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ItemEssays in international capital markets(Georgia Institute of Technology, 2011-11-14) Lee, KyuseokMy dissertation consists of three essays in international capital markets. In Chapter I, we examine the herd trading behavior of institutional investors trading around the world. Using a new transaction-level trades database of 531 U.S. institutional investors trading across 37 countries for the period 2002-2009, we find robust evidence of intra- and inter-period herdings at the monthly frequency. We find no evidence that trades by institutions in our sample destabilize local stock markets. Further analysis shows that: (i) in the buy side, both intra- and inter-period herdings are more pronounced in countries with weaker information environments; and (ii) in the sell side, intra-period herding is more pronounced in countries with stronger information environments, whereas inter-period herding is not significantly related to information environments. In Chapter II, we document that the degree of co-movement between bilateral USD ex- change rates has increased substantially since the introduction of the euro in 1999 and investigate what drives the increased co-movement. For each of our 33 sampled bilateral USD exchange rates, we measure the degree of co-movement using the R-square from re- gressing weekly exchange rate changes on the weekly world exchange rate factor. Our results show that, for the majority of sample exchange rates, the R-square has increased substan- tially over the period 1999-2010. Specifically, the average R-square was 0.15 in 1999, but it increased to 0.47 by more than 200% in 2010. Further analysis reveals that the rising influence of the euro relative to USD over a third currency can explain most of the increase in the measured co-movement over time. In Chapter III, we examine the level and trend of U.S. domestic market integration. For each of our sample states, we construct the state (market) portfolio comprising public firms headquartered within the state and compute R-square, our measure of integration, from regressing state portfolio returns on national stock market factors. Using weekly returns, we estimate the regression for each year of our sample period 1963-2008. The key findings are: (i) For the majority of sample states, the R-square exhibits a statistically significant upward trend, implying that U.S. domestic stock markets were not fully integrated and have been integrating during the sample period; (ii) consistent with the previous result, the explanatory power of the state factor over individual stock returns has been decreasing for the majority of states; and (iii) the increasing integration of U.S. domestic stock markets is associated with the decreasing home state bias, suggesting that investors' pursuit of nation- wide investment opportunities may be a significant driver of domestic financial integration.
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ItemEssays on the role of peer networks in investment banking(Georgia Institute of Technology, 2009-05-18) Chuluun, TugsjargalThe following series of three essays examine the impact of peer networks of investment banks, including those commercial banks that recently entered security underwriting, on investment banking activities. Specifically, I focus on underwriter and financial advisor peer networks in security underwriting and mergers and acquisitions advisory services, and examine how the structure of these peer networks affects the performance of initial public offerings, the shareholders' wealth in mergers and acquisitions, and the market share of underwriters. The results indicate that the peer relations of underwriters and advisors have significant implications along various dimensions.
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ItemThree essays on stock market seasonality(Georgia Institute of Technology, 2008-11-17) Choi, Hyung-SukThree Essays on Stock Market Seasonality Hyung-Suk Choi 136 pages Directed by Dr. Cheol S. Eun In chapter 1, we examine seasonality in returns to style portfolios, which serve as important benchmarks for asset allocation, and investigate its implications for investment. In doing so, we consider monthly returns on the style portfolios classified by six size/book-to-market sorting and six size/prior-return sorting over the sample period 1927 - 2006. The key findings are: first, as is well documented in the literature, small-cap oriented portfolios are subject to the January effect, but also to the 'negative' September and October effects. Second, cross-style return dispersion exhibits a seasonal pattern of its own (it is largest in January and smallest in August), suggesting possibly profitable trading strategies. Third, our seasonal strategies indeed yield significant profits, as high as about 18.7 % per annum. This profit is mostly attributable to the seasonal autocorrelation in style returns. Lastly, we find substantial seasonal patterns in style returns not only in the U.S. but also in other major stock markets Germany, Japan, and the U.K. Our seasonal style rotation strategy yields economically and statistically significant profits in all of these stock markets. In chapter 2, we examine the abnormal, negative stock returns in September which have received little attention from academic researchers. We find that in most of the 18 developed stock markets the mean return in September is negative and in 15 countries it is significantly lower than the unconditional monthly mean return. This September effect has not weakened in the recent period. Further, the examinations of the various style portfolios in the US market show that the September effect is the most pervasive anomalous phenomenon that is not affected by size, book-to-market ratio, past performance, or industry. Our finding suggests that the forward looking nature of stock prices combined with the negative economic growth in the last quarter causes the September effect. Especially in the fall season when most investors become more risk averse, the stock prices reflect the future economic growth more than the rest of the year. Our investment strategy based on the September effect yields a higher mean return and a lower standard deviation than the buy-and-hold strategy. In chapter 3, we establish the presence of seasonality in the cash flows to the U.S. domestic mutual funds. January is the month with the highest net cash flows to equity funds and December is the month with the lowest net cash flows. The large net flows in January are attributed to the increased purchases, and the small net flows in December are due to the increased redemptions. Thus, the turn-of-the-year period is the time when most mutual fund investors make their investment decisions. We offer the possible sources for the seasonality in mutual funds flows.
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ItemThree Essays on the Role of Information Networks in Financial Markets(Georgia Institute of Technology, 2007-07-06) Gupta-Mukherjee, SwastiBased on previous evidence that there are information heterogeneities in capital markets, three essays including empirical frameworks for examining the information processes that impact portfolio investments and corporate investments was proposed. The first essay considers information channels among mutual fund managers (fund-fund networks), and between holding companies and fund managers (fund-company networks). Results show that (1) fund-fund (fund-company) information networks help in generating positive risk-adjusted returns from holdings in absence of fund-company (fund-fund) networks; (2) fund-company networks create information advantage only when the networks are relatively exclusive. Superior networks seem to pick stocks which outperform beyond the quarter. The second essay examines mutual fund managers tendency to deviate from the strategies of their peers. Results indicate a significantly negative relationship between the managers deviating tendency and fund performance, suggesting that the average fund manager is more likely to make erroneous decisions when they deviate from their peers. The third essay investigates the determinants of target choices in corporate acquisitions. Results reveal the influence of various factors, including information asymmetries, which may drive this behavior, including economic opportunities, anti-takeover regimes, competitive responses to other managers, and acquirers size and book-to-market ratios.
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ItemConvergence in Global Capital Markets(Georgia Institute of Technology, 2006-05-19) Lee, JinsooIn chapter 1, we show (i) that the risk-return characteristics of our sample of 17 developed stock markets of the world have converged significantly toward each other during our study period 1974 2004, and (ii) that this international convergence in risk-return characteristics is driven mainly by the declining country effect, rather than the rising industry effect, suggesting that the convergence is associated with international market integration. Specifically, we first compute the risk-return distance among international stock markets based on the Euclidean distance and find that the distance thus computed has been deceasing significantly over time, implying a mean-variance convergence. In particular, the average risk-return distance has decreased by about 43% over our sample period. The speed of convergence, however, varies greatly across individual markets, largely reflecting the initial distance of each individual market from the international average risk-return characteristic. Lastly, we document that the risk-return characteristics of our sample of 14 emerging markets have been converging rapidly toward those of developed markets in recent years. This development notwithstanding, emerging markets still remain as a distinct asset class. In chapter 2, we examine the historical evolution of international earnings-to-price ratios for a sample of 17 markets over the period 1980 2004. We introduce a distance measure of earnings-to-price ratios among international stock markets and find that earnings-to-price ratios of 17 markets have significantly converged toward each other during the period. The average distance measure for 17 markets has decreased by about 80 percent during the period. The speed of convergence for individual markets varies and mainly reflects the initial distance of individual markets from the international average. We also find that although both country and industry effects account for convergence in earnings-to-price ratios among the sample markets, country effect dominates industry effect in terms of the magnitude. We further examine what could explain the declining country effect and document that the time trend of dividend-yield distance measure closely follows that of earnings-to-price distance measure. This result suggests that convergence in earnings-to-price ratio is mainly due to convergence in economic factors such as growth opportunities or discount rates rather than due to convergence in accounting practices.
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ItemEssays on financial economics(Georgia Institute of Technology, 2003-08) Lai, Shu-Ching
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ItemEssays on international asset pricing(Georgia Institute of Technology, 2001-08) Huang, Wei
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ItemPrice discovery for dually traded securities : evidence from the US-Listed Canadian stocks(Georgia Institute of Technology, 2000-08) Sabherwal, Sanjiv