How Widespread Was Late Trading in Mutual Funds? (Session: Exposing Cheating and Corruption, Steven Levitt Presiding)

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "How Widespread Was Late Trading in Mutual Funds? (Session: Exposing Cheating and Corruption, Steven Levitt Presiding)"

Transcription

1 How Widespread Was Lae Trading in Muual Funds? (Session: Exposing Cheaing and Corrupion, Seven Levi Presiding) Eric Zizewiz Sanford Graduae School of Business 518 Memorial Way Sanford, CA Tel: Fax: Firs draf: Sepember 2003 This draf: December 2005

2 How Widespread Was Lae Trading in Muual Funds? Eric Zizewiz * A major componen of he Muual Fund scandals of 2003 was he allegaion ha cerain invesors were allowed o engage in he lae rading of muual fund shares. Under he forward pricing rule, rades in U.S.-based open-ended muual funds are required o be priced a he nex ne asse value per share (NAV) calculaed afer an order is received. 1 For funds ha calculae NAVs once per day a 4 PM Easern ime (he vas majoriy), orders received before 4 PM should be priced a he NAV calculaed on he day of he rade while rades received afer 4 PM should insead be priced a he nex-day ne asse value. 2 Lae rading occurs when invesors place rades afer 4 PM bu sill receive he 4 PM price. Lae raders can use informaion revealed afer 4 PM o guide heir rades: buying fund shares when heir curren value is greaer han NAV and selling when he reverse is rue. Doing so allows hem o earn expeced abnormal reurns a he expense of he fund s long-erm shareholders. 3 * 518 Memorial Way, Sanford, CA Tel: Fax: The auhor would like o hank David Brown, Charles Calomiris, Sean Collins, Frank Edwards, Ned Elon, Larry Harris, John Rea, Brian Reid, Jon Reuer and conference and seminar paricipans a he American Enerprise Insiue, Columbia, NYU, Ohio Sae, he SEC, UC-Boulder, Vanderbil, and several indusry groups for helpful suggesions and commens. Thanks also o Columbia GSB for research suppor during he academic year and o Andrew Clark of Lipper and Charles Biderman of TrimTabs for sharing heir daily fund flow daa and for helpful conversaions abou he daa. 1 See rule 22c-1 enaced in 1968 under he Invesmen Company Ac of Some lae raders reporedly obained legal opinions ha he ime of NAV calculaion refers o he ime ha he calculaion is acually performed, usually minues afer 4 PM, as opposed o he ime he NAV is calculaed as of. Regulaors do no agree ha his is a reasonable inerpreaion of he law, bu i has no ye been esed in cour. See, e.g., Evan C. Sewar (2004) and David Wells and David Wighon (2004). 3 Invesors in open-ended muual funds buy and sell shares from he fund iself, conribuing or receiving he fund s NAV per share on he day of he rade. If a rade is priced a an NAV ha does no reflec he curren value of is asses, diluion of he funds long-erm shareholders can occur. 1

3 This paper presens a mehodology for using daily muual fund flow daa o es wheher lae rading has occurred in a paricular fund. The mehod is o es wheher rades purpored o have been placed before 4 PM are correlaed wih marke movemens afer 4 PM ha make he rade urn ou o have been advanageous. In my sample, his correlaion exiss wih marke movemens beween 4 and 9 PM, bu no wih pos-9 PM movemens. Clearly, one of he leading candidae explanaions for his correlaion is ha some of he rading decisions in quesion were made as lae as 9 PM. Alernaive explanaions are considered, bu none fi he facs well. 4 Using his mehodology and daily flow daa from approximaely 75 percen of U.S.-based equiy muual funds (represening 48 percen of asses), I esimae ha average losses o long-erm shareholders from lae rading were 3.8 and 0.9 basis poins in inernaional and domesic equiy funds from , respecively. If similar diluion raes prevailed ouside he sample, annual losses o lae rading would be approximaely $400 million per year. Fund family-level ess reveal saisically significan evidence of lae rading in 39 ou of 66 fund families. Tha lae rading was his widespread may no longer seem surprising given he ongoing corroboraion of his resul by evidence gahered by regulaors, bu when he firs draf of his sudy was circulaed in early Sepember 2003, i surprised some indusry paricipans o he poin of disbelief. 5 4 See Secion III for a discussion of alernaive explanaions. As addiional pieces of evidence ha hese correlaions are indeed indicaive of lae rading, I noe: 1) ha my esimae of lae rading is roughly hree imes higher for muual fund companies ha have been cied for allowing lae rading in enforcemen acions as of lae 2005 and 2) ha esimaed lae rading fell sharply in mid-o-lae 2003, when invesigaions by federal and sae regulaors began. 5 See, for example, indusry paricipans quoed in Jonahan Buron (2003), John Hechinger (2003) and Sco B. Nelson (2003). 2

4 Profiing from lae rading involves rading muual fund shares a relaively high frequency. Lae rading is usually praciced in combinaion wih a legal pracice known as sale price arbirage or marke iming. Sale price arbirage explois he fac ha for many asse classes, such as inernaional equiies ha rade in differen ime zones, he asse prices used o calculae NAVs a 4 PM do no fully reflec recen marke movemens. Whereas sale price arbirageurs condiion rades on marke movemens as of 4 PM, lae raders pospone rading decisions unil laer in he day. Unlike lae rading, sale price arbirage had been documened in he academic lieraure and discussed in he popular press before Sepember Fund companies were usually aware of any high-frequency rading in heir funds. In some cases, fund companies had received paymens for allowing i, eiher direcly or via so-called sicky asse deals, in which arbirageurs place addiional monies in high-fee invesmens. The degree o which fund companies were aware of illegal lae rading in heir funds varies, however. In some cases, fund managemen companies had direc knowledge of he lae rading (Culer, 2003). In ohers, he lae rading was execued hrough inermediaries, such as brokerage firms. Muual funds have radiionally allowed inermediaries ime afer 4 PM o oal he day s orders before reporing hem o he fund. Some inermediaries allegedly used ha exra ime o add or delee rades afer 4 PM. One limiaion of my analysis is ha I canno deermine wheher a fund company knowingly allowed illegal rading or wheher i allowed rading i hough o be legal (albei harmful o shareholders). 6 Academic papers on he subjec include Rahul Bhargava, e. al. (1998), John Chalmers, e. al. (2001), William Goezmann, e. al. (2001), Jason Greene and Charles Hodges (2002), Jacob Boudoukh, e. al. (2002), and Eric Zizewiz (2003). Press coverage from before Sepember 2003 includes Mark Hulber (2000), Aaron Lucchei (2000), Mercer Bullard (2000), Amey Sone (2002), and Ira Carnahan (2003). 3

5 Academic ineres in undersanding he exen of lae rading springs from ineres in agency conflics in muual fund invesing more generally. While he diluion of shareholder asses due o lae rading was fairly modes in percenage erms, is revelaion has helped promp renewed ineres in addressing hese conflics. The sudy conribues o he lieraure on hese conflics, and can also be viewed as adding o a broader se of sudies ha use saisical echniques o deec illegal aciviy. 7 I. Daa and Mehodology As discussed above, I es for lae rading by measuring he correlaion beween daily muual fund flows and pos-4 PM marke movemens. A simple example of a regression ha does so is: flow asses 1 = β + β ΔSP + β ΔSP + β ΔSP + ε. (1) 0 1 3:00 11: :30 16: :15 21:00 The dependen variable is ne inflows o he fund, normalized by prior-day asses, where inflows are defined as he difference beween he asses of he fund(s) in quesion and he prior-day asses adjused for curren-day fund reurns. The independen variables are log changes in he Chicago Mercanile Exchange near-monh S&P 500 fuures price. The firs wo erms conrol for marke iming using pre-4 PM informaion; he hird erm capures lae rading using pos-4 PM informaion. Conrolling for pre-4 PM marke movemens serves wo purposes: 1) i conrols for any correlaion beween pre and pos- 7 See Paul G. Mahoney (2004) for a survey of he lieraure on manager-invesor conflics in muual funds. 4

6 4 PM marke movemens which, given he liquidiy of he S&P 500 fuure, is minor, and 2) by reducing he variance of he error erm, i improves he efficiency of esimaion. 8 A saring ime of 4:15 is used for he hird erm o preven any saleness in he 4 PM S&P fuures price from improperly leading o an inference of lae rading. The S&P fuure is exremely liquid, wih bid-ask spreads ha are 1-2 basis poins a 4 PM, so any saleness should be minor. Nine PM is aken as he sopping ime since ha was he laes lae rading ime menioned in he complain agains Canary Capial Parners, LLC. 9 Diluion of long-erm shareholders due o lae rading can be calculaed in wo ways ha are concepually differen, bu urn ou o be quaniaively equivalen in expecaion. The firs approach is o measure he reducion in fund asses from he apparen lae rades being priced a oday s raher han omorrow s NAV: E( flow I ) E( flow I dil 4 9PM 4PM 4PM 4PM = ( NAV+ 1 NAV ), (2) PM NAV ) where I 9PM is marke informaion available as of 9 PM. The second erm capures he presumed lae rades, measured as he change in he expecaion of flow due o pos-4 PM marke movemens. The second approach is o measure he reducion in fund asses relaive o wha hey would have been had rades placed by 9 PM been priced a a 9 PM NAV: 8 One migh include oher deerminans of flows ha are known as of 4 PM on he righ-hand-side as conrols; examples include disribuions and fixed effecs for seasonals (e.g., day of week, day of monh, monh). Doing so does no affec he resuls, as one would expec given ha heir effec on flows is smaller and ha hey are essenially uncorrelaed wih 4:15 o 9 PM marke movemens. 9 Sae of New York v. Canary Capial Parners, LLC (2003), Complain, p. 7. 5

7 dil = ( NAV 9PM NAV NAV 4PM 9PM E( flow ) = E( NAV I 4PM I PM ) E( flow 4PM NAV 9PM ) I 4PM ). (3) The difference beween (2) and (3) is he produc of unanicipaed NAV reurns and anicipaed flows (as of 9 PM); in expecaion, his produc mus be zero. 10 Equaion (3) can be viewed as a less noisy version of (2), since i eliminaes he componen of lae rading diluion relaed o pos-9pm marke movemens. Assuming ha rading decisions used only pre-9 PM marke informaion, hen his pos-9 PM componen migh be regarded as aribuable o luck raher han o he improper rading. The daily fund flow daa come from TrimTabs and Lipper, which collec daily asses, reurns, and disribuions from subses of U.S.-based open-ended muual funds. TrimTabs daa is available from February 1998 o December 2003; Lipper daa from March 2000 o December Since pos-4 PM marke indicaors are more readily available for equiy han for fixed income, I resric he sudy o U.S. and inernaional equiy funds and include only hose secor funds whose reurns are well prediced by general equiy indices (communicaion and echnology funds). Of he funds in hese caegories in he June 2001 Morningsar universe ha have ickers, 15 percen (28 percen of asses) appear in TrimTabs a some poin during he sample period, 71 percen (43 percen of asses) appear in Lipper, and 75 percen (48 percen of asses) appear in he combined sample. For funds appearing in boh sources for a given ime period, TrimTabs daa is used. 11 A small number of observaions from Lipper are eliminaed as ouliers If he expecaions are esimaed in-sample using he same linear regression model for flows and reurns, hen (2) and (3) will be idenical, even in a finie sample. 11 Where TrimTabs and Lipper overlap, daily flow-o-asse raios are highly bu no perfecly correlaed (r = 0.93). No measures of flows are consruced by mixing daa from he wo sources. 6

8 An issue wih boh he TrimTabs and Lipper daa is ha inflows are repored wih a one-day lag for almos all funds (see Zizewiz, 2003, Secion 4 and Greene and Hodges, 2002, for a discussion of his issue). 13 I correc for his lag by calculaing flows assuming each day s asse figures are pre-flow raher han pos-flow, bu perform checks below o ensure ha his correcion is appropriae. For simpliciy, I use changes in he price of he near-monh S&P 500 fuure from he CME/Globex Time and Sales daa as a single indicaor of recen marke movemens. The S&P fuure rades from 4:45 PM hrough o he following rading day every day excep Friday (and oher days preceding a marke closure). I experimened wih alernaive pos-4 PM indicaors (he Nasdaq 100 fuure for echnology funds; he Singapore Nikkei fuure opening price for Japan funds); hese indicaors were slighly beer predicors of nex-day reurns bu were no saisically significanly beer predicors of inflows. A he risk of undersaing lae rading in hese asse classes, I used he S&P 500 as a single indicaor for all asse classes. II. Resuls Table I presens esimaes of equaion (1) for inernaional and U.S. equiy funds, and for subcaegories hereof. The resuls sugges clear evidence of a correlaion beween pos-4 PM marke movemens and muual fund inflows, consisen wih lae rading. The correlaions sugges ha lae rading is mos prevalen in echnology, inernaional and 12 Specifically, observaions in which he log of shares ousanding changes by more han 3 (i.e., he number of shares grows or shrinks by a facor of more han roughly 10 in a day) or wih log reurns greaer han 30 percen in absolue value are eliminaed as ouliers. This eliminaes abou 24,000 ou of 3.6 million fund-day combinaions; mosly due o he firs resricion. 13 An excepion o his are funds ha caer o high-frequency raders (e.g., Rydex, Profunds, Poomac), which do no repor wih a lag o TrimTabs (bu do repor wih a lag o Lipper). I drop hese funds from he sample. 7

9 small-cap equiy funds, suggesing ha lae raders undersandably focus on asse classes wih more volailiy and in which 4 PM NAVs are sale. Table II repeas he analysis wih a finer decomposiion of ime periods on he righ-hand side. The relaionship beween curren-day flows and marke movemens is saisically significan in every ime period unil 6 PM. The sum of he coefficiens from 6 PM o 9 PM is significan for inernaional equiy and all funds, alhough coefficiens for individual hourly figures are mosly no. Afer 9 PM, esimaed coefficiens are close o zero (and fairly precisely esimaed). Comparing he pre and pos-4pm coefficiens for inernaional funds yields one measure of how widespread lae rading is. Suppose ha arbirageurs in inernaional funds rade eiher only on pre-4 PM marke movemens or on marke movemens hrough o 6 PM -- hey eiher do sale price arbirage only or combine i wih lae rading, bu never pracice lae rading as a sand-alone sraegy. Assume also ha heir invesmen rule is linear in expeced nex-day fund reurns. 14 In his case, he (dollar-weighed) share of sale price arbirageurs who also lae rade is given by: β β pos 4PM flow pre 4PM flow β β pos 4PM reurn pre 4PM reurn. (5) This raio is roughly 30% using 11:30 AM o 4 PM and 5 o 6 PM as he wo periods, suggesing ha abou 30% of sale price arbirageur dollars were also raded unil 5 o 6 PM. The poin esimae for he 8 o 9 PM period is less precisely esimaed, bu is magniude also suggess ha abou 30% of arbirageur dollars were raded unil his ime. 14 Various ess for a non-linear relaionship beween flows and marke movemens do no rejec lineariy (see Zizewiz, 2006 for deails). 8

10 This is perhaps surprising given he modes conribuion of lae rading o he profiabiliy of arbirage rading inernaional funds. Table III presens esimaes of he abnormal reurns earned by a sale price arbirageur, a lae rader, and a rader employing boh sraegies ogeher. For domesic equiy funds, prices are no very sale as of 4 PM, and so lae rading conribues he bulk of he abnormal reurns. For inernaional funds he conribuion of lae rading is modes, however. I is herefore a puzzle why so many inernaional fund arbirageurs engaged in illegal aciviy o raise heir reurns by such a modes amoun. One possibiliy is ha lae rading was only available o arbirageurs who were so large ha hey were compelled o rade in muliple asse classes, including asse classes like large-cap equiy ha were only profiable o rade using pos-4 PM informaion. Given ha hey were already lae rading domesic funds, even a small amoun of incremenal profi made lae rading inernaional funds aracive. Unforunaely, wih only fund-level daa, I canno es his hypohesis. Tables IV and V repor esimaes of he losses due o lae rading. These are calculaed using equaion (3) above, where NAV 9 PM and E(flow I 9PM ) are calculaed using he linear model in Table 2 (excluding he pos-9 PM righ-hand-side variables). Esimaing diluion using (2) yields quaniaively similar, bu less precise, esimaes. Lae rading losses are larges in echnology and inernaional equiy funds. Unsurprisingly, esimaed lae rading drops afer Sepember 2003, when he regulaors invesigaion was announced The apparen decline from 1999 o 2000 is no relaed o he addiion of he Lipper funds o he sample; a similar decline is observed if he sample is resriced o he TrimTabs daa. 9

11 To furher examine how widespread lae rading was, I repea he analysis in Table I for individual fund families. My agreemens wih TrimTabs and Lipper preven me from reporing resuls for individual fund companies, bu a sufficien number of fund families have been named in SEC and sae invesigaions ha I can repor resuls for hese families as a group. 16 If I replicae he resuls Table I for named and unnamed fund families, I find ha coefficiens are neiher saisically nor economically significanly differen for eiher inernaional or U.S. equiy funds. If I limi he named firms o firms ha have been specifically cied for allowing lae rading, however, I find ha he coefficien for named firms is approximaely hree imes higher han for unnamed firms. This facor of 3 difference exiss for boh inernaional and U.S. equiy funds and is significan a he 1 percen level. Given ha hese firms represen abou 11 percen of asses in my sample, his implies ha abou 30 percen of he lae rading in my sample was conduced in fund families ha were cied for knowingly allowing i. If I replicae Table I for individual fund families, I find saisically significan evidence (a a one-ailed, 95 percen confidence level) of lae rading in he inernaional funds of 40 ou of 71 fund companies and he domesic equiy funds of 13 of 77 families. 17 Among families wih sufficien daa available from boh asse classes, for According o he Scandal Scorecard on WSJ.com, he following firms have been accused of allowing improper rading as of December 2004: Alliance, Alger, Amvescap, Bank of America, Bank One, Deusche, Federaed, Flee, Franklin-Templeon, Fremon, Invesco, Janus, Loomis Sayles, MFS, PEA/Pimco, Pilgrim, Punam, RS, Seligman, and Srong. Of hese, Alger, Alliance, Bank of America, Federaed, and MFS have been specifically cied for allowing lae rading. No all of hese firms are necessarily included in my combined sample. 17 In oher words, he coefficien on he 4:15 o 9 PM marke movemens is posiive and significan for 40 ou of 71 fund families. The coefficien is negaive and significan for 2 of 71 and 4 of 77 families for inernaional and domesic equiy funds, respecively. Regressions for fund families are run by consrucing a ime series of oal inflows-o-oal asses raios for a family s funds in a given asse class. Fund families wih fewer han 5,000 observaions (fund*day combinaions) were excluded from his analysis. 10

12 of 66 he join hypohesis of no lae rading in eiher asse class can be rejeced; 11 of hese families es posiive for lae rading in boh classes. As discussed, his does no necessarily imply ha all 39 fund families were colluding wih lae raders. Firs, given a 95 percen confidence level, one would expec a false posiive rae of 5 percen. In addiion, lae raders ofen placed rades hrough inermediaries; in hese cases funds may have been aware of he frequen rading, bu no of he fac ha rading decisions were being made afer 4 PM. The SEC repored in November 2003 ha jus over 10 percen of 88 large fund families admied o knowledge of lae rading in heir funds (Culer, 2003, 16). Combined wih my resuls hey sugges ha some funds were aware of he lae rading, and some were no. III. Alernaive Explanaions Wha, oher han lae rading, could produce a correlaion beween supposedly pre-4 PM muual fund orders and pos-4 PM marke movemens? As menioned above, one possibiliy is ha some funds in he TrimTabs and Lipper samples repor daily asse daa pos-flow raher han pre-flow, and inappropriaely reaing hem as pre-flow creaes an apparen correlaion wih nex-day marke movemens. The fac ha flows are uncorrelaed wih pos-9 PM marke movemens (and he regression coefficiens are precisely esimaed) suggess ha his is no he source of he relaively srong correlaion wih 4:15 o 9 PM marke movemens In addiion, I replicae he family-level ess for correlaions wih pos-9 PM nex-day marke reurns conduced in Zizewiz (2003) and again find ha he null hypohesis of no correlaion is rejeced only a raes ha approximae he significance level of he es. Especially for inernaional funds, where i is now acknowledged ha sale price arbirage was commonplace, his suggess ha he flow daa is no inappropriaely lagged. 11

13 A second possibiliy is insider rading, e.g. a echnology CFO buying a ech fund prior o a posiive earnings surprise raher han buying his own company s sock. As a es of wheher his was an imporan source of he correlaion, I reesimaed Table I excluding he period 10 o 45 days afer he end of he calendar quarer when over 75 percen of COMPUSTAT firms announce quarerly earnings. The coefficien excluding his period was no significanly differen. A hird possibiliy is ha he causaliy runs in he oher direcion: muual fund inflows lead o an increase in he sock marke. The iming of he correlaions does no fi well wih his explanaion; he sory would have o be ha flows hrough inermediaries ha ge invesed he following day are fron run by people who learn abou hem beween 4 and 9 PM. This explanaion also does no fi well wih he fac ha he sronges correlaion is beween inernaional fund inflows and pos-4 PM movemens in he S&P 500. If reverse causaliy were he source of he correlaion, regressing 4:15 o 9 PM S&P 500 reurns on he esimaed dollar value of inflows ino inernaional and domesic equiy funds would capure his relaionship. When I do his, he coefficien on inernaional fund inflows suggess ha a $1 billion inflow causes a 32 basis poin appreciaion in he S&P 500, which is an implausibly large effec by several orders of magniude. IV. Discussion This paper presens evidence ha muual fund rades supposedly placed before 4 PM are correlaed wih marke movemens from 4 o 9 PM, and argues ha illegal lae rading is he likely source of he correlaion. Trading muual funds using pos-4 PM informaion 12

14 earns profis for he arbirageurs, bu coss long-erm shareholders an annual average of 3.8 and 0.9 basis poins from in inernaional and domesic equiy funds, respecively, or abou $400 million per year oal. While diluion due o lae rading may have been small as a percenage of asses, he fac ha illegal rading was so widespread has helped promp increased regulaory scruiny of manager-invesor conflics more generally. The exen of lae rading appears o have dropped sharply since Sepember In addiion, policy proposals are now being considered ha will likely make lae rading more difficul o execue. Among hese is he so-called hard close, which would require orders o be received by he fund or is ransfer agen by 4 PM, eliminaing he possibiliy for inermediaries o add or cancel orders afer 4 PM. Even if his rule is pu in place, however, i is unlikely ha any sysem will be compleely immune o abuse. Hopefully, he fairly simple empirical echniques used in his paper will provide a mehod for fund managers, rusees, and regulaors o monior for lae rading in he fuure. 13

15 References Bhargava, Rahul, Ann Bose, and David Dubofsky. Exploiing Inernaional Sock Marke Correlaions wih Open-End Inernaional Muual Funds, Journal of Business, Finance, and Accouning, 1998, 25, pp Boudoukh, Jacob, Mahew P. Richardson, Mari Subrahmanyam, and Rober F. Whielaw. Sale Prices and Sraegies For Trading Muual Funds, Financial Analyss Journal 2002, 58, pp Bullard, Mercer. Your Inernaional Fund May Have he Arbs Welcome Sign Ou, TheSree.Com (June 10, 2000). Buron, Jonahan. Sudy Finds Lae Trading Widespread, CBSMarkewach.com (Sepember 11, 2003). Carnahan, Ira. Looing Muual Funds, Forbes.com (March 19, 2003). Chalmers, John, Roger Edelen, and Gregory Kadlec. On he Perils of Securiy Pricing by Financial Inermediaries: The Wildcard Opion in Transacing Muual Fund Shares, Journal of Finance, 2001, 56, pp Culer, Seven. Tesimony Concerning Recen Aciviy o Comba Misconduc Relaing o Muual Funds Before he Senae Subcommiee on Financial Managemen, he Budge, and Inernaional Securiy, Commiee on Governmenal Affairs, (November 3, 2003). Goezmann, William, Zoran Ivkovic, and Geer Rouwenhors. Day Trading Inernaional Muual Funds: Evidence and Policy Soluions, Journal of Financial and Quaniaive Analysis, 2001, 36, pp Greene, Jason and Charles Hodges. The Diluion Impac of Daily Fund Flows on Open- End Muual Funds, Journal of Financial Economics, 2002, 65, pp Hechinger, John. Lae Trading of Funds Found Prevalen, Wall Sree Journal (Sepember 12, 2003). Hulber, Mark. Monioring Trades for he Good of he Fund, New York Times (April 9, 2000). Lucchei, Aaron. Frequen Trading Worries Fund Firms, Wall Sree Journal (Sepember 22, 2000). Nelson, Sco B. Lae Trading May Be More Widespread Than Though, Boson Globe (Sepember 12, 2003). 14

16 Sae of New York v. Canary Capial Parners, LLC. Complain. Sepember 3, Sewar, C. Evan. The Sof 4 PM Brick Wall: A Realiy Check on Lae Trading, Money Managemen Execuive (March 22, 2004). Sone, Amey. When Marke Timers Targe Funds, Business Week Online (December 11, 2002). Wells, David and David Wighon. Broker Quesions Lae Trading Orhodoxy, Financial Times (April 6, 2004). Zizewiz, Eric. Who Cares Abou Shareholders? Arbirage-proofing Muual Funds, Journal of Law, Economics, and Organizaion, 2003, 19(4), Zizewiz, Eric. How Widespread is Lae Trading in Muual Funds, unpublished paper,

17 Table I. Correlaion of fund inflows wih pos-4pm marke movemens Dependen variable: flow()/asses(-1) S&P 500 fuures changes Weighing Obs. R^2 3 AM o 11:30 AM 11:30 AM o 4 PM 4:15 PM o 9 PM Inernaional equiy Equal *** (0.026) 0.459*** (0.024) 0.309*** (0.074) Asse *** (0.014) 0.301*** (0.015) 0.173*** (0.043) Foreign sock Equal *** (0.029) 0.531*** (0.032) 0.423*** (0.090) Asse *** (0.019) 0.403*** (0.021) 0.254*** (0.058) Asia/Japan/Europe sock Equal *** (0.066) 0.830*** (0.056) 0.593*** (0.172) Asse *** (0.063) 1.033*** (0.059) 0.434** (0.178) Global/Lain/EM sock Equal *** (0.025) 0.254*** (0.017) 0.102** (0.049) Asse *** (0.008) 0.136*** (0.008) 0.072*** (0.024) U.S. equiy Equal *** (0.007) 0.060*** (0.008) 0.061*** (0.017) Asse *** (0.005) 0.050*** (0.004) 0.039* (0.020) Large cap Equal *** (0.008) 0.044*** (0.010) 0.051*** (0.018) Asse *** (0.006) 0.035*** (0.004) (0.022) Mid cap Equal *** (0.009) 0.094*** (0.009) 0.044* (0.027) Asse *** (0.009) 0.104*** (0.008) 0.049** (0.021) Small cap Equal *** (0.011) 0.072*** (0.010) 0.107** (0.042) Asse *** (0.010) 0.069*** (0.008) 0.071*** (0.026) Technology funds Equal *** (0.099) 0.240*** (0.049) 0.184*** (0.058) Asse *** (0.035) 0.253*** (0.026) 0.355*** (0.080) Noes: 1. Each row is a regression of flows on S&P fuures changes for differen asse classes and weighing mehods. 2. Heeroskedasiciy-robus sandard errors in parenhesis. 3. Significance a 10, 5, and 1 percen level indicaed by 1, 2, and 3 aserisks, respecively.

18 Table II. Unil when does lae rading occur? Dependen variable Flow()/Asses(-1) Reurns(+1) Sandard deviaion of S&P changes Asse class Inernaional U.S. equiy All Inernaional U.S. equiy (in basis poins) Observaions R^ o 11:30 AM 0.368*** 0.056*** 0.212*** 0.217*** (0.026) (0.008) (0.015) (0.020) (0.015) 11:30 AM o 4 PM 0.473*** 0.064*** 0.268*** 0.348*** 0.083*** 93.8 (0.023) (0.009) (0.014) (0.020) (0.016) 4 o 4:15 PM 0.418*** 0.096*** 0.114* 0.516*** 0.695*** 23.0 (0.113) (0.035) (0.065) (0.067) (0.111) 4:15 o 5 PM 0.365*** 0.085*** 0.225*** 0.683*** 0.934*** 21.7 (0.103) (0.024) (0.056) (0.064) (0.054) 5 o 6 PM 0.269** 0.050* 0.160** 0.908*** 0.981*** 16.8 (0.118) (0.028) (0.064) (0.092) (0.071) 6 o 7 PM *** 1.044*** 10.6 (0.186) (0.040) (0.103) (0.156) (0.102) 7 o 8 PM * 0.209* 0.955*** 0.783*** 9.1 (0.210) (0.058) (0.122) (0.179) (0.122) 8 o 9 PM *** 0.823*** 9.7 (0.221) (0.054) (0.122) (0.242) (0.165) 9 PM o 3 AM (+1) *** 1.059*** 24.8 (0.098) (0.030) (0.052) (0.118) (0.050) 3 o 11:30 AM (+1) *** 0.980*** (0.024) (0.009) (0.014) (0.022) (0.014) 11:30 AM o 4 PM (+1) *** 0.908*** (0.025) (0.007) (0.014) (0.019) (0.016) Noes: 1. Each column is a regression of flows or reurns on S&P fuures changes for differen ime periods. 2. Heeroskedasiciy-robus sandard errors in parenhesis. 3. Significance a 10, 5, and 1 percen level indicaed by 1, 2, and 3 aserisks, respecively.

19 Table III. Theoreical profiabiliy of sale price arbirage, lae rading, and he wo sraegies in andem Annualized excess reurns versus buy-and-hold sraegy wih comparable exposure o same funds Sraegy pursued Asse class Sale price arbirage Lae rading Boh All inernaional equiy 37.1*** 8.5** 40.3*** (4.2) (3.6) (4.4) All domesic equiy * 13.6** (5.7) (5.6) (5.8) Domesic echnology funds ** 20.9*** (7.8) (7.7) (7.9) Noes: Annualized excess reurns are measured as in Zizewiz (2003): a maximum frequency rading sraegy is assumed in which he rader holds he equal-weighed average fund if expeced nex-day reurns are posiive and cash oherwise. Expeced reurns are esimaed using he model in Table I for he wo prior years (for domesic equiy funds, S&P changes from 2 o 3 PM and 3 o 4 PM are subsiued as he pre-4pm predicive variables). Reurns are compared wih a sraegy of buying and holding he fund and cash in proporions ha yields he same average exposure o he fund. Heeroskedasiciy-robus sandard errors are in parenhesis.

20 Table IV. Diluion due o lae rading by asse class Basis poins per year, Equal Value U.S. equiy 1.30*** 0.88** (0.34) (0.36) Large cap 0.95*** 0.51 (0.30) (0.35) Mid cap 0.94** 1.02*** (0.44) (0.38) Small cap 1.55*** 1.06*** (0.55) (0.37) Technology funds 6.74*** 13.45*** (1.95) (2.73) Inernaional equiy 6.27*** 3.77*** (1.57) (0.90) Foreign sock 6.05*** 3.80*** (1.25) (0.83) Asia/Japan/Europe sock 11.30*** 10.23*** (3.54) (3.83) Global/Lain/EM sock 2.36** 1.62*** (1.05) (0.52) Diluion is calculaed for each day using he formula in Equaion (3) in he ex and he model in Table II (including variables hrough 9 PM). The heeroskedasiciy-robus sandard error is from a regression of hese 1,076 daily diluion figures on a consan.

21 Table V. Diluion due o lae rading by year Basis poins per year U.S. Equiy Inernaional equiy Year Equal Value Equal Value ** 1.17** 11.68** 5.66** (1.00) (0.73) (4.32) (2.23) *** 1.23*** 7.35*** 4.24*** (1.03) (0.61) (3.30) (2.03) * (0.66) (1.67) (4.65) (1.96) *** 1.41*** 12.68*** 7.88*** (0.69) (0.63) (3.91) (2.45) * (0.82) (0.53) (3.67) (2.66) 2003 (Jan-Aug) 0.87*** 1.09*** 4.12*** 3.23*** (0.33) (0.30) (3.01) (1.69) 2003 (Sep-Dec) (3.17) (0.22) (0.81) (0.79) 1998 o *** 0.88*** 6.27*** 3.77*** (0.34) (0.36) (1.57) (0.90) Diluion is calculaed for each day using he formula in Equaion (3) in he ex and he model in Table II (including variables hrough 9 PM). The heeroskedasiciy-robus sandard error is from a regression of hese 1,076 daily diluion figures on ime period dummies.

How Widespread is Late Trading in Mutual Funds? Eric Zitzewitz * Stanford Graduate School of Business

How Widespread is Late Trading in Mutual Funds? Eric Zitzewitz * Stanford Graduate School of Business How Widespread is Lae Trading in Muual Funds? Eric Zizewiz * Sanford Graduae School of Business Firs draf: Sepember 2003 This draf: November 2004 Absrac. This paper uses daily fund flow daa o examine he

More information

Morningstar Investor Return

Morningstar Investor Return Morningsar Invesor Reurn Morningsar Mehodology Paper Augus 31, 2010 2010 Morningsar, Inc. All righs reserved. The informaion in his documen is he propery of Morningsar, Inc. Reproducion or ranscripion

More information

Chapter 8: Regression with Lagged Explanatory Variables

Chapter 8: Regression with Lagged Explanatory Variables Chaper 8: Regression wih Lagged Explanaory Variables Time series daa: Y for =1,..,T End goal: Regression model relaing a dependen variable o explanaory variables. Wih ime series new issues arise: 1. One

More information

Market Liquidity and the Impacts of the Computerized Trading System: Evidence from the Stock Exchange of Thailand

Market Liquidity and the Impacts of the Computerized Trading System: Evidence from the Stock Exchange of Thailand 36 Invesmen Managemen and Financial Innovaions, 4/4 Marke Liquidiy and he Impacs of he Compuerized Trading Sysem: Evidence from he Sock Exchange of Thailand Sorasar Sukcharoensin 1, Pariyada Srisopisawa,

More information

Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613.

Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613. Graduae School of Business Adminisraion Universiy of Virginia UVA-F-38 Duraion and Convexiy he price of a bond is a funcion of he promised paymens and he marke required rae of reurn. Since he promised

More information

BALANCE OF PAYMENTS. First quarter 2008. Balance of payments

BALANCE OF PAYMENTS. First quarter 2008. Balance of payments BALANCE OF PAYMENTS DATE: 2008-05-30 PUBLISHER: Balance of Paymens and Financial Markes (BFM) Lena Finn + 46 8 506 944 09, lena.finn@scb.se Camilla Bergeling +46 8 506 942 06, camilla.bergeling@scb.se

More information

Supplementary Appendix for Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?

Supplementary Appendix for Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking? Supplemenary Appendix for Depression Babies: Do Macroeconomic Experiences Affec Risk-Taking? Ulrike Malmendier UC Berkeley and NBER Sefan Nagel Sanford Universiy and NBER Sepember 2009 A. Deails on SCF

More information

4. International Parity Conditions

4. International Parity Conditions 4. Inernaional ariy ondiions 4.1 urchasing ower ariy he urchasing ower ariy ( heory is one of he early heories of exchange rae deerminaion. his heory is based on he concep ha he demand for a counry's currency

More information

Hedging with Forwards and Futures

Hedging with Forwards and Futures Hedging wih orwards and uures Hedging in mos cases is sraighforward. You plan o buy 10,000 barrels of oil in six monhs and you wish o eliminae he price risk. If you ake he buy-side of a forward/fuures

More information

Journal Of Business & Economics Research September 2005 Volume 3, Number 9

Journal Of Business & Economics Research September 2005 Volume 3, Number 9 Opion Pricing And Mone Carlo Simulaions George M. Jabbour, (Email: jabbour@gwu.edu), George Washingon Universiy Yi-Kang Liu, (yikang@gwu.edu), George Washingon Universiy ABSTRACT The advanage of Mone Carlo

More information

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Profi Tes Modelling in Life Assurance Using Spreadshees PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Erik Alm Peer Millingon 2004 Profi Tes Modelling in Life Assurance Using Spreadshees

More information

Principal components of stock market dynamics. Methodology and applications in brief (to be updated ) Andrei Bouzaev, bouzaev@ya.

Principal components of stock market dynamics. Methodology and applications in brief (to be updated ) Andrei Bouzaev, bouzaev@ya. Principal componens of sock marke dynamics Mehodology and applicaions in brief o be updaed Andrei Bouzaev, bouzaev@ya.ru Why principal componens are needed Objecives undersand he evidence of more han one

More information

Chapter 6: Business Valuation (Income Approach)

Chapter 6: Business Valuation (Income Approach) Chaper 6: Business Valuaion (Income Approach) Cash flow deerminaion is one of he mos criical elemens o a business valuaion. Everyhing may be secondary. If cash flow is high, hen he value is high; if he

More information

Individual Health Insurance April 30, 2008 Pages 167-170

Individual Health Insurance April 30, 2008 Pages 167-170 Individual Healh Insurance April 30, 2008 Pages 167-170 We have received feedback ha his secion of he e is confusing because some of he defined noaion is inconsisen wih comparable life insurance reserve

More information

Small and Large Trades Around Earnings Announcements: Does Trading Behavior Explain Post-Earnings-Announcement Drift?

Small and Large Trades Around Earnings Announcements: Does Trading Behavior Explain Post-Earnings-Announcement Drift? Small and Large Trades Around Earnings Announcemens: Does Trading Behavior Explain Pos-Earnings-Announcemen Drif? Devin Shanhikumar * Firs Draf: Ocober, 2002 This Version: Augus 19, 2004 Absrac This paper

More information

DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR

DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR Invesmen Managemen and Financial Innovaions, Volume 4, Issue 3, 7 33 DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR Ahanasios

More information

The Identification of the Response of Interest Rates to Monetary Policy Actions Using Market-Based Measures of Monetary Policy Shocks

The Identification of the Response of Interest Rates to Monetary Policy Actions Using Market-Based Measures of Monetary Policy Shocks The Idenificaion of he Response of Ineres Raes o Moneary Policy Acions Using Marke-Based Measures of Moneary Policy Shocks Daniel L. Thornon Federal Reserve Bank of S. Louis Phone (314) 444-8582 FAX (314)

More information

Day Trading International Mutual Funds: Evidence and Policy Solutions

Day Trading International Mutual Funds: Evidence and Policy Solutions Day Trading Inernaional Muual Funds: Evidence and Policy Soluions William N. Goezmann Zoran Ivković K. Geer Rouwenhors Yale School of Managemen Firs Draf: Ocober 2, 1999 This Version: February 20, 2000

More information

Why Did the Demand for Cash Decrease Recently in Korea?

Why Did the Demand for Cash Decrease Recently in Korea? Why Did he Demand for Cash Decrease Recenly in Korea? Byoung Hark Yoo Bank of Korea 26. 5 Absrac We explores why cash demand have decreased recenly in Korea. The raio of cash o consumpion fell o 4.7% in

More information

Measuring macroeconomic volatility Applications to export revenue data, 1970-2005

Measuring macroeconomic volatility Applications to export revenue data, 1970-2005 FONDATION POUR LES ETUDES ET RERS LE DEVELOPPEMENT INTERNATIONAL Measuring macroeconomic volailiy Applicaions o expor revenue daa, 1970-005 by Joël Cariolle Policy brief no. 47 March 01 The FERDI is a

More information

Vector Autoregressions (VARs): Operational Perspectives

Vector Autoregressions (VARs): Operational Perspectives Vecor Auoregressions (VARs): Operaional Perspecives Primary Source: Sock, James H., and Mark W. Wason, Vecor Auoregressions, Journal of Economic Perspecives, Vol. 15 No. 4 (Fall 2001), 101-115. Macroeconomericians

More information

Nikkei Stock Average Volatility Index Real-time Version Index Guidebook

Nikkei Stock Average Volatility Index Real-time Version Index Guidebook Nikkei Sock Average Volailiy Index Real-ime Version Index Guidebook Nikkei Inc. Wih he modificaion of he mehodology of he Nikkei Sock Average Volailiy Index as Nikkei Inc. (Nikkei) sars calculaing and

More information

LEASING VERSUSBUYING

LEASING VERSUSBUYING LEASNG VERSUSBUYNG Conribued by James D. Blum and LeRoy D. Brooks Assisan Professors of Business Adminisraion Deparmen of Business Adminisraion Universiy of Delaware Newark, Delaware The auhors discuss

More information

Impact of scripless trading on business practices of Sub-brokers.

Impact of scripless trading on business practices of Sub-brokers. Impac of scripless rading on business pracices of Sub-brokers. For furher deails, please conac: Mr. T. Koshy Vice Presiden Naional Securiies Deposiory Ld. Tradeworld, 5 h Floor, Kamala Mills Compound,

More information

Markit Excess Return Credit Indices Guide for price based indices

Markit Excess Return Credit Indices Guide for price based indices Marki Excess Reurn Credi Indices Guide for price based indices Sepember 2011 Marki Excess Reurn Credi Indices Guide for price based indices Conens Inroducion...3 Index Calculaion Mehodology...4 Semi-annual

More information

MSCI Index Calculation Methodology

MSCI Index Calculation Methodology Index Mehodology MSCI Index Calculaion Mehodology Index Calculaion Mehodology for he MSCI Equiy Indices Index Mehodology MSCI Index Calculaion Mehodology Conens Conens... 2 Inroducion... 5 MSCI Equiy Indices...

More information

Can Individual Investors Use Technical Trading Rules to Beat the Asian Markets?

Can Individual Investors Use Technical Trading Rules to Beat the Asian Markets? Can Individual Invesors Use Technical Trading Rules o Bea he Asian Markes? INTRODUCTION In radiional ess of he weak-form of he Efficien Markes Hypohesis, price reurn differences are found o be insufficien

More information

Usefulness of the Forward Curve in Forecasting Oil Prices

Usefulness of the Forward Curve in Forecasting Oil Prices Usefulness of he Forward Curve in Forecasing Oil Prices Akira Yanagisawa Leader Energy Demand, Supply and Forecas Analysis Group The Energy Daa and Modelling Cener Summary When people analyse oil prices,

More information

Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Domestic Stock Market Activity

Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Domestic Stock Market Activity Migraion, Spillovers, and Trade Diversion: The mpac of nernaionalizaion on Domesic Sock Marke Aciviy Ross Levine and Sergio L. Schmukler Firs Draf: February 10, 003 This draf: April 8, 004 Absrac Wha is

More information

expressed here and the approaches suggested are of the author and not necessarily of NSEIL.

expressed here and the approaches suggested are of the author and not necessarily of NSEIL. I. Inroducion Do Fuures and Opions rading increase sock marke volailiy Dr. Premalaa Shenbagaraman * In he las decade, many emerging and ransiion economies have sared inroducing derivaive conracs. As was

More information

Evidence from the Stock Market

Evidence from the Stock Market UK Fund Manager Cascading and Herding Behaviour: New Evidence from he Sock Marke Yang-Cheng Lu Deparmen of Finance, Ming Chuan Universiy 250 Sec.5., Zhong-Shan Norh Rd., Taipe Taiwan E-Mail ralphyclu1@gmail.com,

More information

Ownership structure, liquidity, and trade informativeness

Ownership structure, liquidity, and trade informativeness Journal of Finance and Accounancy ABSTRACT Ownership srucure, liquidiy, and rade informaiveness Dan Zhou California Sae Universiy a Bakersfield In his paper, we examine he relaionship beween ownership

More information

Contrarian insider trading and earnings management around seasoned equity offerings; SEOs

Contrarian insider trading and earnings management around seasoned equity offerings; SEOs Journal of Finance and Accounancy Conrarian insider rading and earnings managemen around seasoned equiy offerings; SEOs ABSTRACT Lorea Baryeh Towson Universiy This sudy aemps o resolve he differences in

More information

Does Option Trading Have a Pervasive Impact on Underlying Stock Prices? *

Does Option Trading Have a Pervasive Impact on Underlying Stock Prices? * Does Opion Trading Have a Pervasive Impac on Underlying Sock Prices? * Neil D. Pearson Universiy of Illinois a Urbana-Champaign Allen M. Poeshman Universiy of Illinois a Urbana-Champaign Joshua Whie Universiy

More information

SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES

SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES Inernaional Journal of Accouning Research Vol., No. 7, 4 SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES Mohammad Ebrahimi Erdi, Dr. Azim Aslani,

More information

A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation

A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation A Noe on Using he Svensson procedure o esimae he risk free rae in corporae valuaion By Sven Arnold, Alexander Lahmann and Bernhard Schwezler Ocober 2011 1. The risk free ineres rae in corporae valuaion

More information

The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas

The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas The Greek financial crisis: growing imbalances and sovereign spreads Heaher D. Gibson, Sephan G. Hall and George S. Tavlas The enry The enry of Greece ino he Eurozone in 2001 produced a dividend in he

More information

DNB W o r k i n g P a p e r. Stock market performance and pension fund investment policy: rebalancing, free f loat, or market timing?

DNB W o r k i n g P a p e r. Stock market performance and pension fund investment policy: rebalancing, free f loat, or market timing? DNB Working Paper No. 154 / November 2007 Jacob Bikker, Dirk Broeders and Jan de Dreu DNB W o r k i n g P a p e r Sock marke performance and pension fund invesmen policy: rebalancing, free f loa, or marke

More information

Florida State University Libraries

Florida State University Libraries Florida Sae Universiy Libraries Elecronic Theses, Treaises and Disseraions The Graduae School 2008 Two Essays on he Predicive Abiliy of Implied Volailiy Consanine Diavaopoulos Follow his and addiional

More information

SPEC model selection algorithm for ARCH models: an options pricing evaluation framework

SPEC model selection algorithm for ARCH models: an options pricing evaluation framework Applied Financial Economics Leers, 2008, 4, 419 423 SEC model selecion algorihm for ARCH models: an opions pricing evaluaion framework Savros Degiannakis a, * and Evdokia Xekalaki a,b a Deparmen of Saisics,

More information

MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR

MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR The firs experimenal publicaion, which summarised pas and expeced fuure developmen of basic economic indicaors, was published by he Minisry

More information

USE OF EDUCATION TECHNOLOGY IN ENGLISH CLASSES

USE OF EDUCATION TECHNOLOGY IN ENGLISH CLASSES USE OF EDUCATION TECHNOLOGY IN ENGLISH CLASSES Mehme Nuri GÖMLEKSİZ Absrac Using educaion echnology in classes helps eachers realize a beer and more effecive learning. In his sudy 150 English eachers were

More information

INTRODUCTION TO FORECASTING

INTRODUCTION TO FORECASTING INTRODUCTION TO FORECASTING INTRODUCTION: Wha is a forecas? Why do managers need o forecas? A forecas is an esimae of uncerain fuure evens (lierally, o "cas forward" by exrapolaing from pas and curren

More information

NASDAQ-100 Futures Index SM Methodology

NASDAQ-100 Futures Index SM Methodology NASDAQ-100 Fuures Index SM Mehodology Index Descripion The NASDAQ-100 Fuures Index (The Fuures Index ) is designed o rack he performance of a hypoheical porfolio holding he CME NASDAQ-100 E-mini Index

More information

Appendix D Flexibility Factor/Margin of Choice Desktop Research

Appendix D Flexibility Factor/Margin of Choice Desktop Research Appendix D Flexibiliy Facor/Margin of Choice Deskop Research Cheshire Eas Council Cheshire Eas Employmen Land Review Conens D1 Flexibiliy Facor/Margin of Choice Deskop Research 2 Final Ocober 2012 \\GLOBAL.ARUP.COM\EUROPE\MANCHESTER\JOBS\200000\223489-00\4

More information

GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA

GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA Journal of Applied Economics, Vol. IV, No. (Nov 001), 313-37 GOOD NEWS, BAD NEWS AND GARCH EFFECTS 313 GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA CRAIG A. DEPKEN II * The Universiy of Texas

More information

Market Efficiency or Not? The Behaviour of China s Stock Prices in Response to the Announcement of Bonus Issues

Market Efficiency or Not? The Behaviour of China s Stock Prices in Response to the Announcement of Bonus Issues Discussion Paper No. 0120 Marke Efficiency or No? The Behaviour of China s Sock Prices in Response o he Announcemen of Bonus Issues Michelle L. Barnes and Shiguang Ma May 2001 Adelaide Universiy SA 5005,

More information

SPECIAL REPORT May 4, Shifting Drivers of Inflation Canada versus the U.S.

SPECIAL REPORT May 4, Shifting Drivers of Inflation Canada versus the U.S. Paul Ferley Assisan Chief Economis 416-974-7231 paul.ferley@rbc.com Nahan Janzen Economis 416-974-0579 nahan.janzen@rbc.com SPECIAL REPORT May 4, 2010 Shifing Drivers of Inflaion Canada versus he U.S.

More information

Bid-ask Spread and Order Size in the Foreign Exchange Market: An Empirical Investigation

Bid-ask Spread and Order Size in the Foreign Exchange Market: An Empirical Investigation Bid-ask Spread and Order Size in he Foreign Exchange Marke: An Empirical Invesigaion Liang Ding* Deparmen of Economics, Macaleser College, 1600 Grand Avenue, S. Paul, MN55105, U.S.A. Shor Tile: Bid-ask

More information

Risk Modelling of Collateralised Lending

Risk Modelling of Collateralised Lending Risk Modelling of Collaeralised Lending Dae: 4-11-2008 Number: 8/18 Inroducion This noe explains how i is possible o handle collaeralised lending wihin Risk Conroller. The approach draws on he faciliies

More information

Investor sentiment of lottery stock evidence from the Taiwan stock market

Investor sentiment of lottery stock evidence from the Taiwan stock market Invesmen Managemen and Financial Innovaions Volume 9 Issue 1 Yu-Min Wang (Taiwan) Chun-An Li (Taiwan) Chia-Fei Lin (Taiwan) Invesor senimen of loery sock evidence from he Taiwan sock marke Absrac This

More information

Performance Center Overview. Performance Center Overview 1

Performance Center Overview. Performance Center Overview 1 Performance Cener Overview Performance Cener Overview 1 ODJFS Performance Cener ce Cener New Performance Cener Model Performance Cener Projec Meeings Performance Cener Execuive Meeings Performance Cener

More information

Estimating Time-Varying Equity Risk Premium The Japanese Stock Market 1980-2012

Estimating Time-Varying Equity Risk Premium The Japanese Stock Market 1980-2012 Norhfield Asia Research Seminar Hong Kong, November 19, 2013 Esimaing Time-Varying Equiy Risk Premium The Japanese Sock Marke 1980-2012 Ibboson Associaes Japan Presiden Kasunari Yamaguchi, PhD/CFA/CMA

More information

Present Value Methodology

Present Value Methodology Presen Value Mehodology Econ 422 Invesmen, Capial & Finance Universiy of Washingon Eric Zivo Las updaed: April 11, 2010 Presen Value Concep Wealh in Fisher Model: W = Y 0 + Y 1 /(1+r) The consumer/producer

More information

A Note on the Impact of Options on Stock Return Volatility. Nicolas P.B. Bollen

A Note on the Impact of Options on Stock Return Volatility. Nicolas P.B. Bollen A Noe on he Impac of Opions on Sock Reurn Volailiy Nicolas P.B. Bollen ABSTRACT This paper measures he impac of opion inroducions on he reurn variance of underlying socks. Pas research generally finds

More information

Cointegration: The Engle and Granger approach

Cointegration: The Engle and Granger approach Coinegraion: The Engle and Granger approach Inroducion Generally one would find mos of he economic variables o be non-saionary I(1) variables. Hence, any equilibrium heories ha involve hese variables require

More information

I. Basic Concepts (Ch. 1-4)

I. Basic Concepts (Ch. 1-4) (Ch. 1-4) A. Real vs. Financial Asses (Ch 1.2) Real asses (buildings, machinery, ec.) appear on he asse side of he balance shee. Financial asses (bonds, socks) appear on boh sides of he balance shee. Creaing

More information

Consumer sentiment is arguably the

Consumer sentiment is arguably the Does Consumer Senimen Predic Regional Consumpion? Thomas A. Garre, Rubén Hernández-Murillo, and Michael T. Owyang This paper ess he abiliy of consumer senimen o predic reail spending a he sae level. The

More information

VALUE BASED FINANCIAL PERFORMANCE MEASURES: AN EVALUATION OF RELATIVE AND INCREMENTAL INFORMATION CONTENT

VALUE BASED FINANCIAL PERFORMANCE MEASURES: AN EVALUATION OF RELATIVE AND INCREMENTAL INFORMATION CONTENT VALUE BASED FINANCIAL PERFORMANCE MEASURES: AN EVALUATION OF RELATIVE AND INCREMENTAL INFORMATION CONTENT Pierre Erasmus Absrac Value-based (VB) financial performance measures are ofen advanced as improvemens

More information

Chapter 1.6 Financial Management

Chapter 1.6 Financial Management Chaper 1.6 Financial Managemen Par I: Objecive ype quesions and answers 1. Simple pay back period is equal o: a) Raio of Firs cos/ne yearly savings b) Raio of Annual gross cash flow/capial cos n c) = (1

More information

Resiliency, the Neglected Dimension of Market Liquidity: Empirical Evidence from the New York Stock Exchange

Resiliency, the Neglected Dimension of Market Liquidity: Empirical Evidence from the New York Stock Exchange Resiliency, he Negleced Dimension of Marke Liquidiy: Empirical Evidence from he New York Sock Exchange Jiwei Dong 1 Lancaser Universiy, U.K. Alexander Kempf Universiä zu Köln, Germany Pradeep K. Yadav

More information

Revisions to Nonfarm Payroll Employment: 1964 to 2011

Revisions to Nonfarm Payroll Employment: 1964 to 2011 Revisions o Nonfarm Payroll Employmen: 1964 o 2011 Tom Sark December 2011 Summary Over recen monhs, he Bureau of Labor Saisics (BLS) has revised upward is iniial esimaes of he monhly change in nonfarm

More information

Default Risk in Equity Returns

Default Risk in Equity Returns Defaul Risk in Equiy Reurns MRI VSSLOU and YUHNG XING * BSTRCT This is he firs sudy ha uses Meron s (1974) opion pricing model o compue defaul measures for individual firms and assess he effec of defaul

More information

Efficiency of the Mutual Fund Industry: an Examination of U.S. Domestic Equity Funds: 1995-2004

Efficiency of the Mutual Fund Industry: an Examination of U.S. Domestic Equity Funds: 1995-2004 Geysburg Economic Review Volume 1 Aricle 4 2006 Efficiency of he Muual Fund Indusry: an Examinaion of U.S. Domesic Equiy Funds: 1995-2004 Chase J. Sewar Geysburg College Class of 2006 Follow his and addiional

More information

Does Option Trading Have a Pervasive Impact on Underlying Stock Prices? *

Does Option Trading Have a Pervasive Impact on Underlying Stock Prices? * Does Opion Trading Have a Pervasive Impac on Underlying Soc Prices? * Neil D. Pearson Universiy of Illinois a Urbana-Champaign Allen M. Poeshman Universiy of Illinois a Urbana-Champaign Joshua Whie Universiy

More information

Option Trading Costs Are Lower Than You Think

Option Trading Costs Are Lower Than You Think Opion Trading Coss Are Lower Than You Think Dmiriy Muravyev Boson College Neil D. Pearson Universiy of Illinois a Urbana-Champaign March 15, 2015 Absrac Convenionally measured bid-ask spreads of liquid

More information

NATIONAL BANK OF POLAND WORKING PAPER No. 120

NATIONAL BANK OF POLAND WORKING PAPER No. 120 NATIONAL BANK OF POLAND WORKING PAPER No. 120 Large capial inflows and sock reurns in a hin marke Janusz Brzeszczyński, Marin T. Bohl, Dobromił Serwa Warsaw 2012 Acknowledgemens: We would like o hank Ludwig

More information

Long-Run Stock Returns: Participating in the Real Economy

Long-Run Stock Returns: Participating in the Real Economy Long-Run Sock Reurns: Paricipaing in he Real Economy Roger G. Ibboson and Peng Chen In he sudy repored here, we esimaed he forward-looking long-erm equiy risk premium by exrapolaing he way i has paricipaed

More information

Multiple Structural Breaks in the Nominal Interest Rate and Inflation in Canada and the United States

Multiple Structural Breaks in the Nominal Interest Rate and Inflation in Canada and the United States Deparmen of Economics Discussion Paper 00-07 Muliple Srucural Breaks in he Nominal Ineres Rae and Inflaion in Canada and he Unied Saes Frank J. Akins, Universiy of Calgary Preliminary Draf February, 00

More information

Working Paper No. 482. Net Intergenerational Transfers from an Increase in Social Security Benefits

Working Paper No. 482. Net Intergenerational Transfers from an Increase in Social Security Benefits Working Paper No. 482 Ne Inergeneraional Transfers from an Increase in Social Securiy Benefis By Li Gan Texas A&M and NBER Guan Gong Shanghai Universiy of Finance and Economics Michael Hurd RAND Corporaion

More information

Journal of Financial and Strategic Decisions Volume 12 Number 1 Spring 1999

Journal of Financial and Strategic Decisions Volume 12 Number 1 Spring 1999 Journal of Financial and Sraegic Decisions Volume 12 Number 1 Spring 1999 THE LEAD-LAG RELATIONSHIP BETWEEN THE OPTION AND STOCK MARKETS PRIOR TO SUBSTANTIAL EARNINGS SURPRISES AND THE EFFECT OF SECURITIES

More information

Understanding the Profitability of Pairs Trading

Understanding the Profitability of Pairs Trading Undersanding he Profiabiliy of Pairs Trading Sandro C. Andrade UC Berkeley Vadim di Piero Norhwesern Mark S. Seasholes UC Berkeley This Version February 15, 2005 Absrac This paper links uninformed demand

More information

The Grantor Retained Annuity Trust (GRAT)

The Grantor Retained Annuity Trust (GRAT) WEALTH ADVISORY Esae Planning Sraegies for closely-held, family businesses The Granor Reained Annuiy Trus (GRAT) An efficien wealh ransfer sraegy, paricularly in a low ineres rae environmen Family business

More information

Article The determinants of cash flows in Greek bond mutual funds. International Journal of Economic Sciences and Applied Research

Article The determinants of cash flows in Greek bond mutual funds. International Journal of Economic Sciences and Applied Research econsor www.econsor.eu Der Open-Access-Publikaionsserver der ZBW Leibniz-Informaionszenrum Wirschaf The Open Access Publicaion Server of he ZBW Leibniz Informaion Cenre for Economics Grose, Chrisos Aricle

More information

Does Stock Price Synchronicity Represent Firm-Specific Information? The International Evidence

Does Stock Price Synchronicity Represent Firm-Specific Information? The International Evidence Does Sock Price Synchroniciy Represen Firm-Specific Informaion? The Inernaional Evidence Hollis Ashbaugh-Skaife Universiy of Wisconsin Madison 975 Universiy Avenue Madison, WI 53706 608-63-7979 hashbaugh@bus.wisc.edu

More information

THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS

THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS VII. THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS The mos imporan decisions for a firm's managemen are is invesmen decisions. While i is surely

More information

The Information Content of Implied Skewness and Kurtosis Changes Prior to Earnings Announcements for Stock and Option Returns

The Information Content of Implied Skewness and Kurtosis Changes Prior to Earnings Announcements for Stock and Option Returns The Informaion Conen of Implied kewness and urosis Changes Prior o Earnings Announcemens for ock and Opion Reurns Dean Diavaopoulos Deparmen of Finance Villanova Universiy James. Doran Bank of America

More information

Measuring the Effects of Exchange Rate Changes on Investment. in Australian Manufacturing Industry

Measuring the Effects of Exchange Rate Changes on Investment. in Australian Manufacturing Industry Measuring he Effecs of Exchange Rae Changes on Invesmen in Ausralian Manufacuring Indusry Robyn Swif Economics and Business Saisics Deparmen of Accouning, Finance and Economics Griffih Universiy Nahan

More information

The Influence of Positive Feedback Trading on Return Autocorrelation: Evidence for the German Stock Market

The Influence of Positive Feedback Trading on Return Autocorrelation: Evidence for the German Stock Market The Influence of Posiive Feedback Trading on Reurn Auocorrelaion: Evidence for he German Sock Marke Absrac: In his paper we provide empirical findings on he significance of posiive feedback rading for

More information

Predicting Stock Market Index Trading Signals Using Neural Networks

Predicting Stock Market Index Trading Signals Using Neural Networks Predicing Sock Marke Index Trading Using Neural Neworks C. D. Tilakarane, S. A. Morris, M. A. Mammadov, C. P. Hurs Cenre for Informaics and Applied Opimizaion School of Informaion Technology and Mahemaical

More information

THE SUPPLY OF STOCK MARKET RETURNS. Roger G. Ibbotson Yale University. Peng Chen Ibbotson Associates, Inc.

THE SUPPLY OF STOCK MARKET RETURNS. Roger G. Ibbotson Yale University. Peng Chen Ibbotson Associates, Inc. THE SUPPLY OF STOCK MARKET RETURNS Roger G. Ibboson Yale Universiy Peng Chen Ibboson Associaes, Inc. June 2001 The Supply of Sock Marke Reurns Roger G. Ibboson, Ph.D. Professor in he Pracice of Finance

More information

How does working capital management affect SMEs profitability? This paper analyzes the relation between working capital management and profitability

How does working capital management affect SMEs profitability? This paper analyzes the relation between working capital management and profitability How does working capial managemen affec SMEs profiabiliy? Absrac This paper analyzes he relaion beween working capial managemen and profiabiliy for small and medium-sized firms by conrolling for unobservable

More information

Relationships between Stock Prices and Accounting Information: A Review of the Residual Income and Ohlson Models. Scott Pirie* and Malcolm Smith**

Relationships between Stock Prices and Accounting Information: A Review of the Residual Income and Ohlson Models. Scott Pirie* and Malcolm Smith** Relaionships beween Sock Prices and Accouning Informaion: A Review of he Residual Income and Ohlson Models Sco Pirie* and Malcolm Smih** * Inernaional Graduae School of Managemen, Universiy of Souh Ausralia

More information

One dictionary: Native language - English/English - native language or English - English

One dictionary: Native language - English/English - native language or English - English Faculy of Social Sciences School of Business Corporae Finance Examinaion December 03 English Dae: Monday 09 December, 03 Time: 4 hours/ 9:00-3:00 Toal number of pages including he cover page: 5 Toal number

More information

The Behavior of China s Stock Prices in Response to the Proposal and Approval of Bonus Issues

The Behavior of China s Stock Prices in Response to the Proposal and Approval of Bonus Issues The Behavior of China s Sock Prices in Response o he Proposal and Approval of Bonus Issues Michelle L. Barnes a* and Shiguang Ma b a Federal Reserve Bank of Boson Research, T-8 600 Alanic Avenue Boson,

More information

Option Put-Call Parity Relations When the Underlying Security Pays Dividends

Option Put-Call Parity Relations When the Underlying Security Pays Dividends Inernaional Journal of Business and conomics, 26, Vol. 5, No. 3, 225-23 Opion Pu-all Pariy Relaions When he Underlying Securiy Pays Dividends Weiyu Guo Deparmen of Finance, Universiy of Nebraska Omaha,

More information

Monetary Policy & Real Estate Investment Trusts *

Monetary Policy & Real Estate Investment Trusts * Moneary Policy & Real Esae Invesmen Truss * Don Bredin, Universiy College Dublin, Gerard O Reilly, Cenral Bank and Financial Services Auhoriy of Ireland & Simon Sevenson, Cass Business School, Ciy Universiy

More information

Asymmetric Information, Perceived Risk and Trading Patterns: The Options Market

Asymmetric Information, Perceived Risk and Trading Patterns: The Options Market Asymmeric Informaion, Perceived Risk and Trading Paerns: The Opions Marke Guy Kaplanski * Haim Levy** March 01 * Bar-Ilan Universiy, Israel, Tel: 97 50 696, Fax: 97 153 50 696, email: guykap@biu.ac.il.

More information

WORKING CAPITAL ACCRUALS AND EARNINGS MANAGEMENT 1

WORKING CAPITAL ACCRUALS AND EARNINGS MANAGEMENT 1 Invesmen Managemen and Financial Innovaions, Volume 4, Issue 2, 2007 33 WORKING CAPITAL ACCRUALS AND EARNINGS MANAGEMENT Joseph Kersein *, Aul Rai ** Absrac We reexamine marke reacions o large and small

More information

Why does the correlation between stock and bond returns vary over time?

Why does the correlation between stock and bond returns vary over time? Why does he correlaion beween sock and bond reurns vary over ime? Magnus Andersson a,*, Elizavea Krylova b,**, Sami Vähämaa c,*** a European Cenral Bank, Capial Markes and Financial Srucure Division b

More information

Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Domestic Stock Market Activity

Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Domestic Stock Market Activity Migraion, Spillovers, and rade Diversion: he mpac of nernaionalizaion on Domesic Sock Marke Aciviy Ross Levine and Sergio L. Schmukler January 6, 006 Absrac his paper sudies he relaion beween inernaionalizaion

More information

A Further Examination of Insurance Pricing and Underwriting Cycles

A Further Examination of Insurance Pricing and Underwriting Cycles A Furher Examinaion of Insurance ricing and Underwriing Cycles AFIR Conference, Sepember 2005, Zurich, Swizerland Chris K. Madsen, GE Insurance Soluions, Copenhagen, Denmark Svend Haasrup, GE Insurance

More information

Determinants of Capital Structure: Comparison of Empirical Evidence from the Use of Different Estimators

Determinants of Capital Structure: Comparison of Empirical Evidence from the Use of Different Estimators Serrasqueiro and Nunes, Inernaional Journal of Applied Economics, 5(1), 14-29 14 Deerminans of Capial Srucure: Comparison of Empirical Evidence from he Use of Differen Esimaors Zélia Serrasqueiro * and

More information

Tax Externalities of Equity Mutual Funds

Tax Externalities of Equity Mutual Funds Tax Exernaliies of Equiy Muual Funds Joel M. Dickson The Vanguard Group, Inc. John B. Shoven Sanford Universiy and NBER Clemens Sialm Sanford Universiy December 1999 Absrac: Invesors holding muual funds

More information

THE INTERPLAY BETWEEN DIRECTOR COMPENSATION AND CEO COMPENSATION

THE INTERPLAY BETWEEN DIRECTOR COMPENSATION AND CEO COMPENSATION The Inernaional Journal of Business and Finance Research VOLUME 8 NUMBER 2 2014 THE INTERPLAY BETWEEN DIRECTOR COMPENSATION AND CEO COMPENSATION Dan Lin, Takming Universiy of Science and Technology Lu

More information

Influence of the Dow returns on the intraday Spanish stock market behavior

Influence of the Dow returns on the intraday Spanish stock market behavior Influence of he Dow reurns on he inraday Spanish sock marke behavior José Luis Miralles Marcelo, José Luis Miralles Quirós, María del Mar Miralles Quirós Deparmen of Financial Economics, Universiy of Exremadura

More information

JCER DISCUSSION PAPER No.136

JCER DISCUSSION PAPER No.136 JCER DISCUSSION PAPER No.136 Belief changes and expecaion heerogeneiy in buy- and sell-side professionals in he Japanese sock marke Ryuichi Yamamoo and Hideaki Hiraa February 2012 公 益 社 団 法 人 日 本 経 済 研

More information

The impact of the trading systems development on bid-ask spreads

The impact of the trading systems development on bid-ask spreads Chun-An Li (Taiwan), Hung-Cheng Lai (Taiwan)* The impac of he rading sysems developmen on bid-ask spreads Absrac Following he closure, on 30 June 2005, of he open oucry sysem on he Singapore Exchange (SGX),

More information

Price elasticity of demand for crude oil: estimates for 23 countries

Price elasticity of demand for crude oil: estimates for 23 countries Price elasiciy of demand for crude oil: esimaes for 23 counries John C.B. Cooper Absrac This paper uses a muliple regression model derived from an adapaion of Nerlove s parial adjusmen model o esimae boh

More information

Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Stock Market Liquidity

Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Stock Market Liquidity Migraion, Spillovers, and Trade Diversion: The mpac of nernaionalizaion on Sock Marke Liquidiy Ross Levine and Sergio L. Schmukler Firs Draf: February 10, 2003 This draf: March 30, 2003 Absrac Wha is he

More information