Two Essays On Investor Sentiment And Equity Offerings
DOWNLOAD
Download Two Essays On Investor Sentiment And Equity Offerings PDF/ePub or read online books in Mobi eBooks. Click Download or Read Online button to get Two Essays On Investor Sentiment And Equity Offerings book now. This website allows unlimited access to, at the time of writing, more than 1.5 million titles, including hundreds of thousands of titles in various foreign languages. If the content not found or just blank you must refresh this page
Two Essays On Investor Sentiment And Equity Offerings
DOWNLOAD
Author :
language : en
Publisher:
Release Date : 2006
Two Essays On Investor Sentiment And Equity Offerings written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Corporations categories.
Using monthly open-end mutual fund flows as a proxy for investor sentiment, I am able to examine the impact of sentiment on IPO volume and underpricing. I find that issuers' filing decisions are significantly affected by the predicted future sentiment around the expected IPO dates. Furthermore, sentiment has an impact on the final offer price setting and over-allotment options exercised. While previous research documents IPO cycles with respect to other proxies for investor sentiment, I am able to examine IPO cycles and underpricing with respect to sentiment along with investor risk preferences. I hypothesize that a going public firm will try to issue its IPO when investor risk preferences are favorable to the firm's own risk characteristics. Empirical results based on 5,661 initial public offerings between 1986 and 2004 are consistent with my hypotheses that issuers not only time the market with sentiment in general, but also attempt to incorporate investor risk preferences into their going public decisions. Furthermore, underpricing is more severe when firms issue equity during months with large inflows into equity mutual funds. In my second essay, I find that SEO firms appear to time market efficiently because of the shorter filing periods compared to the average 2-3 months of the IPOs. Also, sentiment not only affects a SEO offer price setting but also affects the over-allotment options exercised. I examine two subgroups of the SEO samples: shelf registration and non-shelf SEOs. I find that shelf-registered SEOs incorporate investor sentiment into offering price to a greater degree compared to regular SEOs. Lastly I find that investor risk preference plays a role in firms' decision to file prospectuses with the SEC. In other words, firms rationally decide the timing of filing based on the predicted investor preference and try to match firm characteristics with investor preference around the expected SEO date.
Two Essays On Investor Sentiment And The Profitability Of Contrarian And Momentum Strategies
DOWNLOAD
Author : Changmei Zhang
language : en
Publisher:
Release Date : 2010
Two Essays On Investor Sentiment And The Profitability Of Contrarian And Momentum Strategies written by Changmei Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Foreign exchange market categories.
Essays In Financial Economics
DOWNLOAD
Author : Sung Bin Sohn
language : en
Publisher:
Release Date : 2012
Essays In Financial Economics written by Sung Bin Sohn and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
This dissertation consists of three essays in financial economics. The first two essays explore how initial public offerings are affected by various stock market conditions. In the third essay, I study the meaning of innovations in investor sentiment. In the first essay, I use cointegration techniques to decompose stock market shocks into permanent and transitory shocks, building on the idea that transitory shocks should not have long-run effects on dividends and stock prices. The decomposed shocks improve on existing valuation measures by indicating the extent to which market value is driven by permanent or transitory fluctuations. I then examine the effects of these shocks on several aspects of IPOs, and find that (1) despite the lack of long-run effects on firms' value, more firms go public in response to stronger transitory shocks; (2) firms that go public after stronger transitory shocks underperform their benchmark more severely in the long run; (3) during the book-building period, managers are more likely to limit secondary share sales after stronger transitory shocks; and (4) managers who limit secondary share sales further during the book-building period exhibit more severe long-run underperformance. These findings are consistent with the hypothesis that transitory shocks induce more IPOs that opportunistically exploit temporarily higher market valuation than IPOs that finance profitable projects in better market conditions. The findings are also consistent with the hypothesis that managers are more prone to become overconfident after stronger transitory shocks and that the resulting overconfidence leads to long-run underperformance. The decomposition methodology can also be applied to other corporate finance decisions such as SEOs, mergers and investments. The second essay establishes a model that incorporates both uncertainty and dispersion of opinion to examine how these two factors affect IPO stock performance. The model predicts that, unlike uncertainty, dispersion of opinion has nonlinear effects. There is a threshold of dispersion of opinion below which the dispersion does not affect IPO stock performance. Above the threshold, on the other hand, larger dispersion of opinion bids up the stock price higher and consequently yields the lower long-run return. The level of the threshold is increasing in the amount of free-floating shares in the market. Since IPO firms tend to have relatively small free-floating shares than other listed firms, IPO stocks are more subject to the dispersion of opinion. Thus, empirical researches that do not control the dispersion of opinion can produce misleading results on IPO performance. The model also predicts IPOs observations are subject to self-selection bias. Private firms would decide not to go public under the combination of high uncertainty and small dispersion of opinion, which could actually yield high long-run returns. This prediction helps explain the time variation of IPO volume and the general pattern of IPO long-run underperformance. The third essay tries to understand the meaning of innovations in investor sentiment. The role of investor sentiment in the stock market has attracted attentions of economists. Previous papers show that investor sentiment has return predictability and it is more pronounced among stocks that are more difficult to value and to arbitrage, and emphasize the behavioral role of investor sentiment. However, it still remains unclear whether this predictability is due to a causal effect of autonomous animal spirits or not. Alternatively, investor sentiment may reflect systematic risks and the predictability could be mere coincidence, not causation. For a structural interpretation, I introduce a modified version of the long-run risks model in which sentiment innovations arise from both animal spirit shocks and several risk shocks, and animal spirit shocks could affect stock returns. By matching impulse responses from data simulated according to the theoretical model to those from actual data, I estimate parameters in the model. The estimated model moderately replicates the historical data in the actual stock market. The estimation results show that a substantial amount of variation in investor sentiment is explained by systematic risk shocks as well as by animal spirit shocks, and that animal spirit shocks can have significant effects on stock returns. The findings suggest that investor sentiment is a noisy proxy of animal spirits and that autonomous animal spirits are at least in part responsible for the apparent return predictability of investor sentiment.
Trading On Sentiment
DOWNLOAD
Author : Richard L. Peterson
language : en
Publisher: John Wiley & Sons
Release Date : 2016-03-21
Trading On Sentiment written by Richard L. Peterson and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-03-21 with Business & Economics categories.
In his debut book on trading psychology, Inside the Investor’s Brain, Richard Peterson demonstrated how managing emotions helps top investors outperform. Now, in Trading on Sentiment, he takes you inside the science of crowd psychology and demonstrates that not only do price patterns exist, but the most predictable ones are rooted in our shared human nature. Peterson’s team developed text analysis engines to mine data - topics, beliefs, and emotions - from social media. Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent—through the 2008 financial crisis. In this groundbreaking guide, he shows you how they did it and why it worked. Applying algorithms to social media data opened up an unprecedented world of insight into the elusive patterns of investor sentiment driving repeating market moves. Inside, you gain a privileged look at the media content that moves investors, along with time-tested techniques to make the smart moves—even when it doesn’t feel right. This book digs underneath technicals and fundamentals to explain the primary mover of market prices - the global information flow and how investors react to it. It provides the expert guidance you need to develop a competitive edge, manage risk, and overcome our sometimes-flawed human nature. Learn how traders are using sentiment analysis and statistical tools to extract value from media data in order to: Foresee important price moves using an understanding of how investors process news. Make more profitable investment decisions by identifying when prices are trending, when trends are turning, and when sharp market moves are likely to reverse. Use media sentiment to improve value and momentum investing returns. Avoid the pitfalls of unique price patterns found in commodities, currencies, and during speculative bubbles Trading on Sentiment deepens your understanding of markets and supplies you with the tools and techniques to beat global markets— whether they’re going up, down, or sideways.
Two Essays On Stock Preference And Performance Of Institutional Investors
DOWNLOAD
Author : Jin Xu (doctor of finance.)
language : en
Publisher:
Release Date : 2008
Two Essays On Stock Preference And Performance Of Institutional Investors written by Jin Xu (doctor of finance.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Capitalists and financiers categories.
Two essays on the stock preference and performance of institutional investors are included in the dissertation. In the first essay, I document that mutual fund managers and other institutional investors tend to hold stocks with higher betas. This effect holds even after precisely controlling for stocks' risk characteristics such as size, book-to-market equity ratio and momentum. This is contrary to the widely accepted view that betas are no longer associated with expected returns. However, these results support my simple model where a fund manager's payoff function depends on returns in excess of a benchmark. For the manager, on the one hand, he tends to load up with high beta stocks since he wants to co-move with the market and other factors as much as possible. On the other hand, the manager faces a trade-off between expected performance and the volatility of tracking error. My model thus shows that the manager prefers to choose higher beta than his benchmark, and that his beta choice has an optimal level which depends on his perceived factor returns and volatility. My empirical findings further confirm the model results. First, I show that the effect of managers holding higher beta stocks is robust to a number of alternative explanations including the effects of their liquidity selection or trading activities. Second, consistent with the model predictions of managers sticking close to their benchmarks during risky periods, I demonstrate that the average beta choice of mutual fund managers can predict future market volatility, even after controlling for other common volatility predictors, such as lagged volatility and implied volatility. The second essay is the first to explicitly address the performance of actively managed mutual funds conditioned on investor sentiment. Almost all fund size quintiles subsequently outperform the market when sentiment is low while all of them underperform the market when sentiment is high. This also holds true after adjusting the fund returns by various performance benchmarks. I further show that the impact of investor sentiment on fund performance is mostly due to small investor sentiment. These findings can partially validate the existence of actively managed mutual funds which underperform the market overall (Gruber 1996). In addition, when conditioning on investor sentiment, the pattern of decreasing returns to scale in mutual funds, recently documented in Chen, Hong, Huang, and Kubik (2004), is fully reversed when sentiment is high while the pattern persists and is more pronounced when sentiment is low. Further results suggest that smaller funds tend to hold smaller stocks, which is shown to drive the above patterns. I also document that smaller funds have more sentiment timing ability or feasibility than larger funds. These findings have many important implications including persistence of fund performance which may not exist under conventional performance measures.
Essays In Investor Sentiment
DOWNLOAD
Author : Major Coleman
language : en
Publisher:
Release Date : 2013
Essays In Investor Sentiment written by Major Coleman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Chapter 1. If investors choose consumption and investment levels jointly to maximize expected utility or value, then investor sentiment about stock returns should be reflected in consumption choices. I find a positive contemporaneous relationship between aggregate consumption of nondurables and investor stock sentiment. Investors' false perceptions of changes in stock market wealth appear to move consumption in the same direction initially. But as expected stock returns do not materialize, sentiment-based consumption is reversed. On average, this reversal occurs two to four years later, which coincides with the time it takes for sentiment to correct from prior levels. Sentiment does not positively predict returns as a positive proxy of rational expectations of risk would. Nor does sentiment negatively predict the covariance between consumption growth and returns as an inverse proxy for rational expectations of risk would. The results suggest that bias in investor expectations is an important factor in consumption-based asset pricing models. Chapter 2. I hypothesize that directly observable past returns drive housing investment more so than fundamentals because the difference between price and fundamental value---sentiment---is not directly observable. Housing sentiment only becomes recognizable when it is extreme, so the magnitude of sentiment must be large enough relative to recent returns in order for prices to correct. I construct indices of housing sentiment and use the measures to calibrate a specification of home price growth driven by momentum investing. I find that home price growth is persistent even when prices are moving away from fundamental value, and reversals in home price growth are only likely when the housing sentiment measures are extreme.
Essays On Investors Sentiment And Attention
DOWNLOAD
Author : Daniele Ballinari
language : en
Publisher:
Release Date : 2021
Essays On Investors Sentiment And Attention written by Daniele Ballinari and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
The first paper investigates the predictive power of investors' sentiment and attention for the stock returns' volatility. We introduce a novel and extensive dataset that combines information from social media platforms, news articles, search engine data, and information consumption. Applying a state-of-the-art sentiment classification technique, we construct measures of investors' sentiment and attention for 18 U.S. stocks and the financial market in general. We identify investors' attention, as measured by the number of Google searches on financial keywords (e.g. «financial market» and «stock market»), and the daily volume of company-specific short messages posted on the social media platform StockTwits to be the most relevant variables. The second paper investigates a potential driver of the predictive power documented in the first paper. We focus on news releases of 360 U.S. companies from the S&P 500 universe and analyze how investors' attention affects the speed at which new information is incorporated in stock prices. Our results show that higher investors' attention around news releases is related to higher contemporaneous volatility. Further, retail investor attention increases the post-announcement volatility, whereas institutional investor attention has a small but negative impact on volatility on days following news releases. The third paper extends the analysis of the first paper to the multivariate stock return volatility. Building on the theoretical and empirical evidence that links the price comovements with retail investors' behavior, we analyze the predictive power of retail investors' sentiment and attention for the realized correlation matrix of 35 Dow Jones stocks. We propose a new model of realized covariances that allows exogenous predictors to influence the correlation dynamics while ensuring the predicted matrices' positive definiteness. Using this model, we find retail investors' attention to have predictive power for return correlations, especially for longer forecasting horizons and during the COVID-19 pandemic. The last paper analyzes in more detail the time-series properties of the daily online investor sentiment measures used in the first two papers. We detect structural breaks in the sentiment series for most of the 360 U.S. companies considered in this paper. We illustrate the economic significance of this finding with a return prediction exercise.
Essays In Financial Economics
DOWNLOAD
Author : Francisco Jose Guedes dos Santos
language : en
Publisher: Stanford University
Release Date : 2011
Essays In Financial Economics written by Francisco Jose Guedes dos Santos and has been published by Stanford University this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This dissertation consists of three essays that examine various problems in financial economics. Chapter 1 fills in a gap in the IPO literature by documenting a close connection between IPO underpricing and the long-term underperformance of IPOs. Firms going public in periods of low underpricing do not underperform in the long run, while firms going public in high underpricing periods do. Furthermore, IPOs in later stages of high underpricing periods underperform even relative to their offer prices, which suggests that many of the most "underpriced" IPOs are in fact priced above fundamental value. This result is unlikely to be explained by differences in risk, or to be driven by a peso problem. I also find that firms going public in later stages of high underpricing periods display worse operating performance and profitability, lower asset growth, lower investment rates and higher cash holdings. Finally, I provide evidence that investor sentiment is stronger in high-underpricing periods. These results are consistent with a setting in which low quality firms, in periods in which the average underpricing in the market is high, try to exploit investors' sentiment by going public. Chapter 2 looks at the return predictability information in Single Country Closed-End Fund (SCCEF) discounts. It is long argued that discounts in closed-end funds are caused by differences in sentiment between investors that trade the fund and investors that trade the underlying assets. SCCEFs provide an interesting setting given the clear market segmentation. American SCCEFs are priced by American investors, while underlying assets are mainly traded by investors in the respective country. I argue that if cross-sectional and time-series variation in SCCEFs are linked to differences in sentiment, then the SCCEF discount can be used to predict future performance of SCCEFs, international stock markets, or both. The evidence on international stock markets' return predictability using SCCEF discounts is mixed. A trading strategy designed to exploit potential differences in sentiment by buying and selling international stock indices delivers alphas of around 90bps per month in an International CAPM. Adding three extra factors: value, size and momentum in U.S. equity does not change the result. However, once we control for international value and momentum in stock markets, we no longer observe positive alphas for short-horizon investments. The evidence on SCCEF return predictability from SCCEF discounts is very strong. For all three asset pricing models considered, a strategy that exploits differences in sentiment yields positive alphas, with magnitudes ranging from 2% to 4% per month. In Chapter 3, I investigate how the stock market reacts to earnings surprises announced during major sport events in the U.S. In a rational and frictionless market, investors should not react differently to announcements released during sport events. However, major sport events combine two known psychological biases. First, sports can be distracting, impairing investors' judgment. Second, sports can change people's mood. Hence, through these biases, market prices could be affected. Considering the Super Bowl, World Series of Baseball and NBA finals I find that investors, immediately after sport events, underreact to positive surprises, and overreact to negative surprises in earnings. After this initial reaction, I find that, investors undo their 'mistakes' in the following weeks to the announcement. However, for the most negative and positive surprises, they over-compensate. In this study, I show that non relevant financial events have an impact on market prices. Moreover, I show that the observed impact cannot be explained only by limited attention, as investor mood seems to be crucial to explain investors' reactions.
Essays On Investor Sentiment Mispricing And Cross Section Of Stock Returns
DOWNLOAD
Author : Xiao Han
language : en
Publisher:
Release Date : 2021
Essays On Investor Sentiment Mispricing And Cross Section Of Stock Returns written by Xiao Han and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Effects Of Investor Sentiment On Seasoned Equity Offering And Stock Return
DOWNLOAD
Author :
language : en
Publisher:
Release Date : 2018
Effects Of Investor Sentiment On Seasoned Equity Offering And Stock Return written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.