Richard J. Kish

Technical trading strategies and return predictability: NYSE

This study consists of an empirical analysis on technical trading rules (the simple price moving average, the momentum, and trading volume) utilizing the NYSE value-weighted index over the period 1962–1996, as well as, three subperiods. The methodologies employed include the traditional t-test and residual bootstrap methodology utilizing random walk, GARCH-M and GARCH-M with some instrument variables. The results indicate that the technical trading rules add a value to capture profit opportunities over a buy-hold strategy. When the trading rules are applied to the different sub-samples, the results are weaker in the last sub-period, 1985–1996. This may imply that the market is getting efficient in information over the recent years because of technological improvements.

Determinants of the call option on corporate bonds

Abstract A number of hypotheses have been proposed as explanations of the call feature in corporate bonds. Using a large sample of callable and noncallable corporate bonds issued during the period 1977–1986, this paper simultaneously examines the empirical validity of five hypotheses that have been offered to explain the call option. The evidence provides no support for the hypotheses that the call option provides managerial flexibility or tax advantages. There is mixed support for agency cost explanations of the corporate call feature. The call feature is found to be highly correlated with the level of interest rates and the maturity of debt issues. That is, the call feature is found to be more likely during periods of higher interest rates and for longer maturity bonds.

Cross-border mergers and acquisitions: the European-US experience

Abstract Our study, utilizing logit and multiple regression models, tests the hypothesis that macroeconomic variables, in particular bond yields, exchange rates, and stock prices, influenced the number and direction of cross-border acquisitions between firms in the United States and each of four European countries: Germany, Italy, the United Kingdom, and France. While the logit model results suggest that bond yields explain the trends in cross-border acquisitions, the regression results show the US stock prices to be a good explanatory variable. In general, the results suggest that foreign acquisitions occur more frequently when bond yields in the acquirers country are higher than those from the country of the firm being acquired. In addition, a depressed US stock market relative to foreign stock markets encourages foreign acquisition of US companies.

A comparative study of technical trading strategies and return predictability: an extension of Brock, Lakonishok, and LeBaron (1992) using NYSE and NASDAQ indices

Abstract This study extends the work of Brock et al.’s (1992) empirical analysis on technical trading rules (price and momentum) by including trading volume moving averages; broader indices (New York Stock Exchange (NYSE) and National Association of Security Dealers Automatic Quotations (NASDAQ)) covering both large-cap and small-cap firms using market weightings; and focusing on a time period that includes great innovations in trading and disseminating data to the market. Similar to their study, we base our conclusions on nonparametric analysis. By extending the t -test analysis through a residual bootstrap methodology utilizing a random walk, a generalized autoregressive conditional heteroskedasticity in mean (GARCH-M), and a GARCH-M with instrument variables, criticisms of earlier technical analysis are mitigated. Overall, the results support Brock et al.’s (1992) price-weighted index (Dow Jones Industrial Average (DJIA)) analysis by showing that the technical trading rules add value by capturing profit opportunities when compared to a buy-and-hold strategy. When the analysis of the trading rules are applied to different time periods, the results reveal a weakening in profit potential over time. This may imply that the market is becoming more efficient in disseminating information to a wider range of investors.

The Contrarian/Overreaction Hypothesis: An analysis of the US and Canadian stock markets

Abstract The Contrarian/Overreaction Hypothesis implies simultaneously buying (long) previous losers and selling (short) previous winners in order to realize excess returns. The conventional wisdom is that extreme previous losers are undervalued due to investor overreaction possibly instigated by some adverse news and events. Given adequate time, previous losers will outperform the market. Conversely, the overvalued previous extreme winners will underperform the market in subsequent periods. This paper investigates the Contrarian/Overreaction Hypothesis as proposed by DeBondt and Thaler (1985, 1987) using a non-parametric methodology with a multi-factor asset pricing model, within both the US and the Canadian stock markets. Results from risk-adjusted, non-parametric, multi-factor bootstrap-simulated estimates show that, for the US, short-term and intermediate-term contrarian portfolios yield significant excess returns above the market. For the Canadian market, the intermediate-term contrarian portfolio works best.

Tests of the Contrarian Investment Strategy Evidence from the French and German stock markets

Abstract The Contrarian Investment Strategy (CIS) implies simultaneously buying previous losers and selling previous winners. This paper examines the CIS as first proposed by DeBondt and Thaler (1985) (Journal of Finance 40, 793–808) in an effort to expand and complement existing research. Results from our risk-adjusted, nonparametric, multifactor, bootstrap-simulated estimates show that, for both the French and German stock markets, short-term contrarian portfolios work best. Overall, the highest contrarian profits are obtained in the short run and the profits decrease over time. In addition, higher returns are not correlated to increases in the risk coefficients, which is consistent with investor overreaction.

Cross-border mergers and acquisitions: The undervaluation hypothesis

The growing interdependency of the global economy has developed new relationships between economic agents of different countries. In the last decade, a very interesting phenomenon has surfaced in the international market for corporate control. In a reversal of previous patterns, the number of foreign firms acquiring U.S. firms has been larger than the number of U.S. firms taking over foreign companies. The exact motivations for this switch in the role of U.S. firms from bidder to target are many. We focus our attention on the quest for undervalued assets. Under our undervaluation hypothesis, we postulate that the existence of market imperfections that cause frictions in the product and service markets also contributes to favor the acquisition of a company already operating. Thus, in order to minimize the costs penetrating into foreign markets, firms will search across national boundaries for undervalued companies as targets for their acquisitions. The results of this study offer support for this viewpoint.

An empirical investigation of factors affecting cross-border acquisitions: the United States vs. United Kingdom experience

Since the 1981-1982 recession in the United States, there has been a marked increase in domestic merger and acquisition activity. For example, the number of acquisitions involving U.S. companies was 2,296 and 3,701, respectively, for 1982 and 1987. The value of mergers involving U.S. companies also increased from about

The post-privatization financial performance of former state-owned enterprises

60 billion in 1982 to over

Factors Affecting Cross-Border Mergers and Acquisitions: The Canada-U.S. Experience

167 billion in 1987. Cross-border acquisitions involving U.S. firms have also become more common, increasing from 364 in 1982 to 553 in 1987. During 1988, the number of cross-border acquisitions involving U.S. firms reached 605. While the number of annual cross-border acquisitions has generally increased over time, the composition of cross-border activity has shifted abruptly in some periods. For example, U.S. acquisitions of non-U.S. firms increased modestly from 149 in 1983 to 177 in 1987 while foreign acquisitions of U.S. firms rose substantially over this same period. In 1983, there were 116 foreign acquisitions of U.S. firms, valued at about