Contents of Volume 6, Number 1

Special Issue: Applied Economics and Finance (Guest Editors: N. Benos, Y. Goletsis, S. Symeonides)

June 2010

Special Issue Papers

Earnings Management: Study of Indian Equity Rights Issues and their Post-Issue Performance

S. Narayan Rao, S. Dandale

Abstract: The objective of the paper is to investigate whether there is any manipulation of accounting earnings through accrual choices by Indian equity rights issue offering firms in the year preceding the issue. We hypothesize that rights issue firms manage earnings by adopting discretionary accounting accruals adjustment to raise reported earnings. By doing so, managers may increase the share price of the firm and proceed from the issue. When we estimated discretionary accrual using Modified Jones model for sample of 320 equity rights issue firms for a period of April1993- March2005, we find significant difference in discretionary current accrual before and after the rights issue. Most interestingly, we also found evidences that discretionary current accruals also predict stock market underperformance in post–issue period.

Impact of Risk Aversion on Bidder's Optimal Strategy in Takeover Contests

D.D. Hounwanou

Abstract: We consider a takeover setting in which bidders are risk adverse and study their optimal strategy. We found that when bidders are risk adverse, under certain conditions, their overbidding depends on the size of toeholds they hold in target firm. We show that there is a threshold under which a potential bidder, with toeholds, doesn’t overbid into the takeover contest and overbids in takeover contests above that threshold. However, if the overbidding increases in toeholds, it decreases in valuation. Nevertheless, the overbidding can lead to inefficiency. Without toeholds, takeover’s results are similar if bidders are adverse or neutral risk.

Non Linear Diachronic Effects Between Stock Returns and Mutual Fund Flows: Additional Empirical Evidence from the Athens Stock Exchange

E. Thanou, D. Tserkezos

Abstract: This short  paper examines the nonlinear  interaction between mutual fund flows and stock returns in Greece. We investigate the possibility of a nonlinear causality mechanism through which mutual funds flows may affect stock returns and vice versa. The statistical evidence derived from linear and nonlinear causality tests indicates that there is indeed a bidirectional nonlinear causality between mutual fund flows and stock returns. We also detect a unidirectional causality from the Dow Jones Index to the domestic stock price index and the domestic mutual fund flows.

An Empirical Analysis of Financial Ratios for the Greek IT Sector Firms During a Bullish Market

I.A. Tampakoudis, D.L. Papadopoulos, D.N. Subeniotis

Abstract: In this paper we utilize specific ratios in order to evaluate the financial conditions of the Greek technology companies listed on the Athens Stock Exchange (ASE). We circumscribe the analysis of performance of these companies using ratios that measure liquidity, financial leverage, profitability and the attractiveness of investment in each company for the period 2003-2005. The empirical findings of our survey indicate that the companies in question present moderate corporate profitability, robust liquidity ratios and a medium level of leverage in their capital structure. The shareholders of technology firms receive a negligible 2.21% in the form of dividend income, while considering their stock market value change only two companies appeared to present positive total stock return at the end of 2005.  We consider fundamental analysis up to a certain extent of identifying profitable investment choices, since it seems that stock market prices are affected by various factors. Indeed, IT firms demonstrate a decline trend which could not be justified by the entire ratios values, during a bull stock market.  

Quality Indexes of Predictive Models in Risk and Portfolio Management

M. Řezáč, F. Řezáč

Abstract: For a measurement of partial processes of a financial institution, especially their components like scoring models or other predictive models, it is possible to use quantitative indexes such as Gini index, K-S statistics, Lift and Information statistics. They can be used for comparison of several developed models at the moment of development. It is possible to use them for monitoring of quality of models after the deployment into real business as well. The outcome is then an effective tool to attract new creditworthy customers, and at the same time, control losses. This paper deals with definition of good/bad client, which is crucial for further computations. The main part is devoted to quality indexes based on distribution functions and on density functions. It brings some interesting results connected to Lift in general and for normally distributed data. An application on real data is included too. 

A Note on Temporal Aggregation Effects on the Mean Variance Portfolio Optimization Approach - Some Empirical Results

G. Kaimakamis, K. Kiriakopoulos

Abstract: In this short note we test  the effects of temporal aggregation (desegregation) on the optimal  of portfolio construction using the mean variance  optimization approach. Using data from the Athens Stocks Exchange we confirm that the use of temporally aggregated data affects seriously the optimal of portfolio construction. Especially as the degree of temporal aggregation increases the application of the Mean Variance portfolio optimization technique, could lead to different results regarding the participation of the stocks in the portfolio, the portfolio’s weights, the average and total portfolio performance and finally the associated portfolio’s risk. 

Regular Papers

Forecasting Stock Trends Using a Combined Technical Analysis and Neuro-Fuzzy Based Approach

G.S. Atsalakis, K.P. Valavanis

Abstract: The technical analysis methodology to stock market forecasting is followed to derive an Adaptive Neuro Fuzzy Inference System (ANFIS) used to predict the next day stock trend. The proposed ANFIS is implemented and evaluated for the National Bank of Greece (ETE) stock price that is listed in the Athens Stock Exchange (ASE) considered to be an emerging market. Input data are first preprocessed to generate three indexes; the Relative Strength Index (RSI), the Moving Average (MA) and the Price Rate of Change (PROC) used as inputs to the ANFIS. Training of the ANFIS is based on the rolling and moving window approach using past data over a four year period. Stock trend prediction results are close to 64% that certainly justify further research based on soft computing techniques.

Fair Distribution of Stock Exchange Securities Among Customers: A Clearance Optimization Application

Ch. Gogos, C. Kyritsis, I. Sotiropoulos

Abstract: We present how a standard task in the clearance of financial brokers can find new creative, integer optimization, computerized solutions. The broker makes wholesome massive transactions of Stock Exchange securities and then wants to distribute them in a fair way to the retail customers, so that each one has almost the same average price of buying or selling.

Elaborating Financial Reporting Through the Evaluation of Customer Perceived Value 

T. Karagiorgos, P. Lathiras, Ch. Vasiliadis

Abstract:  The contribution of intangibles to business value creation is widely recognized. The marketing strength as an intangible asset is one of the most important means by which companies deliver the value they provide to customers. A determination of the perceived value by customers in the form of indexes can provide the financial administration of a company with a functional tool to evaluate the usefulness of a product or a service characteristic. This paper attempts to create perceived value indexes through a field study in tourism enterprises located in Greece. Questionnaires were conducted in twelve skiing resorts. Conjoint analysis was applied to estimate the utilization indexes that represent the perceived value indexes. These indexes can be used by the financial analysts to develop an index system which values the features of the product/service and compare it with other indexes related to customers such as brand loyalty and customer satisfaction.