Using intelligent optimization methods to improve the group method of data handling in time series prediction

In this paper we show how the performance of the basic algorithm of the Group Method of Data Handling (GMDH) can be improved using Genetic Algorithms (GA) and Particle Swarm Optimization (PSO). The new improved GMDH is then used to predict currency exchange rates: the US Dollar to the Euros. The performance of the hybrid GMDHs are compared with that of the conventional GMDH. Two performance measures, the root mean squared error and the mean absolute percentage errors show that the hybrid GMDH algorithm gives more accurate predictions than the conventional GMDH algorithm

Market Reaction to Stock Repurchases in Greece

This paper examines open market stock repurchases by Greek firms, using a unique dataset covering the period 2000-2010. Positive and statistically significant cumulative average abnormal returns are observed around the date of repurchase program authorizations. Investors react more to authorizations of initial programs than to subsequent programs. After the implementation of the EU Market Abuse Directive in Greece, investors react more favorably to buyback announcements. The reason for initiating a repurchase program, as stated by the companies, is directly related to the market valuation of the program. The paper identifies the characteristics of firms that announce dividend changes, given the decision to initiate a stock buyback. The regression results appear to support the hypothesis of signaling undervaluation

Market Reaction to Stock Repurchases in Greece

This paper examines open market stock repurchases by Greek firms, using a unique dataset covering the period 2000-2010. Positive and statistically significant cumulative average abnormal returns are observed around the date of repurchase program authorizations. Investors react more to authorizations of initial programs than to subsequent programs. After the implementation of the EU Market Abuse Directive in Greece, investors react more favorably to buyback announcements. The reason for initiating a repurchase program, as stated by the companies, is directly related to the market valuation of the program. The paper identifies the characteristics of firms that announce dividend changes, given the decision to initiate a stock buyback. The regression results appear to support the hypothesis of signaling undervaluation

The role of asset payouts in the estimation of default barriers

In the barrier option model of corporate security valuation, the firm’s creditors impose a default-triggering barrier on the firm value to protect their claim. Two disputed issues in the literature are whether the implied default barrier is positive, and whether it is above or below the book value of the firm’s liabilities. We extend the model of Brockman and Turtle (2003, Journal of Financial Economics 67, 511–529) by embedding asset payouts in the valuation of shareholders’ equity. Using a sample of US stocks from the NYSE, AMEX, and NASDAQ exchanges, our paper exploits market and firm information to compute the implied default barrier for thirty 2-digit SIC groups, including industrials and banks. Our results show that the implied default barrier is lower than it is in the received literature, and it can be less than total liabilities, even zero for some firms. The implied physical default probabilities are significantly lower in the presence of payouts, providing a closer fit to the historical corporate default rates, particularly for issuers of speculative-grade bonds

Market Reaction to Actual Daily Share Repurchases in Greece

The stock market reaction around the announcement date of actual share repurchases, the factors that affect the size of that reaction, and the motives behind share acquisitions are examined. A unique, hand-collected dataset is used, including public announcements of companies traded on the Athens Stock Exchange. Consistent with the price support hypothesis, companies repurchase when their share price exhibits a declining trend, whereas the short-term market reaction is not statistically significant. Large firms and firms with low book-to-market ratio repurchase when their stock has underperformed the market. Small firms and firms with high book-to-market ratio repurchase even though their shares have not experienced abnormal declines. The market reacts more favorably to buybacks by small firms and firms with high book-to-market ratio. Long-term abnormal returns are higher for repurchasing firms compared to non-repurchasing controls, and depend positively on the frequency of repurchases and the stated reason for program authorization

EU Regulation and open market share repurchases: new evidence

This paper re-examines the impact of the EU Market Abuse Directive (MAD) on the market reaction around share repurchase announcements. We use a unique hand-collected dataset of firms listed on the Athens Stock Exchange, and we find evidence that contrasts with previous conclusions for large European economies. The implementation of the MAD is followed by a significant increase in announcement abnormal returns, which is more pronounced in initial repurchase programs. Our results remain robust to a series of robustness tests. We attribute our findings to cross-country differences in institutional framework and pre-MAD existing national laws. Collectively, our results support the notion that EU directives do not have a uniform effect across Member States. Thus, the impact of such reforms should also be examined in individual capital market studies

A meta-analysis of the investment-uncertainty relationship

In this article we use meta-analysis to investigate the investment-uncertainty relationship. We focus on the direction and statistical significance of empirical estimates. Specifically, we estimate an ordered probit model and transform the estimated coefficients into marginal effects to reflect the changes in the probability of finding a significantly negative estimate, an insignificant estimate, or a significantly positive estimate. Exploratory data analysis shows that there is little empirical evidence for a positive relationship. The regression results suggest that the source of uncertainty, the level of data aggregation, the underlying model specification, and differences between short- and long-run effects are important sources of variation in study outcomes. These findings are, by and large, robust to the introduction of a trend variable to capture publication trends in the literature. The probability of finding a significantly negative relationship is higher in more recently published studies. JEL Classification: D21, D80, E22 1

Bank capital regulation in a barrier option framework

The barrier options theory of corporate security valuation is applied to the contingent claims of a regulated bank. The regulator/insurer of a bank owns a down-and-in call option on the bank assets which can be balanced against the expected coverage cost. Raising the regulatory barrier (critical asset level triggering bank closure) leads to a transfer of wealth from stockholders to the insurer and reduces stockholder incentives to increase asset risk. Empirical tests on a sample of 152 one-bank holding companies show that regulatory barriers are priced in the stock market and are inversely related to Tier 1 leverage ratios.