Browsing by Subject "Liquidity"

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    An Empirical Examination of the Commitment to Increased Disclosure
    (2008-06-04) Evans, Mark

    I examine the relation between a corporate commitment to increased disclosure and measures of liquidity, information asymmetry, and cost of equity capital. Relative to prior research on voluntary disclosure, I use a composite, ex ante measure of commitment based in social psychology and measure commitment using characteristics of earnings announcement disclosures. Prior to Regulation Fair Disclosure (Reg FD) I find that commitment to increased disclosure is negatively related to bid-ask spreads, probability of informed trade (PIN) scores, and implied cost of capital estimates. Further analysis reveals that the disclosure of balance sheet information in earnings releases is significantly related to spreads and PINs, regardless of firms' conference call behavior, while the combination of consistent open calls and disclosure of balance sheet information in earnings releases yields the most significant results for cost of capital. After the effective date of Reg FD I find that commitment is negatively related to PIN scores and implied cost of capital estimates, but not related to bid-ask spreads. Further analysis reveals that the disclosure of balance sheet information in earnings releases is significantly related to PINs and cost of capital, regardless of firms' conference call behavior.

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    Foreign Exchange Responses to Macroeconomic Surprises: Playing “Peek-a-Boo” with Financial Markets
    (2012-04-16) Nathan, Vignesh
    This paper explores the relationship between precisely timed macroeconomic “news” (or “surprises”) and the immediate currency price fluctuations that surround them. Using data from 2005-2011, I find significant movements in foreign exchange markets around a variety of announcements (unemployment, GDP, retail sales, inflation) for three different countries (United States, Australia, Canada). My results demonstrate that in the very short-run, as in the long run, the value of a country’s currency is driven by its macroeconomic fundamentals. Upon further investigation, this paper also uncovers the following financial phenomena in these foreign exchange responses to macroeconomic surprises: asymmetric response, nonlinearity, financial stress, liquidity, and exchange rate specificity. These phenomena refer to the difference in responses between: positive and negative surprises, big versus small surprises, pre-crisis versus crisis surprises, ten- versus sixty-minute returns, and two distinct reference currencies, respectively.