Liping Zou

The value impact of name changes evidence from Chinese firms during the technology boom

For a sample of US stocks in the period 1998–1999, Cooper, Dimitrov, and Rau (2001) report dramatic value increases in the 10 days around the announcement of dotcom name changes. We find much smaller value changes for a sample of Chinese listed firms with changes to internet-related dotcom names for the 1998 to 2002 period. This result is surprising given the high proportion of retail trading in China and the prohibition to short sell Chinese stocks. Also in contrast to Cooper, Dimitrov, and Rau (2001), we find that most of the value increase for our sample firms is realized gradually prior to the announcement. Further investigation reveals that our sample firms experience more frequent CEO-turnover, significant increase in return-on-assets, and involve more restructure activities around the name change event. These results suggest that the value increases for firms with name changes are the consequence of substantial and successful operational changes, and that the name change is simply part of that process, instead of the cosmetic effects of name change or investor mania suggested by previous studies.

ASYMMETRIC INFORMATION IMPACTS: EVIDENCE FROM THE AUSTRALIAN TREASURY‐BOND FUTURES MARKET

The effect of information flows on the return volatility of Australian 3-year Treasury bond futures is examined using linear and non-linear GARCH models. Results show significant asymmetric information effects, where bad news has a greater impact on volatility than good news and a non-linear Threshold ARCH(1,1) in mean model provides the most accurate estimation of return volatility. Diagnostic tests confirm this finding and out of sample forecasting error statistics verify that the Threshold ARCH(1,1) in mean model yields the lowest forecasting error. The Threshold ARCH(1,1)-M model is best at capturing the asymmetric information impact on the Australian three-year T-Bond futures return volatility. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd

An Empirical Note on US Stock Split Announcements, 2000-2009

This article analyses the market reaction to stock splits announcements, using a unique US sample over the period 2000 to 2009. Our event study finds a significantly positive Cumulative Average Abnormal Return (CAAR) around the announcement date. Liquidity increases lead to higher stock price changes, which supports the liquidity improvement hypothesis. Further, firm size and abnormal returns are inversely related, which is in line with the attention hypothesis.

How Important are Earnings Announcements in China

Purpose This paper tests the information efficiency of the Chinese stock market to judge if it contravenes the Fama (1965) efficient market hypothesis. Following China’s stock market reforms the market has grown in international importance, however many find information difficult to obtain and interpret. Design/methodology/approach The relative importance of earnings announcements is quantified using cross-sectional regressions of calendar-year annual returns R_i on returns in the four quarterly earnings announcement windows return R_j. The metric developed by Ball and Shivakumar (2008) and Basu et al. (2013) is used to determine the level of new information contained in earnings announcements. Findings Analysis reveals earnings announcements contain little new information of value, thus demonstrating the Chinese markets are not informationally efficient. Therefore, investors cannot automatically assume assets are always correctly priced, as they are in other established markets. Originality/value Major structural changes were made to Chinese equity markets in 2004, with the introduction of the Qualified Foreign Institutional Investors scheme. At the same time, firms were required to make earnings announcements on a quarterly basis. This paper is the first to test the impact of these changes on the information value of earnings announcements since the changes.

Contrarian Strategies, Investor Expectations and Sentiments: The U.S. Evidence

This study documents that contrarian investment strategies offer superior returns because these strategies exploit investors’ expectation errors. The underlying source of these expectation errors may be due to biases on analysts’ earnings forecasts. We found both positive earnings surprises and negative earnings surprises significantly affect subsequent returns. Negative earnings surprises have less impact on value stocks relative to glamour stocks. This may contribute to the superior performance from value strategies. We also investigate whether investor sentiment can be an alternative source of value stocks’ superior performance. Our results conclude that when the investor sentiment is higher, the value stocks earn significant higher return than glamour stocks.