Stock Price Effects Research Articles

Stock price effects of bank rating announcements: An application to European Union countries

AbstractThis paper uses daily stock prices data surrounding credit rating announcement dates to examine abnormal returns of stocks of the European Union banks experiencing debt rating announcements, during the period 2004–2015. The results of the event studies suggest that rating agencies, by issuing downgrades and upgrades, provide relevant information to capital markets. The results also indicate that rating agencies contribute to enhance the transparency and efficiency in capital markets by standardizing information for all investors. The large positive preupgrade returns we observe are consistent with the view that upgrades are of most interest to market investors. There is no significant evidence of abnormal returns on announcements of rating watches.

Stock Market Reactions to the Sprint-TMO Merger

I conduct an event study on the proposed $26.5 billion merger between Sprint and T-Mobile. Positive and statistically significant stock price effects are observed for the merging firms in response to credible rumors of the transaction, but large and negative returns are observed after the official announcement, reflecting perhaps fears of antitrust impediments to the deal or a response to the release of greater details on the transaction. The pattern of returns for the merging firms and Verizon is consistent with a market power interpretation of the merger. AT&T’s returns appear unaffected by news of the transaction, so one might reasonably conclude the evidence is mixed. Event studies are but one piece in a portfolio of evidence. Industry structure in the mobile wireless industry has been heavily influenced by past regulatory decisions thereby requiring modification to the traditional assessment of the horizontal mergers. The combination of Sprint and T-Mobile warrants thoughtful analysis as it may affect market performance in the mobile wireless industry in either positive and negative ways, or both.

Corporate financing with loss aversion and disagreement

We build an equilibrium model to analyze the effect of loss aversion and disagreement on capital structure and stock price effect. It identifies that loss aversion has negative relation with capital structure and stock price effect without disagreement. However, in the case of disagreement between manager and outside investors, under different scale of probability of value gain, capital structure has different relation with loss aversion and disagreement level, and stock price effect has negative relation with loss aversion but has positively related with disagreement level. The numerical simulation results verify our theoretical findings to some extent.

Does Customer Stock Price Crash Risk Have the Contagion Effects on Their Suppliers

Previous studies have documented that information asymmetry and agency problem are the most important factors that can lead to stock price crash risk. While the supervision of stakeholders such as analysts, institutional investors and creditors can effectively reduce a firm’s stock price crash risk. Specially, as one of the firms’ important stakeholders, the customers can exert the corporate governance effect and help to reduce their supplier firms’ stock price crash risk. However, none of the existing studies has focus on the impact of certain specific characteristics of a customer on its supplier firm’s stock price crash risk. Based on customer-supplier relationship chain, this paper examines whether stock price crash risk of a customer can spread to its supplier firm owing to close economic correlation from an external perspective. Because of the existence of the relationship as an interest community between suppliers and customers, a customer and its supplier rarely stand or fall alone; when a customer has the stock price crash risk, the crash risk may spread to its supplier, which we call the contagion effect along the supply chain. Specially, when the supplier’s own corporate governance is poor or information asymmetry is serious, a customer’s stock price crash risk can easily become the last straw that will lead to a death of a camel, that is to say, when the supplier’s healthy is poor, the contagion effect will be more significant. What’s more, we further analyze how the close degree of a customer and its supplier can influence the contagion effect. We expect that closer relation will lead to stronger contagion effect. Due to closer relation, a customer or its supplier will be more difficult to change their trading object because of highly switching cost. Using a special database that both a customer and its supplier along the supply chain are listed companies, we explore the contagion effect through the supply chain based on customer stock price crash risk. It comes to the following conclusions: firstly, there is no synchronicity between a customer’s crash risk and its supplier’ concurrent stock price crash risk, but stock price crash risk of a customer is positively related with the stock price crash risk of its supplier in the following year, which means that there exists contagion effect along the supply chain. What’s more, this contagion effect only exists when the supplier’s own stock price crash risk is higher. Secondly, when a customer highly relies on its supplier or a supplier highly relies on its customer, or one firm has much proprietary investment, or the relationship between them are more stable or benign, the contagion effect is stronger. Its contributions may lie in the following three aspects: firstly, many studies investigate the contagion effect between two firms that are in the same industry or are link up by a third party, and few of them are based on contagion through a supply chain, so our study may provide a new setting on the literature of contagion effect. Secondly, the mainstream literature considers that internal factors like hiding bad information and poor corporate governance are the main factors leading to stock price crash risk. This paper shows that a customer’s stock price crash risk as an external factor can also lead to its supplier firm’s stock price crash risk, thereby helping to enrich the literature of stock price crash risk. Thirdly, most of the existing literature focuses on how customer concentration affects the supply firm’s performance; based on a special supply chain, we examine the contagion effect of customer stock price crash risk on its supplier, providing new insight into economic consequences of customer-supplier relationship and helping to enrich the literature of customer-supplier relationship.

PENGARUH VARIABEL MAKROEKONOMI DAN HARGA SAHAM ASING TERHADAP INDEKS HARGA SAHAM GABUNGAN

Abstract : This study aimed to analyze the effect of macroeconomic variables and foreign stock price on Jakarta Composite Index (JCI) in Indonesia Stock Exchange covering the data period from January 2008 to December 2015. The methodology applied initially used the standard time series techniques, Vector Autoregression (VAR). The result showed that JCI are influenced with the selected macroeconomic and foreign stock price. Increasing in industrial production index and inflation will increase JCI, but exchange rate (Rp/USD) will decreases it. Money supply (M2) and interest rate is found insignificant on JCI. Strait Times Index, Philippines Stock Exchange Index and Dow Jones Industrial Average are found positively and significantly influenced JCI. However, Nikkei 225 and Shanghai Composite Index negatively and significantly influenced JCI. Kuala Lumpur Composite Index and stock Exchange of Thailand insignificant influenced JCI. Our finding suggest that JCI can be influence by macroeconomic variables and stock price in develop country and countries that are in the same region. DOI : https://doi.org/10.26905/jbm.v5i1.2321

Capital Gains Taxes and the Market Response to Earnings Announcements

We investigate the stock price and trading volume effects of differential capital gains taxes applied to short and long-term capital gains when firms disclose public information. We extend the theoretical framework developed in Shackelford and Verrechia (2002) linking differential CGT to price and volume, allowing for positive and negative news and incorporating exogenous non-taxable, uninformed traders. Our model, like SV, indicates that price responses to public information are magnified and volume inhibited during tax capital gain tax regimes in which the difference between short-term capital gains tax rates and long-term capital gains tax rates are larger. However, the degree of magnification/inhibition for price reaction and trading volume differs across multiple well-defined regions of public signal and supply change realizations. We use actual stock price and trading data to empirically investigate these predictions. Our results provide strong support for the price response predictions, but at best marginal support for the volume predictions.

CORPORATE FINANCING UNDER HETEROGENEOUS BELIEFS

The paper models firm’s optimal capital structure and stock price effects from the perspective of expectation equilibrium when manager and outside investors have heterogeneous prior and posterior beliefs on firm’s future cash flow. I find that the more optimistic (pessimistic) of outside investors and the more dispersion of beliefs between manager and outside investors, the higher (lower) the issuing price of stocks, the higher (lower) the issuing amount, hence the higher (lower) the proportion of equity capital in capital structure, and a higher positive (negative) stock price effect after security issuance. The numerical simulation also verifies the findings to some extent.

THE INFLUENCE OF NET PROFIT MARGIN AND CURRENT RATIO ON STOCK PRICE

This research have purpose to examine empirically the effect on Net Profit Margin and Liquidity (Current Ratio) to Stock Price on Sub Sector Pharmaceutical Company Listed on IndonesiaStock Exchange Period 2012-2016. The problems that occur in Sub Sector Pharmaceutical Companyis the decrease of Stock Price but not followed by the increase of Net Profit Margin. Then the companyhas descreased Stock Price but not followed by the increase of Liquidity (Current Ratio). The research uses descriptive verification analysis method with population 10 companies from Sub Sector Pharmaceutical Companies. Sample selected by using purposive sampling, so thesample obtained to 8 companies with 40 financial reports from Sub Sector Pharmaceutical CompanyListed in Indonesia Stock Exchange Period 2012-2016. Technical of data analysis is multiple linearregression with SPSS 16.0 version as the application. The result of the analysis showed that Net Profit Margin has positive and significant effect to Stock Price, and Liquidity which measured by Current Ratio has Positive dan significant effect toStock Price.

The Effect of Daily Stock Price Limits on the Investment Risk: Evidence from the Egyptian Stock Market

The study aims to investigate the relationship between daily price limits and stock volatility, trading volume, delayed adjustment of stock prices, and its fair value. To achieve this goal, we used the data of the listed firms in EGX30. We analyzed the data using descriptive analysis then we applied General linear model, ARCH and GARCH models. Based on our analysis results show a positive relationship between upper daily limit and stock volatility, a positive relationship between daily price limits (upper limit- lower limit) and trading volume, a positive relationship between upper daily limit and the return between the closing price and the opening price on the same day, a positive relationship between lower daily limit and the return between the closing price and the opening price in the next day, a negative relationship between upper daily limit and the return between the closing price and the opening price in the next day, and a positive relationship between daily stock price limits and the fair value.

Brexit: Short-term stock price effects and the impact of firm-level internationalization

We perform an event study analysis to determine short-term abnormal stock returns following the Brexit referendum. Moreover, we examine whether firm-level internationalization helps explaining abnormal returns. We find that stocks of firms with higher proportions of domestic sales realized more negative abnormal returns than stocks of firms with more sales abroad, i.e., a higher degree of international diversification. While firm-level internationalization largely explains abnormal returns on the trading day after the referendum, it has no relevant pricing effect in the following days. The quick adjustment of stock prices to reflect firm-level internationalization indicates a high degree of market efficiency.

Coupling detrended fluctuation analysis of Asian stock markets

This paper uses the coupling detrended fluctuation analysis (CDFA) method to investigate the multifractal characteristics of four Asian stock markets using three stock indices: stock price returns, trading volumes and the composite index. The results show that coupled correlations exist among the four stock markets and the coupled correlations have multifractal characteristics. We then use the chi square (χ2) test to identify the sources of multifractality. For the different stock indices, the contributions of a single series to multifractality are different. In other words, the contributions of each country to coupled correlations are different. The comparative analysis shows that the research on the combine effect of stock price returns and trading volumes may be more comprehensive than on an individual index. By comparing the strength of multifractality for original data with the residual errors of the vector autoregression (VAR) model, we find that the VAR model could not be used to describe the dynamics of the coupled correlations among four financial time series.

Analisis faktor-faktor yang mempengaruhi bid-ask spread saham pada perusahaan yang tergabung dalam indeks LQ45 periode 2013 - 2016

This study aims to determine the effect of stock price, stock trading volume, stock return volatility, and stock trading frequency on bid-ask spread. This study uses purposive sampling method, the population is the corporations which listed in LQ45 Index from 2013 to 2016. There are 24 corporations as samples use in this study. The analysis of this study used Multiple Linear Regression. Results from t-test explains that the stock price does not affect the bid-ask spread with p-value significant 0.342. The stock trading volume has a positive and significant effect on bid ask spread with p-value significant 0.000. Stock return volatility has a positive and significant effect on bid ask spread with p-value significant 0,000. Stock frequency trading has a negative and significant effect on the bid-ask spread with a p-value significant 0.000. Simultaneously (F-test) shows that stock price, stock trading volume, stock return volatility, and stock trading frequency of stock have significant effect to bid ask spread with p-value 0,000.

The Importance of Being Steve: An Econometric Analysis of the Contribution of Steve Jobs’s Patents to Apple’s Market Valuation

This paper evaluates the contribution of patent-related events to changes in stock prices, proposing that economics has traditionally failed to find much effect for two reasons which we identify and correct. First, patents vary widely in quality so we use quantile analysis and alternative measures of patent quality to identify effects. Second, we permit the possibility that information leaks out into investor sentiment during the long and uncertain time until patent grant, so evaluate the stock price effect at four different dates in the life of each patent. As a case study to test this approach, track all patents over a 27-year period for Apple Inc., permiting design patents to have different effects that traditional utility-model patents, and isolate the effect that Steve Jobs’s name on a patent has at each stage of a patent’s life.

The price impact of block transactions in the Netherlands

In this paper, the authors analyse the stock price effects of block transactions and the disclosure thereof for Dutch firms. The authors measure a significant positive price effect for block purchases directly around the transaction date, but not for block sales. The authors do not measure a significant price effect for the disclosures of block transactions. The authors find two opposing effects about the agency role of large shareholders. In particular, while the authors find that the market reacts positively to the entrance of a new block holder, the authors also measure a negative reaction to the purchase of large blocks.

Quantitative easing tilts the balance between monetary and macroprudential policy

ABSTRACTQuantitative easing by central banks has stimulated risk-taking in financial markets and contributed to a liquidity-driven boom in asset prices. It puts the relation between monetary policy and financial stability into a new perspective. We show by a regression analysis for a panel of 11 advanced economies that an asset price bust has adverse effects on inflation. The effect of stock prices and corporate bond rates on inflation is significant, also if we control for developments in credit. This insight implies that in conducting and implementing quantitative easing, central banks should closely monitor and take into account asset bubbles.

Do Annual Stock Price Effects of Extreme Cash Dividend Pay-Out Events Differ from Their Short Term Effects?

In this paper, we assess the long-term stock price impact of 1327 cash dividend payment initiations and 1156 cash dividend payment omissions of firms listed on the NYSE and the NASDAQ, from 1972 to 2012. In particular we compare the annual returns of dividend initiating and omitting firms and firms that are equally likely to initiate (or omit). We find larger price effects during the years of cash dividend initiation and omission than is measured by earlier short period event studies, but we find no price impact after the year has elapsed. When measuring such long-run effects, contemporaneous (same year) determinants of price effects may confound the findings of pure dividend initiations or omissions. We therefore test whether there are also unexpected changes in the contemporaneous determinants of returns, and we find that risk measures and net income differ systematically between firms that initiate (or omit) and firms that have similar characteristics, but do not change their payout policy. When correcting for such effects we find that systematic risk does not influence concurrent returns in the years of initiations or omissions, though total risk does. Idiosyncratic risk changes only influence the returns after dividend omissions. With and without correction for ‘contemporaneous’ factors, we find –also for several robustness tests- that the one year price impact of initiations is larger than that of omissions, which suggests that the surprise effects of dividend omissions are on average smaller than those of dividend initiations.

Price manipulation, front running and bulk trades: Evidence from India

We analyze the stock price effects of bulk trade in India over the period 2004–2012. Using an event study model we note significant impact of bulk trades on the share prices with cumulative returns being very high around the trades for both BSE and NSE. Buy trade has significant positive cumulative abnormal returns, indicating that buy trades on average increases firm value. Next, we regress cumulative average abnormal returns of different windows on different independent variables. The effect of all the variables considered is found to be higher in the case of buy trades than that of the sell trades.

The Effect of Cash Dividend, Retained Earnings, and Stock Price of Manufacturing Company Listed In Indonesia Stock Exchange

This study aims to determine the effect of cash dividends per share, retained earnings per share, earnings per share, and leverage on the stock price of manufacture industry in Indonesia from 2008-2012. Research used secondary data in which the source was obtained indirectly through an intermediary medium or data processed from literatures and reports associated with this research. Independent variables in this study (x) are cash dividends per share, retained earnings per share, earnings per share, and leverage, while the dependent variable (y) is stock price. The samples used were 23 companies with purposive sampling method. The empirical results of this study indicate that cash dividends per share, retained earnings per share, earnings per share, and leverage has significant effect on the stock price. It is therefore the higher stock price will attract investors to invest their money. Hence, companies and investors need to attend cash dividends per share, retained earnings per share, earnings per share, and leverage as factors that affect the increase or decrease of the stock price.

Diversification with the Option-to-Abandon: An Integrated Valuation Model

A model that recognizes the possibility of total shareholder loss in the aftermath of bankruptcy reveals simultaneously the stock price effects of diversification and of the option to abandon assets to creditors. In essence the model integrates security pricing behavior predicted by the CAPM and by the OPM in a single formula. Results have implications for the valuation of equity and debt securities of firms in distress and of options when underlying cash flows are correlated with the market. The analysis suggests why models that consider only diversification or the option-to-abandon sometimes fail to track the behavior of actual returns.

Exceeding Expectations: Economic Forecasts and Underreaction to Macroeconomic Announcements

Existing research relies on the assumption of rational behavior and argues that only unexpected macroeconomic news may affect stock prices. Unlike these papers, we find significant stock price effects of expected components of macroeconomic announcements, which are revealed by survey forecasts of market participants. Since economic forecasts are systematically biased towards the values of previous announcements, we hypothesize that the historical information embedded in these forecasts may impact stock prices. Our results confirm this hypothesis and suggest that some investors trade on historical macroeconomic announcements.