Albert Corhay

Common stochastic trends in European stock markets

The objective of the paper is to investigate whether price indices of different European stock markets display a common long-run trending behaviour. Using cointegration analysis, we provide empirical evidence of common stochastic trends among five important European stock markets over the period 1975-1991.

Hedge fund performance and persistence in bull and bear markets

Abstract This paper tests the performance of 2894 hedge funds in a time period that encompasses unambiguously bullish and bearish trends whose pivot is commonly set at March 2000. The database proves to be fairly trustable with respect to the most important biases in hedge funds studies, despite the high attrition rate of funds observed in the down market. An original ten-factor composite performance model is applied that achieves very high significance levels. The analysis of performance indicates that most hedge funds significantly outperformed the market during the whole test period, mostly thanks to the bullish subperiod. In contrast, no significant underperformance of individual hedge funds strategies is observed when markets headed south. The analysis of persistence yields very similar results, with most of the predictability being found among middle performers during the bullish period. However, the ‘Market Neutral’ strategy represents a remarkable exception, as abnormal performance is sustained throughout and significant persistence can be found between the 20% and 69% best performers in this category, probably thanks to an extreme adaptability and a very active investment behaviour.

Conditional Heteroskedasticity Adjusted Market Model and an Event Study

Stock returns series generally exhibit time-varying volatility. Therefore, one can cast doubt on the way abnormal returns are calculated and consequently interpreted in traditional event studies. In this paper we apply a market model which accounts for GARCH effects leading to more efficient estimators. Using a sample of divestitures, we empirically investigate how this adjustment affects the magnitude of the abnormal returns associated with an event.

Long run behaviour of Pacific-Basin stock prices

In this paper, we investigate the long run relationship among five major Pacific-Basin stock markets. We focus on the common long run behaviour of their stock price indices over a sample period of 20 years. Using cointegration theory, we find that while there exists a rather integrated Pacific Basin financial area, the regional aspects (Asian versus Pacific) play important roles.

International acquisitions and shareholder wealth Evidence from the Netherlands

Abstract In this article, we test wealth effects of international acquisitions using a sample of foreign acquisitions by Dutch firms during the period 1990–96. We find weak evidence that cross-border acquisitions are wealth-creating corporate activities, especially for acquisitions in the U.S. We observe further that for the West European acquisitions, benefits from internalization are larger for companies having relatively less international exposure and making acquisitions outside of their main activities.

Development Path and Capital Structure of Belgian Biotechnology Firms

This study investigates the relationship between the evolution of real options values and associated financing policies for Belgian companies in the sector of bio-industries. Each firms situation regarding the relevant types of real options is stylistically represented through a scenario tree. The consumption of a time-to-build or a growth option is respectively considered as a success or a failure in company development. Empirically, several variables enable us to locate each company along the tree at any time. The study of transitions leads us to discover that failures tend to trigger higher leverage, unlike in the trade-off theory. Yet, the increases in debt maturity, in lease and in convertible financing confirm our predictions. Overall, we emphasize evidence of undercapitalization and of proper, yet insufficient, use of hybrid financing by biotech companies.

The intervalling effect bias in beta: a note

Abstract Based on a comprehensive sample of domestic securities traded on the Brussels Stock Exchange, this paper points out the intervalling effect in the estimated betas and examines the speed of convergence of these. The results reveal that the estimated betas seem to converge to their asymptotic values and that their value depends on what day the differencing interval starts. It also appears that the magnitude of the intervalling effect is inversely related to the market value of the firms.

The long run performance of Malaysian initial public offerings (IPO): value and growth effects

Outlines previous research on the underpricing of initial public offerings (IPOs), describes the institutional framework for IPOs in Malaysia and presents a study of long run Malaysian IPO performance using 1992‐1996 data on 258 IPOs, classified into growth or value portfolios. Explains the methodology and presents the results, which show that value IPOs outperform growth IPOs, while both outperform the market. Finds their cumulative market adjusted return (averaged at 41.7 per cent) positively correlated with book‐to‐market equity, earnings‐to‐price, cashflows‐to‐price and the time lag between close of application and actual listing; and negatively related to the IPO price and size. Briefly considers consistency with other research and the market implications.

A Look at the Validity of the CAPM in Light of Equity Market Anomalies: The Case of the Belgian Common Stocks

We re-examine the pricing of common stocks on the Belgium Stock Exchange in light of two related phenomena recently reported in the literature: the size effect and risk-premia seasonality. When these two phenomena are ignored we cannot reject the hypothesis that the behavior of common stock prices conform to the CAPM. However, when size and seasonality are accounted for in the stochastic process that generates stock returns, the hypothesis that the CAPM describes (and explains) the pricing of common stocks must be rejected, even during the month of January despite the presence of a positive systematic risk premium and the absence of an unsystematic risk premium during that month.

New evidence on beta stationarity and forecast for belgian common stocks

Abstract Based on a comprehensive sample of 170 securities traded continuously on the Brussels Stock Exchange from December 1966 to December 1983 this paper presents evidence which indicates that the stationarity of beta-coefficients is not as strong as reported in previous studies which were based on smaller samples. It is shown, however, that beta forecast can be generally improved using an adjustment method and that the improvement is highest for portfolios of increasing size.