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Glenn Growe, Marinus DeBruine, John Y. Lee and José F. Tudón Maldonado
This paper examines the profitability and performance measurement of U.S. regional banks during the period 1994–2011, using the GMM estimator technique. Our study extends prior…
Abstract
Purpose
This paper examines the profitability and performance measurement of U.S. regional banks during the period 1994–2011, using the GMM estimator technique. Our study extends prior research by including several factors not previously considered using U.S. data.
Approach
We use bank-specific, industry-specific, and macroeconomic determinants of profitability contemporaneous with our performance indicators. We follow the accounting fundamental analysis path in explaining the bank performance.
Findings
Among the performance measures, the efficiency ratio and provisions for credit losses are negatively and equity scaled by assets is positively related to profitability. However, these relationships either reverse (efficiency ratio and provisions for credit losses) or become insignificant (equity scaled by assets) when the target becomes change in profitability. The level of nonperforming assets is negatively related to profitability across all measures of profitability used. Macroeconomic variables are largely unrelated to profitability during the year they are measured. However, they have a significant relationship with earnings change measures, suggesting they have a lagged effect on profitability. The slope of the yield curve is especially strong in this regard.
Originality
We use our determinants to model changes in bank profitability one year ahead, in addition to including several factors not previously considered, using the predictive focus of the fundamental analysis research.
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Keywords
David M. Smith, Christophe Faugère and Ying Wang
This study takes a novel approach to testing the efficacy of technical analysis. Rather than testing specific trading rules as is typically done in the literature, we rely on…
Abstract
This study takes a novel approach to testing the efficacy of technical analysis. Rather than testing specific trading rules as is typically done in the literature, we rely on institutional portfolio managers’ statements about whether and how intensely they use technical analysis, irrespective of the form in which they implement it. In our sample of more than 10,000 portfolios, about one-third of actively managed equity and balanced funds use technical analysis. We compare the investment performance of funds that use technical analysis versus those that do not, using five metrics. Mean and median (3 and 4-factor) alpha values are generally slightly higher for a cross section of funds using technical analysis, but performance volatility is also higher. Benchmark-adjusted returns are also higher, particularly when market prices are declining. The most remarkable finding is that portfolios with greater reliance on technical analysis have elevated skewness and kurtosis levels relative to portfolios that do not use technical analysis. Funds using technical analysis appear to have provided a meaningful advantage to their investors, albeit in an unexpected way.
Recent corporate scandals such as WorldCom, Enron, and others suggest a failure of corporate governance, that is, of the allocation of power and its lawful use and accountability…
Abstract
Purpose
Recent corporate scandals such as WorldCom, Enron, and others suggest a failure of corporate governance, that is, of the allocation of power and its lawful use and accountability within the corporation.
Design/methodology/approach
This chapter presents a game theoretic model for analyzing the power dynamics among the three groups responsible for oversight in the Anglo-American corporate model – namely the Board of Directors through its audit committee, corporate management, and the external auditors.
Findings
The chapter shows, among other findings, that the current governance structure results in an extreme imbalance of power among the three groups that not only permits but even induces management to conceal necessary financial data and often to ignore the long-term interests of the firm.
Implications and value
The chapter also derives changes in principles of governance that can right such imbalances and prevent defalcations from taking place through institutionalizing effective ex-ante checks and balances of power in addition to the ex post measures that come into play only after a wrong has been committed and which are the case with recent exchange rules and Congressional enactments.
Research limitations
None.
Originality/value
No prior analysis along these lines.
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Firda Nosita and Rifqi Amrulloh
The authors believe the COVID-19 pandemic has an impact on supply and demand. The potential decline in real sector performance leads to lower expectations of securities…
Abstract
The authors believe the COVID-19 pandemic has an impact on supply and demand. The potential decline in real sector performance leads to lower expectations of securities performance. The uncertainty of future performance can change investor behaviour. This study tried to gain insight into stock investor behaviour during the COVID-19 pandemic. The results showed that the majority of the investor realized and believed the pandemic would affect the stock market performance. Hence, they did not show herding behaviour and were very confident during the COVID-19 pandemic. The survey also indicates that investors tend to avoid risk rather than take the opportunity to buy at a lower price. Moreover, investors believe that the COVID-19 vaccine will soon be found, and the economy will return to normal. Government and self-regulated organizations (SRO) are responsible for making effective policies to convince the investors about the future prospect.
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