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| Author | : Jin Xu (doctor of finance.) |
| Publisher | : |
| Total Pages | : 290 |
| Release | : 2008 |
| Genre | : Capitalists and financiers |
| ISBN | : |
Download Two Essays on Stock Preference and Performance of Institutional Investors Book in PDF, ePub and Kindle
Two essays on the stock preference and performance of institutional investors are included in the dissertation. In the first essay, I document that mutual fund managers and other institutional investors tend to hold stocks with higher betas. This effect holds even after precisely controlling for stocks' risk characteristics such as size, book-to-market equity ratio and momentum. This is contrary to the widely accepted view that betas are no longer associated with expected returns. However, these results support my simple model where a fund manager's payoff function depends on returns in excess of a benchmark. For the manager, on the one hand, he tends to load up with high beta stocks since he wants to co-move with the market and other factors as much as possible. On the other hand, the manager faces a trade-off between expected performance and the volatility of tracking error. My model thus shows that the manager prefers to choose higher beta than his benchmark, and that his beta choice has an optimal level which depends on his perceived factor returns and volatility. My empirical findings further confirm the model results. First, I show that the effect of managers holding higher beta stocks is robust to a number of alternative explanations including the effects of their liquidity selection or trading activities. Second, consistent with the model predictions of managers sticking close to their benchmarks during risky periods, I demonstrate that the average beta choice of mutual fund managers can predict future market volatility, even after controlling for other common volatility predictors, such as lagged volatility and implied volatility. The second essay is the first to explicitly address the performance of actively managed mutual funds conditioned on investor sentiment. Almost all fund size quintiles subsequently outperform the market when sentiment is low while all of them underperform the market when sentiment is high. This also holds true after adjusting the fund returns by various performance benchmarks. I further show that the impact of investor sentiment on fund performance is mostly due to small investor sentiment. These findings can partially validate the existence of actively managed mutual funds which underperform the market overall (Gruber 1996). In addition, when conditioning on investor sentiment, the pattern of decreasing returns to scale in mutual funds, recently documented in Chen, Hong, Huang, and Kubik (2004), is fully reversed when sentiment is high while the pattern persists and is more pronounced when sentiment is low. Further results suggest that smaller funds tend to hold smaller stocks, which is shown to drive the above patterns. I also document that smaller funds have more sentiment timing ability or feasibility than larger funds. These findings have many important implications including persistence of fund performance which may not exist under conventional performance measures.
| Author | : Jian Huang |
| Publisher | : |
| Total Pages | : 89 |
| Release | : 2010 |
| Genre | : Financial institutions |
| ISBN | : |
Download Two Essays on Institutional Investors Book in PDF, ePub and Kindle
| Author | : Hoang Huy Nguyen |
| Publisher | : |
| Total Pages | : 111 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Download Two Essays on Institutional Investors Book in PDF, ePub and Kindle
This dissertation consists of two essays investigating the trading by institutions and its impact on the stock market. In the first essay, I investigate why changes in institutional breadth predict return. I first show that changes in breadth are positively associated with abnormal returns over the following four quarters. I then demonstrate that this return predictability can be attributed to the information about the firms' future operating performance. When I examine different types of institutions independently, I find that the predictive power varies across the population of institutions. More specifically, institutions that follow active management style are better able to predict future returns than the passive institutions, and their predictive power appears to be associated with information about future earnings growth. These findings are consistent with the information hypothesis that changes in breadth of institutional ownership can predict return because they contain information about the fundamental value of firms. In the second essay, I examine institutional herding behavior and its impact on stock prices. I document that herds by institutions usually last for more than one quarter and that herds occur more frequently for small and medium size stocks. I find that after herds end, there are reversals in stocks returns for up to four quarters. The magnitude of reversals is positively related to the duration of herding, and negatively related to the price impact of current herding activity. This pattern in returns prevails for all sub-periods examined and is concentrated in small and medium size stocks. My findings suggest that institutional herding may destabilize stock prices.
| Author | : Qian Wang |
| Publisher | : |
| Total Pages | : 190 |
| Release | : 2006 |
| Genre | : Preferred stocks |
| ISBN | : |
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This dissertation contains two essays that address issues concerning preferred stock. In the first essay, I study the incidence of preferred stock issuance to address two issues: (1) what influences the timing of such issues, and (2) do the influential factors suggest that firms view preferred stock as a substitute for common stock or for debt. Using a sample of U.S. preferred stock issuance from 1980 to 2002, I find that the issuance of straight preferred stock responds to bond market conditions, particularly at the short end of the maturity spectrum. Consequently my evidence is consistent with preferred stock being more of a substitute for debt than for common stock, and with managers timing the issuance of new preferred stock according to the past path of interest rates. In the second essay, I examine the relationship between corporate governance and preferred stock ratings and yields. Using a sample of preferred stocks traded in November, 2004, I find evidence for the following conclusions. First, firms with rated issues tend to be larger and more profitable firms. Further, firms with rated issues tend to have more anti-takeover provisions and higher institutional shareholding. Second, preferred stock ratings are largely influenced by their issuer's long-term debt rating, with institutional ownership and CEO ownership adding extra explaining power. The yields of preferred stocks are affected by anti-takeover provisions, rating information together with firm specific features, such as size, profitability, systematic risk and idiosyncratic risk.
| Author | : Viktoriya Lantushenko |
| Publisher | : |
| Total Pages | : 226 |
| Release | : 2016 |
| Genre | : Finance |
| ISBN | : |
Download Essays in Institutional Investor Behavior Book in PDF, ePub and Kindle
This dissertation consists of one chapter studying mutual fund active management and two chapters examining institutional trading in various settings. The three essays in my dissertation explore institutional investor behavior. My first paper titled "Innovation in mutual fund portfolios: Implications for fund alpha" introduces a new measure of portfolio holdings that has power to explain future fund abnormal returns. This measure is defined as "return on portfolio innovation." It is constructed as the return on completely new portfolio positions that a fund has not held before. I evaluate the return on newly added positions because their performance can signal the quality of managerial effort. On average, a one-standard deviation increase in the return on innovation increases the Carhart (1997) four-factor fund alpha by approximately 0.34 to 0.52 percent per year. The results have important implications for fund performance and manager behavior. The second essay titled "Institutional property-type herding in real estate investment trusts," with Edward Nelling, explores whether institutional investors exhibit herding behavior by property type in real estate investment trusts (REITs). Our analysis of changes in institutional portfolio holdings suggests strong evidence of this behavior. We analyze the autocorrelation in aggregate institutional demand, and find that most of it is driven by institutional investor following the trades of others. Although momentum trading explains a small amount of this herding, institutional property type demand is more strongly associated with lagged institutional demand than lagged returns. The results suggest that correlated information signals drive herding in REITs. In addition, we examine the extent to which herding in REIT property types affects price performance in the private real estate market. We find that information transmission resulting from institutional herding in REITs occurs faster in public real estate markets than in private markets. The final essay titled "Investing in innovation: Evidence from institutional trading around patent publications," with Edward Nelling, examines institutional trading activity around patent publication dates. Unlike previous studies that use the future citations count to proxy for patent value, we measure the value of innovation by the three-day cumulative abnormal returns (CARs) around announcements. We find an increase in institutional demand for a firm's shares around patent announcements, and this increase is correlated with announcement returns. In addition, the increase in demand is greater when the firm's shareholder base consists of a higher percentage of long-term institutions. We find no correlation between patent announcement returns and the future number of citations. Patent announcements are also associated with increases in liquidity and analyst coverage, indicating that innovation may reduce information uncertainty between a firm and its investors. In addition, firms that announce patents outperform those in a control sample over a long-run. Overall, our results suggest that both investors and firms benefit from innovation.
| Author | : Haoyu Xu |
| Publisher | : |
| Total Pages | : |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Two Essays on Financial Markets and Institutional Investors Book in PDF, ePub and Kindle
My thesis consists two studies on financial markets and institutional investors. In Chapter 2, I study the trades immediately after the market open and immediately before the market close. The trades in the morning positively predict future returns and cause price continuation. The trades in the afternoon negatively predict future returns and cause price reversals. The momentum trading strategies based on morning returns and the reversal trading strategies based on afternoon returns generate significant abnormal returns, which cannot be explained by standard risk factors including momentum and reversal factors. The results provide strong evidence that trades in the morning are mostly information driven and trades in the afternoon are mostly liquidity driven. In Chapter 3, we explore the properties of equity mutual funds that experience a loss of assets after poor performance. We document that both inflows and outflows are less sensitive to performance because performance-sensitive investors leave or decide not to invest after bad performance. Consistent with the idea that attrition measures the sorting of performance-sensitive investors, we find that attrition has less of an impact on the fundâ s flow-performance sensitivity for institutional funds where there is less dispersion in investor performance-sensitivity. Also, attrition has no effect on the flow- performance sensitivity when attrition arises after good performance or investors invest for non-performance reasons.
| Author | : Jian Huang |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
Download Two essays on institutional investors Essay one Book in PDF, ePub and Kindle
| Author | : Ligang Zhong |
| Publisher | : |
| Total Pages | : 436 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
Download Three Essays on Institutional Investors Book in PDF, ePub and Kindle
In this dissertation, I investigate the impact of institutional investors on security prices and corporate policies, and offer a new perspective on the vital role that institutional investors play in the modern capital market. Specifically, on the impact on security price movements, I design a new measure of stock-level sentiment based on mutual fund publically disclosed portfolio information and provide a new dimension to better predict stock returns. A trading strategy based on the new sentiment metrics can generate an annualized alpha of 21.27%. The abnormal returns cannot be explained by the time-varying expected returns and transaction costs, and can be best explained by mutual fund overreactions. Hence, my findings can be interpreted as a new anomaly in a new era-when institutional investors are the marginal traders. On the impact on corporate policy side, I document two pieces of new empirical evidence on the importance of long-term institutional holdings: the entrenchment effect of long-term institutional holdings in the context of corporate financing decisions and the active monitoring role of long-term institutional investors in the context of international firms' accounting qualities. Combined with previous studies which favour a long-term institutional investor, the evidence on the cost side of long-term holding I document here can serve as the first call for an optimal investment horizon for firms operating in the U.S.
| Author | : Lu Qin |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2021 |
| Genre | : Business |
| ISBN | : |
Download Two Essays on Investor Preference Book in PDF, ePub and Kindle
This dissertation explores two different kinds of investor preferences for stocks: geographicpreference and skewness preference. In the first essay titled "Faster than Flying: High-Speed Rail, Investors, and Firms", we study the effects of a direct high-speed rail (HSR) service between two cities on investors and firms in China. We find that, after the HSR introduction, investors make more crosscity searches and block purchases of firms in connected cities. The HSR introduction also leads to less comovement among local stocks and more comovement between stocks in connected cities. Firms located in more central cities in the HSR network enjoy higher firm valuation, lower cost of equity, and better liquidity, in part through the channel of increased investor recognition. The HSR effects on valuation, cost of equity, and liquidity are more pronounced among small firms and when the connected city pair distance is below 1,500 km, for which HSR is faster than flying. In the second essay titled, "Can skewness preference cause misreactions to SEO announcements?", we report that the degree of skewness in a firm's stock returns can influence the stock price reaction to its SEO announcement. We find that high skewness issuers are associated with higher reactions to their SEO announcements. Our results add to the literature that studies the impact of skewness preference on asset prices. Our analysis can help explain why some SEOs are received favorably by investors, despite the fact that theory suggests SEO announcements signal overvaluation and empirical studies report negative stock price reactions
| Author | : Reena Aggarwal |
| Publisher | : World Bank Publications |
| Total Pages | : 47 |
| Release | : 2003 |
| Genre | : Foreign exchange |
| ISBN | : |
Download Portfolio Preferences of Foreign Institutional Investors Book in PDF, ePub and Kindle
