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Abnormal Returns (abnormal + return)
Kinds of Abnormal Returns Selected AbstractsThird Left Pulmonary Vein with Abnormal Return Associated with Arteriovenous FistulaJOURNAL OF CARDIAC SURGERY, Issue 4 2008Ali Can Hatemi M.D., Ph.D. A 20-year-old woman with complaints of effort-induced dyspnea and easy fatigability was diagnosed with a third left pulmonary vein with abnormal return and arteriovenous fistula accompanied by a secundum atrial septal defect (ASD). Complete surgical repair was performed by ASD closure with a pericardial patch and triple ligation of the left vertical vein and associated third pulmonary vein. The patient was discharged on the seventh postoperative day in good health. Her last control examination was performed in the second postoperative year, revealing normal echocardiographic findings with an excellent clinical course. [source] The Quiet Period Goes out with a BangTHE JOURNAL OF FINANCE, Issue 1 2003Daniel J. Bradley We examine the expiration of the IPO quiet period, which occurs after the 25th calendar day following the offering. For IPOs during 1996 to 2000, we find that analyst coverage is initiated immediately for 76 percent of these firms, almost always with a favorable rating. Initiated firms experience a five-day abnormal return of 4.1 percent versus 0.1 percent for firms with no coverage. The abnormal returns are concentrated in the days just before the quiet period expires. Abnormal returns are much larger when coverage is initiated by multiple analysts. It does not matter whether a recommendation comes from the lead underwriter or not. [source] How Did the 2003 Dividend Tax Cut Affect Stock Prices?FINANCIAL MANAGEMENT, Issue 4 2008Gene Amromin We test the hypothesis that the 2003 dividend tax cut boosted US stock prices and thereby lowered the cost of equity capital. Using an event-study methodology, we attempt to identify an aggregate stock market effect by comparing the behavior of US common stock prices with that of foreign equities and the equities of real estate investment trusts (REITs). We also examine the relative cross-sectional response of prices of high- and low-dividend-paying stocks. We do not find any imprint of the dividend tax cut news on the value of the aggregate US stock market. On the other hand, high-dividend stocks outperformed low-dividend stocks by a few percentage points over the event windows, suggesting that the tax cut may have induced asset reallocation within equity portfolios. Finally, the positive abnormal return on nondividend paying US stocks in 2003 does not appear to be tied to tax cut news. [source] Investment Decisions and Managerial Discipline: Evidence from the Takeover MarketFINANCIAL MANAGEMENT, Issue 2 2005Ralph Scholten This article focuses on the relative importance of boards of directors and the hostile takeover market in disciplining managers who make poor acquisition decisions. The evidence shows a weak inverse relationship between acquisition performance and the likelihood of becoming a takeover target, but only after it becomes clear that the internal control mechanism has failed. A forced turnover of a top executive was more likely in the 1990s, the more negative the abnormal return associated with an acquisition announcement. The relationship between forced turnover and negative acquisition returns is stronger when hostile takeover activity is less intense. Hence, it appears that being disciplined for making a poor acquisition is a function more of the internal control mechanism than of the workings of the takeover market. [source] Indexing, cointegration and equity market regimesINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2005Carol Alexander Abstract This paper examines, from a market efficiency perspective, the performance of a simple dynamic equity indexing strategy based on cointegration. A consistent ,abnormal' return in excess of the benchmark is demonstrated over different time horizons and in different real world and simulated stock markets. A measure of stock price dispersion is shown to be a leading indicator for the abnormal return and their relationship is modelled as a Markov switching process of two market regimes. We find that the entire abnormal return is associated with the high volatility regime as the indexing model implicitly adopts a strategic position that pays off during market crashes, whilst effectively tracking the benchmark in normal market circumstances. Therefore we find no evidence of market inefficiency. Nevertheless our results have implications for equity fund managers: we show how, without any stock selection, solely through a smart optimization that has an implicit element of market timing, the benchmark performance can be significantly enhanced. Copyright © 2005 John Wiley & Sons, Ltd. [source] Value creation through spin-offs: A review of the empirical evidenceINTERNATIONAL JOURNAL OF MANAGEMENT REVIEWS, Issue 4 2009Chris Veld This paper reviews the literature on the factors that influence the wealth effects associated with the announcements of corporate spin-offs (also known as demergers). Meta-analysis is used to summarize the findings of 26 event studies on spin-off announcements. A significantly positive average abnormal return of 3.02% is found during the event window. Returns are higher for larger spin-offs, for divestments that are tax or regulatory friendly and for spin-offs that lead to an improvement of industrial focus. It is also found that spin-offs that are later completed are associated with lower abnormal returns than non-completed spin-offs. The second part of the paper overviews studies on the long-run stock price performance of spin-offs. Even though early studies find a long-run superior performance, this effect is no longer found in later studies that use more refined statistical tests. [source] Third Left Pulmonary Vein with Abnormal Return Associated with Arteriovenous FistulaJOURNAL OF CARDIAC SURGERY, Issue 4 2008Ali Can Hatemi M.D., Ph.D. A 20-year-old woman with complaints of effort-induced dyspnea and easy fatigability was diagnosed with a third left pulmonary vein with abnormal return and arteriovenous fistula accompanied by a secundum atrial septal defect (ASD). Complete surgical repair was performed by ASD closure with a pericardial patch and triple ligation of the left vertical vein and associated third pulmonary vein. The patient was discharged on the seventh postoperative day in good health. Her last control examination was performed in the second postoperative year, revealing normal echocardiographic findings with an excellent clinical course. [source] The Quiet Period Goes out with a BangTHE JOURNAL OF FINANCE, Issue 1 2003Daniel J. Bradley We examine the expiration of the IPO quiet period, which occurs after the 25th calendar day following the offering. For IPOs during 1996 to 2000, we find that analyst coverage is initiated immediately for 76 percent of these firms, almost always with a favorable rating. Initiated firms experience a five-day abnormal return of 4.1 percent versus 0.1 percent for firms with no coverage. The abnormal returns are concentrated in the days just before the quiet period expires. Abnormal returns are much larger when coverage is initiated by multiple analysts. It does not matter whether a recommendation comes from the lead underwriter or not. [source] Who Blinks in Volatile Markets, Individuals or Institutions?THE JOURNAL OF FINANCE, Issue 5 2002Patrick J. Dennis We investigate the relationship between the ownership structure and returns of firms on days when the absolute value of the market's return is two percent or more. We find that a firm's abnormal return on these days is related to the percentage of institutional ownership, that there is abnormally high turnover in the firm's shares on these days, and that this abnormal turnover is significantly related to the percentage of institutional ownership in the firm. Taken together, these results are consistent with positive feedback herding behavior on the part of some institutions, particularly mutual and pension funds. [source] Share Liquidity and Market Microstructure Reform: The Case of Screen-based Trading in Mumbai,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 3 2010Christopher J. Green G12; G14; G18 Abstract We investigate the impact of the March 1995 move to screen-based trading on the Mumbai Stock Exchange, using separate samples of more liquid (A) and less liquid (B) shares. Following the move, the average cumulative abnormal return for A shares was 4.5%, whereas that for B shares was over 12%; market liquidity and efficiency increased but the effect on volatility was more ambiguous. We identify a significant cross-sectional relationship between the size of cumulative abnormal returns and firm-specific improvements in liquidity, efficiency, and volatility, with differences in the effects of reform on A and B shares. [source] An Emerging Market's Reaction to Initial Modified Audit Opinions: Evidence from the Shanghai Stock Exchange,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2000CHARLES J. P. CHEN Abstract This study investigates the valuation effect of modified audit opinions (MAOs) on the emerging Chinese stock market. Here, the term MAO refers to both qualified opinions and unqualified opinions with explanatory notes. The latter can be considered an alternative form of a qualified opinion in China. The institutional setting in China enables us to find compelling evidence in support of the monitoring role of independent auditing as an institution. First, we find a significantly negative association between MAOs and cumulative abnormal returns after controlling for effects of other concurrent announcements. Further, results from a by-year analysis suggest that investors did not reach negative consensus about MAOs' valuation effect until the second year, exhibiting the learning process of a market without prior exposure to MAOs. Second, we do not observe significant differences between market reaction to non-GAAP- and GAAP-violation-related MAOs. Third, no significant difference is found between market reaction to qualified opinions and market reaction to unqualified opinions with explanatory notes. [source] Investor Reaction to Inter-corporate Business Contracting: Evidence and ExplanationECONOMIC NOTES, Issue 3 2006Fayez A. Elayan We examine the stock market reaction to 1227 inter-corporate ordinary business contract announcements reported by Dow Jones between January 1, 1990 and December 31, 2001. Around contract announcement dates, we find statistically significant positive average abnormal returns and abnormal trading volume for contractors, but insignificant positive abnormal returns and negative abnormal volume for contractees. Cross-sectionally, contract announcement period returns are higher for contractors who are small relative to the contract size, have higher return volatility, larger market-to-book ratios and higher profitability. The announcement period returns of contract-awarding firms are not significant and are only marginally related to cross-sectional explanatory factors. The results are consistent with two explanatory stories: contractor quasi-rents induced by the winner's curse and information signalling about contractor production costs. The results are not consistent with perfect competition, with contracts having positive net present values for both parties, and with a version of incomplete contracting theory. [source] The missing dark matter in the wealth of nations and its implications for global imbalancesECONOMIC POLICY, Issue 51 2007Ricardo Hausmann SUMMARY Dark matter and international imbalances Current account statistics may not be good indicators of the evolution of a country's net foreign assets and of its external position's sustainability. The value of existing assets may vary independently of current account flows, so-called ,return privileges' may allow some countries to obtain abnormal returns, and mismeasurement of FDI, unreported trade of insurance or liquidity services, and debt relief may also play a role. We analyse the relevant evidence in a large set of countries and periods, and examine measures of net foreign assets obtained by capitalizing the net investment income and then estimating the current account from the changes in this stock of foreign assets. We call dark matter the difference between our measure of net foreign assets and that measured by official statistics. We find it to be important for many countries, analyse its relationship with theoretically relevant factors, and note that the resulting perspective tends to make global net asset positions appear relatively stable. , Ricardo Hausmann and Federico Sturzenegger [source] The Performance of Characteristics-based Indices1EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2009Noël Amenc G11; G12 Abstract This paper analyses a set of characteristics-based indices that, it has been argued, outperform market cap-weighted indices. We analyse the performance of an exhaustive list of these indices and show that i) the outperformance over value-weighted indices may be negative over long time periods, and ii) there is no significant outperformance over equal-weighted indices. An analysis of the style and sector exposures of characteristics-based indices reveals a significant value tilt. When this tilt is properly adjusted for, the abnormal returns of these indices decrease considerably. Moreover, it is straightforward to construct portfolios with higher Sharpe ratios than characteristics-based indices through factor or sector tilts. [source] Corporate Sell-offs in the UK: Use of Proceeds, Financial Distress and Long-run Impact on Shareholder WealthEUROPEAN FINANCIAL MANAGEMENT, Issue 2 2008Edward Lee G34 Abstract This study examines the long-run return performance following UK corporate sell-off announcements. We observe significant negative abnormal returns up to five years subsequent to sell-off announcements. Our finding is robust to various specifications, irrespective of the intended use of proceeds. We also find a significantly positive association between long-run abnormal returns and the magnitude of cash proceeds for sellers reducing corporate debt as well as for sellers with deeper financial distress or higher growth prospects. Overall, we find that UK corporate sell-offs are associated with declines in subsequent shareholder wealth. [source] Shareholder Wealth Effects of European Domestic and Cross-border Takeover BidsEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2004Marc Goergen G32; G34 Abstract This paper analyses the short-term wealth effects of large intra-European takeover bids. We find announcement effects of 9% for the target firms compared to a statistically significant announcement effect of only 0.7% for the bidders. The type of takeover bid has a large impact on the short-term wealth effects with hostile takeovers triggering substantially larger price reactions than friendly operations. When a UK firm is involved, the abnormal returns are higher than those of bids involving both a Continental European target and bidder. There is strong evidence that the means of payment in an offer has an impact on the share price. A high market-to-book ratio of the target leads to a higher bid premium, but triggers a negative price reaction for the bidding firm. We also investigate whether the predominant reason for takeovers is synergies, agency problems or managerial hubris. Our results suggest that synergies are the prime motivation for bids and that targets and bidders share the wealth gains. [source] Short-run Returns around the Trades of Corporate Insiders on the London Stock ExchangeEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2002Sylvain Friederich Previous work examined the long-run profitability of strategies mimicking the trades company directors in the shares of their own company, as a way of testing for market efficiency. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange. We find movements in returns that are consistent with directors engaging in short-term market timing. We also report that some types of trades have superior predictive content over future returns. In particular, medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) ,stealth trading' hypothesis whereby informed traders avoid trading in blocks. Another contribution of this study is to properly adjust the abnormal return estimates for microstructure (spread) transactions costs using daily bid-ask spread data. On a net basis, we find that abnormal returns all but disappear. [source] The Emerging Role of the European Commission in Merger and Acquisition Monitoring: The Boeing,McDonnell Douglas CaseEUROPEAN FINANCIAL MANAGEMENT, Issue 4 2001Nihat Aktas The object of this study is to evaluate the consequences of the application of the EEC Regulation 4064/89 to non,European companies. We focus on the Boeing,McDonnell Douglas merger case, one of the first non,European mergers considered by the Commission. The analysis of abnormal returns on the two securities shows that the threat of a ban of the merger by the Commission were not perceived as credible at first. But when Boeing decided to ask the support of the American government, just after the decision of the European Commission to extend its investigations to the long term exclusivity contracts, the role of the Commission emerged. [source] The Pricing of French Unit Seasoned Equity OfferingsEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2001Pierre Chollet Units are bundles of common stock and warrants. By issuing units, firms precommit to a future and uncertain seasoned offering at the exercise price of the warrants. This study shows that the issuance of units seasoned offerings in France is accompanied by significant abnormal returns of on average 9,12%, depending on the computing methods. Underpricing increases with the risk of the issuer and the relative size of the future seasoned equity issue linked to warrant exercises. Our results are consistent with our signaling hypothesis. [source] Information Asymmetry Determinants of Sarbanes-Oxley Wealth EffectsFINANCIAL MANAGEMENT, Issue 3 2010Aigbe Akhigbe We investigate the roles of information asymmetry and governance in the wealth effects associated with passage of the Sarbanes-Oxley Act (SOX) for a sample of 1,158 firms. For events suggesting adoption of stringent reform legislation, we find more (less) favorable abnormal returns (ARs) for firms with high (low) information asymmetry and for firms with weak (strong) governance. More favorable effects could result from expected improvements for firms with high information asymmetry or weak governance. Firms with positive ARs experience information asymmetry reductions post-SOX, indicating the market was able to discern the firms that would most benefit from the legislation's passage. [source] Ratings Changes, Ratings Levels, and the Predictive Value of Analysts' RecommendationsFINANCIAL MANAGEMENT, Issue 2 2010Brad M. Barber We show that abnormal returns to analysts' recommendations stem from both the ratings levels assigned and the changes in those ratings. Conditional on the ratings change, buy and strong buy recommendations have greater returns than do holds, sells, and strong sells. Conditional on the ratings level, upgrades earn the highest returns and downgrades the lowest. We also find that both ratings levels and changes predict future unexpected earnings and the associated market reaction. Our results imply that 1) investment returns may be enhanced by conditioning on both recommendation levels and changes; 2) the predictive power of analysts' recommendations reflects, at least partially, analysts' ability to generate valuable private information; and 3) some inconsistency exists between analysts' ratings and the formal ratings definitions issued by securities firms. [source] Market Misvaluation, Managerial Horizon, and AcquisitionsFINANCIAL MANAGEMENT, Issue 2 2010Huasheng Gao This paper analyzes the impact of managerial horizon on mergers and acquisitions activity. The main predication is that acquiring firms managed by short-horizon executives have higher abnormal returns at acquisition announcements, less likelihood of using equity to pay for the transactions, and inferior postmerger stock performance in the long run. I construct two proxies for managerial horizon based on the CEO's career concern and compensation scheme, and provide empirical evidence supporting the above prediction. Moreover, I also demonstrate that long-horizon managers are more likely to initiate acquisitions in response to high stock market valuation. [source] Insider Trading after Repurchase Tender Offer Announcements: Timing versus Informed TradingFINANCIAL MANAGEMENT, Issue 1 2010Henock Louis Abnormally high net insider selling is commonly observed after repurchase tender offer (RTO) announcements although, on average, firms experience positive abnormal returns in the years after the repurchases. We explore two potential explanations: liquidity trade timing and informed trading. Consistent with the notion that fixed price RTOs are more likely than Dutch-auction RTOs to signal undervaluation, the results suggest that insider selling after fixed price RTO announcements are driven largely by insiders who time their trades with the repurchase announcements. In contrast, selling after Dutch-auction RTOs seems to be driven primarily by informed traders who exploit mispricing associated with the repurchase announcements. [source] Stock Price Response to Calls of Convertible Bonds: Still a Puzzle?FINANCIAL MANAGEMENT, Issue 2 2007Ivan E. Brick The liquidity hypothesis predicts negative abnormal returns around the conversion-forcing call announcements of convertible bonds, followed by a price recovery. We find the former but not the latter. The liquidity hypothesis also implies that the abnormal returns during the announcement and the post-announcement periods should be related to proxies for the stock s liquidity. Again, our findings do not support these implications of the liquidity hypothesis. We conclude that the reason for the negative abnormal returns around the announcement of a conversion-forcing call needs further examination. [source] Investor Recognition, Liquidity, and Exchange Listings in the Reformed MarketsFINANCIAL MANAGEMENT, Issue 2 2006Pankaj K. Jain We examine multiple facets of firms' descisions to list on the NYSE. Although the average Nasdaq spreads are now comparable to the average NYSE spreads, we find that firms continue to switch from Nasdaq to the NYSE, and that they experience positive cumulative abnormal returns on listing. Using a simultaneous ststem of equations approach, we establish that enhanced investor recognition mainly explains this phenomenon. A logistic regression suggesrts that corporate listing choice is consistent with these findings, since eligible unlisted firms already have high volumes and recognition and might not benefit as much as do firms that actually switch. [source] Risk Changes around Calls of Convertible BondsFINANCIAL REVIEW, Issue 3 2010Luis García-Feijóo G14; G32 Abstract We examine changes in equity and asset betas around convertible bond calls and report two major findings. First, calling firms exhibit an increase in asset betas following the call. We argue that the finding is consistent with the implications of the sequential financing theory but not of the backdoor equity financing theory. Second, abnormal returns at call announcements are negative only for the subsample of firms that also exhibit an increase in equity beta. We conclude that risk changes help explain the market reaction to convertible bond calls. [source] Initial Public Offerings: CFO PerceptionsFINANCIAL REVIEW, Issue 4 2006James C. Brau G14; G24; G32; G34 Abstract We examine four issues pertaining to initial public offerings (IPOs) using a survey of 438 chief financial officers (CFOs). First, why do firms go public? Second, is CFO sentiment stationary across bear and bull markets? Third, what concerns CFOs about going public? Fourth, do CFO perceptions correlate with returns? Results support funding for growth and liquidity as the primary reasons for IPOs. CFO sentiment is generally stationary in pre- and post-bubble years. Managers are concerned with the direct costs of going public, such as underwriting fees, as well as indirect costs. We find a negative relation between a focus on immediate growth and long-term abnormal returns. [source] The Importance of Board Quality in the Event of a CEO DeathFINANCIAL REVIEW, Issue 3 2006Kenneth A. Borokhovich G34 Abstract We examine board quality and executive replacement decisions around deaths of senior executives. Stock price reactions to executive deaths are positively related to board independence. Controlling for such factors as the deceased's stockholdings, outside blockholdings, board size, and whether the deceased was a founder, board independence is the most significant factor explaining abnormal returns. Board independence is particularly important when there is no apparent successor and firm performance is poor. The results are consistent with independent boards being reluctant to discipline poorly performing incumbent managers, but nevertheless using the opportunity of an executive death to improve the quality of management. [source] Evidence on Value Creation in the Financial Services Industries through the Use of Joint Ventures and Strategic AlliancesFINANCIAL REVIEW, Issue 2 2003Kimberly C. Gleason G21/G29/G14 Abstract While an extensive body of literature has examined merger, acquisition, and consolidation activity in commercial banks and other financial services firms, little attention has been paid to examining how these institutions use the cooperative activities of joint ventures and strategic alliances to accomplish their growth objectives. We analyze the effects of the use of joint ventures and strategic alliances by a sample of firms in the banking, investment services, and insurance industries. Our results show that commercial banks, investment services firms, and insurance companies experience significant abnormal returns of 0.66% on average when they announce their participation in a joint venture or strategic alliance. These abnormal returns are significantly positive across the four strategic motives of domestic, international, horizontal, and diversifying cooperative activities. Using a matched sample, we also show that our sample firms enjoy significant, positive, abnormal returns for holding periods of six, 12, and 18 months after the announcement of the cooperative activity. [source] Wealth Effects of Private Equity Placements: Evidence from SingaporeFINANCIAL REVIEW, Issue 2 2002Sheng-Syan Chen We examine institutional characteristics and the wealth effects of private equity placements in Singapore. Our findings show that private placements in Singapore generally result in a negative wealth effect and a reduction in ownership concentration. We find that at high levels of ownership concentration, the relation between abnormal returns and changes in ownership concentration is significantly negative. We also show that the market reacts less favorably to placements in which management ownership falls below 50%, but more favorably to issues to single investors. We do not find evidence suggesting that our results are due to an information effect. [source] | ||||||||||||||||||||||||||||