Segal Graduate School of Business Final Projects

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PERFORMANCE OF SOCIALLY RESPONSIBLE INDICES DURING MARKET CRISIS IN NORTH AMERICA AND EUROPE

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

This paper investigates whether socially responsible investment indices in the United States, Canada, the Eurozone and the United Kingdom provide downside protection during market crisis when compared to their respective market indices. Socially responsible investment indices in US and Canada perform similarly to their market indices during market crisis periods between 2000 and 2014, offering neither downside protection nor excess return in overall market conditions.

 

In Eurozone, the socially responsible investment index we selected performs worse than their market index during both the Financial Crisis and the Euro Crisis but not during the Tech Bubble. In the United Kingdom, socially responsible investment index underperforms its respective market index during all crisis periods, including the Tech Bubble, Financial Crisis and the Euro Crisis but outperforms during non-crisis periods. Overall, we do not find that SRI indices offer downmarket protection in North America and Europe.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Peter Klein

ESTIMATION OF IMPLIED VOLATILITY SURFACE AND ITS DYNAMICS: EVIDENCE FROM S&P 500 INDEX OPTION IN POST-FINANCIAL CRISIS MARKET

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

There is now an extensive literature on modeling the implied volatility surface (IVS) as a function of options’ strike prices and time to maturity. The polynomial parameterization is one of these approaches and it provides a simple and efficient way for practitioners to estimate implied volatility. This project tests the predictive capability of this methodology in the post-financial crisis market. Using data for the period from July 1st, 2012 to June 30th, 2015 for European puts and calls of the S&P 500 index options, we estimate a vector autoregressive model to capture the dynamics of the IVS. Our results show that this methodology has better predictive capability on IVS of index options in post-financial crisis market than on IVS of equity options in pre-financial crisis period.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Christina Atanasova

REALIZED GARCH: EVIDENCE IN CSI 300 DURING A HIGH-VOLATILITY PERIOD

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

Numerous studies have suggested the application of GARCH and its extensions to model volatility of stock prices and indices. However, the performance of these models is not well established during the period of unusually high volatility. In this paper, we compare three GARCH specifications namely, standard GARCH, EGARCH, and Realized GARCH, in their ability to model volatility during the recent Chinese stock market debacle.

 

In addition, three models are applied to the quantile forecast of Value-at-Risk (VaR). Normal distribution, student's t distribution as well as skewed student's t distribution are used. While all specifications perform in a similar fashion during normal periods, we document that Realized GARCH model with skewed student's t distribution outperfoms the others during the high-volatility period from January 2015 to October 2015.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Andrey Pavlov

STOCK SPLITS AND ADVERSE SELECTION

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

What impact can the market expect from a stock split announcement? This paper delves into the effect of stock split announcements on the immediate excess return over the market for stocks in the US market by considering stock splits over a span of 35 years from 1980 to 2014 across different industries.

 

We find that the average market reaction to stock splits announcement is 1.5%. We also find that excess return over the market after stock split announcement is negatively correlated with firm size and positively correlated with bid-ask spread upon the application of industry fixed effect and year fixed effect. However, upon the application of firm fixed effect, these relationships are not significant. In addition, we found that there is no significant relationshi

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Amir Rubin

TIME-VARYING CORRELATION IN CANADIAN HOUSING PRICES

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Andrey Pavlov

THE EFFECT OF FINANCIAL CRISIS ON THE LEAD-LAG RELATIONSHIP BETWEEN THE FUTURE AND SPOT MARKET

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Andrey Pavlov

The Consistency between Analysts’ Earnings Forecast Errors and Recommendations

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

We study the relationship between analysts’ earnings forecast errors and their stock recommendations. We hypothesize that analysts who give optimistic recommendations are more likely to have positive forecast errors, and analysts who give pessimistic recommendations tend to have negative forecast errors. This consistency in behaviour should be driven either by the objectivity illusion, or simply because of analysts’ rationality. Our regression results generally support the tendency of analysts’ to provide consistent estimates across these two tasks (ACAT). We also find that analyst’s consistency is independent at the analyst-firm level, meaning that ACAT is an analyst-firm characteristic.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Amir Rubin

Executive Compensation Concentration and Institutional Ownership Power

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

In this paper, we examine whether institutional shareholders prefer concentrated or dispersed executive compensation structure. To address this question, we study the relationship between executive compensation concentration and institutional ownership power because institutional investors can influence executive compensation more when they have more power. We measure institutional ownership power using institutional ownership level and institutional ownership concentration. We find a significant negative relationship between executive compensation concentration and institutional ownership power.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Amir Rubin

Nonlinear Relationship between diversification and bank profitability

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

This paper examines the relation between revenue diversification and bank profitability. We use the ratio of non-interest income to total income as our measure of diversification, and return on assets as our main measure of profitability. Using a sample of US bank holding companies from 2002 to 2014, we find a nonlinear relation between revenue diversification and bank profitability. When we divide banks into several groups by size, we find that the non- linear relation exists for large banks, but not for small and medium banks.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Jijun Niu

BANK SIZE AND BANK VALUATION

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2015-12
Abstract: 

This paper studies the relation between bank size and bank valuation. We use Tobin’s Q and market-to-book ratio as measures of bank valuation, and another two variables—natural logarithm of total assets and natural logarithm of total operating income—as measures of bank size. Using a sample of publicly-traded U.S. bank holding companies from 2002 to 2014, we find a quadric relation between bank size and bank valuations. Bank valuations will rise and then fall as bank size increases. This finding holds in different sample periods: before, during, and after the financial crisis of 2007-2009.

Document type: 
Graduating extended essay / Research project
Senior supervisor: 
Jijun Nui