Stock price distributions and news:evidence from index options

We estimate the shape of the distribution of stock prices using data from options on the underlying asset, and test whether this distribution is distorted in a systematic manner each time a particular news event occurs. In particular we look at the response of the FTSE100 index to market wide announcements of key macroeconomic indicators and policy variables. We show that the whole distribution of stock prices can be distorted on an event day. The shift in distributional shape happens whether the event is characterized as an announcement occurrence or as a measured surprise. We find that larger surprises have proportionately greater impact, and that higher moments are more sensitive to events however characterised.

Le prix de l'individualité. Maine de Brian, Samuel Taylor Coleridge et la volonté: Deux postétités distinctes

This thesis is concerned with Maine de Biran’s and Samuel Taylor Coleridge’s conceptions of will, and the way in which both thinkers’ posterities have been affected by the central role of these very conceptions in their respective bodies of thought. The research question that animates this work can therefore be divided into two main parts, one of which deals with will, while the other deals with its effects on posterity. In the first pages of the Introduction, I make the case for a comparison between two philosophers, and show how this comparison can bring one closer to truth, understood not in objective, but in subjective terms. I then justify my choice by underlining that, in spite of their many differences, Maine de Biran and Samuel Taylor Coleridge followed comparable paths, intellectually and spiritually, and came to similar conclusions concerning the essential activity of the human mind. Finally, I ask whether it is possible that this very focus on the human will may have contributed to the state of both thinkers’ works and of the reception of those works. This prologue is followed by five parts. In the first part, the similarities and differences between the two thinkers are explored further. In the second part, the connections between philosophy and singularity are examined, in order to show the ambivalence of the will as a foundation for truth. The third part is dedicated to the traditional division between subject and object in psychology, and its relevance in history and in moral philosophy. The fourth part tackles the complexity of the question of influence, with respect to both Maine de Biran’s and Coleridge’s cases, both thinkers being indebted to many philosophers of all times and places, and having to rely heavily on others for the publication, or the interpretation of their own works. The fifth part is concerned with the different aspects of the faculty of will, and primarily its relationship with interiority, as incommensurability, and actual, conditioned existence in a certain historical and spatial context. It ends with a return to the question of will and posterity and an announcement of what will be covered in the main body of the thesis. The main body is divided into three parts:‘L’émancipation’, ‘L’affirmation, and ‘La projection’. The first part is devoted to the way Maine de Biran and Samuel Taylor Coleridge extricated themselves from one epistemological paradigm to contribute to the foundation of another. It is divided in four chapters. The first chapter deals with the aforementioned change of paradigm, as corresponding to the emergence of two separate but associated movements, Romanticism and what the French philosopher refers to as ‘The Age of History’. The second chapter concerns the movement that preceded them, i.e. the Enlightenment, its main features according to both of our thinkers, and the two epistemological models that prevailed under it and influenced them heavily in their early years: Sensationism (Maine de Biran) and Associationism (Coleridge). The third chapter is about the probable influence of Immanuel Kant and his followers on Maine de Biran and Coleridge, and the various facts that allow us to claim originality for both thinkers’ works. In the fourth chapter, I contrast Maine de Biran and Coleridge with other movements and thinkers of their time, showing that, contrary to their respective thoughts, Maine de Biran and Coleridge could not but break free from the then prevailing systematic approach to truth. The second part of the thesis is concerned with the first part of its research question, namely, Maine de Biran’s and Coleridge’s conceptions of the will. It is divided into four chapters. The first chapter is a reflection on the will as a paradox: on the one hand, the will cannot be caused by any other phenomenon, or it is no longer a will; but it cannot be left purely undetermined, as if it is, it is then not different from chance. It thus needs, in order to be, to be contradictorily already moral. The second chapter is a comparison between Maine de Biran’s and Coleridge’s accounts of the origin of the will, where it is found that the French philosopher only observes that he has a will, whereas the English philosopher postulates the existence of this will. The comparison between Maine de Biran’s and Coleridge’s conceptions of the will is pursued in the third chapter, which tackles the question of the coincidence between the will and the self, in both thinkers’ works. It ends with the fourth chapter, which deals with the question of the relationship between the will and what is other to it, i.e. bodily sensations, passions and desires. The third part of the thesis focuses on the second part of its research question, namely the posterity of Maine de Biran’s and Coleridge’s works. It is divided into four chapters. The first chapter constitutes a continuation of the last chapter of the preceding part, in that that it deals with Maine de Biran’s and Coleridge’s relations to the ‘other’, and particularly their potential and actual audience, and with the way these relations may have affected their writing and publishing practices. The second chapter is a survey of both thinkers’ general reception, where it is found that, while Maine de Biran has been claimed by two important movements of thoughts as their initiator, Coleridge has been neglected by the only real movement he could have, or may indeed have pioneered. The third chapter is more directly concerned with the posterities of Maine de Biran’s and Coleridge’s conceptions of will, and attempts to show that the approach to, and the meaning of the will have evolved throughout the nineteenth century, and in the French Spiritualist and the British Idealist movements, from an essentially personal one to a more impersonal one. The fourth chapter is a partial conclusion, whose aim is to give a precise idea of where Maine de Biran and Coleridge stand, in relation to their century and to the philosophical movements and matters we are concerned with. The conclusion is a recapitulation of what has been found, with a particular emphasis on the dialogue initiated between Maine de Biran and Coleridge on the will, and the relation between will and posterity. It suggests that both thinkers have to pay the price of a problematic reception for the individuality that pervades their respective works, and goes further in suggesting that s/he who chooses to found his individuality on the will is bound to feel this incompleteness in his/her own personal life more acutely than s/he who does not. It ends with a reflection on fixedness and movement, as the two antagonistic states that the theoretician of the will paradoxically aspires to.

The Internet's unexploited path diversity

The connectivity of the Internet at the Autonomous System level is influenced by the network operator policies implemented. These in turn impose a direction to the announcement of address advertisements and, consequently, to the paths that can be used to reach back such destinations. We propose to use directed graphs to properly represent how destinations propagate through the Internet and the number of arc-disjoint paths to quantify this network's path diversity. Moreover, in order to understand the effects that policies have on the connectivity of the Internet, numerical analyses of the resulting directed graphs were conducted. Results demonstrate that, even after policies have been applied, there is still path diversity which the Border Gateway Protocol cannot currently exploit.

An empirical investigation of the effect of rights issue announcements on share returns and the determinants of abnormal returns on the Kuala Lumpur Stock Exchange

This thesis examines the effect of rights issue announcements on stock prices by companies listed on the Kuala Lumpur Stock Exchange (KLSE) between 1987 to 1996. The emphasis is to report whether the KLSE is semi strongly efficient with respect to the announcement of rights issues and to check whether the implications of corporate finance theories on the effect of an event can be supported in the context of an emerging market. Once the effect is established, potential determinants of abnormal returns identified by previous empirical work and corporate financial theory are analysed. By examining 70 companies making clean rights issue announcements, this thesis will hopefully shed light on some important issues in long term corporate financing. Event study analysis is used to check on the efficiency of the Malaysian stock market; while cross-sectional regression analysis is executed to identify possible explanators of the rights issue announcements' effect. To ensure the results presented are not contaminated, econometric and statistical issues raised in both analyses have been taken into account. Given the small amount of empirical research conducted in this part of the world, the results of this study will hopefully be of use to investors, security analysts, corporate financial managements, regulators and policy makers as well as those who are interested in capital market based research of an emerging market. It is found that the Malaysian stock market is not semi strongly efficient since there exists a persistent non-zero abnormal return. This finding is not consistent with the hypothesis that security returns adjust rapidly to reflect new information. It may be possible that the result is influenced by the sample, consisting mainly of below average size companies which tend to be thinly traded. Nevertheless, these issues have been addressed. Another important issue which has emerged from the study is that there is some evidence to suggest that insider trading activity existed in this market. In addition to these findings, when the rights issue announcements' effect is compared to the implications of corporate finance theories in predicting the sign of abnormal returns, the signalling model, asymmetric information model, perfect substitution hypothesis and Scholes' information hypothesis cannot be supported.

Corporate restructuring: empirical evidence from the UK

Corporate restructuring is perceived as a challenge to research. Prior studies do not provide conclusive evidence regarding the effects of restructuring. Since there are discernible findings, this research attempts to examine the effects of restructuring events amongst the UK listed firms. The sample firms are listed in the LSE and London AIM stock exchange. Only completed restructuring transactions are included in the study. The time horizon extends from year 1999 to 2003. A three-year floating window is assigned to examine the sample firms. The key enquiry is to scrutinise the ex post effects of restructuring on performance and value measures of firms with contrast to a matched criteria non-restructured sample. A cross sectional study employing logit estimate is undertaken to examine firm characteristics of restructuring samples. Further, additional parameters, i.e. Conditional Volatility and Asymmetry are generated under the GJR-GARCH estimate and reiterated in logit models to capture time-varying heteroscedasticity of the samples. This research incorporates most forms of restructurings, while prior studies have examined certain forms of restructuring. Particularly, these studies have made limited attempts to examine different restructuring events simultaneously. In addition to logit analysis, an event study is adopted to evaluate the announcement effect of restructuring under both the OLS and GJR-GARCH estimate supplementing our prior results. By engaging a composite empirical framework, our estimation method validates a full appreciation of restructuring effect. The study provides evidence that restructurings indicate non-trivial significant positive effect. There are some evidences that the response differs because of the types of restructuring, particularly while event study is applied. The results establish that performance measures, i.e. Operating Profit Margin, Return on Equity, Return on Assets, Growth, Size, Profit Margin and Shareholders' Ownership indicate consistent and significant increase. However, Leverage and Asset Turn Over suggest reasonable influence on restructuring across the sample period. Similarly, value measures, i.e. Abnormal Returns, Return on Equity and Cash Flow Margin suggest sizeable improvement. A notable characteristic seen coherently throughout the analysis is the decreasing proportion of Systematic Risk. Consistent with these findings, Conditional Volatility and Asymmetry exhibit similar trend. The event study analysis suggests that on an average market perceives restructuring favourably and shareholders experience significant and systematic positive gain.

Wealth effects of mergers and acquisitions for US firms: using alternative pricing models

This empirical study employs a different methodology to examine the change in wealth associated with mergers and acquisitions (M&As) for US firms. Specifically, we employ the standard CAPM, the Fama-French three-factor model and the Carhart four-factor models within the OLS and GJR-GARCH estimation methods to test the behaviour of the cumulative abnormal returns (CARs). Whilst the standard CAPM captures the variability of stock returns with the overall market, the Fama-French factors capture the risk factors that are important to investors. Additionally, augmenting the Fama-French three-factor model with the Carhart momentum factor to generate the four-factor captures additional pricing elements that may affect stock returns. Traditionally, estimates of abnormal returns (ARs) in M&As situations rely on the standard OLS estimation method. However, the standard OLS will provide inefficient estimates of the ARs if the data contain ARCH and asymmetric effects. To minimise this problem of estimation efficiency we re-estimated the ARs using GJR-GARCH estimation method. We find that there is variation in the results both as regards the choice models and estimation methods. Besides these variations in the estimated models and the choice of estimation methods, we also tested whether the ARs are affected by the degree of liquidity of the stocks and the size of the firm. We document significant positive post-announcement cumulative ARs (CARs) for target firm shareholders under both the OLS and GJR-GARCH methods across all three methodologies. However, post-event CARs for acquiring firm shareholders were insignificant for both sets of estimation methods under the three methodologies. The GJR-GARCH method seems to generate larger CARs than those of the OLS method. Using both market capitalization and trading volume as a measure of liquidity and the size of the firm, we observed strong return continuations in the medium firms relative to small and large firms for target shareholders. We consistently observed market efficiency in small and large firm. This implies that target firms for small and large firms overreact to new information resulting in a more efficient market. For acquirer firms, our measure of liquidity captures strong return continuations for small firms under the OLS estimates for both CAPM and Fama-French three-factor models, whilst under the GJR-GARCH estimates only for Carhart model. Post-announcement bootstrapping simulated CARs confirmed our earlier results.

The role of pre-existing liquidity in determining pricing efficiency and liquidity gains following the introduction of SETSmm

In this paper we examine the impact that the new trading system SETSmm had on market quality measures such as firm value, liquidity and pricing efficiency. This system was introduced for mid-cap securities on the London Stock Exchange in 2003. We show that there is a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. We find that migration to SETSmm also improves liquidity and pricing efficiency and these changes are related to the return premium. We also find that these gains are stronger for firms with high pre SETSmm liquidity and weaker for firms with low SETSmm liquidity.

Efficiency and the trading system:The case of SETSmm

This paper studies the impact that a change from a dealer system to a market-maker supported auction system has on market quality. We study the impact that the introduction of SETSmm at the London Stock Exchange had on firm value, price efficiency and liquidity. We discover a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. Moreover, securities that migrate to SETSmm are characterized by improvements to liquidity and pricing efficiency. We find that these changes are related to the return premium.

Editorial

Readers may have noted that a short but very important announcement was made in the last issue of CLAE, at the top of the contents page. CLAE has been accepted by Thomson Reuters for abstracting and indexing in its SciSearch, Journal Citation Reports, and Current Contents services. This will ensure a greater visibility to the international research community. In addition, in June 2012 CLAE will receive its very first official Impact Factor – a measure of journal influence of importance to authors and readers alike. The impact factor value has not yet been decided but internal estimates by Elsevier estimate it will be around 1, and it will be applied to all CLAE issue back to January 2009 (volume 32). I would guess readers at this stage would have one of two responses – either ‘that's good news’ or perhaps ‘what's an impact factor?’ If you are in the latter camp then allow me to try and explain. Basically the impact factor or citation index of a journal is based on how many times in the previous year papers published in that journal in the previous two years were cited by authors publishing in other journals. So the 2012 impact factor for CLAE is calculated on how many times in 2011 papers that were published in CLAE in 2010 and 2009 were cited in other journals in 2011, divided by the number of papers published in CLAE 2010 and 2009. Essentially authors will try and get their work published in journals with a higher impact factor as it is thought that the paper will be cited more by other authors or the paper will have higher visibility in the arena. For universities having its published output in higher journals is one of the markers used to judge esteem. For individual authors publishing in journals with a higher impact factor or the number of times one of their papers is published is something that they are likely to add to their CVs or demonstrate the importance of their work. Journals with higher impact factors tend to be more review journals or journals with a wider spectrum so for a relatively small journal with a specialised field like CLAE it is great to be listed with a citation index. The awarding of a citation index crowns many changes that CLAE has undergone since the current Editor took the reins in 2005. CLAE has increased from four issues (in 2004) to six issues per year with at least one review article per issue and one article with continuing education per issue. The rejection rate has gone up significantly meaning that only best papers are published (currently it stands at 37%). CLAE has been Medline/Pubmed indexed for a few years now which is also a very important factor in improving visibility of the journal. The submission and reviewing process for CLAE in now entirely online and finally the editorial board has changed from being merely a list of keynote people to being an active group of keynote people who are enthusiastically involved with the journal. From the editorial board one person is appointed as a Reviews Editor plus we have two additional editors who work as Regional Editors. As ever, on behalf of CLAE I would like to thank the BCLA Council for their continued support (especially Vivien Freeman) and Elsevier for their continuing guidance (in particular Andrew Miller and Rosie Davey) and the excellent Editorial Board (Christopher Snyder, Pauline Cho, Eric Papas, Jan Bergmanson, Roger Buckley, Patrick Caroline, Dwight Cavanagh, Robin Chalmers, Michael Doughty, Nathan Efron, Michel Guillon, Nizar Hirji, Meng Lin, Florence Malet, Philip Morgan, Deborah Sweeney, Brian Tighe, Eef van Der Worp, Barry Weissman, Mark Willcox, James Wolffsohn and Craig Woods). And finally, a big thanks to the authors and reviewers who work tirelessly putting manuscripts together for publication in CLAE. Copyright © 2012 Published by Elsevier Ltd.

The role of pre-existing liquidity in determining price efficiency and liquidity gains following the introduction of SETSmm

In this paper we examine the impact that the new trading system SETSmm had on market quality measures such as firm value, liquidity and pricing efficiency. This system was introduced for mid-cap securities on the London Stock Exchange in 2003. We show that there is a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. We find that migration to SETSmm also improves liquidity and pricing efficiency and these changes are related to the return premium. We also find that these gains are stronger for firms with high pre SETSmm liquidity and weaker for firms with low SETSmm liquidity. © 2013 John Wiley & Sons Ltd.

Pre-adoption market reaction to IFRS 9:a cross-country event-study

We are the first to examine the market reaction to 13 announcement dates related to IFRS 9 for over 5400 European listed firms. We find an overall positive reaction to the introduction of IFRS 9. The regulation is particularly beneficial to shareholders of firms in countries with weaker rule of law and a smaller divergence between local GAAP and IAS 39. Bootstrap simulations rule out the possibility that sampling error or data mining are driving our findings. Our main findings are also robust to confounding events and the extent of the media coverage for each event. These results suggest that investors perceive the new regulation as shareholder-wealth enhancing and support the view that stronger comparability across accounting standards of European firms is beneficial to international investors and outweighs the costs of poorer firm-specific information.

The effect of timeliness and credit ratings on the information content of earnings announcements

Abstract: This paper investigates the impact of timeliness and credit ratings on the information content of the earnings announcements of Greek listed firms from 2001 to 2008. Using the classical event study methodology and regression analysis, we find that firms tend to release good news on time and are inclined to delay the release of bad news. We also provide evidence that the level of corporate risk differentiates the information content of earnings according to the credit rating category. Specifically, firms displaying high creditworthiness enjoy positive excess returns on earnings announcement dates. In contrast, firms with low creditworthiness undergo significant share price erosions on earnings announcement days. We also observe a substitution effect between timeliness and credit ratings in relation to the information content of earnings announcements. Specifically, we find that as the credit category of earnings-announcing firms improves, the informational role of timeliness is mitigated.

Can we predict dividend cuts?

I examine the predictability of dividend cuts based on the time interval between dividend announcement dates using a large dataset of US firms from 1971 to 2014. The longer the time interval between dividend announcements, the larger the probability of a cut in the dividend per share, consistent with the view that firms delay the release of bad news.

A közép-kelet-európai bankfúziók eredményessége (The success of the bank mergers in Central Eastern Europe)

Az elmúlt években a nagy európai bankcsoportok egyre több közép-kelet-európai bankot vásároltak fel. Tanulmányunkban a bankfúziók értékteremtő hatását részvényesi szemmel elemezzük. A közép-kelet-európai régióban tevékenykedő hét legnagyobb bankcsoport 2000 és 2008 közötti akvizíciós tranzakcióit az eseményelemzés módszerével vizsgáljuk. Úgy tűnik, a részvényesek összességében értékelik a bankcsoportok akvizíciós törekvéseit: a fúziók kicsit több mint felében pozitív a kumulált abnormális hozam, és enyhén pozitív az összes esemény abnormális hozamának átlaga is. Számításaink során elsőként az egyes bankcsoportok felvásárlási stratégiáját értékeljük. A felvásárlás bejelentése körüli háromnapos időintervallumot alapul véve, a Raiffeisen és az OTP stratégiája tekinthető a legsikeresebbnek, míg az Erste felvásárlásai a legkevésbé eredményesnek. Ezt követően rávilágítunk arra, hogy eltérő befektetői szándékból ugyan, de mind a legmagasabb, mind a legalacsonyabb értékű ügyletek esetében a pozitív abnormális hozamú fúziók vannak túlsúlyban. Végezetül megállapítjuk, hogy az országhatáron átívelő ügyletek befektetői megítélése nem rosszabb az országhatáron belüli tranzakciókénál. /===/ The big European banking groups have been buying up more and more banks in Central Eastern Europe. The study analyses the value-enhancing effects of the mergers from the shareholder’s angle by examining by occurrence analysis methods the Central East European acquisition transactions of the seven biggest banking groups between 2000 and 2008. The shareholders as a whole seem to appreciate the acquisition activity of the banks: cumulative abnormal yield is positive in over half the mergers and average abnormal yield of all occurrences is mildly positive as well. The authors evaluate first the acquisition strategies of each banking group. Based on a three-day period round the acquisition announcement, Raiffeisen and OTP seem to have the most successful strategies and Erste the least successful. Light is then shed on investment intentions in each case, but mergers with a positive abnormal yield predominate among the highest and the lowest value transactions. Finally, the investor evaluation of cross-border transactions is no worse than for domestic ones.

Kiigazítás recesszió nélkül. Esettanulmány a magyar stabilizációról = Adjustment without recession: A Case Study of Hungarian Stabilization

1995. március 12-én a magyar kormány és a központi bank szigorú kiigazítási és stabilizációs programot hirdetett meg. A cikk az első eredmények számbavételére tesz kísérletet. A program meghirdetése előtt Magyarország két egymást követő év- ben hatalmas fizetésimérleg-hiányt mutatott fel, és nemzetközi megítélése romlani kezdett. A program radikális intézkedései nyomán elkerülhetővé vált a mexikói vál- sághoz hasonló pénzügyi katasztrófa. Sok makrogazdasági mutató jól érzékelhető javulást jelez: lényegesen csökkent a kereskedelmi mérleg és a folyó fizetési mérleg hiánya, a költségvetés elsődleges egyenlege pozitív lett. Az ilyesféle stabilizációs programokat rendszerint súlyos visszaesés és a munkanélküliség nagy növekedése kíséri. Magyarország elkerülte ezeket a mellékhatásokat: a GDP drasztikus vissza- esés helyett valamelyest tovább növekedett, és a munkanélküliség változatlan ma- radt. A javulásnak nagy ára volt: az életszínvonal erőteljes csökkenése, az infláció felgyorsulása, bár a magyarországi infláció még mindig a kézben tartott, mérsékelt infláció sávjában maradt. A cikk ismerteti a program heterodox módszereit: 1. nagy leértékelés, az előre meghirdetett csúszó árfolyam rezsimjének bevezetése, valamint ideiglenes import- vámpótlék kivetése; 2. határozott jövedelempolitika, amely 12 százalékos reálbércsök- kenést kényszerített ki; 3. fiskális intézkedések, köztük jóléti jogosultságok csök- kentése (a program meghirdetése előtt ezek a jogosultságok tabuk voltak); 4. a hitel- kínálat átcsoportosítása a vállalati szektor javára, a jövedelmezőség növekedése; 5. feszített (bár nem mértéktelenül feszített) monetáris politika, amely lehetővé tette a sikeres vállalatok expanzióját; 6. a privatizáció felgyorsítása, nagy és sikeres lépé- sek egyes kulcsszektorok (energia, telekommunikáció) privatizációjában. Végezetül a tanulmány óva int a túlzott magabiztosságtól és felhívja a figyelmet a potenciális veszélyekre. A makrogazdasági javulás még törékeny. A magyar fejlődés legbiztatóbb sajátossága a termelékenység erőteljes és folyamatos növekedése. / === / On March 12, 1995 Hungary s government and central bank announced a tough program of adjustment and stabilization. This study is an attempt to asses the first results. Before the announcement of the program Hungary had a huge current account deficit for two consecutive years, and her international reputation started to decline. The program s radical measures made it possible to avoid a Mexico-style financial catastrophe. Many macroeconomic indicators show tangible improvement: the trade deficit and the deficit on the current account have been reduced significantly, the primary budget shifted to surplus. These kinds of adjustment programs are usually associated with deep recession and a large increase of unemployment. Hungary avoided these adverse side-effects: GDP instead of a drastic decline, continued to grow somewhat, and unemployment remained unchanged. There was a high price for the improvement: a sharp decline in the standard of living, and an acceleration of inflation, although Hungary is still in the range of controlled, moderate inflation. The paper describes the heterodox instruments of the program: (1) large devaluation, followed by a new exchange rate regime of pre-announced crawling peg, and a temporary import surcharge, (2) energetic income policy, enforcing a 12% cut in real wages; (3) fiscal measures, including cuts in welfare entitlements. That happened for the first time: before the program entitlements had been regarded as taboo ; (4) reallocation of credit supply in favor of the enterprise sector; increase of profitability; (5) tight (but not excessively tight) monetary policy, allowing the expansion of successful private busi- ness; (6) acceleration of privatisation, including large and successful steps in the privatisation of some key sectors (energy, telecommunication). Finally the paper warns against excessive self- confidence and draws the attention to potential dangers. The macroeconomic improvement is still fragile. The most reassuring feature of Hungary s development is the impressive and persistent improvement of productivity.