The Journal of Finance

Hedging Pressure Effects in Futures Markets

Published: 6/2000,  Volume: 55,  Issue: 3  |  DOI: 10.1111/0022-1082.00253  |  Cited by: 402

Frans A. De Roon, Theo E. Nijman, Chris Veld

We present a simple model implying that futures risk premia depend on both own‐market and cross‐market hedging pressures. Empirical evidence from 20 futures markets, divided into four groups (financial, agricultural, mineral, and currency) indicates that, after controlling for systematic risk, both the futures own hedging pressure and cross‐hedging pressures from within the group significantly affect futures returns. These effects remain significant after controlling for a measure of price pressure. Finally, we show that hedging pressure also contains explanatory power for returns on the underlying asset, as predicted by the model.

An Anatomy of Commodity Futures Risk Premia

Published: 1/7/2014,  Volume: 69,  Issue: 1  |  DOI: 10.1111/jofi.12096  |  Cited by: 317

MARTA SZYMANOWSKA, FRANS DE ROON, THEO NIJMAN, ROB VAN DEN GOORBERGH

We identify two types of risk premia in commodity futures returns: spot premia related to the risk in the underlying commodity, and term premia related to changes in the basis. Sorting on forecasting variables such as the futures basis, return momentum, volatility, inflation, hedging pressure, and liquidity results in sizable spot premia between 5% and 14% per annum and term premia between 1% and 3% per annum. We show that a single factor, the high‐minus‐low portfolio from basis sorts, explains the cross‐section of spot premia. Two additional basis factors are needed to explain the term premia.

Testing for Mean‐Variance Spanning with Short Sales Constraints and Transaction Costs: The Case of Emerging Markets

Published: 4/2001,  Volume: 56,  Issue: 2  |  DOI: 10.1111/0022-1082.00343  |  Cited by: 212

Frans A. De Roon, Theo E. Nijman, Bas J. M. Werker

We propose regression‐based tests for mean‐variance spanning in the case where investors face market frictions such as short sales constraints and transaction costs. We test whether U.S. investors can extend their efficient set by investing in emerging markets when accounting for such frictions. For the period after the major liberalizations in the emerging markets, we find strong evidence for diversification benefits when market frictions are excluded, but this evidence disappears when investors face short sales constraints or small transaction costs. Although simulations suggest that there is a possible small‐sample bias, this bias appears to be too small to affect our conclusions.

Tax Reform and Ex‐Dividend Day Behavior

Published: 9/1983,  Volume: 38,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1983.tb02289.x  |  Cited by: 79

JOSEF LAKONISHOK, THEO VERMAELEN

This paper investigates the effect of a major Canadian tax reform on the ex‐dividend day behavior of companies on the Toronto Stock Exchange. The results are inconsistent with the hypothesis that price changes on ex‐dividend days reflect the relative taxation of dividends and capital gains for the “representative” investor, but are consistent with the hypothesis that ex‐dividend day price behavior reflects short‐term trading activities.

Anomalous Price Behavior Around Repurchase Tender Offers

Published: 6/1990,  Volume: 45,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1990.tb03698.x  |  Cited by: 223

JOSEF LAKONISHOK, THEO VERMAELEN

This paper reports anomalous price behavior around repurchase tender offers. Buying shares before the expiration date of a repurchase tender offer and tendering to the firm produces, on average, abnormal returns of more than 9 percent over a period shorter than one week. In addition, we find that repurchasing companies experience economically and statistically significant abnormal returns in the two years after the repurchase. The upward price drift is mainly caused by the behavior of the small firms in the sample.

Stock Repurchases in Canada: Performance and Strategic Trading

Published: 10/2000,  Volume: 55,  Issue: 5  |  DOI: 10.1111/0022-1082.00291  |  Cited by: 300

David Ikenberry, Josef Lakonishok, Theo Vermaelen

During the 1980s, U.S. firms announcing stock repurchases earned favorable long‐run returns. Recently, concerns have been raised over the robustness of these findings. This concern comes at a time of explosive growth in repurchase programs. Thus, we study new evidence from the 1990s for 1,060 Canadian repurchase programs. Moreover, because of Canadian law, we can carefully track repurchase activity monthly. Similarly to the situation in the United States, the Canadian stock market discounts the information in repurchase announcements, particularly for value stocks. Completion rates in Canada are sensitive to mispricing. Trades also appear linked to price movements; managers buy more shares when prices fall.

Stock Prices and Financial Analysts' Recommendations

Published: 3/1983,  Volume: 38,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1983.tb03634.x  |  Cited by: 116

JAMES H. BJERRING, JOSEF LAKONISHOK, THEO VERMAELEN

The recommendations of a Canadian brokerage house are evaluated by a number of techniques. The results reveal that an investor following the recommendations would have achieved significantly positive abnormal returns, even after allowing for transactions cost.