Click on Title to View Abstract
"The 'Dogs of the Dow' Myth"
Mark Hirschey
"Valuing the Potential Transformation of
Banks into Financial Service Conglomerates: Evidence
from the Citigroup Merger"
Jarrod Johnston
and Jeff Madura
"The Impact of Country Diversification on
Wealth Effects in Cross-Border Mergers"
Halil Kiymaz and Tarun K. Mukherjee
"Real Activity, Inflation, Stock Returns, and
Monetary Policy"
Kwangwoo Park and Ronald A. Ratti
"January Anomalies: Implications for the
Market's Incorporation of News"
Rohan Christie-David, and
Mukesh Chaudhry
"The Predictive Ability of Dividend and
Earnings Yields for Long-Term Stock Returns"
Chunchi Wu and Xu-Ming Wang
"Informed and Uninformed Trading in an
Electronic, Order-Driven Environment"
Paul Brockman and Dennis Y. Chung
"Stock-price Effects of Internet Buy-Sell
Recommendations: The Motley Fool Case"
Mark Hirschey, Vernon J. Richardson, and Susan Scholz
"The 'Dogs of the Dow' Myth"
Mark Hirschey
Volume 35, No. 2, pp. 1-16
Abstract: The "Dogs of the Dow"
(or "Dow Dog") investment strategy, is a popular
investment approach that promises huge abnormal returns
for investors in the ten top yielding stocks from the
Dow Jones Industrial Average (DJIA). However, periods of
evident outperformance are balanced by periods of
conspicuous underperformance. When strategy returns are
adjusted for taxes and rebalancing costs, Dow Dogs
perform in line with the DJIA over the 1961–1998 period.
As a result, there is no robust evidence of an average
return anomaly tied to Dow Dogs.
"Valuing the Potential
Transformation of Banks into Financial Service
Conglomerates: Evidence from the Citigroup Merger"
Jarrod Johnston and Jeff Madura
Volume 35, No. 2, pp. 17-36
Abstract: The merger between
Citicorp and Travelers Group on April 6, 1998 could have
emitted two relevant signals for firms that provide
financial services. The first signal is the endorsement
by two prominent financial institutions that benefits
from cross-selling of bank services with insurance
services, brokerage services, and other financial
services can be realized. The second signal is that
regulators will allow the combination of commercial
banking with insurance underwriting and full-service
brokerage, paving a path for similar combinations in the
future. We document a favorable share price response for
commercial banks, insurance companies, and brokerage
firms, which supports the argument that the merger sets
a precedent for other combinations between banks and
nonbank financial services that will facilitate
cross-selling and efficiencies.
"The Impact of Country
Diversification on Wealth Effects in Cross-Border
Mergers"
Halil Kiymaz and Tarun K. Mukherjee
Volume 35, No. 2, pp. 37-58
Abstract: We posit that country
diversification via cross-border mergers creates wealth
by providing benefits for firms that are not available
to their shareholders. We hypothesize that these
benefits are inversely related to the extent of
co-movement in the economies of the bidder’s and
target’s countries. We examine the wealth effects of
U.S. targets and bidders involved in cross-border
mergers with firms in other countries during 1982–1991.
We show that wealth effects vary, depending on country
affiliations of two merging firms, and are inversely
related to the degree of economic co-movement between
the two countries.
"Real Activity, Inflation, Stock
Returns, and Monetary Policy"
Kwangwoo Park and
Ronald A. Ratti
Volume 35, No. 2, pp. 59-78
Abstract: We find that
contractionary monetary policy shocks generate
statistically significant movements in inflation and
expected real stock returns, and that these movements go
in opposite directions. Since positive shocks to output
precipitate monetary tightening, we argue that the
countercyclical monetary policy process is important in
explaining the negative correlation between inflation
and stock returns. Examining the 1979–1982 period, we
find that monetary policy tightens significantly in
response to positive shocks to inflation, and that the
impact of monetary policy shocks on stock returns is
negative and volatile. Therefore, we see evidence that
an "anticipated policy" hypothesis is at work.
"January Anomalies:
Implications for the Market's Incorporation of News"
Rohan Christie-David, and
Mukesh Chaudhry
Volume 35, No. 2, pp. 79-96
Abstract: We examine the responses
of five interest rate instruments to the release of
macroeconomic announcements to determine whether January
returns behave differently from returns in other months
when information is released. Our results suggest that
in all instruments, returns in January are less
sensitive to macroeconomic news, compared with other
months. This is true even though the number and type of
announcements are much the same in January as in other
months. The instruments examined feature important
differences in liquidity, maturity, credit risk, and
other institutional differences, suggesting that our
evidence is robust.
"The Predictive Ability of
Dividend and Earnings Yields for Long-Term
Stock Returns"
Chunchi Wu and
Xu-Ming Wang
Volume 35, No. 2, pp. 97-124
Abstract: We use empirical models
to examine the predictive ability of dividend and
earnings yields for long-term stock returns. Results
show that dividend and earnings yields share a similar
predictive power for future stock returns and growth. We
find that the predictive power of dividend yields
increases with the return horizon, but that yields
forecast future returns and growth over a much longer
horizon. Finally, dividend and earnings yields exhibit
high autocorrelation and strong contemporaneous
relations.
"Informed and Uninformed Trading in an Electronic, Order-Driven
Environment"
Paul Brockman and Dennis Y. Chung
Volume 35, No. 2, pp. 125-146
Abstract: The purpose of our study
is to investigate the trading behavior of informed and
uninformed investors in a screen-based, order-driven
environment. As more and more exchanges conduct trading
through electronic limit-order books, it is increasingly
important to analyze consequent trading behavior and its
impact on the liquidity provision process. We examine
one of the largest electronic, order-driven markets in
the world, the Stock Exchange of Hong Kong. Our findings
show that the interaction of informed and uninformed
traders plays a significant role in determining
corporate liquidity.
"Stock-price Effects of Internet
Buy-Sell Recommendations: The Motley
Fool Case"
Mark Hirschey, Vernon J. Richardson, and Susan Scholz
Volume 35, No. 2, pp. 147-174
Abstract: The Motley Fool has
attracted significant notoriety for stock market
buy-sell advice on the Internet. Across five different
investment portfolios, Motley Fool buy recommendations
appear to generate an average 1.62% rise in stock prices
on the announcement Day 0, and 2.40% returns over the
announcement period Day -1, Day +1. Sell recommendations
seem to cause a -1.49% announcement day return, and a
-3.33% announcement period return. Small cap growth
stock buy recommendations for The Motley Fool's flagship
Rule Breaker Portfolio are associated with returns of
3.66% on the announcement day, and a 6.15% return over
the announcement period. These findings suggest
herd-like behavior among Internet investors, and that
such announcements are more newsworthy than second-hand
buy-sell recommendations published in traditional print
and electronic media.