Robert A. Van Ness

The Value of Winning in Motorsports: Sponsorship-linked Marketing

ABSTRACT Corporate sponsorship of events, especially sports, has become a commonplace marketing communications tool. Still at question in sponsorship-linked marketing programs is the economic value of the firm. Also largely unexamined in marketing research on sponsorship is the impact of participation outcomes. For example, is it more valuable to the firm to sponsor a winner, or is it simply participation and, thus, exposure that brings value to the firm? This study presents an analysis of the share-price impact of sponsoring the drivers in the Indianapolis 500 mile race to assess the value of motorsports victories and participation within a firms sponsorship-linked marketing strategy. This approach allows the use of historical data in the analysis of the value of sponsorship. While the findings of the study suggest that autoracing sponsorships involving products that are not closely linked to the automotive industry probably offer little chance for increasing overall corporate valuations, sponsors with logical or matched ties to the consumer automotive industry registered statistically and economically significant gains in their share prices around the time of their sponsorship victories. ‘Win on Sunday, Sell on Monday-an old adage founded by Detroits automakers, which has withstood the racing test of time. -Economaki, 1997

Determinants and Effects of Corporate Lobbying

We examine the determinants and value effects of corporate lobbying, controlling for corporate PAC campaign contributions. We find evidence that firms with greater potential payoffs from favorable policy and regulations lobby most actively, and that managers often utilize both lobbying and campaign contribution channels to influence the political climate affecting the firm. We also find that shareholders value the lobbying activities pursued by management on their behalf, particularly if the firm does not have a PAC that contributed to an election campaign. The results are robust to a number of tests designed to mitigate potential omitted-variable and self-selection bias.

Can the Treatment of Limit Orders Reconcile the Differences in Trading Costs between the Differences in Trading Costs between NYSE and Nasdaq Issues

In this paper, we determine whether each bid (ask) quote reflects the trading interest of the specialist, limit order traders, or both for a sample of NYSE stocks in 1991. We then compare Nasdaq spreads with NYSE spreads that reflect the trading interest of the specialist. Our empirical results show that the average Nasdaq spread is significantly larger than the average NYSE specialist spread. We find that, on average, 49% of the difference between Nasdaq and specialist spreads is due to the differential use of even-eighth quotes between Nasdaq dealers and NYSE specialists. We also find that the NYSE specialist spread is significantly larger than the limit order spread, although NYSE specialists and limit order traders are similiar in their use of even-eighth quotes.

Short Selling and the Weekend Effect for Nyse Securities

Using short-sale transactions data, we examine the relation between short selling and the weekend effect. We do not find that short selling is more abundant on Monday than on Friday, even for stocks that have higher Friday returns. We find that short sellers execute more short sale volume during the middle of the week, and that the positive correlation between short selling and returns on Monday is greater, on average, than the correlation on the other days of the week. Our results are robust to subsamples of stocks with larger weekend effects and stocks that do not have listed options.

Short Selling during Extreme Market Movements

This study examines the short selling of NYSE stocks contained in the S&P 500 on days with extreme increases (up days) and extreme decreases (down days) in the index. Although Diether, Lee, and Werner [2009] showed, using contemporaneous returns of individual stocks, that short sellers are generally contrarian, Blau, Van Ness, Van Ness, and Wood find that short selling in stocks increases (decreases) on large down (up) days for the S&P, which suggests that during extreme market movements short sellers tend to follow the crowd. Further, the authors’ results show that short sellers do not anticipate down days, indicating that these event days are largely unforeseen. When examining the return predictability of short sellers on event days, the authors observe that short sellers on up days are significantly better at predicting negative next-day returns than short sellers on down days, suggesting that market-induced contrarian short selling is more profitable than momentum short selling.

Capitalizing on Catastrophe: Short Selling Insurance Stocks Around Hurricanes Katrina and Rita

We develop several hypotheses regarding short-selling activity around Hurricanes Katrina and Rita. We find that abnormal short selling does not increase until 2 trading days after the landfall of Katrina and that short-selling activity is much more significant around Rita. We find a substantial increase in short-selling activity in the trading days prior to the landfall of Rita and relatively less short-selling activity in the trading days after landfall. There is little evidence that suggests that traders short insurance stocks with more potential exposure in the Gulf region than other insurance stocks in the days before landfall.

Short- and Long-Term Effects of Multimarket Trading

We analyze short- and long-term effects of multimarket trading by examining the entries of multiple markets into transacting three ETFs, DIA, QQQ, and SPY. We find that large-scale entries improve overall market quality, while small-scale entries have ambiguous effects. Our results show that the competition effect dominates the fragmentation effect over a long horizon and that market fragmentation leads to a decline in trading costs. Further, we find that the order handling rules help mitigate the fragmentation effect and facilitate the competition effect. We do not find that multimarket trading harms price efficiency or increases price volatility.

Is the Adverse Selection Component Really Higher on the NYSE/Amex than on the Nasdaq?

Affleck-Graves, Hegde and Miller (1994) find that the adverse selection component of the bid-ask spread is higher for NYSE and Amex stocks than for Nasdaq stocks. Using the model of Huang and Stoll (1997), we revisit their study and find the opposite to be true - the adverse selection component is actually higher for Nasdaq stocks than for NYSE and Amex stocks. The economic magnitude of this additional adverse selection cost is very significant. Our results have important implications for the understanding of information production in dealer versus auction markets, and the costs of trading on such markets. Copyright Blackwell Publishers Ltd 2002.

REIT Auditor Fees and Financial Market Transparency

This article examines the relationship between overinvestment in audit services, abnormal nonaudit fees paid to the auditor and market-based measures of firm transparency. Because real estate investment trusts (REITs) must distribute 90% of their earnings as dividends, many are repeat participants in the seasoned equity market. Thus, REITs have unusually strong incentives to strive for security market transparency. We find that the capital markets reward REITs that overinvest in audit services with better liquidity as measured by bid-ask spreads. However, firms with abnormally high nonaudit expenditures appear to be penalized with wider spreads, consistent with the notion that such fees may compromise auditor independence.

Aggressive Short Selling and Price Reversals

We show that short selling may, occasionally, cause excessive price pressure. We study large negative price reversals that occur on no-news days and find that short selling during such reversals is abnormally aggressive and substantially increases the magnitude of price declines. This negative effect on prices extends beyond a mere selling pressure from aggressive sell orders. Consistent with extant theories of predatory trading, price reversals are also accompanied by aggressive non-short selling. Large price reversals are more likely to occur in the stocks for which short selling restrictions are lifted; however, even when restrictions apply, traders often successfully circumvent them.