Essays on Stock Market Reactions to New Information

A functioning stock market is an essential component of a competitive economy, since it provides a mechanism for allocating the economy’s capital stock. In an ideal situation, the stock market will steer capital in a manner that maximizes the total utility of the economy. As prices of traded stocks depend on and vary with information available to investors, it is apparent that information plays a crucial role in a functioning stock market. However, even though information indisputably matters, several issues regarding how stock markets process and react to new information still remain unanswered. The purpose of this thesis is to explore the link between new information and stock market reactions. The first essay utilizes new methodological tools in order to investigate the average reaction of investors to new financial statement information. The second essay explores the behavior of different types of investors when new financial statement information is disclosed to the market. The third essay looks into the interrelation between investor size, behavior and overconfidence. The fourth essay approaches the puzzle of negative skewness in stock returns from an altogether different angle than previous studies. The first essay presents evidence of the second derivatives of some financial statement signals containing more information than the first derivatives. Further, empirical evidence also indicates that some of the investigated signals proxy risk while others contain information priced with a delay. The second essay documents different categories of investors demonstrating systematical differences in their behavior when new financial statement information arrives to the market. In addition, a theoretical model building on differences in investor overconfidence is put forward in order to explain the observed behavior. The third essay shows that investor size describes investor behavior very well. This finding is predicted by the model proposed in the second essay, and hence strengthens the model. The behavioral differences between investors of different size furthermore have significant economic implications. Finally, the fourth essay finds strong evidence of management news disclosure practices causing negative skewness in stock returns.

With Good Reputation Size Does not Matter: Issue Frequency and the Determinants of Debt Maturity

This paper examines empirically the effect firm reputation has on the determinants of debt maturity. Utilising data from European primary bond market between 1999 and 2005, I find that the maturity choice of issuers with a higher reputation is less sensitive to macroeconomic conditions, market credit risk-premiums, prevailing firm credit quality and size of the debt issue. The annualised coupon payments are shown to be a significant factor in determining the debt maturity and reveal a monotonously increasing relationship between credit quality and debt maturity once controlled for. Finally, I show that issuers lacking a credit rating have an implied credit quality positioned between investment-grade and speculative-grade debt.

The Influence of World Factors on Finnish Stock Market Volatility

This paper investigates to what extent the volatility of Finnish stock portfolios is transmitted through the "world volatility". We operationalize the volatility processes of Finnish leverage, industry, and size portfolio returns by asymmetric GARCH specifications according to Glosten et al. (1993). We use daily return data for January, 2, 1987 to December 30, 1998. We find that the world shock significantly enters the domestic models, and that the impact has increased over time. This applies also for the variance ratios, and the correlations to the world. The larger the firm, the larger is the world impact. The conditional variance is higher during recessions. The asymmetry parameter is surprisingly non-significant, and the leverage hypothesis cannot be verified. The return generating process of the domestic portfolio returns does usually not include the world information set, thus indicating that the returns are generated by a segmented conditional asset pricing model.

Union Formation and Bargaining Rules in the Labor Market

This paper analyzes union formation in a model of bargaining between a firm and several unions. We address two questions: first, the optimal configuration of unions (their number and size) and, second, the impact of the bargaining pattern (simultaneous or sequential). For workers, grouping into several unions works as a price discrimination device which, at the same time, decreases their market power. The analysis shows that optimal union configuration depends on the rules that regulate the bargaining process (monopoly union, Nash bargaining or right to manage).

Market survey of the periwinkle Tympanotonus fuscatus in Rivers State: Sizes, prices, trade routes and exploitation levels

Tympanotonus fuscatus was collected from 23 markets through Rivers State (Nigeria), a few in neighbouring states, and from an unexploited population at Buguma. The size distribution of shells was determined,and information on prices and trade routes was also obtained. The mean shell length of specimens from the unexploited Buguma population was 46.4 mm, compared to 30.4 mm for the Buguma market samples. Mean sizes in other markets showed a geographic pattern: the smallest were from the Adoni-Ogoni-Opobo sector (28.1-30.9); the largest were from the Nembe-Brass sector (37.7-44.2) and Bendel State (35.7-45.6); The results suggest the population structure of Tympanotonus in much of Rivers State has been strongly impacted by overharvesting. They show that local market as well as some in Cross River State, are increasingly being supplied by road with specimens from the Benin River area of Bendel State. Differences between shell types; and relations between shell size, selling price and market distance from source, are also discussed

Evaluation of the capture efficiency and size selectivity of four pot types in the prospective fishery for North Pacific giant octopus (Enteroctopus dofleini)

Over 230 metric tons of octopus is harvested as bycatch annually in Alaskan trawl, long-line, and pot fisheries. An expanding market has fostered interest in the development of a directed fishery for North Pacific giant octopus (Enteroctopus dofleini). To investigate the potential for fishery development we examined the efficacy of four different pot types for capture of this species. During two surveys in Kachemak Bay, Alaska, strings of 16 –20 sablefish, Korean hair crab, shrimp, and Kodiak wooden lair pots were set at depths ranging between 62 and 390 meters. Catch per-unit-of-ef for t estimates were highest for sablefish and lair pots. Sablefish pots caught significantly heavier North Pacific giant octopuses but also produced the highest bycatch of commercially important species, such as halibut (Hippoglossus stenolepis), Pacific cod (Gadus macrocephalus), and Tanner crab (Chionoecetes bairdi).

No evidence of bias from fish behavior in the selectivity of size and sex of the protogynous red porgy (Pagrus pagrus, Sparidae) by hook-and-line gear

Most fisheries select the size of fish to be caught (are size selective), and many factors, including gear, market demands, species distributions, fishery laws, and the behavior of both fishermen and fish, can contribute to that selectivity. Most fishing gear is size-selective and some, such as gill nets, are more so than others. The targeting behavior of fishermen is another key reason commercial and recreational fisheries tend to be size-selective. The more successful fishermen constantly seek areas and methods that yield larger or more profitable sizes of fish. Fishery regulations, especially size limits, produce size-selective harvests. Another factor with the potential to cause selectivity in a hook-and-line fishery is the different behavioral responses of fish to the bait or lure, whether the different responses arise among different fish sizes or between the sexes.

Em busca de um índice alternativo à relação Book to Market para a construção de carteiras mais rentáveis

Muitos estudos buscam tentar prever o retorno potencial sobre portfólios de ações, com intuito de obter melhor rentabilidade sobre o capital aplicado. Diversas modelagens já foram utilizadas, sendo que as mais conhecidas são as que relacionam o risco com o retorno. Nesta linha destacam-se a Teoria de Carteiras proposta por Markowitz, e o CAPM de Sharpe. Através destas teorias entende-se a questão da influência da covariância dos retornos e que para um melhor desempenho de uma carteira, não é suficiente avaliar cada ativo individualmente. Por outro lado, diversas críticas em relação ao CAPM, vêm ensejando estudos complementares na busca de outras variáveis que melhorem os métodos de seleção de ativos. Fama e French (1993) fizeram um estudo com variáveis complementares em relação ao beta do CAPM, utilizando o tamanho e a relação Book to Market, conseguindo resultados melhores que o CAPM tradicional. O presente estudo leva em conta a questão do reinvestimento do lucro gerado e utilizando o modelo de Gordon propõe uma variável de classificação de empresas de crescimento e empresas valor, conceito já utilizado na literatura de finanças.Com base nesta variável montam-se carteiras de ações entre os anos de 2005 e 2012 e observa-se que é possível obter ganhos com a lógica proposta. Ao longo do período seria possível obter com as carteiras selecionadas ganhos de até 107,85% contra os retornos de 55,58% das carteiras com todos os ativos. Organizamos os mesmos ativos pela ótica da relação Book to Market as quais obtiveram retorno total do período de 90,42%. Apesar de notar uma mudança clara de comportamento, onde apenas nos quatro primeiros anos do estudo as carteiras com empresas value são superiores e nos quatro últimos períodos as carteiras de empresas growth são as melhores. Estes resultados são compatíveis com os resultados de Braga e Leal (2000), e Mescolin, Martinelli Braga e da Costa Jr. (1997), verificando um melhor desempenho para as empresas value.

Fecundity, egg deposition, and mortality of market squid (Lolilgo opalescens)

Loligo opalescens live less than a year and die after a short spawning period before all oocytes are expended. Potential fecundity (EP), the standing stock of all oocytes just before the onset of spawning, increased with dorsal mantle length (L), where EP = 29.8L. For the average female squid (L of 129 mm), EP was 3844 oocytes. During the spawning period, no oogonia were produced; therefore the standing stock of oocytes declined as they were ovulated. This decline in oocytes was correlated with a decline in mantle condition and an increase in the size of the smallest oocyte in the ovary. Close agreement between the decline in estimated body weight and standing stock of oocytes during the spawning period indicated that maturation and spawning of eggs could largely, if not entirely, be supported by the conversion of energy reserves in tissue. Loligo opalescens, newly recruited to the spawning population, ovulated about 36% of their potential fecundity during their first spawning day and fewer ova were released in subsequent days. Loligo opalescens do not spawn all of their oocytes; a small percentage of the spawning population may live long enough to spawn 78% of their potential fecundity. Loligo opalescens are taken in a spawning grounds fishery off California, where nearly all of the catch are mature spawning adults. Thirty-three percent of the potential fecundity of L. opalescens was deposited before they were taken by the fishery (December 1998−99). This observation led to the development of a management strategy based on monitoring the escapement of eggs from the fishery. The strategy requires estimation of the fecundity realized by the average squid in the population which is a function of egg deposition and mortality rates. A model indicated that the daily total mortality rate on the spawning ground may be about 0.45 and that the average adult may live only 1.67 days after spawning begins. The rate at which eggs escape the fishery was modeled and the sensitivity of changing daily rates of fishing mortality, natural mortality, and egg deposition was examined. A rapid method for monitoring the fecundity of the L. opalescens catch was developed.

Chemical, bacteriological and sensory examination of split, dried, smoked bream on the market in Zambia

A critical examination of the market quality of split, dried and smoked bream (Tilapia spp.) was chemically, bacteriologically and organoleptically conducted for the period of August 1968 to January 1969. The aim of this survey was to obtain basic information for the development of national quality standards for the commodity. Relationships of cooked meat score to pH, fish size, appearance and smell score, and water content wcre significantly correlated and responsive. Therefore, these parameters were proposed to be used as indices for the quality standards of the products.

Fractional versus decimal pricing: Evidence from the UK Long Gilt futures market

ap Gwilym, Owain, McManus, Ian, and Thomas, Stephen, 'Fractional versus decimal pricing: Evidence from the UK Long Gilt futures market', Journal of Futures Markets (2005) 25(5) pp.419-442 RAE2008

Bid-ask spreads and volatility in the foreign exchange market. An empirical analysis

Consistent with the implications from a simple asymmetric information model for the bid-ask spread, we present empirical evidence that the size of the bid-ask spread in the foreign exchange market is positively related to the underlying exchange rate uncertainty. The estimation results are based on an ordered probit analysis that captures the discreteness in the spread distribution, with the uncertainty of the spot exchange rate being quantified through a GARCH type model. The data sets consists of more than 300,000 continuously recorded Deutschemark/dollar quotes over the period from April 1989 to June 1989. © 1994.

Law, Politics and Financial Development: The Great Reversal of the U.K. Corporate Debt Market

This article examines the role of creditor protection in the development of the U.K. corporate bond market. This market grew rapidly in the late nineteenth century, but in the twentieth century it experienced a reversal, albeit with a short-lived post-1945 renaissance. Such was the extent of the reversal that the market from the 1970s onwards was smaller than it had been in 1870. We find that law does not explain the variation in the size of this market over time. Alternatively, our evidence suggests that inflation and taxation policies were major drivers of this market in the post-1945 era. Copyright © The Economic History Association 2013

The cross-section of stock returns in an early stock market

Using a new dataset which contains monthly data on 1015 stocks traded on the London Stock Exchange between 1825 and 1870, we investigate the cross section of stock returns in this early capital market. Unique features of this market allow us to evaluate the veracity of several popular explanations of asset pricing behavior. Using portfolio analysis and Fama–MacBeth regressions, we find that stock characteristics such as beta, illiquidity, dividend yield, and past-year return performance are all positively correlated with stock returns. However, market capitalization and past-three-year return performance have no significant correlation with stock returns.

Vulnerability and robustness of SME supply chains: An empirical study of risk and disturbance management of fresh food processors in a developing market

The aim of this paper is to analyse vulnerability and robustness of small and medium size enterprises (SMEs) supply chains and to consider contextual factors that might influence the success of their disturbance management: Risky product and business environment. By using an exploratory case study it is shown how these contextual factors attribute vulnerability sources, contribute to the robustness of a company’s performance and supply chain vulnerability, as well as how a company seeks to manage internal and external vulnerability sources. The exploratory case is based on a fresh food supply chain of a manufacturing SME operating in a developing market.
Case findings suggest that fresh food supply chains of a manufacturing SME in developing markets are prone to disruptions of their logistics and production processes due to ‘riskiness’ of fresh food products, the ‘riskiness’ of developing markets, as well as ‘riskiness’ of SMEs themselves. However, this does not necessarily indicate the vulnerability of an SME and its entire supply chain. Findings indicate that SMEs can be very successful in disturbance management by selective use of redesign strategies that aim to prevent or reduce the impact of disturbances. More precise, it is likely that an SME can achieve robust performance by employing preventive redesign strategies in managing disturbances that result from internal, company related vulnerability sources, while impact reduction strategies are likely to contribute to robust performance of an SME if used to manage disturbances that result from internal, supply chain related vulnerability sources, as well as external vulnerability sources.