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Stirling University - Department of Accounting and Finance
In Defence of Capitalisation Weights: Evidence from the FTSE 100 Index 1984-2004
Isaac Thomas TabnerAbstract
Capitalisation weighting has added 8,000 basis points of incremental returns to the FTSE 100 Index compared to an equally weighted portfolio of the same constituents. Industry factors explained 66% of the incremental returns, while size and style factors explained 2%. The capitalisation weighted index volatility was lower than the equally weighted counterpart during negative tail events in the return distribution. Diversification benefits have arisen because the largest firms either had above average returns or below average covariance, compared to the rest of the portfolio constitu ents.
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Earnings management in IPOs: determinants and post-IPO performance
Nurwati A. Ahmad-ZalukiKevin Campbell
Alan Goodacre
Abstract
Ball and Shivakumar (2008) question the ‘hypothesis of widespread and substantial earnings management by IPO firms’ and we provide further evidence on this issue. While at first sight Malaysian IPOs show evidence of earnings management, this is largely restricted to IPOs undertaken in a period of economic crisis. Similarly, aggressive earnings management companies have poorer post-IPO market performance than their conservative counterparts, but only for crisis period IPOs. Further analysis suggests that company age, auditor prestige and retained ownership are important earnings management determinants; owners’ concern about post-IPO control appears to be more important than wealth protection or signalling.
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