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| Author | : Tak-jun Wong |
| Publisher | : |
| Total Pages | : 274 |
| Release | : 1990 |
| Genre | : Accounting and price fluctuations |
| ISBN | : |
| Author | : Peng-Chia Chiu |
| Publisher | : |
| Total Pages | : 137 |
| Release | : 2013 |
| Genre | : |
| ISBN | : 9781303167850 |
This dissertation includes three chapters, which are about empirical investigation of the return earnings relation. Chapter 1 explores the differential timing in stock price incorporation of industry and firm-specific earnings. I find that on average stock returns anticipate industry revenue and expense components earlier than the respective firm-specific components. Further analysis shows that the timing difference between industry versus firm-specific information about revenue or expense is inversely related to product market competition and accounting reporting quality. Additionally, the timing difference between industry versus firm-specific information about expense line-items varies across line-items. Overall, these results aid in our understanding of the price discovery process with respect to accounting earnings information. Chapter 2 examines a new dimension, the effect of seasonality, on the relation between expected earnings (EE) and subsequent price drift. The key finding is that the relation between EE proxied by analyst forecasts and future returns is positive in non-January months but negative in January. This reverse January relation is observed among different types of stocks, domestic and international markets, and cannot be explained away by other variables associated with January returns. Further analysis suggests that the reverse January relation is a result of a temporary price drift away from fundamental value. The results illustrate the importance of controlling for the calendar-time dimension when studying market efficiency with respect to expected earnings. Chapter 3 investigates whether seasonally-differenced quarterly gross margin, a component of earnings, predicts future stock returns incremental to previously documented pricing anomalies based on financial accounting variables. A long/short trading strategy based on the gross profit surprises yields monthly returns over 115 basis points and generates positive returns in 113 out of 136 calendar quarters spanning 1977-2010. Further analysis shows that the return spread is larger for firms in industries characterized by low levels of capital expenditures and R & D intensity. Since 2000, gross profit surprise hedge portfolios yield returns of 91 basis points per month compared to 42 basis points per month for earnings surprise-based hedge strategies. The results suggest that gross margin contains information about future core profitability that is incremental to reported earnings and that information is reflected in stock prices with a delay.
| Author | : Seongyeon Lim |
| Publisher | : |
| Total Pages | : |
| Release | : 2004 |
| Genre | : Investment analysis |
| ISBN | : |
Abstract: This dissertation studies how psychological and reputational considerations affect the behavior of individual investors and security analysts. The first essay examines investors' preference for framing their gains and losses using trading records of individual investors at a large discount brokerage firm. I find that investors tend to bundle sales of losers on the same day and separate sales of winners over different days. The result is consistent with the principles of mental accounting (Thaler (1985)), according to which individuals attain higher utility by integrating losses and segregating gains. Alternative explanations based on tax-loss selling strategies, margin calls, the number of winners and losers in a portfolio, the difference in the potential proceeds from selling winners and losers, and correlations among winners and losers in a portfolio do not fully account for the observed behavior. Logistic analyses show that investors are more likely to sell multiple stocks when they realize losses, after controlling for various factors including market and portfolio returns, overall sales activity during the day, and investor characteristics. The second essay provides a theoretical and empirical analysis of analysts' incentives to incorporate public information in their earnings forecasts. The model show that analysts may underreact to public news due to their reputational concerns, and that an analyst's incentive to underreact to public information 1) decreases with the size of unexpected news; 2) decreases with the uncertainty of earnings; 3) increases with the analyst's initial reputation; and 4) increases with how much the analyst values his/her current reputation relative to forecast accuracy. I test the implications of the model and find that analysts underreact to earnings news less when the size of unexpected earnings is large, when there is more uncertainty about the earnings, and when they have long track records. The model also implies that the strategic biases of analysts can lead to divergent responses of forecasts to public announcements. Furthermore, the stock market may react to revisions in analysts' forecasts made in response to information that has already been incorporated into stock prices.
| Author | : Ting Luo |
| Publisher | : |
| Total Pages | : 140 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
| Author | : Seunghan Lee |
| Publisher | : |
| Total Pages | : 99 |
| Release | : 2017 |
| Genre | : Cash flow |
| ISBN | : |
This dissertation studies the role of cash flow in explaining stock price variations and the determination of equity premium after correcting for the measurement error of cash flow growth. In Chapter 1, we incorporate price-total payout (dividends plus repurchases) ratio into the models of Binsbergen and Koijen (2010) and Campbell and Ammer (1993) to reassess the role of cash flow in stock price movement. We find that the existing results of a high persistence in expected returns and a strong dependence of stock price variation on discount rates are partly attributable to the use of price-dividend ratio with measurement error as a predictor of stock returns. The incorporation of price-total payout ratio enables the models i) to improve an in-sample goodness of fit for return and cash flow growth, ii) to produce a lower persistence of expected returns, which leads to a smaller shock to stock prices from the discount rate channel, iii) to show a higher contribution of cash flow channel to stock price movement in terms of variations in price-cash flow ratio and unexpected return. These results apply to medium and large cap portfolios as well as to aggregate market index. In Chapter 2, we explore the effects on stock market variation of other factors than stock repurchases that could account for the non-stationarity of price-dividend ratio by incorporating regime shifts in the mean of price-total payout ratio into the models of Binsbergen and Koijen (2010) and Campbell and Ammer (1993). Compared to the results of Chapter 1, we achieve i) an improvement in in-sample goodness of fit for return and cash flow growth, ii) a lower persistence and higher volatility of expected returns, iii) stronger role of cash flow channel in stock market variation, all of which show that not only stock repurchases but also other structural factors such as persistent decline in consumption volatility affecting the relationship between stock prices and cash flows should be taken into account when we attempt to investigate the sources of stock price variations. In Chapter 3, we incorporate price-total payout ratio and endogenously generated consumption volatility with regime shifts into the dynamic asset pricing model of Bansal, Kiku, Shaliastovich, and Yaron (2014) (hereafter, "BKSY model"), which stresses the role of a sizable positive risk premium from the macroeconomic volatility channel in explaining the equity premium by introducing the volatility risk into traditional consumption-based asset pricing model. Our extension of the BKSY model provides a different identification of the consumption volatility risk by including the effects of the economic agent's revision of expectation on the volatility states on each of three channels to determine the equity premium. From annual samples of 1930 to 2015, we find that our model shows a much smaller contribution of the consumption volatility risk to the total equity premium, most of which is now explained by the cash flow risk. This finding applies to cross-sectional portfolio returns as well as to aggregate market index return. Our model also indicates that the consumption volatility risk is not large enough to reverse a negative correlation between equity return and human capital return.
| Author | : Patricia Dechow |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Accounting earnings summarize periodic corporate financial performance and are key determinants of stock prices. We review research on the usefulness of accounting earnings, including research on the link between accounting earnings and firm value and research on the usefulness of accounting earnings relative to other accounting and nonaccounting information. We also review research on the features of accounting earnings that make them useful to investors, including the accrual accounting process, fair value accounting, and the conservatism convention. We finish by summarizing research that identifies situations in which investors appear to misinterpret earnings and other accounting information, leading to security mispricing.
| Author | : Michael Constas |
| Publisher | : |
| Total Pages | : 320 |
| Release | : 1994 |
| Genre | : Corporate profits |
| ISBN | : |
| Author | : Cheng Few Lee |
| Publisher | : World Scientific |
| Total Pages | : 269 |
| Release | : 2006-04-18 |
| Genre | : Business & Economics |
| ISBN | : 9814478830 |
News Professor Cheng-Few Lee ranks #1 based on his publications in the 26 core finance journals, and #163 based on publications in the 7 leading finance journals (Source: Most Prolific Authors in the Finance Literature: 1959-2008 by Jean L Heck and Philip L Cooley (Saint Joseph's University and Trinity University). Market microstructure is the study of how markets operate and how transaction dynamics can affect security price formation and behavior. The impact of microstructure on all areas of finance has been increasingly apparent. Empirical microstructure has opened the door for improved transaction cost measurement, volatility dynamics and even asymmetric information measures, among others. Thus, this field is an important building block towards understanding today's financial markets. One of the pioneers in the field of market microstructure is David K Whitcomb, who retired from Rutgers University in 1999 after 25 years of service. David generously funded the David K Whitcomb Center for Research in Financial Services, located at Rutgers University. The Center organized a conference at Rutgers in his honor. This conference showcased papers and research conducted by the leading luminaries in the field of microstructure and drew a broad and illustrious audience of academicians, practitioners and former students, all who came to pay tribute to David K Whitcomb. Most of the papers in this volume were presented at that conference and the contributions to this volume are a lasting bookmark in microstructure. The coverage of topics on this volume is broad, ranging from the theoretical to empirical, and covering various issues from market architecture to liquidity and volatility.
| Author | : Andrei I. Nikiforov |
| Publisher | : |
| Total Pages | : 136 |
| Release | : 2009 |
| Genre | : Electronic dissertations |
| ISBN | : |
In these essays, I identify the effects of earnings seasons (i.e., the clustering of earnings releases), on stock market liquidity and asset pricing. In the first essay, I document strong seasonal regularities associated with aggregate earnings announcements. Applying the large body of literature linking earnings announcements to liquidity effects, I argue that these earnings seasons create market-wide liquidity shocks and I show that both liquidity betas and liquidity risk change during earnings seasons In the second essay, I test the impact of earnings seasons on commonality in liquidity as measured by both spreads and depths. I find that commonality significantly decreases during the four weeks of each calendar quarter when most companies release their earnings. These findings contribute to the literature by identifying and examining the clustering effect of firm-specific information on commonality in liquidity. In the third essay, I extend the study of the liquidity effects of earnings seasons to a sample of 20 countries. I find that the international data corroborate both hypotheses. I also find that the aggregate quality of accounting information, and the duration and frequency of interim reporting periods are important determinants of the liquidity effects (both liquidity betas and commonality in liquidity) during earnings seasons.
| Author | : Cheng-Few Lee |
| Publisher | : Center for PBBEFR & Airiti Press |
| Total Pages | : 304 |
| Release | : 2009-01-01 |
| Genre | : Business & Economics |
| ISBN | : 9868518245 |
Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession. The papers in this volume cover a wide range of topics including corporate finance and debt management, earnings management, equity market, auditing, option pricing theory, and interest rate theory. In this volume there are eleven chapters, five of them are corporate finance and debt management: 1. Liquidity and Adverse Selection: Evidence from the Five-or-Fewer Rule Change; 2. Changing Business Environment and the Value of Relevance of Accounting Information; 3. Pricing Risky Securities in Hidden Markov-Modulated Poisson Processes; 4. An Empirical Assessment of Alternative Dividend Expectation Models; 5. Quantitative Market Risk Disclosure, Bond Default Risk and The Cost of Debt: Why Value At Risk? There are two of the other six chapters which cover interest rate theory: 1. Positive Interest Rates and Yields: Additional Serious Considerations; 2. Collapse of Dimensionality in the Interest Rate Term Structure. The remaining four chapters cover financial analysts earnings forecasts, equity market, auditing, and option pricing theory. These four papers are: 1. Investors’ Apparent Under-weighting of Financial Analysts’ Earnings Forecasts: The Role of Share Price Scaling and Omitted Risk Factors; 2. Predicting Stock Price by Applying the Residual Income Model and Bayesian Statistics; 3. Intertemporal Associations Between Non-Audit Services and Auditors’ Tendency to Allow Discretionary Accruals; 4. Put Option Portfolio Insurance vs. Asset Allocation.
