Download or read book Two Essays on Stock Preference and Performance of Institutional Investors written by Jin Xu (doctor of finance.) and published by . This book was released on 2008 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two essays on the stock preference and performance of institutional investors are included in the dissertation. In the first essay, I document that mutual fund managers and other institutional investors tend to hold stocks with higher betas. This effect holds even after precisely controlling for stocks' risk characteristics such as size, book-to-market equity ratio and momentum. This is contrary to the widely accepted view that betas are no longer associated with expected returns. However, these results support my simple model where a fund manager's payoff function depends on returns in excess of a benchmark. For the manager, on the one hand, he tends to load up with high beta stocks since he wants to co-move with the market and other factors as much as possible. On the other hand, the manager faces a trade-off between expected performance and the volatility of tracking error. My model thus shows that the manager prefers to choose higher beta than his benchmark, and that his beta choice has an optimal level which depends on his perceived factor returns and volatility. My empirical findings further confirm the model results. First, I show that the effect of managers holding higher beta stocks is robust to a number of alternative explanations including the effects of their liquidity selection or trading activities. Second, consistent with the model predictions of managers sticking close to their benchmarks during risky periods, I demonstrate that the average beta choice of mutual fund managers can predict future market volatility, even after controlling for other common volatility predictors, such as lagged volatility and implied volatility. The second essay is the first to explicitly address the performance of actively managed mutual funds conditioned on investor sentiment. Almost all fund size quintiles subsequently outperform the market when sentiment is low while all of them underperform the market when sentiment is high. This also holds true after adjusting the fund returns by various performance benchmarks. I further show that the impact of investor sentiment on fund performance is mostly due to small investor sentiment. These findings can partially validate the existence of actively managed mutual funds which underperform the market overall (Gruber 1996). In addition, when conditioning on investor sentiment, the pattern of decreasing returns to scale in mutual funds, recently documented in Chen, Hong, Huang, and Kubik (2004), is fully reversed when sentiment is high while the pattern persists and is more pronounced when sentiment is low. Further results suggest that smaller funds tend to hold smaller stocks, which is shown to drive the above patterns. I also document that smaller funds have more sentiment timing ability or feasibility than larger funds. These findings have many important implications including persistence of fund performance which may not exist under conventional performance measures.

Download or read book Two Essays on Institutional Investors written by Hoang Huy Nguyen and published by . This book was released on 2007 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays investigating the trading by institutions and its impact on the stock market. In the first essay, I investigate why changes in institutional breadth predict return. I first show that changes in breadth are positively associated with abnormal returns over the following four quarters. I then demonstrate that this return predictability can be attributed to the information about the firms' future operating performance. When I examine different types of institutions independently, I find that the predictive power varies across the population of institutions. More specifically, institutions that follow active management style are better able to predict future returns than the passive institutions, and their predictive power appears to be associated with information about future earnings growth. These findings are consistent with the information hypothesis that changes in breadth of institutional ownership can predict return because they contain information about the fundamental value of firms. In the second essay, I examine institutional herding behavior and its impact on stock prices. I document that herds by institutions usually last for more than one quarter and that herds occur more frequently for small and medium size stocks. I find that after herds end, there are reversals in stocks returns for up to four quarters. The magnitude of reversals is positively related to the duration of herding, and negatively related to the price impact of current herding activity. This pattern in returns prevails for all sub-periods examined and is concentrated in small and medium size stocks. My findings suggest that institutional herding may destabilize stock prices.

Download or read book Two Essays on Institutional Investors written by Jian Huang and published by . This book was released on 2010 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Preferred Stock written by Qian Wang and published by . This book was released on 2006 with total page 190 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains two essays that address issues concerning preferred stock. In the first essay, I study the incidence of preferred stock issuance to address two issues: (1) what influences the timing of such issues, and (2) do the influential factors suggest that firms view preferred stock as a substitute for common stock or for debt. Using a sample of U.S. preferred stock issuance from 1980 to 2002, I find that the issuance of straight preferred stock responds to bond market conditions, particularly at the short end of the maturity spectrum. Consequently my evidence is consistent with preferred stock being more of a substitute for debt than for common stock, and with managers timing the issuance of new preferred stock according to the past path of interest rates. In the second essay, I examine the relationship between corporate governance and preferred stock ratings and yields. Using a sample of preferred stocks traded in November, 2004, I find evidence for the following conclusions. First, firms with rated issues tend to be larger and more profitable firms. Further, firms with rated issues tend to have more anti-takeover provisions and higher institutional shareholding. Second, preferred stock ratings are largely influenced by their issuer's long-term debt rating, with institutional ownership and CEO ownership adding extra explaining power. The yields of preferred stocks are affected by anti-takeover provisions, rating information together with firm specific features, such as size, profitability, systematic risk and idiosyncratic risk.

Download or read book Essays in Institutional Investor Behavior written by Viktoriya Lantushenko and published by . This book was released on 2016 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of one chapter studying mutual fund active management and two chapters examining institutional trading in various settings. The three essays in my dissertation explore institutional investor behavior. My first paper titled "Innovation in mutual fund portfolios: Implications for fund alpha" introduces a new measure of portfolio holdings that has power to explain future fund abnormal returns. This measure is defined as "return on portfolio innovation." It is constructed as the return on completely new portfolio positions that a fund has not held before. I evaluate the return on newly added positions because their performance can signal the quality of managerial effort. On average, a one-standard deviation increase in the return on innovation increases the Carhart (1997) four-factor fund alpha by approximately 0.34 to 0.52 percent per year. The results have important implications for fund performance and manager behavior. The second essay titled "Institutional property-type herding in real estate investment trusts," with Edward Nelling, explores whether institutional investors exhibit herding behavior by property type in real estate investment trusts (REITs). Our analysis of changes in institutional portfolio holdings suggests strong evidence of this behavior. We analyze the autocorrelation in aggregate institutional demand, and find that most of it is driven by institutional investor following the trades of others. Although momentum trading explains a small amount of this herding, institutional property type demand is more strongly associated with lagged institutional demand than lagged returns. The results suggest that correlated information signals drive herding in REITs. In addition, we examine the extent to which herding in REIT property types affects price performance in the private real estate market. We find that information transmission resulting from institutional herding in REITs occurs faster in public real estate markets than in private markets. The final essay titled "Investing in innovation: Evidence from institutional trading around patent publications," with Edward Nelling, examines institutional trading activity around patent publication dates. Unlike previous studies that use the future citations count to proxy for patent value, we measure the value of innovation by the three-day cumulative abnormal returns (CARs) around announcements. We find an increase in institutional demand for a firm's shares around patent announcements, and this increase is correlated with announcement returns. In addition, the increase in demand is greater when the firm's shareholder base consists of a higher percentage of long-term institutions. We find no correlation between patent announcement returns and the future number of citations. Patent announcements are also associated with increases in liquidity and analyst coverage, indicating that innovation may reduce information uncertainty between a firm and its investors. In addition, firms that announce patents outperform those in a control sample over a long-run. Overall, our results suggest that both investors and firms benefit from innovation.

Download or read book Two Essays on Financial Markets and Institutional Investors written by Haoyu Xu and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My thesis consists two studies on financial markets and institutional investors. In Chapter 2, I study the trades immediately after the market open and immediately before the market close. The trades in the morning positively predict future returns and cause price continuation. The trades in the afternoon negatively predict future returns and cause price reversals. The momentum trading strategies based on morning returns and the reversal trading strategies based on afternoon returns generate significant abnormal returns, which cannot be explained by standard risk factors including momentum and reversal factors. The results provide strong evidence that trades in the morning are mostly information driven and trades in the afternoon are mostly liquidity driven. In Chapter 3, we explore the properties of equity mutual funds that experience a loss of assets after poor performance. We document that both inflows and outflows are less sensitive to performance because performance-sensitive investors leave or decide not to invest after bad performance. Consistent with the idea that attrition measures the sorting of performance-sensitive investors, we find that attrition has less of an impact on the fundâ s flow-performance sensitivity for institutional funds where there is less dispersion in investor performance-sensitivity. Also, attrition has no effect on the flow- performance sensitivity when attrition arises after good performance or investors invest for non-performance reasons.

Download or read book Two essays on institutional investors Essay one written by Jian Huang and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Institutional Investors written by Ligang Zhong and published by . This book was released on 2012 with total page 436 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I investigate the impact of institutional investors on security prices and corporate policies, and offer a new perspective on the vital role that institutional investors play in the modern capital market. Specifically, on the impact on security price movements, I design a new measure of stock-level sentiment based on mutual fund publically disclosed portfolio information and provide a new dimension to better predict stock returns. A trading strategy based on the new sentiment metrics can generate an annualized alpha of 21.27%. The abnormal returns cannot be explained by the time-varying expected returns and transaction costs, and can be best explained by mutual fund overreactions. Hence, my findings can be interpreted as a new anomaly in a new era-when institutional investors are the marginal traders. On the impact on corporate policy side, I document two pieces of new empirical evidence on the importance of long-term institutional holdings: the entrenchment effect of long-term institutional holdings in the context of corporate financing decisions and the active monitoring role of long-term institutional investors in the context of international firms' accounting qualities. Combined with previous studies which favour a long-term institutional investor, the evidence on the cost side of long-term holding I document here can serve as the first call for an optimal investment horizon for firms operating in the U.S.

Download or read book Two Essays on Investor Preference written by Lu Qin and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores two different kinds of investor preferences for stocks: geographicpreference and skewness preference. In the first essay titled "Faster than Flying: High-Speed Rail, Investors, and Firms", we study the effects of a direct high-speed rail (HSR) service between two cities on investors and firms in China. We find that, after the HSR introduction, investors make more crosscity searches and block purchases of firms in connected cities. The HSR introduction also leads to less comovement among local stocks and more comovement between stocks in connected cities. Firms located in more central cities in the HSR network enjoy higher firm valuation, lower cost of equity, and better liquidity, in part through the channel of increased investor recognition. The HSR effects on valuation, cost of equity, and liquidity are more pronounced among small firms and when the connected city pair distance is below 1,500 km, for which HSR is faster than flying. In the second essay titled, "Can skewness preference cause misreactions to SEO announcements?", we report that the degree of skewness in a firm's stock returns can influence the stock price reaction to its SEO announcement. We find that high skewness issuers are associated with higher reactions to their SEO announcements. Our results add to the literature that studies the impact of skewness preference on asset prices. Our analysis can help explain why some SEOs are received favorably by investors, despite the fact that theory suggests SEO announcements signal overvaluation and empirical studies report negative stock price reactions

Download or read book Portfolio Preferences of Foreign Institutional Investors written by Reena Aggarwal and published by World Bank Publications. This book was released on 2003 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book ESG and Responsible Institutional Investing Around the World A Critical Review written by Pedro Matos and published by CFA Institute Research Foundation. This book was released on 2020-05-29 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: This survey examines the vibrant academic literature on environmental, social, and governance (ESG) investing. While there is no consensus on the exact list of ESG issues, responsible investors increasingly assess stocks in their portfolios based on nonfinancial data on environmental impact (e.g., carbon emissions), social impact (e.g., employee satisfaction), and governance attributes (e.g., board structure). The objective is to reduce exposure to investments that pose greater ESG risks or to influence companies to become more sustainable. One active area of research at present involves assessing portfolio risk exposure to climate change. This literature review focuses on institutional investors, which have grown in importance such that they have now become the largest holders of shares in public companies globally. Historically, institutional investors tended to concentrate their ESG efforts mostly on corporate governance (the “G” in ESG). These efforts included seeking to eliminate provisions that restrict shareholder rights and enhance managerial power, such as staggered boards, supermajority rules, golden parachutes, and poison pills. Highlights from this section: · There is no consensus on the exact list of ESG issues and their materiality. · The ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” · Investors should be positioning themselves for increased regulation, with the regulatory agenda being more ambitious in the European Union than in the United States. Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals. CFA Institute provides an exemplary case in its Future of Finance series (www.cfainstitute.org/research/future-finance). For the academic community, I suggest we ramp up research aimed at tackling some of the open questions around the pressing societal goals of ESG investing. I am optimistic that practitioners and academics will identify meaningful ways to better harness the power of global financial markets for addressing the pressing ESG issues facing our society.

Download or read book Exit Voice and Loyalty written by Albert O. Hirschman and published by Harvard University Press. This book was released on 1970 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: An innovator in contemporary thought on economic and political development looks here at decline rather than growth. Albert O. Hirschman makes a basic distinction between alternative ways of reacting to deterioration in business firms and, in general, to dissatisfaction with organizations: one, “exit,” is for the member to quit the organization or for the customer to switch to the competing product, and the other, “voice,” is for members or customers to agitate and exert influence for change “from within.” The efficiency of the competitive mechanism, with its total reliance on exit, is questioned for certain important situations. As exit often undercuts voice while being unable to counteract decline, loyalty is seen in the function of retarding exit and of permitting voice to play its proper role. The interplay of the three concepts turns out to illuminate a wide range of economic, social, and political phenomena. As the author states in the preface, “having found my own unifying way of looking at issues as diverse as competition and the two-party system, divorce and the American character, black power and the failure of ‘unhappy’ top officials to resign over Vietnam, I decided to let myself go a little.”

Download or read book Dividends and Dividend Policy written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2009-05-04 with total page 552 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividends And Dividend Policy As part of the Robert W. Kolb Series in Finance, Dividends and Dividend Policy aims to be the essential guide to dividends and their impact on shareholder value. Issues concerning dividends and dividend policy have always posed challenges to both academics and professionals. While all the pieces to the dividend puzzle may not be in place yet, the information found here can help you gain a firm understanding of this dynamic discipline. Comprising twenty-eight chapters—contributed by both top academics and financial experts in the field—this well-rounded resource discusses everything from corporate dividend decisions to the role behavioral finance plays in dividend policy. Along the way, you'll gain valuable insights into the history, trends, and determinants of dividends and dividend policy, and discover the different approaches firms are taking when it comes to dividends. Whether you're a seasoned financial professional or just beginning your journey in the world of finance, having a firm understanding of the issues surrounding dividends and dividend policy is now more important than ever. With this book as your guide, you'll be prepared to make the most informed dividend-related decisions possible—even in the most challenging economic conditions. The Robert W. Kolb Series in Finance is an unparalleled source of information dedicated to the most important issues in modern finance. Each book focuses on a specific topic in the field of finance and contains contributed chapters from both respected academics and experienced financial professionals.

Download or read book Corporate Governance Strengthening Latin American Corporate Governance The Role of Institutional Investors written by OECD and published by OECD Publishing. This book was released on 2011-07-01 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report reflects long-term, in-depth discussion and debate by participants in the Latin American Roundtable on Corporate Governance.

Download or read book Institutional Investor Activism written by William W. Bratton and published by Oxford University Press, USA. This book was released on 2015 with total page 817 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past two decades, activist investors have begun to play an increasingly important role in corporate governance around the world. This book analyses the impact of activists on the companies that they invest, the effects on shareholders and on activists funds themselves.

Download or read book The Shareholder Value Myth written by Lynn Stout and published by Berrett-Koehler Publishers. This book was released on 2012-05-07 with total page 151 pages. Available in PDF, EPUB and Kindle. Book excerpt: An in-depth look at the trouble with shareholder value thinking and at better options for models of corporate purpose. Executives, investors, and the business press routinely chant the mantra that corporations are required to “maximize shareholder value.” In this pathbreaking book, renowned corporate expert Lynn Stout debunks the myth that corporate law mandates shareholder primacy. Stout shows how shareholder value thinking endangers not only investors but the rest of us as well, leading managers to focus myopically on short-term earnings; discouraging investment and innovation; harming employees, customers, and communities; and causing companies to indulge in reckless, sociopathic, and irresponsible behaviors. And she looks at new models of corporate purpose that better serve the needs of investors, corporations, and society. “A must-read for managers, directors, and policymakers interested in getting America back in the business of creating real value for the long term.” —Constance E. Bagley, professor, Yale School of Management; president, Academy of Legal Studies in Business; and author of Managers and the Legal Environment and Winning Legally “A compelling call for radically changing the way business is done... The Shareholder Value Myth powerfully demonstrates both the dangers of the shareholder value rule and the falseness of its alleged legal necessity.” —Joel Bakan, professor, The University of British Columbia, and author of the book and film The Corporation “Lynn Stout has a keen mind, a sharp pen, and an unbending sense of fearlessness. Her book is a must-read for anyone interested in understanding the root causes of the current financial calamity.” —Jack Willoughby, senior editor, Barron’s “Lynn Stout offers a new vision of good corporate governance that serves investors, firms, and the American economy.” —Judy Samuelson, executive director, Business and Society Program, The Aspen Institute

Download or read book Financial Markets in Finland written by and published by . This book was released on 1986 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: