The information content of directors' trades: empirical analysis of the Australian market

We examine the trading activities of directors in shares of their own companies on the Australian Stock Exchange during the July-December 2005 period. We find that directors of small companies in particular earn abnormal return after both their 'Purchase' and as well as their 'Sale' trade. Directors of these companies have an uncanny ability to time the market by trading when mispricing is greatest, and are able to predict the future performance of their firms in short run. For directors of medium and large companies, we find evidence that 'Sale' trades are the ones which work as loss avoiders. Outsiders recognise to some extent that directors' trades are informative, however they are slow to incorporate the new information into prices, refuting much of the market efficiency literature.

Information content of directors' trading around acquisitions

This paper investigates the patterns of directors' trades and returns around takeover announcements. We find that the pre-announcement net value (the difference between buy value and sell value) of directors' trading is positively related to acquirers' announcement period abnormal returns. This relation is stronger for private target acquisitions and for stock-financed acquisitions, when the information asymmetry between directors and outside investors is more pronounced. However, this relation does not hold for better governed and highly monitored acquirers. Our findings indicate opportunistic trading by directors prior to takeovers and highlight a significant role that corporate governance mechanism plays in restraining these opportunistic behaviors.

Information signalling of common stock repurchase announcements: Australian evidence

Stock repurchases (or share buy-backs) have become increasingly popular among Australian companies. One of the main aims of announcing a stock repurchase by a listed company is signalling the market that its shares are currently underpriced. When market reacts to the signal, price of the shares is expected to increase immediately after the announcement. While there are several ways of repurchasing shares, 'on-market buy-backs' is the most popular method of stock repurchases in Australia. Australian listed companies have announced more than two hundred on-market share buy-backs over the past three years. The aim of this paper is to examine the information signalling effects of these on-market buy-back announcements. If the signal is considered positively (negatively) by the market, the price of the repurchasing company's shares should increase (decrease) immediately after the announcement. If there is no information content in the announcement, the price will remain the same. In this study, signalling effect of share buy-back announcements was examined using most recent Australian data. The total population of on-market buy-back announcements during the period from January 1, 2000 to March 10, 2003 was included. The abnormal market return over the short-run (announcement day and 9 trading days centred on the announcement date) was computed using the All Ordinaries Accumulation Index as the reference portfolio. The daily Abnormal Returns (AR) and Cumulative Abnormal Returns (CAR) during the event period were computed. The results strongly support the information-signalling hypothesis of share buy..backs. Australian market generally considers announcement of on~market share repurchases as signalling of insider information that shares are currently underpriced.

Evaluating a measure of content quality for accounting narratives (with an empirical application to narratives from Australia, Hong Kong, and the United States)

This paper evaluates a texture-based approach developed by Sydserff and Weetman (1999), to examine corporate annual report narratives. This is achieved by using the texture index to evaluate information content (which includes readability) in accounting narratives. Specifically, we examine the letter to shareholders of reports from Australia, Hong Kong and the United States.

We suggest a texture-based evaluation provides a robust measure of narrative quality due to the incorporation of readability and content analysis. The ability to measure content quality assists in promoting accountability, with the aim of improving usefulness of corporate
information and disclosures, and greater investor confidence in capital markets.

This paper also investigates these exploratory results to consider variations in quality between different countries. Considerable differences were found between the countries with Hong Kong reports generally superior. These tentative findings provide a small contribution to the comparative annual report literature and the emerging area of narrative evaluation.

Information leakage and informed trading around unscheduled earnings announcements

While there has been much judicial discussion regarding the competency of Australia's continuous disclosure regime with reference to contemporaneous international standards, there has to date been limited empirical analysis of the Australian system's effectiveness in preventing selective disclosure and information leakage. This paper presents an empirical study of information content and trading behaviour around unscheduled earnings announcements - comprising of profit upgrades, profit warnings and neutral trading statements - made by ASX-listed companies during 2004. The contention is that informed trading impacts on the stock returns and trading volumes of listed entities, and hence abnormal returns or trading volumes observed prior to an announcement provide evidence of information leakage. The paper models a range of factors that potentially influence firm disclosure practices and contribute to the level information asymmetry in the market during the pre- announcement period. Previous research has investigated the influence of firm size and information content in contributing to information leakage. This study further considers the variables of firm growth, capital structure and industry group.

Developing a web-based information resource for palliative care : an action-research inspired approach

Background : General Practitioners and community nurses rely on easily accessible, evidence-based online information to guide practice. To date, the methods that underpin the scoping of user-identified online information needs in palliative care have remained under-explored. This paper describes the benefits and challenges of a collaborative approach involving users and experts that informed the first stage of the development of a palliative care website.

Method : The action research-inspired methodology included a panel assessment of an existing palliative care website based in Victoria, Australia; a pre-development survey (n = 197) scoping potential audiences and palliative care information needs; working parties conducting a needs analysis about necessary information content for a redeveloped website targeting health professionals and caregivers/patients; an iterative evaluation process involving users and experts; as well as a final evaluation survey (n = 166).

Results : Involving users in the identification of content and links for a palliative care website is time-consuming and requires initial resources, strong networking skills and commitment. However, user participation provided crucial information that led to the widened the scope of the website audience and guided the development and testing of the website. The needs analysis underpinning the project suggests that palliative care peak bodies need to address three distinct audiences (clinicians, allied health professionals as well as patients and their caregivers).

Conclusion : Web developers should pay close attention to the content, language, and accessibility needs of these groups. Given the substantial cost associated with the maintenance of authoritative health information sites, the paper proposes a more collaborative development in which users can be engaged in the definition of content to ensure relevance and responsiveness, and to eliminate unnecessary detail. Access to volunteer networks forms an integral part of such an approach.

Statistical properties and taxonomies of human untranslated exons

Two taxonomies for the accurate classification of human and predicted exons were produced. Based on these taxonomies important statistical properties of untranslated exons useful for improving automated genefinding efforts were calculated. Finally an important correlation between the energy and the information content in the human genome was identified.

Underpricing, risk management, hot issue and crowding out effects : evidence from the Australian resources sector initial public offerings

The main purpose of this paper is to explore the role of risk management, speculative industry competition effect and hot issue markets. We used a sample of 260 initial public offerings (IPOs) in the Australian resource sector for the 1994–2004 period to test the underpricing effect. We do not find any evidence that risk management can reduce the uncertainty relating to the new issue and hence alleviate the extent of underpricing. A plausible explanation for this lack of evidence is the poor information content of publicly available disclosures regarding risk management activities of IPO firms. We further provide evidence that the underpricing returns for resources IPOs are not impacted upon by the strength of alternative speculative IPO markets. We also show that the degree of underpricing adjusts to both market return in the preceding three months and the average underpricing of resources IPOs in the 12 month period leading to the float which offers an explanation to the hot issue effect observed in the IPO market.

Comparing different economic linkages among commodity futures

Gasoline (GA) and kerosene (KO) are extracted from crude oil (CO), such that the three fuel commodities share a chemical link. On the other hand, GA also shares an industrial link with natural rubber (NR) and palladium (PA) as complementary commodities that are heavily consumed by the automobile industry. We contrast the information content embedded in the two economic linkages. Focusing on TOCOM futures contracts written on the five commodities and centering on GA, we confirm that incremental information provided by either CO, KO or NR, PA over a buy-and-hold strategy and a naive forecast, are both statistically and economically significant. While the chemical link forecast is more profitable, a double-link forecast generated from a VECM with two cointegrating vectors (KO-GA and GANR prices) outperforms both single-link forecasts based on risk-adjusted profit net of transaction costs. Further comparisons against the profitability of commodity-based momentum strategies documented in Erb and Harvey (2006) and Miffre and Rallis (2007) show that the double-link forecast holds its own against the most profitable of the 75 momentum strategies considered. This strongly suggests that not only are there incremental profits to be gained from harnessing and combining economic links among commodity futures, the resultant incremental profits are economically significant against other proven commodity-based trading strategies in the existing literature.

Global software development : measuring, approximating and reducing the complexity of global software development using extended axiomatic design theory

This paper considers GSD projects as designed artefacts, and proposes the application of an Extended Axiomatic Design theory to reduce their complexity in order to increase the probability of project success. Using an upper bound estimation of the Kolmogorov complexity of the so-called ‘design matrix’ (as a proxy of Information Content as a complexity measure) we demonstrate on two hypothetical examples how good and bad designs of GSD planning compare in terms of complexity. We also demonstrate how to measure and calculate the ‘structural’ complexity of GSD projects and show that by satisfying all design axioms this ‘structural’ complexity could be minimised.

Freehand 3D Scanning in a Mobile Environment using Video

This work is motivated by two important trends in consumer computing: (i) the growing pervasiveness of mobile computing devices, and (ii) the users’ desire for increasingly complex but readily acquired and manipulated information content. Specifically, we develop and describe a system for 3D model creation of an object, using only a standard mobile device such as a smart phone. Our approach applies the structured light projection methodology and exploits multiple image input such as frames from a video sequence. In comparison with previous work, a significant further challenge addressed here is that of lower quality input data and limited hardware (processing power and memory, camera and projector quality). Novelties include: (i) a comparison of projection pattern detection approaches in the context of a mobile environment – a robust method combining colour detection and a phase congruency descriptor is evaluated, (ii) a model for single view reconstruction which exploits epipolar, coplanarity and topological constraints, (iii) the use of mobile device sensor data in the iterative closest point algorithm used to register multiple partial 3D reconstructions, and (iv) two heuristics for determining the order in which buffered single view based reconstructions are merged. Our experiments demonstrate that visually appealing results are obtained in a speedy manner which does not require specialist knowledge or expertise from the user.

Impact of the Pick and Tick food information program on the salt content of food in New Zealand

The Pick the Tick programme of the National Heart Foundation of New Zealand aims to provide a framework for cooperation with the food industry to improve nutrition labelling and to develop a healthy food supply. Food manufacturers, whose products meet defined nutritional criteria, are able to display the Pick the Tick logo on food labels. The tick is used by 59% of shoppers in assisting them make healthy food choices. Food companies are encouraged to reformulate product composition if they fail to meet criteria and develop new products to specifically meet the Pick the Tick criteria. The objective of this study was to evaluate the impact of the programme on food formulation. The main outcome measure was the amount of salt not added to food products. Changes to sodium levels were multiplied by the volume of sales and then converted to salt in tonnes to provide a tangible measure of the impact of the programme. In a 1-year period, July 1998 to June 1999, Pick the Tick influenced food companies to exclude ~33 tonnes of salt through the reformulation and formulation of 23 breads, breakfast cereals and margarine. Breakfast cereals showed the largest reduction in sodium content by an average of 378 mg sodium per 100 g product (61%). Bread was reduced by an average of 123 mg per 100 g product (26%) and margarine by 53 mg per 100 g (11%). Pick the Tick appeals to the food industry as a tool for marketing food products and has provided an incentive to improve the nutritional value of foods. The tick on approved products not only acts as a ‘nutrition signpost’ for consumers but can also significantly influence the formulation of products without sacrificing taste or quality.