Securities & Commodity Exchanges

7 Results

 

Lehman Brothers Plus Five: Have We Learned from Our Mistakes?

Is the US financial system in better shape today than it was five years ago? Finance professors Victoria Ivashina, David Scharfstein, and Arthur Segel see real progress—but also missed opportunities and more challenges. Open for comment; 2 Comments posted.

Playing Favorites: How Firms Prevent the Revelation of Bad News

Given the current regulatory environment in the United States (and increasingly globally) of level playing-field information laws, firms can only communicate information in public exchanges. However, even in these highly regulated venues, there are subtle choices that firms make that reveal differential amounts of information to the market. In this paper the authors explore a subtle but economically important way in which firms shape their information environments, namely through their specific organization and choreographing of earnings conference calls. The analysis rests on a simple premise: firms understand they have an information advantage and the ability to be strategic in its release. The key finding is that firms that manipulate their conference calls by calling on those analysts with the most optimistic views on the firm appear to be hiding bad news, which ultimately leaks out in the future. Specifically, the authors show that "casting" firms experience higher contemporaneous returns on the (manipulated) call in question, but negative returns in the future. These negative future returns are concentrated around future calls where they stop this casting behavior, and hence allow negative information to be revealed to the market. Read More

What’s Behind China’s Wild Stock Ride?

Podcast: The recent one-day plunge of 9 percent in China's stock markets has continued to weigh heavily on other markets around the world. What caused the fall? Are more ups and downs to come? Professor Li Jin discusses the unique characteristics that drive Chinese stocks. Read More

Float Manipulation and Stock Prices

When a firm reduces the number of shares available to trade, so-called float manipulation, the price of the stock is often driven up. The author uses a series of 2,000 stock split events in Japan as an experiment to understand the consequences of float manipulation for stock prices. The conclusion: Stock prices are raised significantly when there are differing opinions about the value of shares, investors are unable to sell short, and the number of outstanding shares is reduced. Read More

A Cross-Sectional Analysis of the Excess Comovement of Stock Returns

This paper develops cross-sectional predictions from a model in which the excess comovement of stock returns comes from correlated demand shocks. The model is tested on 298 Nikkei index stocks and 1,458 non-index stocks for the years 1993 through 2003. The study finds that controlling for index membership, index overweighting is a significant determinant of the comovement of returns with index returns. Read More

Analyst Disagreement, Forecast Bias and Stock Returns

It is well documented that financial analysts' opinions are reflected in stock prices. The problem: Analysts often operate under incentives that are inconsistent with telling the truth. Retail investors, who tend to be less sophisticated, may fail to make proper adjustments for the more nuanced of the resulting biases, some of which might be reflected in market prices. To study the scope of market efficiency, Scherbina studied analysts' incentives, resulting forecast biases, and their potential impact on market prices. Read More

What It Takes to Restore Trust in Business

What’s still wrong with American business? Start with pervasive conflicts of interest and the limits of enforcement. Read More