Wai-Ming Fong

Information, Trading and Stock Returns: Lessons from Dually-Listed Securities

This paper compares the intra-day patterns on the NYSE and AMEX of volatility, trading volume and bid-ask spreads for European and Japanese dually-listed stocks with American stocks of comparable average trading volume and volatility. It is shown that the intra-day patterns for these stocks are remarkably similar even though public information flows differ markedly across these stocks during the trading day. In the early morning, all stocks have higher volatility than later in the day, but this phenomenon is most pronounced for Japanese stocks and affects American stocks the least. We argue that these patterns are consistent with markets reacting to the overnight accumulation of public information but are inconsistent with the view that early morning volatility can be attributed to monopolistic specialist behavior.

Relative informational efficiency of cash, futures, and options markets: The case of an emerging market

We study the lead‐lag relationships among the spot, futures, and options markets on Hong Kong’s Hang Seng Index (HSI). The young options market experiences thin trading, and the option returns lag the cash index returns. The more mature futures market experiences active trading. Yet its lead over the cash index appears to be less than the counterparts in other countries. A possible reason is the dominance of a few major stocks in the index; and these stocks have symmetric lead‐lag relations with the futures. Furthermore, the informativeness of the non-lasting futures and options quotations seems to depend on the market maturity. ” 2001 Elsevier Science B.V. All rights reserved.

New York Stock Exchange trading halts and volatility

Abstract This study compares the volatility after NYSEs trading halts with the volatility after pseudo-halts. Every pseudo-halt is a period of continuous trading matching the corresponding trading halt in stock, sign of excess (or net-of-market) return, duration, and time of day. No pseudo-halt can be within 10 trading days before or after a trading halt of the same stock. Each pseudo-halt slightly over-matches or slightly undermatches in absolute excess return the corresponding trading halt. The average absolute during-pseudo-halt excess return is insignificantly different from the average absolute during-halt excess return, so that the during-pseudo-halt volatility should be, on average, similar to the during-halt volatility. The main result of this study is that the post-halt volatility (measured as the absolute excess returns of 30-trading-minute intervals) is significantly larger than the post-pseudo-halt volatility for less than two trading hours after the market re-opens.

Privatization and Performance: The Experience of Firms in China

This article investigates the effects of privatization on corporate performance in China. We focus on two very different industries: the manufacturing industry--the largest (relatively) competitive industry in China--and the basic material industry--the largest industry protected and closely monitored by the central government. We find that privatization to the domestic public has only a small positive effect on corporate performance for the manufacturing industry, but does not have any effect for the basic material industry, suggesting that privatization does not work when competition does not prevail. We also find that privatization to institutions hurts corporate performance for the manufacturing industry, but not for the basic material industry, suggesting that control by legal person shares often means additional layers of bureaucracy and higher agency costs, unless the central government closely monitors the firms, mitigating the agency problems.

The information content of corporate domicile relocation announcements: the case of Hong Kong

This paper examines the information content of domicile relocation announcements of Hong Kong listed companies. The results suggest that investors regard the disadvantages of domicile relocation as more significant than the advantages. There are statistically significant negative abnormal returns after the announcements. On the other hand, it was found that there was no statistically significant abnormal trading volume around the announcements, suggesting that the announcements are unexpected and investors interpret the relocation identically. The results contrast sharply with the statistically significant abnormal trading volume but insignificant abnormal returns around the announcements as documented in previous studies. It was found that those studies used unreliable data and inappropriate methods, which lead to misleading results.

Mergers & Acquisitions and the Acquirer-Target Cultural Differences

Abstract We investigate the impacts of cultural environment on mergers and acquisitions (M&A) in the U.S. To measure the cultural environment of a firm, we use several variables of cultural dimension widely adopted in the literature, mainly the percentage of religious adherents and the percentage of Republican supporters in the county where the firm is headquartered. We compute alternative summary variables to proxy for the overall differences in cultural environment between firms. We find that the bigger cultural differences between two firms, the less likely that the firms will start an M&A negotiation. However, once an M&A negotiation has started, the cultural differences have a small positive impact on the negotiation success rate, a significantly positive impact on the immediate abnormal return of the target, and a small positive impact on the long-run abnormal return of the acquirer, but no negative impacts on other negotiation outcomes.