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Book part
Publication date: 19 March 2018

Eric C. Lin, James L. Kuhle and Helen Xu

We examine market response to changes in the annual “Dogs of the Dow” (DOD) portfolio. Specifically, we explore stock prices and trading volumes of the Dow stocks that are newly…

Abstract

We examine market response to changes in the annual “Dogs of the Dow” (DOD) portfolio. Specifically, we explore stock prices and trading volumes of the Dow stocks that are newly included into or excluded from the DOD portfolio. Although the historical performance of this popular dividend-driven investment strategy is subject to debate, our study focuses on investigating Harris and Gurel’s (1986) “noninformation-motivated demand shifts” in the sample of DOD additions and deletions. Utilizing standard event study methodology over the period 1996–2016, we find evidence that a Dow stock experiences a significant but temporary increase (decrease) in price when it is newly included into (excluded from) the DOD portfolio. Price reversals occur within one week of the reconstitutions. We also find that trading volumes temporarily increase following both index additions and deletions. The results support the price-pressure hypothesis as the DOD reconstitutions do not generally convey new information.

Details

Global Tensions in Financial Markets
Type: Book
ISBN: 978-1-78714-839-0

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Content available
Book part
Publication date: 19 March 2018

Abstract

Details

Global Tensions in Financial Markets
Type: Book
ISBN: 978-1-78714-839-0

Article
Publication date: 21 June 2013

Michael Clemens

The purpose of this research is to investigate the risk and return characteristics of dividend investing compared to a passive “market” approach and provide probable explanations…

1725

Abstract

Purpose

The purpose of this research is to investigate the risk and return characteristics of dividend investing compared to a passive “market” approach and provide probable explanations for any differences in return and risk.

Design/methodology/approach

The research design is a standard time series analysis of two different data sets containing information about return for “dividend portfolios” and the “market portfolio”.

Findings

Investing in high dividend‐paying firms earns abnormal returns in a long short‐strategy in the USA and in world indices, confirming earlier studies. Different overlapping strategies and agency theory are used to provide explanations for the dividend strategy's persistence.

Research limitations/implications

While the US findings were significant at conventional levels, the results using the world indices had significance levels that were slightly below the usual academic cut off but may be acceptable to practitioners.

Practical implications

Seemingly anomalous findings should disappear once reported, yet the high dividend‐paying strategy continues to persist and this article provides some explanations relating to the value strategy, beta puzzle and agency theory.

Social implications

Paying dividends may be socially responsible since it is explained as a way of deploying free cash flow in an efficient manner rather than wasting money through overpriced acquisitions or buybacks of overpriced shares.

Originality/value

By using different databases, earlier research is confirmed and also found to be robust across different time periods. The contribution of this paper is to link the value premium, the beta puzzle and agency issues of free cash flows together to explain the outperformance and persistence of dividend investing from a practitioner viewpoint.

Details

International Journal of Managerial Finance, vol. 9 no. 3
Type: Research Article
ISSN: 1743-9132

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Content available
Book part
Publication date: 19 March 2018

Abstract

Details

Global Tensions in Financial Markets
Type: Book
ISBN: 978-1-78714-839-0

Abstract

Details

Broken Pie Chart
Type: Book
ISBN: 978-1-78743-554-4

Article
Publication date: 21 September 2015

Robert J. Allio

This masterclass seeks to identify the leaders others should emulate, what’s are best practices, how did the acclaimed exemplars get to be leaders, and what can we learn from…

13659

Abstract

Purpose

This masterclass seeks to identify the leaders others should emulate, what’s are best practices, how did the acclaimed exemplars get to be leaders, and what can we learn from their stories?

Design/methodology/approach

The author, a veteran practitioner and long-time observer of the evolution of strategic management regularly scans the business idea marketplace to identify any breakthroughs in the perennial quest for insights into the field of leadership.

Findings

Forget leadership – it’s strategy that matters. Companies excel when they adopt good strategies and implement them efficiently. The role of the leader is diminishing, and leadership has little utility as an organizing principle.

Practical implications

Look realistically at attempts to show how some CEOs shaped the future of their firms. Stories of success and failure typically exaggerate the impact of leadership style and management practices on performance. They focus on the singularities – the few extraordinary successes– and ignore the many events that failed to happen. We all fall prey to this affective fallacy when we extoll certain individuals – and then overweight their contribution to the success of their organizations.

Originality/value

We need to refocus our attention on strategy. Successful leadership ultimately comes down to good strategy and good fortune. We have little control over the vicissitudes of the macro-environment, but firms that adopt the right strategy will do better over the long term.

Details

Strategy & Leadership, vol. 43 no. 5
Type: Research Article
ISSN: 1087-8572

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Content available
Article
Publication date: 21 September 2015

Catherine Gorrell

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Abstract

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Strategy & Leadership, vol. 43 no. 5
Type: Research Article
ISSN: 1087-8572

Article
Publication date: 28 June 2013

Henry A. Davis

The purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.

Abstract

Purpose

The purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.

Design/methodology/approach

The paper provides FINRA Regulatory Notice 12‐40, SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities; Regulatory Notice 12‐44, SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements); Regulatory Notice 12‐55, Guidance on FINRA's Suitability Rule; and Regulatory Notice 13‐13, Trading and Quotation Halts in OTC Equity Securities; Trade Reporting Notice of April 17, 2013: Reduction of Reporting Times for Agency Pass‐Through Mortgage‐Backed Securities Traded TBA.

Findings

Notice 12‐40: FINRA Rule 5123 is part of a multi‐pronged approach to enhance oversight and investor protection in private placements; the rule will provide FINRA with more timely and complete information about the private placement activities of firms on behalf of other issuers. Notice 12‐44: The SEC approved amendments to FINRA Rule 4210 (Margin Requirements) related to option spread strategies, maintenance margin requirements for non‐margin eligible equity securities, free‐riding, “exempt accounts” and stress testing in portfolio margin accounts. Notice 12‐55: This Notice addresses two issues discussed in Regulatory Notice 12‐25: the scope of the terms “customer” and “investment strategy.” Notice 12‐25 provided guidance in a “frequently asked questions” format in FINRA Rule 2111 (Suitability). Notice 13‐13: The SEC approved amendments to FINRA Rule 6440, which provides authority for FINRA to initiate trading and quotation halts in OTC equity securities in circumstances where it is necessary to protect investors and the public; the rule provides authority to impose foreign regulatory halts, derivative halts and extraordinary event halts. Trade Reporting Notice of April 17, 2013: FINRA reminds firms of the coming reduction in reporting periods for the timely reporting of transactions in agency pass‐through mortgage‐backed securities traded TBA (to be announced) for good delivery and products not traded for good delivery.

Originality/value

These FINRA notices are selected to provide a useful indication of regulatory trends.

Article
Publication date: 7 September 2012

Henry A. Davis

The aim is to provide details of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in March, April and May 2012.

Abstract

Purpose

The aim is to provide details of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in March, April and May 2012.

Design/methodology/approach

The paper provides Regulatory Notice 12‐17, April 2012, “Telemarketing: SEC Approves Consolidated Telemarketing Rule,” and Regulatory Notice 12‐25, May 2012, “Suitability: Additional Guidance on FINRA's New Suitability Rule”.

Findings

Notice 12‐17: FINRA Rule 3230 (Telemarketing) updates exiting NASD and NYSE rules that require member firms to maintain and consult do‐not‐call lists, limit the hours of telephone solicitations and prohibit members from using deceptive and abusive acts and practices in connection with telemarketing, and adopts provisions that are substantially similar to Federal Trade Commission (FTC) rules that prohibit deceptive and other abusive telemarketing acts or practices. Notice 12‐25: The new FINRA Rule 2111 requires, in part, that a broker‐dealer or associated person “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the [firm] or associated person to ascertain the customer's investment profile.” In general, the new rule retains the core features of the previous NASD suitability rule, codifies several important interpretations of the predecessor rule and imposes a few new or modified obligations.

Originality/value

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends.

Details

Journal of Investment Compliance, vol. 13 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 20 November 2018

Gerasimos Rompotis

A well-documented pattern in the literature concerns the outperformance of small-cap stocks relative to their larger-cap counterparts. This paper aims to address the “small-cap…

Abstract

Purpose

A well-documented pattern in the literature concerns the outperformance of small-cap stocks relative to their larger-cap counterparts. This paper aims to address the “small-cap versus large-cap” issue using for the first time data from the exchange traded funds (ETFs) industry.

Design/methodology/approach

Several raw return and risk-adjusted return metrics are estimated over the period 2012-2016.

Findings

Results are partially supportive of the “size effect”. In particular, small-cap ETFs outperform large-cap ETFs in overall raw return terms even though they fail the risk test. However, outperformance is not consistent on an annual basis. When risk-adjusted returns are taken into consideration, small-cap ETFs are inferior to their large-cap counterparts.

Research limitations/implications

This research only covers the ETF market in the USA. However, given the tremendous growth of ETF markets worldwide, a similar examination of the “small vs large capitalization” issue could be conducted with data from other developed ETF markets in Europe and Asia. In such a case, useful comparisons could be made, so that we could conclude whether the findings of the current study are unique and US-specific or whether they could be generalized across the several international ETF markets.

Practical implications

A possible generalization of the findings would entail that profitable investment strategies could be based on the different performance and risk characteristics of small- and large-cap ETFs.

Originality/value

This is the first study to examine the performance of ETFs investing in large-cap stock indices vis-à-vis the performance of ETFs tracking indices comprised of small-cap stocks.

Details

Review of Accounting and Finance, vol. 18 no. 1
Type: Research Article
ISSN: 1475-7702

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