HKUST Institutional Repository
(5.016 recursos)
Repository of Hong Kong University of Science and Technology. Managed by the HKUST Library.
Mostrando recursos 1 - 12 de 12
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Market efficiency and the returns to technical analysis - Bessembinder, Hendrik; Chan, Kalok
We further investigate and provide interpretation for the intriguing Brock, Lakonishok, and LeBaron (1992) finding that simple forms of technical analysis contain significant forecast power for U.S. equity index returns. We document that the forecast ability is partially, but not solely, attributable to return measurement errors arising from nonsynchronous trading. We argue that the evidence of technical forecast power need not be inconsistent with market efficiency. "Breakeven" one-way trading costs are computed to be 0.39% for the full sample and 0.22% since 1975, which are small compared to recent estimates of actual trading costs. Further, we test but fail to...
2.
A multivariate model of strategic asset allocation - Campbell, John Y.; Chan, Yeung Lewis; Viceira, Luis M.
Much recent work has documented evidence for predictability of asset returns. We show how such predictability can affect the portfolio choices of long-lived investors who value wealth not for its own sake but for the consumption their wealth can support. We develop an approximate solution method for the optimal consumption and portfolio choice problem of an infinitely-lived investor with Epstein-Zin utility who faces a set of asset returns described by a vector autoregression in returns and state variables. Empirical estimates in long-run annual and postwar quarterly US data suggest that the predictability of stock returns greatly increase the optimal demand...
3.
Book-to-market, firm size and the turn-of-the-year effect : evidence from Pacific-Basin emerging markets - Chui, Andy Chun Wai; Wei, John K. C.
This paper investigates the relationship between expected stock returns and market beta, book-to-market equity, and size in five Pacific-Basin emerging markets: Hong Kong, Korea, Malaysia, Taiwan, and Thailand. In all the markets examined, the relationship between average stock return and market beta is weak. On the other hand, the book-to-market equity can explain the cross-sectional variation of expected stock returns in Hong Kong, Korea, and Malaysia, while the size effect is significant in all five markets. Interestingly, the degree of the relation between average return and book-to-market equity coincides with the magnitude of the average book-to-market ratio in a country....
4.
Understanding stock market volatility : the case of Korea and Taiwan - Titman, Sheridan; Wei, John K. C.
The Taiwanese stock market has historically been considerably more volatile than the Korean market. This is somewhat surprising given the many similarities of the two markets. One notable difference between the two markets is that trading volume is substantially higher in Taiwan, leading some to believe that the higher volatility in Taiwan is a result of 'excessive' speculation. The evidence presented in this paper is somewhat mixed. First, we find no evidence of mean-reversion in the stock market index in either country. Second, we find that Taiwanese stock returns are much more correlated with their earnings than are Korean returns...
5.
Growth opportunities and investment policies in the U.S. defense industry - Goyal, Vidhan K.
The U.S. defense industry provides a natural experiment for examining how changes in growth opportunities affect corporate financial policies -- growth opportunities increased substantially during the Reagan defense buildup of the early 1980s, but plummeted with the end of the cold war and associated defense budget cuts in the late 1980s and early 1990s. We examine a variety of corporate financial policies for a sample of 61 defense firms and a benchmark sample of 61 manufacturing firms during 1980-1995, a period spanning the changes in growth opportunities in the defense industry. Weapons manufacturers, the defense firms most affected by these...
6.
Asset price shocks, financial constraints, and investment : evidence from Japan - Goyal, Vidhan K.; Yamada, Takeshi
We examine corporate investment spending around the asset price bubble in Japan in the late 1980s and make three contributions to our understanding of how stock valuations affect investment. First, investment responds significantly to nonfundamental components of stock valuations during asset price shocks; fundamentals matter less. Clearly, the stock market is not a sideshow. Second, the time series variation in the sensitivity of investment to cash flow is affected more by changes in monetary policy than by shifts in collateral values. Third, asset price shocks primarily affect firms that rely more on bank financing and not necessarily those that use...
7.
Why did individual stocks become more volatile? - Wei, Steven X.; Zhang, Chu
We investigate why individual stocks become more volatile over the 1976-2000 period, during which quarterly accounting data are available at the firm level. On average, corporate earnings have deteriorated and their volatilities have increased over the sample period. This is more evident for newly listed stocks than for existing stocks. The stock return volatility is negatively related to the return-on-equity and positively related to the volatility of the return-on-equity in cross-sections. The upward trend in average stock return volatility is fully accounted for by the downward trend in the return-on-equity and the upward trend in the volatility of the return-on-equity.
9.
Insider ownership and corporate performance : evidence from the adjustment cost approach - Cheung, Adrian W. K.; Wei, John K. C.
This paper examines the relation between insider ownership and corporate performance in the presence of adjustment costs and investigates how the adjustment costs are determined. In a model specification without adjustment costs, we find that insider ownership is significantly positively associated with corporate performance. But once we allow for adjustment costs, the relationship no longer exists. We find that insider ownership and corporate performance can be explained by their respective lagged values and that many firm characteristics that were previously useful in explaining these two variables turn out to be statistically insignificant. In addition, there is no evidence that insider...
10.
Sources of contrarian profits in the Japanese stock market - Chou, K. Pin-Huang; Wei, John K. C.; Chung, Huimin
This paper investigates the profitability of contrarian strategies on the Tokyo Stock Exchange (TSE) across various ranking and holding horizons ranging from one month to three years. In sharp contrast to the evidence from the U.S. and European markets, our data show that contrarian strategies are profitable in Japan across all horizons, especially with a very short horizon of one month or a very long horizon of two years or longer. The results are very robust to skipping one month between the holding and ranking periods, excluding firms with extreme past returns, and partitioning the whole sample into bull and...
11.
Creditor rights, enforcement and bank loans - Bae, Kee-Hong; Goyal, Vidhan K.
We examine if differences in legal protection affect loan amounts, maturity and interest rate spreads on loans to borrowers in 48 countries. Results show that banks respond to poor enforceability of contracts by reducing loan quantities, shortening loan maturities and increasing loan spreads. These effects are both statistically significant and economically large. Average loan sizes will be $53 million larger, maturities will be 2.5 years longer, and spreads will be 67 basis points lower, if a borrower moves from a country with the weakest protection of property rights to a country with the strongest protection of property rights, all else...
12.
Capital structure decisions : which factors are reliably important? - Goyal, Vidhan K.; Frank, Murray Z.
This paper examines the relative importance of many factors in the everage decisions of publicly traded American firms from 1950 to 2003. The most reliable factors are median industry leverage (+ effect on leverage), market-to-book ratio (-), tangibility (+), profits (-), log of assets (+), and expected inflation (+). Industry subsumes a number of smaller effects. The empirical evidence seems reasonably consistent with some versions of the tradeoff theory of capital structure.
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