An Examination of the Small‐firm Effect on the Basis of Skewness Preference

Booth, James R.; Smith, Richard L.

doi:10.1111/j.1475-6803.1987.tb00477.x

Cited by 18 publications

(10 citation statements)

References 23 publications

(24 reference statements)

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“…The lower bounds and low tail of a distribution can have a critical effect on stochastic dominance tests, as demonstrated by Booth and Smith [1]. It may be observed, first, that a single highly negative outlier (such as that which occurred on October 19, 1987) is sufficient to prevent dominance by a sample distribution that is everywhere else dominant.…”

Section: Stochastic Dominance Research Methods and Resultsmentioning

confidence: 99%

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On Stochastic Dominance Analysis of Day‐of‐the‐week Return Patterns

Wingender

Groff

1989

J of Financial Research

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Studies show that significant differences exist among return distributions of days of the week. While these results are ubiquitous, their validity depends on the robustness of statistical procedures used. Virtually every day‐of‐the‐week study has used mean/variance analysis despite it being well documented that daily return distributions are nonnormal. This study uses stochastic dominance analysis, which is not distribution dependent, to test for a day‐of‐the‐week effect. Results indicate that the day‐of‐the‐week effect is robust and that previous findings are not artifacts deriving from violations of distributional assumptions.

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Section: Stochastic Dominance Research Methods and Resultsmentioning

confidence: 99%

“…The results reported in Table 1 are robust even when the lowest 50 percent of the returns are dropped. The Booth and Smith [1] risk‐free rate adjustment of the lower bounds also is used to check the sensitivity of results. The same patterns result from the stochastic dominance tests.…”

Section: Stochastic Dominance Research Methods and Resultsmentioning

confidence: 99%

On Stochastic Dominance Analysis of Day‐of‐the‐week Return Patterns

Wingender

Groff

1989

J of Financial Research

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“…A company's equity risk profile could be influenced by its size. For example, the share prices of corporations with a large market capitalization tend to be less volatile (i.e., they have a low equity risk profile) than the share prices of companies with relatively little market capitalization value (e.g., Booth & Smith, 1987;Fabozzi, Garlicki, Ghosh, & Kislowski, 1986). Large companies may also have relatively fewer investment opportunities than small companies, because they are normally mature organizations (Bai et al, 2004;Smith, Guthrie, & Chen, 1989).…”

Section: Control Variablesmentioning

confidence: 98%

Corporate ownership, equity risk and returns in the People's Republic of China

2008

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A large body of literature has examined how managerial ownership affects corporate strategy and risk-taking. The present study extends this literature by investigating the effect of other forms of corporate ownership on a firm’s equity risk (measured as the volatility of a company’s stock returns) and stock returns in the People’s Republic of China (PRC) – an important emerging economy that is rich in various forms of corporate ownership. We find that the various types of corporate ownership appear to have important but different impacts on equity risk and returns. In particular, companies with more state ownership tend to have higher stock volatility and lower stock returns; in contrast, companies with more legal-person ownership tend to have lower stock volatility and higher stock returns. Foreign and managerial ownership are found to have little effect on firms’ equity risk and returns. These findings support the predictions of agency theory – for example, that state ownership increases agency conflicts in companies because bureaucrats and state agencies do not have the same economic incentives to maximize the value of firms. We believe that our study contributes to the international business literature on investment strategy and risk assessment in developing markets such as China, and as a result our findings could have important implications for international investors. Journal of International Business Studies (2008) 39, 1149–1168. doi:10.1057/palgrave.jibs.8400394

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“…The results reported in Table 1 are robust even when the lowest 50 percent of the returns are dropped. The Booth and Smith [1] riskfree rate adjustment of the lower bounds also is used to check the sensitivity of results. The same patterns result from the stochastic dominance tests.…”

Section: Stochastic Dominance Research Methods and Resultsmentioning

confidence: 99%

Stochastic Dominance Analysis of Day‐of‐the‐week Return Patterns

Wingender

Groff

1987

The Financial Review

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Oklahoma State U n i v e r s i t y James G r o f f , Oklahoma S t a t e U n i v e r s i t y Numerous r e s e a r c h e r s have found s y s t e m a t i c d i f f e r e n c e s among r e t u r n s for d i f f e r e n t d a y s o f t h e week. on t and F s t a t i s t i c s t o t e s t f o r day-of-the-week r e t u r n d i f f e r e n c e s . These p a r a m e t r i c tests are o n l y a p p r o p r i a t e f o r n o r m a l l y d i s t r i b u t e d r e t u r n comparisons.week have s t a t i s t i c a l l y s i g n i f i c a n t skewness which i m p l i e s nonnormally d i s t r i b u t e d r e t u r n p a t t e r n s . V i r t u a l l y a l l o f t h e p r e v i o u s s t u d i e s have r e l i e d W e o b s e r v e t h a t t h e d i s t r i b u t i o n s o f r e t u r n s f o r t h e d a y s o f t h e T h i s s t u d y i n t r o d u c e s s t o c h a s t i c dominance t o t h e a n a l y s i s of t h e day-of-theweek effect. S i n c e s t o c h a s t i c dominance is a d i s t r i b u t i o n -f r e e a p p r o a c h i t c a n compare nonnormal d i s t r i b u t i o n s w i t h o u t t h e problems p a r a m e t r i c tests would have. The s t o c h a s t i c dominance t e s t s s t r o n g l y c o n f i r m t h a t Monday's r e t u r n d i s t r i b u t i o n o f f e r e d a poor r i s k -r e t u r n r e l a t i o n s h i p compared t o t h o s e o f t h e o t h e r d a y s o f t h e week. Monday r e t u r n s were dominated by v i r t u a l l y e v e r y o t h e r day f o r t h e f u l l sample, t h e January-only sample, and t h e non-J a n u a r y sample. T h i s f i n d i n g r e j e c t s t h e t r a d i n g day h y p o t h e s i s , as well as t h e j o i n t h y p o t h e s i s o f s t o c k market r a t i o n a l i t y f o r d a i l y r e t u r n s . W e a l s o p a r t i t i o n e d t h e e n t i r e t e s t p e r i o d i n t o s u b p e r i o d s t o t e s t whether t h e o b s e r v e d r e l a t i o n s h i p s h e l d a c r o s s time. The time-series a n a l y s i s r e v e a l s a h e r e t o f o r e u n d e t e c t e d t r e n d i n t h e day-of-the-week p a t t e r n . Our unexpected f i n d i n g i s a p a t t e r n of dominance t h a t s u g g e s t s t h a t t h e end-of-che-week r e t u r n d i s t r i b u t i o n s (Thursday and F r i d a y ) were s u p e r i o r t o t h e b e g i n n i n g o f t h e week r e t u r n s (Monday and Tuesday). I n summary, f o r p o r t f o l i o managers and a c t i v e i n v e s t o r s t h e r i s k -r e t u r n t r a d e o f f is b e c c e r a t t h e end o f t h e week t h a n t h e b e g i n n i n g o f t h e week, p a r t i c u l a r l y i f f u t u r e d a i l y r e t u r n d i s t r i b u t i o n s are g o i n g t o be l i k e t h e l a s t 10 y e a r s . S p e c u l a t i o n as t o why t h i s p a t t e r n h a s o c c u r r e d is l e f t t o f u t u r e r e s e a r c h . The bottom l i n e from t h e implementation o f t h e s t o c h a s t i c dominance approach f o r i n v e s t o r s is t h e answer t o t h e q u e s t i o n : When is t h e b...

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An Examination of the Small‐firm Effect on the Basis of Skewness Preference

Cited by 18 publications

References 23 publications

On Stochastic Dominance Analysis of Day‐of‐the‐week Return Patterns

On Stochastic Dominance Analysis of Day‐of‐the‐week Return Patterns

Corporate ownership, equity risk and returns in the People's Republic of China

Stochastic Dominance Analysis of Day‐of‐the‐week Return Patterns

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