Search results

Prior research on meeting or beating earnings thresholds documents that firms with earnings momentum are awarded with valuation premiums. However, it is unclear from this strand of literature why this is the case. Therefore, this study aims to investigate the effects of time-varying earnings persistence on earnings momentum and their pricing effects.

This study exploits a firm that reports earnings momentum as research setting to examine whether earnings persistence is significantly higher for firms with consecutive earnings increases. In addition, it investigates a relation between earnings momentum and fundamentals-driven earnings persistence and estimates return associations of earnings momentum conditional on economic-based persistence of earnings.

The empirical evidence suggests that firms with earnings momentum reflect higher time-varying earnings persistence. It further reveals that longer duration of earnings momentum is associated with higher fundamentals-driven earnings persistence. More importantly, valuation premiums are exclusively assigned to earnings momentum determined by strong firm fundamentals, not momentum itself.

This study provides new empirical evidence that valuation premiums accrued to firms with earnings momentum are conditional on time-varying earnings persistence. The research implications are relevant to investors, regulators and auditors, as the results bring conclusions that earnings momentum reflects successful business models not poor accounting quality. This leads to a more complete view of earnings momentum and helps allocate resources when evaluating earnings-momentum firms.

Housing prices in Sydney have increased rapidly in the past three decades. This leads to a debate of whether Sydney housing prices have departed from macroeconomic fundamentals. However, little research has been devoted to this area. Therefore, this study aims to fill this gap by examining the long-run association between housing prices and market fundamentals. Further, it also examines the long-run determinants of housing prices in Greater Sydney.

The analysis of this study involves two stages. The first stage is to estimate the presence of long-run relationship between housing prices and market fundamentals with the Johansen and Juselius Cointegration test. Thereafter, the determinants of housing prices in Greater Sydney is assessed by using a vector error correction model.

The empirical results show that Sydney housing prices are cointegrated with market fundamentals in the long run. In addition, there is evidence to suggest that market fundamentals such as gross disposable income, housing supply, unemployment rate and gross domestic product are the key long-run determinants of Sydney housing prices, reflecting that Sydney housing prices, in general, can be explained by market fundamentals in the long run.

The findings enable more informed and practical policy and investment decision-making regarding the relation between housing prices and market fundamentals.

This paper is the first study to offer empirical evidence of the degree to which the behaviour of housing prices can be explained by market fundamentals, from a capital city instead of at a national level, using a relatively disaggregated dataset of housing price series for Greater Sydney.

What explains patterns in stock prices is an important question. One such pattern, price momentum, is a well-known capital markets anomaly where recent stock price performance appears to continue into the future. This momentum is frequently thought to reflect delayed reaction by investors to unspecified information (i.e. underreaction). This study aims to provide a useful insight regarding momentum: potential mispricing related to accounting fundamentals appears to conceal longer-term reversals in price momentum. Controlling for these fundamentals reveals that price momentum reverses, indicating that investor overreaction is a potentially important source of stock price momentum. The evidence presented in this study emphasizes the importance of decoupling momentum and accounting fundamentals to achieve a more complete understanding of what explains stock price momentum.

This study explores this question by examining the longer-term performance of momentum stocks in the US market after decoupling it from performance related to accounting fundamentals using returns to fundamentals-based factors as controls in time series regressions.

This study finds evidence of clear reversals in the remaining price momentum. These reversals provide a new insight into the momentum effect because they imply that the component of price momentum not traceable to accounting fundamentals reflects investor overreaction rather than underreaction.

The findings indicate that the underlying nature of the information driving price movements is important to achieving a complete understanding of what explains price momentum. To the best of the author’s knowledge, no other study has examined the behavior of stock price momentum while controlling for accounting fundamentals.

The purpose of this paper is to empirically analyse how different exchange rate regimes affect the links between monetary fundamentals and exchange rates in Sub-Saharan Africa.

Using the Pedroni method for panel cointegration, mean group and pooled mean group and the panel vector autoregressive technique, this study empirically investigates whether monetary fundamentals impact exchange rates similarly in both regimes. Thus, the author acquires needed and credible empirical data.

The result suggests that the impact is dissimilar. In the floating regime, an increase in relative money supply and relative real output depreciates and appreciates the nominal exchange rate in the long run whereas in the non-floating regime, the evidence is mixed. Thus, exchange rates bear a theoretically consistent relationship with monetary fundamentals across SSA countries with floating regimes but fails under non-floating regimes. This provides evidence that regime choice is important if the relationship between monetary fundamentals and exchange rates in SSA are to be theoretically consistent.

This study empirically incorporates the dissimilarities in exchange rate regimes in a panel framework and study the links between exchange rates and monetary fundamentals. The focus on how exchange rate regimes might alter the equilibrium relationships between exchange rates and monetary fundamentals in SSA is a pioneering experiment.

The innovations in fundamentals coupled with noise traders induce co-movement in diverse markets. This co-movement in equity markets which is evidenced higher during the turmoil period influences economic fundamentals of a country dissimilar in nature. The purpose of this paper is to examine whether economic fundamentals or investors’ behavior attributable to disturbances across the world are the rationale behind the crisis transmission, and thereby distinguish fundamental-based contagion from investor-induced contagion.

Initially, the study investigates the role of macroeconomic fundamentals and stock returns on crisis occurrence using panel probit estimates. Additionally, ordinary least squares estimates controlling the influence of fundamentals on domestic return capture the discrete country effect measuring the influence of domestic as well as foreign economic fundamentals along with foreign returns on the domestic stock index.

The empirical results reveal that foreign country stock index returns are having a significant influence on domestic returns besides a prominent role in crisis occurrence. The binary probit model confirmed the influence of both macroeconomic factors and foreign returns in crisis occurrence. The OLS estimates found evidence for investor-induced contagion in the crisis period where the effects of economic fundamentals are small in comparison to foreign market returns that are mainly dominant in pre- and post-crisis period.

The propagation of crisis from one market to other would enable the policy makers to make clear regulations at right time to control for the crisis in future. The results can help the policy makers as well as investors in reducing the impact of the crisis in future by clearly monitoring the behavior of the factors under study.

The current study addresses the role of macro fundamentals and investors influence in crisis propagation. Adopting subprime crisis of 2008-2009 as a reference point and separating the sample period into pre-crisis, crisis and post-crisis period, the study explains how badly the other 30 markets impacted the crisis that emerged in the USA.

Economic theory suggests that profits of firms in industries with higher competition are less persistent and more volatile than in industries with lower competition (Stigler, 1963; Mueller, 1977). Extending this reasoning, I hypothesize that accounting-based fundamentals are more effective in predicting performance in industries with lower competition. I find that a measure of fundamentals (Piotroski’s F-score) has greater ability to identify potentially mispriced securities in industries with lower competition. The results are robust to using a variety of competition measures and imply that industry competition is an important consideration in the application of fundamental analysis.

This paper aims to study how the trajectory of fundamental values affects price discovery in an experimental asset market.

An experiment is conducted with two treatments, in which the time path of fundamentals differs between treatments. In the peak treatment, fundamentals first rise and then fall, while in the valley treatment fundamentals first fall and then recover. The experiment allows market prices to be compared to fundamental values.

Both peak and valley treatments experience bubbles when traders are inexperienced. However, price discovery is more rapid and complete in the peak than in the valley treatment. In the peak treatment, prices track the value, the direction of the trend, and changes in trend, more closely than in the valley treatment.

This paper documents the first experimental results regarding pricing behavior in markets with non‐monotonic fundamentals. It creates an environment (the valley treatment) in which convergence to close to fundamentals does not occur even with repetition of the market under identical conditions. The results demonstrate that the likelihood that an asset market tracks fundamentals depends on the time path of fundamentals.

The purpose of this paper is to provide an extensive review of the monetary model of exchange rate determination which is the main theoretical framework on analyzing exchange rate behavior over the last 40 years. Furthermore, we test the flexible price monetarist variant and the sticky price Keynesian variant of the monetary model. We conduct our analysis employing a sample of 14 advanced economies using annual data spanning the period 1880–2012.

The theoretical background of the paper relies on the monetary model to the exchange rate determination. We provide a thorough econometric analysis using a battery of unit root and cointegration testing techniques. We test the price-flexible monetarist version and the sticky-price version of the model using annual data from 1880 to 2012 for a group of industrialized countries.

We provide strong evidence of the existence of a nonlinear relationship between exchange rates and fundamentals. Therefore, we model the time-varying nature of this relationship by allowing for Markov regime switches for the exchange rate regimes. Modeling exchange rates within this context can be motivated by the fact that the change in regime should be considered as a random event and not predictable. These results show that linearity is rejected in favor of an MS-VECM specification which forms statistically an adequate representation of the data. Two regimes are implied by the model; the one of the estimated regimes describes the monetary model whereas the other matches in most cases the constant coefficient model with wrong signs. Furthermore it is shown that depending on the nominal exchange rate regime in operation, the adjustment to the long run implied by the monetary model of the exchange rate determination came either from the exchange rate or from the monetary fundamentals. Moreover, based on a Regime Classification Measure, we showed that our chosen Markov-switching specification performed well in distinguishing between the two regimes for all cases. Finally, it is shown that fundamentals are not only significant within each regime but are also significant for the switches between the two regimes.

The results are of interest to practitioners and policy makers since understanding the evolution and determination of exchange rates is of crucial importance. Furthermore, our results are linked to forecasting performance of exchange rate models.

The present analysis extends previous analyses on exchange rate determination and it provides further support in favor of the monetary model as a long-run framework to understand the evolution of exchange rates.

The purpose of this paper is to identify the fundamentals of a performance measurement system (PMS) as discussed in the literature for the past 32 years in an attempt to provide a research agenda (RA) for future research.

The paper uses a systematic review of the business, public and non-profit sector literature in examining what constitutes the fundamentals of PMS, and how these fundamentals have influenced the use of data (especially on non-financial data), development of measuring methods, measuring attributes and measuring process.

The paper finds that there are a small number of articles providing that can be considered to have provided substantial discussion of the fundamentals of PMS. While there is no consensus on what constitute the fundamentals of PMS, using content analysis, citation analysis and on the strict criteria of necessary and/or sufficient for the existence of a PMS, this paper managed to characterize the fundamentals into six categories. This paper found that the field of PMS has not change much during the past 30 or more years, and there remains various pragmatic and research gaps that need to be addressed.

The results, outcomes, and analysis of this paper have both practical and academic implications. The gaps and recommendations for future research is consolidated into a RA that provides practitioners to evaluate existing PMS, avoid issues and seek ways to develop a conceptual (theoretical) PMS that is of greater practical significance.

The results of this study contribute toward providing an update of the current state of development and research into PMS; and managed to identify existing practical issues and research gaps of PMS, and provided a RA on which ongoing and future research efforts on this topic can be built upon.

The purpose of this paper is to examine the evidence of herding phenomenon, spill-over effects related to herding and whether herding is driven by fundamentals or non-fundamentals for various sub-periods and sub-samples.

The cross-sectional absolute deviation model is applied to China’s A- and B-share markets in combination with fundamental information.

Herding is prevalent on both A- and B-share markets. In detail, investors on A-share market herd for small and growth stock portfolios irrespective of market states while they only herd for large or value stocks in down market, therefore leading the whole herding behaviour to be pronounced in down market. Comparatively, on B-share market, herding is robust for various investment styles (small or large, value or growth) or market situations. Additionally, spill-over effects related to herding do not exist no matter from A-shares to B-shares or from B-shares to A-shares. Moreover, investors on B-share markets tend to herd as the response to non-fundamental information more frequently during financial crisis.

Investors on A- and B-share markets tend to herd as the response to non-fundamental information more frequently during financial crisis. Analysing the herding behaviours could be helpful in controlling the financial risk.