Blue Chip Stocks Research Articles

Are blue chip stock market indices good proxies for all-shares market indices? The case of the Brussels Stock Exchange 1833–2005

In this article, we calculate a market-weighted return index for the 20 largest stocks listed on the Brussels Stock Exchange over the period 1833–2005, based on a new, unique and high-quality database. We find that this index captures the most important stylised facts of the value-weighted return of all shares listed on the Brussels Stock Exchange in this period. Our results support the empirical practice of concentrating on just the largest stocks. The indices we construct are based on one of the longest Belgian time series available. The indices take into account the exact dividends, the timing of the dividend cash flows and all capital operations. We are therefore able to decompose total returns into capital gain returns and dividend returns, which is not possible with most historical return series. We show that, to construct a credible return index, it is crucial to fully take into account dividends.

Commonality in returns, order flows, and liquidity in the Greek stock market

Using a unique high-frequency data-set on a comprehensive sample of Greek blue-chip stocks, spanning from September 2003 through March 2006, this note assesses the extent and role of commonality in returns, order flows (OFs), and liquidity. It also formally models aggregate equity returns in terms of aggregate equity OF, in an effort to clarify OF's importance in explaining returns for the Athens Exchange market. Almost a quarter of the daily returns in the FTSE/ATHEX20 index is explained by aggregate own OF. In a second step, using principal components and canonical correlation analyses, we document substantial common movements in returns, OFs, and liquidity, both on a market-wide basis and on an individual security basis. These results emphasize that asset pricing and liquidity cannot be analyzed in isolation from each other.

The Impact of Liquidity Risk: A Fresh Look*

This paper takes a fresh look at the importance of liquidity risk using a comprehensive liquidity measure, weighted spread, in a Value-at-Risk (VaR) framework. The weighted spread measure extracts liquidity costs by order size from the limit order book. Using a unique, representative data set of 160 German stocks over 5.5 years, we show that liquidity risk is an important risk component. Actually, liquidity risk is increasing the total price risk by over 25%, even at 10-day horizons and for liquid blue chip stocks and especially in larger, yet realistic order sizes beyond €1 million. When correcting for liquidity risk, it is commonly assumed that liquidity risk can be simply added to price risk. Our empirical results show that this is not correct, as the correlation between liquidity and price is non-perfect and total risk is thus overestimated.

Tracking Portfolio Optimization

This article introduces a new approach to the tracking portfolio composition. Unlike traditional approaches, it doesn’t require benchmark composition to be known and works on any sets of assets. Models presented in the article allow deriving a portfolio composition that results in the optimal value of a tracking performance indicator for the given sets of assets. An S&P 500 tracking portfolio composed of 16 arbitrary selected blue chip stocks generated with the models had in 2010 the annualized TEV of about 4%. Tracking accuracy is significantly affected by frequency of rebalancing and number of assets in portfolio for ex-post tests. Ex-ante tests during the same time period show lower tracking accuracy with the annualized TEV of about 4.4% for the same portfolio, and indicate no benefit in frequent rebalancing.

Sector level cost of equity in African financial markets

This paper assesses the effectiveness of Liu (2006) metrics in measuring illiquidity within a multifactor CAPM pricing model. Costs of equity are estimated using this model for the major sectors within Africa's larger equity markets: Morocco, Tunisia, Egypt, Kenya, Nigeria, Zambia, Botswana and South Africa. In all countries, the cost of equity is found to be highest in the financial sector and lowest in the blue chip stocks of Tunisia, Morocco, Namibia and South Africa. At an aggregate level, Nigeria and Zambia have the highest cost of capital.

Managerial ownership concentration and Agency Conflict using Logistic Regression Approach: Evidence from Bursa Malaysia

This paper adopted logistic regression model to examine the relationship between level of managerial ownership concentration and agency conflict which are proxied by level of risk, firms leverage and firms dividend policy. The study covers a period of 5 years from 1997 through 2001. The study is based on the 100 blue-chip stocks, majority of which are derived from CI components. The findings suggest a positive and significant association between level of level of risk at lower level and managerial ownership while a negative and significant association is also evidenced between risk at higher level and managerial ownership concentration. While debt policy which serves as positive monitoring substitute for agency conflict is found to be positive and significant explaining the level of ownership concentration. Furthermore, dividend policies, which also serve as monitoring, substitute to reduce agency conflict between manager and external shareholders do not appear to have any significant impact on managerial ownership. On the other hand, the level of institutional ownership, which serves as external monitoring force, is found to have inverse impact on level of managerial ownership concentration. This is marginally significant at 10 level (p=.12). The findings, in part explain the argument that the managerial ownership help reduce agency conflict between outside equity holders and managers.

Feasible momentum strategies: Evidence from the Swiss stock market

While there is little controversy on the profitability of momentum strategies, their implementation is afflicted with many difficulties. Most important, chasing momentum can generate high turnover. Though there are already several attempts to make momentum strategies less expensive with respect to transaction costs, we go a step further in the simplification of momentum strategies. By restricting our sample to Switzerland’s largest blue-chip stocks and choosing only one winner and one loser stock, we find average returns to our momentum arbitrage portfolios of up to 44% p.a. depending on the formation and holding periods. While unconditional risk models are at odds with momentum profits, stock market predictability and time-varying expected returns explain a large part of the momentum payoffs, including the post-holding period behavior of the winner and loser stocks (overreaction and subsequent price correction).

Specialized Day Trading - A New View of an Old Game

After the U.S market earned strong returns in 2003, day trading made a comeback and once again became a popular trading method among traders. Although there is no comprehensive empirical evidence available to answer the question do individual day traders make money, there is a number of studies that point out that only few are able to consistently earn profits sufficient to cover transaction costs and thus make money. The day trading concept of buying and selling stocks on margin alone suggests that it is more risky than the usual going long way of making profit. This paper offers a new approach to day trading, an approach that eliminates some of the risks of day trading through specialization. The concept is that the trader should specialize himself in just one (blue chip) stock and use existing day trading techniques (trend following, playing news, range trading, scalping, technical analysis, covering spreads ) to make money.

Feasible Momentum Strategies - Evidence from the Swiss Stock Market

While there is little controversy on the profitability of momentum strategies, their implementation is afflicted with many difficulties. Most important, chasing momentum can generate high turnover. Though there are already several attempts to make momentum strategies less expensive with respect to transaction costs, we go a step further in the simplification of momentum strategies. By restricting our sample to Switzerland's largest blue-chip stocks and choosing only one winner and one loser stock, we find average returns to our momentum arbitrage portfolios of up to 44% p.a. depending on the formation and holding periods. While unconditional risk models are at odds with momentum profits, stock market predictability and time-varying expected returns explain a large part of the momentum payoffs, including the post-holding period behavior of the winner and loser stocks (overreaction and subsequent price correction). We also report interesting patterns of a number of stock characteristics over the (pre-)formation and (post-)holding periods.

Day-of-the-week effects in US and Asia–Pacific stock markets during the Asian financial crisis: a non-parametric approach

This paper is devoted to extending the determination of day-of-the-week effect existing in a sample of Asia–Pacific markets such as Hong Kong, Korea, Singapore and Taiwan. At the same time, we also like to test for the presence of weekend effects in developed markets of the US and Japan. In view of recent studies regarding the disappearing day-of-the-week effect for US firms, we will focus our attention on the recent years to better track the presence of weekend effects during and after the Asian financial crisis in 1997 and the recent collapse of the blue chip stocks in the United States. The results reveal that there exists no evidence of the day-of-the-week effect in all countries except Singapore. For Singapore, it is low returns on Monday and Tuesday and high returns on Wednesday to Friday.

Revamp for Malaysian gas processing plant

Indonesian retail industries for fashion sector continue growing vigorously due to raise of income per capita and rise of middle-up class people. PT Mitra Adiperkasa Tbk (MAP) is the leader of fashion retailer in Indonesia. The company's stock had ever categorized as a blue chip stock in Febuary 2013 - January 2014 indicates its satisfactory performances. The company successfully brought many top fashion brands from other countries such as Zara and takes the Indonesian market well. In 2014, the stock is no longer pinned as a blue chip even some securities dwindled 24% of the stock price and the profit growth reach the negative area. The issues above trigger a curiosity about the company performance and value. How is the actual financial performance of MAP compare with other local and global companies? What innovative idea does each brand of MAP have to captivate Indonesian market? How small fashion businesses in Indonesia should develop themselves to be the fashion leader brand in the home country? To assess the financial performance, ratio analysis is going to be used. PT Mitra Adiperkasa financial performance will be compared with PT Matahari Department Store, PT Ramayana Lestari Sentosa, FJ Benjamin Sdn Bhd (Malaysia), Royal Sporting House Ltd (Singapore), and Giordano International Ltd (Hong Kong). The valuation will use 2 methods; DCF and market approach. The valuation using DCF method confirms that MAP's shares will grow 46% in 2029.This financial analysis is an encouragement either for the entrepreneurs to start fashion business or small businesses to continue developing since in the future fashion business is always tempting for investors and customers. Small fashion business should implement effective and efficient supply chain to create fast retailing and become the fashion business leader in the home country.

Defining, Using, and Challenging the Rhetorical Tradition

What counts as 'the tradition'? was the question that provoked this series of essays. Several of us attended a retreat sponsored by the Rhetoric Society of America, and we had dutifully split into smaller groups in an attempt to define or mark rhetoric as a discipline. Patricia Bizzell and Bruce Herzberg had recently published the second edition of their The Rhetorical and Michael Leff wanted to know what criteria Bizzell and Herzberg used as they revised the tradition. Bizzell was part of the group and responded. Jacqueline Jones Royster also responded to the opening question as the terrain shifted from defining to using and quite naturally for everyone in the room challenging the tradition. Maurice Charland soon entered into this Burkean parlor, despite his refusal to call rhetoric a discipline. One product of this ongoing conversation was a panel at the 2002 RSA biennial conference, from which the essays in this special issue of Philosophy & Rhetoric emerged. In their essays, Bizzell (English), Charland (Communication Studies), Leff (Communication Studies), and Royster (English) agree on several key points, the most basic of which are not only the existence but also the dynamic nature of a rhetorical tradition. The essayists agree that contemporary users of the tradition have agency in its constitution, and that texts by performers as well as by rhetorical theorists have a place in the tradition. But all of the essays have different starting points and offer us myriad ways to think about the rhetorical tradition. Patricia Bizzell writes with a unique perspective, having, as she says, edited the tradition twice. In Editing the Rhetorical Tradition, Bizzell takes stock and quickly accounts for us her sense of the traditional tradition, or the tradition's blue chip stocks, and then offers tips on high risk and growth stocks. Playing with the stock market metaphor, Bizzell imag-

From Brownian motion to operational risk: Statistical physics and financial markets

High-frequency returns of the DAX German blue chip stock index are used to test geometric Brownian motion, the standard model for financial time series. Even on a 15-s time scale, the linear correlations of DAX returns have a zero-time delta function which carries 90% of the weight, while the remaining 10% are positively correlated with a decay time of 53 s and negatively correlated on a 9.4-min scale. The probability density of the returns possesses fat tails with power laws whose exponents continuously increase with time scales. It is suggested that hydrodynamic turbulence may provide a phenomenological framework for the description of these data, and at the same time, open a way to use them for risk-management purposes, e.g. option pricing and hedging. Option pricing also is the cornerstone of credit valuation, an area of much practical importance not considered explicitly in most other physics-inspired papers on finance. Finally, operational risk is introduced as a new risk category currently emphasized by regulators, which will become important in many banks in the near future.

Price and trading volume reaction: the case of Hong Kong companies’ earnings announcements

In this paper, we investigate the price changes and trading volume reactions during the days surrounding the announcements of annual earnings based on a 31-day observation window for a sample of Hong Kong firms listed on the Stock Exchange of Hong Kong (SEHK). The major findings of our study: (1) materially support the findings of Morse (1981), (2) demonstrate significant price and volume reactions over four days surrounding the annual earnings announcement over the years 1992 to 1995, (3) show similar market reaction for Blue Chip stocks compared to Non–Blue Chip stocks, and (4) indicate a larger overall price reaction for Non–Blue Chip stocks and mixed results regarding volume reaction when comparing the Blue Chip and Non–Blue Chip stocks. These results show that, although the Hong Kong results are largely in line with the U.S. and international evidence, the Blue Chip stocks are followed more and remain the mainstream stocks for Hong Kong investors.

Information and Geography: Evidence from the German Stock Market

The electronic trading system Xetra of the German Security Exchange provides a unique data source on the equity trades of 453 large traders located in 23 different cities and 8 European countries. We explore information asymmetries across the trader population: Traders located outside Germany in non-German speaking cities show lower proprietary trading profits. Their underperformance is not only statistically significant, it is also of economically significant magnitude and occurs for large blue chip stocks. We also examine if a trader location in Frankfurt as the financial center or local proximity of the trader to the corporate headquarter of the traded stock or affiliation with a large financial institution results in superior trading performance. The data provides no evidence for a 'financial center advantage.' But the data show decreasing 'institutional scale economies' and an information advantage due to corporate headquarter proximity for high frequency (intra-day) trading.

Of Dragons and Development

Economists could profitably treat academic publishing as a lagging economic indicator. Just as the Tokyo stock market hit its peak in late 1989, books on Japan's economic sucess began to pour off the presses; they still thrive today despite the fact that in the intervening three years, the Tokyo market has dropped over 50 per cent. In a like manner, academics are suddenly blessed with a plethora of studies of the countries presumably following in Japan's successful economic wake - the new Asian NICs of South Korea, Taiwan, Hong Kong and Singapore; plus the potential 'next NICs', Thailand, Malaysia and Indonesia - just at the time that the world's investors are liquidating their holdings in these rather stagnant Asian markets and pouring them into the suddenly thriving economies of Argentina, Chile, Mexico and Brazil. Fortunately for scholars, the dividends paid by good books are less affected by the transitory events that create such wild swings in the equities markets. Good scholarship, like blue chip stock, generates high dividends regardless of the short-term performance of the ephemeral economic markets.

Impact of price limits on Taiwan security returns

The paper investigates the effects of daily price limits imposed by the R.O.C. Government on shares listed on the Taiwan Stock Exchange. The study is performed on nineteen blue-chip stocks from six industries. For each sample stock, the daily returns (from 4 January 1986 to 24 October 1987) are divided into three groups: (A) first experimental, (B) second experimental and (C) control groups. Each sample point in groups A and B consists of one event day and the following six trading days. Event day is defined to be the day the stock price reaches the upper (lower) price limit. Group C comprises all other days, except ex-dividend days. Group C data are used in the market model to obtain the alpha and beta estimates for that stock. These estimates are then used to (CARs) embedded in data sets A and B. The preliminary results of this research suggest severe violation of the random walk hypothesis. Further, the impact of government imposed price limits on stocks varies across stocks. While several patterns of CARs of stock return are observed, the results suggest existence of potential profitable short-run investment strategies among several sample stocks in this study.

Stock Index Futures: Does the Tail Wag the Dog?

(1987). Stock Index Futures: Does the Tail Wag the Dog? Financial Analysts Journal: Vol. 43, No. 2, pp. 57-61.

Using the analytic hierarchy process to select investment in a heterogenous environment

The purpose of this paper is to apply the Analytical Hierarchy Process (AHP) model in selecting an investment. The selection process takes into account the following factors: the investors' characteristics, the investments' characteristics and the investment alternatives. The set of investors' characteristics consists of: wealth, experience, age and the concept of utility functions. When we speak of the investments' characteristics we are referring to such items as: liquidity, taxability, minimum requirement, transaction cost and yield or rate of return. The other set of characteristics are the investment alternatives which include: the Money Market Fund, Government and Municipal Bond Fund, Balanced Fund, Corporate Bond Fund, Blue Chip Stock Fund. In terms of the AHP method, this study does indicate that AHP can add a new perspective to the analysis of portfolio selection and certainly provides researchers an alternative mechanism to the expected utility maximization approach.

Art and the General Welfare

Our judgment of the level of civilization of any specific epoch in Western culture may well hinge upon the propositions which it takes for granted. That today one is forced to ask: Does art promote the general welfare? What, after all, does culture contribute to the common good or general enlightenment? indicates an aesthetic skepticism endemic to a narrowly pragmatic or commercial age, where the cash nexus reigns supreme and even the arts themselves have become corrupted by the values of mechanical efficiency and private profit. Le Corbusier thinks that a city street is a machine for traffic to pass through as efficiently as possible. Other urban architects are under the quaint delusion that a home is a housing project. And serious books are now written with the title Art as Investment to aid collectors whose collections perform the same role as portfolios of blue chip stocks and bonds. In other ages it was profoundly different. Cosimo de Medici, Sigismondo Malatesta, and Federigo da Montefeltro were also great collectors, and in some cases great businessmen, but they would have been scornful and contemptuous of a collector's passion guided by the principles of investment and tax deduction. The streets of the agora in Athens permitted rapid passage when necessary, but Alcibiades used them to meet and greet his friends, and Socrates lingered in them talking ethics and politics with sophists and young aristocrats as if they were a private club. And when Bess, Countess of Shrewsbury, commis-