Increase Stock Return Research Articles

Using Deep Learning to Develop a Stock Price Prediction Model Based on Individual Investor Emotions

The general purpose of stock price prediction is to help stock analysts design a strategy to increase stock returns. We present the conceptual framework of an emotion-based stock prediction system (ESPS) focused on considering the multidimensional emotions of individual investors. To implement and evaluate the proposed ESPS, emotion indicators (EIs) are generated using emotion term frequency–inverse emotion document frequency (), which modifies term frequency–inverse document frequency (). Stock price is predicted using a deep neural network (DNN). To compare the performance of the ESPS, sentiment analysis and a naïve method are employed. The prediction accuracy of the experiments using EIs was the highest at 95.24%, 96.67%, 94.44%, and 95.31% for each training period. The accuracy of prediction using EIs was better than the accuracy of prediction using other methods.

The Impact of Political Risk and Macro Economics on Stock Return at Indonesia Stock Exchange (An Approach of Arbritage Pricing Theory (APT))

PoliticsRiskandMacroEconomicsfactorsIndonesiahavebecomeoneoftheindicators for investors to invest in Indonesia. Generally, investors expect a higher expected return, but the desire is not in accordance with the fact that the rate of return obtained is small. This study aims to find out the effect of Politic Risk and macro factors on the return rate with the approach of Arbitrage Pricing Theory (APT). Systematic factors that became the object of this study, among others; market risks, economic growth (GDP), inflation, interest rates, rupiah exchange rate and political risks.This research uses the explanatory method, with analysis unit is the companies listed in Indonesia Stock Exchange. The data used are time-series data and cross-section data based on the company’s financial statements during the study period 2007-2017. The sampling technique used purposive sampling method in 194 companies for nine years.Data analysis is done in two stages: First-pass regression (time-series) to determine excess return asset based on the beta value of macro factor and second-pass regression (cross-section). The result of the research shows that there is difference of systematic factors influence to stock return in three observation period. Increased market risk and economic growth, increase stock returns. High inflation and interest rates cause investors to reconsider the investments they have made. The strengthening of the rupiah against the US dollar is a positive signal for market participants where they still have confidence in Indonesia’s economic condition. Political risk becomes one of the factors that need to be considered in determining stock return other than market risk and macroeconomic factors.

The effect of earning information, cash flow components, and financing decision on stock returns: empirical evidence on Indonesia stock exchange

Trading, Service, and Investment sectors show an essential role in the national economy, and they have grown significantly during the past years. They have created many job opportunities in both the formal sector and the non-formal sector. This study aims to analyze the effect of net profit, operating cash flow, financing cash flow and investing cash flow and, financing decisions on stock’s return of service industry listed at Indonesia Stock Exchange (IDX). The analysis was done using the data panel regression. It shows that earning information, operating cash flow, financing cash flow positively affect stock returns. However, investing cash flow and financing decisions (proxy leverage) show a negative effect on the stock's return significantly. Simultaneously, the variables above affect stock return significantly. The implication is that management should pay more attention to financial factors, especially net profit, cash flow, and leverage to increase stock return and the company’s value.

Investor Protection and Asset Prices

AbstractEmpirical evidence suggests that investor protection significantly affects ownership concentration and asset prices. We develop a dynamic asset pricing model to address the empirical regularities and uncover some of the underlying mechanisms at play. Our model features a controlling shareholder that endogenously accumulates control over a firm, and diverts a fraction of its output. Better investor protection decreases stock holdings of controlling shareholders, increases stock mean returns, and increases stock return volatilities when ownership concentration is sufficiently high, consistent with the related empirical evidence. The model also predicts that better protection increases interest rates and decreases the controlling shareholder’s leverage.Received August 14, 2017; editorial decision January 15, 2019 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Does residual state ownership increase stock return volatility? Evidence from China's secondary privatization

Abstract Using hand-collected data, we find residual state ownership is negatively related to stock return volatility, following China's secondary privatization initiated by the non-tradable share reform. Conservative corporate policies are channels through which residual state ownership reduces stock return volatility. Further, the volatility-mitigating effect is more prevalent in firms in which the government has greater influence on corporate decisions. However, the volatility-mitigating effect is temporary, lasting up to three years after state shares become fully tradable. The evidence suggests the government can send credible signals by retaining state ownership, which reduces investor uncertainty. However, investors must weigh the positive signaling effect of residual state ownership in reducing uncertainty, surrounding sudden policy changes, against the inefficiencies of state control.

Macro and Micro Determinants of Stock Return Companies in LQ-45 Index

The purpose of this study is to analyze the influence of solvability ratio, market ratio, inflation and interest rate on stock return of company LQ-45 listed in Indonesia Stock Exchange. The population of this study is the companies included in the LQ-45 index in the listing on the Indonesia Stock Exchange during the period 2015-2016 amounted to 90 companies. Data analysis in this research used multiple regression. The results showed that the variable solvabilities proxied with debt to equity ratio have a negative and significant effect on stock returns. The market ratio variable is proxied by price to book value have the positive and significant effect on stock return. The market ratio variable is proxied by price earnings ratio has the positive and significant effect on stock return. This means that any increase in the percentage of market value proxied by price earnings ratio will increase stock return. Inflation variable has a negative and significant effect on stock return. This means any increase in inflation will reduce the stock return, and interest rate variables have a positive and significant effect on stock returns. JEL Classification: D04; E44; G11 DOI: https://doi.org/10.26905/jkdp.v22i2.1439

Investor types and stock return volatility

Abstract The purpose of this paper is twofold: investigate how different types of investors affect stock return volatility, and provide some explanations based on investors’ trading behavior. Norway provides an excellent setting with monthly holding data of all investors on all listed firms over a period of 15 years. The results show that foreign investors increase stock return volatility because they trade the most, are momentum traders, and have the shortest investment horizon. In contrast, individual investors reduce stock return volatility because they trade the least, are contrarian traders, and have the longest investment horizon. Domestic institutional investors fall in-between these extremes.

Herding Behavior of Institutional Investors in Romania. An Empirical Analysis

Abstract During the last decades, institutional investors have been the main players, both in developed as well as in emerging stock markets. Thus, their investment behavior was analyzed at the national or international level, in order to assess if institutional investors herd, increase stock return volatility, affect market efficiency and liquidity, influence the corporate governance, or destabilize stock prices. This paper studies the behavior of the institutional investors on the Romanian stock market, a European frontier market that struggles to attain the status of emerging market. We examine if the disclosure level generates any herding behavior for institutional investors. In emerging markets, the lack of transparency affects the degree of investments in a listed company, as long as insider trading is pushed to the limit of the legal line. For this study, we used financial information from the companies listed on the Bucharest Stock Exchange for the period 2010-2014. The findings highlight that there is a certain herding behavior among institutional investors in Romania.

MEKANISME TRANSMISI GONCANGAN HARGA MINYAK DAN HARGA PANGAN DUNIA TERHADAP PEREKONOMIAN MAKRO INDONESIA: PENDEKATAN STRUCTURAL VECTOR AUTOREGRESSIVE (SVAR)

<p>This study examines the transmission channels of oil and food price shocks to selected Indonesian macroeconomic variables including Indonesia industrial production index, world interest rate, inflation, domestic interest rate, real effective exchange rate, and Jakarta Composite Index using monthly data over the period 2001M01-2013M08. An empirical analysis is carried out by utilizing structural vector autoregressive (SVAR) framework. Impulse response functions (IRFs) and forecast variance decompositions (FEVDs) are employed to track the impact of oil and food price shock to Indonesian economy. The empirical findings of IRFs suggest that oil price shock negatively affects industrial production, depreciates real effective exchange rate, increases inflation and interest rate, and negatively affects aset price. However, following food price shocks, industrial production increases, depreciates real effective exchange rate, increase stock return. Moreover, inflation and interest rate respond positively following food price shocks. The FEVDs results clearly reveals that the variation in industrial production growth, inflation, interest rate, real effective exchange rate, and aset price due to oil price shock is relatively larger than the food price shocks. This implies that oil price is most important source of disturbances in Indonesian macroeconomy. As a whole, this study recommend that world oil and food price should be considered for policy analysis and forecasting an Indonesian macroeconomy.<br />Key Words : Oil and food price shocks, SVAR, IRFs, FEVDs, Indonesia</p>

The Asymmetric Impacts of Oil Price Uncertainty on Stock Returns

This paper examines the asymmetric impact of oil price uncertainty on stock returns using monthly data covered the period July 1997 to March 2016. The measure of oil price change is the logarithmic first difference of the West Texas Intermedieate(WTI) while stock return is the logarithmic first difference of the KOSPI. Oil price uncertainty is measured by the conditional standard deviation of the one-step-ahead forecast error for the change in the oil price. A bivariate GARCH-in-mean vector autoregressive model of Elder and Serletis (2010) is used for analysis. The results show that oil price uncertainty has a positive significant impact on stock returns. That is, an increase in oil price uncertainty tends to increase stock returns. The study also finds that the responses of stock returns to positive and negative oil price shocks are asymmetric since the responses are not equal in absolute terms. The negative oil price shock appears to have a larger effect than the negative oil price shock of equal size. Furthermore, the inclusion of the contemporaneous oil price volatility term in stock return equation dampens the responses of stock returns to positive oil price shock. On the other hand, it amplifies its response to a negative oil price shock at least for the first two horizons. However, the effect is significant only in the response of stock returns to positive oil price shock. Overall, these results show that oil price uncertainty matters for stock returns in Korea.

Does institutional ownership increase stock return volatility? Evidence from Vietnam

The literature on institutional ownership and stock return volatility often ignores small emerging countries. However, this issue is more profound, due to the large size of institutional investors and small stock market size, in emerging equity markets. This paper examines the effects of the institutional ownership on the firm-level volatility of stock returns in Vietnam. Our data cover most of non-financial firms listed on the Ho Chi Minh City stock exchange for the period 2006–2012. Employing different analysis techniques for panel data and controlling for possible endogeneity problems, our empirical results suggest that institutional investors stabilize the stock return volatility. Moreover, we document that: i) the stabilizing effect of institutional investor ownership is higher in dividend paying firms, and ii) if firms are paying out more dividends, this stabilizing effect is greater. Our results outline the important role of institutional investors in maintaining the stability in emerging stock markets.

The Supply Chain Bullwhip Effect and Earnings Quality

The Bullwhip Effect amplifies demand variations through a supply network. Accordingly, we expect that the Bullwhip Effect decreases earnings quality and increases the uncertainty of the public information available to stock investors and creditors. Based on a sample of US public firms from 1998 to 2011, we find that the Bullwhip Effect (measured as the firm-specific hierarchical position within its supply chain network) decreases earnings quality, increases stock return synchronicity, and increases credit spreads. The return synchronicity impact is more significant for firms facing higher information asymmetry and for firms that increase exposure to the Bullwhip Effect through proactive changes in their supply-chain position.

Oil Price Shocks and Volatility in Australian Stock Returns

This paper examines the effect of oil shocks on return and volatility in the sectors of Australian stock market and finds significant effects for most sectors. For the overall market index, an increase in oil price return significantly reduces return, and an increase in oil price return volatility significantly reduces volatility. An advantage of looking at sector returns rather than a general index of stock returns is that sectors may well differ markedly in how they respond to oil price shocks. The energy and material sectors (as expected) and the financial sector (surprisingly) are out of step (in different ways) with results for the other sectors and for the overall index. A rise in oil price increases returns in the energy and material sectors and an increase in oil price return volatility increases stock return volatility in the financial sector. Explanation for the negative (positive) association between oil return (oil return volatility) and returns (volatility of returns) in the financial sector must be based on the association via lending to and/or holdings of corporate bonds issued by firms with significant exposure to oil price fluctuations and their speculative positions in oil‐related instruments.

Dynamic asset pricing model with heterogeneous sentiments

The systematic and important role of investor sentiment has been supported by some recent empirical and theoretical literatures. In this paper, we present a dynamic asset pricing model with heterogeneous sentiments and we find that the equilibrium stock price is the wealth-share-weighted average of the stock prices that would prevail in an economy with one sentiment investor only. Moreover, heterogeneous sentiments induce fluctuations in the wealth distribution, which increases stock return volatility and induces mean reversion in stock returns. The model offers a partial explanation for the financial anomaly of mean reversion.

Equity Risk Incentives and Corporate Tax Aggressiveness

ABSTRACT This study examines equity risk incentives as one determinant of corporate tax aggressiveness. Prior research finds that equity risk incentives motivate managers to make risky investment and financing decisions, since risky activities increase stock return volatility and the value of stock option portfolios. Aggressive tax strategies involve significant uncertainty and can impose costs on both firms and managers. As a result, managers must be incentivized to engage in risky tax avoidance that is expected to generate net benefits for the firm and its shareholders. We predict that equity risk incentives motivate managers to undertake risky tax strategies. Consistent with this prediction, we find that larger equity risk incentives are associated with greater tax risk and the magnitude of this effect is economically significant. Our results are robust across four measures of tax risk, but do not vary across several proxies for strength of corporate governance. We conclude that equity risk incentives are a significant determinant of corporate tax aggressiveness.

Equity Market Liberalization, Fundamental Volatility, and External Finance

Using data for emerging market firms that are either investable or uninvestable to foreigners, we study the effects of investability on fundamental volatility, excess volatility, and external finance. We find that fundamental volatility is lower for investable firms, while excess stock return volatility is greater. Share issuance is lower for investable firms, while debt issuance is essentially unchanged. These firm-level findings pose challenges to current theories of equity market liberalization, which contend that investability increases risk sharing, does not increase stock return volatility, and reduces financial constraints.

Explicit and Implicit Incentives in Delegated Portfolio Management

Investors can incentivize a fund manager by assigning a compensation contract to provide explicit incentives, or by adjusting fund flows to provide implicit incentives, or both. In this paper based on a tractable dynamic model we show that the interplay between the explicit and implicit incentives is important in accounting for a puzzling phenomenon in the mutual fund industry, namely, the convex flow-performance relationship whereby disproportionate amounts of new money flow into funds with superior recent performance while less money escapes from funds with poor performance. Furthermore, this paper sheds new light on asset pricing implications of portfolio delegation; in particular, we show that introducing delegated portfolio management increases stock return volatility and reduces unconditional stock risk premium.

Impact Of Monetary Policy On Financial Asset Returns: An Analysis Of Selected Stocks From The Nigerian Capital Market

This paper presents an analysis of the impact of monetary policy on financial asset returns, with particular reference to stocks. The minimum discount rate and an index based on the direction of change in discount rate were used as monetary policy proxies. The analysis was done using a multi-association model of which business environment proxies (Dividend per share, term spread, and default spread) were introduced as additional independent variables to the monetary policy proxies. Our finding among others was that restrictive monetary policy decreases portfolio returns while expansive ones increases stock return. Above all monetary policy posture has significant explanatory power in predicting financial asset returns beyond the business environmental conditions Journal of Research in National Development Vol. 4 (1) 2006: pp. 83-91

Dividends and market efficiency: a multi‐index arbitrage investment strategy

Outlines previous research on the relationship between dividend policy and stock returns; and uses a linear programme and multi‐index model to form an investment strategy to see whether dividend yields increase stock returns. Explains the methodology, tests it on 1965‐1989 US data and presents the results, which suggests that the multi‐index model is superior to the single index market model in terms of explanatory power and volatility; but provides conflicting conclusions on the relevance of dividends to stock returns. Suggests that the negative relationship between dividends and stock returns can be explained by Jensen’s (1986) free cash flow theory and the influence of transaction costs.