Common Investors Research Articles

DOES ELECTION IMPACT ON STOCK MARKET RETURNS IN BANGLADESH?

This paper investigates the impact of parliamentary general election on the stock market returns by considering the previous fifteen days and the after fifteen days of each of six elections in Bangladesh held between 1991 and 2018. The study analyzed the election effect on stock returns through considering both abnormal returns by choosing 20 stocks as a proxy of portfolio motive of the investors and the broad index returns as a measurement of whole market scenario. The study employed descriptive statistics, t-tests, and F-tests to understand the impact of election by gauging the changes in return series. Descriptive statistics showed very high differences in means, standard deviations, and volatilities. Paired t-tests showed significant differences between the means and F-tests showed significant differences between the variances of the returns during before and after days of these elections. The results were the same for abnormal returns and broad index returns. The impacts of individual election on the returns were also found as the same in most cases. The study has found some very useful insights part of which can benefit the policymakers to reform the policies. The common investors and the financial market participants can also make better investment plan.

The hedging-based utility risk measure

FinTech makes numerous financial products accessible to common investors but up to now, there is no risk measure method specially customized for common investors instead of financial institutions which are generally too big to fail. This paper develops a hedging-based utility risk measure (HBU) theory. We show that HBU is a convex risk measure and if the utility has a constant relative risk aversion coefficient, HBU is also coherent. Roughly speaking, HBU is the opposite of a generalized utility indifference price. HBU depends on claimants' utility and the hedging instruments accessible to them and thus it is a personal (subjective) risk measure especially suitable for common investors who need to have a comprehensive risk evaluation of a financial product.

Foreign-Born Resident Networks and Stock Comovement: When Local Bias Meets Home (Country) Bias

AbstractForeign migration flows have important stock market consequences. Foreign-born resident networks within U.S. Metropolitan Statistical Areas (MSAs) are associated with excess return comovement between locally headquartered stocks and American Depositary Receipts (ADRs) from countries with ties to the MSA through the network of foreign-born residents. This comovement is hardly due to correlated fundamentals and at least partially driven by correlated trading within members of a common investor base consisting of foreign-born residents. Our evidence has implications for both investors and foreign multinational corporations (MNCs) seeking to reap benefits from cross-listings and is consistent with the notion that foreign-born residents exhibit both local bias and home (country) bias.

INVESTOR RELATIONS TOOLS FOR BUSINESS IN SMART SPECIALIZATION STRATEGY

Communication with investors is an important component in the activities of SMEs and large companies. Facing the new changes (development of digital technologies, COVID-19, smart specialization) the search for optimal tools of communication with investors becomes a priority for all key stakeholders of the investment process (business, academia, civil society, local authorities). The aim of the article is to identify effective communication tools for business and develop recommendations for their use in the context of smart specialization. Subject of research: investor relations of large, medium and small companies in the context of smart specialization. The main research methods are systemic (to build a system of investor relations tools) and analytical (to determine the IR tools among the studied companies; to analyze the tools of investor relations by using social media). As a result of the study, it is determined that the promotion of the Ukrainian companies through social networks is inactive (Facebook – 13%, Instagram and Twitter – 4%, YouTube – 5% and LinkedIn – 1%). More than half of the surveyed companies indicate that the most common investor relations tools are news releases and presentations (71.4%), answers to questions (61.1%) and annual reports (52.7%). In this article, smart specialization is considered as a common tool for communication between key stakeholders. It was determined that in the conditions of COVID-19, they used the following tools: online dialogues, online conferences, online sessions, online workshops, online presentations, world cafes, annual lectures, online consultations, webinars (partner webinars). This study set out to explore investor relations tools in the context of smart specialization. In addition, such global tendencies were revealed as: IR boosting startups’ transformation into large companies; increasing both the investors’ interest to the companies and the requirements to corporate transparency promote using of IR tools; investor meetings via online platforms; impact of regional specifics on choosing IR tools of different companies. The results of the investigation show that Ukrainian companies have different IR politics. The main reasons why they use IR tools actively are their own internal requirements to the quality management and the need in external funding. Moreover, new legislation demands to the super advisory boards of public companies are reflected in using IR tools.

Performance of VC/PE-backed IPOs: New Insights from India

This article explores long-term equity and operating performance of Indian firms issuing initial public offerings (IPOs) backed by venture capital/private equity (VC/PE) funding. Using data for 173 IPOs backed by VC/PE funding during 2000–2016, the article shows that equity market performance of VC/PE-backed IPOs is unimpressive post issue, compared to their peers. This is not only due to market perception but also associated with a declining operating performance. However, information asymmetry, mispricing and ‘timing the market’ by issuing firms do not seem to be the reasons for such long-term underperformance. We argue that it may be a case of too much money chasing too few winners for Indian IPOs and individual rent-seeking activities by managers. The observation raises the question of effectiveness of the monitoring role of venture capitalists or PE funders post the IPO in an Indian context. This is substantiated by our additional finding that sustained monitoring and hand-holding by venture capitalists and PE funders post the IPO cause an improvement in performance. The findings of this study can have significant implications for all stakeholders, particularly common investors in the Indian equity market.

Private Inequity: Private Markets and the Death of the Micro-Cap Stock

This paper examines the decline in publicly listed equities in the United States with respect to both the public and private markets. Public equities have halved in count in the U.S. between the mid-1990s and today, with a paucity of small stocks limiting access to high-growth opportunities for common investors. The paper finds that the decrease in listed equities is more likely to be attributable to a lack of new entrants via IPOs than it is to be due to increased de-listing activity via mergers and acquisitions, liquidations, and involuntary de-listing. Furthermore, this shift is shown to be driven by micro-cap stocks, which once drove initial public offering volume. The second half of the paper reviews the role of the private markets in abetting micro-caps’ abstention of the public markets, identifying growth in follow-on funding and secondary liquidity as potential factors for further analysis.

Investee Peers and the Imitation of Corporate Social Strategy

As institutional ownership becomes prevalent, firms are faced with competitions not only from their industry peers but also from investee peers with whom they share common investors. To compete for the limited financial resource, firms likely refer to and imitate their investee peers’ behaviors to gain equal or favorable treatment by the common institutional investors or to prevent the investors from withdrawing their capital investment. In this study, we investigate how firms react to their investee peers’ corporate social responsibility (CSR) performance using data on 2267 listed firms in the U.S. from 2002 to 2017. After addressing potential endogeneity issues, we find that high CSR performance of investee peers motivates the focal firm to improve its own CSR performance. Further, the investee peers’ effect on the focal firm’s CSR performance is more pronounced if the investee peers are more visible. Also, when investee peers are linked by dedicated vis-à-vis transient institutional investors, the peer effect becomes stronger.

Common institutional investors and supplier performance in supply chains

AbstractWe investigate how common institutional investors (CIIs) in supply chains affect supplier performance. Social network theory suggests that buyer–supplier relationships are influenced by networks of ties in which they are embedded. While prior research has concentrated on networks of trade interactions, we instead examine the influences of networks through common investors. Utilizing a large sample of buyer–supplier relationships, we find that the presence of CIIs improves suppliers' operating and market performance, especially for suppliers with greater dependence on buyers. In addition, supplier performance increases with the common ownership stakes held by CIIs, but decreases with the asymmetric ownership stakes of CIIs across supply chain partners. We find that better financial collaboration between the partners appears to be a mechanism through which CIIs enhance supplier performance. Lastly, we find that the role of CIIs in strengthening supplier performance is distinct from that of direct equity links. Collectively, our findings highlight a novel role of indirect cross‐ownership in fostering supply chain collaboration and coordinating vertical relationships and, in turn, improving supplier performance.

Information Externalities and Voluntary Disclosure: Evidence from a Major Customer's Earnings Announcement

ABSTRACT We examine the relation between information externalities along the supply chain and voluntary disclosure. Information transfers from a major customer's earnings announcement (EA) can substitute for its supplier's disclosure. Conversely, if the customer's EA increases uncertainties regarding the supplier's future prospects, it can increase the demand for disclosure. After controlling for information incorporated in supplier returns, we find that the supplier is more likely to issue earnings guidance after the customer's EA when the EA news deviates more from the market's expectation. The positive effect of the customer's news on earnings guidance is weaker when common investors, supply-chain analysts, or a common industry allow investors to better understand the value implications of the news, while the effect increases with the importance of the customer to the supplier. The effect is also stronger when EA news is negative rather than positive. Collectively, the results suggest that supply-chain relationships influence voluntary disclosure. Data Availability: All data are publicly available from sources indicated in the text.

Information Externalities and Voluntary Disclosure: Evidence from a Major Customer’s Earnings Announcement

We examine the relation between information externalities along the supply chain and voluntary disclosure. Information transfers from a major customer’s earnings announcement (EA) can substitute for its supplier’s disclosure. Conversely, if the customer’s EA increases uncertainties regarding the supplier’s future prospects, it can increase the demand for disclosure. After controlling for information incorporated in supplier returns, we find that the supplier is more likely to issue earnings guidance after the customer’s EA when the EA news deviates more from the market’s expectation. The positive effect of the customer’s news on earnings guidance is weaker when common investors, supply-chain analysts, or a common industry allow investors to better understand the value implications of the news, while the effect increases with the importance of the customer to the supplier. The effect is also stronger when the EA news is negative than positive. Collectively, the results suggest that supply-chain relationships influence voluntary disclosure.

Do Fama–French common risk-factor portfolio investors herd on a daily basis? Implications for common risk-factor regressions

Purpose The purpose of this paper is to examine whether Fama–French common risk-factor portfolio investors herd on a daily basis for five developed markets, namely, Europe, Japan, Asia Pacific ex Japan, North America and Globe. Design/methodology/approach To examine the herd behavior of common risk-factor portfolio investors, this paper utilizes the cross-sectional absolute deviations (CSAD) methodology, covering a daily data sampling period of July 1990 to January 2019 from Kenneth R. French-Data Library. CSAD driven by fundamental and non-fundamental information is assessed using Fama–French five-factor model. Findings The results do not provide evidence for herding under normal market conditions, either when reacting to fundamental information or non-fundamental information, for any region under consideration. However, Fama–French common risk-factor portfolio investors mimic the underlying risk factors in returns related to size and book-to-market value, size and operating profitability, size and investment and size and momentum of the equity stocks in European and Japanese markets during crisis period. Also, no considerable evidence is found for herding (on fundamental information) under crisis and up-market conditions except for Japan. Ancillary findings are discussed under conclusion. Research limitations/implications Further research on new risk factors explaining stock return variation may help improve the model performance. The performance can be improved by adding new risk factors that are free from behavioral bias but significant in explaining common stock return variation. Also, it is necessary to revisit the existing common risk factors in order to understand behavioral aspects that may affect cost of capital calculations (e.g. pricing errors) and valuation of investment portfolios. Originality/value This is the first paper that examines the herd behavior (fundamental and non-fundamental) of Fama–French common risk-factor investors using five-factor model.

Multifractal analysis of volatility for detection of herding and bubble: evidence from CNX Nifty HFT

This study delves into the herding and bubble detection in the volatility domain of a capital market underlying. Furthermore, it focuses on creating heuristics, so that common investors find it relatively easy to understand the state of the market volatility. Hence, it can be termed that this study is focused on the specific financial innovation regarding bubble and herding detection coupled with investor awareness. The traces of possible volatility bubble emerge when it is positioned against its own lags (both lag1 and lag2). The volatility trigger indicated clear traces of herding and an embedded parabola function. Continuous and repetitive parabola function hinted at a subtle presence of “fractals”. Firstly, the detrended fluctuation analysis has been used with its multifractal variant. Secondly, the regularized form of Hurst calculation and analysis have been used. Both tests reveal the traces of nascent bubble formation owing to prominent herding in CNX Nifty HFT environment. They also indicate a clear link with Hausdorff topological patterns. These patterns would help to create heuristics, enabling investors to be aware of possible bubble and herd situations.

Managing Investment Risks: Modern vs Traditional Knowledge and Practices

The present study is a comparative study between modern investment tools and old investment tools. The study has been conducted in Rajasthan (India) and therefore the old tools of investment available in Rajasthan have been identified and compared with the modern tools. The primary purpose of the study was to compare the risk management tools available a common investor. The researchers found that the traditional tools or the old tools were also very good, but the modern tools offer more systematic and secure options. The researchers conclude that the modern tools are better in comparison to the traditional tools.

Inclusive Development and Mutual Funds: Roadmap and Hurdles

Mutual funds are tools for savings and investment. They provide reasonable returns while minimizing risks associated with investment. The present research is a research to identify whether mutual funds can contribute towards inclusive growth and development. The research was conducted based on survey among one hundred random investors from Bikaner (Rajasthan, India). The research found that the mutual funds are now becoming popular among common investors also. The researcher has tested two hypothesis relating to the study and found that there is no significant relation between income of the investor, experience of the investor and preference of the mutual fund. Based on data analysis, the researchers found that income and experience of the investor is not an important variable for investment in mutual fund. Therefore common people are also able to take equal benefits from the mutual funds. The researchers concluded that mutual funds can contribute towards inclusive growth and development.

Reexamining the Market Timing Ability of Equity Funds in China—Cash-Flow and Discount-Rate Perspective

With the development of China’s stock market, equity mutual funds are playing a more and more important role in shaping the market. However, with some many funds in the present market, which ones are able to predict the future market movements and adjust the risk exposure of their fund portfolios correspondingly to make reasonable return faced by various market conditions? Based on the former study, this paper uses a new method to reexamine the market-timing ability of open-end, equity funds in China, that is, to decompose the market-timing ability into cash-flow timing and discount rate timing. This differentiation provides a more specific metric to measure the funds’ market timing performance besides rate of return, T-M measure and H-M measure, etc. The empirical study reveals that on average, Chinese equity fund managers can bring about 0.58% excess return per year when timing the aggregate stock market, but it is not significant at any reasonable levels. However, the writer finds there have significant timing skill in Chinese equity fund managers who can predict the changes of discount rate and it is highly unlikely to find an equity fund that can make continuous positive return as it declares. Therefore, it is hard for a common investor to make abnormal returns through investing capital in the mutual funds for a long time.

Value Transfer in Acquisitions: Signaling from Target Firms’ Common-investor Network

Drawing from signaling theory, this paper argues for a novel function of a target firm’s common investor network in determining the stock market’s appraisal on acquisitions. When a target startup’s...

Performance Evaluation of Pakistan's Mutual Fund through CAPM and Fama French 3-Factor Model

Mutual fund is selection for the common investors for investing in to the capital market. In the research paper Capital Asset Pricing Model (CAPM) and FAMA French 3 factor model applied for the measurement and evaluate the performance of the mutual fund. Daily data of mutual fund which are selected in open ended mutual fund of Pakistan and daily data collected from 2010 to 2016. Then applied these models and Capital Assets Pricing Model showed the significant result and R² value more co-related with the market returns and premium. FAMA French 3 factor model showed the not good results with the two factors SMB and HML. Time series regression model are applied between two competing models.

Estimating Beta (β) Values of Stocks in the Creation of Diversified Portfolio - A Detailed Study

In this paper researchers investigate thorough analysis of stocks from different sectors in order to estimate beta values and thus creating optimum portfolio of estimated low β values.There are many traditional as well modern stock market theories prevalent in the system to facilitate common investors to enhance their returns from the stock market. Investors usually only focus on expected returns from their investments in the stock market and the forego various types of systematic and unsystematic risks involved in their investments in stock market that is basically risky way for investment.Therefore this paper is an attempt to inculcate some basic as well as advance knowledge to create awareness about various types of risks involved in their investments. In this paper we, researchers have considered beta to be measured of different stocks taken from various sectors in the stock market.

A STUDY OF FACTORS THAT AFFECT THE SELECTION OF MUTUAL FUND SCHEMES BY INDIVIDUAL INVESTORS – WITH REFERENCE TO PUNE CITY

Mutual Fund is a form of investment where a common investor can participate in the Indian capital market with professional fund management irrespective of the amount invested. A large number of people are moving towards mutual fund investments through the route of systematic investment plan. The Indian mutual fund industry is growing steadily and this is reflected in the increase in Assets under management of various fund houses. The investment in Mutual funds is a relatively safer option for risk averse investors as they are less risky than directly investing in stocks. This research paper aims at finding out the factors affecting investment decision of mutual funds and the preference of investors to particular schemes of mutual funds. The findings will help mutual fund companies to identify the parameters which influence the investment decision of the common investor and also the preferences of particular schemes and fund houses by the investors

Do Common Equity Investors Evaluate Companies’ Preferred Stock Based on Contractual Settlement Provisions or Other Economic Characteristics?

Do Common Equity Investors Evaluate Companies’ Preferred Stock Based on Contractual Settlement Provisions or Other Economic Characteristics?