Parvez Ahmed

Wealth Effect of Drug Withdrawals on Firms and Their Competitors

In this paper, we examine the impact of a drug withdrawal on shareholders of firms and their direct competitors. We find shareholders suffer significant wealth losses when there are reports of adverse drug reactions and when the firm actually withdraws a drug from the market. Additionally, shareholder wealth losses are inversely related to the firm’s market capitalization. Firms that withdraw drugs during advanced clinical investigations experience greater wealth loss than drugs withdrawn during post-marketing surveillance. Wealth losses are lower if many firms withdraw the same type of drug and if that drug has available substitutes.

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.

Forecasting correlation among equity mutual funds

Abstract Investors often buy multiple funds that are actively managed, specializing within narrowly defined market segments. To successfully implement a strategy of diversification investors must obtain accurate estimates of correlation among mutual fund returns. This paper forecasts mutual fund correlations using eight models that are broadly classified into historical, mean and index. Results indicate that estimate of future correlations from the Multi-Style Index, Dynamic and Fama–French 3-Factor models have the lowest prediction errors. Moreover, the relative ranks of Multi-Style Index and Fama–French 3-Factor models have lower dispersion across different forecasting time periods and in sub-samples of funds belonging to similar or different ‘style’ categories.

Can moving average technical trading strategies help in volatile and declining markets? a study of some emerging Asian markets

Outlines previous research on stock market efficiency and technical trading rules in both developed and emerging markets. Uses variable moving average (VMA) models to develop five technical trading rules and applies them to markets in Taiwan, Thailand and The Phillippines 1994‐1999. Compares results with the US and Japan indices and a simple buy and hold strategy. Finds the VMA rules gave higher returns in Taiwan and very much higher returns in Thailand and The Phillippines, even after transaction costs, but not in Japan and the USA. Considers the reasons why and calls for further research.

Moving average technical trading strategies for currencies of emerging economies

This paper studies the efficacy of using moving average technical trading rules with currencies of emerging economies. If technical trading rules are successful, they can become a risk management tool for multinational firms and investors in emerging markets. Typical risk management tools such as forwards, futures, and options are not sufficiently active in emerging currency markets. In this paper we use four Variable Length Moving Average (VMA) trading models and compare them to a simple buy and hold strategy. Results support the effectiveness of our trading models, which imply the presence of strong serial correlation among currency returns for emerging markets. As a result, the predictability of future currency prices will allow investors to create effective hedges in the often volatile emerging markets.

Can firms do well while doing good

We investigate the relationship between a firms degree of social responsibility and its performance. To accomplish this objective, we examine the stock market reaction to the announcement of Fortune magazines list of 100 Best Companies to Work For over the 1998-2003 period. We find significant positive excess returns, which indicate that being included on the list is viewed positively by the stock market. To explain the positive abnormal performance, we regress the excess returns against firm-specific variables. Excess return has a positive relation to the job growth rate, but not to firm rank, on a pre-listing basis. However, the additional analysis reveals that the firms with a more favourable ranking are relatively small and have a higher job growth rate, low employee turnover, high betas and extremely positive stock market performance prior to their inclusion on the list. In the year following the publication, sample firms with a favourable ranking have higher sales and gross profit margin than their lower-ranked counterparts. Overall, the results indicate that firms exhibiting a high degree of social responsibility towards their employees are positively rewarded by stock market participants, and that the rankings are somewhat related to pre- and post-survey financial performance.

The Performance of Faith-Based Funds

This article examines the performance of faith-based mutual funds for the period 1998 to 2009. It compares the performance of this group of funds with socially responsible funds and with all U.S. equity mutual funds. The article also examines the factors that account for the cross-sectional differences in fund returns.

Willingness to pay for safe drinking water: A contingent valuation study in Jacksonville, FL

A surprising number of U.S. cities have drinking water with unhealthy levels of chemicals and contaminants. The city of Jacksonville (Florida), the location for this study, owns the dubious distinction of being ranked among the worst major American cities in water quality according to water quality tests conducted between 2005 and 2009 by the Environmental Working Group (EWG). This report of toxic chemicals in the Jacksonville water supply generated considerable negative publicity and coincides with a frequent and common complaint among residents of foul-smelling water. System revenues from water supply and program subsidies from government are often inadequate in mitigating the problems, perceived or real, with water quality. Therefore, this paper investigates how much residents will be willing to pay for improvements in the quality of tap water. The commonly known economic metric willingness-to-pay (WTP) is applied to estimate any possible rate hikes public utility can assess in any effort to improve real or perceived water quality. The study shows that the estimated weighted average of WTP is

The relation between the informational content of implied volatility and arbitrage costs: Evidence from the Oslo Stock Exchange

6.22, which can be added to the regular water bill without eliciting much negative reaction from residents. Evidence shows that factors such as trust in authorities, health concerns, family structure, and education significantly impact the WTP.

Corporate Governance and Ethics of Islamic Finance Institutions

Abstract This study investigates the proposition that volatility of stock returns can be predicted from the volatility implied by options on the Oslo Stock Exchange (OSE), conditional on the ability to perform arbitrage. Insights into the relation between the informational content of implied volatility and arbitrage cost can be distilled from Oslo Stock Exchange data. For Norwegian firms, options and their underlying stock trade on the Oslo Stock Exchange and have an overlapping set of market makers thereby lowering the cost of arbitrage. Other components of arbitrage trading costs, liquidity and dispersion of stock return volatility, vary widely across Norwegian firms. Moreover, restriction on the short selling of stock in Oslo allows further insight into the role of arbitrage costs in determining the informational content of implied volatility. The results yield support for the arbitrage cost hypothesis: the lower the arbitrage cost between the stock and the option, the greater the informational content of implied volatility.