Category Archives: Finance

Are there exploitable trends in commodity futures prices?

Yufeng Han, Ting Hu, Jian Yang
Journal of Banking & Finance,Vol. 70, Pages: 214-234.

We provide evidence that a simple moving average timing strategy, when applied to portfolios of commodity futures, can generate superior performance to the buy-and-hold strategy. The outperformance is very robust. It can survive the transaction costs in the futures markets, it is not concentrated in a particular subperiod, and is robust to short-sale constraints, alternative specifications of the moving average lag length, alternative construction of the continuous time-series of futures prices, and impact from data mining. …
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Information Flow Between Forward and Spot Markets: Evidence From the Chinese Renminbi

Jiadong Tong, Zijun Wang, Jian Yang
Journal of Futures Markets,Vol. 36, Issue 7, Pages: 695-718.

We apply a new model selection approach that allows for the joint determination of structural breaks and cointegration to examine the term structure of Chinese Renminbi (RMB)-US dollar spot and forward exchange rates during the managed-floating period of 2005-2013. We find that the RMB market has exhibited different dynamic relationships between spot and forward exchange rates over time, apparently due to significant policy changes. Offshore forward rates with either shorter or longer maturities can substantially …
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Price Jump Risk in the US Housing Market

Robert I Webb, Jian Yang, Jin Zhang
The Journal of Real Estate Finance and Economics,Vol. 53, Issue 1, Pages: 29-49.

Housing prices, like the prices of other speculative assets, contain a mix of both small and large changes (ie, jumps). We apply a jump-GARCH model to monthly Case-Shiller housing price indexes of twenty cities in the US during the period January 1991 through December 2011. We document the evidence of large housing price jumps in many cities, during both the financial crisis and non-crisis periods. The housing price jump intensity observed during the whole sample is largely explained by city, state and national …
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A parsimonious quantile regression model to forecast day-ahead value-at-risk

Erik Haugom, Rina Ray, Carl J Ullrich, Steinar Veka, Sjur Westgaard
Finance Research Letters,Vol. 16, Pages: 196-207.

This paper proposes a parsimonious quantile regression model for forecasting Value-at-Risk. The model uses only observable measures of daily, weekly, and monthly volatility as input and thus simplifies optimization substantially compared with other methods proposed in the literature. The framework also provides a new way of illustrating the volatility effects of a heterogeneous market. When subjected to formal coverage tests for out-of-sample VaR predictions, model performance is similar to more complicated models.
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Athletic success and NCAA profit-athletes’ adjusted graduation gaps

Richard M Southall, E Woodrow Eckard, Mark S Nagel, Morgan H Randall
Sociology of Sport Journal,Vol. 32, Issue 4, Pages: 395-414.

Within the National Collegiate Athletic Association (NCAA) Football Bowl Subdivision (FBS) and Division I men’s basketball many profit-athletes travel to Predominately White Institution (PWI) work sites for “pre-professional” sport opportunities. At most PWIs the Black male student population is less than ten percent, while football and men’s basketball rosters are overwhelmingly comprised of Black athletes. This studyusing multiple regression modelsexamines the relationship between athletic success and profit-athletes’ graduation rates. …
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The differential impact of the bank–firm relationship on IPO underpricing: evidence from China

Xiangchao Hao, Jing Shi, Jian Yang
Pacific-Basin Finance Journal, Vol. 30, November 2014, Pp. 207-232

This study investigates the impact of the bank–firm relationship on IPO underpricing in China, an emerging economy with a bank-dominated financial system. Utilizing a hand-collected loan data for 902 Chinese IPO firms from 2004 to 2011, we document that the bank–firm relationship reduces the degree of IPO underpricing. Both the lender’s and the borrower’s firm characteristics affect the signal quality of the bank–firm relationship, resulting in differential impacts on IPO underpricing. The relationship between firms and banks with …

Explaining the Location of Mission-Driven Businesses: An Examination of B-Corps

Hickman, Leila; Byrd, John; Hickman, Kent
Journal of Corporate Citizenship, Volume 2014, Number 55

In his well-known essay, Milton Friedman (1970) argued that it is the social responsibility of business to maximize profit. While such laissez-faire reasoning theoretically considers the welfare of all the stakeholders in the business enterprise through market pricing mechanisms, there is a growing and pressing concern with market failures. Among these failures are externalities, issues of inter-generational equity and short-termism, the commons problem, and decision making biases. The ramifications of these market imperfections have manifested themselves in climate change, financial crises, and deforestation, among other global challenges. Some businesses have responded by refocusing their mission away from solely profit maximisation to broader, more sustainable goals. In this paper, we explore the factors that contribute to businesses adopting one such innovation, the B-Corporation designation.

Let’s talk: an analysis of the “vote vs. negotiated withdrawal” decision for social activist environmental health shareholder resolutions

John Byrd, Elizabeth S Cooperman
Journal of Sustainable Finance & Investment, Volume 4 Issue 3, July 2014, Pages 230-248

Social and environmental shareholder activists engage in a form of corporate social governance by submitting proxy resolutions for a specific change in corporate behavior deemed to be harmful to society. Using a unique data-set for environmental health shareholder resolutions filed by shareholder activists at 70 different companies during 2006–2011, we examine the success rate of resolutions and characteristics affecting the “vote vs. negotiated withdrawal” decision. Supporting a self-interest hypothesis, resolutions …

Let’s talk: an analysis of the “vote vs. negotiated withdrawal” decision for social activist environmental health shareholder resolutions

John Byrd, Elizabeth S Cooperman
Journal of Sustainable Finance & Investment,Vol. 4, Issue 3, Pages: 230-248.

Social and environmental shareholder activists engage in a form of corporate social governance by submitting proxy resolutions for a specific change in corporate behavior deemed to be harmful to society. Using a unique data-set for environmental health shareholder resolutions filed by shareholder activists at 70 different companies during 2006-2011, we examine the success rate of resolutions and characteristics affecting the “vote vs. negotiated withdrawal” decision. Supporting a self-interest hypothesis, resolutions …
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Income Hedging and Portfolio Decisions

Yosef Bonaparte, George M. Korniotis and Alok Kumar
Journal of Financial Economics, Volume 113, Issue 2, Pp. 300–324

We examine whether the decision to participate in the stock market and other related portfolio decisions are influenced by income hedging motives. Economic theory predicts that the market participation propensity should increase as the correlation between income growth and stock market returns decreases. Surprisingly, empirical studies find limited support for the income hedging motive. Using a rich, unique Dutch data set and the National Longitudinal Survey of the Youth (NLSY) from the United States, we show that when the income-return correlation is low, individuals exhibit a greater propensity to participate in the market and allocate a larger proportion of their wealth to risky assets. Even when the income risk is high, individuals exhibit a higher propensity to participate in the market when the hedging potential is high. These findings suggest that income hedging is an important determinant of stock market participation and asset allocation decisions.

Determinants of corporate carbon reduction targets

John Byrd, Elizabeth S Cooperman, Ken Bettenhausen
Interdisciplinary Environmental Review, Volume 15 Issue 4, January 2014, Pages 271-289

This paper examines attributes affecting a corporation’s choice of an intensity-only (carbon emissions relative to sales, production, etc.) versus an absolute carbon dioxide (CO 2) emissions goal. We investigate alternative hypotheses for this choice including: 1) a high growth hypothesis whereby high growth companies select an intensity goal, to continue to grow without an absolute emission reduction; 2) a high emissions industrial sector hypothesis where firms in high CO 2 emission industries prefer an intensity goal that is …

Credit Risk Spillovers Among Financial Institutions Around the Global Credit Crisis: Firm-Level Evidence

Jian Yang and Yinggang Zhou
Management Science, (2013) Vol 59, Issue 10, pp. 2343-2359

Using credit default swap data, we propose a novel empirical framework to identify the structure of credit risk networks across international major financial institutions around the recent global credit crisis. Specifically, we identify three groups of players, including prime senders, exchange centers, and prime receivers of credit risk information. Leverage ratios and, particularly, the short-term debt ratio appear to be significant determinants of the roles of financial institutions in credit risk transfer, while corporate governance indexes, size, liquidity, and asset write-downs are not significant. Our findings carry important implications for a new regulatory standard on capital subcharge and liquidity coverage ratio.

A New Anomaly: The Cross-Sectional Profitability of Technical Analysis

Yufeng Han, Ke Yang and Guofu Zhou
Journal of Financial and Quantitative Analysis, Volume 48 Issue 05, October 2013, pp 1433-1461.

In this paper, we document that an application of a moving average timing strategy of technical analysis to portfolios sorted by volatility generates investment timing portfolios that substantially outperform the buy-and-hold strategy. For high-volatility portfolios, the abnormal returns, relative to the capital asset pricing model (CAPM) and the Fama-French 3-factor models, are of great economic significance, and are greater than those from the well-known momentum strategy. Moreover, they cannot be explained by market timing ability, investor sentiment, default, and liquidity risks. Similar results also hold if the portfolios are sorted based on other proxies of information uncertainty.

Context-Based Sustainability and Corporate CO2 Reduction Targets: Are Companies Moving Fast Enough?

John W Byrd, Ken Bettenhausen, Elizabeth S Cooperman
International Review of Accounting, Banking, and Finance, Volume 5 Issue 3/4, Fall/Winter 2013, pp. 87-104.

Corporate sustainability activities are often ad hoc; that is, the extent to which a company moves toward being more sustainable is based on organizational feasibility or economic acceptance rather than true sustainability criteria. This paper examines corporate climate and carbon policy through the lens of context-based sustainability (CBS). CBS argues that true sustainable efforts must consider the ecological capacity of the environment and the fair allocation of this capacity. Only by doing so will the result be an outcome of a livable and sustainable world. The paper combines aspects of physical science (atmospheric CO2 carrying capacity) and philosophy (inter-generational equity and resource allocation) with corporate policy. When applied to climate change this implies examining corporate efforts relative to climate stabilization paths and further examining what a fair allocation of future emissions would be. We look at the documented carbon reductions for a sample of large US corporations including EPA Climate Leadership Award Winners in 2012 and a larger sample of companies from the same industries and compare their carbon reductions to several allocations of the global carbon budget required to limit climate change to just 1°C or 2°C. We find that the emissions path of these US corporations only satisfies the most generous, business-as-usual allocation of carbon emissions.

Time-Varying Risk–Return Trade-off in the Stock Market

Hui Guo, Zijun Wang, Jian Yang
Journal of Money, Credit and Banking, Vol. 45, Issue 4, pp. 623-650

We uncover a strong comovement of the stock market risk–return trade-off with the consumption–wealth ratio (CAY). The finding reflects time-varying investment opportunities rather than countercyclical aggregate relative risk aversion. Specifically, the partial risk–return trade-off is positive and constant when we control for CAY as a proxy for investment opportunities. Moreover, conditional market variance scaled by CAY is negatively priced in the cross-section of stock returns. Our results are consistent with a limited stock market participation model, in which shareholders require an illiquidity premium that increases with CAY, in addition to the risk premium that is proportional to conditional market variance.

The Greening of Finance: A Brief Overview.

Elizabeth S Cooperman
International Review of Accounting, Banking & Finance, Volume 5 Issue 1, March 2013, Pp. 47-65.

This paper provides a brief overview of some of the sustainability developments that companies and non-profit groups have undertaken in the finance area including sustainability in banking, venture capital and investment companies, and integration of sustainability as part of corporate social responsibility by large and small companies. Although in practice by many corporations have taken on a more social and environmental focus in terms of sustainable finance and accounting efforts, the field of finance generally …

Political Activism, Information Costs, and Stock Market Participation

Yosef Bonaparte and Alok Kumar
Journal of Financial Economics, Volume 107, Issue 3, Pp. 760–786

This paper examines whether political activism increases people’s propensity to participate in the stock market. Our key conjecture is that politically active people follow political news more actively, which increases their chance of being exposed to financial news. Consequently, their information gathering costs are likely to be lower and the propensity to participate in the market would be higher. We find support for this hypothesis using multiple micro-level data sets, state-level data from the US, and cross-country data from Europe. Irrespective of their political affiliation, politically active individuals are 9–25% more likely to participate in the stock market. Using residence in “battleground” states and several other geographic instruments, we demonstrate that greater political activism reduces information gathering costs and causes higher market participation rates. Further, consistent with our conjecture, we find that politically active individuals spend about 30 minutes more on news daily and appear more knowledgeable about the economy and the markets.