Larry J. Lockwood

Robustness of Size and Value Effects in Emerging Equity Markets, 1985-2000

We examine the robustness of size and book-to-market effects in 35 emerging equity markets during 1985-2000. Book-to-market effects are significant and are robust to tests accounting for non-normality and for firm size effects, and they do not depend on extreme returns. Size effects are also present but do not have the robustness found for book-to-market results. Book-to-market effects are found within size portfolios, but size effects are not found within book-to-market portfolios. Significant size results are produced by extreme returns. Moreover, size effects are found when size is measured relative to the local market but not in tests using absolute firm size. Cross-sectional regressions controlling for global and local systematic risk confirm the findings.

Wealth effects of asset securitization

Abstract This paper examines changes in wealth for firms that securitize assets. Findings are industry specific with wealth increase for finance companies, with no wealth change for industrial companies and automobile companies, and with wealth loss for banks. Further examination, however, reveals that excess returns for banks are significantly related to financial slack in the quarter preceding the securitization announcement. Findings indicate that strong banks experience wealth gain while weak banks experience wealth loss upon the announcement of asset securitization.

The size effect in the Mexican stock market

Abstract This paper tests for a firm size effect in the Mexican stock market using data from January 1987 to December 1992. Our initial tests indicate that average stock returns are positively related to market betas. We also find, however, that average returns are negatively related to firm size. To measure the effects on average return of betas that are unrelated to firm size, we examine portfolios formed on the basis of size and beta We find that beta is priced in addition to firm size for the Mexican stock market, even after carefully separating the effects of beta and size.

Determinants of Industrial Property Value

This paper examines the determinants of industrial properly value. We use the factor‐analytic linear structural relations (LISREL) model to confront measurement problems associated with related work. A simultaneous test of the effects on property value of factors summarizing physical property, national market, local market, interest rate and location variables is performed. Findings indicate that the value of industrial buildings during 1987–1991 in the Dallas/Fort Worth area is primarily related to local market effects and to physical characteristics and location of the property.

Short-term stock price patterns: NYSE, AMEX, OTC

30 T he objective of this paper is to document !z I systematic patterns in daily common stock returns in all three of the primary markets for stocks in the United States: the NYSE, the AMEX, and the overthe-counter market. Three useful stock price regularities prevail in all three markets. There is, first, a monthly pattern, in which returns during the first half of the month are consistently above those during the last half. Second, we find a weekly pattern, in which returns for the first two days of the week are consistently below the last three days of the week. Finally, we demonstrate the persistence of a negative return for the Friday close to Monday close period.

Multistyle Rotation Strategies

Terminal wealth improves dramatically by shifting from single–factor to multifactor models of portfolio formation. The authors provide simulated results to demonstrate the variability in terminal wealth for each style portfolio. They find that terminal wealth increases more than 50% by rotating across multiple– versus single–investment style portfolios. Their results provide downside risk assessment that is unencumbered by distributional assumptions and time diversification problems, and that lends itself well to value at risk analysis.

Expanded securities underwriting: Implications for bank risk and return

Abstract This paper investigates the effects of a Federal Reserve Board ruling in 1987 that expanded the securities underwriting ability for Citicorp, J. P. Morgan, and Bankers Trust. Results derived from a factor-analytic event study support an infrastructure proposition in which money center versus regional banks benefit the most from expansion in underwriting. Investment banks do not suffer significant loss from a market share reduction nor is there a significant wealth transfer from investment to commercial banks. Little evidence of a reduction in total risk around the event period is found.

The performance of international bond funds

Abstract This paper evaluates the performance of U.S. based international bond mutual funds over the November 1988–March 1994 period. The funds are evaluated against single- and multi-index benchmarks. Our tests indicate that the funds, in general, were unable to outperform either benchmark over the total sample period. Fund managers did, however, outperform the multi-index during the 1988–1991 subperiod. We run further tests that indicate that the multi-index model is the more appropriate model to use in evaluating international bond fund performance.

Tests of stability for variances and means of overnight/intraday returns during bull and bear markets☆

Abstract This paper examines the behavior of overnight and intraday returns during (and across) bull and bear markets. Robust tests, new to the finance literature, are performed to examine the stability of both variability of returns and mean returns over time Comparing bull and bear markets, intraday returns are significantly more volatile during bear markets, but no statistical difference in overnight returns is found. Variability of returns is significantly greater intraday than overnight during both bull and bear markets. Differences in mean returns between bull and bear markets are shown to occur primarily intraday rather than overnight. Implications for future studies of trading phenomena and return generating processes are presented.

The performance of initial public offerings in the Mexican stock market, 1987-1993

Abstract This paper documents differences in the performance of bank and nonbank initial public offerings (IPOs) in Mexico during 1987–1993. We measure performance relative to the Mexican stock market index. Banks experience much larger initial underpricing than nonbanks due in part to a hot issue market in 1987. In the aftermarket, excess returns for banks, industrials, and services are not significant. Excess aftermarket returns for brokerage houses are significantly negative. We also find that underpricing of the privatized IPOs diminishes over time, supporting the argument that the Mexican government offered discounts on IPOs issued early in the privatization program.