Investment Analysts Journal - Volume 2014, Issue 80, 2014
Volumes & issues
Volume 2014, Issue 80, 2014
Investment Analysts Society Award for the best article published annually in the Investment Analysts JournalSource: Investment Analysts Journal 2014 (2014)More Less
The relationship between discretionary accruals and announced repurchase intentions : the case of the Taiwan Stock Exchange marketAuthor B-C. ChiouSource: Investment Analysts Journal 2014, pp 1 –12 (2014)More Less
Previous studies have found significantly positive abnormal returns following repurchase announcements in the Taiwanese security market, whatever the announced intention of the repurchase. The present study shows that the abnormal returns that follow a repurchase announcement when the intention is to maintain the share price is positively related to the discretionary accruals (DAs) prior to the announcement, as well as to the repurchase percentage. Moreover, these DAs are positively correlated with operational performance following the repurchase. That is, managers use the DAs to inflate earnings prior to the repurchase announcement and thus signal future favourable operational performance. However, when the announced repurchase intention is to transfer stock to employees or option holders, the abnormal returns are positively related to the repurchase percentage but not to the DAs.
Embezzlement disclosure request and information asymmetry between individual and institutional investorsSource: Investment Analysts Journal 2014, pp 13 –23 (2014)More Less
This paper investigates the effect of embezzlement disclosure requests as well as the information asymmetry among investors for the firms listed on the Korea Exchange. Firms that receive an embezzlement disclosure request exhibit an abnormal return of -8.41% on the request day, an abnormal return of -2.16% on the following day, and a cumulative abnormal return of about -20% leading to the disclosure request. This result confirms that embezzlement is materially bad news, causing substantial loss to the investors. Furthermore, individual investors show net purchases on firms prior to embezzlement disclosure requests while institutional investors show net sales, suggesting that the information asymmetry exists between individual and institutional investors prior to embezzlement disclosure requests causing individual investors trade with institutional investors at an informational disadvantage.
Author M. MelgarejoSource: Investment Analysts Journal 2014, pp 25 –36 (2014)More Less
This paper examines whether beating previous year cash flow values and analysts' cash flow forecasts impact the firms' cost of debt. Creditors are expected to be more concerned about firm solvency than firm profitability. Accordingly, if lenders have any reference point it may be related to cash flow numbers. This study finds that firms that beat analysts' cash flow forecasts have smaller initial bond yield spreads in the next period and a decrease in their initial bond yield spreads between consecutive periods. This effect is more pronounced at short maturities and for observations with less informative earnings. Firms with lower earnings response coefficients that beat analysts' cash flow forecasts show a higher probability of a credit rating upgrade.
Source: Investment Analysts Journal 2014, pp 37 –43 (2014)More Less
The purpose of this paper is to analyse whether applying Altman's model, with specific adjustments to highly levered firms, can reliably predict bankruptcies one quarter, one year, and two years in advance. Our focus on highly levered firms is motivated by leverage-driven theories of financial crises, where highly levered firms are the early defaulters once the expansionary phase of the business cycle turns into a recessionary phase. We find high predictability of defaults of firms in the Real-estate and Holding-companies sectors in Israel one year before the recent crisis.
Source: Investment Analysts Journal 2014, pp 45 –57 (2014)More Less
This study establishes that equity analyst recommendations have a significant short-term impact on share prices, by utilising an international database containing 31 363 analyst recommendations on JSE-listed and delisted companies, published over the period 1995 to 2011. In addition, two portfolio strategies were constructed. The first strategy shows that only investing in stocks with the most favourable consensus recommendations is associated with significant abnormal returns. The second strategy demonstrates that a portfolio consisting of recently upgraded stocks earns positive abnormal returns while a portfolio consisting of downgraded stocks is associated with negative abnormal returns.
Source: Investment Analysts Journal 2014, pp 59 –69 (2014)More Less
Van Rensburg and Robertson (2003) stated that the CAPM beta estimated using share returns has little or no relationship with returns generated by size and value (proxied by price-to-earnings) sorted portfolios. This study intends to show that a reformulated CAPM beta, estimated using return on equity as opposed to share returns, unravels the size and value premium. The study makes use of vector autoregressive models in order to examine the short term effect of structural shocks to the cash-flow fundamentals of a share or portfolio of shares through impulse response functions as well as quantifying a long-term relationship between cash-flow fundamentals and share returns using a vector error correction model (VECM) specification.
Author Y-H. LeeSource: Investment Analysts Journal 2014, pp 71 –78 (2014)More Less
This paper investigates the lead-lag relationship and jump effect linkages between the Nikkei 225 returns and the changes in the Volatility Index Japan (hereafter VXJ). The empirical results show that the evidence regarding the market returns influences the feelings of the investors. It is found that both the jump components in investor sentiment and market returns are strong phenomena. Moreover, the results of this study also indicate that the time-varying arrival of correlated jumps is jointly determined by the volatility in the changes in the VXJ. Finally, the CBP-GARCH model can be used to examine the jump effect between Nikkei 225 returns and the changes in the VXJ.