Spanish Equity Research Articles

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study*

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study*

Herding behaviour in strategic asset allocations: new approaches on quantitative and intertemporal imitation

In this article, we contribute to financial literature on institutional herding behaviour, intertemporal imitation and informational cascades by analysing the changes in the strategic asset allocations of Spanish equity pension plans investing in Eurozone equities. This article is mainly focused on methodological improvements. Firstly, the study examines the herding phenomenon by using the traditional measure developed by Lakonishok, Shleifer and Vishny (LSV) (1992). Afterwards, some original analyses such as the consideration of a restricted definition of buying and selling and the amount of the variations in the strategic allocations are carried out to overcome certain shortcomings existing in this metric. Moreover, we analyse the intertemporal imitation and the informational cascades through time-series regressions. The results show that Spanish pension managers are involved in herd behaviour, a phenomenon that is reinforced when important movements of the strategic allocations are required. Intertempo...

Evaluating the style portfolio performance of Spanish equity pension plans

ABSTRACTThis paper firstly examines the strategic asset allocations followed by Spanish equity pension plans from 2001 to 2006. Once the investment style of each portfolio is known, the second aim of the paper is to analyse the performance obtained by these portfolios along with the performance obtained by their investment style to determine the value added by each manager and the suitability of the style chosen. In this sense, the performance evaluation has been conducted by considering different performance measures used in financial Literature along with an alternative metric proposed to test the consistency of the different metrics. Finally, the study also addresses some robustness analyses to examine the consequences of imposing the portfolio constraint when non-exhaustive models are used and the effects of some well-known biases such as survivorship and look-ahead bias.

Herding behaviour in Spanish equity funds

We analyse the herding phenomenon in the management style of Spanish equity funds. Using the methodology of Lakonishok et al. (1992) and Sharpe's style analysis (1992), we find interesting conclusions in the investment behaviour of fund managers, a barely-explored aspect, especially in the Spanish market.

Performance persistence and its influence on money and investor flows into Spanish pension plans

This article analyzes the phenomenon of performance persistence in Spanish equity pension plans between 1999 and 2006 to determine whether plans with higher performance in one period continue obtaining higher performance in the future. It also aims to determine the influence of past performance on investor behavior in order to examine whether money and investor flows of these portfolios are affected by past performance. The results reveal the existence of short-term performance persistence and a statistically significant relationship between historical returns and investment flows.

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study

Behavioural Patterns in German and Spanish Equity Funds: A Comparative Study

The importance of asset allocation in Spanish equity pension plans

AbstractFollowing the methodological approach taken by Ibbotson and Kaplan (2000), we provide evidence of a major contribution of strategic asset allocation to Spanish equity personal pension plan performance, finding that on average more than 90% of variability of returns over time, and about 70% of the variation of returns among plans, are explained by strategic policy.Furthermore, we also have evidence that survivor and look-ahead bias detected in previous research have very little impact on the conclusions about the importance of asset allocation on the variability of returns over time.The importance of asset allocation to explain the variability of returns over time is quite similar for the different investment vocations considered in our study, Euro zone and global equity. Very similar results are also found when we consider the size of the Spanish plans as an explanatory factor for the contribution of asset allocation to performance.Finally, the value that active management adds to the mere passive tracking of the strategic policy is not statistically different to the management costs of the plans.

Performance Persistence of Spanish Pension Funds: The Best Winners and Losers Usually Repeat

In this paper, we analyse the persistence phenomenon on the returns obtained by Spanish equity pension funds in the period 1999–2006, an unexplored topic in the Spanish financial market, one of the most emerging pension fund industries in the European Union. We provide evidence for a short-run persistence in some of the yearly periods analysed by using a contingency table approach. In this sense, we firstly apply 2 × 2 contingency tables to observe whether the best or worst managed funds repeat in this situation in consecutive years and to check the existence of this phenomenon for the whole investment period analysed. Then, the study improves the methodological approach by using 4 × 4 contingency tables, a research that leads us to interesting results confirming the findings obtained with the previous analysis and determining the pension funds that cause the persistence. On the other hand, this paper also examines the existence of long-run performance persistence obtaining worse results in general. More specifically, a minority of funds show a constant winning (losing) behaviour, presenting important (deficient) management skills.

A comparison between German and Spanish equity fund markets

A comparison between German and Spanish equity fund markets

Serial correlation in the Spanish Stock Market

In this article, we investigate the efficiency of the Spanish Stock Market over time, as this market has become more transparent, larger and more liquid. Using Variance Ratio tests, we find that the most important Spanish equity indexes (IGBM and IBEX35) have been predictable until 1997 on a daily basis, but not after that date. Regarding weekly and monthly index returns, they have been serially uncorrelated since 1972 and, at least 1966, respectively. In addition, we find evidence of cross-serial correlation between small portfolio returns and lagged large portfolio returns, that cannot be explained by autocorrelation and high contemporaneous correlation between portfolios. Instead, partial adjustment to new information seems to be the most plausible explanation.

Performance metrics for Spanish investment funds

The aim of this study is to examine the most appropriate way to capture the true performance of Spanish equity funds, considering that almost all have significantly asymmetric return distributions over the time period studied. We apply alternative risk measures, such as semi-standard deviation and absolute deviation and test if the associated performance measures provide markedly different rankings from the classic indices. We find that one subset of funds analysed displays negative return premia, and make an additional adjustment to the suggested performance metrics. Overall when comparing the rankings, we see strong evidence that — despite the strong asymmetry in returns — the non-traditional performance metrics do not differ markedly from the traditional measurements. This would point to the Spanish equity market behaving more like more mature and liquid markets, and hence being amenable to the application of classic performance and investment management tools.

The influence of performance on the flows into Spanish equity funds

This is a study about how performance influences on the behaviour of investors in Spanish domestic equity funds over an eight-year period. This is a broad timeframe given the relative immaturity of this market when compared to other more developed markets such as the American or English, among others. It is, in this respect, a pioneering and innovative study of the Spanish market. Well-defined behavioural guidelines are found, with results indicating that investors tend to consider the results obtained by funds in a fairly immediate past though they take a relatively broad time before making their decisions.

Performance persistence in Spanish equity funds

Past literature shows that tests of performance persistence do not agree in the most important mutual fund markets and so there is a need for further research in other smaller countries such as Spain, one of the biggest growth fund markets in Europe in the nineties. Spanish equity funds investing in domestic stocks exhibit mixed results when performance persistence is analysed. These results were obtained from an exhaustive application of parametric and non-parametric procedures proposed in the past financial literature.

Style portfolio performance: Empirical evidence from the Spanish equity funds

This work evaluates the performance of the results obtained from a sample of Spanish equity funds in relation to what could have been obtained if the style portfolios allocated by each one had been passively tracked. This analysis is undertaken based on three methods never before applied in Spain, all reaching the conclusion that, in general terms, the active management of Spanish equity funds subtracts added value from the performance of their style portfolios. Lastly, the application of a novel performance measure in addition to the Performance Style (PS) proposed by Sharpe (1992, ‘Asset Allocation: Management Style and Performance Measurement’, Journal of Portfolio Management, Winter, 18, 7–19) shows that Spanish equity funds allocate style portfolios efficiently within the mean-variance framework.

Who Benefits from IPO Underpricing? Evidence Form Hybrid Bookbuilding Offerings

This paper uses a unique sample of 175 Spanish equity offerings from 1985 to 2002 to test who benefits from IPO underpricing and why. Institutions receive nearly 75% of the profits in underpriced issues, while they have to bear only 56% of the losses in overpriced offerings. Superior information regarding first day underpricing cannot completely explain the institutional abnormal profits. Underwriters are better informed about the companies they take public, and use that information to favor their long term clients. The preferential treatment of institutional investors, however, does not come at the expense of retail investors. Retail investors earn positive profits from participating in the new issues market. The driving factor behind the relative retail large allocation in overpriced issues when compared to underpriced offerings is not the underwriter allocation bias in favor of institutional investors. Retail investors subscribe more heavily to underpriced issues, consistent with individuals being partially informed. JEL Classification: G32, G24

From Venture Capital to Private Equity

This article analyzes the evolution of the Spanish venture capital and private equity markets during the last 16 years, making at the same time a comparison with that experienced by the European markets. The aim of the article is to identify some key ideas that could explain the shift in the investment focus from the original concept of venture capital to the wider approach of private equity. Evidence of a shift towards mature companies is found, the difficulties in the exit processes of early-stage investments being the main constraint on real venture capital activity.

Option‐Expiration Effects in Small Markets: The Spanish Stock Exchange

AbstractThis study analyzes the effect of the expiration of the Ibex‐35 Index derivatives, as well as the first four stock options traded in the Spanish Equity Derivatives Exchange, on the return, conditional volatility, and trading volume of the underlying assets. The analysis covers the period from the introduction of the various derivatives to December 1995. This period has been divided into two subperiods in order to determine if there are changes in the conclusions. The expiration of the Ibex‐35 index derivatives is associated with an increase in the trading volume of the underlying asset, but it has no significant effect on either the underlying asset prices or on the level of volatility on the expiration day. However, the expiration of the stock options has significant impact on their underlying assets. We observed a downward pressure on prices and a reduction of volatility level in the week before the expiration date and a significant increase in trading volume on the expiration day. The absence of futures contracts on individual stocks, among other possible causes, may explain these differences. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:905–928, 2001

Modelling conditional heteroskedasticity: Application to the "IBEX-35" stock-return index

This paper compares alternative time-varying volatility models for daily stock-returns using data from Spanish equity index IBEX-35. Specifically, we estimate a parametric family of models of generalized autoregressive heteroskedasticity (which nests the most popular symmetric and asymmetric GARCH models), a semiparametric GARCH model, the generalized quadratic ARCH model, the stochastic volatility model, the Poisson Jump Diffusion model and, finally, a nonparametric model. Those models which use conditional standard deviation (specifically, TGARCH and AGARCH models) produce better fits than all other GARCH models. We also compare the within sample predictive power of all models using a standard efficiency test. Our results show that the asymmetric behaviour of responses is a statistically significant characteristic of these data. Moreover, we observe that specifications with a distribution which allows for fatter tails than a normal distribution do not necessarily outperform specifications with a normal distribution.

Historical Returns in the Spanish Equity Market

Historical Returns in the Spanish Equity Market

The Spanish Toll Highway Sector

Analysis of publicly-listed Spanish Toll Highway equity securities. Written in 1992 under the auspices of Asesores Bursatiles.