Abstracts of Volume 40, Number 3, August 2005
Click on title to go directly to the abstract
Nasdaq
Trading and Trading Costs
Bonnie F. Van Ness, Robert A. Van Ness and Richard S.
Warr
Determinants of Bank Debt in a Continental Financial
System. Evidence from Spanish Companies
Pablo de Andrés Alonso, Félix J. López Iturriaga, Juan
A. Rodríguez Sanz and Eleuterio Vallelado González
Risk-adjusted Long-term Contrarian Profits: Evidence
from Non-S&P 500 High Volume Stocks
Udomsak Wongchoti, Chong Soo Pyun
Capital Structure and the Ex-Dividend Day Return
Dan W. French, Paula L. Varson and Kenneth P.
Moon
Asymmetric Volatility and Trading Activity in Index
Futures Options
Kam C. Chan, Louis T. W. Cheng, Peter P. Lung
Underpricing, Share Overhang and Insider Selling in
Follow-on Offerings
Shaorong Zhang
Nasdaq
Trading and Trading Costs
Bonnie F. Van Ness, Robert A. Van Ness and Richard S.
Warr
Nasdaq spreads decline from 1993 to 2002, largely
independently of tick size reductions. Trade size
declines, consistent with greater retail investor
activity. Using the method of Chordia, Roll, and
Subrahmanyam (2001), we find that concurrent market
returns strongly affect liquidity and trading activity.
Liquidity exhibits distinct day-of-the-week patterns.
There is little evidence that macroeconomic
announcements or changes in key interest rates affect
Nasdaq stocks overall, but in the bear market we find a
relation between some of these variables and effective
spreads, which we interpret as consistent with Nasdaq
participants’ paying greater attention to fundamentals
after the market crash.
Determinants of Bank Debt in a Continental Financial
System. Evidence from Spanish Companies
Pablo de Andrés Alonso, Félix J. López Iturriaga, Juan
A. Rodríguez Sanz and Eleuterio Vallelado González
We analyze hypotheses about the structure of corporate
debt ownership and the use of bank debt by firms in a
civil-law country (Spain). We focus on bank debt effects
in the presence of information asymmetries and agency
costs, and on efficient versus inefficient firm
liquidation. We find that the relation between growth
opportunities and bank financing is not as strong as the
one found in common law countries, that there is a
positive relation between firm size and the proportion
of bank debt used, and that firms closer to bankruptcy
and highly leveraged are more prone to using bank debt.
Risk-adjusted Long-term Contrarian Profits: Evidence
from Non-S&P 500 High Volume Stocks
Udomsak Wongchoti, Chong Soo Pyun
Can trading volume help unravel the long-term
overreaction puzzle? With portfolios of non-S&P 500 NYSE
stocks, we show that (a) both the high- and low-volume
(abnormal volume) contrarian portfolios earn a much
higher market-adjusted excess return than the
normal-volume contrarian portfolio, (b) however, when
leverage-induced risk is factored in, excess returns
from contrarian portfolios with normal and low-volume
stocks are insignificant, (c) only excess returns from
high-volume contrarian stocks are significant and cannot
be explained away by the time-varying risk and return
framework, and (d) such high-volume, risk-adjusted
excess returns arise mainly from winner (glamour)
stocks.
Capital Structure and the Ex-Dividend Day Return
Dan W. French, Paula L. Varson and Kenneth P.
Moon
We propose the application of an option-pricing
framework to the ex-dividend behavior of common stocks.
The framework explains the observed behavior of positive
returns on the ex-dividend day and predicts that
ex-dividend day returns will be higher for firms with
greater financial leverage. An empirical test using
observed ex-day returns and firm financial data confirms
that there is a positive relationship between leverage
and the ex-day return. Tests also control for and
confirm the importance of effects of other variables on
ex-dividend day behavior. In contrast to results of
prior studies, we find that dividend-capture activity
has no significant impact on ex-dividend behavior, and
we offer an explanation based on the importance of tick
intervals.
Asymmetric Volatility and Trading Activity in Index
Futures Options
Kam C. Chan, Louis T. W. Cheng, Peter P. Lung
We examine the impact of option trading activity on
implied volatility changes to returns in the index
futures option market. Controlling for option moneyness,
delta-to-option-premium ratio, and liquidity, we find
that net buying pressure, profit-maximization behavior,
and liquidity are interrelated and affect asymmetric
responses of implied volatilities to returns. Implied
volatilities of options with more liquidity, a higher
exercise price, and a higher delta-to-option-premium
ratio have the most profound asymmetric response.
Underpricing, Share Overhang and Insider Selling in
Follow-on Offerings
Shaorong Zhang
Prospect and information-momentum theories predict that
insiders can offer fewer shares in an IPO to create
informational momentum and obtain higher prices in
follow-on offerings. I find that dilution and insider
participation in the IPO are negatively related to the
number and size of follow-on offerings, consistent with
the prediction. However, insider selling in follow-on
offerings is positively related IPO selling, contrary to
the theories. Returns around follow-on offering
announcements are more negative for newly public firms
than older firms, but for newly public firms do not
differ by whether the announcement comes before or after
the lockup expiration date.
Eastern Finance Association members and institutional
subscribers have free access to the full text of
articles published in The Financial Review (now starting
from the first quarterly issue in 1969) at our
Blackwell site. Join now at
http://www.blackwellpublishing.com/memb.asp?ref=0732-8516).
You can also
purchase individual articles online at our
Blackwell site.