Investment Analysts Journal - Volume 2013, Issue 78, 2013
Volumes & issues
Volume 2013, Issue 78, 2013
Investment Analysts Society Award for the best article published annually in the Investment Analysts JournalSource: Investment Analysts Journal 2013 (2013)More Less
Author A. CharterisSource: Investment Analysts Journal 2013, pp 1 –11 (2013)More Less
Exchange-traded funds (ETFs) trade at a market-determined price which may differ from their Net Asset Value (NAV). This study examines the price deviations of four domestic and three foreign South African-listed ETFs. Five of these funds were found to trade at a premium to their NAV on average and two at a discount. These differences however do not persist for more than two trading days and thus the opportunity for arbitrage opportunities for investors is limited. However, the deviations do contain important information about the following day's returns on ETFs, in contravention of weak-form market efficiency. A trading strategy is developed in order to profit from this information and this is found to be successful for three of the funds after accounting for transaction costs.
Source: Investment Analysts Journal 2013, pp 13 –26 (2013)More Less
Pairs trading strategies aim to profit from temporary deviations in some underlying relationship between the prices of two stocks. The trader takes appropriate long and short positions in the two stocks and waits for their prices to revert back to the underlying relationship or even to deviate in the opposite direction from the current deviation, at which time the trader may exit at a profit. We formulate formal trading rules that implement pairs trading strategies and discuss their profitability and risk by means of back-testing on stocks listed on the Johannesburg Stock Exchange (JSE).
Source: Investment Analysts Journal 2013, pp 27 –44 (2013)More Less
This paper aims to examine the adjustment speed of debt maturity structures within the context of African countries. Dynamic adjustment models using system GMM proposed by Blundell and Bond (1998) were employed to analyze data pertaining to 986 non-financial firms drawn from nine African countries. We find evidence that firms in Africa adjust their debt maturity structures to a target. Our results also indicate that the legal protection afforded to investors and the efficiency of the legal system enhance the pace at which firms in Africa rebalance their debt maturity structures. The evidence shows that firms in richer and fast growing economies experience comparatively rapid adjustments to their debt maturity structures than is the case in poorer and slow-growth economies. In addition, the size and growth prospects of firms positively enhance adjustment speed while the distance from optimal maturity structures deters the rebalancing pace. These findings signify the role that agency, bankruptcy and transaction costs, liquidity pressure and financial flexibility play in the maturity structures decision of firms in Africa.
Author G. LoureiroSource: Investment Analysts Journal 2013, pp 45 –64 (2013)More Less
I examine how the information environment of cross-listed firms is affected by a mechanism of reputational bonding: the choice of a reputable underwriter to sponsor an equity offering. Using a sample of foreign firms cross-listed in the U.S. from 1980 to 2004, I find that those that raise equity and hire a reputable underwriter, post cross-listing, observe higher analyst coverage and more accurate earnings forecasts. Empirical evidence shows that these improvements are positively related to firm value. More importantly, the improved accuracy of firms sponsored by top underwriters has an additional positive impact on their Tobin's q. Overall, the results show that top underwriters play an important monitoring role, via their impact on firm's information environment.
Source: Investment Analysts Journal 2013, pp 65 –81 (2013)More Less
We hypothesize and find empirical evidence that two structural constraints of the industry are informative in the corporate failure prediction, industry concentration and dependence on customers and suppliers. Using an extensive database on corporate failures and bankruptcies in the U.S. market from 1998 to 2009 we find that the probabilities of failure and bankruptcy are significantly higher for firms in highly concentrated industries. The probability of bankruptcy is higher for firms in industries with stronger customer dependency, but this factor does not affect failure probabilities. Also in the case of failures the model's fit is noticeably higher than in the case of bankruptcies.
Source: Investment Analysts Journal 2013, pp 83 –96 (2013)More Less
The private sector and financial regulators have improved their ability to monitor and control risk taking. The Basel II Accord binds credit institutions to revise the collateral values of their credit loans frequently and states that statistical methods may be used. Although valuation of residential properties has traditionally been based solely on consultation with experts, this article presents an expert system for estimating collateral value that reduces costs and avoids expert consultations by using spatial statistical methods (kriging). This expert system allows for immediate, accurate and affordable valuations of large portfolio properties in the residential market. Using data from the Spanish market, we obtain sufficient goodness-of-fit in comparing actual and estimated prices. Particularly, results indicate that eight out of ten residential properties in Madrid are valued with less than 20% error and eight out of ten in Barcelona. Finally, the price of a housing portfolio is evaluated at two different dates.