Clive Gaunt

The Impact of Share Price on Seasonality and Size Anomalies in Australian Equity Returns

Given the high correlation between a firms stock price and market capitalisation, it is possible that the well-documented size anomaly is masking a share-price effect. Using a seemingly unrelated regression model to accommodate contemporaneous correlation between portfolios, we estimate the separate effects of firm size and share price on returns to Australian equity portfolios. The analysis is also extended to estimate seasonal components of size and price effects. Our major findings are: i) firm size and share price have significant and independent effects on portfolio returns averaged over all months, ii) the familiar negative relation between size and returns is confirmed across all months, and iii) the relation between share price and returns is negative in July and positive in all other months, with the exception of January where no price effect occurs. These findings, which are consistent across sub-periods and robust to method variations, highlight the need for future research to provide an economic foundation for the relation between average returns, size and price.

Size and Book-to-Market Factors in Australia

There is continuing debate in the asset-pricing literature as to the acceptance of the Fama–French three-factor model. While this model has received strong empirical support from tests in the US equity market, tests of the model in the Australian market have yielded inconclusive findings, particularly in respect of the high-minus-low factor. Prior research in Australia has suffered from limited datasets in respect of the accounting variables, and previous results vary with the scope of the dataset employed. Our study provides two advances. Firstly, the study utilizes a purpose-built dataset spanning 25 years and 98% of all listed firms. Secondly, the study employs a more appropriate portfolio construction method than that employed in prior studies. With these advances, the study is more able to test the three-factor model against the capital asset-pricing model (CAPM). The findings support the superiority of the Fama–French model, and for the first time align the research in this area between Australia and the USA.

Overreaction in the Australian equity market: 1974-1997

Abstract Previous assessment of overreaction in the Australian equity market by Brailsford [Brailsford, T., 1992. A test for the winner–loser anomaly in the Australian equity market: 1958–87, Journal of Business Finance and Accounting, 19 (2) 225–241] and Allen and Prince [Allen, D.E., Prince, R., 1995. The winner/loser hypothesis: Some preliminary Australian evidence on the impact of changing risk. Applied Economics Letters 2, 280–283] finds no evidence of performance reversal in loser portfolios and no significant difference between the test period performance of winner and loser portfolios. This result is not consistent with evidence from overseas markets and warrants further examination. This study finds evidence of price reversal where monthly portfolio rebalancing is employed but the price reversal disappears when a buy and hold strategy is used. Further analysis reveals that the loser portfolio is dominated by small firms and that any abnormal returns are not exploitable given the lack of liquidity in small capitalisation Australian stocks. It is possible that the lack of consistency between Australian and US research can be explained by the different time periods examined in these studies.

Short-Term Autocorrelation in Australian Equities

This paper examines the statistical and economic significance of short-term autocorrelation in Australian equities. We document large negative first-order autocorrelation in individual stock returns. Preliminary results suggest this autocorrelation is economically significant, as two simple trading strategies based on the autocorrelation structure appear to yield large risk-adjusted returns. Further analysis, however, shows that these results are driven by the inclusion of smallcapitalisation and low-priced stocks which are vulnerable to a number of market-microstructure-related problems. After revising the dataset to mitigate these problems, little evidence of economic significance remains.

The impact of taxi deregulation on small urban areas: some New Zealand evidence

In 1989 the New Zealand government deregulated the taxicab industry. Barriers to entry and centralised fare setting were abandoned. This paper examines the impact of the deregulation on industry concentration and fares in urban areas with populations of less than 100 000. While there appears to be only minor changes in concentration and fares in these areas, the direction and magnitude of fare changes, in particular, appear to be related to the size of the urban centre. Two alternative explanations are offered for this result. Evidence is presented which supports one explanation and indicates that the deregulated taxi market is competitive.

Price and Earnings Momentum in Australian Stock Returns

There is no prior published Australian research on earnings momentum and only one prior unpublished work of limited depth and scope. We provide some of the first Australian evidence on earnings momentum and revisit price momentum with the first Australian evidence of the behaviour of returns beyond 12 months. Price momentum is found to be a feature of this market, but there is some reversal of returns during the second year after portfolio formation, suggesting trend chasing behaviour. Earnings momentum is also present, but with weak continuation into the second year. Price momentum and earnings momentum are shown to provide independent explanatory power over future returns.

The Economic Cost Of taxicab Regulation: The Case of Brisbane

The Brisbane taxicab industry is highly regulated with government imposed controls over the number of taxi licenses issued and the fares to be charged. These controls protect existing license holders from competition, allowing monopoly rents to be earned. Monopoly rents are reflected in the market price of a Brisbane taxi license which was around

THE UNANTICIPATED EFFECTS OF THE INDUSTRY COMMISSION'S RECOMMENDATIONS ON THE REGULATION OF THE TAXI CAB INDUSTRY.

190,000 in 1993. Deregulation of the industry, were it to occur, would be expected to benefit consumers of taxicab services by an average of

Size and book to market effects and the Fama French three factor asset pricing model: evidence from the Australian stockmarket

1.47 per taxi ride, through a combination of an expected 15 per cent increase in the number of taxicabs, and service innovation thereby ending the 20 million dollar per annum consumer wealth loss.

A comparison of alternative bankruptcy prediction models

The Industry Commission has recommended deregulation of entry restrictions to the Australian Taxicab industry and provided two options for achieving this. This paper considers the economic consequences of the two options and finds that they fail to achieve the Commissions objectives. Their options are arbitrary in their construction and impact, representing a token effort to correct the current regulatory frameworks wealth transfer from consumer to license holder. In case the Commission is intent on pursuing a gradual deregulation, this paper analyzes a third option and finds it more efficient in achieving the Commissions objectives. However, total and immediate deregulation of the industry is superior in achieving the consumer and public interest objectives espoused by the Commission.