The Financial ReviewAbstracts and Full Text of of Volume 42, Number 3, August 2007Click here to jump to abstracts or click on an article title to view the full text of the pre-publication version. IPO Pricing, Block Sales and Long Term Performance Kuntara Pukthuanthong-Le, Nikhil Varaiya Short- and Long-Term Effects of Multimarket Trading Vanthuan Nguyen, Bonnie F. Van Ness, Robert A. Van Ness Deal Size, Bid Premium and Gains in Bank Mergers: The Impact of Managerial Motivations Atul Gupta, Lalatendu Misra Aron A. Gottesman, Gordon S. Roberts Trading Volume and Market Volatility: Developed vs. Emerging Stock Markets Eric Girard, Rita Biswas The Impact of Changes in the FTSE 100 Index Bryan Mase
IPO Pricing, Block Sales and Long Term Performance Kuntara Pukthuanthong-Le, Nikhil Varaiya Block sales following IPOs are related to the IPOs’ value relative to an estimate of intrinsic value, opening-trade return and IPO size. Overvalued IPOs experience more block sales than undervalued IPOs. IPOs with high block sales outperform IPOs with low block sales from twenty days after IPO through lockup expiration; however, IPOs with high block sales underperform IPOs with low block sales from lockup expiration through the third year after the IPO. The results indicate that block traders are advantaged relative to other traders; whether the advantage is based on superior information or superior valuation capabilities is unknown. Keywords: Initial public offering, block sales, large trades, long-horizon performance Full text (subscription or article purchase required) Short- and Long-Term Effects of Multimarket Trading Vanthuan Nguyen, Bonnie F. Van Ness, Robert A. Van Ness We analyze short and long term effects of multimarket trading by examining the entries of multiple markets into transacting three ETFs, DIA, QQQ and SPY. We find that large scale entries improve overall market quality, while small scale entries have ambiguous effects. Our results show that the competition effect dominates the fragmentation effect over a long horizon and that market fragmentation leads to a decline in trading costs. Further, we find that the order handling rules help mitigate the fragmentation effect and facilitate the competition effect. We do not find that multimarket trading harms price efficiency or increases price volatility. Keywords: Exchange traded funds, multimarket trading, competition, fragmentation, consolidation Full text (subscription or article purchase required) Deal Size, Bid Premium and Gains in Bank Mergers: The Impact of Managerial Motivations Atul Gupta, Lalatendu Misra Do mergers with greater target relative to acquirer size create more value than mergers with smaller relative sized targets? Do larger bid amounts represent wealth transfer from acquirer or do they signal greater expected merger gains? We hypothesize that the relationship between aggregate merger gains, relative size and bid premiums is asymmetric across mergers made by value-enhancing versus value-reducing managers. We use a large sample of bank mergers to test these predictions and find that the value response to different explanatory variables is asymmetric. Our findings provide new insights into how the market values merger bids. Keywords: Bank mergers, managerial motivations, merger gains Full text (subscription or article purchase required) Aron A. Gottesman, Gordon S. Roberts We investigate the relation between corporate loan spreads and collateralization. We use propensity scoring to create a matched sample of pairs of loan facilities from the DealScan database. We find that noncollateralized loans are associated with lower spreads even after controlling for risk. Keywords: Bank, borrower, loan, contract terms, collateral Full text (subscription or article purchase required) Trading Volume and Market Volatility: Developed vs. Emerging Stock Markets Eric Girard, Rita Biswas We investigate the relation between volatility and volume in 22 developed markets and 27 emerging markets. Compared to developed markets, emerging markets show a greater response to large information shocks and exhibit greater sensitivity to unexpected volume. We find a negative relation between expected volume and volatility in several emerging markets, which can be attributed to the relative inefficiency in those markets. Previous research reports that the persistence in volatility is not eliminated when lagged or contemporaneous trading volume is considered. Our findings show that, when volume is decomposed into expected and unexpected components, volatility persistence decreases. Keywords: Stock index returns, trading volume, emerging markets, volatility, TARCH Full text (subscription or article purchase required) The Impact of Changes in the FTSE 100 Index Bryan Mase This paper investigates FTSE 100 index membership changes, which are determined quarterly by market capitalization and should have no information content. Return reversal around index additions and deletions suggests that buying (selling) pressure moves prices temporarily away from equilibrium, consistent with short-term downward sloping demand curves. In contrast to widely reported results for the S&P 500, there is no evidence of permanent price effects. Further results suggest that investor awareness and monitoring due to index membership do not explain the price effects. There is statistically significant anticipatory trading in stocks that just fail to be promoted to the FTSE 100. Keywords: FTSE 100 index, index trackers, price pressure, return reversal, stock market index changes, stock market liquidity Full text (subscription or article purchase required) Full text articles are available on this site until publication. Eastern Finance Association members have free access to the full text of articles published in The Financial Review (now starting from the first quarterly issue in 1969) at our Blackwell Synergy site. Join the EFA now at http://www.blackwellpublishing.com/memb.asp?ref=0732-8516). 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