...finance Eugene F. Fama* Graduate School of Business, University of Chicago, Chicago, IL 60637, USA Received 17 March 1997; received in revised form 3 October 1997 Abstract Market efficiency survives the challenge from the literature on long-term return anomalies. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent overreaction to information is about as common as underreaction, and post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Most important, consistent with the market efficiency prediction that apparent anomalies can be due to methodology, most long-term return anomalies tend to 1998 Elsevier Science S.A. All rights disappear with reasonable changes in technique. reserved. JEL classification: G14; G12 Keywords: Market efficiency; Behavioral finance 1. Introduction Event studies, introduced by Fama et al. (1969), produce useful evidence on how stock prices respond to information. Many studies focus on returns in a short window (a few days) around a cleanly dated event. An advantage of this approach is that because daily expected returns are close to zero, the model for expected returns does not have a big effect on inferences about abnormal returns. * Corresponding author. Tel.: 773 702 7282; fax: 773 702 9937; e-mail: eugene.fama@gsb.uchicago. edu. The comments of Brad Barber, David Hirshleifer, S.P. Kothari, Owen Lamont, Mark Mitchell, Hersh Shefrin, Robert Shiller, Rex Sinquefield, Richard...
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...F. Fama* Graduate School of Business, University of Chicago, Chicago, IL 60637, USA Received 17 March 1997; received in revised form 3 October 1997 Abstract Market efficiency survives the challenge from the literature on long-term return anomalies. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent overreaction to information is about as common as underreaction, and post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Most important, consistent with the market efficiency prediction that apparent anomalies can be due to methodology, most long-term return anomalies tend to disappear with reasonable changes in technique. 1998 Elsevier Science S.A. All rights reserved. JEL classification: G14; G12 Keywords: Market efficiency; Behavioral finance 1. Introduction Event studies, introduced by Fama et al. (1969), produce useful evidence on how stock prices respond to information. Many studies focus on returns in a short window (a few days) around a cleanly dated event. An advantage of this approach is that because daily expected returns are close to zero, the model for expected returns does not have a big effect on inferences about abnormal returns. * Corresponding author. Tel.: 773 702 7282; fax: 773 702 9937; e-mail: eugene.fama@gsb.uchicago. edu. The comments of Brad Barber, David Hirshleifer, S.P. Kothari, Owen Lamont, Mark Mitchell, Hersh Shefrin, Robert Shiller, Rex Sinquefield...
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...------------------------------------------------- STOCK HOLDER EQUITY Submitted to: Madam Hina Samdani DATE: 04-01-2011 BBA-II (D) Reference: mainly taken from your lectures and some data from company’s official website FINANCIAL ACCOUNTING Submitted by: Shafqat Ali Faizan Ali Adeel Murtaza DanialQureshi Imran Zahoor SabtainZubair INTRODUCTION TOTAL STOCK HOLDER EQUITY: This is a portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings. Stockholders' equity represents the equity stake currently held on the books by affair’s equity investors. It is calculated either as a firm's total assets minus its total liabilities or as share capital plus retained earnings minus treasury shares. FOCAL POINT: The problem is focused by such perspectives as follows. a.The point which is being focused in this project is that the deep study of stock holder equity that consists brief of its all contents and terms related to it. b.To understand the effects on stock holder equity when company issue shares, pay dividends, acquiring of assets against shares, treasury stock, retain earnings, and costs like organizingcost. IMPORTANT ENOUGH: Why the problem is important enough to study. * It is a lay man’s concept that the stock holder equity is just about the net worth of the company but for the student of the financial accounting there is need to understand complete working of the stock holder...
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...Study Guide for Exam 2 ACC322 Chapter 13 * The differences between current liabilities and long-term liabilities. * Journal entries related to accounts payable (at the time of purchase and at the time of payment). * Journal entries related to interest-bearing notes: the issuance, interest expense, interest payment, and on the maturity date. * Journal entries related to zero-interest-bearing notes: the issuance, interest expense, and on the maturity date. * What is the revenue principle? * How do we account for unearned revenues? (Cash collection and revenue recognition) * How do we account for gift card revenues? (Cash collection, revenue recognition and gift card expiration). * What is the matching principle? * How do we account for paid future absence? * How do we account for warranty? (Estimated warranty and actual warranty expenditures) * The accounting treatments for gain contingencies: disclose or ignore. * The accounting treatments for loss contingencies: report (accrual), disclose (footnote), or ignore. Chapter 14 * What is the bond price at the time of issuance? Prepare journal entry for bond issuance. * What are the interest expense and interest payment for a specific period? Prepare journal entry for interest expense and payment. * At the time of early retirement of bond, what is the book...
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...-Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172 AN EMPIRICAL ANALYSIS OF IMPACT OF RIGHT ISSUES ON SHAREHOLDERS RETURNS OF INDIAN LISTED COMPANIES Pooja Miglani Assistant Professor PG Deptt. of Commerce & Management Apeejay College of Fine Arts, Jalandhar, Punjab, India ABSTRACT This study explores the impact of right shares issued by Indian companies that took place during 2005 & 2010. The samples of 32 right issues have been used to study the announcement effect. The study examines the stock price reaction to information content of right issues with a view of finding whether Indian stock market is semi-strong efficient or not. The standard event study methodology has been used for the purpose of examining the right issue announcement reaction. The study reveals statistically significant abnormal returns on the announcement & surrounding dates. Keywords: Right Issue, Event study, Announcement date, Abnormal returns International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– II, Issue –4,Oct. 2011 [169] -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172 INTRODUCTION: This paper is organized as follows: Section I includes this introductory exposition. It includes two parts. Part 1 specifies meaning of right shares & growth/quantum of right issues in India & Part 2 Reviews the pertinent literature. Section II gives details of methodology. It further includes part 1 of data Sources & part 2 of data...
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...earnings announcements from both China and developed countries, and has used event study method to focus on earnings announcements and share prices of all 29 real estate companies listed in Shanghai A-share market from 31 July 2012 to 30 Jun 2013. The event date was selected on the day when earnings for the year 2012 were announced. The method for calculating normal performance of shares was market model. The result of study showed that there was no significant reaction of share prices to earnings announcement containing good news in event window during [-30, -1] and [-1, +1], except 6 days before announcement day, 1 day before announcement day, and there was a significant reaction of share prices of real estate sector in Shanghai A-share market to earnings announcements containing good news in event window during [+1, +30]. For earnings announcements containing bad news, according to event study, we found no significant reaction of share prices of real estate sector in Shanghai A-share market in the event window between [-30, -1], [-1, +1] and [+1, +30], except 18 days and 7 days before earnings announcement day, 9 days, 21 days and 30 days after earnings announcement day. And we reached the conclusion that the real estate sector in Shanghai A-share does not conform to semi-strong form market efficiency. Key words: earnings announcement, share price, efficient market hypothesis, event studies, Chinese real estate market 1 Directory Directory ....................
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...This paper presents clinically-based studies of two acquisitions that received very different stock market reactions at announcementCone positive and one negative. Despite the differing market reactions, we find that, ultimately, neither acquisition created value overall. In exploring the reasons for the acquisition outcomes, we rely primarily on interviews with managers and on internally generated performance data. We compare the results of these analyses to those from analyses of post-acquisition operating and stock price performance traditionally applied to large samples. We draw two primary conclusions. (1) Our findings highlight the difficulty of implementing a successful acquisition strategy and of running an effective internal capital market. Post-acquisition difficulties resulted because: (a) managers of the acquiring company did not deeply understand the target company at the time of the acquisition; (b) the acquirer imposed an inappropriate organizational design on the target as part of the post-acquisition integration process; and (c) inappropriate management incentives existed at both the top management and division level. (2) Measures of operating performance used in large sample studies are weakly correlated with actual post-acquisition operating performance. * University of Chicago and NBER, University of Chicago, and Harvard University, respectively. We especially thank Shel Erikson, Thomas Hix, William Berger, Michael Grimes and Joseph Chamberlain...
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...CHAPTER 11 Reporting and Analyzing Stockholders’ Equity Study Objectives • • • • • • • • • Identify and discuss the major characteristics of a corporation. Understand the Components of Stockholders’ Equity. Record the issuance of common stock. Explain the accounting for the purchase of treasury stock. Differentiate preferred stock from common stock. Prepare the entries for cash dividends and understand the effect of stock dividends and stock splits. Identify the items that affect retained earnings. Prepare a comprehensive stockholders' equity section. Evaluate a corporation's dividend and earnings performance from a stockholder's perspective. Chapter Outline Study Objective 1 - Identify and Discuss the Major Characteristics of a Corporation 1. A corporation is a. a legal entity created by law b. a corporation has most of the rights and privileges of a person. c. Corporations may be classified in a variety of ways. Two common classifications are i. by purpose ii. by ownership. 1. Classification by ownership differentiates publicly held or privately held; a. A publicly held corporation is regularly traded on a national securities market and may have thousands of stockholders. b. A privately held corporation, often referred to as a closely held corporation, does not offer its stock for sale to the general public and may have only a few stockholders. 2. Distinguishing Corporations from proprietorships and partnerships. a. Separate legal existence: i. An entity separate and distinct...
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...expectations and differences in opinions. In addition, analysts’ earnings forecasts are one of the rare settings for which researchers have a large natural data set of individual analysts’ actual decisions, and for which the biases in decision making can be observed and verified ex-post. Not surprisingly, the activities of analysts have been a fertile ground for behavioral research. Prior studies have shown that analysts often suffer from a number of biases. However, the implications of these potential cognitive biases for investors and, even more so for managers, are less understood. This study considers the behavior of financial market participants from a perspective different from that of previous research. It focuses on anchoring bias, a topic that has been characterized by Hirshleifer (2001) as an important part of “dynamic psychology-based assetpricing theory in its infancy” (p. 1535). “Anchoring” describes the fact that, in forming numerical estimates of uncertain quantities, adjustments in assessments away from some initial value are often insufficient. One of the first studies of this cognitive bias is the seminal experiment by Kahneman and Tversky (1974). These authors report that estimates of an uncertain proportion (the percentage of African nations in the United Nations) were affected by a number between 0 and 100 that was determined by spinning a wheel of fortune in the subjects’ presence. Subsequent research (reviewed in Section 2) has confirmed the generality...
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...Project Evaluation Corporate Finance 2013-2014 The 14 essays convey many interesting ideas. I am very impressed by some analysis which gives very technical and detailed description. These works have shown that you have great potential to go further, either to a comprehensive report for practical consultancy or to deepen the knowledge for academic research. However, there are some problems that I must mention for your future work. • Lack of theoretical foundations: Some reports just filled the paper with lots of facts, figures and data. The question follows is often “and so what?” The report will be more scientific based if you provide some explanations linking to the theories and interpretations we learned in the class. Present your shining points first: Many reports just give the introduction as a general description of the background of the selected companies. However, a more important part expected in these reports is your research questions and key points of analysis. If you don’t highlight the shining points from the beginning, you make your report less worthy of further reading. Coordination problem: I found some reports give strongly contradict results. I understand that you just share the task among the team members. But at least you must have something complete and logically right. Avoid using abbreviations for words that are less frequently used (eg. ADS, ROI, OTC…). If you insist to use, please write the full words for the first time you employ them. Reference of...
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...RECENT TRENDS IN CAPITAL MARKET OF BANGLADESH: CRITICAL EVALUATION OF REGULATION by Syed Golam Shahjarul Alam A thesis submitted in partial fulfillment of the requirements for the degree of Professional Master in Banking and Finance Examination Committee: Dr. Sundar Venkatesh (Chairperson) Dr. Winai Wongsurawat Dr. Yuosre Badir Nationality: Previous Degree: Bangladeshi Master of Business Administration University of Dhaka Dhaka, Bangladesh Bangladesh Bank (Central Bank of Bangladesh) Scholarship Donor: Asian Institute of Technology School of Management Thailand May2012 ACKNOWLEDGEMENTS My greatest Gratitude is given to Dr. Sundar Venkatesh, my project advisor, for his deep insight in capital market, which helped me to accomplish the project paper. His dedication towards teaching, motivating and supervising influenced me greatly, leading to do my project work carefully and seriously. I wish to express my deepest gratitude and appreciation to Bangladesh Bank, My office, for granting me a scholarship, to pursue my Masters in banking and finance. I express my gratitude and deepest appreciation to my friend Ms. Senjuti binte rafiq, My Colleagues in Bangladesh Bank and DSE Library staffs who helped me by providing valuable suggestions and necessary data for my analysis. I am very much thankful to Dr. Winai Wongsurawat and Dr. Juthathip Jongwanich for their valuable suggestions regarding my project. I express my gratitude and deepest appreciation to Ms...
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...Factors affecting on stock price 1. Introduction The stock market has become an essential market playing a vital role in economic prosperity that fostering capital formation and sustaining economic growth. Stock markets are more than a place to trade securities; they operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk, and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. In essence, a large number of economic variables like gross domestic product, interest rates, current account, monthly supply, employment, their information etc. have an impact on daily stock prices (Kurihara, 2006). This paper reflects how stock price is determined by considering the effect of different factors and outlines whether the internal, external and economic factors have impact on stock pricing. This study is about to know whether Dividends, paid up capital, market capital, corporate social responsibility, lawsuits, Retained Earnings, AGM, EGM, Earning Per Share, Rumors, Margin Loan, Net Income, Face Value, Return on Investment, Goodwill of the firm, Company News, Analysts Report, Sentiment, Rumors, etc. depends on stock price or merely some special factors like stock dividend, P/E ratio, government policy, macroeconomics fundamental, investors sentiment...
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...RECENT TRENDS IN CAPITAL MARKET OF BANGLADESH: CRITICAL EVALUATION OF REGULATION by Syed Golam Shahjarul Alam A thesis submitted in partial fulfillment of the requirements for the degree of Professional Master in Banking and Finance Examination Committee: Dr. Sundar Venkatesh (Chairperson) Dr. Winai Wongsurawat Dr. Yuosre Badir Nationality: Previous Degree: Bangladeshi Master of Business Administration University of Dhaka Dhaka, Bangladesh Bangladesh Bank (Central Bank of Bangladesh) Scholarship Donor: Asian Institute of Technology School of Management Thailand May2012 ACKNOWLEDGEMENTS My greatest Gratitude is given to Dr. Sundar Venkatesh, my project advisor, for his deep insight in capital market, which helped me to accomplish the project paper. His dedication towards teaching, motivating and supervising influenced me greatly, leading to do my project work carefully and seriously. I wish to express my deepest gratitude and appreciation to Bangladesh Bank, My office, for granting me a scholarship, to pursue my Masters in banking and finance. I express my gratitude and deepest appreciation to my friend Ms. Senjuti binte rafiq, My Colleagues in Bangladesh Bank and DSE Library staffs who helped me by providing valuable suggestions and necessary data for my analysis. I am very much thankful to Dr. Winai Wongsurawat and Dr. Juthathip Jongwanich for their valuable suggestions regarding my project. I express my gratitude and deepest appreciation to Ms...
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... 3B, 4B, 5B Study Objectives 1. Prepare the entries for cash dividends and stock dividends. Identify the items reported in a retained earnings statement. Prepare and analyze a comprehensive stockholders’ equity section. Describe the form and content of corporation income statements. Compute earnings per share. Questions 1, 2, 3, 4, 5, 6, 7, 8 Exercises 1, 2, 3, 4, 5, 6, 7 2. 9, 10, 11, 12, 13, 14 4, 5 6, 8, 9 2A, 3A, 4A 2B, 3B, 4B 3. 14, 15 6, 7 5, 6, 10, 11, 13, 15, 16 1A, 2A, 3A, 4A, 5A 1B, 2B, 3B, 4B, 5B 4. 15, 16 8 12, 13, 14 5. 17 9, 10 12, 14, 15, 16, 17 3A 3B 14-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description 1A 2A Prepare dividend entries and stockholders’ equity section. Journalize and post transactions; prepare retained earnings statement and stockholders’ equity section. Prepare retained earnings statement and stockholders’ equity section, and compute earnings per share. Prepare the stockholders’ equity section, reflecting dividends and stock split. Prepare the stockholders’ equity section, reflecting various events. Prepare dividend entries and stockholders’ equity section. Journalize and post transactions; prepare retained earnings statement and stockholders’ equity section. Prepare retained earnings statement and stockholders’ equity section, and compute earnings per share. Prepare the stockholders’ equity section, reflecting dividends and stock split. Prepare the stockholders’...
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... (i) empirical and theoretical analyses of patterns in the cross-section of average stock returns, (ii) studies on trading activity, and (iii) research in corporate finance. Behavioural finance is an exciting new field because it presents a number of normative implications for both individual investors and CEOs. The papers reviewed here allow us to learn more about these specific implications. Keywords: behavioural finance, market efficiency, cross-section of stock returns JEL classifications: G00, G10, G11, G14, G31, G32, G34 1. Introduction The field of finance, until recently, had the following central paradigms: (i) portfolio allocation based on expected return and risk (ii) risk-based asset pricing models such as the CAPM and other similar frameworks, (iii) the pricing of contingent claims, and (iv) the Miller-Modigliani theorem and its augmentation by the theory of agency. These economic ideas were all derived from investor rationality. While these approaches revolutionised the study of finance and brought rigour into the field, many lacunae were left outstanding by the theories. For example, the traditional models have a limited role for volume, yet in actuality, annual volume on the NYSE amounts to somewhere in the region of 100% of shares outstanding. Second, while the benefits of diversification are emphasised by modern theories, individual investors often hold only a few stocks in their portfolios. Finally, expected returns...
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