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"Ownership Structure as a Determinant of
Firm Value: Evidence from Newly Privatized Czech Firms"
Anil K. Makhija and Michael Spiro
"The Performance Persistence of Closed-End
Funds"
Martina K. Bers and Jeff Madura
"Fund Manager Succession in Closed-End Mutual
Funds"
Wei Wang Rowe and Wallace N. Davidson III
"Market Efficiency in Specialist Markets
Before and After Automation"
William C. Freund and Michael S. Pagano
"On Testing the Random-Walk Hypothesis: A
Model-Comparison Approach"
Ali F. Darrat and Maosen Zhong
"Asymmetric Effects of Interest Rate Changes
on Stock Prices"
Bento J. Lobo
"The Impact of the Financial Institutions
Reform, Recovery and Enforcement Act On The Risk of
Savings Institutions"
Jeff Madura and Marilyn K. Wiley
"Ownership Structure
as a Determinant of Firm Value: Evidence from Newly
Privatized Czech Firms"
Anil K. Makhija and Michael Spiro
Volume 35, No. 3, pp. 1-32
Abstract: Using a sample of 988
newly privatized Czech firms, with part of the ownership
structure exogenously determined prior to voucher
privatization, we find that share values are positively
related with the ownership stakes of foreigners,
insiders, and restituents. While the findings for
foreigners and insiders can be attributed to their
superior ability to identify more profitable firms, we
interpret the findings on restituents as evidence of the
beneficial effect of blockholdings. On the other hand,
we find that the ownership of the fund with the largest
stake is not significantly related with share value,
suggesting that the value of external blocks depends on
the identity of the owner. However, when the fund is
also the largest blockholder in the firm, it has an
adverse effect on share value. The negative effect of
the dominant block owned by a fund is mitigated,
however, when a bank sponsors the fund. Although funds
are legally separated from their sponsoring
institutions, bank-sponsored funds may nevertheless have
inherited a better access to the innards of these firms,
and may be in a better position to monitor them.
"The Performance Persistence
of Closed-End Funds"
Martina K. Bers and Jeff Madura
Volume 35, No. 3, pp. 33-52
Abstract: The purpose of this
study is to extend the research on mutual fund
performance persistence to net asset value and market
price performance of domestic closed-end funds. While
research has assessed the performance persistence of
open-end mutual funds, it has not assessed the
performance persistence of closed-end funds. Yet, the
unique characteristics of closed-end funds allow
stronger arguments for their persistence than the
arguments previously submitted for open-end mutual
funds. The results show evidence for risk-adjusted
performance persistence.
"Fund Manager Succession
in Closed-End Mutual Funds"
Wei Wang Rowe and Wallace N. Davidson III
Volume 35, No. 3, pp. 53-78
Abstract: Managing the succession
process by the hiring and firing of key executives is
one of the important functions of a board of directors.
In this research we study successions of fund managers
in the closed-end mutual fund industry. The agency
issues inherent in closed-end mutual funds makes them a
unique laboratory for such a study. Our results suggest
that while the overall abnormal returns of these manager
changes are statistically insignificant, that the
returns are more positive for funds with large expense
ratios and for funds trading at a discount. We also find
the abnormal returns are negatively related to the
percentage of inside director stock ownership. Corporate
bond funds and international equity funds react more
negatively to these announcements than other types of
funds. The abnormal returns do not appear to be related
to board composition, but board composition does vary
across fund type, and may therefore indirectly influence
the results.
"Market Efficiency in Specialist Markets Before and After
Automation"
William C. Freund
and Michael S. Pagano
Volume 35, No. 3, pp. 79-104
Abstract: Using nonparametric
statistical analysis, we measure the degree of market
efficiency before and after automation at the New York
and Toronto Stock Exchanges. Overall, the results show
that the level of informational efficiency remains
effectively unchanged during the automation period.
Despite several deviations from a random walk process,
the returns for stocks on these exchanges do not appear
to exhibit consistent patterns that investors can
exploit to generate abnormal returns. Automation also
coincides with an improvement in market efficiency at
the Toronto Stock Exchange when compared to the New York
Stock Exchange.
"On Testing the Random-Walk
Hypothesis: A Model-Comparison Approach"
Ali F. Darrat and Maosen Zhong
Volume 35, No. 3, pp. 105-124
Abstract: The main intention of
this paper is to investigate, with new daily data,
whether prices in the two Chinese stock exchanges
(Shanghai and Shenzhen) follow a random-walk process as
required by market efficiency. We use two different
approaches, the standard variance-ratio test of Lo and
MacKinlay (1988) and a model-comparison test that
compares the ex post forecasts from a NAÏVE model
with those obtained from several alternative models:
ARIMA, GARCH and the Artificial Neural Network (ANN). To
evaluate ex post forecasts, we utilize several
procedures including RMSE, MAE, Theil’s U, and
encompassing tests. In contrast to the variance-ratio
test, results from the model-comparison approach are
quite decisive in rejecting the random-walk hypothesis
in both Chinese stock markets. Moreover, our results
provide strong support for the ANN as a potentially
useful device for predicting stock prices in emerging
markets.
"Asymmetric Effects
of Interest Rate Changes on Stock Prices"
Bento J. Lobo
Volume 35, No. 3, pp. 125-144
Abstract: This study examines the
stock price adjustment process around announcements of
changes in the federal funds rate target in the 1990s
using asymmetric autoregressive exponential GARCH model
(ASAR-EGARCH). We find that target change announcements
convey new information to the stock market. Risk
aversion increases before the announcement of a rate
change, and especially before the announcement of a
joint target and discount rate change. The volatility
estimates suggest that such joint rate changes send a
clearer signal to the stock market about monetary policy
objectives relative to unilateral target changes. Our
findings are consistent with overreaction in the wake of
bad news (rate hikes), and point to a shift in
volatility from before to after the rate change
announcement since the adoption of the immediate
disclosure policy of the Federal Open Market Committee
in February 1994.
"The Impact of the Financial
Institutions Reform, Recovery and Enforcement Act On
The Risk of Savings Institutions"
Jeff Madura and
Marilyn K. Wiley
Volume 35, No. 3, pp. 145-168
Abstract: The Financial
Institutions Reform, Recovery and Enforcement Act
(FIRREA) of 1989 was intended to enhance the safety of
savings institutions. We develop and test a model
showing how institution-specific characteristics modify
the overall effect of FIRREA on the risk of savings
institutions. Our model incorporates market risk,
interest rate risk, and exposure to real estate
conditions. We find that risk shifts vary across savings
institutions. Larger institutions exhibit no obvious
shift in risk, while smaller institutions show reduced
risk since FIRREA. Moreover, the effects are more
favorable for institutions that maintained higher
capital levels in response to FIRREA=s provisions.