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1 – 10 of over 131000Chris Bates, Carlos Conceicao, Guy Norman, David Pudge and Patrick Sarch
The purpose of this paper is to explain the FSA's new disclosure regime for short selling during rights issues, which it introduced by amending the Code of Market Conduct (MAR 1…
Abstract
Purpose
The purpose of this paper is to explain the FSA's new disclosure regime for short selling during rights issues, which it introduced by amending the Code of Market Conduct (MAR 1) under the Financial Services and Markets Act 2000 (FSMA).
Design/methodology/approach
The paper outlines the new provisions; explains the legal basis for the new regime; details the specific additions to the Code of Market Conduct; discusses the use of the UK super‐equivalent positions; explains the lack of FSA consultation based on urgent need for action; discusses practical issues for market participants, including compliance systems and controls; provides answers to frequently asked questions (FAQs) relating to the scope of the regime in terms of issuers and transactions covered, the applicability of the disclosure requirement to pre‐existing positions, the timing of intra‐day positions, netting of short and long positions for the purpose of calculating whether a short position reaches the threshold, including short positions in a rights issue in the calculation of the overall net short position, the exclusion of positions an entity holds in its capacity as a market maker, the requirement for the legal entity that holds the short position to make the required disclosures but not to aggregate positions held by its affiliates, the means of disclosure, disclosure deadlines, the content of disclosures, and disclosure of changes in position; and indicates likely further FSA action.
Findings
The new measures require market disclosure of short positions of 0.25 per cent or more in companies undertaking rights issues. The deadline for required disclosures is 3.30 pm on the business day following the day the short position threshold is reached. The new rules apply to shares in UK‐listed companies from 20 June 2008. The measures have been implemented as changes to the Code of Market Conduct rather than FSA rules as such. Rather than carrying out a consultation and cost‐benefit analysis as normally required by the FSMA, the FSA apparently relied on the FSMA's provisions that allow immediate amendments in cases of urgent need. The FSA is undertaking a wider review of the capital‐raising process and considering other measures, such as restrictions on stock lending.
Practical implications
On an ongoing basis firms need to have in place systems and controls that identify announcements by companies that they are undertaking rights issues subject to the regime and provide the means to calculate the level of positions held by the firm that might require disclosure.
Originality/value
The paper offers practical guidance by experienced securities lawyers.
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This study aims to spot wheat data and disaggregated commitment of trader data for CME traded wheat futures to examine the effect of exogenous shocks for hedging positions of…
Abstract
Purpose
This study aims to spot wheat data and disaggregated commitment of trader data for CME traded wheat futures to examine the effect of exogenous shocks for hedging positions of Producers and Swap Dealers on cash-futures basis and excess futures returns.
Design/methodology/approach
A Bayesian vector autoregression (BVAR) methodology is used to capture volatility transfer effects.
Findings
Evidence is presented that institutional short hedging positions play a major role in the pricing of asymmetric information held by Swap Dealers into the basis. The results also indicate that producer hedging contains information when conditions in the supply chain create a shift in long vs short hedging demand. Finally, the results demonstrate that that Swap Dealer short hedging has the greatest effect on risk premium size and historical volatility.
Originality/value
Various proxies for spot prices are used in the literature, although actual spot price data is not common. In addition, stationarity for basis and open interest data is induced using the Baxter-King filter which allows us to work with levels, rather than percentage changes, in the time series data. This provides the ability to directly observe the effect of outright open interest positions for hedgers on contemporaneous innovations in basis and in excess returns. The use of a BVAR methodology represents an improvement over other structural VAR models by capturing contemporaneous systemic effects within an endogeneity based structural framework.
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Short option positions carry significant risk of losses well in excess of 100 per cent of the initial option price. Margin requirements associated with such positions are…
Abstract
Purpose
Short option positions carry significant risk of losses well in excess of 100 per cent of the initial option price. Margin requirements associated with such positions are therefore considerable. The purpose of this paper is to develop a methodology for calculating margin requirement‐based option portfolio returns that realistically represent the returns realized by investors, and to demonstrate the effects of this methodology on analyses of option returns.
Design/methodology/approach
A methodology is developed for calculating margin requirement‐based short option portfolio returns.
Findings
Accounting for margin requirements reduces the returns of simple short option strategies by up to 92 per cent compared to the price return. In long/short portfolio analyses, use of margin requirement returns necessitates additional methodological adjustments to ensure that unwanted volatility risk is properly hedged.
Originality/value
The result is a portfolio return that more accurately represents the return realized by investors, and increased power to detect cross‐sectional patterns in option returns.
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William Beaver, Maureen McNichols and Richard Price
We highlight key assumptions implicit in the models used by academics conducting research on market efficiency. Most notably, many academics assume that investors can borrow…
Abstract
We highlight key assumptions implicit in the models used by academics conducting research on market efficiency. Most notably, many academics assume that investors can borrow unlimited amounts and construct long-short portfolios at zero cost. We relax these assumptions and examine the attractiveness of long-short strategies as stand-alone investments and as a part of a diversified portfolio. Our analysis illustrates that the key benefit of long-short investing is adding diversification to a portfolio beyond what the market provides. We show that as stand-alone investments, nontrivial risk remains in the “hedge” strategies and that the returns generally do not beat the market in a head-to-head contest. Our findings raise questions about the degree of inefficiency in anomaly studies because plausible measures of costs generally offset strategy returns. The ability to achieve greater diversification may be, but is not necessarily, due to market inefficiency. We also highlight the key role of the generally ignored but critically important short interest rebate and show that absent this rebate, the long-short strategies we examine generally yield insignificant returns.
Khmarskyi Valentyn and Roman Pavlov
The purpose of this paper is to determine relation between marketing expenses and bank’s financial position. Factor and cluster analyses were applied to unify different financial…
Abstract
Purpose
The purpose of this paper is to determine relation between marketing expenses and bank’s financial position. Factor and cluster analyses were applied to unify different financial variables into financial clusters. Each cluster has specific long-term and short-term financial position and is allocated to appropriate rating position of new rating system. Using rating positions, it is possible to determine whether overall bank position is fragile or stable, and which financial position is vulnerable. Comparing marketing expenses with financial positions, it is possible to evaluate how effectively banks manage their financial resources, and what impact marketing activity has on the financial position.
Design/methodology/approach
Financial statements of Ukrainian banks for last five years are analyzed. Database of financial documents are reviewed. Coefficient, principal components, and hierarchical cluster analyzes are applied to elaborate new rating system. “Bartlett’s Test of Sphericity” and “Kaiser-Meyer-Olkin Measure of Sampling Adequacy Test” validate input data. Box-and-whisker plots are used to describe graphically interaction between marketing expenses and bank financial positions.
Findings
The new rating system describes short-term and long-term bank financial positions. In their marketing activity, Ukrainian banks mostly have uneven distribution of marketing expenses in context of financial positions. Such pattern disrupts long-term stability of Ukrainian banking system. Each financial variable has different impact on marketing activity; however, the correlation level is insignificant. In general, Ukrainian banks do not consider financial positions in marketing planning.
Practical implications
New rating system can be used by the National Bank of Ukraine, the main supervisory bank of Ukraine, to determine fragile banks and to predict their bankruptcy. Banks may use findings to analyze their financial positions and to find optimal marketing expenses.
Originality/value
This paper contributes into the scientific literature in novelty of marketing-finance interaction in the Ukrainian banking system. New rating system of Ukrainian banks considers different aspects of bank financial stability: liquidity level, credit risks, deposit portfolio, and bank’s ability to attract additional financial resources on financial markets. Cluster analysis helps to allocate similar financial factors to different clusters and to evaluate financial risks in conjunction. As legal regulations concerning banking market, are also considered, the rating system can be adjusted to different countries. In addition, marketing expenses are analyzed in context of banks’ financial positions.
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This paper aims to provide a detailed description of the four releases issued by the US Securities and Exchange Commission (the “SEC”) on October 14 and 15, 2008 in connection…
Abstract
Purpose
This paper aims to provide a detailed description of the four releases issued by the US Securities and Exchange Commission (the “SEC”) on October 14 and 15, 2008 in connection with the three SEC emergency orders that were adopted on September 17 and 18, 2008, relating to the regulation of short selling.
Design/methodology/approach
The paper presents a general overview of: Interim Final Temporary Rule 204‐T; Interim Final Temporary Rule 10a‐3T; the Amendments to Regulation SHO; and the Final Rule 10b‐21, each regulating short selling; and highlights each rule's new requirements, the exceptions to those requirements, and the material differences between the new rules and the rules as they were originally adopted.
Findings
The Interim Temporary Rules, the Amendments to Regulation SHO and the Final Rule 10b‐21 are important because: Interim Final Temporary Rule 204‐T imposes a penalty on any “participant” of a “registered clearing agency”, as defined below, and any associated broker‐dealer for having a fail‐to‐deliver position at a registered clearing agency in any equity security; Interim Final Temporary Rule 10a‐3T requires certain institutional investment managers to file a new form with the SEC on the last business day of every calendar week subsequent to the manager effecting a short sale; the Amendments to Regulation SHO eliminate the “options market maker exception” from Regulation SHO's close‐out requirement; and Final Rule 10b‐21 prohibits any person from intentionally deceiving a broker‐dealer, or a buyer as to the intention or ability of that person to deliver shares on the settlement date. Each of these actions creates new day‐to‐day compliance responsibility for market participants generally and for US‐registered broker‐dealers in particular.
Originality/value
The paper provides expert guidance on recent SEC releases by experienced securities lawyers.
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Jake David Hoskins and Abbie Griffin
This research paper aims to investigate detailed relationships between market selection and product positioning decisions and their associated short- and long-term product…
Abstract
Purpose
This research paper aims to investigate detailed relationships between market selection and product positioning decisions and their associated short- and long-term product performance outcomes in the context of the music category: a cultural goods industry with high amounts of product introductions. Market selection decisions are defined by the size, competitiveness and age of market subcategories within an overall product category. Positioning decisions include where a product’s attributes are located spatially in the category (periphery versus the market center), whether a product resides within a single subcategory or spans multiple ones and what brand strategy (single versus co-branding) is used.
Design/methodology/approach
Data are from multiple sources for the US music industry (aka product category) from 1958 to 2019 to empirically test the hypotheses: genres (rock, blues, etc.) correspond to subcategories; artists to brands; and songs to products. Regression analyses are used.
Findings
A complex set of nuanced results are generated and reported, finding that key marketing decisions drive short-term new product success differently and frequently in opposing ways than long-term success. Launching into very new, well-established or very competitive markets leads to the strongest long-term success, despite less attractive short-run prospects. Positioning a product away from the market center and spanning subcategories similarly poses short-run challenges, but long-run returns. Brand collaborations have reverse effects. Short-run product success is found, overall, to be difficult to predict even with strong data inputs, which has substantial implications for how firms should manage portfolios of products in cultural goods industries. Long-run product success is considerably more predictable after short-run success is observed and accounted for.
Originality/value
While managers and firms in cultural goods industries have long relied on intuition to manage market selection and product positioning decisions, this research tests the hypothesis that objective data inputs and empirical modeling can better predict short- and long-run success of launched products. Specific insights on which song characteristics may be associated with success are found – as are more generalizable, industry-level results. In addition, by distinguishing between short- and long-run success, a more complete picture on how key decisions holistically affect product performance emerges. Many market selection and product positioning decisions have differential impacts across these two frames of reference.
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Dilip Kumar and Srinivasan Maheswaran
This paper aims to propose a framework based on the unbiased extreme value volatility estimator (namely, the AddRS estimator) to compute and predict the long position and the short…
Abstract
Purpose
This paper aims to propose a framework based on the unbiased extreme value volatility estimator (namely, the AddRS estimator) to compute and predict the long position and the short position value-at-risk (VaR) and stressed expected shortfall (ES). The precise prediction of VaR and ES measures has important implications toward financial institutions, fund managers, portfolio managers, regulators and business practitioners.
Design/methodology/approach
The proposed framework is based on the Giot and Laurent (2004) approach and incorporates characteristics like long memory, fat tails and skewness. The authors evaluate its VaR and ES forecasting performance using various backtesting approaches for both long and short positions on four global indices (S&P 500, CAC 40, Indice BOVESPA [IBOVESPA] and S&P CNX Nifty) and compare the results with that of various alternative models.
Findings
The findings indicate that the proposed framework outperforms the alternative models in predicting the long and the short position VaR and stressed ES. The findings also indicate that the VaR forecasts based on the proposed framework provide the least total loss for various long and short position VaR, and this supports the superior properties of the proposed framework in forecasting VaR more accurately.
Originality/value
The study contributes by providing a framework to predict more accurate VaR and stressed ES measures based on the unbiased extreme value volatility estimator.
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Zhiqiang Liu, Liang Ge and Wanying Peng
The purpose of this paper was to examine the relationship between organizational tenure and employee innovative behavior and the influence of culture difference and status-related…
Abstract
Purpose
The purpose of this paper was to examine the relationship between organizational tenure and employee innovative behavior and the influence of culture difference and status-related moderators (i.e. status hierarchy and status stability) on the linkage.
Design/methodology/approach
By using a meta-analysis method that included 76 empirical studies, this study examines the relationship of organizational tenure and innovative behavior. In this study, 79 samples (N = 21659) derived from 76 empirical studies that met the inclusion criteria in the meta-analysis.
Findings
The results show that organizational tenure has a weak positive effect on employee innovative behavior (r = 0.04), and status hierarchy, position tenure, culture difference and measurement ways influence the relationship between the two. In addition, a three-way interaction among status hierarchy, position tenure and organizational tenure is found to jointly affect innovative behavior; specifically, for those who are low in status hierarchy and short in position tenure, their organizational tenures are positively related to innovative behavior, but for those with a longer position tenure in organizations, their organizational tenure may relate to innovative behavior negatively, whatever their status hierarchies are (high or low). This study is helpful in providing theoretical foundation and practical skills to such issues regarding how to trigger innovative behavior efficiently at different career stages.
Research limitations/implications
Limitations include tenure range of participants and no longitudinal samples in our studies. Future research should examine more contextual factors which influenced the relationship between organizational tenure and innovative behavior.
Practical implications
The results of this study show that long organizational tenure is not negatively related to innovative behaviors. For managers, do not ignore the contribution of long-tenured employees to innovation. Through promotion or job rotation to increase employees’ job satisfaction and innovative willing.
Originality/value
To authors’ knowledge, this is the first study to examine status attribute class variables in the relationship between organizational tenure on innovative behavior. The study is helpful in providing theoretical foundation and practical skills to such issues regarding how to trigger innovative behavior at different career stages correctly.
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