Browsing by Subject "Market timing"
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Item A broader test of market timing theory of capital structure(Texas Tech University, 2007-05) Kaya, Halil D.; Hein, Scott E.; Mercer, Jeffrey M.; Cooney Jr., John W.; Bremer, Ronald H.This dissertation attempts to answer these three main questions: (1) Is there evidence of market timing by corporations in equity, public debt, private placement, 144a, and syndicated bank loan markets? (2) Does market timing in each of these markets have a persistent impact on issuing firms’ capital structures? (3) What are the factors that affect a firm’s decision to use a specific type of financing? I find evidence of market timing in IPO, SEO, public debt, private placement/144a, and syndicated bank loan markets. I find that hot-market IPO and SEO firms issue substantially more equity than cold-market firms do. In all three debt markets, firms incorporate the observed changes in the interest rates into their decisions on how much to borrow from the creditors. However, firms do not incorporate or are not able to incorporate their predictions for future rates into their decisions on how much to borrow. In public debt and syndicated bank loan markets, firms use both the observed changes in interest rates and their predictions for the future rates as their main criteria for their maturity choice. However, for private placements and 144a issues, they use only the observed changes in interest rates as their main criteria for maturity choice. Although market conditions have an impact on the amount of financing and the maturity of debt financing, I find that they do not have an impact on a firm's choice between equity and public debt, public debt and private debt, and private debt and syndicated bank loan financing. On the other hand, equity market timing is a determinant of a firm's choice between equity and private debt financing, and syndicated loan market timing is a significant predictor of a firm's choice between public debt and syndicated loan financing. There is no evidence of a persistent impact of market timing in equity, public debt, private placement/144a, and syndicated bank loan markets. The results for the equity markets are consistent with the previous studies.Item Investment skill of hedge funds : a holdings-based evaluation(2015-08) Maslennikov, Sergey Nikolaevich; Johnson, Travis L.; Titman, Sheridan; Sialm, Clemens; Schneider, Jan; Tompaidis, EfstathiosIn Chapter 1, I provide new compelling evidence that hedge funds possess investment skill. Using the longest-in-literature hedge fund sample with fewer biases, I show that large holdings of past winners earn 7% annual benchmark-adjusted return. This remarkable performance is consistent with the notion that large holdings represent managers' best ideas. My sample goes back to 1980 and does not miss non-surviving hedge funds, or those that do not voluntarily report to commercial databases. It consists of all investment managers that must report to the SEC, except those that I identify as managers other than hedge funds. While publicly available data is not sufficient to identify hedge funds directly, my "reverse identification" method achieves both high sensitivity and specificity. I also find weaker yet significant evidence of investment skill in standard indicators such as average fund performance and performance persistence. Additionally, I study the announcement effect of 13F holdings disclosure on the disclosed stock return and trading volume. In Chapter 2, I provide new evidence on market timing by studying ETF option holdings of hedge funds. I find that market option holdings are economically significant in terms of their impact on the market exposure of the funds. Further, I find significant time variation in market option holdings, which could be due to market timing activity. I find that market option holdings are associated with such fund characteristics as active share and market exposure of the fund due to its stock holdings; this evidence is consistent with options being used for hedging. Increases in aggregate hedge fund industry holdings of market put options predict low market returns. In the cross-section of hedge funds, the top 5% group has market volatility timing skill that is distinguished from luck with a bootstrapping test. Additionally, I measure market timing ability as the average risk-adjusted return on market option holdings, which, due to data limitations, requires additional assumptions about option prices. I find that this market timing ability is close to zero for the average fund but it is negative for heavy option users.