growth expectation stock
230715700
Firm Life Cycle, Expectation Errors and Future Stock Returns
I study the return predictability of firm life cycle, originally documented by Dickinson (2011) I show that a hedge portfolio strategy going long on mature firms and short on introduction firms generates a significant hedge portfolio return of 1.4% per month in return weighted portfolios and 0.75% in value weighted portfolios. The returns to firm life cycle are related to investors' and analysts' expectation errors, are driven by market wide investor sentiment, and are more pronounced among stocks with low institutional ownership and high idiosyncratic volatility. Quantile regressions show that introduction firms have considerably greater uncertainty and skewness in future earnings growth outcomes than mature firms, such that analysts are better able to justify optimistically biased forecasts for introduction firms compared to mature firms.
Theodosia Konstantinidi
168608112
THE ENVISAGED ROLE OF CAPITAL MARKETS: CAN THE JORDANIAN STOCK EXCHANGE MEET THE EXPECTATION OF ECONOMIC GROWTH
The subject matter of financial development in Jordan cannot be underestimated. For example, licensed banks' total assets are equivalent to about 180 percent of Gross Domestic Product (GDP) In addition, the country boasts one of the oldest stock markets in the region. The Amman Securities Exchange (ASE) was established in 1978 and its current capitalization is equivalent to about 75 percent of GDP. Given Jordan's socio economic challenges, and the fact that successive governments have been suffering from relatively large and consistent budget deficits, it is surprising to learn that since the establishment of the ASE, the market has not developed an active secondary bonds market. The issued bonds are sold to all licensed banks. This observation is unfortunate. Avoiding the concentration of financial intermediation in banks makes sense. In addition, whilst a well developed bond market allows banks to transfer their risk (securitization) such a market makes the conduct of monetary policy more effective and contributes to budgetary discipline by exposing the government to financial discipline. This paper argues for the need for developing a government securities market. In addition, the paper examines the already listed shares in terms of their liquidity cost. Based on the empirical results, it is reported that listed shares suffer from relatively high liquidity cost. This finding, and its implications, are useful in recommending what must be done to develop an active bonds market
Ghassan Omet
199403802
Why are asset prices so volatile Sales Growth Persistence and the Expectation Hypothesis
Aiming to find the missing link between accounting numbers and stock return volatility, this paper examines how sales growth persistence is related to Extrapolation Hypothesis via the variance of its asset returns. Differentiating from the literature, growth persistence is captured by a mean reverting state space model. Portfolios formed on the level of growth persistence feature many favourable attributes. Within this framework high persistent companies are found to realise high sales growth and show signs of predictability. Combining growth persistence, quarterly report announcements and the forecast errors from the state space model as explanatory variables in the conditional variance equation in a GARCH framework, the results show evidence that these variables add to the explanation of realised volatility. The research forms evidence that suggest a difference in reaction to forecast errors along the growth persistence portfolios. Overall the findings of the study represent a first step in the direction of applying company fundamentals in explaining stock return volatility.
R Herrewijn
209443795
Skin in the Game: Operating Growth, Firm Performance, and Future Stock Returns
Prior research documents that asset growth is negatively associated with future firm performance. In contrast, we show that growth financed by product market stakeholders (i.e. "operating growth" is positively associated with future firm performance. Investors and security analysts under estimate the positive effects of operating growth on future performance, resulting in return predictability and overly pessimistic earnings forecasts for firms with high operating growth. Future stock returns largely concentrate around subsequent earnings announcements with declining magnitudes, consistent with the error in expectation explanation. Results from cross sectional tests further support the hypothesis that operating growth signals high future performance but investors underreact to it.
Sean Shun Cao Zhe Wang P Eric Yeung
168445934
Effect of Stock Market Development on Economic Growth: A Case of Nairobi Securities Exchange, Kenya
Nairobi securities Market has not been performing to the expectation of many Kenyan. The collapse of its two stock brokers almost the same time as caused a lot of anxiety and affected most of individual investors in this institution. This issue interwoven with the under subscription of initial public over (LPO) such as cooperative bank of Kenya and British American Insurance is a clear sign of deterioration in this institution. In relation to newly industrialized countries like Asian tigers which at some point were at par with Kenyan economy but now Kenya is far much behind. The listed companies in stock markets in these economies are much higher compares to the one listed in NSE. This paper carried empirical investigation mainly to establish the short run and long run relationship between stock market development and economic growth in Kenya. The annual secondary data was used for period running from 1992 to 2011.The study used the Ordinary Least squares (OLs) Method to run regression and Error correction model. The economic growth rate was proxied by GDP per capita growth rate. The stock market development was assumed to measure by market capitalization, equity turnover and total shares traded .The study also employed two other variables which were felt to be very crucial in both stock market and economic growth. These were investment and human capital development proxied by university student enrolment. The counteraction test results showed that there was long run relationship between indicators of stock market development and economic growth in Kenya. These results are supported by unit root test graphs. Further investigation by Error Correction Model (ECM) indicated that market capitalization series has negative relationship with economic growth whilst investment series showed very strong and positive relationship with economic growth rate series. The study finds out that stock market development affects economic growth through providing pool of cheap fund for investment. The policy recommendation to the policy makers is that NSE is very crucial institution to be taken into to consideration if Kenya has to realize the dream of being regional financial hub by 2030 by accelerated development to boost domestic and international resource mobilization. The areas policy makers needs A to focus on are various incentives, enhanced competiveness and attractiveness of NSE, regulations of individual and A institution investors, stock brokers players and privatization of state own enterprises.
Wycliffe Mukulu Musyoka Evans Geoffrey Mogeni David Musimbi Murunga Pollyne Mbithe Mutunga
154722149
A NOTE ON GROWTH EXPECTATION
Recently, several researchers have succeeded in producing expectation driven cycles by balancing the tension between the wealth effect and the substitution effect stemming from the higher expected future productivity. Especially, seminal research by Christiano et al. "Monetary Policy and Stock Market Boom Bust Cycles," mimeo, Northwestern University, 2007) explains "stock market boom bust cycles," characterized by increases in consumption, labor inputs, investment, and stock prices relating to high expected future technology levels. We, however, show that such expectation driven cycles are difficult to generate based on "growth expectation," which reflects expectations of higher productivity growth rates.
Macroeconomic Dynamics
Ippei Fujiwara
202756395
Growth Expectation
For a long time, changes in expectations about the future have been thought to be significant sources of economic fluctuations, as argued by Pigou (1926) Although creating such an expectation driven cycle (the Pigou cycle) in equilibrium business cycle models was considered to be a difficult challenge, as pointed out by Barro and King (1984) recently, several researchers have succeeded in producing the Pigou cycle by balancing the tension between the wealth effect and the substitution effect stemming from the higher expected future productivity. Seminal research by Christiano, Ilut, Motto and Rostagno (2007) explains the "stock market boom bust cycles," characterized by increases in consumption, labor inputs, investment and the stock prices relating to high expected future technology levels, by introducing investment growth adjustment costs, habit formation in consumption, sticky prices and an inflation targeting central bank. We, however, show that such a cycle is difficult to generate based on "growth expectation," which reflect expectations of higher productivity growth rates. Thus, Barro and King's (1984) prediction still applies.
Ippei Fujiwara
157306611
Growth Options and Related Stock Market Anomalies: Profitability, Distress, Lotteryness, and Volatility
Growth options increase idiosyncratic skewness and reduce risk exposure, and thereby create the appearance of profitability, distress, lotteryness, and volatility anomalies, influencing their returns via the channel of idiosyncratic skewness. To capture these effects, we estimate expected idiosyncratic skewness due to growth options reflecting investors' expectation about the firm's mix of growth options versus assets in place. We find that investors require a positive premium to hold stocks of inflexible firms with low growth options and hence negative expected idiosyncratic skewness, and that a newly proposed skewness factor based on growth options or firm inflexibility explains the aforementioned anomalies.
Turan G Bali Luca Del Viva Neophytos Lambertides Lenos Trigeorgis
73665131
Impact of the Nigerian stock exchange on economic growth.
This study examines the impact of the Nigerian stock exchange on economic growth from 1981 to 2011. GDP is the dependent variable, a proxy for economic growth. Market capitalization is a proxy for the Nigerian stock exchange. Other explanatory variables were employed in the model. This study employs the ordinary least square (OLS) methods of estimation, heteroscedasticity and autocorrelation covariance (HAC) in order to avoid spurious regression results. The E views 6.0 was employed in the regression analysis. In executing this study, the ADF (augumented dickey fuller) test and the Unit Root Test was carried out to test the stationarity of the variables. The result shows that the market capitalization, interest rate, total number of listed securities, number of deals and foreign direct investment satisfy the economic apriori expectation while the total number of issues and the value of deals negates the a priori expectation. The stationarity test shows that all the variables employed are stationary at first difference. The ADF test shows a long run relationship among the variables in the model of study. Using the t test, it is revealed that only three (3) variables are significant in the explanation of the dependent variable (GDP) while the remaining four variables are insignificant. Recommendations are made based on the result.
Anulika Azubike
59576928
^EFFECT OF STOCK MARKET DEVELOPMENT ON ECONOMIC GROWTH:
Nairobi securities Market has not been performing to the expectation of many Kenyan investors. The weak management has manifested itself after the collapse of two stock brokers almost at the same time. This happened in 2008 and 2009 causing a lot of anxiety among the individual investors As a result there has been under subscription of initial public offer and right issues for instance in the case of Cooperative Bank of Kenya, British American Insurance and Kenya airways. This is a clear sign of deterioration in performance and loss of goodwill in this important institution. The main objective of the study was to investigate the relationship between stock market development and economic growth. Stock market development indicators were market capitalisation, total shares traded and equity turnover. The specific objectives were to examine the effect and direction of stock market capitalisation on economic growth, to determine the effect of total value of shares traded on economic growth, to establish how the equity turnover in the securities market had influenced economic growth and to examine the effect of investment and university enrolment on economic growth. The study carried an empirical investigation using quarterly time series data for the period 1996 to 2010, to establish the short run and long run effects of each indicators of stocjc market development on economic growth. The study adopted the Harrod Domar growth model and used the Ordinary Least squares (OLS) Method to estimates the effect. ECM was used to (estimate the short run dynamics. The short run analysis revealed that investments, market capitalisation and equity turnover had positive effect on economic growth while total value of shares traded, equity turnover and university enrolment had positive effects on economic growth in the long run. The result implies
Maurice Awiti Zachary Kamau Mwangi