Copyright (c) 2010 All rights reserved. http://works.bepress.com/will_bertin Recent documents in Will Bertin en-us Thu, 11 Nov 2010 21:10:31 PST 3600 http://works.bepress.com/will_bertin/15 http://works.bepress.com/will_bertin/15 Tue, 09 Nov 2010 17:36:33 PST This study focuses on the price discovery process in Australian option and warrant markets. Characterizing these two markets in terms of their cost structures and institutional features, we formally test competing price discovery hypotheses. The general findings indicate that the warrants market is the dominant market suggesting that their lower trading cost outweigh their less attractive institutional features. Additionally, we find that idiosyncratic differences among firms may result in a clientele effect thus providing justification for the coexistence of these seemingly redundant markets. Will J. Bertin http://works.bepress.com/will_bertin/14 http://works.bepress.com/will_bertin/14 Thu, 23 Sep 2010 18:10:29 PDT We calculate dividend drop ratios over periods with changing quotation and taxation frameworks to assess the validity of competing explanations. Using intraday prices adjusted for non-trading, we provide a more accurate picture of price changes due to dividend payments than those produced in previous literature. Intraday estimates for dividend drop ratios are consistently higher than those calculated with end of day prices. Further findings indicate that stocks trading ex-dividend, on average, underperform the market over the following month. We attribute this phenomenon to dividend capture trading by tax advantaged and tax indifferent market participants. Vyas Balasubramaniam http://works.bepress.com/will_bertin/13 http://works.bepress.com/will_bertin/13 Thu, 23 Sep 2010 17:11:15 PDT We calculate dividend drop ratios over periods with changing quotation and taxation frameworks to assess the veracity of competing explanations. We use intraday prices, adjusted for non-trading, to provide a more accurate picture of price changes due to dividend payments than those produced in previous literature. Intraday estimates for dividend drop ratios are consistently higher than those calculated with end of day prices. Further we find that stocks trading ex-dividend, on average, underperform the market by a large amount over the following month. We attribute this phenomenon to dividend capture trading by tax advantaged and tax indifferent market participants. Vyas Balasubramaniam Finance http://works.bepress.com/will_bertin/12 http://works.bepress.com/will_bertin/12 Mon, 20 Sep 2010 23:15:27 PDT Examination of 871 takeover rumors published in two columns of the Wall Street Journal during 1985 through 1988 reveals that the market reacts differently to reports on the same page of the Journal. Rumors in the “Abreast of the Market” column are associated with short-term over-reactions, while those in the “Heard on the Street” column exhibit rapid price stabilization following rumor publication. Trading on these overreactions would have resulted in annualized excess returns averaging 20 percent with 70 percent of the trades being profitable. The degree of overreaction appears insensitive to target firm size, percentage of institutional ownership and market (beta) risk. Terry L. Zivney http://works.bepress.com/will_bertin/11 http://works.bepress.com/will_bertin/11 Thu, 22 Jul 2010 19:34:09 PDT A rapidly growing mutual fund category is funds of funds (FOFs) which invest in other mutual funds instead of individual securities. This study reports on FOFs' characteristics and performance relative to traditional equity mutual funds and finds that FOFs compare favorably. FOFs with identified managers outperform their unidentified counterparts, and FOFs that invest in-family outperform both traditional equity funds and those FOFs investing out-of-family. Finally, replicating FOFs' holdings can be prohibitively expensive since they commonly hold funds with high minimum initial investments, closed funds and/or funds that are restricted to a particular investor type. Will J. Bertin http://works.bepress.com/will_bertin/10 http://works.bepress.com/will_bertin/10 Wed, 26 May 2010 18:47:17 PDT Trade-direction algorithms play an important role in traditional studies of market microstructure and in understanding the market for immediacy. This paper examines the underlying definition of trade origination and proposes a new liquidity motivation (LM) method to classify individual trades using orders. This LM model represents a unique alternative to the traditional algorithms used in most microstructure research. Using the NYSE TORQ database, LM trade classifications are compared with traditional methods for classifying trade direction. We document systematic biases resulting from the conventional algorithms and provide an alternative liquidity-based classification method that captures the actual behavior of market participants. William J. Bertin http://works.bepress.com/will_bertin/9 http://works.bepress.com/will_bertin/9 Thu, 19 Nov 2009 18:58:12 PST For many years the Wall Street Journal’s "Your Money Matters" column has conducted monthly stock selection contests where random "dartboard portfolios" have been pitted against professional stock analysts’ portfolios. In the professional portfolios, four stocks are selected by four experts, while the dart portfolios consists of four stocks randomly selected by Wall Street Journal staff members throwing darts onto a dartboard containing all stock listings from the NYSE, AMEX, and NASDAQ. In both portfolios each stock is given an equal weight of 25 percent. The returns for each stock are computed over a six-month holding period, and the portfolio returns are simply a weighted average of the individual security returns. This paper analyzes completed contests over a six year period during which the experts have won 60 percent of the time (39 out of 65 contests). Furthermore, the returns for the expert portfolios have outpaced those of the Dow Jones Industrial Average (DJIA) on 36 of the 65 occasions. Although interesting, these Wall Street Journal contests fail to include information that may directly impact and alter contest results. This study re-examines and presents the results of past contests, making adjustments for risk. In addition to providing performance statistics for the entire six-year period, we also consider the value of the experts’ recommendations based on their ability to repeat winning performances. William J. Bertin http://works.bepress.com/will_bertin/6 http://works.bepress.com/will_bertin/6 Thu, 19 Nov 2009 18:58:12 PST This study measures and analyzes the liquidity differences between Real Estate Investment Trusts (REITs) and other common stocks. The intraday variations documented in this study have implications for the appropriate timing of trades to minimize transaction costs and the substitutability of investments if illiquidity is priced. The findings reveal intraday patterns indicating lower liquidity for REITs than for common stocks when the liquidity measure is friction-based. In contrast, activity measures exhibit higher liquidity levels for REITs than for common stocks but this difference is only statistically significant at the beginning of the trading day. The findings also indicate that the ability to trade without influencing prices is 15%–25% greater for non-REITS compared to REITs, and the price of immediacy is 7% higher for REITs. William J. Bertin http://works.bepress.com/will_bertin/8 http://works.bepress.com/will_bertin/8 Thu, 19 Nov 2009 18:58:12 PST This study provides a comprehensive examination of recent mutual fund performance by analyzing a large set of both mutual funds and fund attributes in an effort to link performance to fund-specific characteristics. The results indicate that the hypothesized relationships between performance and the explanatory variables are generally upheld. After taking into consideration general market conditions and fund investment objective, the characteristic variables that relate to fund popularity, growth, cost, and management also explain performance. Finally, after controlling for survivorship and benchmark error as well as fund-specific factors, the results refute the performance persistence phenomenon. Laurie Prather http://works.bepress.com/will_bertin/7 http://works.bepress.com/will_bertin/7 Thu, 19 Nov 2009 18:58:12 PST This study goes beyond the scope of the typical analysis of mutual fund performance by considering a broader set of fund-specific factors uniquely categorized in terms of their impact on returns. Also unique to this study is a detailed exposition of the linkages between fund characteristics and performance. Traditional regression techniques explore these relationships in an attempt to predict fund performance, while the sample of funds examined is screened for survivor bias in a non-conventional fashion. The results suggest that our unique categories of fund popularity, agility, and growth, as well as the standard cost and managerial factors are relevant in explaining fund performance. Finally, after controlling for survivorship bias and benchmark error, the results refute the performance persistence phenomenon. Laurie Prather http://works.bepress.com/will_bertin/4 http://works.bepress.com/will_bertin/4 Thu, 19 Nov 2009 18:58:11 PST This study focuses on the price discovery process in Australian option and warrant markets. Characterizing these two markets in terms of their cost structures and institutional features, we formally test competing price discovery hypotheses. The general findings indicate that the warrants market is the dominant market suggesting that their lower trading cost outweigh their less attractive institutional features. Additionally, we find that idiosyncratic differences among firms may result in a clientele effect thus providing justification for the coexistence of these seemingly redundant markets. William J. Bertin http://works.bepress.com/will_bertin/5 http://works.bepress.com/will_bertin/5 Thu, 19 Nov 2009 18:58:07 PST This paper extends Huang and Stoll (1997) to develop a spread decomposition model that includes the costs of trading that are specific to the options market. The trade and risk indicator (TRIN) model includes separate inventory cost components that reflect the market maker’s delta, vega, and gamma risk. We find that adverse selection accounts for only 5.53% of option spread, is positively related to liquidity and leverage, and is higher given negative trade imbalances. Of the inventory risk, gamma risk is the largest component (7.01%), surpassing adverse selection risk, while vega risk accounts for 5.16% and delta risk is 4.12%. David Michayluk http://works.bepress.com/will_bertin/2 http://works.bepress.com/will_bertin/2 Sun, 16 Aug 2009 17:58:30 PDT The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm's stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price. William J. Bertin http://works.bepress.com/will_bertin/1 http://works.bepress.com/will_bertin/1 Sun, 16 Aug 2009 17:58:29 PDT A rapidly growing mutual fund category is Fund of Funds (FOFs), which invest in other mutual funds instead of individual securities. This study reports on FOFs’ characteristics and performance relative to traditional equity mutual funds and finds that FOFs compare favourably. In particular, FOFs with identified managers outperform their unidentified counterparts, and FOFs that invest in-family outperform both traditional equity funds and those FOFs investing out-of-family. Finally, replicating FOFs’ holdings can be prohibitively expensive since they commonly hold funds with high minimum initial investments, closed funds and/or funds that are restricted to a particular investor type. William J. Bertin