Few areas of research in the finance literature have received greater attention than the efficient market hypothesis. Much of the research has been directed toward the securities market while very little research has been done in the real estate markets. The existing research on real estate market efficiency has been either descriptive or illustrative with very little empirical testing being performed. The major reason for the lack of empirical testing has been the inability to develop an adequate data base. The results of the empirical work that has been done do not support the widely held belief that real estate markets are inefficient. This study, using the autoregressive-integrative-moving average (ARIMA) time series analysis technique, tests the weak-form efficiency of the Dallas-Fort Worth office properties real estate market. According to the weak-form efficient market hypothesis, all price information should be capitalized into current real estate prices and not provide the basis for earning abnormal returns in trading. Price data formed from office building sales dating from January, 1979 to January, 1985 are used to test the market. The data was gathered from the files of several professional appraisal firms located in the Dallas-Fort Worth area. The transaction information includes (1) transaction …

This empirical study is concerned with the usefulness of proposed supplementary disclosures for oil and gas producers to financial analysts in valuing a company. It is concerned with what supplementary information is being used, to what extent it is being used and which type of information is used most. Three main research procedures are employed. In the first procedure, the Mann-Whitney U Test is applied to determine any significant difference between valuing an oil and gas producing company using basic financial statements and ratio data, and valuing the same company with this information plus the proposed disclosures. The second procedure involves applying the chi-square and Cramer's V statistics to determine whether the disclosure information caused switching in valuation method used for each of the cases. The third procedure tests for significant differences between financial ratios used for each case by employing the test of differences between two proportions. Additional evaluation attempts to determine analysts' perceived usefulness of each of the schedules of the proposed disclosures

The forces that shaped banking practices in the late 1970s and which fostered attempts by the banks to rapidly expand their markets are examined. Why, and to what extent, the Texas energy banks committed themselves to the oil industry in those years, as well as the effects of the oil industry's four-and-one-half year decline on the banks' financial strength is detailed. How banks structured loans to various energy borrowers and why these borrowers lost their ability to service their debts is analyzed. The changes that the Texas banks' painfully learned lessons will bring about in energy and other specialized lending is considered.

This study examines the differential effect of each of the ten largest bank failures on shareholders' wealth of non-failed banks over the period from 1973 through 1984. It examines how contagion and information effects of major bank failures have changed over time. FDIC policy for settling failures has important implications for system stability, and has changed over time. This study's purpose is to provide empirical evidence on the effects of FDIC policy. The FDIC's handling of the Penn Square failure signaled a policy shift and offers a unique opportunity to examine changes in market reactions to large bank failures. The literature on the capital market effects of major bank failures provides limited evidence on the impact of bank failures and related FDIC policy. Most fail to discriminate between contagion and information effects, and conduct analysis on one (or a few) bank failure(s) in the mid-1970s using traditional event study methodology. This study considers multivariate regression (MVRM) an appropriate methodology for bank failures which are likely to have simultaneous impact on non-failed banks. MVRM, which accounts for contemporaneous cross-sectional dependence of residuals, has three advantages over standard residual analysis: no "event clustering" problem, multiple hypotheses tests, and computational efficiency. This study …

The purpose of the study was to find the best prediction models of short-term bank CD ratings using financial variables. This study used short-term bank CD ratings assigned by Moody's and Standard and Poor's.

This dissertation examines the reaction of common stock prices to the announcement of changes in bond ratings by Moody's Bond Service, while having a control for differential information availability. The Institutional Brokers Estimate System (I/B/E/S) number of security analysts and coefficient of variation of earning per share (EPS) estimates are used as a proxy for information availability of the firms. Past studies differs in their conclusions as to whether the market has responded to announcement of bond rating changes. None of past studies have controlled for differential information availability. This study, using daily stock returns data and the event study methodology with the statistical test, finds that while the sample of rating downgrades exhibit significantly negative abnormal price effect during the announcement period, the magnitude of this effect is significantly higher for firms with low information availability. For the rating upgrades, the sample as a whole has no abnormal announcement period returns, but the sample of firms with lower information earns significantly positive abnormal returns. This study provides support for the hypothesis that the announcement effect of bond-rating changes is conditional on the information available about the firm.

This study provides information about convertible preferreds generally and, in particular, those used in financing mergers during the period 1968-1984. Specifically, the following topics are examined: (1) traditional corporate motives for the use of convertible preferreds as a financing means in mergers and acquisitions, (2) annual data about convertible preferreds' issuance by volume and purpose for the period 1968-1984, (3) average annual returns of merger-related convertible preferreds and average annual returns of common stock of the same companies for the period 1968-1980, (4) performance of convertible preferreds in relation to the market in general, and (5) the future of convertible preferreds as a financing instrument in merger activity.

The purpose of this paper is to investigate the effect of the "limits of arbitrage" on securities mispricing. Specifically, I investigate the effect of the availability of substitutes and financial constraints on stock mispricing. In addition, this study investigates the difference in the limits of arbitrage, in the sense that it will lead to lower mispricing for these stocks, relative to non-S&P 500 stocks. I also examine if the lower mispricing can be attributed to their lower limits of arbitrage. Modern finance theory and efficient market hypothesis suggest that security prices, at equilibrium, should reflect their fundamental value. If the market price deviates from the intrinsic value, then a risk-free profit opportunity has emerged and arbitrageurs will eliminate mispricing and equilibrium is restored. This arbitrage process is characterized by large number of arbitrageurs which have infinite access to capital. However, a better description of reality is that there are few numbers of arbitrageurs to the extent that they are highly specialized; and they have limited access to capital. Under these condition arbitrage is no more a risk-free activity and can be limited by several factors such as arbitrage risk and transaction costs. Other factors that are discussed in the literature …

The purpose of this study is to examine the wealth effect of the Risk-Based Capital (RBC) regulation on the U.S. commercial banking industry. The RBC plan was first proposed in January 1986, and its final form was announced on July 11, 1988. This plan resulted from dissatisfaction with the old capital regulation, which did not account for asset risk and off-balance sheet activities. The present study hypothesizes that the new regulation restricted bank optimal behavior and, therefore, adversely affected stock prices. The second and third hypotheses suggest that investors used company specific information, Net Tier 1 and Total risk-based capital ratios respectively, in valuing stocks of the affected bank holding companies. Hypotheses four and five suggest that abnormal returns are proportionally related to the levels of Net Tier 1 or Total RBC ratio. Both the traditional event study and the portfolio time-series regression, with RBC ratios (Net Tier 1 or Total) as the weight factors, are used in this study.

This dissertation consists of three essays: essay 1, Underwriting Use of Credit Information and Firm Performance ‐ An Empirical Study of Texas Property‐Liability Insurers, essay 2, Prediction of Ratings in Property‐Liability Industry when The Organizational Form Is Endogenous, and essay 3, A Discussion of Parsimonious Methods Predicting Insurance Companies Ratings. The purpose of the first essay is to investigate the influence of underwriting use of credit information on variation in insurers’ underwriting performance. Specifically, this study addresses the following two research questions: first, what firm‐level characteristics are associated with the insurers’ decision to use credit information in underwriting? second, is there a relationship between the use of credit information and variation in insurers’ underwriting performance? The empirical results indicate that larger insurance companies, companies having more business in personal auto insurance, and those with greater use of reinsurance are more likely to use credit information in underwriting. More importantly, the results indicate that use of credit information is associated with lower variation in underwriting performance, consistent with the hypothesis that use of credit information enables insurers to better predict their losses. The purpose of the second essay is to resolve the inconsistent relationship between the organizational forms (i.e., stock versus …

During the Great Recession of 2007 and 2008, liquidity and credit dried up, threatening the stability of financial institutions, particularly the banking firms. Traditional source of funds from the last resort, the Discount Window of the Federal Reserve System, failed to remedy the liquidity problem. To assuage the liquidity and credit problem, the Federal Reserve System established several emergency lending facilities and provided unprecedented amount of loans to the banking industry. Using a dataset published by Bloomberg LLP in the aftermaths of the financial crisis, which contains daily loan balances from the Fed, I conduct an event study to test whether financial markets are efficient in reflecting all public, anticipated and classified information in security prices. The most important contribution of this dissertation to the finance discipline and literature is the investigation and analysis of the Fed’s unprecedented loans to the banking industry during the Great Recession and the market reaction to it. The second major contribution of this study is the empirical test of strong form efficient market hypothesis, which has not been feasible due to legal data challenges. This dissertation has other contributions to the finance discipline and banking research. First, I develop an algorithm for measuring the …

The purpose of this study is to examine a two-part hypothesis. The first part is that underdepreciation is the cause of serious financial problems which have beset investor-owned electric utilities in recent years. The second part is that depreciation adjusted for changes in the general level of prices would do much to alleviate these problems.