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Open Access
Article
Publication date: 4 June 2021

Jeongjoon Park, Jaewan Bae and Changjun Lee

Given the importance of style allocation strategy under the outsourced chief investment officer (OCIO) structure, the authors examine the validity of style allocation…

Abstract

Purpose

Given the importance of style allocation strategy under the outsourced chief investment officer (OCIO) structure, the authors examine the validity of style allocation strategies in the Korean stock market. The authors find that external investment agencies can improve performance by using newly suggested investment styles such as high dividend yield and low volatility as well as traditional styles. In addition, the authors find that the style combination strategies create economically large and statistically significant returns. Finally, empirical results indicate that factor timing strategies suggested in this study can improve the reward-to-risk ratio. In sum, the empirical findings indicate that external investment agencies under the OCIO structure can improve performance using active style allocation strategies.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 2
Type: Research Article
ISSN: 1229-988X

Keywords

Article
Publication date: 7 October 2021

Maria Elisabete Neves, Mário Abreu Pinto, Carla Manuela de Assunção Fernandes and Elisabete Fátima Simões Vieira

This study aims to analyze the returns obtained from companies with strong growth potential (growth stocks) and the returns from companies with quite low stock prices, but…

Abstract

Purpose

This study aims to analyze the returns obtained from companies with strong growth potential (growth stocks) and the returns from companies with quite low stock prices, but with high value (value stocks).

Design/methodology/approach

The sample comprises monthly data, from January 2002 to December 2016, from seven countries, Germany, France, Switzerland, the UK, Portugal, the USA and Japan. The authors have used linear regression models for three different periods, the pre-crisis, subprime crisis and post-crisis period.

Findings

The results point out that the performance of value and growth stocks differs from different periods surrounding the global financial crisis. In fact, for six countries, value stocks outperformed growth stocks in the period that precedes the subprime crisis and during the crisis, this tendency remained only for France, Portugal and Japan. This trend changed in the period following the crisis. The results also show that investor sentiment has a robust significance in value and growth stock returns, mostly in the period before the crisis, highlighting that the investor sentiment is more significant in the moments that the value stocks outperformed.

Originality/value

As far as the authors know, this is the first work that, taking into account the future research lines of Capaul et al. (1993), investigates whether the results obtained by those authors remain current, meeting the authors’ challenge and covering the gap of recent studies on the performance of value and growth stocks. Besides, the authors have introduced a new country, heavily punished by both the global financial crisis and the sovereign debt crisis to understand whether there are significant differences in investment styles and whether this is related to the different economies. Also, in this context, the authors were pioneers in adding investor sentiment as an exogenous variable in the influence of stock returns.

Details

International Journal of Accounting & Information Management, vol. 29 no. 5
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 1 May 1986

James Lawrenson

Organisations either keep spares for their own use, or‐for‐sale to other organisations. In either case, the ultimate need is to be able to replace worn or defective parts…

Abstract

Organisations either keep spares for their own use, or‐for‐sale to other organisations. In either case, the ultimate need is to be able to replace worn or defective parts in operational machinery or equipment. In an economic sense, spares are kept to meet the needs of the situation in the cheapest way.

Details

International Journal of Physical Distribution & Materials Management, vol. 16 no. 5
Type: Research Article
ISSN: 0269-8218

Article
Publication date: 27 July 2012

Nancy Mohan and M. Fall Ainina

Until 2005, corporations could choose whether to expense incentive options or to disclose the value in the financial footnotes. During 2004, however, the Financial…

Abstract

Purpose

Until 2005, corporations could choose whether to expense incentive options or to disclose the value in the financial footnotes. During 2004, however, the Financial Accounting Standards Board adopted the revised Statement No. 123, which requires public corporations to measure the cost of stock options on grant‐date and expense that cost over the vesting period of the grant. This study investigates the impact of SFAS 123(R) on the type of executive incentive pay‐option versus restricted stock.

Design/methodology/approach

Comprehensive compensation data was collected from Standard & Poors ExecuComp data base for the period 2002‐2006 for two industries identified by SIC codes 73 (business services) and 35 (electronics). The study tracks the percentage of pay in the form of incentive stock options or restrictive stock grants before and after SFAS No. 123(R) was adopted in 2004. A series of multivariate regression models test whether the restricted stock percentage of total compensation can be partially explained by the adoption of SFAS 123(R).

Findings

The results show that the average fair value of stock awards is higher and the average fair value of option awards is lower after 2004. In addition, after 2004, stock compensation as a percentage of total pay is positively related to stock price volatility. The data also suggest that those companies substituting restricted stock for options actually increase total incentive pay.

Social implications

The study's findings may suggest that those companies substituting restricted stock for options increase total executive pay. This would be a side effect from the adoption of SFAS 123(R), in that most companies use the Black‐Scholes model to value executive options. Given the long life of these options and the high volatility in certain industries the option value is quite high. Therefore, the amount of substituted restricted stock is also inflated.

Originality/value

The adoption of SFAS 123(R) was highly contested by executives in industries with high stock price volatility. The authors document that, in the case of two industries, executive incentive pay structure was affected.

Article
Publication date: 12 October 2012

Doina C. Chichernea, Anthony D. Holder and Jie (Diana) Wei

The purpose of this paper is to investigate the connection between the accrual quality and the growth/value characteristics (and their return premia) at firm level.

Abstract

Purpose

The purpose of this paper is to investigate the connection between the accrual quality and the growth/value characteristics (and their return premia) at firm level.

Design/methodology/approach

The paper employs a battery of univariate and multivariate cross‐sectional tests. Fama‐MacBeth regressions with main effects and interaction effects are used to identify the relation between accrual quality, book‐to‐market and returns. The analysis is conducted on the overall sample, as well as after conditioning on up and down markets.

Findings

Value (growth) stocks are more likely to be associated with high (low) accrual quality. Value stocks earn higher returns mainly in down markets, while poor accrual quality firms have significantly higher returns during up markets, but significantly lower returns during down markets. There is a significant interaction effect between accrual quality and the value premium, which only exhibits in the down markets (i.e. stocks with poor accrual quality earn a higher value premium in down markets than stocks with good accrual quality).

Originality/value

Results in this paper help disentangle between various explanations proposed for the accrual quality premium and the value premium. These findings are consistent with the idea that the same underlying risk factor generating the value premium also generates the cross‐sectional variation in accrual quality responsible for the accrual quality premium. From the corporate managers' perspective, the results imply that value firms can mitigate their higher costs of capital by providing high quality of accounting information. From an analyst's perspective, the study suggests that considering both accrual quality and growth characteristics can help make better portfolio allocation decisions than when these are considered separately.

Details

Managerial Finance, vol. 38 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 July 2005

Bartolomé Dey´‐Tortella, Luis R. Gomez‐Mejía, Julio O. de Castro and Robert M. Wiseman

Agency theoretic models have been used in the past to justify the use of stock options as an effective incentive alignment mechanism to create a common fate between…

897

Abstract

Agency theoretic models have been used in the past to justify the use of stock options as an effective incentive alignment mechanism to create a common fate between principals and agents. In this paper, we use behavioral theory to reach the opposite conclusion – namely, that the design characteristics of the typical stock option plan foster perverse incentives for loss‐averse agents, leading to decisions with detrimental consequences for principals. We also consider alternative stock option designs and other equity‐based executive compensation plans and argue that they may suffer from the same problems as traditional stock option plans – namely, that loss‐averse executives will try to protect the endowed value of that equity through self‐serving decisions that do not enhance shareholder wealth.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 3 no. 2
Type: Research Article
ISSN: 1536-5433

Keywords

Article
Publication date: 21 September 2009

John A. Doukas and Meng Li

This study documents that high book‐to‐market (value) and low book‐to‐market (glamour) stock prices react asymmetrically to both common and firm‐specific information…

1217

Abstract

This study documents that high book‐to‐market (value) and low book‐to‐market (glamour) stock prices react asymmetrically to both common and firm‐specific information. Specifically, we find that value stock prices exhibit a considerably slow adjustment to both common and firm‐specific information relative to glamour stocks. The results show that this pattern of diferential price adjustment between value and glamour stocks is mainly driven by the high arbitrage risk borne by value stocks. The evidence is consistent with the arbitrage risk hypothesis, predicting that idiosyncratic risk, a major impediment to arbitrage activity, amplifies the informational loss of value stocks as a result of arbitrageurs’ (informed investors) reduced participation in value stocks because of their inability to fully hedge idiosyncratic risk.

Details

Review of Behavioural Finance, vol. 1 no. 1/2
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 24 August 2020

Vanita Tripathi and Priti Aggarwal

This paper is an attempt to explore the fact that whether the literature-promised value premium has any sector orientation. The paper tests the relationship between the…

Abstract

Purpose

This paper is an attempt to explore the fact that whether the literature-promised value premium has any sector orientation. The paper tests the relationship between the value premium and Indian sectors: fast-moving consumer goods (FMCG), financials, healthcare, information technology (IT), manufacturing and miscellaneous.

Design/methodology/approach

The paper analyses around 210–480 companies listed on BSE-500 for the period of the recent 18 years ranging from March 1999 to March 2017. The paper employed Welch's ANOVA to examine whether the price-to-book market ratio is significantly different across sectors. Two prominent asset pricing models – single factor market model and Fama–French three-factor model – were used to examine the existence of value premium within sectors for full period and two sub-periods.

Findings

The empirical results of the paper suggest that the difference in the P/B ratio both between sectors and within sectors is statistically significant. The results further suggest that the value premium exists within the sectors irrespective of their value-growth orientation.

Research limitations/implications

The paper is not free from certain limitations. Firstly, due to the non-availability of data in the public domain, the time period before 1999 could not be considered. Secondly, the study has used data pertaining to the Indian stock market only. To add to it, our study has concentrated on BSE-500 companies only; however, the future researchers can include both NSE and BSE companies.

Practical implications

The paper has important implications for portfolio managers and retail investors following a top-down approach of investing. The portfolio manager can strategically build up the portfolios to concentrate more on the companies belonging to sectors like healthcare, manufacturing and FMCG. Investors following the top-down approach should avoid the underperforming growth stocks belonging to the growth sectors and allocate their funds to value stocks in the growth sector.

Originality/value

The paper is first of its kind to study the relationship between the value premium and Indian sectors. The paper contributes to portfolio management and asset pricing literature for an emerging market.

Details

Managerial Finance, vol. 46 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 8 October 2018

Maria Teresa Medeiros Garcia and Ricardo António Abreu Oliveira

The purpose of this paper is to construct and evaluate value and growth portfolios in Portugal, Italy, Ireland, Greece and Spain, which are commonly known as the EU PIIGS…

Abstract

Purpose

The purpose of this paper is to construct and evaluate value and growth portfolios in Portugal, Italy, Ireland, Greece and Spain, which are commonly known as the EU PIIGS, from 2003 to 2015. Previous research evidence suggests that stocks trading at a lower price relative to their fundamentals (value stocks) tend to outperform stocks that trade at higher prices (growth stocks) in the long run. Although this market anomaly has been studied immensely worldwide, especially for the US stock market, there is no clear evidence whether such an assertion is applicable in less-renowned countries.

Design/methodology/approach

The paper utilises Fama and Macbeth (1973) regressions and its model extensions.

Findings

This paper finds a significant value premium in these countries, which is compatible with previous studies conducted worldwide.

Originality/value

To the best of the authors’ knowledge, this is the first attempt to examine this asset pricing anomaly in the PIIGS.

Details

Journal of Economic Studies, vol. 45 no. 5
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 29 June 2018

Myungsun Kim, Robert Kim, Onook Oh and H. Raghav Rao

The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.

Abstract

Purpose

The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.

Design/methodology/approach

The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in SeekingAlpha.com (SA).

Findings

The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market sentiment periods for firms that are more susceptible to the market sentiment, hence, harder to value. The tone of the stock articles during low sentiment periods also predicts the news in the forthcoming earnings.

Practical implications

The findings help stock investors identify value-relevant information provided by online freelance stock analysts, particularly for hard-to-value stocks and during the low market sentiment period.

Originality/value

This study utilizes a unique dataset obtained from SA. This is the first paper to examine whether online analysts help investors correct potential undervaluation of hard-to-value firms during the low market sentiment period.

Details

Managerial Finance, vol. 44 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

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