The momentum effect on the London Stock Exchange

This study intends to investigate the momentum effect, which states that shares which performed the best (worst) over the previous three to twelve months continue to perform well (poorly) over the subsequent three to twelve months. Evidence suggests that a strategy that buys previous winner shares and sells short past loser stocks can generate abnormal profitability of about 1 per cent per month (Jegadeesh and Titman, 1993). Although momentum payoffs tend to persist when share returns in international markets are employed (e. g., Griffin et al., 2003, Rouwenhorst, 1998), a significant number of studies have debated the potential explanation of the momentum effect without reaching a consensus. Using data from the London Stock Exchange from January 1975 to October 2001, this thesis investigates some factors that influence the magnitude of continuation gains that have not been previously identified. I examine the relationship between momentum profitability and the stock market trading mechanism and is motivated by recent changes to the trading systems that have taken place on the London Stock Exchange. Since 1975 the London stock market has employed three different trading systems: a floor based system, a computerised dealer system called SEAQ and the automated auction system SETS. I find that after the introduction of the computerised dealer system SEAQ momentum profits are higher than when the floor based system operated. I also document that companies trading on the SETS auction system display greater momentum profitability than shares trading on SEAQ. Results are robust to the use of different samples and alternative risk adjustments. I investigate the role of volatility in influencing momentum profits. Shares with high volatility display wide spread out returns and therefore, potential higher magnitude momentum profitability. Given that shares displayed higher volatility traded on the post-Big Bang period (Tonks and Webb, 1991) and on the SETS system (Chelley-Steeley, 2003), I examine whether the different levels of momentum profitability achieved in alternative stock market structures arises from volatility. I find that momentum profits are strongly influenced by volatility, but the finding that the organisation of a stock market influences the momentum profits holds even after considering differences in volatility. I examine whether the magnitude of momentum profitability varies following bull and bear markets. Momentum profits stem from the winner shares in bull markets and from the loser stocks in bear markets. I report that momentum profits are stronger following bear markets, showing a sign of mean reversion in the UK stock market. Overall, this study contradicts the model of Hong and Stein (1999) that the momentum effect arises from the gradual expansion of information among investors and the model of Daniel et al, (1998) that the momentum effect stems from the investors' overconfidence that increases following the arrival of confirming news. This study also indicates that a significant portion of momentum profits stem from the magnitude of volatility

Why Do Financially Unconstrained Firms Borrow to Repurchase Shares?

The authors are grateful to Seth Armitage, Vidhan Goyal, Yulia Merkoulova, Patrick Verwijmeren, and Betty Wu for helpful comments and suggestions. Special thanks go to two anonymous referees and to Alan Lowe and Nathan Joseph, the editors, for their very helpful comments.Preprin

Climate theory & managerial decisions on cross-border mergers

We explore the significance of climate theory concerning managerial decisions in cross-border mergers. We report that temperature offers a good familiarity proxy showing that country pairs that experience little (large) distance in temperature experience relatively more (less) acquisitions. A one-unit decrease in the difference of the temperature in a country pair is linked with an increase in the number of cross-border mergers by 1.09%. We then highlight the significance of relatively warm temperatures on managerial decisions: We find that (i) the relationship is driven by the Summer months; during June-August for country pairs in the Northern hemisphere and December-February for pairs in the Southern hemisphere, (ii) relatively more cross-border mergers occur towards countries with modestly warmer temperatures showing evidence of managerial affinity towards warmer places, and (iii) country pairs with relatively high temperatures exhibit more acquisitions. Overall, this study highlights a new perspective in the field of climate finance

Treatment of chronic dry eye: focus on cyclosporine

To review the current treatment of chronic dry eye syndrome, focusing on cyclosporine A (CsA), a systematic literature search was performed using PubMed databases in two steps. The first step was oriented to articles published for dry eye. The second step was focused on the use of CsA in dry eye. A manual literature search was also undertaken based on citations in the published articles. The knowledge on the pathogenesis of dry eye syndrome has changed dramatically during the last few years. Inflammation and the interruption of the inflammatory cascade seem to be the main focus of the ophthalmologic community in the treatment of dry eye, giving the anti-inflammatory therapy a new critical role. The infiltration of T-cells in the conjuctiva tissue and the presence of cytokines and proteasis in the tear fluid were the main reason introducing the use of immunomodulator agents such as corticosteroids, cyclosporine, and doxycicline in order to treat dry eye syndrome. CsA emulsion is approved by the FDA for the treatment of dry eye, while clinical trials of this agent have demonstrated efficacy and safety of CsA. CsA seems to be a promising treatment against dry eye disease. New agents focused on the inflammatory pathogenesis of this syndrome in combination with CsA may be the future in the quest of treating dry eye. More studies are needed to determine the efficacy, safety, timing, and relative cost/effect of CsA

International Music Preferences as a Measure of Culture: Evidence from Cross-Border Mergers

This paper introduces the significance of international music preferences as a determinant of cross-border mergers. We argue that international music preferences capture the distance in culture between nations. We find that country pairs whose citizens experience relatively small distance in their music preferences (listen to each other’s music) exhibit more cross-border mergers. Overall, this study highlights that music preferences can measure international similarities in culture

BitTorrent locality and transit trafficreduction: When, why, and at what cost?

A substantial amount of work has recently gone into localizing BitTorrent traffic within an ISP in order to avoid excessive and often times unnecessary transit costs. Several architectures and systems have been proposed and the initial results from specific ISPs and a few torrents have been encouraging. In this work we attempt to deepen and scale our understanding of locality and its potential. Looking at specific ISPs, we consider tens of thousands of concurrent torrents, and thus capture ISP-wide implications that cannot be appreciated by looking at only a handful of torrents. Second, we go beyond individual case studies and present results for few thousands ISPs represented in our data set of up to 40K torrents involving more than 3.9M concurrent peers and more than 20M in the course of a day spread in 11K ASes. Finally, we develop scalable methodologies that allow us to process this huge data set and derive accurate traffic matrices of torrents. Using the previous methods we obtain the following main findings: i) Although there are a large number of very small ISPs without enough resources for localizing traffic, by analyzing the 100 largest ISPs we show that Locality policies are expected to significantly reduce the transit traffic with respect to the default random overlay construction method in these ISPs; ii) contrary to the popular belief, increasing the access speed of the clients of an ISP does not necessarily help to localize more traffic; iii) by studying several real ISPs, we have shown that soft speed-aware locality policies guarantee win-win situations for ISPs and end users. Furthermore, the maximum transit traffic savings that an ISP can achieve without limiting the number of inter-ISP overlay links is bounded by “unlocalizable” torrents with few local clients. The application of restrictions in the number of inter-ISP links leads to a higher transit traffic reduction but the QoS of clients downloading “unlocalizable” torrents would be severely harmed.The research leading to these results has been partially funded by the European Union's FP7 Program under the projects eCOUSIN (318398) and TREND (257740), the Spanish Ministry of Economy and Competitiveness under the eeCONTENT project (TEC2011-29688-C02-02), and the Regional Government of Madrid under the MEDIANET Project (S2009/TIC-1468).Publicad

Bank regulation, financial crisis and the announcement effects of seasoned equity offerings of US commercial banks

This paper studies the differences in the announcement effects of seasoned equity offerings (SEOs) of commercial banks and non-banks, and explores the influence of bank regulation and the financial crisis on such differences. We find that abnormal stock returns on SEO announcements for US commercial banks are significantly higher than those of non-banks, consistent with the hypothesis that bank regulations reduce the likelihood that bank SEOs signal overpriced equity. The propensity score matching-based difference-in-difference analysis indicates that the differences in stock returns between banks and non-banks decreased during the 2007–2009 financial crisis period and increased after the passage of the Dodd-Frank Act in 2010