Using the setting of earnings conference calls, this paper investigates the temporal focus of management presentation during those calls, i.e., the extent to which managers allocate their discussions to future firm prospects relative to past firm performance. I find a negative association between firms' past performance and the future focus of management presentation. Moreover, the association is less negative for firms with more long-term investors and is more negative for firms with high litigation risk. Additionally, I find that the temporal focus of management presentation is positively associated with that of analyst questions. I also find that managers' future focus is positively associated with the number of analysts following the firm but negatively associated with forecast quality of analyst reports (lower accuracy and higher dispersion). Finally, I find the future discussions in management presentation is positively associated with the time that analysts took to release the next quarter's forecasts. / Ph. D. / In recent years, it has become a common practice for public companies to hold earnings conference calls right after the release of their quarterly earnings results. Earnings conference calls are also publically accessible. Thus, earnings conference calls are believed to contain timely and important information to investors, analysts, and other interested parties. During the calls, managers first highlight the company’s financial performance and discuss its future prospects, and then answer some questions asked by call participants (primarily financial analysts). This paper investigates how managers allocate their effort to discuss the company’s future firm prospects (i.e., future focus) based on its quarterly earning results (past firm performance). I find managers are more likely to discuss future firm prospects when they have a bad quarter; and are more likely to discuss past results when they have a good quarter. In other words, there is a negative association between firms’ past performance and the future focus of management discussion. Moreover, I find the association is less negative for firms with more long-term investors and is more negative for firms with high litigation risk. Additionally, I find that when managers allocate more discussions on the future, analysts tend to ask more questions about the future. I also find that managers’ future focus is positively associated with the number of analysts following the firm but negatively associated with forecast quality of analyst reports. Finally, I find that managers’ future focus is positively associated with the time that analysts took to release the next quarter’s forecasts.

This dissertation contains three applications of time series in finance and macroeconomics. The first essay compares the cumulative returns for stocks and bonds at investment horizons from one to ten years by using a test for spatial dominance. Spatial dominance is a variation of stochastic dominance for nonstationary variables. The results suggest that for investment horizons of one year, bonds spatially dominate stocks. In contrast, for investment horizons longer than five years, stocks spatially dominate bonds. This result is consistent with the advice given by practitioners to long term investors of allocating a higher proportion of stocks in their portfolio decisions. The second essay presents a method that allows testing of whether or not an asset stochastically dominates the other when the time horizon is uncertain. In this setup, the expected utility depends on the distribution of the value of the asset as well as the distribution of the time horizon, which together form the weighted spatial distribution. The testing procedure is based on the Kolmogorov Smirnov distance between the empirical weighted spatial distributions. An empirical application is presented assuming that the event of exit time follows an independent Poisson process with constant intensity. The last essay applies a dynamic factor model to generate out-of-sample forecasts for the inflation rate in Mexico. Factor models are useful to summarize the information contained in large datasets. We evaluate the role of using a wide range of macroeconomic variables to forecast inflation, with particular interest on the importance of using the consumer price index disaggregated data. The data set contains 54 macroeconomic series and 243 consumer price subcomponents from 1988 to 2008. The results indicate that factor models outperform the benchmark autoregressive model at horizons of one, two, four and six quarters. It is also found that using disaggregated price data improves forecasting performance.

In this dissertation, I investigate the impact of institutional investors on security prices and corporate policies, and offer a new perspective on the vital role that institutional investors play in the modern capital market. Specifically, on the impact on security price movements, I design a new measure of stock-level sentiment based on mutual fund publically disclosed portfolio information and provide a new dimension to better predict stock returns. A trading strategy based on the new sentiment metrics can generate an annualized alpha of 21.27%. The abnormal returns cannot be explained by the time-varying expected returns and transaction costs, and can be best explained by mutual fund overreactions. Hence, my findings can be interpreted as a new anomaly in a new era-when institutional investors are the marginal traders. On the impact on corporate policy side, I document two pieces of new empirical evidence on the importance of long-term institutional holdings: the entrenchment effect of long-term institutional holdings in the context of corporate financing decisions and the active monitoring role of long-term institutional investors in the context of international firms’ accounting qualities. Combined with previous studies which favour a long-term institutional investor, the evidence on the cost side of long-term holding I document here can serve as the first call for an optimal investment horizon for firms operating in the U.S. / Thesis (Ph.D, Management) -- Queen's University, 2012-04-11 22:22:17.627

This thesis is an effort to advance our knowledge and understanding of the role that labor plays in shaping corporate financial policies and how it is in turn affected by considerations related to firms' financing. I present three essays on the interaction between finance and labor. First, I provide two examples of how labor affects financial decisions, in which I investigate the impacts that commitment to employee welfare and reliance on skilled labor have on cash management policies. Next, I examine the effect of ownership structure on labor investment decisions as an example of how finance affects human capital. In the first essay, I examine the relation between employee welfare practices and corporate cash holdings. Consistent with the predictions of the stakeholder theory, I find firms that are strongly committed to employee welfare, measured by ratings on employee relations, to hold more cash. The effect of employee welfare standards on cash holdings is stronger for firms in human-capital-intensive, competitive, and low turnover industries in which employees are more important to their businesses. The findings highlight the importance of human capital and employee-friendly practices as an overlooked determinant of cash holdings and suggest that managers can use cash to signal their financial health to current and potential employees, thereby increasing their competitiveness in labor markets. The second essay examines whether a firm's dependence on skilled labor affects its cash holdings. Consistent with a precautionary motive to accumulate cash when higher labor adjustment costs slow a firm's labor demand reaction to cash flow shocks, I find robust evidence that companies with higher shares of skilled labor hold more cash. The effect of skilled labor on cash holdings is more pronounced for firms that are financially constrained, attach higher values to their human capital, operate in competitive product markets, and belong to industries characterized by high labor mobility. The findings suggest that labor heterogeneity, and in particular the skill level of workers is an important determinant of corporate cash policies. The results provide managers of firms, particularly those that are financially constrained, with insights on how to minimize their labor adjustment costs and reduce the risk of losing their valuable human capital. In my third essay, I examine whether the presence of long-term institutional investors, who typically have strong monitoring incentives, can help mitigate agency conflicts associated with firms' employment choices. I find that abnormal net hiring, measured as the absolute deviation from net hiring predicted by economic fundamentals, decreases in the presence of institutional investors with longer investment horizons. Firms dominated by long-term shareholders reduce both over-investment (over-hiring and under-firing) and under-investment in labor (under-hiring).The monitoring role of long-term investors is more pronounced for firms facing higher labor adjustment costs. These findings suggest that institutional investors play an important role in firm-level employment decisions.

The main goal of this work is to simplify the plethora of information on the topic of investment and formulate them into a form, that is understandable for the normal investor. Thus, the investor gets the theoretical framework to find appropriate product, or a way to to invest in capital markets. Partial aim is to highlight the pitfalls associated with investing, define essential factors necessary for the proper choice of each investment and give specifics of individual investment instruments. Last but not least, simulations of selected investment instruments, assessing their development along with identification key factors having influence on the result of investment.

This thesis investigates if Environmental, Social and Governance (ESG) investments can be considered as an independent asset class. As ESG and responsible investing has increased substantially in recent years, responsible investments have entered the portfolios with other asset classes too. Therefore, there is a need in studying ESG investment properties with other financial asset classes. By collecting daily price data from October 2007 to December 2018, we research the directionalities between ESG, ethical, conventional, commodities and currency. Initially, we employed a MODWT, multiscale investment horizon wavelet analysis transformation of the data. The decomposed wavelet data is then applied in pairwise linear and non-linear Granger causality estimations to study the directionality relationships dependent on investment horizon. Additionally, econometric filtering processes have been employed to study the effects of volatility on directionality relationships. The results mainly suggest significant directionality relationships between ESG and the other asset classes. On the medium-term investment horizon, almost all estimations indicate strict bidirectionality. Thus, on the medium-term, ESG can be said to be integrated with the other asset classes. For the long-term horizon, most relationships are still predominantly bidirectional between ESG and all other asset classes. The biggest differences are found on the short-term horizon, with no directionality found between ESG and commodities that cannot be explained by volatility. Furthermore, most directionality relationships also disappear when controlling for the volatility transmission between ESG and currency on the short-term horizon. Thus, our findings suggest significantly more integration between ESG and ethical and conventional as bidirectionality overwhelmingly prevails regardless of investment horizon. As previous research has found similarities between ethical and conventional as well as ESG having similar characteristics to commodities as conventional and ethical, we suggest that ESG should be considered as being integrated and having strong similarities with other equities. Thus, it should be treated as being part of the conventional equity asset class. Deviations from bidirectionality could be caused by ESG variable specific heterogeneity. However, despite our rejection of ESG as an independent asset class, it still carries significant potential as it excludes firms with climate-harming practices, thereby helping in combating climate-related as well as social and governance issues the world is facing.

Bakgrund: Aktieintresset i Sverige är stort trots turbulens på börsen. Antalet aktieägare är rekordhögt, samtidigt som marknadsvärdet på aktier sjunkit. För att välja aktier optimalt kan investeringsstrategier som relativvärdering användas som utnyttjar avvikelser i aktiers prissättning. Genom att använda investeringsstrategin teoretiska multiplar ska man enligt teorin kunna finna dessa avvikelser, vilket studien ämnar undersöka i praktiken.  Syfte: Syftet med studien är att analysera om en investeringsstrategi som baseras på teoretiskt härledda multiplar kan skapa överavkastning på den svenska aktiemarknaden.  Metod: Studien har en kvantitativ forskningsmetod och en deduktiv ansats. Studien undersökte mätperioden 2014–2023 och undersökte bolag noterade på OMX Large Cap 2023. Författarna studerade multiplarna P/E, EV/EBITDA och EV/S och undersökte även tre olika tidshorisonter vilket var på tre, sex, nio och tolv månader. Författarna konstruerade även portföljer för respektive multipel för att kunna besvara studien syfte och frågeställningar. Resultat: Resultatet visade att EV/EBITDA var den multipel som var bäst på att identifiera undervärderade aktier, följt av EV/S. Resultatet visade även att EV/EBITDA och EV/S var bristfälliga när det kom till att identifiera övervärderade aktier. P/E-multipeln lyckades inte identifiera de mest undervärderade aktierna då den övervärderade portföljen genererade högre avkastning än den undervärderade portföljen. Samtliga portföljer överavkastade dock index. Den tidsperiod som lämpade sig bäst för investeringsstrategin var portföljerna som hölls i tolv månader för den ackumulerade avkastningen. För den riskjusterade avkastningen presterade portföljerna som hölls i nio månader bäst. / Background: The interest in stocks in Sweden is high despite market turbulence. The number of shareholders is at a record high, even though the market value of stocks has declined. To choose stocks optimally, investment strategies such as relative valuation can be used, which exploit deviations in stock pricing. By utilizing the investment strategy of theoretical multiples, one can theoretically identify these deviations, which the study aims to investigate. Purpose: The purpose of the study is to analyze whether an investment strategy based on theoretically derived multiples can generate excess returns in the Swedish stock market. Methodology: The study employed a quantitative research method with a deductive approach. The research period covered 2014-2023, focusing on companies listed on the OMX Large Cap 2023. The authors examined the multiples P/E, EV/EBITDA, and EV/S, and also investigated three different time horizons: three, six, nine, and twelve months. The authors constructed portfolios for each multiple to address the purpose and research questions of the study. Result: The results showed that EV/EBITDA was the multiple that performed best in identifying undervalued stocks, followed by EV/S. The results also demonstrated that both EV/EBITDA and EV/S were inadequate in identifying overvalued stocks. The P/E multiple failed to identify the most undervalued stocks as the overvalued portfolio generated higher returns than the undervalued portfolio. However, all portfolios outperformed the index. The investment strategy was most suitable for portfolios held for twelve months in terms of cumulative returns for all multiples. For risk-adjusted returns, the portfolios held for nine months performed the best.