Browsing by Department "Rahoituksen laitos"

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Now showing 1 - 20 of 1523
  • A 21st Century Breakdown? The Development of Capital Market Anomalies and Market Turnover in Finland
    (2019) Lindfors, Lauri
     School of Business | Bachelor's thesis
    This thesis studies the existence and development of capital market anomalies in Finland during the 21st century. In theory, factors that reduce trading frictions should lead to more efficient markets and thus attenuating anomaly returns. I study whether the changes in market turnover has the kind of effect on seven capital market anomalies. Three of the seven anomalies are statistically significant during the time period. I do not find evidence of the anomalies decreasing over time. Furthermore, I find that the market turnover in Finland has had a negative trend during the 21st century. I find weak evidence of anomalies having an inverse trend with market turnover and by using the quantile regression method I find more extreme values of the anomalies having a stronger reaction to changes in market turnover.
  • The 52-Week High Momentum in the Finnish Stock Market
    (2019) Rissanen, Olli
     School of Business | Bachelor's thesis
    Previous research has shown that in many international stock markets, a readily available piece of information - the 52-week high price - when divided by the stock’s current price, explains a major portion of momentum investing profits. However, no thorough research has been made on the subject in the Finnish stock market. I use monthly data from 01/1998 to 09/2019 to examine how the 52-week high momentum investment strategy compares to individual stock and industry momentum strategies in the market, and whether the returns from the strategy experience short- or long-term reversals. My results show that the 52-week high momentum strategy produces significant positive returns in the Finnish stock market when a holding period of 6 months is used, and that those returns are even higher when the returns in Januaries are excluded. However, despite its high profitability, the strategy is still outperformed by the individual stock momentum when returns in all calendar months are taken into account. The evidence also suggests that the 52-week high does not have more predictive power over future stock returns than the past individual stock returns when Januaries are included, although it clearly has more than the past industry returns. There is no clear evidence of short-term reversals for the 52-week high momentum strategy, but the overall returns produced by the strategy reverse in the long run when returns in all calendar months are taken into account. However, when Januaries are excluded, the 52-week high returns persist in the long run, which presents a challenge to current theories that predict long-term reversals for stock returns and suggest that momentum and long-term reversals are associated with the same phenomenon.
  • Abnormal CEO Compensation and Firm Performance: Empirical Evidence from Europe
    (2017) Auria, Sebastian
     School of Business | Bachelor's thesis
    This study presents new evidence on a relationship between chief executive officer compensation and subsequent firm performance. The sample is collected from Europe, consists of 1459 firm years and covers period of 2000-2013. Methods used to test the relationship in this study are ordinary least squares and weighted least squares regression models. Previous studies of Carter et al. (2016) and Core et al. (1999) suggest that abnormal CEO compensation has a decreasing effect on subsequent firm performance. Contrary to the previous findings, results of this study suggest that the relationship is rather positive, albeit abnormal compensation coefficients are not thoroughly found statistically significant. The results might be explained with global differences in CEO compensation practices, policies and regulations.
  • Abnormal returns and the S&P 500 membership - Proof that the index effect is temporary
    (2018) Vienola, Jussi
     School of Business | Bachelor's thesis
  • Abnormal returns and volatilities around the filing of 8K reports and the performance of large language models in finance
    (2023) Paranko, Klaus
     School of Business | Master's thesis
    Public companies listed in the US must report specific events determined by the SEC in an 8K filing. The events that must be reported on are what the SEC considers “material” to investors, meaning that the SEC believes knowledge of these events is required for investors to be able to accurately value a company. Examples include “1.03 Bankruptcy or Receivership,” “2.01 Completion of Acquisition or Disposition of Assets,” and “4.01 Changes in Registrant’s Certifying Accountant.” In this paper I demonstrate that 8K reports can be used to predict the filing company’s abnormal returns and abnormal volatilities during the first two weeks after a filing. I also show that newer transformer-based large language models perform better than previously used bag-of-words models in textual analysis on this dataset. To do this I gather a novel dataset of 551 501 8K reports spanning the years 2000-2021 for 4753 listed companies. For this I make a program in the Python programming language that automatically gathers, cleans, and parses reports from the SEC’s EDGAR database. I combine the data in the reports with return data from CRSP for each filing company for the same period. I find that companies tend to earn abnormal returns after making a filing regardless of the content of the filing. A filing company also has abnormal volatility during the days around the filing. I also find that certain event categories cause predictably negative or positive abnormal returns. Most event categories predict decreased abnormal volatility. When utilizing textual analysis of the reports instead of just the event category I find that bag-of-word models can pick up on some of the sentiment in a report, but a transformer-based model can do this better. The sentiment from textual analysis provides less information about abnormal volatility than the first two models.
  • Abnormal returns around the announcement of clinical trial study results and FDA regulatory decisions
    (2020) Autio, Esko
     School of Business | Master's thesis
    Stock returns around Phase II, Phase III and FDA Regulatory decision announcements are relatively unexploited topics studied in finance due to the sample size restrictions. The event study methodology was used to analyze the returns around the announcements using t(-20,+20) CAR window and t(-40,+40) event window. Sample sizes used in the study: Phase II (403 main sample, 275 sub-sample), Phase III (476 main sample, 211 sub-sample) and FDA regulatory decisions (455 main sample, 263 sub-sample). The results show that the new information released from the study results is not known beforehand and gets incorporated into the stock prices accordingly, causing abnormal event and post-event returns, in line with the outlying distant foundations in finance (Ball & Brown, 1968). Furthermore, as previous literature found different return patterns for positive and negative announcements (Overgaard et al., 2000; Rothenstein et al., 2011), this study showed that there is no pre-event abnormal return difference between positive and negative announcements that could indicate information leakage before the announcement. To support this finding, market reaction asymmetry between positive and negative announcements was found to be explanatory by the expected probability of success of the compound in each stage (e.g. Phase II, Phase III and FDA Regulatory Decision), especially for companies with a market capitalization above $ 1,982 Million. For below $ 1,982 Million market capitalization companies, the M&A premia after successful study results and financial distress after negative study results are possible explanations on why the stage-specific success-rates are not able to explain the market reaction asymmetry between positive and negative announcements. This study indicates that all market participants have access to the same level of information while assessing the companies, causing investors to value companies primarily on their expected stagespecific success-rates empirically found in the literature (Wong et al., 2019).
  • Abnormal returns associated with recommendation revisions
    (2022) Levonen, Tuomas
     School of Business | Bachelor's thesis
  • Abnormal returns at IPO lock-up expiration: Finnish and Swedish Evidence
    (2019) Heiskanen, Mika
     School of Business | Master's thesis
  • Abnormal returns in an efficient market? Statistical and economic weak form efficiency of online sports betting in European soccer
    (2016) Tiitu, Tero
     School of Business | Master's thesis
    Online sports betting markets have expanded significantly during the recent decade. At the same time, due to their apparent similarities with traditional financial markets, the academic literature has perceived sports betting markets as a suitable empirical setting for different tests of efficiency. Employing a data set more extensive than in any previous relevant study, this thesis investigates weak form efficiency of online sports betting in European soccer between seasons 2009 and 2014 from two perspectives: statistical and economic. The statistical tests examine whether subjective probability indicated by average market odds is an unbiased estimator of objective outcome probability. Economic tests, representing the stricter tests of efficiency, inspect whether any betting strategy yields positive returns, utilizing highest odds quoted in the market. The statistical tests find clear evidence of a persistent favorite-longshot bias and hence of statistical weak form betting market inefficiency. On the aggregate level, both the linear and logit regression models reveal that as the subjective probability of an outcome increases, the objective probability increases more than implied by market efficiency. On the individual odds level, the technique that sorts odds into groups based on subjective probability discovers that the deviations between subjective and objective probability occur on both perimeters of the odds spectrum, not in the middle of it. Thus, in a statistical sense, the betting market appears to be weak form inefficient at high respective low probabilities, while being efficient in between. The economic tests give a more ambiguous view on weak form efficiency. When considering all the matches in the sample, neither the tobit regression model nor any of the naïve strategies show chances for profitable betting, while some of the odds groups with highest subjective probability demonstrate moderately positive returns. When only including matches with a positive expected value and simulating the associated returns, the sophisticated strategy based on quasi-arbitrage yields no profits, but the strategy that takes into account the favorite-longshot bias generates consistent profits. Therefore, the betting market seems to be inefficient also in an economic sense. The study concludes that the European online sports betting market in soccer is weak form inefficient. The results are consistent with the earlier literature in terms of statistical efficiency but not in terms of economic efficiency. Due to the lower bookmaker margins in the current market, it is shown that well known statistical biases now also lead to economic inefficiency. The study provides two explanations for the persistence of these inefficiencies: institutional arrangements and market immaturity. Since sports betting markets are not yet as sophisticated as many financial markets, they provide attractive investment opportunities for sharp bettors.
  • Abnormal trading by advisory banks before M&A announcements: coincidence, skills or insider trading?
    (2012) Chu Ngoc, Trung
     School of Economics | Master's thesis
    ABNORMAL TRADING BY ADVISORY BANKS BEFORE M&A ANNOUNCEMENTS: COINCIDENCE, SKILLS OR INSIDER TRADING? PURPOSE OF THE STUDY In a merger and acquisition (M&A), acquirer’s advisory banks are believed to have information about the target beforehand. This study investigates whether the banks exploit this inside information to increase their holdings in the target firm before the public announcement. DATA The institutional holdings data are collected from the quarterly 13F fillings of SEC via WRDS database. The M&A data are collected from SDC Platinum. Other supporting data such as share prices, deal characteristics and company characteristics are acquired from SDC Platinum, Thomson One Banker, CRSP and COMPUSTAT. The final data set consists of 1064 cases for insider trading investigation from 715 M&As. RESULTS The main findings suggest that advisory banks do increase their holdings in the targets before takeover announcements. These increases have already been benchmarked against those of the advisory banks in targets’ peers. On average, the banks start accumulating targets’ shares since 11 quarters before the announcement. However, their changes in holdings in the targets during the last five quarters immediately prior to the takeover are positive, but not statistically significant. In addition, the results of this study suggest a positive relationship between the trading behavior of the advisory banks and the target premium. KEYWORDS Insider trading, investment bank, merger and acquisition, 13F filling.
  • Abnormal volume prior to Mergers and Acquisitions announcements in Europe
    (2019) Huhtamäki, Aleksi
     School of Business | Bachelor's thesis
  • Absolute strength momentum in Germany
    (2020) Laurila, Mikko
     School of Business | Master's thesis
    Absolute strength momentum, a pattern of stocks with significant recent returns continuing to gain while stocks with significant recent losses continue to lose, is a recent addition to the stock price momentum literature. Absolute strength winner and loser stocks are determined not by only the latest cross-section of returns, but by the comprehensive historical distribution across time and across stocks. This thesis studies absolute strength momentum in the context of the German equity markets, using a Datastream data set of monthly returns over March 1973 – December 2019 for a total of 2320 distinct German equities. The results support the findings of Gulen and Petkova (2018): Absolute strength momentum delivers abnormal returns not explainable by conventional factors. The example strategy that uses a 11-month ranking, 1-month skipping and 1-month holding period delivers a mean monthly return of 2.17%, a three-factor alpha of 1.79% (t-value of 3.51) and a monthly Sharpe ratio of 0.20. Additionally, the returns of the absolute strength momentum strategy explain returns of the relative strength (cross-sectional) and time series momentum strategies, but not vice versa. However, contrary to the findings of Yang and Zhang (2019), removing stocks with extreme absolute strength does not improve the performance of momentum strategies in the data set used in this thesis. While this thesis provides evidence in support of the profitability of absolute strength momentum, a need for further research remains both in understanding the underlying mechanisms of absolute strength momentum (e.g. rational and irrational behavioural models), and the potential of absolute strength momentum as an investing strategy (e.g. transaction costs and scalability).
  • Acquirer performance: Effect of anticipated and unanticipated acquisitions – Evidence from Europe
    (2023) Riikonen, Eero
     School of Business | Master's thesis
    In recent years, the global M&A markets have seen a significant amount of completed deals due to low interest rates and companies’ growth ambitions. In the previous M&A studies, there have been observations that completed deals generally result in negative shareholder value for the acquiring firm and only benefit the target firm. Regarding this information, the consistent increase in dealmaking activity remains puzzling. This raises the question of what motivates companies to engage in acquisitions, especially when those deals are seen as value-losing for their shareholders. Tunyi (2021) explores this puzzle by categorizing acquirers into five quintiles (Q1–Q5) based on firms’ bid anticipation likelihood. Tunyi (2021) finds that unanticipated acquirers (Q1) earn CARs of 5.2% on a 3-day event window. At the same event window, the most anticipated acquirers (Q5) earn CARs of only 0.4%. Those findings support the notion that companies in the same sector tend to mimic their competitors. This thesis re-evaluates Tunyi’s (2021) findings, focusing on the European stock markets from 2003 to 2021, using an event study approach. By using similar methods in this thesis as Tunyi (2021), this thesis reveals that acquirers in the European market generate mean CARs of 0.8% for a 3-day event window, respectively. The 3-day CAR for Q1 in this thesis is only 0.3%, compared to the previously found CAR of 5.2% by Tunyi (2021). This discrepancy could be partly due to a significantly lower number of deals in Q1 in this thesis compared to Tunyi’s (2021) study. Another unexpected result in this thesis is that companies in the last quintile (Q5) generated the highest 3-day CAR of 0.9%. Still, these first-of-its-kind findings regarding acquirer returns from European markets suggest that acquisitions do generate positive returns for the firm’s shareholders. Importantly, some of the statistical results derived regarding CAR factors do not show explicit statistical significance. This lack of significance implies a need for a cautious interpretation of the data. Even if results hint at certain trends and correlations, these implications are not strong enough to be collectively determined using statistical evidence. Subsequent chapters of this thesis conclude open questions regarding CARs and aim to offer new pathways for future research on acquirer returns. For the proofreading of this thesis, the ChatGPT 4.0 application has been used.
  • Acquirer reference prices and performance of cross-border and domestic acquirers
    (2020) Tokola, Mikko
     School of Business | Master's thesis
    In this thesis I examine the acquirer reference price effect in the context of private target acquisition announcements by publicly listed German firms. In accordance with the reference price effect, I ex-pect to find a negative relationship between acquirer announcement-period returns and the proximi-ty of the acquirer pre-announcement stock price to its past peak price, the 52-week high. I hypothe-size that under the influence of anchoring, investors perceive acquirer firm valuation relative to the 52-week high, despite the economic irrelevancy of past peak prices. Following a recently introduced methodology, I analyze the existence of the effect and its cause using several falsification tests. Based on the tests, I examine whether the potential effect is explained by rational explanations, or whether the irrational perception of acquirer valuation relative to past peak prices explains the reference price effect. Furthermore, I hypothesize that based on the tendency of the anchoring phenomenon to strengthen in opaque informational contexts and under increased uncertainty, the acquirer reference price effect should be more prevalent among cross-border acquisitions compared to domestic ones. Examining a sample of 1,820 acquisition announcements by German publicly listed firms, I find a reference price effect among German acquirers that is weaker than in earlier empirical findings from the US. In my sample the weak effect is likely explained at least partly by rational reasons, including acquirer market-to-book value, instead of the irrational influence of past peak prices. Additionally, I find a relatively strong reference price effect in a subsample of 1,006 cross-border acquisition announcements, that is not likely explained by acquirer conventional valuation or other firm and deal factors. The result suggests that investors may be particularly influenced by past peak prices in the context of cross-border acquisition announcements.
  • Acquirer return at cross-border acquisition announcement by emerging market companies: Observations from BRICS countries
    (2015) Hämäläinen, Yanxin
     School of Business | Master's thesis
    Since the late 1990s and early 2000s, the world has witnessed a rapid growth of cross-border ac-quisitions conducted by emerging market acquirers. This thesis, inspired by several prior papers in the field, intends to analyse the acquirer return at the cross-border acquisition announcement from a group of emerging markets, namely Brazil, Russia, India, China, and South Africa (the BRICS countries). The main research goal of this thesis is to find out whether emerging market companies benefit from cross-border acquisitions in the form of stock return and what are the fac-tors that influence the return. The data used in this study covers cross-border acquisitions from the BRICS countries from Jan-uary 1, 1995 to December 31, 2014. The data is retrieved from Thomson Financial Securities Data Company (SDC) and Thomson One systems. Using publicly listed acquiring company, sufficient stock price data, and single acquisition announcement by the same acquirer during the event win-dow as the selection criteria, a full sample of 958 deals is obtained. Event study methodology and cross-sectional regression analysis are used in the empirical tests. The event study is carried out using cumulative abnormal returns from event windows (-1, +1), (-3, +3), and (-5, +5). For the cross-sectional regression analysis, a total of 14 variables are introduced, which lead to a reduced subsample of 535 deals. Event study results show that emerging market acquirers enjoys significant positive returns dur-ing 3-day event window when the target companies are from developed markets and when acquir-ers themselves don't have government ownership involvement. Natural resources relatedness gives mixed results: emerging market acquirers of non natural resources related deals enjoy signif-icant positive returns from 3-day event window, while acquirers of natural resources related deals enjoy significant positive returns from 7-day and 11-day event windows. Cross-sectional regression results show that relative deal size has significant positive influence on the acquirer return.
  • Acquirers performance persistence in acquisitions - European evidence
    (2013) Chen, Yu
     School of Business | Master's thesis
    Objective of the study The purpose of this thesis is to study acquirers performance persistence issue in merger and acquisition (M&A) market based on empirical evidence from EU 15 countries. This study provides an overview of different factors affecting serial acquirers' performance in M&A market as measured by excess stock returns. Focus of this thesis is to test the existence of acquirers performance persistence and factors contributing to this possible persistence effect. Academic background and methodology An overview of existing theories and analysis framework regarding M&A market and acquirers' performance behaviors is obtained through literature research. Empirical data regarding M&A market in EU 15 countries are obtained from various data sources available from Aalto University School of Business. Data are processed by using statistical package EViews. The purpose of the statistical analysis is to discover relations between various variables and acquirers' performance persistence in M&A deals. The regression results are analyzed using established theories on M&A performance, as well as by comparing with relevant study from other scholars. Findings and conclusions This thesis uses a statistical analysis model in which different variables pertinent to M&A deals, together with acquirers' prior performance, are analyzed for detecting their impacts on acquirers' performance. This study reveals that depending on different model specifications, acquirers' performance persistence can be identified in terms of value creation for own companies, value creation for both acquirers and targets, and acquirers' bargaining power in acquisition deals.
  • Acquiring acquirers: Evidence from Europe
    (2016) Valtonen, Antti
     School of Business | Master's thesis
    OBJECTIVES OF THE STUDY The value creation effects of M&A activity is one of the most researched phenomena within the corporate finance literature. Especially the close to zero and negative announcement returns realized to the acquirer has had their fair share of spotlight. However, the recent papers have mainly been focusing on the traditional drivers behind M&A value creation effects and have disregarded how target's prior acquisition activity might impact this phenomenon. I follow the paper of Phalippou et al. (2015) studying acquisitions of acquisitive targets and provide comparable results of such acquisitions from European perspective, by using the "eat or be eaten" theory of Gorton et al. (2009) as my motivation. DATA AND METHODOLOGY The sample used in this thesis is gathered from the SDC and Datastream databases and covers the years from 1995 to 2014.The main sample comprises of 727 individual M&A deals completed in one of the EU14 countries, of which 71 (9.77%) are deals where the target has made prior acquisitions over the preceding five years before the acquisition announcement. The secondary sample also includes withdrawn deals and has 890 individual observations. The thesis uses OLS and logistic regression models to assess the hypotheses based on the recent academia and highly motivated by the "eat or be eaten" theory of Gorton et al. (2009). MAIN FINDINGS I find no significant relationship between the number of target's prior acquisitions and target's announcement returns. However, acquirer announcement returns are significantly and negatively driven by the number of target's prior acquisitions, on average decreasing by -0.81% when target's number of prior acquisitions increases by one. I also find that acquisitive targets are able to resist takeover attempts 12.63% more often and that failing to acquire an acquisitive target significantly increases acquirer's probability of being acquired over the following five years 103.70% more than failing to acquire a non-acquisitive target. In addition, I find acquisitive targets to only significantly destroy acquirer shareholder value when the industry concentration is lower, the relative target size is higher, the deal occurs pre-merger wave, and when the deal is a cross-industry or an intra-border deal. In Europe, the results are only partially supportive of the idea that acquisitions of acquisitive firms would have a defensive nature. The value-destroying nature could also arise from the fact that acquisitive targets are simply able to resist takeover attempts more often, making the acquisition more expensive for the acquirer.
  • Acquiror Size, Acquisition Announcement Returns, and Periods of Financial Distress
    (2023) Kaltio, Tuomo
     School of Business | Bachelor's thesis
    This thesis studies the relationship between acquiror size and acquisition announcement returns with the objective of assessing whether the negative size effect found in previous studies holds in the Nordic M&A markets as welI. Additionally, I provide new insights on the possible explanations behind this phenomenon. I examine a sample of 1,425 acquisitions by public Nordic companies from 2000 to 2022 and find an average abnormal announcement return of 3.1%. However, large acquirors gain 5.7% lower average abnormal announcement returns than small acquirors. The size effect is robust to firm and deal characteristics and holds irrespective of the form of financing or the organizational form of acquired assets. The evidence on possible explanations behind the size effect aligns most convincingly with equity and growth signaling theories. As for the crises, this study does not find conclusive evidence on reversed size effect during periods of financial distress.
  • Active management, cash holdings and future fund performance
    (2019) Varheenmaa, Aaro
     School of Business | Master's thesis
  • Activist hedge funds and ESG: Seeking out the good, the bad or the ugly? Evidence from the activist hedge fund campaigns in the United States
    (2023) Leskinen, Eveliina
     School of Business | Master's thesis
    This study aims to add to the ongoing debate on whether activist hedge funds seek short-term shareholder gains at the cost of long-term stakeholders by examining the link between activist hedge funds and a firm’s corporate social performance. Using a hand-collected sample of 145 activism events during the period of 2016-2020, I examine the association between the firm’s ex-ante ESG performance and the likelihood of becoming targeted by an activist hedge fund. Moreover, I examine whether hedge fund activism affects the target firms’ subsequent corporate social performance. I document positive but statistically insignificant results on the firm ESG performance and the likelihood of becoming targeted by an activist hedge fund. For the second research question, I do not document significant changes in the target firms’ ESG performance for one and two years after the intervention. The inconclusive results are in contrast to the prior literature documenting that higher CSR firms are more likely to be targeted and the target firms’ CSR activities deteriorate after the activist campaign. The study has three significant contributions to the existing literature. First, the thesis provides the most recent evidence on the relationship between hedge fund activism and corporate social performance. Furthermore, by breaking down the ESG performance into E and S, the thesis provides a more granular overview of the relationship. Second, the study demonstrates how the assumption of homogeneity in empirical studies on shareholder activism may result in insignificant results and confounding interpretations. Last, the inconclusive findings of this paper raise an important question on the potential bias of using specific data sources for ESG performance in the studies on corporate social performance.