Ranko Jelic

The accuracy of earnings forecasts in IPO prospectuses on the Kuala Lumpur Stock Exchange

Abstract This paper examines the accuracy of earnings forecasts made by managers of Malaysian initial public offerings (IPOs) during the period 1984–1995. It is a mandatory requirement for Malaysian IPOs to furnish earnings forecasts together with the opinions thereon of the auditors and the lead underwriter in their prospectuses. Their accuracy is measured by forecast errors, absolute forecast errors, squared forecast errors and standardised forecast errors. The results suggest that, on average, managers under-forecast earnings by 33.37%. A comparison with the naive no change model in earnings suggests that 96 out of 122 companies outperform this model. A number of company specific characteristics (size, age, forecast interval, gearing, proportion of shares retained by owners, auditor reputation and industry) are tested. The results reveal that both the age and industry classification of the company are statistically significant, and that management earnings forecasts are particularly inaccurate where fi...

Hungarian Privatisation Strategy and Financial Performance of Privatised Companies

This paper examines Hungarian privatisation strategy and the financial performance of privatised enterprises. The results suggest that Hungary has preferred privatisation by direct sales by a considerable margin, but has recently shifted towards share issues. Both types of sale have predominantly been gradual. Subsequent sales, however, confirm the governments intention to sell previously retained shares. An analysis of IPOs during 1990-1998 shows positive initial returns on Privatisation Initial Public Offers (PIPOs) and greater underpricing than for other IPOs. The long term returns of PIPOs are positive and they outperform other IPOs in all periods after the listing. Copyright Blackwell Publishers Ltd 1999.

Privatisation Initial Public Offerings: the Polish Experience

The Polish government has preferred gradual direct sales to privatisation initial public offerings lPIPOsr by a 2.8 to 1 margin. Evidence suggests that the government has attempted to manage the timing of PIPOs. We, however, find no evidence of underpricing of PIPOs to a greater degree than that found for issues in the private sector. Both domestic and international investors in PIPOs earned predominantly positive buy-and-hold returns up to 36 months after listing. The difference between PIPOs and private sector IPOs average returns is statistically significant only for international investors. Copyright Blackwell Publishing Ltd, 2003.

The Operating Performance of Newly Privatised Firms in Central European Transition Economies

This study examines the operating performance of privatised firms in three Central European Transition Economies between 1990 and 1998. Overall, we find no evidence of a significant improvement in operating performance for the first six years after privatisation. Contrary to the increasing empirical evidence for non-transition economies, our privatised firms experience no improvement in profitability, capital investments, efficiency, and output, a significant drop in employment, as well as a significant increase in leverage. The most important determinants of the performance changes following privatisation were country effects, timing of the privatisation sales, industry classification, and state ownership after privatisation. Our findings are consistent with the empirical evidence that the transition process proved to be more difficult than expected and that, although necessary, privatisations do not necessarily produce equal efficiency gains in transition economies (Megginson, 2005; Havrylyshyn and McGettigan, 1999).

European bond ETFs: tracking errors and the sovereign debt crisis

This study examines the tracking performance of 31 eurozone sovereign debt exchange traded index funds (ETFs) during 2007-2010. The tracking performance is assessed by four different tracking error models. Overall, funds underperform their respective benchmarks. Active returns (net of fees) vary substantially (from +46.74 to -30.36 basis points) and are of considerable economic interest. The significant differences in the performance of swap-based and in-kind funds highlight the importance of appropriate (e.g. correlation vs. cointegration based) metrics required for the assessment of funds adopting different replication methods. We also document important changes in the tracking performance due to the changing characteristics of EU sovereign bonds since the start of the sovereign debt crisis.

Staying power of UK buy-outs

This paper examines 1,089 private equity (PE) backed and non-PE backed (pure) UK buy-outs, determinants of their survival, and their exit behaviour during the period of 1966-2004. Our results suggest that 56% of the pure sample buy-outs remained in a buy-out organisational form for at least seven years after the original buy-out transaction, thus lending support to views that buy-outs present long rather than short term form. PE backed buy-outs exhibit higher exit rates, fewer early (within 12 months) exits and fewer liquidations than their pure counterparts. Buy-outs sponsored by PE syndicates, those harvested during periods with strong market conditions and greater supply of PE funding, tend to have shorter longevity. The most notable difference between the survival experiences of PE backed and pure buy-outs is documented in IPO exits, where a significant number of pure buy-outs exit early to the Alternative Investment Market (AIM).

Common Factors in the Performance of European Corporate Bonds – Evidence Before and After the Financial Crisis

We examine monthly excess returns for 23 Euro�?denominated corporate bond indices and propose a new specification for bond asset pricing models. Specifically, we separate level and slope components of term and default risk factors and examine liquidity risk. Our results suggest that level and slope risk factors, derived from complete interest rate and default spread term structures, significantly improve the explanatory power of the Fama and French (1993) 2�?factor model. We also demonstrate different sensitivities of risk factors before and after recent financial crisis. The results are robust to calendar seasonality and the consideration of equity market returns.

Market risk management in a post-Basel II regulatory environment

We propose a novel method of Mean-Capital Requirement portfolio optimization. The optimization is performed using a parallel framework for optimization based on the Nondominated Sorting Genetic Algorithm II. Capital requirements for market risk include an additional stress component introduced by the recent Basel 2.5 regulation. Our optimization with the Basel 2.5 formula in the objective function produces superior results to those of the old (Basel II) formula in stress scenarios in which the correlations of asset returns change considerably. These improvements are achieved at the expense of reduced cardinality of Pareto-optimal portfolios. This reduced cardinality (and thus portfolio diversification) in periods of relatively low market volatility may have unintended consequences for banks’ risk exposure.

European asset swap spreads and the credit crisis

We examine time-varying behaviour and determinants of asset swap (ASW) spreads for 23 iBoxx European corporate bond indexes from January 2006 to January 2009. The results of a Markov switching model suggest that ASW spreads exhibit regime-dependent behaviour. The evidence is particularly strong for Financial and Corporates Subordinated indexes. Stock market volatility determines ASW spread changes in turbulent periods, whereas stock returns tend to affect spread changes in calm periods. While market liquidity affects spreads only in turbulent regimes the level of interest rates is an important determinant of spread changes in both regimes. Finally, we identify stock returns, lagged ASW spread levels, and lagged volatility of ASW spreads as major drivers of the regime shifts. The results are robust in the extended sample (January 2006 to October 2013) that includes a post-crisis period.

Mean-univariate GARCH VaR portfolio optimization

In accordance with Basel Capital Accords, the Capital Requirements (CR) for market risk exposure of banks is a nonlinear function of Value-at-Risk (VaR). Importantly, the CR is calculated based on a banks actual portfolio, i.e. the portfolio represented by its current holdings. To tackle mean-VaR portfolio optimization within the actual portfolio framework (APF), we propose a novel mean-VaR optimization method where VaR is estimated using a univariate Generalized AutoRegressive Conditional Heteroscedasticity (GARCH) volatility model. The optimization was performed by employing a Nondominated Sorting Genetic Algorithm (NSGA-II). On a sample of 40 large US stocks, our procedure provided superior mean-VaR trade-offs compared to those obtained from applying more customary mean-multivariate GARCH and historical VaR models. The results hold true in both low and high volatility samples. We introduce mean-univariate GARCH VaR actual portfolio optimization in accordance with Basel Capital Accords.We develop optimization software that combines NSGA-II algorithm and R statistical software.Computational results show that our approach provides better mean-univariate GARCH VaR trade-offs of actual portfolios in comparison to benchmarks estimated by analytical methods.Empirical tests cover both low and high volatility samples.