Block share purchases and corporate performance

Article Abstract:

This paper investigates the causes and consequences of activist block share purchases in the 1980s. We find that activist investors were most likely to purchase large blocks of shares in highly diversified firms with poor profitability. Activists were not less likely to purchase blocks in firms with shark repellents and employee stock ownership plans. Activist block purchases were followed by increases in asset divestitures, decreases in mergers and acquisitions, and abnormal share price appreciation. Industry-adjusted operating profitability also rose. This evidence supports the view that the market for partial corporate control plays an important role in limiting agency costs in U.S. corporations. (Reprinted by permission of the publisher.)

Agency theory, Block trading

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Investor reaction to salient news in closed-end country funds

Article Abstract:

We use panel data on prices and net asset values to test whether dramatic country-specific news affects the response of closed-end country fund prices to asset value. In a typical week, prices underreact to changes in fundamentals; the (short-run) elasticity of price with respect to asset value is significantly less than one. In weeks with news appearing on the front page of The New York Times, prices react much more; the elasticity of price with respect to asset value is closer to one. These results are consistent with the hypothesis that news events lead some investors to react more quickly. (Reprinted by permission of the publisher.)

Other Financial Vehicles, Investors, not elsewhere classified, Investment Offices, Investment Companies, Open-End Investment Funds, Investors NEC, Economic aspects, Financial markets, Foreign news

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Returns to speculators and the theory of normal backwardation

Article Abstract:

The returns to speculators in wheat, corn and soybeans futures markets are examined using a nonparametric statistical procedure, which shows that the theory of normal backwardation is supported. It is also shown that the presence of the risk premiums to speculators tends to be more prominent in recent years than in the past, and that large wheat speculators in general had some superior forecasting ability. The results of the research are inconsistent with the hypothesis that commodity futures prices are unbiased estimates of the corresponding future spot prices.

Models, Analysis, Financial futures, Commodity futures, Keynesian economics, Contango and backwardation

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