Expectations of Infrequently Occurring Jumps in Returns: The Reclined 7-Curve Shape of Cumulative Abnormal Returns

2002 ◽  
Author(s):  
Aku Penttinen
Keyword(s):  
Abnormal Returns ◽  
Curve Shape ◽  
Cumulative Abnormal Returns

Cryptocurrency bubble risk and the FOMC announcements during COVID-19 black swan event

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anis Jarboui ◽  
Emna Mnif
Keyword(s):  
Federal Reserve ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Future Research ◽  
Open Market ◽  
Predictive Capacity ◽  
Federal Open Market Committee ◽  
Content Type ◽  
Cumulative Abnormal Returns ◽  
Practical Implications

Purpose After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the markets. This paper aims to evaluate the effects of the Federal Reserve monetary policy on the cryptocurrency dynamics during the COVID19 pandemic. Design/methodology/approach We examine the response and feedback effects via an event study methodology. For this purpose, abnormal returns (AR) and cumulative abnormal returns (CARs) around the first FOMC (Federal Open Market Committee) announcement related to the COVID-19 pandemic for the top five cryptocurrencies are explored. We, further investigate the effect of the eight FOMC statement announcements during the COVID19 pandemic on these cryptocurrencies (Bitcoin, Ethereum, Tether, Litecoin, and Ripple). In the above-mentioned crypto-currency markets, we investigate the presence of bubbles by using the PSY test. We then examine the concordance of the dates of these bubbles with the dates of the FOMC announcements. Findings The empirical results show that the first FOMC event has a negative significant effect after 4 days of the announcement date for all studied cryptocurrencies except Tether. The results also indicate that cumulative abnormal returns are significant during the event windows of (−3,8), (−3,9), and (−3,10). Besides, we find that Bitcoin, Ethereum and, Litecoin lived short bubbles lasting for a few days. However, Ripple and Tether markets present no bubbles and no explosive periods. Research limitations/implications This paper presents trained proof that FOMC announcements have a positive effect on volatility's predictive capacity. This work therefore promotes the study of the data quality of volatility in future research as well. Practical implications The justified effect of the FOMC announcements on cryptocurrency as a speculative asset has practical implications for investors in building their trading strategies in anticipation of the next FOMC announcement. Therefore, this study implies that the FOMC announcements contain very relevant information for investors in the cryptocurrency market. This research may not only encourage a better understanding of the evolution of the expectations of policymakers, but also facilitate a better understanding of how these expectations are developed. Originality/value The COVID-19 pandemic has disturbed the stability of financial markets, inciting the Fed to take some monetary regulations. To the best of our knowledge, this study is the first one that analyses the response of five major cryptocurrencies to FOMC announcements during COVID 19 pandemic and associates these dates with bubble occurrences.

scholarly journals TRADEMARK ACTIVITY AND THE MARKET PERFORMANCE OF U.S. COMMERCIAL BANKS

2012 ◽  
Vol 13 (5) ◽  
pp. 931-950 ◽  
Author(s):  
Carlos González-Pedraz ◽  
Sergio Mayordomo
Keyword(s):  
Commercial Banks ◽  
Negative Impact ◽  
Abnormal Returns ◽  
Market Value ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Cumulative Abnormal Returns ◽  
And Performance ◽  
Positive Effect

This empirical paper analyzes the effect of trademark activity on the market value and performance of US commercial banks from two perspectives. First, a longterm perspective considers the effect of such activity on banks’ Tobin's q. Second, with a short-term perspective, the authors analyze the effect of trademark activity on banks’ abnormal returns. An older portfolio of trademarks diminishes the ratio of market value to firm assets, but this ratio can be improved in the long term by abandoning old trade-marks. Portfolios of trademarks with wide diversification do not help increase Tobin's q. Furthermore, according to an event study, the creation of a trademark has a positive effect on cumulative abnormal returns compared with no event, whereas a cancellation event has a negative impact.

How Sports Sponsorship Influences a Sponsor’s Financial Performance: A Case Study from the Korea Baseball Organization

2021 ◽  
Vol 30 (4) ◽  
Author(s):  
Hyun-Min Kim ◽  
Woon-Kyung Song ◽  
Sanghak Lee
Keyword(s):  
Financial Performance ◽  
Stock Returns ◽  
Abnormal Returns ◽  
Positive Influence ◽  
Cumulative Abnormal Returns ◽  
Abnormal Stock Returns ◽  
Korea Baseball Organization ◽  
Positive Effect ◽  
Insight Into

This study aims to examine the effects of sponsorship on the sponsor’s financial performance. Th is study investigates return on sponsorship (ROS) with a quantitative analysis. Nexen Tire’s title sponsorship agreement with the Heroes baseball club in the Korea Baseball Organization (KBO) in 2010 is studied. The positive effect of sponsorship on the sponsor’s Tobin’s q is confirmed by comparing the non-sponsorship period (2000‒2009) with the sponsorship period (2010‒2018). It is also shown from an event study that the sponsor experiences negative abnormal stock returns on the news of the sponsorship agreement, though this was not found to be statistically significant. Still, when the sponsee enters the postseason, positive cumulative abnormal returns are observed, particularly significant 10 days before the postseason games. Th is study confirms the positive influence of sponsorship on the sponsor’s financial performance and, with evidence from South Korea, provides insight into Asian markets in need of research. Th e results suggest that 10 days before a postseason game would be an ideal time to leverage marketing and activate a sponsorship strategy.

The valuation effects of hotel mergers

2021 ◽  
pp. 135481662110504
Author(s):  
Seongsu David Kim
Keyword(s):  
Panel Data Analysis ◽  
Hotel Industry ◽  
Abnormal Returns ◽  
Lodging Industry ◽  
Causal Inferences ◽  
Valuation Effects ◽  
Cumulative Abnormal Returns ◽  
Announcement Date ◽  
Total Debt ◽  
Jel Classifications

This study aims to evaluate the merger effect of hotel mergers between 1981 and 2019 and assess which theoretical framework mergers in the lodging industry would conform. Previously, no work has been done about the nature of hotel mergers using the combined return, while this lack of thoroughness in assessing the motivation of those mergers has triggered different interpretations. The design of this study follows the traditional framework of an event study by assessing various types of cumulative abnormal returns around the announcement date. The key finding of this study suggests that the nature of hotel mergers strongly supports the synergy hypothesis. In order to explore the causal inferences of this result by bidder and target, an additional analysis was conducted by regressing the cumulative abnormal returns on accounting measures as well as merger- and hotel industry–specific variables. This panel data analysis showed that in a merger where both the bidder and target are affected, the amount of total debt, being engaged in the casino business, and whether the merger was involving a stock swap sent out positive signals to the market, whereby longer duration and higher deal value lifted the undervalued target. JEL Classifications: G34 (Mergers; Restructuring; Corporate Governance)

Bank Dependence and Bank Financing in Corporate M&A

2021 ◽  
Author(s):  
Sheng Huang ◽  
Ruichang Lu ◽  
Anand Srinivasan
Keyword(s):  
Mergers And Acquisitions ◽  
Abnormal Returns ◽  
Loan Pricing ◽  
Loan Contracts ◽  
Cumulative Abnormal Returns ◽  
Bank Financing ◽  
The Difference

We examine the valuation impact of bank-financed mergers and acquisitions (M&As) and the loan contracts used to finance M&A transactions, focusing on the difference between bank-dependent acquirers and other acquirers. We find that bank-financed deals have higher acquirer’s cumulative abnormal returns relative to other cash M&A deals, but this certification effect exists only for bank-dependent acquirers. Despite bank-dependent acquirers being more susceptible to hold-up, banks do not impose higher loan pricing or more stringent nonprice terms on them. After completion of the acquisition, bank-dependent acquirers retain the M&A financing banks for a much larger share of their borrowing needs, suggesting the importance of repeat business for lack of hold-up. Our findings highlight the positive aspects of bank dependence and the importance of implicit contracting for the lack of hold-up in lending markets. This paper was accepted by David Simchi-Levi, finance.

scholarly journals Is Investors’ Psychology Affected Due to a Potential Unexpected Environmental Disaster?

2020 ◽  
Vol 13 (7) ◽  
pp. 151
Author(s):  
George Halkos ◽  
Argyro Zisiadou
Keyword(s):  
Relevant Literature ◽  
Abnormal Returns ◽  
Systematic Risk ◽  
Environmental Disaster ◽  
Historical Sources ◽  
Unexpected Event ◽  
Macroeconomic Factors ◽  
Technological Disasters ◽  
Environmental Disasters ◽  
Cumulative Abnormal Returns

The purpose of this paper is to approach the way investors perceive the risk associated with unexpected environmental disasters. For that reason, we examine certain types of natural and technological disasters, also known as “na-tech”. Based on the existing relevant literature and historical sources, the most common types of such disasters are geophysical and industrial environmental disasters. After providing evidence of the historical evolution of the na-tech events and a brief description of the events included in the sample, we estimate the systematic risk of assets connected to these events. The goal is to capture possible abnormalities as well as to observe investors’ psychology of risk after the occurrence of an unexpected event. Finally, we examine whether macroeconomic factors may affect those abnormalities. The empirical findings indicate that the cases we examined did not cause significant cumulative abnormal returns. Moreover, some events caused an increase in systematic risk while surprisingly some others reduced risk, showing that investors tend to support a country and/or corporation due to their reputation.

New CEOs’ previous experience and acquisition performance

2019 ◽  
Vol 27 (3) ◽  
pp. 745-758 ◽  
Author(s):  
Heejin Woo
Keyword(s):  
Abnormal Returns ◽  
Competitive Advantages ◽  
Upper Echelon ◽  
Acquisition Performance ◽  
Content Type ◽  
Corporate Strategies ◽  
Cumulative Abnormal Returns ◽  
The Us ◽  
Event Study Method ◽  
Industry Experience

Purpose This study aims to investigate how new CEOs’ previous experiences in other organizations and other industries create value in acquisitions. Drawing on the upper echelon perspective, this study theorizes that the multiorganizational experience of new CEOs is positively associated with acquisition performance and, in particular, that the multi-industry experience of new CEOs leads to better performance in diversifying acquisitions than in related acquisitions. While new CEOs without multiorganizational experience undergo a cognitive entrenchment in firm-specific experience, new CEOs with multiorganizational experience can lead acquisitions with more flexibility and agility. Design/methodology/approach Acquisition and organizational data were drawn from the US manufacturing industries (SIC 20-39) between 2008 and 2010. The event study method was used to test hypotheses. In 346 acquisitions made by 139 firms, acquisition performance was measured according to cumulative abnormal returns. Findings Consistent with the hypotheses, the multiorganizational experience of new CEOs was positively associated with acquisition performance and, in particular, the multi-industry experience of new CEOs led to better performance in diversifying acquisitions than in related acquisitions. Originality/value This paper contributes to the CEO literature and acquisition literature by suggesting that the multiorganizational experience of new CEOs can be a valuable source of competitive advantages, particularly when implementing corporate strategies involving interorganizational integration processes.

IMMEDIATE AND LONGER-TERM STOCK PRICE DYNAMICS FOLLOWING LARGE STOCK PRICE CHANGES

2020 ◽  
Vol 15 (01) ◽  
pp. 2050002
Author(s):  
ANDREY KUDRYAVTSEV
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Market Model ◽  
Conditional Volatility ◽  
Short Term ◽  
Price Increases ◽  
Cumulative Abnormal Returns ◽  
Price Reversal

The study explores the correlation between the immediate and the longer-term stock returns following large daily price moves. Following the previous literature, which documents a tendency for price reversals after initial large price moves, I suggest that if a large stock price move is immediately followed by a short-term price drift, then it may indicate that the company-specific shock is more completely incorporated in the stock price, significantly increasing the probability of subsequent longer-term price reversal. Analyzing a vast sample of large stock price moves, I document that negative (positive) longer-term stock price reversals after large price increases (decreases) are significantly more pronounced if the latter are immediately followed by relatively high (low) short-term cumulative abnormal returns, that is, by short-term price drifts. The effect remains significant after accounting for additional company-specific (size, market model beta, historical, or conditional volatility) and event-specific (stock’s return and trading volume on the event day) factors.

Political connections and stock returns: evidence from the Boulangist campaign, 1888–1889

2018 ◽  
Vol 25 (3) ◽  
pp. 323-356
Author(s):  
Miguel Ángel Ortiz-Serrano
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Third Republic ◽  
Political Connections ◽  
Coup D'etat ◽  
Cumulative Abnormal Returns ◽  
Original Dataset ◽  
Political Agitation ◽  
Paris Bourse

The decade of the 1880s was a turbulent period for the French Third Republic. Corruption scandals that discredited republican parties and a lacklustre economic performance after the Paris Bourse crash of 1882 gave rise to widespread public disenchantment with the republican political elites. The rise of the Boulangist movement was the most representative example of this disillusionment. In 1887, Georges Boulanger, an army general and former minister of war, began orchestrating a populist mass campaign against the ruling republicans and the parliamentary regime. His political agitation, supported by a heterogeneous coalition of socialists, radicals and royalists, reached a climax in January 1889, when, after winning a Paris by-election, he had an opportunity to stage acoup d’état, which did not materialise. To understand whether French investors perceived the Boulangist campaign as a real threat to their interests, I use an original dataset of daily stock prices to analyse the effect of the January 1889 by-election on the value of politically connected firms listed on the Paris Bourse. The results show that firms with links to the republican parties experienced positive cumulative abnormal returns after Boulanger's refusal to stage the coup, while there was no effect on firms connected to the royalist parties or with no political ties. These findings suggest that French investors reacted positively to the prospective subsiding of the Boulangist movement.

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