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In this paper, I examine the potential of mobile alerting services empowering investors to react quickly to critical market events. Therefore, an analysis of short-term (intraday) price effects is performed. I find abnormal returns to company announcements which are completed within a timeframe of minutes. To make use of these findings, these price effects are predicted using pre-defined external metrics and different estimation methodologies. Compared to previous research, the results provide support that artificial neural networks and multiple linear regression are good estimation models for forecasting price effects also on an intraday basis. As most of the price effect magnitude and effect delay can be estimated correctly, it is demonstrated how a suitable mobile alerting service combining a low level of user-intrusiveness and timely information supply can be designed.
Recent empirical research suggests that measures of investor sentiment have predictive power for future stock returns at intermediate and long horizons. Given that sentiment indicators are widely published, smart investors should exploit the information conveyed by the indicator and thus trigger an immediate market response to the publication of the sentiment indicator. The present paper is the first to empirically analyze whether this immediate response can be identified in the data. We use survey-based sentiment indicators from two countries (Germany and the US). Consistent with previous research we find predictability at intermediate horizons. However, the predictability in the US largely disappears after 1994. Using event study methodology we find that the publication of sentiment indicators affects market returns. The sign of this immediate response is the same as the sign of the intermediate horizon predictability. This is consistent with sentiment being related to mispricing but is inconsistent with the sentiment indicator providing information about future expected returns.
JEL-Classification: G12, G14
Recent empirical research suggests that measures of investor sentiment have predictive power for future stock returns over the intermediate and long term. Given the widespread publication of sentiment indicators, smart investors should trade on the information conveyed by such indicators and thus trigger an immediate market response to their publication. The present paper is the first to empirically analyze whether an immediate response can be identified from the data. We use survey-based sentiment indicators from two countries (Germany and the US). Consistent with previous research we find there is predictability at intermediate time horizons. For the US, however, the predictability all but disappears after 1994. Using event study methodology we find that the publication of sentiment indicators affects market returns. The sign of the immediate response is the same as that of the predictability over the intermediate term. This finding is consistent with the idea that sentiment is related to mispricing, but is inconsistent with the idea that the sentiment indicator provides information about future expected returns.
Over the last four decades the literature on bond rating changes and its effects on security prices increased significantly with almost all studies not controlling for the respective reason for those. We therefore investigate the impact of rating events on the stock and the credit default swap (CDS) market incorporating rating reviews and rating changes together with the reason mentioned by the rating agency. Our results for the general effects are in line with prior findings but conditioning on the respective reason shows that the markets’ anticipation of rating actions is largely driven by events due to changes in firms’ operating performance. Furthermore, we provide empirical evidence for the hypothesis in prior literature that a surprise downgrade does not necessarily have to be bad news for stockholders when wealth is transferred from bondholders, but negative rating actions are always bad news for bondholders. The results additionally reveal increasing rating announcement effects by declining credit quality of firms for both rating reviews and changes. JEL Classification: D82, G14, G20. Keywords: Credit Default Swaps, Credit Ratings, Credit Rating Reasons, Event Study.