Top PDF An empirical study on market timing theory: A case study of Tehran Stock Exchange

An empirical study on market timing theory: A case study of Tehran Stock Exchange

An empirical study on market timing theory: A case study of Tehran Stock Exchange

One of the most important issues in financing corporate is to find appropriate method to make a wise selection between getting loans and increasing the number of shares. There are different theories for making appropriate financing methods. The primary purpose of this paper is to investigate this issue based on market timing theory. The proposed model of this paper chooses selective companies from Tehran Stock Exchange. The proposed model of this paper uses regression analysis on two different models. The primary purpose of the first model given in this paper is to study the effect of market timing theory. In this part of survey, we measure the effect of the ratio of market value to book value on the sources of financing firms though increase in equities. Based on the results, we can conclude that as the ratio of market value to book value increases, firms tend to increase their equity though an increase to the number of shares. The first hypothesis of this paper is confirmed. The second model is associated with the relationship with mean ratio of market value on weighted book value and Leverage and the results of this paper do not confirm such relationship.
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Market timing and selectivity: an empirical investigation of european mutual fund performance

Market timing and selectivity: an empirical investigation of european mutual fund performance

The work of Jensen (1968) is considered to be a landmark regarding performance evaluation. However, while the Jensen (1968) model consists on a single factor equation, several developments to this measure have been proposed in order to capture distinct factors that influence the fund manager’s performance. These models aim to study two specific components of fund returns. Indeed, the selection of the best assets with a similar risk profile (selectivity) is as important as the predictive power of market fluctuations and the consequent allocation of investments between different risk segments (market timing), that is, to the stock market and the risk-free market. Superior performance can be achieved if managers develop both selectivity and market anticipation strategies. While some authors evaluate their separate contributions through non-parametric tests, we focused on the parametric tests of Henriksson and Merton (1981) and Treynor and Mazuy (1966) since they are performed through publicly available information and they do not rely on the knowledge of the fund managers market forecast. In order to carry out our study we retrieved a comprehensive data sample of European mutual funds from the Bloomberg database, consisting of the returns of 193 mutual funds from 2000 to 2012. Taking into account the effects of the financial crisis of 2007, which are still being felt today in Europe, we chose to separate the sample period into two specific subsets, the pre-crisis period, between January 2000 and July 2007 and the period of the financial crisis, ranging from August 2007 to December 2012.
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A study on effect of information asymmetry on earning management: Evidence from Tehran Stock Exchange

A study on effect of information asymmetry on earning management: Evidence from Tehran Stock Exchange

Vernon J Richardson (2000) performed an empirical investigation on the relationship between information asymmetry and earnings management forecasted by Dye (1988) and Trueman and Titman (1988). When information asymmetry becomes high, stakeholders do not have necessary resources, incentives, or access to relevant information to monitor manager's actions, which gives rise to the practice of earnings management (Schipper, 1989; Warfield et al., 1995). Empirical results recommend a systematic relationship between the magnitude of information asymmetry and the level of earnings management in two different settings. Tucker and zarowin (2006) implemented a new technique to study whether income smoothing garbles earnings information or it could improve the in formativeness of past and current earnings about future earnings and cash flows. They measured income smoothing by the negative correlation of a firm’s change in discretionary accruals with its change in pre-managed earnings. Applying the approach of Collins et al. (1994), they reported that the change in the current stock price of higher-smoothing firms could contain more information about their future earnings. This achievement is robust for decomposing earnings into cash flows and accruals and for controlling for firm size, growth, future earnings variability, private information search activities, and cross-sectional correlations.
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Investigating the relationship between auditor’s opinion and stock return in the companies listed at Tehran stock exchange market

Investigating the relationship between auditor’s opinion and stock return in the companies listed at Tehran stock exchange market

The most important informing instrument in this market is the financial information with required quality specifications, from which reliability is of importance. Financial information is reliable when financial events and other financial transactions are measured fairly, and as a result, the users of such financial information can rely on them as the reliability of such information is confirmed by an independent, fair, and competent person. In the present economic system, financial statements are audited by independent auditors for voicing their opinion through auditor's report. It seems that the best information source used to determine the yields of a business enterprise is its financial statements provided by the management of the enterprise together with the independent auditor's report. These sources are used for making right decisions based on the provided financial statements. Taking into this fact, the present research aims to study the significance of the opinions expressed in the auditor's reports and its effects on the stock return of the companies listed on Tehran Stock Exchange.
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A study on the effect of intellectual capital on firm performance: Evidence from Tehran Stock Exchange

A study on the effect of intellectual capital on firm performance: Evidence from Tehran Stock Exchange

The term intellectual capital includes inventions, ideas, general knowledge, design techniques, computer programs and publications. An ex-editor of the business magazine “Fortune”, Thomas Stewart describes intellectual capital as “something that cannot be touched, although it slowly makes you rich”. Jacob Ben- Simchon, (2005) the term ‘intellectual capital’ uses to enclose all of the non- tangible or intangible assets and resources of a firm, as well as its practices, patents and the implicit knowledge of its members and their network of partners and contracts. Stewart (1997) defines it as ‘packaged useful knowledge’, Sullivan (2000) as ‘knowledge that can be converted into profit’, Reeds et al. (2000) as the ‘sum of knowledge’ of its members and practical translation of this knowledge into brands, trademarks and processes. Edvinsson and Malone (1997) define it as the possession of knowledge, applied experience, organizational technology, customer relations and professional skills that provide a company with a competitive edge in the market. One of the most popular models for classifying IC was introduced by Saint-Onge (1996) in the early 1990s. It divides IC into three parts including Human capital, Structural capital; and Customer capital.
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A study on relationship between asymmetric information on dividend polices of companies listed in Tehran Stock Exchange

A study on relationship between asymmetric information on dividend polices of companies listed in Tehran Stock Exchange

Brav et al. (2005) surved 384 financial executives and conduct in-depth interviews with an additional 23 to detect the factors that drive dividend and share repurchase decisions. They reported that maintaining the dividend level was on par with investment decisions, while repurchases were made out of the residual cash flow after investment spending. Brockman and Unlu (2011) investigated the agency cost version of the lifecycle theory of dividends by taking advantage of cross-country variations in disclosure environments and confirmed that the lifecycle theory of dividends explains dividend payout patterns around the world. Cao et al. (2011) investigated disproportional ownership structure and pay–performance relationship by looking on some evidence from China's listed firms. Chae et al. (2009) tried to find out how corporate governance has affected payout policy under agency problems and external financing constraints. Chen and Dhiensiri (2009) tried to find determinants of dividend policy by looking into some evidences from New Zealand. Crutchley and Hansen (1989) presented a test of the agency theory of managerial ownership, corporate leverage, and corporate dividends. Denis and Osobov (2008), Easterbrook (1984) and Grullon and Michaely (2002) tried to find out why firms pay dividend.
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Estimate of Market Risk Premium by Considering the Market Leverage in Tehran Stock Exchange

Estimate of Market Risk Premium by Considering the Market Leverage in Tehran Stock Exchange

Various theories based on the efficient market hypothesis try to justify the investors’ behaviors. Stock portfolio theory, capital asset pricing model (CAPM), Fama and French three-factor model, Arbitrage pricing model and the representation theory are of these models. Investment managers, Stock portfolio managers, and other real and legal persons trading stocks and other capital assets in the stock market, needs to study various factors affecting investment returns in different economic conditions to maintain and increase the value of their investment portfolio. CAPM model is based on the assumption that investors using the theory of Stock portfolio and reducing systemic risk, according to their degree of risk aversion, choose one of the stock efficient baskets. In this model, the expected investment return rate is directly related to risk, in other words, if the investor tolerates more risk, more efficiency also will be expected.
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Exchange-traded funds as an alternative investment option : a case study

Exchange-traded funds as an alternative investment option : a case study

An Exchange-Traded Fund is a form of collective investment scheme whose units or shares 4 are traded in an Exchange market. For the purpose of this investigation, the scope of ETF will be limited to the ones that aim to replicate specific indices as close as possible. It’s comparability with mutual funds, in particular with index funds, is understandable as the main portfolio characteristics and fund features are present. Moreover, ETFs combine the attributes of mutual funds with the characteristics of common stock, making it possible to trade each share on an exchange market which leads to the intraday possibility of sell each position instead of having to wait, like in mutual funds, for the process of redemption from the fund (which occurs at the end of the day Net Asset Value (NAV) that is calculated with the close of the market prices). Since shares are traded in an exchange market each ETF has two different prices, the value in which the security (fund’s shares) is being traded and also the intrinsic value of the fund assets that results from the net asset value of the ETF divided by the total number of existing shares. As
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Market timing and selectivity: an empirical investigation of European mutual fund performance

Market timing and selectivity: an empirical investigation of European mutual fund performance

To show whether it is possible to perform well by doing good, (Cortez, Silva, & Areal, 2012) investigate the style and performance of US and European socially responsible funds that invest in the global market. With respect of investment style, the authors found evidence that this kind of funds are strongly exposed to small cap and growth stocks. Additionally, their results pointed a significant home bias implying that investors in these funds may not fully benefit from the diversification that could potentially arise from a truly global investing. One issue that has been addressed in this line of research has been the choice of benchmark. Using the (Henriksson & Merton, 1981) and the (Chen & Stockum, 1986) (Note 3) models to study a sample of 101 UK unit trusts, (Fletcher, 1995) concluded that fund managers exhibited negative market timing skills despite being good stock pickers. However, although the general findings did not alter due to the choice of benchmark, the results were slightly different depending on the portfolio against which the funds‘ returns were evaluated. (Dellva, DeMaskey, & Smith, 2001) measured the performance of sector funds because many investors were using them as an investment vehicle. The author intended to verify if the market timing skill of sector fund managers could be captured through general market benchmarks and stated that, although the market timing estimate was negative for most funds irrespective of the benchmark, the selectivity estimates were positively affected by benchmarks that were more closely related to the fund‘s strategy. These results could be related with the findings of (Klein et al., 2015).
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THE INFLUENCE OF RUMORS AND ITS CONSEQUENCES IN DYNAMICS OF STOCK MARKET PRICES

THE INFLUENCE OF RUMORS AND ITS CONSEQUENCES IN DYNAMICS OF STOCK MARKET PRICES

This work is part of an ongoing study that aims to analyze the influence of rumors on the price dynamics in the stock market, through a case study of companies whose shares are traded much among financial agents. For this purpose we used historical prices of securities traded in the spot market of Sao Paulo Stock Exchange in the years 2007 to 2011, from files available in its website. A sample of 10 companies was selected among the stocks with higher trading volume during this period to collect the documents presented for communication of relevant facts and clarifications in stock exchange’s site. Only communications presented on the period specified that provide clarification related to news and unverified information disclosed in the press were brought within the scope of data collection. Until now, only the company communications with the most actively traded stocks were collected, whose analysis allowed the categorization of information and creation of a diagram for representing information about the rumors treated on these documents. This diagram was applied to a database where the information collected was stored for later retrieval and analysis. From this information, asset prices were retrieved to analyze the influence of rumors reported by the press in the price fluctuation of the asset. The authors Kapferer, Müller and Martins form the theoretical framework. As a result, the research has identified some rumors that interfered in the stock prices, as well as classified the rumors about the issues they address. So, as many times the rumor rises from the void of knowledge and information asymmetry, it is noted that there is no perfect competition among financial agents.
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Innate and discretionary accruals quality and corporate governance: A case study of Tehran Stock Exchange

Innate and discretionary accruals quality and corporate governance: A case study of Tehran Stock Exchange

Ştefănescu (2011) performed an investigation to find the level of disclosure ensured by corporate governance codes in force in European Union member states. She reported that common law regime could likely ensure the biggest level of transparency through corporate governance needs. They also asserted that the compliance of corporate governance codes with OECD principles was consistent with prior research achievement associated with disclosure considering codes’ issuer type and countries’ legal regime. Ammann et al. (2011) studied the relationship between firm-level corporate governance and firm value based on a dataset from Governance Metrics International (GMI), which includes 6663 firm-year observations from 22 developed countries over the period of 2003-2007. Based on a set of 64 individual governance attributes they built two alternative additive corporate governance indices with equal weights. The corporate governance attributed to the governance attributes and one index derived from a principal component analysis and they reported a strong and positive relation between firm-level corporate governance and firm valuation. Besides, they studied the value associated with governance attributes, which document the companies' social behavior. Their findings were robust against alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.
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An analysis of determinants of going concern audit opinion: Evidence from Tehran Stock Exchange

An analysis of determinants of going concern audit opinion: Evidence from Tehran Stock Exchange

According to Cheung and Lee (1995), the advantages of listing a company's stock on a foreign exchange to reach better global market integration have been examined, extensively. They explained the effect of firms in their selection of foreign stock markets for listing by implementing a signaling technique. They also investigated the current dispute between the NYSE and the Securities and Exchange Commission (SEC) for the desire of the NYSE to relax its registration necessities in order to obtain more listings by foreign companies. Huddart et al. (1999) implemented a rational expectations framework to study how public disclosure requirements influence listing decisions by rent-seeking corporate insiders, and allocation decisions by liquidity traders looking to minimize trading costs. They reported that exchanges competing for trading volume engage in a ‘race for the top’ whereunder disclosure requirements could increase and trading expenditure fall. This result was robust to diversification incentives of risk-averse liquidity traders, institutional impediments, which restrict the flow of liquidity, and listing costs.
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AN EMPIRICAL STUDY OF MARKETING COMMUNICATIONS EFFECTIVENESS IN SLOVENIAN MARKET

AN EMPIRICAL STUDY OF MARKETING COMMUNICATIONS EFFECTIVENESS IN SLOVENIAN MARKET

markets are evident, especially in the composition of marketing communication mix, which depends on various market factors. A relatively small number of participants and the complexity of purchasing decisions on business-to-business markets usually require more involvement and the least disturbed two-way exchange of information. In the case of complex technical products and services, where several persons are involved in the purchase decision-making process, the interpersonal communication is the best way to present the products or services and their properties. Since the two-way communication, the seller may keep the buyer's response to the perception of the information; to adapt and keep this eliminates any confusion or doubt. This was adapted the choice of ways of marketing communication, among which is dominated by direct personal contact. Throughout marketing communication mix in the industrial market the sales staff has the biggest influence on customer’s attitude. The buyer in the business- to-business markets prefers communication tools, which allow the direct and interactive exchange of information like direct mail, fairs, conferences and visits of sales representatives. (Tosun, 2003: 3; Borghini and Rinallo, 2003: 6). Indeed, there exists limited literature that explores marketing communications in business-to-business context (Nowak, Cameron and Delorme, 1996: 173; McArthur and Griffin, 1997: 19; Low, 2000: 27; Garber and Dotson, 2002: 1; Kitchen and Schultz, 2003, 66; Hall and Wickham, 2008: 193; Grove, Carlson and Dorsch, 2007: 37-54).
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Predicting the price index of Tehran Stock Exchange

Predicting the price index of Tehran Stock Exchange

The  random  behavior  is  assumed  for  most  of  economic  variables  in  the  given  literature  of   economy  and  econometrics.  Such  an  assumption  results  in  that  the  fluctuations  of  such  variables   is  not  predictable.  At  the  middle  of  1970s  and  also  since  1980s,  new  and  extensive  efforts  were   started   regarding   predictability   of   stock   prices   by   means   of   modern   mathematical   techniques,   long   time-­‐series   and   advanced   tools   that   were   led   to   advent   of   Chaos   Theory   and   linear   and   nonlinear  dynamism.  This  theory  is  a  strong  and  important  method  for  identifying  economic  and   financial   processes.   The   chaos   phenomenon   tends   to   seek   for   regularity   in   seemingly   random   behavior  of  price  in  stock  exchange  and  other  financial  markets.  One  can  discover  the  complex   pattern  over  such  variables  and  use  them  for  prediction  of  their  future  trend  in  short  term  by   means   of   Chaos   Theory.   Therefore   it   can   be   implied   the   monetary   and   financial   markets   are   deemed  as  one  of  the  suitable  cases  for  adaption  of  Chaos  Theory.  The  Chaos  Theory  provides  for   conducting   more   accurate   study   on   very   complex   behavioral   characteristics   of   economic   variables  which  are  impossible  to  be  met  by  the  current  tools  (Moshiri,  2002).  
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A study on relationship among free cash flow, firm value and investors’ cautiousness: Evidence from Tehran Stock Exchange

A study on relationship among free cash flow, firm value and investors’ cautiousness: Evidence from Tehran Stock Exchange

Financial statements as well as financial standards are always considered as primary sources for getting rich information of firms. The standards are normally divided in two categories of economic and accounting and each of these standards shows one of the specifications of the company and has its own advantageous and disadvantageous. There are different standards, which are used for firm assessment. Therefore, a company with more gained prominences has more change to succeed in attracting credits and financing from the capital market. Under such circumstances, such a company can attract more finance and it can be sold sooner on the stock exchange. This paper tries to investigate on the free cash flow as an effective factor in specifying the real value of the business enterprises on 56 selected firms from Tehran Stock Exchange. The results of this study have disclosed that, there was a direct and meaningful relationship between free cash flow of the business enterprises and their real values. Second, the real values of the business enterprises are more than their predicted values. Finally, the predicted value of the business enterprises on the basis of the free cash flow is more than their market value.
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An empirical study on open position risk assessment using VAR and regression analysis: A case study of Iranian banking industry

An empirical study on open position risk assessment using VAR and regression analysis: A case study of Iranian banking industry

Bakshi et al. (2008) developed some techniques of stochastic discount factors in international economies, which generate stochastic risk premiums and stochastic skewness in currency options by approximating the models using time-series returns and option prices on three currency pairs. The results indicated that the average risk premium in Japan was larger than that in the US or the UK, the global risk premium was more persistent and volatile than the country-specific risk premiums, and investors responded differently to various shocks. They also determined high-frequency jumps in each economy but reported that only downside jumps were priced. Finally, their analysis specified that the risk premiums were economically compatible with movements in stock and bond market fundamentals.
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A study on the effect of interest rate on performance of stock exchange: A case study of Tehran Stock Exchange

A study on the effect of interest rate on performance of stock exchange: A case study of Tehran Stock Exchange

Interest rate plays an important role on financial market in any different sectors from real state to auto industry. An increase on interest rates will increase cost of borrowing money from banks, which reduces profitability. The proposed study of this paper investigates the relationship between bank interest rates on performance of stock exchange over the period 2001-2010. The proposed study categorizes interest rates into five different categories including short-term interest rate, special short-term rate, one-year, two-year, three-year, four-year and five-year terms. The results of performing regression analysis have confirmed that there are some positive and meaningful relationship between interest rate in all groups and performance of stock exchange.
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A study on the effect of size and ratio of book value to market value on excessive return

A study on the effect of size and ratio of book value to market value on excessive return

Stock market plays an important role on demonstrating economy direction and it provides good opportunities for people who wish to purchase a small portion of different firms' shares. In this paper, we propose an empirical study to measure the impact of the market size and the ratio of book value on market value on excessive return. The study gathers the necessary information from some of active stock shares traded on Tehran Stock Exchange over the period of 2010- 2011. The proposed model of this paper uses linear regression analysis to investigate the relationship between the excessive return and other factors. The study divides the information into seven equal groups and fits the regression model using ordinary least square technique. The results indicate that there is a negative relationship between size and excessive return and a positive relationship between the ratio of BV/MV and excessive return. Although the results of both tests are positive, we have to be more cautious about what have reported on the second hypothesis.
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Investment strategies used as spectroscopy of financial markets reveal new stylized facts.

Investment strategies used as spectroscopy of financial markets reveal new stylized facts.

We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of financial and economic markets. We study the detailed order flow on the Shenzhen Stock Exchange of China for the whole year of 2003. This enormous dataset allows us to compare (i) a closed national market (A-shares) with an international market (B-shares), (ii) individuals and institutions, and (iii) real traders to random strategies with respect to timing that share otherwise all other characteristics. We find in general that more trading results in smaller net return due to trading frictions, with the exception that the net return is independent of the trading frequency for A-share individual traders. We unveiled quantitative power laws with non-trivial exponents, that quantify the deterioration of performance with frequency and with holding period of the strategies used by traders. Random strategies are found to perform much better than real ones, both for winners and losers. Surprising large arbitrage opportunities exist, especially when using zero-intelligence strategies. This is a diagnostic of possible inefficiencies of these financial markets.
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An empirical study on entrepreneurs' personal characteristics

An empirical study on entrepreneurs' personal characteristics

Zhou (2007) presented a comprehensive study on the effects of entrepreneurial proclivity and foreign market knowledge on early internationalization. Brush et al. (2009) introduced pathways to entrepreneurial growth by investigating the influence of management, marketing and money. They reported that fast-growing companies exhibit different rates and patterns of growth: some represent fast growth trajectories; some, slower, more measured rates; others, episodic periods of quick growth followed by sharp retrenchment. They also found that three key factors—management, marketing, and money—affected company growth across these patterns. Obschonka et al. (2010) explained that entrepreneurial intention is the key success for new ideas. Ucbasaran et al. (2010) presented a study on the nature of entrepreneurial experience, business failure and comparative optimism. Lin (2006) presented a comparative study on the trends of entrepreneurial behaviors of enterprises in different strategies. Schmitt-Rodermund (2004) introduced four aspects of parenting, personality, early entrepreneurial competence, and interests for the success of entrepreneurship. She reported an early start-up and an entrepreneurial personality of the founder as important factors. She reported on implications of her findings, which are bank professionals dealing with venture capital loans.
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