In the US, shareholders can form a class action to sue a company under S10b-5 of the Securities Exchange Act for allegedly releasing misleading information, or for failing to disclose material information. The substantial cost of litigation, and its associated impact on shareholder value, has prompted debate over whether to reform access to the shareholder class action mechanism. However, the debate is as yet unguided by any study of the long-term financial impact on firms involved in litigation.
Solvency II is a European Union (EU) legislative program that introduces a harmonised insurance regulatory regime across the region. The program is one of the first insurance regulations in the world to follow the Basel Accord approach, with a 3-pillar structure that covers capital requirements, risk management and disclosure requirements. In Australia, the Life and General Insurance Capital (LAGIC) regime, which governs life and general insurers, follows a similar approach. In common with Solvency II, LAGIC adopts a risk-based approach for insurers, aimed at tailoring insurers’ capital requirements to their actual risk exposure. This is because the insurance industry is widely considered to be of systemic importance to the financial sector of the economy. This study focuses on Pillar 1, which deals with the capital requirements of the insurance regulations.
The shift from defined benefit to defined contribution superannuation schemes within developed countries has correspondingly increased the importance of retirement savings and investment plans. Variable annuities (VAs) with guaranteed minimum benefits (GMBs) are gaining in popularity as products that can meet the demands of the ageing population. However, guaranteeing policyholders a minimum level of return exposes insurance providers to equity risk.
The recent high profile court cases in the U.S., UK and China on high frequency trading (HFT) have further elevated the concerns about HFT. In particular, a core issue in the ongoing debate is the impact of HFT on market liquidity.
Are rules and their enforcement effective at mitigating insider trading? A study shows that rules and surveillance together have the potential to mitigate the perpetration of market manipulation but also to exacerbate the profits from such manipulative activities.
Managers and major shareholders typically have an information advantage over outside investors when trading a company’s shares.
Ethan Wang Summary 15-12-14
Increasing life expectancy rates are extending the liability profiles of annuity income providers. However, the challenge of devising asset allocation strategies to fund these liabilities is complicated by a lack of appropriate assets.
Estelle Liu Summary 15-12-14
Evidence from UK interest rate futures market reveals that traders have been “drowning” the market with oversized orders, increasing their allocation under a pure pro-rata matching algorithm.
Sean Foley Summary 14-11-14
Seasoned equity offerings (SEOs) are widely regarded as one of the most important capital structure events for listed companies. CMCRC researchers show brokers affiliated with SEO managers gain additional market share during SEOs as compared to unaffiliated brokers.
Motivated by ongoing debates on investment-cash flow sensitivity (ICFS), its relation to firm-level financial constraints and its documented decline in the U.S., we investigate the determinants of cross-country and time-series variation in ICFS.
Fariborz Moshirian,Vikram Nanda,Alexander Vadilyev,Bohui Zhang Full Article 20-05-14
A new study by CMCRC researchers James Melouney and Dr. Matthew Clifton report that a trading strategy based on short-selling information can be used to develop several stock portfolios, achieving annual returns ranging from 0.2118% to 6.3015% after transaction costs.
James Melouney Summary 01-05-14
CMCRC research reports the efficiency of opening prices is associated with the stock- specific open-auction sequence on the ASX. The sequential nature of the Australian opening auction implies that some stocks always open before other.
An emulation fund collects trade signals from a sponsor’s multi-manager portfolio (e.g. a superannuation fund that hires a number of underlying active managers to make trading decisions) and rebalances on a lagged basis to match its holdings.
Our paper is among the first to provide an empirical assessment as to whether High Frequency Trading (HFT) has a positive effect on market fairness.
Our research shows that the volume traded by insiders is positively linked to the value of their insider information and negatively related to the likely penalty they will receive if detected by market regulators.
There are certain stocks with similar characteristics to lottery tickets, though with a very small chance of winning and a negative average return, why would any investor choose to purchase such “lottery stocks”?
A new study investigates whether an investment strategy which rotates between different investment styles based on macroeconomic signals adds economic value using stock and fund level data.