financial constraints and stock returns, primarily among R&D-intensive firms. Moreover, R&D predicts returns only among financially constrained firms. This evidence suggests that financial constraints potentially drive the positive R&D-return relation. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Contrasting Global Trends in Marine Fishery Status Obtained from Catches and from Stock Assessments

Abstract: There are differences in perception of the status of fisheries around the world that may partly stem from how data on trends in catches over time have been used. On the basis of catch trends, it has been suggested that about 70% of all stocks are overexploited due to unsustainable harvesting and 30% of all stocks have collapsed to <10% of unfished levels. Catch trends also suggest that over time an increasing number of stocks will be overexploited and collapsed. We evaluated how use of catch data affects assessment of fisheries stock status. We analyzed simulated random catch data with no trend. We examined well-studied stocks classified as collapsed on the basis of catch data to determine whether these stocks actually were collapsed. We also used stock assessments to compare stock status derived from catch data with status derived from biomass data. Status of stocks derived from catch trends was almost identical to what one would expect if catches were randomly generated with no trend. Most classifications of collapse assigned on the basis of catch data were due to taxonomic reclassification, regulatory changes in fisheries, and market changes. In our comparison of biomass data with catch trends, catch trends overestimated the percentage of overexploited and collapsed stocks. Although our biomass data were primarily from industrial fisheries in developed countries, the status of these stocks estimated from catch data was similar to the status of stocks in the rest of the world estimated from catch data. We conclude that at present 28-33% of all stocks are overexploited and 7-13% of all stocks are collapsed. Additionally, the proportion of fished stocks that are overexploited or collapsed has been fairly stable in recent years.

Government Spending, Political Cycles and the Cross Section of Stock Returns

Abstract: Using a novel measure of industry exposure to government spending, we document predictable variation in cash flows and stock returns over political cycles. During Democratic presidencies, firms with high government exposure experience higher cash flows and stock returns, while the opposite pattern holds true during Republican presidencies. Business cycles, firm characteristics, and standard risk factors do not account for the pattern in returns across presidencies. An investment strategy that exploits the presidential cycle predictability generates abnormal returns as large as 6.9 percent per annum. Our results suggest market under reaction to predictable variation in the effect of government spending policies.

Asset market linkages: Evidence from financial, commodity and real estate assets

Abstract: We use a general Markov switching model to examine the relationships between returns over three different asset classes: financial assets (US stocks and Treasury bonds), commodities (oil and gold) and real estate assets (US Case–Shiller index). We confirm the existence of two distinct regimes: a “tranquil” regime with periods of economic expansion and a “crisis” regime with periods of economic decline. The tranquil regime is characterized by lower volatility and significantly positive stock returns. During these periods, there is also evidence of a flight from quality – from gold to stocks. By contrast, the crisis regime is characterized by higher volatility and sharply negative stock returns, along with evidence of contagion between stocks, oil and real estate. Furthermore, during these periods, there is strong evidence of a flight to quality – from stocks to Treasury bonds.

The US stock market leads the Federal funds rate and Treasury bond yields

Abstract: Using a recently introduced method to quantify the time varying lead-lag dependencies between pairs of economic time series (the thermal optimal path method), we test two fundamental tenets of the theory of fixed income: (i) the stock market variations and the yield changes should be anticorrelated; (ii) the change in central bank rates, as a proxy of the monetary policy of the central bank, should be a predictor of the future stock market direction. Using both monthly and weekly data, we found very similar lead-lag dependence between the S&P500 stock market index and the yields of bonds inside two groups: bond yields of short-term maturities (Federal funds rate (FFR), 3M, 6M, 1Y, 2Y, and 3Y) and bond yields of long-term maturities (5Y, 7Y, 10Y, and 20Y). In all cases, we observe the opposite of (i) and (ii). First, the stock market and yields move in the same direction. Second, the stock market leads the yields, including and especially the FFR. Moreover, we find that the short-term yields in the first group lead the long-term yields in the second group before the financial crisis that started mid-2007 and the inverse relationship holds afterwards. These results suggest that the Federal Reserve is increasingly mindful of the stock market behavior, seen at key to the recovery and health of the economy. Long-term investors seem also to have been more reactive and mindful of the signals provided by the financial stock markets than the Federal Reserve itself after the start of the financial crisis. The lead of the S&P500 stock market index over the bond yields of all maturities is confirmed by the traditional lagged cross-correlation analysis.

The health impacts of cold homes and fuel poverty

Abstract: Three reasons to act: the health burden, inequity, and mitigation On 12 May Michael Marmot and his team published their report, “The heath impacts of cold homes and fuel poverty,” commissioned by Friends of the Earth.1 The report highlights an obvious, well known, and largely ignored fact—that cold homes waste energy and harm their occupants—and identifies an opportunity for simultaneous gains on three fronts. By improving the thermal efficiency of British homes the government would reduce carbon dioxide (“greenhouse”) emissions, avoid a major burden of ill health, and reduce health inequity, which—as the report shows—maps closely with social and economic disadvantage. The report delivers three messages. Firstly, improving the energy efficiency of the housing stock—to spread “affordable warmth”—would bring multiple health gains, directly and through improved home finances. Secondly, fuel poverty as a result of poor housing stock causes avoidable health inequality and is unjust. Thirdly, reduced fuel use would bring environmental gains, in the short term through reduced air pollution and in the longer term in helping to mitigate climate change. The same is true of Australia, which is perhaps often envied by inhabitants of northern Europe as a land of sand, sunshine, and seasonal tropical monsoons that bring welcome warm rains …

Dividend policy and share price volatility: UK evidence

Abstract: Purpose – The purpose of this paper is to examine the relation between dividend policy and share price changes in the UK stock market.Design/methodology/approach – Multiple regression analyses are used to explore the association between share price changes and both dividend yield and dividend payout ratio.Findings – A positive relation is found between dividend yield and stock price changes, and a negative relation between dividend payout ratio and stock price changes. In addition, it is shown that a firm's growth rate, debt level, size and earnings explain stock price changes.Practical implications – The paper supports the fact that dividend policy is relevant in determining share price changes for a sample of firms listed in the London Stock Exchange.Originality/value – To the best of the authors' knowledge, this paper is the first to show that corporate dividend policy is a key driver of stock price changes in the UK.