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Author: Nathan Sosner Publisher: ISBN: Category : Languages : en Pages :
Book Description
In April 2000, 30 stocks were replaced in the Nikkei 225 Index. The unusually broad index redefinition allowed for a study of the effects of index-linked trading on the excess comovement of stock returns. A large increase occurred in the correlation of trading volume of stocks added to the index with the volume of stocks that remained in the index, and opposite results occurred for the deletions. Daily index return betas of the additions rose by an average of 0.45; index return betas of the deleted stocks fell by an average of 0.63. Theoretical predictions for changes in autocorrelations and cross-serial correlations of returns of index additions and deletions were confirmed. The results are consistent with the idea that trading patterns are associated with short-run excess comovement of stock returns.
Author: Nathan Sosner Publisher: ISBN: Category : Languages : en Pages :
Book Description
In April 2000, 30 stocks were replaced in the Nikkei 225 Index. The unusually broad index redefinition allowed for a study of the effects of index-linked trading on the excess comovement of stock returns. A large increase occurred in the correlation of trading volume of stocks added to the index with the volume of stocks that remained in the index, and opposite results occurred for the deletions. Daily index return betas of the additions rose by an average of 0.45; index return betas of the deleted stocks fell by an average of 0.63. Theoretical predictions for changes in autocorrelations and cross-serial correlations of returns of index additions and deletions were confirmed. The results are consistent with the idea that trading patterns are associated with short-run excess comovement of stock returns.
Author: Robin M. Greenwood Publisher: ISBN: Category : Languages : en Pages :
Book Description
Relative to their weights in a value-weighted index, a number of stocks in Japan's Nikkei 225 stock index are overweighted by a factor of 10 or more. I document a strong positive relation between overweighting and the comovement of a stock with other stocks in the Nikkei index, and a negative relationship between index overweighting and comovement with stocks outside of the index. The cross-sectional approach resolves endogeneity problems associated with event study demonstrations of excess comovement. A trading strategy that bets on the reversion of stock prices of overweighted stocks generates economic profits, confirming that the observed comovement patterns are excessive, and providing further evidence that comovement of stock returns can be a consequence of commonality in trading behavior.
Author: Nathan Sosner Publisher: ISBN: Category : Languages : en Pages : 59
Book Description
In April 2000, in one day, 30 stocks were replaced in the Nikkei 225 index in Japan. We analyze the change in comovement of returns of stocks added to and deleted from the index with the returns of stocks remaining in the index. A simple model shows that upon inclusion into (deletion from) a stock index, stocks should begin to comove more (less) with the index, due to a change in their trading pattern. The empirical findings provide sound support for these predictions: In the sample, daily index betas of the added stocks rose by an average of 0.60, while the average beta of the deleted stocks fell by 0.71. Our results confirm additional predictions of the model for changes in R2, turnover, and the autocorrelation of returns upon index inclusion and deletion, and hold at daily, weekly and bi-weekly return horizons. Fundamentals based explanations fail to account for these findings. We conclude that correlated trading of index stocks causes excess comovement of stock returns. We argue that the distinct trading mechanism on the Tokyo Stock Exchange contributes to the significance and magnitude of our results.
Author: Yishay Yafeh Publisher: International Monetary Fund ISBN: 1455218952 Category : Business & Economics Languages : en Pages : 36
Book Description
Using newly-constructed data covering the last decade, we document that, in most of forty markets, when added to the main index, firms’ returns experience an increase in comovement with the rest of the index, reflected in higher beta and greater explanatory power of the market return. Stock turnover and analyst coverage also typically increase upon inclusion. Using various tests, we find the demand-based view of comovement (the category/habitat theories of Barberis, Shleifer and Wurgler, 2005) to provide a good explanation for many of our findings. Some results, though, suggest that information-related factors are also important in explaining the increased comovement.
Author: Jing Yao Publisher: ISBN: Category : Languages : en Pages : 43
Book Description
This paper investigates how individual investor trading can cause stock prices to move for reasons unrelated to fundamentals. We use a sample of dual-listed stocks to identify the sources of their price movements. The results show that excess price comovement driven by the market-specific shock is persistent over the monthly horizon for some A-shares traded in China, but not for their H-shares traded in Hong Kong. Further trade-based analysis indicates that the market-specific shock to the A-shares' prices may be initiated by individual sentiment changes, as proxied by the buy-sell imbalance (BSI) of individual investors (except the wealthiest individuals), but the mechanism for its persistence must be an indirect one. We then hypothesize and confirm a feedback view that the sentiment-related feedback of sophisticated individuals can strengthen the persistence of sentiment-induced excess volatility. We find that the monthly correlation in daily BSI between two investor groups, the wealthiest individuals and all individuals, is positively related to the shock at the monthly frequency. Meanwhile, the BSI of the wealthiest individuals is negatively related to the shock's magnitude, suggesting that their trading behavior cannot be explained by an unawareness of the documented excess comovement but can be explained as the risk averse behavior of sophisticated investors. Our evidence and interpretation suggest that individual investors are more than a simple carrier of noise trading, and they can contribute to market inefficiency not only through individual irrationality, but also through individual rationality. We use the feedback view to shed light on several cross-country empirical anomalies.
Author: Jeffrey A. Frankel Publisher: University of Chicago Press ISBN: 0226260216 Category : Business & Economics Languages : en Pages : 428
Book Description
This timely volume addresses three important recent trends in the internationalization of United States equity markets: extensive market integration through foreign investment and links among stock prices around the world; increasing securitization as countries such as Japan come to rely more than ever before on markets in equities and bonds at the expense of banks; and the opening of national financial systems of newly industrializing countries to international financial flows and institutions, as governments remove capital controls and other barriers. Eight essays examine such issues as the current extent of international market integration, gains to U.S. investors through international diversification, home-country bias in investing, the role of time and location around the world in stock trading, and the behavior of country funds. Other, long-standing questions about equity markets are also addressed, including market efficiency and the accuracy of models of expected returns, with a particular focus on variances, covariances, and the price of risk according to the Capital Asset Pricing Model.
Author: Philipp Sandner Publisher: Springer Science & Business Media ISBN: 3834983934 Category : Business & Economics Languages : en Pages : 235
Book Description
Intangible assets such as knowledge or brands are increasingly important to companies. Such assets are essentially needed to develop new innovative products and to introduce them to the market. Philipp Sandner is one of the first researchers to approach the valuation of both technology- and market-based intangibles simultaneously by relying on portfolios of intellectual property (IP) derived from patents and trademarks.
Author: Mr.Taimur Baig Publisher: International Monetary Fund ISBN: 1451857284 Category : Business & Economics Languages : en Pages : 60
Book Description
This paper tests for evidence of contagion between the financial markets of Thailand, Malaysia, Indonesia, Korea, and the Philippines. Cross-country correlations among currencies and sovereign spreads are found to increase significantly during the crisis period, whereas the equity market correlations offer mixed evidence. A set of dummy variables using daily news is constructed to capture the impact of own-country and cross-border news on the markets. After controlling for own-country news and other fundamentals, the paper shows evidence of cross-border contagion in the currency and equity markets.
Author: Miguel Anton Sancho Publisher: ISBN: Category : Languages : en Pages :
Book Description
In this thesis I study the effects of institutional trading on the comovementof financial assets. In the first chapter, joint work with Christopher Polk, we connect stocks through common active mutual fund ownership, and use these connections to forecast cross-sectional variation in return covariance, controlling for similarity in style and other pair characteristics. We argue this covariance is due to contagion based on return decomposition evidence, cross-sectional heterogeneity in the extent of the effect, and the magnitude of average abnormal returns to a cross-stock reversal trading strategy exploiting information in these connections. We show that the typical long/short hedge fund covaries negatively with this strategy suggesting that hedge funds may potentially exacerbate the price dislocation we document. In the second chapter I study the sources of change in the systematic risks of stocks added to the S&P 500 index. Firstly, using vector autoregressions (VARs) and a two-beta decomposition, I find that I cannot reject the hypothesis that all of the well-known change in beta comes from the cash-flow news component of a firm's return. Secondly, I study fundamentals of included firms directly to reduce any concerns that the VAR-based results are sensitive to my particular speciffcation. As ownership structure cannot directly influence fundamentals, these results challenge previous findings, as they are consistent with the change in beta being due to a selection effect. In the third chapter, joint work with Daniel Bergstresser, we explore index-based comovement in the market for Credit Default Swaps (CDS). We exploit the additions of individual CDS contracts in the Markit CDX Index, a major credit derivative benchmark. We find that for single name CDS contracts, comovement increases after inclusion in the index. Comparing movements in the CDS spreads to movements of the bonds of the same issuers, the CDS spread comovement increases significantly more than the bond spread comovement. This pattern of evidence is consistent with the excess comovement in equity markets documented by Barberis et al (2005) and others.
Author: Nathan Sosner
Author: Nathan Sosner
Author: Robin M. Greenwood
Author: Nathan Sosner
Author: Yishay Yafeh
Author: Jing Yao
Author: Jeffrey A. Frankel
Author: Dr GangineniDhanaiah
Author: Philipp Sandner
Author: Mr.Taimur Baig
Author: Miguel Anton Sancho