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Abstract:
Several empirical studies show a systematic relationship between stock characteristics (size, earning yield, dividend yield, etc.) and stock returns. The previous studies, that show stocks with high earnings yield produce superior returns use univariate measures (such as E/P or B/P) to classify stocks into value or growth stocks. This paper shows that the traditional method of classification ignores instances when value and growth investing strategies instead of being mutually exclusive can complement each other in selecting superior performing stocks. Growth in EPS provides a more meaningful way to capture growth than using a measure of low E/P ratio. A strategy focusing on investing in stocks that have the dual characteristics of a high E/P ratio and high growth in EPS outperforms a strategy of high E/P alone. The study also documents some evidence of persistence in performance for stocks having the dual characteristic of high growth in EPS and high E/P ratio.

Value and growth investing, style investing

Abstract:
Over the last decade investing in financial markets of emerging countries has become increasingly popular. In this paper we examine the performance of equity and bond mutual funds that invest primarily in the emerging markets. Our results indicate that emerging market stock funds generally under perform their benchmarks, whereas bond funds perform just as well as their benchmarks. We also find that the performance and diversification benefits of emerging markets funds are conditional on U.S. monetary policy. Emerging market funds perform better during periods of restrictive monetary policy, i.e., when the Federal Reserve raises the discount rate. The results of this paper have implications for investors and pension plan sponsors.

Mutual fund performance, emerging markets, monetary policy, international diversification

Abstract:
We investigate the relationship between a firm's degree of social responsibility and its performance. To accomplish this objective, we examine the stock market reaction to the announcement of Fortune magazine's list of 100 Best Companies to Work For over the 1998 to 2003 period. We find significant positive excess returns, which indicate the being included on the list is viewed positively by the stock market. To explain the positive abnormal performance, we regress the excess returns against firm-specific variables. Excess return has a positive relation to the job growth rate, but not to firm rank, on a pre-listing basis. However, additional analysis reveals that firms with a more favorable ranking are relatively small and have a higher job growth rate, low employee turnover, high betas, and extremely positive stock market performance prior to their inclusion on the list. In the year following the publication, sample firms with a favorable ranking have higher sales and gross profit margin than their lower-ranked counterparts. Overall, the results indicate that firms exhibiting a high degree of social responsibility toward their employees are positively rewarded by stock market participants, and that the rankings are somewhat related to pre- and post-survey financial performance.

Social responsibility, Fortune, firm reputation, employee turnover, best companies to work for

Abstract:
In this paper, we examine the impact of a drug withdrawal on shareholders of firms and their direct competitors. We find shareholders suffer significant wealth losses when there are reports of adverse drug reactions and when the firm actually withdraws a drug from the market. Additionally, shareholder wealth losses are inversely related to the firm's market capitalization. Firms that withdraw drugs during advanced clinical investigations experience greater wealth loss than drugs withdrawn during post-marketing surveillance. Wealth losses are lower if many firms withdraw the same type of drug and if that drug has available substitutes.

Abstract:
This paper studies the impact of drug withdrawals on shareholder wealth of producers and competitors. Results show that the wealth loss is conditional on the information content of the news of a drug withdrawal. Firms withdrawing drugs during advanced clinical investigations suffer a larger wealth loss than withdrawals during post-marketing surveillance. The wealth loss is inversely related to the market capitalization and is smaller in case multiple firms withdraw the same type of drug. Moreover, reports of adverse drug reactions that sometimes precede the eventual withdrawal of a drug lead to significant loss in shareholder wealth. Finally, shareholders of the direct competitors gain only during the five-day post-event period.

Product recall, product withdrawal, competitors, event study

Abstract:
We examine the performance of enhanced index and quantitative equity funds. Both types of funds use quantitative models in investment selection. Enhanced index funds set an explicit objective to outperform a benchmark index. Proponents of quantitative funds argue that their management style takes human emotions out of the investment decision-making process and leads to more objective stock selection. We find evidence of outperformance by quantitatively managed growth funds, especially those investing in small cap stocks.

Quantitative funds, enhanced index funds, mutual fund, performance evaluation

Abstract:
Previous academic research has presented a theoretical basis for a relationship between attributes of a firm's reputation and its financial performance. For the United States, researchers have analyzed the correspondence between market and accounting based measures of U.S. firm performance and external evaluators' perceptions of the qualitative attributes of U.S. firms. In this study, expert surveys on the qualitative performance of British firms conducted by the British publication, The Economist, which are similar in content to surveys conducted by Fortune magazine for U.S. firms, are used to determine the correspondence between qualitative and quantitative measures of British firms' performance. Results indicate that differences may exist between U.S. and Britain in the use qualitative survey data on a firm's strategic attributes as a forecast of a firm's future quantitative performance measures. Results also indicate that for small firms, certain qualitative factors (e.g., capacity to innovate) may be of greater importance in forecasting accounting and security market returns.

Abstract:
This article describes the operations of the Resolution Trust Corporation (RTC), examines the procedures it employs to resolve distressed Savings and Loan scenarios and investigates the pricing of transactions undertaken by the RTC. The RTC has been criticized for allegedly transferring properties to acquirers at "bargain" prices. The transactions involving publicly traded acquirers in RTC sales are examined from an auction theory perspective. Overall, there is little evidence that winning bidders experience stock price gains. There are, however, subsets of bidders for which the outcomes are predominantly negative. The only category of transactions which provide statistically significant gains to acquirers are Insured Deposit Transfers.