Macquarie Research, Academic abstracts monitor

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Quantitative Analysis
Academic abstracts monitor
This is our final Abstracts Monitor for 2010 - we hope you‟ve found this year‟s
academic ideas interesting and useful. The Macquarie quant team would like to
wish you all a very happy and successful year in 2011. Of course we will be back
with the Academic Abstracts Monitor next year. Our own global research agenda
for next year is also taking shape already but if you have any topics of particular
interest let us know and we will try to fit them in.
Some of this month’s interesting ideas…

 Bursting the gold price bubble – Tsirel et al look at modeling gold price
dynamics using log-periodic oscillation analysis and find that the most
probable timing of the “burst of the gold price bubble” is April – June 2011.
They also analyze some of the possible consequences.
 Innovative Efficiency – Hirschleifer, Hsu and Li find that patents granted per
dollar of R&D capital (“innovative efficiency”) is a strong positive return
predictor. The result holds after accounting for common risk factors.
 Management quality – there were a number of articles this month focusing
on management quality. Kaplan, Klebanov and Sorensen use a unique
dataset to relate CEO characteristics to company performance and find a
positive link between firm performance and CEO “general ability” and
“execution skills”. Masulis and Mobbs find that firms with inside directors who
also hold outside directorships have better operating performance, and also
note that announcements of outside board appointments improve shareholder
wealth.
 Two kinds of Value Premiums – Daehwan Kim finds that there are two
distinct performance clusters within value-oriented strategies which are not
highly correlated with each other. This has potential benefits for diversification
of value strategies and also presents opportunities for value timing.
 Default risk and credit – Chen, Hrdle and Moro use the nonlinear Support
Vector Machine technique to model default risk and find encouraging results.
Meanwhile Mayordomo, Pena and Schwartz conduct a comparative study of
the six major credit default swap databases and find that quotes from the
CMA database tend to lead the others in the price discovery process.
 Focus on IPOs – Johnson, Kang and Yi find that IPO firms that have product
market relationships with large customers experience higher valuation and
better long-term performance. Arnold, Fishe and North apply text analysis to
offering documents and find a significant relationship between ambiguous risk
disclosure and subsequent returns.
 Tax-loss selling – a study by Brown, Ferguson, and Sherry on the effect of
Australia‟s Capital Gains Tax finds significant tax driven trading effects around
the end of financial year. They observe unusually high trading volume and
more selling in June for stocks that have lost value over the financial year.
 Can fund managers pick stocks? – not that you needed convincing of this,
but conclusive evidence in the affirmative from Bakera et al who find that the
average fund‟s recent buys significantly outperform recent sells around
earnings announcements.