David Michayluk

Asymmetric Volatility, Correlation and Returns Dynamics between the U.S. and U.K. Securitized Real Estate Markets

We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior, asymmetric volatility spillover effects and exceedance correlations, this study shows that the real estate markets in these two countries experience significant interaction on a daily basis when synchronously priced data are utilized. These results are different from when close-to-close returns are examined, implying that the use of close-to-close data can misconstrue the true dynamics that exist between these markets. Results also show significant asymmetric effects on both the volatility and correlation dynamics between the markets. This has several implications for property portfolio managers, indicating that positive and negative news impact the markets differently. This is particularly true for the United Kindom, where daily foreign news from the United States can influence U.K. volatility.

The persistent holiday effect: additional evidence

The holiday effect is one of the most perplexing of all seasonal anomalies. Based on evidence using pre-1987 equity returns, this anomaly has been shown to be responsible for somewhere between 30 to 50% of the total return on the market while exhibiting below average variances (Lakonishok and Smidt, 1988; Ariel, 1990). The purpose of this paper is to investigate and document the persistence of the holiday effect (or lack thereof) beyond the 1987 period for equities traded on the NYSE, AMEX, and NASDAQ exchanges. Has the holiday effect continued into the 1990s, or have efficient trading rules exploited the anomaly to the point where it no longer exists? The results provide additional evidence into the nature and potential causes of seasonal market anomalies.

Individual versus institutional investors and the weekend effect

Since the late 1980’s, considerable research has focused on the behavior of individual versus institutional investors and the potential patterns which may emerge from their trading activities. Miller (1988) and Abraham and Ikenberry (1994) posit that the tendency for negative Monday returns on equity (i.e., the weekend effect) is at least partially explained by the trading behavior of individual investors. Sias and Starks (1995), on the other hand, present empirical evidence showing a dominant role played by institutional traders. This study contributes to the literature by distinguishing between individual versus institutional trading as it relates to the weekend effect. We find that the information-processing hypothesis is consistent with observed institutional trading patterns, thus supporting the results of Sias and Starks (1995). In addition, these results are shown to be robust with respect to market type (i.e., auction and dealer markets).

Is Liquidity Symmetric? A Study of Newly Listed Internet and Technology Stocks

Imbedded in liquidity measures is an implicit assumption of symmetry. Although market microstructure models rely on this assumption, there may be directional pressure that creates differences in buy and sell liquidity. This paper develops methods of assessing asymmetric liquidity and empirically examines a sample of newly listed Internet and technology stocks that are hypothesized to be especially subject to asymmetry due to the rapid inflation and deflation of the Internet bubble. Evidence of asymmetric liquidity is observed and the level of asymmetry is found to change over time. These findings suggest that the assumption of symmetry is inconsistent with more precisely constructed market liquidity measures.

Dividend initiations in reverse-LBO firms

Abstract This article documents a lack of share price response to dividend initiation announcements by firms that recently completed a reverse-LBO. We identify a group of firms that had recently completed an IPO and report that they experience a positive reaction to dividend initiation announcements as expected based on the prior dividend initiation literature. We rule out a size-based explanation for the abnormal response in reverse-LBOs and offer some potential explanations for our empirical findings.

Determining value in a complex service setting

Purpose – The purpose of this paper is to capture the richness of customer perceived value by determining its benefit and cost dimensions in a complex service setting. Perceived value is argued as equivalent to value-in-use; that is value that emerges for or is created by the customer. Design/methodology/approach – A series of in-depth interviews was conducted with a diverse group of clients of financial planning services as well as with financial planners in Australia. Findings – Six benefit and four cost dimensions of complex service are identified, namely expertise, education, motivation, support, relationship and convenience benefits, as well as monetary, time and effort, emotional and lifestyle costs. The results also indicate proposed outcomes of these dimensions, along with relevant moderators, leading to a broad conceptual framework for future empirical validation. Originality/value – This study contributes to the sparse conceptual development of value perceptions, or value-in-use, in a complex service context. In particular, the authors identify the benefit and cost dimensions, specifically addressing aspects of value that are linked to the long-term relationship between provider and customer. The authors also develop a conceptual model of value, including both outcomes and situational moderators of the various value dimensions. Finally, the conceptualization of perceived value is discussed with respect to the value co-creation literature.

Suspicious trading halts

Abstract Trading halts are designed to protect investors from price fluctuations under conditions of illiquidity, but on the Paris Bourse specific price limits can be used to manipulate prices. Trading is halted when a trader submits an order outside the maximum daily price limit and this feature permits traders, at little cost, to easily close the market intentionally or in error. We document over 300 suspicious halts where unfilled orders halted trading. These halts are suspicious because the unfilled order was on the opposite side of the market. Discovering potentially inefficient procedures is important for the Paris Bourse and also for French and overseas investors who may be impacted by inappropriate prices.

Stock Splits and Bond Yields: Isolating the Signaling Hypothesis

One explanation offered for stock splits is that the split signals positive information by reducing the stock price range in expectation of improved future prospects. Price declines also lead to changes in stock price dynamics, but related securities are not subject to these other changes and therefore can be used to provide a separate assessment of the markets’ interpretation of the split. We examine corporate bond issues around stock splits and find a significant decline in the bond yield spread following stock splits, supporting the signaling hypothesis. We also confirm improvements in forecasted and realized earnings subsequent to stock splits.

Do lead articles signal higher quality in the digital age? Evidence from finance journals

Citations are regarded as measures of quality yet citation rates vary widely within each of the top finance journals. Since article ordering is at the discretion of editors, lead articles can be interpreted as signals of quality that academics can use to allocate their attention and assert the value of their publications. Advances in electronic journal access allow researchers to directly access articles, suggesting article ordering may be less relevant today. We confirm the past importance of lead articles by examining citation rates from published papers as well as the wider source of papers that are listed in Google Scholar. Our findings also confirm using Google Scholar as a citation source provides congruent results to using citations from articles published in ISI-listed journals, with the additional benefit of it potentially being more timely since it includes wider citation sources, inclusive of working and conference papers.

Reversing the lead, or a series of unfortunate events? NYMEX, ICE and Amaranth

A number of studies compare the efficiency and transparency of floor trading with automated/electronic trading systems in the competition for order flow. Although most of these studies find that electronic systems lead price discovery, a few studies highlight the weaknesses of electronic trading in highly volatile market conditions. A series of unusual events in 2006, sparking extreme volatility in natural gas futures trading, provide an ideal setting to revisit the resilience of trading system price leadership in the face of high volatility. We estimate time‐varying Hasbrouck‐style information shares to investigate the intertemporal and cross‐sectional dynamics in price discovery. The results strongly suggest that the information share is time‐dependent and contract‐dependent. Floor trading dominates price discovery in the less liquid longer‐maturity contracts, whereas electronic trading dominates price discovery in the most liquid spot‐month contract. We find that the floor trading information share increases significantly with realized volatility.