{"title":"The Risk of Beta – Investor Learning and Prospect Theory","authors":"D. Baur, Niels Schulze","doi":"10.2139/ssrn.1536754","DOIUrl":"https://doi.org/10.2139/ssrn.1536754","url":null,"abstract":"Investors show different behaviour in falling markets and in rising markets. This paper demonstrates that the beta of individual stocks varies across the entire return distribution and that the variation depends on the frequency of the returns. While there is a symmetric u-shape increase for extreme daily returns, there is an asymmetric effect with an increased beta for extreme negative returns for weekly and monthly data. We use all constituents of the EUROSTOXX600 index over the period of 1979 until 2009, and estimate the impact of the index on the constituents for different firm-specific return regimes. The regime-dependent role of systematic risks on individual stocks is explained with investor learning for daily and weekly data and prospect theory for monthly data. The results demonstrate that the risk of a stock can be underestimated or overestimated significantly if conditional means are used and the existence of regimes is ignored.","PeriodicalId":171282,"journal":{"name":"2010 Finance & Corporate Governance Conference (Archive)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132830830","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Effect of the GFC (and Other Busts) on Portfolio Diversification Benefits","authors":"B. Hunt","doi":"10.2139/ssrn.1536245","DOIUrl":"https://doi.org/10.2139/ssrn.1536245","url":null,"abstract":"The paper examines the extent of impairment of asset diversification benefits during share market crashes with particular focus on the effects of the GFC. The analysis uses return data on ASX Twenty Leaders’ stocks, from 1985 to 2009, to quantify the effect on diversification benefits of changing market conditions. In particular, the study focuses on the role that changing stock return volatility and changing stock pair-wise return correlations have on the risk characteristics of the minimum variance portfolio.","PeriodicalId":171282,"journal":{"name":"2010 Finance & Corporate Governance Conference (Archive)","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127857562","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Corporate Governance Legal Reforms and Stock Return in Malaysia","authors":"Grace Ooi, Nuttawat Visaltanachoti","doi":"10.2139/ssrn.1536912","DOIUrl":"https://doi.org/10.2139/ssrn.1536912","url":null,"abstract":"This paper examines the relationship between the changes in corporate governance legal system and stock return in Bursa Malaysia (formally known as Kuala Lumpur Stock Exchange, KLSE) in Malaysia for the period from 1996 to 2003. The cross-sectional evidence indicates that the corporate governance is positively associated with stock return before the Asian financial melt down, but there is no evidence of such connection during the 1997 crisis. After the crisis, an implementation of Financial Reporting Act in 1997 and the Code on Corporate Governance in 2000 combined with a revise of Kuala Lumpur Stock Exchange (KLSE) regulations in 2001 have restored the investors’ confidence and enhanced the investor’s awareness and realization of the value of good corporate governance. This study supports a proposition that the changes in legal system have improved the corporate governance in Malaysia.","PeriodicalId":171282,"journal":{"name":"2010 Finance & Corporate Governance Conference (Archive)","volume":"137 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122935609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Global Financial Crisis and Pro-Cyclical Instability Issues of Financial Institutions: The Post-Crisis Responses","authors":"Lakshman Alles","doi":"10.2139/ssrn.1536391","DOIUrl":"https://doi.org/10.2139/ssrn.1536391","url":null,"abstract":"Key factors identified as contributing to the global financial crisis included the roles of financial accounting policies and credit rating agencies, and the combination of these factors in producing a continuing pro-cyclical destabilising effect on financial institutions. This article examines the progress made so far or the lack of it, in addressing these issues in the post-crisis period.","PeriodicalId":171282,"journal":{"name":"2010 Finance & Corporate Governance Conference (Archive)","volume":"88 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133186283","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Board of the Directors as an Active Participant in the Strategic Decision-Making Process: Theory and Practice (Empirical Evidence)","authors":"J. Jeżak","doi":"10.2139/ssrn.1533796","DOIUrl":"https://doi.org/10.2139/ssrn.1533796","url":null,"abstract":"The aim of this paper is to provide an overview of the world-wide discussion on the role of boards of directors in the strategic decision-making process. The first part outlines the evolution of the boards’ role in corporations over the last three decades. The second one presents the latest studies in this field, including the author’s own research, along with key conclusions and their implications for future studies of this kind. The main thesis of the paper is the need to create a new model of the board, playing a more active role in the strategic decision-making process. Active boards of directors increase their power inside corporations and, crucially, improve the quality of strategic decisions made by companies. However, according to research conducted by P. Stiles (2001,) McKinsey & Co. (2005) and D. W. Anderson, S. J. Melanson and J. Maly (2007), most boards are still not directly involved in formulating company strategy. Also Polish supervisory boards (the German model), investigated by the author of this paper, primarily perform monitoring and control functions, though their members believe that they should be advisory and initiating bodies as well. Finally, one should bear in mind that active and knowledgeable boards are an important factor in preventing crisis situations, e.g. by forcing managers to fully account for their strategic decisions and to provide alternative solutions.","PeriodicalId":171282,"journal":{"name":"2010 Finance & Corporate Governance Conference (Archive)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128302715","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Corporate Managers’ Risk Propensity","authors":"Dr. Nesma Ahmed Heshmat","doi":"10.2139/ssrn.1530826","DOIUrl":"https://doi.org/10.2139/ssrn.1530826","url":null,"abstract":"Traditionally, financialists have based their work on the standard assumption that agents are fully rational, self-interested, and maximisers of expected utility. However, researchers are increasingly recognizing that the psychological biases of managers may affect decision-making and outcomes in corporations. Behavioral Finance (BF) and Behavioral Corporate Finance (BCF) examine the effects of managerial and investor psychological biases on firm’s corporate finance decisions (such as investment appraisal and capital structure). This study investigates professional corporate managers’ behavior across decision settings. Specifically, manager’s decisions to take or avoid risk are investigated when evaluating data. The study also, examines the factors which may affect the manager’s tendency towards risk taking or avoiding. Therefore, the relation between Education, Specialist in Education, experience, capitals of the company, understanding financial concepts and the degree of risk aversion has been examined in different business sector in Jeddah area, KSA.","PeriodicalId":171282,"journal":{"name":"2010 Finance & Corporate Governance Conference (Archive)","volume":"642 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126907149","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}