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This study aims to remind researchers that measurement errors and inappropriate inferences may result from improperly combining and adjusting certain Center for Research in Security Prices (CRSP) measures.

In addition to real-world working examples, the study uses earnings announcements data to examine the effects of improperly combining and adjusting CRSP measures.

This study assists researchers with the following two considerations when using CRSP data: stand-alone share prices adjusted with CRSP adjustment factors are inaccurate in the presence of property dividend, spin-off and rights offering events; and ignoring covertly missing stock returns may create misleading test results. The primary objectives of the study are to help researchers increase the integrity of their studies and the probability of publication.

Inadequate consideration for the two issues discussed in the paper may change the researcher’s statistical inferences.

Archival researchers who overtly address and discuss the existence of these issues achieve two important and related benefits. First, the researcher increases his or her credibility with editors and reviewers, which enhances the probability of a published study. Second, the researcher increases his or her perceived technical competency, which potentially affects promotion and tenure decisions, editorial membership decisions, co-authorship opportunities and other professional effects. Doctoral students will find this study to be particularly useful.

Real estate investment has been generally accepted as a value-adding proposition for a portfolio investor. Such an impression is not only shared by investment professionals and financial advisors but also appears to be supported by an overwhelming amount of research in the academic literature. The benefits of adding real estate as an asset class to a well-diversified portfolio are usually attributed to the respectable risk-return profile of real estate investment together with the relatively low correlation between its returns and the returns of other financial assets. By using the regime-switching technique on an extensive historical dataset, we attempt to look for the statistical evidence for such a claim. Unfortunately, the empirical support for the claim is neither strong nor universal. We find that any statistically significant improvement in risk-adjusted return is very much limited to the bullish environment of the real estate market. In general, the diversification benefit is not found to be statistically significant unless investors are relatively risk averse. We also document a regime-switching behavior of real estate returns similar to those found in other financial assets. There are two distinct states of the real estate market. The low-return (high-return) state is characterized by its high (low) volatility and its high (low) correlations with the stock market returns. We find this kind of dynamic risk characteristics to play a crucial role in dictating the diversification benefit from real estate investment.

In most portfolio performance studies, a reference portfolio is used to assess the performance of a portfolio manager. The choice of an appropriate reference portfolio is essential to yield a fair and unbiased evaluation of the manager. In the following analyses, category‐based benchmarks are assessed against established benchmarks to evaluate, which alternative accurately evaluates a portfolio manager's performance. The results indicate that the category‐based benchmarks are more appropriate comparison reference for evaluating the systematic risk of equity portfolios and equity security returns.

This is a companion paper to our previous study in Cao and Wei (2005) on stock market temperature anomaly for eight international stock markets. The temperature anomaly is characterized by a negative relationship between stock market returns and temperature. This line of work relies on the impact of environmental variables, such as temperature, on mood and behavior changes. In this paper, we expand the sample in Cao and Wei (2005) to include 19 additional financial markets. Our evidence confirms the identified negative relationship for the expanded sample. More importantly, our nonparametric tests, as opposite to the parametric or semi-parametric approaches used by previous related studies, demonstrate that this negative relationship is robust to distributional assumptions. Based on the sub-sample analysis, we find that this negative relationship is stable over time. Furthermore, we consider temperature deviation and demonstrate that this negative relationship is not just a level effect.

The purpose of this paper is to examine the dividend initiation announcements made by firms in the information technology sector as defined in a modern system of industrial classification.

On the basis of a modern classification of the information technology industry, the authors examine a wide range of corporate performance and management measures to discriminate between the two theories of the information revealed by the announcement of dividend initiations, the signaling, and life cycle theories.

The empirical results are more consistent with the corporate life cycle theory of dividends than with the information signaling hypothesis. This finding helps clarify the nature of the information revealed by the announcement.

The paper has clear implications for investors who are interested in the growth prospects of technology firms, or for others interested in their prospective stability and degree of maturity.

This paper examines the Random Walk Hypothesis (RWH) for aggregate New Zealand share market returns, as well as the CRSP NYSE‐AMEX (USA) index during the 1980‐2001 period. Using several indices, we rely on the variance‐ratio test and find evidence to support the rejection of the RWH with some evidence of a momentum effect. However, we find evidence to suggest the behaviour of share prices to be time‐dependent in New Zealand. For example, we find the indices tested were closer to random after the 1987 share market crash. Further analysis showed even stronger results for periods subsequent to the passage of the Companies Act 1993 and the Financial Reporting Act 1993. We also find evidence that indices based on large capitalisation stocks are more likely to follow a random walk compared to those based on smaller stocks. For the USA index, we find stronger evidence of random behaviour in our sample period compared to the earlier period examined by Lo and Mackinlay (1988)

We investigate whether external investment banks or internal key IPO insiders such as company directors and officers, venture capitalists and institutions that hold an IPO's stock serve as effective monitors of IPO investments over the post-IPO period. We measure median changes in each group's holdings for the sample, finding large changes in these values during a long-run holding period. We find that long-run buy-and-hold returns (BHARs) are positively related to the lead investment bank underwriter reputation and the gross spread demonstrating that the external monitoring by investment banking firms increases the post-IPO firm's value. Holding the underwriter reputation constant, we find that the BHARs are positively related to the gross spread, also indicative of the value of monitoring by external investment banks.

The aim of this study is to examine real estate investment trust exchange-traded funds (REIT ETFs) and test for the existence of the “asymmetric beta puzzle” phenomenon in these financial instruments that are relatively new and are gaining popularity. The “asymmetric beta puzzle” phenomenon is used to identify the hedging and diversification benefits of a financial instrument. “Asymmetric beta puzzle” exists when betas in declining markets are higher than betas in advancing markets.

To study 14 REIT ETFs by using monthly and daily Center for Research in Security Prices (CRSP) data. Capital asset pricing model (CAPM) and Fama–French three-factor model were used to estimate betas in REIT ETFs and those in advancing and declining markets. Both the S&P 500 and the CRSP value-weighted indices were used in the beta estimation. Two hypotheses with regard to betas in both advancing and declining markets were defined and tested to test for the existence of the “asymmetric beta puzzle” phenomenon.

This study confirms the presence of the “asymmetric beta puzzle” in the data of monthly REIT ETFs as documented by Goldstein and Nelling (1999) and Chatrath et al. (2000) for REITs; however, this phenomenon was not found when using daily data, but quite the opposite – REIT ETF betas are higher in advancing markets than they are in declining markets – was found.

Goldstein and Nelling (1999) and Chatrath et al. (2000) identify the phenomenon of “the asymmetric REIT-beta puzzle” in monthly REIT’s returns. This study revisits the phenomenon identified in the aforementioned authors’ studies by using daily data and a relatively new real estate financial instrument – REIT ETFs. Therefore, this paper fills a void in the literature and would benefit both institutional and retail investors in their portfolio designs.

The purpose of this paper is to study how the target fund in mutual fund mergers performed compared to the acquiring funds had they not been merged but continued on their own as buy-and-hold portfolios.

The authors develop a novel approach to examine post-merger wealth effects. The authors’ study how the target portfolios would have performed compared to the funds acquiring them had they not been merged but continued on their own as passive portfolios. The data set consists of 793 merging US equity funds from January 2003 to December 2014.

The authors find that the target portfolio shareholders would have been better off if the target fund had been converted from an actively managed fund to a passively managed fund that maintained their current holdings.

The findings are the opposite to many previous studies who view target fund shareholders as the major beneficiaries in mutual fund mergers.

Investors receiving notification of their fund merging should reconsider their investment strategy. If they wish to maintain the original strategy of their fund, they should oppose the merger. Alternatively they may withdraw their money from the (soon-to-be) merged fund, replicate the latest portfolio of their fund, and buy-and-hold that portfolio.

The authors develop a novel approach to examine post-merger wealth effects.

Considering the relationship between the central bank balance sheet and unconventional monetary policy after the 2008 financial crisis, it is crucial to see how the unconventional monetary policy, given near-zero interest rates, affects future stock market performance. This paper analyzes the impact of the Fed's balance sheet size on stock market performance.

To analyze the Fed's balance sheet size's long-term stock market implications, this paper uses the asset pricing framework of market return predictability such as Ordinary least squares (OLS) and Generalized method of moments (GMM) analysis.

Findings in this paper suggest that the Fed's balance sheet size, deflated by asset market wealth, presents evidence of return predictability during 1926–2015 that is robust against standard controls. These results can be explained through the redistribution of risk and the wealth channels of monetary policy transmission. The changing balance sheet size of a central bank (1) affects systemic risk, yields and expectations and (2) signals the future direction of monetary policy and thus economic outlook.

The main implication of these findings is that policymakers should avoid a severe imbalance between a central bank's balance sheet size and assets market wealth.

The empirical evidence in this paper documents a century-old relation between the Fed's balance sheet size and US stock market return using the Fed's balance sheet data for the last 100 years and stock market returns from the Center for research in security prices (CRSP) database.