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1 – 10 of 78
Article
Publication date: 20 July 2021

Qingxia Wang, Robert Faff and Min Zhu

More studies have investigated the relation between option measures and stock returns during scheduled corporate events. This study adds to the literature and investigates…

Abstract

Purpose

More studies have investigated the relation between option measures and stock returns during scheduled corporate events. This study adds to the literature and investigates the informational role of options concerning stock returns following unscheduled corporate news events. The authors focus on individual analysts' recommendation changes rather than consensus revisions, as the recommendation consensus might discard a large amount of potentially valuable information in the aggregation process.

Design/methodology/approach

Based on the econometric model, the authors follow Bakshi et al. (2003) to construct the model-free option implied measures. The authors further decompose the implied option variance into upside and downside components. In such a way, the different informational roles of call and put options can be distinguished. A variety of regression analyses are conducted to examine the predictive power of option implied measures, and the ordered probit model is used to test the tipping hypothesis of analyst recommendations.

Findings

This study’s results show that the option market impounds the “valuable” firm-specific news; thus, the pre-event option market is strongly related to stock returns around recommendations even though recommendation changes are largely “unscheduled”. At the same time, these results suggest that upside (good) and downside (bad) implied volatilities contain distinctive information on subsequent stock returns.

Originality/value

This study provides new evidence that an increase in upside (downside) volatility around analyst recommendation changes would increase the probability that analysts upgrade (downgrade) the stock. The findings provide implications for investors and risk managers in making investment decisions.

Details

International Journal of Managerial Finance, vol. 18 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 3 May 2016

Lin Mi, Karen Benson and Robert Faff

The purpose of this study is to provide new cross-country evidence on the relation between real estate investment trust (REIT) returns and idiosyncratic risk for samples…

Abstract

Purpose

The purpose of this study is to provide new cross-country evidence on the relation between real estate investment trust (REIT) returns and idiosyncratic risk for samples of listed and unlisted REITs in the US and Australia.

Design/methodology/approach

Five alternative models with exponential GARCH enhancements were employed, in a Fama-MacBeth (1973) setup. The authors assess the statistical significance of the idiosyncratic risk variable and interpret the outcomes.

Findings

The results show that listed REITs in the US and Australia demonstrate a positive idiosyncratic risk-return linkage over the long period of January 1980-November 2013 and April 1994-December 2012, respectively. A further examination by sub-period reveals that this positive relation is only evident in the new REIT era (January 1993-September 2001), absent in the vintage era (before December 1992) and maturity era (November 2001-August 2008). The unlisted REITs in both countries show no relation with idiosyncratic risk. Further, the global financial crisis has no effect on the relation between idiosyncratic risk and REIT returns.

Originality/value

A key motivation of this paper stems from the mixed findings documented in the literature. Also very little research has been done on the idiosyncratic risk-REIT returns linkage in the Australian context. This study offers unique insights from comparisons: Australia vs the US; and listed vs unlisted REITs.

Details

Accounting Research Journal, vol. 29 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 1 March 2006

Philip Gharghori, Howard Chan and Robert Faff

Daniel and Titman (1997) contend that the Fama‐French three‐factor model’s ability to explain cross‐sectional variation in expected returns is a result of characteristics…

Abstract

Daniel and Titman (1997) contend that the Fama‐French three‐factor model’s ability to explain cross‐sectional variation in expected returns is a result of characteristics that firms have in common rather than any risk‐based explanation. The primary aim of the current paper is to provide out‐of‐sample tests of the characteristics versus risk factor argument. The main focus of our tests is to examine the intercept terms in Fama‐French regressions, wherein test portfolios are formed by a three‐way sorting procedure on book‐to‐market, size and factor loadings. Our main test focuses on ‘characteristic‐balanced’ portfolio returns of high minus low factor loading portfolios, for different size and book‐to‐market groups. The Fama‐French model predicts that these regression intercepts should be zero while the characteristics model predicts that they should be negative. Generally, despite the short sample period employed, our findings support a risk‐factor interpretation as opposed to a characteristics interpretation. This is particularly so for the HML loading‐based test portfolios. More specifically, we find that: the majority of test portfolios tend to reveal higher returns for higher loadings (while controlling for book‐to‐market and size characteristics); the majority of the Fama‐French regression intercepts are statistically insignificant; for the characteristic‐balanced portfolios, very few of the Fama‐French regression intercepts are significant.

Details

Pacific Accounting Review, vol. 18 no. 1
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 9 December 2020

Yuqiang Cao, Zhuoan Feng, Meiting Lu and Yaowen Shan

This paper aims to provide a critical discussion of the application of the research pitching template developed by Professor Robert Faff to a research topic of tax…

493

Abstract

Purpose

This paper aims to provide a critical discussion of the application of the research pitching template developed by Professor Robert Faff to a research topic of tax avoidance and firm risk. This letter provides a brief commentary on using the pitching template and discusses personal reflections on the pitching process.

Design/methodology/approach

This pitching research letter applies Faff’s pitching template and provides a critical commentary of the pitching process.

Findings

The team found that Faff’s pitching template is a valuable tool for conceiving research ideas. It helped the authors to identify, develop and articulate key aspects of the project. Further, they believe that completing the template was a beneficial and rewarding exercise, especially for early-career researchers.

Originality/value

This pitching research letter is tied to the team’s research idea that was pitched at the 2020 AFAANZ “Shark Tank” event. It provides original commentary on the use of Faff’s pitching template. It is not meant to retrofit published papers.

Details

Accounting Research Journal, vol. 34 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 1 February 2001

ROBERT BROOKS, ROBERT FAFF and TOM JOSEV

In this paper we empirically investigate the tendency for beta risk to mean‐revert across industries. Using a sample of Australian stocks over the ten‐year period 1989 to…

Abstract

In this paper we empirically investigate the tendency for beta risk to mean‐revert across industries. Using a sample of Australian stocks over the ten‐year period 1989 to 1998, our key results are as follows. We generally observe evidence of a mean reversion tendency — in particular, this seems most appropriate for the Gold, Energy, Finance and Consumer industry groupings. Moreover, there is some evidence that the mean reversion of beta is different across industries. Furthermore, we see that the maximum mean reversion beta occurs for the Gold industry — a value of approximately 1.4 (1.6) for the OLS (Scholes‐Williams) beta analysis. On the other hand, the minimum mean reversion beta based on the ‘All Stocks’ OLS analysis occurs for Miscellaneous Industries with a value of 0.4, while a similar minimum mean reversion beta based on the Scholes‐Williams analysis occurs for the Consumer industry grouping.

Details

Pacific Accounting Review, vol. 13 no. 2
Type: Research Article
ISSN: 0114-0582

Article
Publication date: 25 November 2020

Lien Duong and Thu Phuong Truong

This paper aims to adopt the pitching research template of Professor Robert Faff for a proposed research project on financial statement comparability and takeover efficiency.

Abstract

Purpose

This paper aims to adopt the pitching research template of Professor Robert Faff for a proposed research project on financial statement comparability and takeover efficiency.

Design/methodology/approach

This paper starts with a brief background on using the pitch research template of Professor Robert Faff pitching methodology for core elements of the research project. Then, the authors’ personal reflections on the pitch exercise are discussed.

Findings

It is found that the template is helpful in articulating and refining the research ideas among co-authors. It is an excellent way to communicate the research ideas to the panel of editors.

Originality/value

The pitching template is an effective tool for mid-career researchers to position their research ideas in the literature.

Details

Accounting Research Journal, vol. 33 no. 6
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 1 January 2003

Karen Benson, Peter Pope and Robert Faff

This paper examines the market timing ability of a sample of 62 Australian International equity funds using the returns‐based approach of Henriksson and Merton (1981…

Abstract

This paper examines the market timing ability of a sample of 62 Australian International equity funds using the returns‐based approach of Henriksson and Merton (1981) (H&M) and Treynor and Mazuy (1966) (T&M). Specifically, the primary focus is to investigate whether market timing ability bears any relationship to the stated fund allocation policy. Generally, the results indicate that fund managers do not successfully time the market. We also find that there is no relationship between the manager's stated level of activity on allocation and their market timing abilities as calculated using the H&M and T&M models. Managers are not successfully implementing their stated policies. These results are consistent with an irrelevance of perceived management style to fund policies and hence performance. Furthermore, it is indicative that fund managers are not successfully targeting particular classes of risk averse investors.

Details

Pacific Accounting Review, vol. 15 no. 1
Type: Research Article
ISSN: 0114-0582

Article
Publication date: 3 July 2017

Searat Ali

The purpose of this pitch research letter (PRL) is to apply the pitching template developed by Faff (2015) to an academic project on boardroom gender diversity and default risk.

Abstract

Purpose

The purpose of this pitch research letter (PRL) is to apply the pitching template developed by Faff (2015) to an academic project on boardroom gender diversity and default risk.

Design/methodology/approach

The pitching template helps the pitcher to identify the core elements that form the framework of the research project. The PRL encloses a brief background about the pitcher and pitch, followed by a brief commentary on the pitch and personal reflections of the pitcher on the pitch exercise itself.

Findings

One of the best aspects of the pitching template is that it forced the researchers to think each item over and over, enabling a synthesis of scattered ideas in a systematic way. Hence, it is strongly recommend learning and applying the pitching template as a tool to refine embryonic research ideas and to track the progress on the research projects.

Originality/value

This PRL is novel as it highlights the worth of performing the pitching exercise (i.e. quality publication), potential adoptability challenge and solutions (i.e. unfamiliarity and training), systematic process of learning the pitching template and application of the “rule of three” in pitching research. Such reflections are believed to be useful for early career researchers (ECRs).

Details

Accounting Research Journal, vol. 30 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 1 January 2000

Robert Faff and TIMOTHY J. BRAILSFORD

In this paper we employ a GMM‐based approach to test the restrictions imposed by a two‐factor ‘market and oil’ pricing model when a risk‐free asset is assumed to exist. We…

Abstract

In this paper we employ a GMM‐based approach to test the restrictions imposed by a two‐factor ‘market and oil’ pricing model when a risk‐free asset is assumed to exist. We examine the Australian market which has several interesting features including self‐sufficiency in relation to oil, a large concentration of natural resource companies, susceptibility to the ‘Dutch disease’ and a diverse industry base. We extend previous literature by examining industry sector equity returns as different industry groups are likely to have different exposures to an oil factor, particularly in Australia. In the formal tests, we find evidence in favour of the model, particularly for industrial sector industries. The preferred model includes a domestic portfolio proxy for market returns in addition to the oil price factor and we find evidence of a positive market risk premium as well as a significantly priced oil factor.

Details

Pacific Accounting Review, vol. 12 no. 1
Type: Research Article
ISSN: 0114-0582

Article
Publication date: 1 March 2004

Thomas Josev, Howard Chan and Robert Faff

This paper investigates the economic impact of corporate name changes around the time of their announcement. We analyse a sample of 107 listed Australian companies that…

398

Abstract

This paper investigates the economic impact of corporate name changes around the time of their announcement. We analyse a sample of 107 listed Australian companies that changed their name over the period January 1995 to December 1999. We conduct separate analysis of firms having ‘major’ versus ‘minor’ name changes; of firms with coincident financial restructuring versus firms without restructuring; of small firms versus large firms and of dotcom firms versus non‐dotcom firms. Generally, we find some evidence of a negative association between the corporate name change event and abnormal returns. This seems particularly the case for those companies whose name change is deemed to be ‘major’.

Details

Pacific Accounting Review, vol. 16 no. 1
Type: Research Article
ISSN: 0114-0582

Keywords

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