A Theory of Capital Structure, Price Impact, and Long-Run Stock Returns Under Heterogeneous Beliefs

2009 ◽  
Author(s):  
Thomas J. Chemmanur ◽  
Mark H. Liu
Keyword(s):  
Capital Structure ◽  
Stock Returns ◽  
Price Impact ◽  
Heterogeneous Beliefs ◽  
Long Run

scholarly journals Pension funds, large capital inflows and stock returns in a thin market

2018 ◽  
Vol 18 (3) ◽  
pp. 347-387
Author(s):  
JANUSZ BRZESZCZYŃSKI ◽  
MARTIN T. BOHL ◽  
DOBROMIŁ SERWA
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Pension Funds ◽  
Price Impact ◽  
Capital Inflows ◽  
Policy Implications ◽  
Private Pension ◽  
Long Run ◽  
Stock Market Investors

Using unique data about capital flows from the public social security institute ZUS (Zakład Ubezpieczeń Społecznych) to private pension funds OFEs (Otwarte Fundusze Emerytalne) in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in the long-run. This result is consistent with the temporary price pressure hypothesis of Ben-Rephael et al. (2011). We analyze the capital transfers, in the form of the aggregated pension contributions collected from all employees in the entire Polish economy, from the ZUS to the private pension funds, which further invest this capital on the stock market. The average time for the subsequent reaction of stock prices is found to be 4 days. The trading strategy based on this result generates superior outcomes in comparison with the passive strategy, which further confirms the price impact of capital inflows. Our findings are not only relevant for stock market investors but they also have broader policy implications for stock market regulators and for the national pension regulators.

Dividends versus Stock Repurchases and Long-Run Stock Returns under Heterogeneous Beliefs

2021 ◽  
Author(s):  
Onur Bayar ◽  
Thomas J Chemmanur ◽  
Mark H Liu
Keyword(s):  
Stock Returns ◽  
Project Success ◽  
Heterogeneous Beliefs ◽  
Stock Repurchases ◽  
External Financing ◽  
Stock Repurchase ◽  
Dividend Payment ◽  
Long Run

Abstract We analyze a firm’s choice between dividends and stock repurchases under heterogeneous beliefs. Firm insiders, owning a certain fraction of equity, choose between paying out cash available through a dividend payment or a stock repurchase, and simultaneously choose the scale of the firm’s project. Outsiders have heterogeneous beliefs about project success and may disagree with insiders. In equilibrium, the firm distributes value through dividends alone, through a repurchase alone, or through a combination of both. In some situations, the firm may raise external financing to fund its payout. We also develop results for long-run stock returns following dividends and repurchases.

scholarly journals Financial Crises, Macroeconomic Variables, and Long-Run Risk: An Econometric Analysis of Stock Returns Correlations (2000 to 2019)

2021 ◽  
Vol 14 (3) ◽  
pp. 127
Author(s):  
Marco Tronzano
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Financial Crises ◽  
Stock Price ◽  
Financial Risk ◽  
Swiss Franc ◽  
Chinese Stock Market ◽  
Stock Market Index ◽  
Defensive Role ◽  
Long Run

This paper focuses on four major aggregate stock price indexes (SP 500, Stock Europe 600, Nikkei 225, Shanghai Composite) and two “safe-haven” assets (Gold, Swiss Franc), and explores their return co-movements during the last two decades. Significant contagion effects on stock markets are documented during almost all financial crises; moreover, in line with the recent literature, the defensive role of gold and the Swiss Franc in asset portfolios is highlighted. Focusing on a new set of macroeconomic and financial series, a significant impact of these variables on stock returns correlations is found, notably in the case of the world equity risk premium. Finally, long-run risks are detected in all asset portfolios including the Chinese stock market index. Overall, this empirical evidence is of interest for researchers, financial risk managers and policy makers.

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