Pierpont and the Capital Market

24 Pages Posted: 10 Jun 2009

See all articles by Philip R. Brown

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Andrew B. Jackson

UNSW Australia Business School, School of Accounting

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Abstract

For almost forty years Trevor Sykes was one of the most recognizable business journalists in Australia. Sykes created his Pierpont character in February 1972 while writing for Australia's leading financial paper, the Australian Financial Review. Pierpont was a take on J. Pierpont Morgan, founder of the J. P. Morgan banking house. Sykes used his Pierpont column to research and reflect on the curious world of Australian business. Articles were mostly in narrative form, comprising an in-depth critique of one or more companies and written with more than a touch of humour. Over the years Pierpont garnered a large following, and it is therefore quite possible his musings influenced investors' beliefs about company fundamentals. We assess this possibility by examining the share price movements of companies around the time they found themselves featured in a Pierpont column. We extend previous work in this area by examining the market reaction to a popular columnist's writings published regularly over a lengthy period, and by implementing an extensive double-coding procedure that allows us to more finely and reliably partition trading recommendations based on the content of each column. In brief, we find evidence that stocks with positive coverage by Pierpont enjoyed abnormal returns averaging 6.4 per cent over thirty days around the publication date, while stocks with negative coverage suffered abnormal losses of 5.5 per cent. Trading volume was also affected.

Suggested Citation

Brown, Philip R. and Jackson, Andrew B. and Ferguson, Andrew, Pierpont and the Capital Market. Abacus, Vol. 45, Issue 2, pp. 147-170, June 2009. Available at SSRN: https://ssrn.com/abstract=1416996 or http://dx.doi.org/10.1111/j.1467-6281.2009.00281.x

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Andrew B. Jackson

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting ( email )

P.O. Box 123 Broadway
Sydney, NSW 2007
Australia
02 9514 3565 (Phone)
02 9514 3669 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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