nep-fmk New Economics Papers
on Financial Markets
Issue of 2013‒09‒13
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Efficiency and stock returns: Evidence from the insurance industry By Gaganis , Chrysovalantis; Hasan, Iftekhar; Pasiouras , Fotios
  2. Underwriter Reputation and the Quality of Certification: Evidence from High-Yield Bonds By Christian Andres; André Betzer; Peter Limbach
  3. Short-term Market Reaction after Trading Halts in Chinese Stock Market By Hai-Chuan Xu; Wei Zhang; Yi-Fang Liu

  1. By: Gaganis , Chrysovalantis (Department of Economics, University of Crete, Greece); Hasan, Iftekhar (Schools of Business, Fordham University and Bank of Finland); Pasiouras , Fotios (Surrey Business School, University of Surrey, UK, and Financial Engineering Laboratory, Technical University of Crete, Greece)
    Abstract: This study investigates whether the capital market values the efficiency of firms. After tracing stock returns and efficiency changes of 399 listed insurance firms in 52 countries during the 2002-2008 period, the paper reports a positive and statistically significant relationship between profit efficiency change and market adjusted stock returns. However, there is no robust evidence that cost efficiency change is associated with stock returns.
    Keywords: efficiency; insurance; stock returns
    JEL: C22 C34 G22
    Date: 2013–08–16
  2. By: Christian Andres (WHU - Otto Beisheim School of Management); André Betzer (BUW - Schumpeter School of Business and Economics); Peter Limbach (KIT - Karlsruhe Institute of Technology)
    Abstract: This paper provides primary evidence of whether certification via reputable underwriters is beneficial to investors in the corporate bond market. We focus on the high-yield bond market, in which certification of issuer quality is most valuable to investors owing to low liquidity and issuing firms’ high opacity and default risk. We find bonds underwritten by the most reputable underwriters to be associated with significantly higher downgrade and default risk. Investors seem to be aware of this relation, as we further find the private information conveyed via the issuer-reputable underwriter match to have a significantly positive effect on at-issue yield spreads. Our results are consistent with the market-power hypothesis, and contradict the traditional certification hypothesis and underlying reputation mechanism.
    Keywords: borrowing costs, certification, downgrade and default risk, reputation, underwriting standards
    JEL: G11 G14 G24
    Date: 2013–08
  3. By: Hai-Chuan Xu; Wei Zhang; Yi-Fang Liu
    Abstract: In this paper, we study the dynamics of absolute return, trading volume and bid-ask spread after the trading halts using high-frequency data from the Shanghai Stock Exchange. We deal with all three types of trading halts, namely intraday halts, one-day halts and inter-day halts, of 203 stocks in Shanghai Stock Exchange from August 2009 to August 2011. We find that absolute return, trading volume, and in case of bid-ask spread around intraday halts share the same pattern with a sharp peak and a power law relaxation after that. While for different types of trading halts, the peaks' height and the relaxation exponents are different. From the perspective of halt reasons or halt duration, the relaxation exponents of absolute return after inter-day halts are larger than that after intraday halts and one-day halts, which implies that inter-day halts are most effective. From the perspective of price trends, the relaxation exponents of excess absolute return and excess volume for positive events are larger than that for negative events in case of intraday halts and one-day halts, implying that positive events are more effective than negative events for intraday halts and one-day halts. In contrast, negative events are more effective than positive events for inter-day halts.
    Date: 2013–09

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