Abstracts of Volume 43, Number 1, February 2008
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Corporate Bond Returns and Volatility
Nianyun Cai, Xiaoquan Jiang
Security Concentration and Active Fund Management: Do
Focused Funds Offer Superior Performance?
Travis Sapp and Xuemin (Sterling)
Yan
Emerging Market Bond Funds: A Comprehensive Analysis
Sirapat Polwitoon, Oranee
Tawatnuntachai
Dual Class IPOs ARE Underpriced Less Severely
Scott B. Smart and Chad J. Zutter
Investor Sentiment, Trading Behavior and Informational
Efficiency in Index Futures Markets
Alexander Kurov
Christine Panasian, Andrew K.
Prevost, Harjeet S. Bhabra
Corporate Bond Returns and Volatility
Nianyun Cai, Xiaoquan Jiang
Recent literature emphasizes the
relation of stock volatility to corporate bond yields.
We demonstrate that during 1996-2005 corporate bond
excess return volatility is directly related to
contemporaneous corporate bond excess returns. In fact,
the decompositions of aggregate bond volatility have a
higher contemporaneous correlation with bond yields in
comparison to idiosyncratic stock risk. Additionally,
bond volatility and idiosyncratic risk are significant
predictors of corporate three-month and six-month ahead
bond excess returns. We also find that corporate bond
volatility contains both slow moving and time-varying
components.
Keywords: Corporate
bond return, volatility, decomposition, dynamic relation
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Security Concentration and Active Fund Management: Do Focused
Funds Offer Superior Performance?
Travis Sapp and Xuemin (Sterling)
Yan
We examine gross fund returns
based on the number of securities held and find no
evidence that focused funds outperform diversified
funds. After deducting expenses, focused funds
significantly underperform. Controlling for various fund
characteristics, fund performance is positively related
to the fund’s number of holdings both before and after
expenses. We find evidence linking focused fund
underperformance to agency and liquidity problems.
Finally, the attrition rate of focused funds is higher
than that of diversified funds. These results do not
support the view that managers holding focused
portfolios have superior stock-picking skills or that
focused funds provide value to investors.
Keywords: Mutual
fund performance, focused fund, security concentration,
best ideas
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Emerging Market Bond Funds: A Comprehensive Analysis
Sirapat Polwitoon,
Oranee Tawatnuntachai
We analyze U.S.-based emerging
market bond funds over a ten-year (1996–2005) complete
cycle of ups and downs in the dominant emerging bond
markets. Emerging market bond funds outperform
comparable domestic and global bond funds. The results
are robust across both conditional and unconditional
models.
The funds also provide international diversification
benefits to U.S. and international bond and equity
portfolios. The funds exhibit persistence in performance
and seasonality. Active funds, large funds and funds
with high minimum purchases perform better on a total
return basis but not on a risk-adjusted basis.
Keywords: Emerging
markets, bond mutual funds, international
diversification, international mutual funds,
performance persistence
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Dual Class IPOs ARE Underpriced Less Severely
Scott B. Smart and Chad J. Zutter
We analyze a sample of dual and
single class IPOs to investigate whether empirical
estimates of underpricing determinants are consistent
across alternative measures of firm size and alternative
techniques intended to account for underwriter price
stabilization efforts. We find that results from
long-standing methods for estimating underpricing
relations are generally robust to one’s choice of size
proxy and are consistent with estimates obtained from
censored regressions of first-day returns and from least
squares regressions of longer horizon initial returns.
We also confirm an existing finding in the literature
that dual class IPOs endure less underpricing than do
single class firms.
Keywords: Dual
class, initial public offerings (IPOs), price
stabilization, censored distribution, mixed
distributions
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Investor Sentiment, Trading Behavior and Informational
Efficiency in Index Futures Markets
Alexander Kurov
This paper shows that traders in
index futures markets are positive feedback traders –
they buy when prices increase and sell when prices
decline. Positive feedback trading appears to be more
active in periods of high investor sentiment. This
finding is consistent with the notion that feedback
trading is driven by expectations of noise traders.
Consistent with the noise trading hypothesis, order flow
in index futures markets is less informative when
investors are optimistic. Transitory volatility measured
at high frequencies also appears to decline in periods
of bullish sentiment, suggesting that sentiment-driven
trading increases market liquidity.
Keywords: feedback
trading, investor sentiment, informational efficiency,
market microstructure, futures markets
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Christine Panasian, Andrew K.
Prevost, Harjeet S. Bhabra
We investigate the determinants
and consequences of compliance with the Dey Committee
recommendations encouraging greater board independence
in Canada. Companies that acted on this recommendation
appear to have done so to improve their performance and
not for cosmetic purposes. Poorly performing firms that
modified their boards experienced a greater increase in
performance compared to those that did not. Overall, it
appears that the primary function of the Dey Report was
to refocus firms’ attention on the quality of board
monitoring, particularly those with poor relative
performance.
Keywords: Corporate
Governance, Board Composition
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