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  • Media and technology effects in the forecasting task
    (2004) Portocalis Van Toorn, Christine
    Thesis
  • Top management turnover : an empirical examination of changes in portfolio holdings and investment performance
    (2004) Nadarajah, Prashanthi
    Thesis
    This thesis presents two research projects examining the relationship between top management turnover (i.e. investment directors of funds management firms) and the performance of actively managed Australian institutional funds. Khorana (1996, 2001) studies this relationship from purely a performance perspective using U.S. managed funds. This thesis extends the work of Khorana (1996, 2001) by providing investors and other stakeholders with empirical evidence on performance, sources of performance and the dynamics of portfolios in the pre-and-post replacement periods. This issue is significant given the importance of executive management in the implementation of the institution's investment strategy, the sizeable assets under their control, as well as the overall success and profitability of the funds management operation. In addition, investors, asset consultants, managed fund ratings agencies and the financial media devote significant resources in scrutinizing the performance, organizational activities, leadership and human capital of investment management firms. Accordingly, the first research project examines the impact of performance and fund flow activity on top management turnover in both the pre-and-post replacement periods. The research documents that turnover of underperforming investment managers results in significantly higher performance in the post-replacement period, while turnover coinciding with outperforming managers delivers investors significantly lower returns (risk-adjusted). The evidence also identifies significant changes in portfolio risk associated with managerial turnover. Finally, the study finds that underperforming investment managers exhibit significantly lower fund flows prior to replacement. The second research project represents the first rigorous analysis of top management turnover with respect to monthly portfolio holdings for a sample of actively managed Australian equity funds. An examination of the dynamics of portfolios surrounding both the departure and the arrival dates of investment managers provides a finer decomposition in understanding investment performance, the sources of value added and the extent to which momentum strategies are executed both pre-and-post the turnover event. Accordingly, the study examines a manager's success or failure depending on 'winner' and 'loser' stock holdings, portfolio turnover, reliance on momentum strategies, variation in portfolio risk, stock preferences and fund flows for underperforming versus outperforming investment directors in the pre-and-post replacement periods. The research also documents that new investment managers of previously underperforming portfolios exhibit superior stock-selections skills in the post-replacement period, therefore reversing the portfolio's previously poor performance. The study finds that new investment managers liquidate 'loser' stocks (i.e. cleaning out the portfolio) as well as decreasing the portfolio's concentration (i.e. increases the portfolio's diversification and lowering tracking error). The results also indicate that underperforming investment managers in the pre-replacement period exhibit a preference for larger stocks (i.e. more liquid stocks with greater relative benchmark weights in the index), growth-oriented securities and a preference towards riding past period winners (i.e. following momentum strategies), however they are unable to successfully select and exploit momentum stocks. On the other hand, incoming managers of underperforming portfolios in the pre-replacement period do not show any particular stock size preference. The study also shows these managers prefer growth stocks, do not rely on momentum strategies, and yet still display superior returns in the post-replacement period. The study also documents that new investment managers of previously outperforming portfolios are unable to replicate the performance of the previous head of equities. In terms of stock preferences related to superior performing portfolios, the results show that departing investment managers prefer larger stocks and select stocks based on momentum strategies. On the other hand, incoming investment managers have a greater preference for smaller stocks, are less reliant on momentum strategies and prefer more volatile securities, however, these strategies do not provide superior returns relative to the pre-replacement period.
  • The announcement effect of private placements of hybrid securities in Australia
    (2004) Tan, Juan Edward
    Thesis
    This thesis investigates the share price response to the announcement of private placements of hybrid securities in Australia. Firstly, the size and direction of the share price response is examined. Secondly, the determinants of the share price response are examined. Where possible, comparisons are made to evidence from international markets. The sample of data tested consists of 43 announcements of convertible debt issues, 39 announcements of preference share issues and 19 announcements of option issues made between 1983 and 2000 by Australian firms. The analysis of the share price impact in response to the announcements is conducted using Maynes and Rumsey (1993) event study methodology that adjusts for thin trading. The determinants of the share price response are examined using model specifications that are derived from the theoretical literature. The analysis of the announcement effect of private placements of hybrid securities finds significant negative abnormal returns for convertible debt issues, insignificant negative abnormal returns for preference share issues and significant positive abnormal returns for option issues. In comparison to international studies, the convertible debt results are similar to public and rights issues, the insignificant preference share results are similar to other findings and the option results are similar to private placements of equity and rights issues of options. The results of the investigation of the determinants of the announcement effect of private placements of hybrid securities finds that convertible debt issues are best explained by information asymmetry - firm and issue characteristics, the information asymmetry - external monitors hypothesis, the information asymmetry - dynamic hypothesis and the agency cost hypothesis. The impact of preference share issues is best explained by information asymmetry - firm and issue characteristics, the information asymmetry - external monitors hypothesis, the agency cost hypothesis and the price pressure hypothesis. The announcement effect of option issues is best explained by information asymmetry - firm and issue characteristics, the information asymmetry -dynamic hypothesis and the optimal capital structure hypothesis.