ABSTRACT This study utilizes variance ratio tests based on the subsampling approach to test the b... more ABSTRACT This study utilizes variance ratio tests based on the subsampling approach to test the behaviour of euro-based exchange rates markets. Results are mixed, although the random walk behaviour is dominant among the three major currencies namely the Japanese yen, the US dollar and the British pound.
Review of Quantitative Finance and Accounting, Feb 1, 2005
ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in additio... more ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in addition to the traditional variance ratio test to examine the behaviour of some UK Financial Times Stock Exchange (FTSE) stock indices. The results suggest that the null hypothesis of martingale difference behaviour of the index returns series examined in the study is rejected. The use of the nonparametric based variance ratio tests provide stronger evidence against the martingale difference behaviour than the conventional variance ratio tests, under conditions of both homoskedasticity and heteroskedasticity for the examined series. Moreover, the application of Wright’s variance ratio tests in a rolling window framework, indicates that the results for the FTSE returns are consistent neither with a linear AR assumption nor with the white noise hypothesis. Copyright Springer Science + Business Media, Inc. 2005
Journal of Real Estate Finance and Economics, Jul 16, 2011
This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard u... more This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard unit root tests show that both time series are I(1) processes. However, the empirical results show that the returns series for both indices deviate from the null hypothesis of white noise. Moreover, we have found evidence of nonlinearity but strong evidence against chaos for the returns series. Further tests show that the source of nonlinearity is rather different. Hence, the construction index returns series displays weak nonlinear forecastability, typical of nonlinear deterministic processes, whereas the real estate index could be characterized as a stationary process about a nonlinear deterministic trend.
This study examines whether significant excess returns accrue to the shareholders of firms coming... more This study examines whether significant excess returns accrue to the shareholders of firms coming in and out of the FTSE around the day of the FTSE Steering Committee Meeting. It appears that there is a gradual rise in cumulative excess returns for firms entering the FTSE about nine days before the Steering Committee Meeting takes place. There is slight positive gain in price for firms entering the FTSE. The findings of the study indicate that firms going out of the FTSE experience negative excess returns three days prior to the Steering Committee Meeting, as well as significant abnormal trading activity on some days following the meeting.
Abstract This study uses statistical analysis based on chaos theory to examine the trading volume... more Abstract This study uses statistical analysis based on chaos theory to examine the trading volume behaviour of the London Financial Times Stock Exchange (FTSE) All Share Index and FTSE 100 Index. The behaviour of the trading volume series are not independent and identically distributed (IID). The results of the study show that some cycles or patterns occur more frequently than would be expected in a true random series. The results may also explain the observed weak association between stock price changes and trading volume reported in previous studies since those studies were based on linear modelling whereas the behaviour of both stock prices and trading volume may be either a chaotic process, non-linear stochastic process or linear stochastic dependence. A GARCH(1,1) model which appear to explain equity index return series (Opong et al. (1999)) do s not explain the behaviour of the equity volume index series on the London Stock Exchange.
Article history: An effective board of directors is central to agency theory's prescription to so... more Article history: An effective board of directors is central to agency theory's prescription to solving the problems of separation of ownership from control in the modern corporation. The shareholders' confidence in the board's ability to fulfil its duties is an important measure of the success or otherwise of this cornerstone of agency theory. The Board Shareholder Confidence Index, focuses on the board of directors and is the standard by which Canadian governance best practices are measured. This paper investigates the relationship between board effectiveness and company performance. Using a sample of 888 firm year observations from 3 2003 to 2009, we find a positive association between the firm's measure of board effectiveness and the firm's contemporaneous and future market measure of performance, Tobin's Q. The results hold across a number of econometric models that control for different types of endogeneities.
This paper examines shareholder wealth effects surrounding applications to, and approvals by, the... more This paper examines shareholder wealth effects surrounding applications to, and approvals by, the United States Food and Drug Administration (FDA) for firms listed on the New York (NYSE) and London (LSE) stock exchanges. Applications to the FDA for drug approvals significantly increase shareholder wealth for NYSE firms only. The increase is driven by applications for enhancements to existing drugs, with the market anticipating the application, thus suggesting information leakage. FDA approvals also significantly increase shareholder wealth in both markets. However, there is no evidence of information leakage and the significant post-event abnormal returns support the attention-grabbing hypothesis. Enhanced drug approvals are value-relevant for both markets, which highlights the contribution of realoptions to firm value.
Review of Quantitative Finance and Accounting, 2005
ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in additio... more ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in addition to the traditional variance ratio test to examine the behaviour of some UK Financial Times Stock Exchange (FTSE) stock indices. The results suggest that the null hypothesis of martingale difference behaviour of the index returns series examined in the study is rejected. The use of the nonparametric based variance ratio tests provide stronger evidence against the martingale difference behaviour than the conventional variance ratio tests, under conditions of both homoskedasticity and heteroskedasticity for the examined series. Moreover, the application of Wright’s variance ratio tests in a rolling window framework, indicates that the results for the FTSE returns are consistent neither with a linear AR assumption nor with the white noise hypothesis. Copyright Springer Science + Business Media, Inc. 2005
The Journal of Real Estate Finance and Economics, 2011
This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard u... more This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard unit root tests show that both time series are I(1) processes. However, the empirical results show that the returns series for both indices deviate from the null hypothesis of white noise. Moreover, we have found evidence of nonlinearity but strong evidence against chaos for the returns series. Further tests show that the source of nonlinearity is rather different. Hence, the construction index returns series displays weak nonlinear forecastability, typical of nonlinear deterministic processes, whereas the real estate index could be characterized as a stationary process about a nonlinear deterministic trend.
This study empirically reexamines the weak form efficient markets hypothesis of the Ghana Stock M... more This study empirically reexamines the weak form efficient markets hypothesis of the Ghana Stock Market using a new robust non-parametric variance-ratios test in addition to its parametric alternative. The main finding is that stock returns are conclusively not efficient in the weak form, neither from the perspective of the strict random walk nor in the relaxed martingale difference sequence sense. Unlike previous evidence, our finding is robust to thin-trading, sub-sample periods as well as the choice of dataset. Consistent with prior studies, the results of the parametric variance-ratios test are ambiguous. By contrast, its non-parametric alternative provides conclusive results.
Based on a sample of U.S. commercial banks from 2002 to 2012, this paper shows that bank loan sec... more Based on a sample of U.S. commercial banks from 2002 to 2012, this paper shows that bank loan securitization has a significant and positive impact on both Z-scores and the likelihood of bank failure, indicating a short-term risk reduction and a long-term risk increase effect. We also find disparate impacts between mortgage and non-mortgage securitization. Loan sale activities are found to have a similar impact to securitization.
This paper presents the difference in the likelihood of being targets or acquirers among standalo... more This paper presents the difference in the likelihood of being targets or acquirers among standalone banks, single-bank holding company (SBHC) affiliates and multi-bank holding company (MBHC) affiliates. Using a sample of U.S. commercial bank data from 1997 to 2012, we find that MBHC affiliates exhibit a greater likelihood of being targets than do stand-alone commercial banks, while stand-alone banks have a greater probability of becoming targets than do SBHC affiliates. Our findings show that MBHC affiliates tend to have a greater likelihood of being acquirers than do SBHC affiliates, which again have a greater probability of being acquirers than do stand-alone banks. Those banks that acquire another bank within the same MBHC structure tend to be smaller and more financially constrained than those banks acquiring outside the same MBHC structure, whereas targets that are acquired by another bank within the same MBHC structure tend to be smaller, higher profitability and capital than targets that are acquired by banks from outside the MBHC structure. Our results suggest that the MBHC parent attempts to discipline distressed, poorly performing and smaller affiliates by involving them in mergers and acquisitions.
Purpose-This paper investigates as to whether post-Apartheid South African (SA) listed corporatio... more Purpose-This paper investigates as to whether post-Apartheid South African (SA) listed corporations voluntarily comply with and disclose recommended good corporate governance (CG) practices and, if so, the major factors that influence such voluntary CG disclosure behaviour. Design/methodology/approach-We construct a broad voluntary CG disclosure index containing 50 CG provisions from the 2002 King Report using a sample of 169 SA listed corporations from 2002 to 2006. We also conduct regression analysis to identify the main drivers of voluntary CG disclosure. Findings-Our results suggest that while compliance with, and disclosure of, good CG practices varies substantially among the sampled companies, CG standards have generally improved over the five-year period examined. We also find that block ownership is negatively associated with voluntary CG disclosure, while board size, audit firm size, cross-listing, the presence of a CG committee, government ownership and institutional ownership are positively related to voluntary CG disclosure. Practical implications-Our findings have important implications for policy-makers and regulators. Evidence of improving CG standards implies that efforts by various stakeholders at improving CG standards in SA companies have had some positive impact on CG practices of SA firms. However, the substantial variation in the levels of compliance implies that enforcement may need to be strengthened further. Originality/value-There is a dearth of evidence on the level of compliance with the King Report. Our study fills this gap by providing evidence for the first time on the level of compliance achieved, as well as contributing generally to the literature on compliance with codes of good governance and voluntary disclosure.
ABSTRACT This study utilizes variance ratio tests based on the subsampling approach to test the b... more ABSTRACT This study utilizes variance ratio tests based on the subsampling approach to test the behaviour of euro-based exchange rates markets. Results are mixed, although the random walk behaviour is dominant among the three major currencies namely the Japanese yen, the US dollar and the British pound.
Review of Quantitative Finance and Accounting, Feb 1, 2005
ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in additio... more ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in addition to the traditional variance ratio test to examine the behaviour of some UK Financial Times Stock Exchange (FTSE) stock indices. The results suggest that the null hypothesis of martingale difference behaviour of the index returns series examined in the study is rejected. The use of the nonparametric based variance ratio tests provide stronger evidence against the martingale difference behaviour than the conventional variance ratio tests, under conditions of both homoskedasticity and heteroskedasticity for the examined series. Moreover, the application of Wright’s variance ratio tests in a rolling window framework, indicates that the results for the FTSE returns are consistent neither with a linear AR assumption nor with the white noise hypothesis. Copyright Springer Science + Business Media, Inc. 2005
Journal of Real Estate Finance and Economics, Jul 16, 2011
This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard u... more This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard unit root tests show that both time series are I(1) processes. However, the empirical results show that the returns series for both indices deviate from the null hypothesis of white noise. Moreover, we have found evidence of nonlinearity but strong evidence against chaos for the returns series. Further tests show that the source of nonlinearity is rather different. Hence, the construction index returns series displays weak nonlinear forecastability, typical of nonlinear deterministic processes, whereas the real estate index could be characterized as a stationary process about a nonlinear deterministic trend.
This study examines whether significant excess returns accrue to the shareholders of firms coming... more This study examines whether significant excess returns accrue to the shareholders of firms coming in and out of the FTSE around the day of the FTSE Steering Committee Meeting. It appears that there is a gradual rise in cumulative excess returns for firms entering the FTSE about nine days before the Steering Committee Meeting takes place. There is slight positive gain in price for firms entering the FTSE. The findings of the study indicate that firms going out of the FTSE experience negative excess returns three days prior to the Steering Committee Meeting, as well as significant abnormal trading activity on some days following the meeting.
Abstract This study uses statistical analysis based on chaos theory to examine the trading volume... more Abstract This study uses statistical analysis based on chaos theory to examine the trading volume behaviour of the London Financial Times Stock Exchange (FTSE) All Share Index and FTSE 100 Index. The behaviour of the trading volume series are not independent and identically distributed (IID). The results of the study show that some cycles or patterns occur more frequently than would be expected in a true random series. The results may also explain the observed weak association between stock price changes and trading volume reported in previous studies since those studies were based on linear modelling whereas the behaviour of both stock prices and trading volume may be either a chaotic process, non-linear stochastic process or linear stochastic dependence. A GARCH(1,1) model which appear to explain equity index return series (Opong et al. (1999)) do s not explain the behaviour of the equity volume index series on the London Stock Exchange.
Article history: An effective board of directors is central to agency theory's prescription to so... more Article history: An effective board of directors is central to agency theory's prescription to solving the problems of separation of ownership from control in the modern corporation. The shareholders' confidence in the board's ability to fulfil its duties is an important measure of the success or otherwise of this cornerstone of agency theory. The Board Shareholder Confidence Index, focuses on the board of directors and is the standard by which Canadian governance best practices are measured. This paper investigates the relationship between board effectiveness and company performance. Using a sample of 888 firm year observations from 3 2003 to 2009, we find a positive association between the firm's measure of board effectiveness and the firm's contemporaneous and future market measure of performance, Tobin's Q. The results hold across a number of econometric models that control for different types of endogeneities.
This paper examines shareholder wealth effects surrounding applications to, and approvals by, the... more This paper examines shareholder wealth effects surrounding applications to, and approvals by, the United States Food and Drug Administration (FDA) for firms listed on the New York (NYSE) and London (LSE) stock exchanges. Applications to the FDA for drug approvals significantly increase shareholder wealth for NYSE firms only. The increase is driven by applications for enhancements to existing drugs, with the market anticipating the application, thus suggesting information leakage. FDA approvals also significantly increase shareholder wealth in both markets. However, there is no evidence of information leakage and the significant post-event abnormal returns support the attention-grabbing hypothesis. Enhanced drug approvals are value-relevant for both markets, which highlights the contribution of realoptions to firm value.
Review of Quantitative Finance and Accounting, 2005
ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in additio... more ABSTRACT This study utilises tests based on ranks and signs suggested by Wright (2000) in addition to the traditional variance ratio test to examine the behaviour of some UK Financial Times Stock Exchange (FTSE) stock indices. The results suggest that the null hypothesis of martingale difference behaviour of the index returns series examined in the study is rejected. The use of the nonparametric based variance ratio tests provide stronger evidence against the martingale difference behaviour than the conventional variance ratio tests, under conditions of both homoskedasticity and heteroskedasticity for the examined series. Moreover, the application of Wright’s variance ratio tests in a rolling window framework, indicates that the results for the FTSE returns are consistent neither with a linear AR assumption nor with the white noise hypothesis. Copyright Springer Science + Business Media, Inc. 2005
The Journal of Real Estate Finance and Economics, 2011
This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard u... more This study assess the nonlinear behavior of U.K. construction and real estate indices. Standard unit root tests show that both time series are I(1) processes. However, the empirical results show that the returns series for both indices deviate from the null hypothesis of white noise. Moreover, we have found evidence of nonlinearity but strong evidence against chaos for the returns series. Further tests show that the source of nonlinearity is rather different. Hence, the construction index returns series displays weak nonlinear forecastability, typical of nonlinear deterministic processes, whereas the real estate index could be characterized as a stationary process about a nonlinear deterministic trend.
This study empirically reexamines the weak form efficient markets hypothesis of the Ghana Stock M... more This study empirically reexamines the weak form efficient markets hypothesis of the Ghana Stock Market using a new robust non-parametric variance-ratios test in addition to its parametric alternative. The main finding is that stock returns are conclusively not efficient in the weak form, neither from the perspective of the strict random walk nor in the relaxed martingale difference sequence sense. Unlike previous evidence, our finding is robust to thin-trading, sub-sample periods as well as the choice of dataset. Consistent with prior studies, the results of the parametric variance-ratios test are ambiguous. By contrast, its non-parametric alternative provides conclusive results.
Based on a sample of U.S. commercial banks from 2002 to 2012, this paper shows that bank loan sec... more Based on a sample of U.S. commercial banks from 2002 to 2012, this paper shows that bank loan securitization has a significant and positive impact on both Z-scores and the likelihood of bank failure, indicating a short-term risk reduction and a long-term risk increase effect. We also find disparate impacts between mortgage and non-mortgage securitization. Loan sale activities are found to have a similar impact to securitization.
This paper presents the difference in the likelihood of being targets or acquirers among standalo... more This paper presents the difference in the likelihood of being targets or acquirers among standalone banks, single-bank holding company (SBHC) affiliates and multi-bank holding company (MBHC) affiliates. Using a sample of U.S. commercial bank data from 1997 to 2012, we find that MBHC affiliates exhibit a greater likelihood of being targets than do stand-alone commercial banks, while stand-alone banks have a greater probability of becoming targets than do SBHC affiliates. Our findings show that MBHC affiliates tend to have a greater likelihood of being acquirers than do SBHC affiliates, which again have a greater probability of being acquirers than do stand-alone banks. Those banks that acquire another bank within the same MBHC structure tend to be smaller and more financially constrained than those banks acquiring outside the same MBHC structure, whereas targets that are acquired by another bank within the same MBHC structure tend to be smaller, higher profitability and capital than targets that are acquired by banks from outside the MBHC structure. Our results suggest that the MBHC parent attempts to discipline distressed, poorly performing and smaller affiliates by involving them in mergers and acquisitions.
Purpose-This paper investigates as to whether post-Apartheid South African (SA) listed corporatio... more Purpose-This paper investigates as to whether post-Apartheid South African (SA) listed corporations voluntarily comply with and disclose recommended good corporate governance (CG) practices and, if so, the major factors that influence such voluntary CG disclosure behaviour. Design/methodology/approach-We construct a broad voluntary CG disclosure index containing 50 CG provisions from the 2002 King Report using a sample of 169 SA listed corporations from 2002 to 2006. We also conduct regression analysis to identify the main drivers of voluntary CG disclosure. Findings-Our results suggest that while compliance with, and disclosure of, good CG practices varies substantially among the sampled companies, CG standards have generally improved over the five-year period examined. We also find that block ownership is negatively associated with voluntary CG disclosure, while board size, audit firm size, cross-listing, the presence of a CG committee, government ownership and institutional ownership are positively related to voluntary CG disclosure. Practical implications-Our findings have important implications for policy-makers and regulators. Evidence of improving CG standards implies that efforts by various stakeholders at improving CG standards in SA companies have had some positive impact on CG practices of SA firms. However, the substantial variation in the levels of compliance implies that enforcement may need to be strengthened further. Originality/value-There is a dearth of evidence on the level of compliance with the King Report. Our study fills this gap by providing evidence for the first time on the level of compliance achieved, as well as contributing generally to the literature on compliance with codes of good governance and voluntary disclosure.
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Papers by Kwaku Opong