Research articles for the 2020-10-17
Changes of the Time Intervals Specific to Calendar Anomalies: The Case of TOQ Effect on Bucharest Stock Exchange
SSRN
The Turn-of-the-quarter (TOQ) Effect is a calendar anomaly consisting in abnormal returns occurring in a specific time interval, that starts in the mth last trading day of a quarter (BQ-m) and ends in the nth last trading day of a quarter (BQ+n). As many other anomalies, the TOQ Effect is not necessary persistent in time, so the interval [BQ-m; BQ+n] could experience some changes. This paper explores such changes for the time intervals specific to the Turn-of-the-quarter (TOQ) Effect using the daily values of three main indexes from Bucharest Stock Exchange: BET, BET-FI and BET-XT. We investigate the presence of this calendar anomaly in two periods: January 2007 â€" December 2013 and January 2014 â€" July 2020. For the first one we found abnormal returns within the time intervals [BQ-3; BQ+1], in the case of BET, [BQ-6; BQ+3], in the case of BET-FI and for a single trading day (BQ-2), in the case of BET-XT. For the second period, the results indicate abnormal returns within the time intervals [BQ-5; BQ+5], in the case of BET and BET-XT, and [BQ-5; BQ+6], in the case of BET-FI. These changes could be linked to the behaviors of investors who want to exploit or to avoid the abnormal returns, but also to the different circumstances associated to the two periods.
SSRN
The Turn-of-the-quarter (TOQ) Effect is a calendar anomaly consisting in abnormal returns occurring in a specific time interval, that starts in the mth last trading day of a quarter (BQ-m) and ends in the nth last trading day of a quarter (BQ+n). As many other anomalies, the TOQ Effect is not necessary persistent in time, so the interval [BQ-m; BQ+n] could experience some changes. This paper explores such changes for the time intervals specific to the Turn-of-the-quarter (TOQ) Effect using the daily values of three main indexes from Bucharest Stock Exchange: BET, BET-FI and BET-XT. We investigate the presence of this calendar anomaly in two periods: January 2007 â€" December 2013 and January 2014 â€" July 2020. For the first one we found abnormal returns within the time intervals [BQ-3; BQ+1], in the case of BET, [BQ-6; BQ+3], in the case of BET-FI and for a single trading day (BQ-2), in the case of BET-XT. For the second period, the results indicate abnormal returns within the time intervals [BQ-5; BQ+5], in the case of BET and BET-XT, and [BQ-5; BQ+6], in the case of BET-FI. These changes could be linked to the behaviors of investors who want to exploit or to avoid the abnormal returns, but also to the different circumstances associated to the two periods.
External Guarantees and Stock Price Crash Risk
SSRN
This study examines the financial risk of pervasive external guarantee activities of listed firms in China. Using a sample of Chinese A-share listed firms during the period from 2008 to 2017, we find a positive association between external guarantees intensity and stock price crash risk. Deals with high repayment obligations and weak guarantee relationship amplify this relationship. In addition, the positive association is more pronounced in firms with low business trust, binding financial constraints, and severe information asymmetry. Our findings provide regulatory insights for preventing systematic risks of external guarantees in the financial market.
SSRN
This study examines the financial risk of pervasive external guarantee activities of listed firms in China. Using a sample of Chinese A-share listed firms during the period from 2008 to 2017, we find a positive association between external guarantees intensity and stock price crash risk. Deals with high repayment obligations and weak guarantee relationship amplify this relationship. In addition, the positive association is more pronounced in firms with low business trust, binding financial constraints, and severe information asymmetry. Our findings provide regulatory insights for preventing systematic risks of external guarantees in the financial market.
Institutional Cross-Ownership of Peer Firms and Investment Sensitivity to Stock Price
SSRN
Theory suggests that stock price guides managers in corporate decisions as managers learn from price. We reason that cross-ownership of industry peers lowers information processing costs and increases industry specialization, helping investors better produce private information and transmit it to stock price. Cross-ownership can thus increase managerial learning from stock price in investment decisions. Consistent with our expectations, we find that a firm’s investment-q sensitivity increases as its cross-ownership in peer firms increases, in particular when information signals are not highly correlated between managers and outsiders. Moreover, we find that a pseudo measure of cross-ownership in non-peer firms is not positively but, rather, negatively associated with the investment-q sensitivity. We strengthen the causal inference by conducting a difference-in-differences analysis using the 2003 mutual fund scandal. Overall, our results suggest that cross-ownership in peer firms can induce more efficient corporate decisions by helping prices better reflect investors’ private information.
SSRN
Theory suggests that stock price guides managers in corporate decisions as managers learn from price. We reason that cross-ownership of industry peers lowers information processing costs and increases industry specialization, helping investors better produce private information and transmit it to stock price. Cross-ownership can thus increase managerial learning from stock price in investment decisions. Consistent with our expectations, we find that a firm’s investment-q sensitivity increases as its cross-ownership in peer firms increases, in particular when information signals are not highly correlated between managers and outsiders. Moreover, we find that a pseudo measure of cross-ownership in non-peer firms is not positively but, rather, negatively associated with the investment-q sensitivity. We strengthen the causal inference by conducting a difference-in-differences analysis using the 2003 mutual fund scandal. Overall, our results suggest that cross-ownership in peer firms can induce more efficient corporate decisions by helping prices better reflect investors’ private information.
