Professor David Michayluk

Lin, B., Michayluk, D.M., Oppenheimer, H. & Sabherwal, S. 2009, 'French and U.S. trading of cross-listed stocks around the period of U.S. decimalization: Volume, spreads, and depth effects', International Review of Financial Analysis, vol. 18, no. 5, pp. 223-231.
View/Download from: Publisher's site
View description>>

We analyze how U.S. decimalization affects stocks cross-listed in France (Euronext) and the U.S. (NYSE). The French stocks examined are much larger than the non-U.S. stocks examined in prior studies of decimalization, and their U.S. trading is likely to be dominated by institutions. So, we explore whether a reduction in depths in the U.S. due to decimalization makes the U.S. market less competitive for institutions trading these French stocks. We find evidence consistent with the above. First, the average NYSE trade size for these stocks relative to that on Euronext declines substantially after decimalization. Second, we categorize individual trades by the number of shares traded. We find that mainly driven by large trades, the NYSE proportion of trading of French firms declines markedly after decimalization. Third, using regression analysis, we find that the decline in the U.S. share of institutional trading volume is significantly positively related with the decline in NYSE depths relative to Euronext, and the decline is greater for French firms. Overall, we find consistent results indicating a migration of institutional order flow in French firms to France after NYSE decimalization. Also, intraday analysis indicates that the institutional volume in both France and the U.S. is greatest when both the markets are open.

Michayluk, D.M., Prather, L., Woo, L. & Yip, H. 2009, 'What do options have to do with it?: Inclusion of options market indicators in bid-ask spread decomposition', Asia-Pacific Journal Of Financial Studies, vol. 38, no. 3, pp. 455-489.
View description>>

This paper develops a cross-market model to extend Huang and Stoll (1997) by utilizing information from trade flows in the options market. Empirical tests reveal a significant increase in the estimated adverse information component, which stays consistent irrespective of the degree of option leverage. Further, intraday variation in stock bid-ask spread components is affected by the stock trade size and the extent of imbalance in information-based option trades. Including the options market information in decomposition of the stock bid-ask spread enhances the quality of its estimation.

Bertin, W., Michayluk, D.M. & Prather, L. 2008, 'Liquidity issues surrounding neglected firms', Investment Management and Financial Innovations, vol. 5, no. 1, pp. 57-65.
View description>>

The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firmi??s stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.

Lin, B., Michayluk, D.M., Oppenheimer, H. & Reid, S.F. 2008, 'Hubris amongst Japanese bidders', Pacific-Basin Finance Journal, vol. 16, no. 1-2, pp. 121-159.
View/Download from: Publisher's site
View description>>

We consider the issue of hubris in the Japanese mergers and acquisitions (M&A) market. Although prior research suggests that hubris should be and is less severe in the Japanese market, our findings suggest that it still has a significant presence. Using past (excess) market return as a proxy for the likelihood of hubris, we find that high hubris bidders frequently have negative event period abnormal returns, while low hubris bidders have positive event period abnormal returns. Given the importance of keiretsu in Japan and their similarity to Korean chaebols we consider these results in light of the alternative hypothesis of tunneling, which explains similar results in Korea. Finally we consider whether the results are driven by better performing bidders using acquisitions to pay in stock while poorer performing bidders choose to pay in cash. Our results are largely consistent with the hubris hypothesis where over-confident managers may engage in value-destroying M&A.

Michayluk, D.M. & Prather, L. 2008, 'A Liquidity Motivated Algorithm for Discerning Trade Direction', Multinational Finance Journal, vol. 12, no. 1/2, pp. 45-66.
View description>>

Most exchanges do not report trade direction thus researchers and traders must deduce whether a trade is buyer or seller initiated since this information is required to evaluate models of bid-ask spread components and to understand the market for immediacy. Algorithms that assign trade direction based on the proximity to bid or ask quotes are easily implemented but ignore information readily discernable from orders, changes in the quoted depth and subsequent price movements. Using the New York Stock Exchange Trades, Orders and Quotes database, systematic biases in existing trade direction algorithms are documented that can be rectified by recognizing that the impact on liquidity is the fundamental characteristic underlying order placement. Although this liquidity-based method is difficult to implement, it more closely captures the actual behavior of market participants (JEL : G 10, G14)

Michayluk, D.M. & Neuhauser, K. 2008, 'Is liquidity symmetric? A study of newly listed internet and technology stocks', International Review of Finance, vol. 8, no. 3-4, pp. 159-178.
View/Download from: Publisher's site
View description>>

Imbedded in liquidity measures is an implicit assumption of symmetry. Although market microstructure models rely on this assumption, there may be directional pressure that creates differences in buy and sell liquidity. This paper develops methods of assessing asymmetric liquidity and empirically examines a sample of newly listed Internet and technology stocks that are hypothesized to be especially subject to asymmetry due to the rapid inflation and deflation of the Internet bubble. Evidence of asymmetric liquidity is observed and the level of asymmetry is found to change over time. These findings suggest that the assumption of symmetry is inconsistent with more precisely constructed market liquidity measures

Michayluk, D.M. 2008, 'The Rise and Fall of Single-Letter Ticker Symbols', Business History, vol. 50, no. 3, pp. 368-385.
View/Download from: Publisher's site
View description>>

A single-letter stock ticker symbol is a limited resource - only 26 possibilities are available in a stock universe of over 475,000 possible one-, two-, three- or four-letter ticker symbols. These symbols were first allocated based on trading volume therefore some of the most important companies at the time were initially placed into this group. This paper examines the history of this group of stocks and documents a decline in the importance of these firms due to a natural turnover in commercial leadership and no established mechanism to remove the single-letter designation from firms that lost their prominence.

Van de Venter, T.W. & Michayluk, D.M. 2008, 'An Insight into Overconfidence in the Forecasting Abilities of Financial Advisers', Australian Journal of Management, vol. 32, no. 3, pp. 545-557.
View description>>

Financial market participants exercise judgment in decision making and psychological studies have shown that individuals are overconfident about their ability to evaluate financial securities. Range estimation calibration studies indicate that individuals tend to estimate narrow intervals in their estimation of unknown future quantities, suggesting overconfidence. Financial planners have an inherent duty of care and this may lead these individuals to behave differently in their estimation methodology and behaviour. From a survey of Australian financial planners, we find extensive overconfidence in respondents? ability to make judgements under uncertainty as shown by a narrow range of forecasts and a substantial number of inaccurate predictions. The overconfidence is present both when comparing estimates to the ex-post outcome of a predicted quantity and to an interval based on historical return volatility.

Graham, A., Lin, B., Michayluk, D.M. & Stuerke, P. 2007, 'Sarbannes-Oxley: Some Unintended Consequences', Journal of Business and Economic Perspectives, vol. 33, no. 1, pp. 39-46.

Mathew, P., Michayluk, D.M. & Kofman, P. 2007, 'Are Foreign Issuers Complying with Regulation Fair Disclosure?', Journal of International Financial Markets, Institutions and Money, vol. 17, no. 3, pp. 246-260.
View/Download from: Publisher's site
View description>>

Regulation Fair Disclosure (RFD) requires that any release of material information be made to the general public rather than to select individuals. The regulation represents an attempt by the Securities and Exchange Commission to restore a level of fairness to the market. Foreign issuers, however, are currently exempt from this rule. We examine liquidity changes around earnings announcements of American Depository Receipts (ADRs) before and after the introduction of RFD. We find that market makers have adjusted spreads to reflect the new, less information asymmetric environment for U.S. issues, but the same changes are not observed for our ADR sample. Similarly, the decline in activity measures of U.S. issues is not observed in our ADR sample. Our results suggest that investors and market makers are not yet convinced that foreign issuers are complying with RFD.

Van de Venter, T.W. & Michayluk, D.M. 2007, 'Subjectivity in Judgements: Further Evidence from the Financial Planning Industry', The Journal of Wealth Management, vol. 10, no. 3, pp. 17-24.
View description>>

Asset allocation is a critical component of portfolio performance and is a significant component of the advice provided by financial plan-ners. The fiduciary obligation of financial planners is to provide investment advice that is appropriate to a client's personal circumstances. Academic research has found evidence of inconsistencies in advice provided by financial advisors. Using a survey of 352 Australian financial planners, the article also finds inconsistencies in a hypothetical asset allocation decision. These inconsistencies may be attributed to the presence of subjective judgment in the decision-making process due to the presence of various psychological factors such as expectations, traits, and biases, the lack of any standardized method for collecting information from clients, and different assumptions, perceptions, and interpretations based on the financial planner's own knowledge, experience, intuitions, and skill sets. The choice of financial planners influences the asset allocation and ultimately the investment returns and outcome.

Michayluk, D.M., Wilson, P.J. & Zurbruegg, R. 2006, 'Asymmetric volatility, correlation and returns dynamics between the US and UK securitized real estate markets', Real Estate Economics, vol. 34, no. 1, pp. 109-131.
View description>>

We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior,

Michayluk, D.M. & Sanger, G.C. 2006, 'Day-end effect on the Paris bourse', Journal of Financial Research, vol. 29, no. 1, pp. 131-146.

Michayluk, D.M. & Neuhauser, K. 2006, 'Investor overreaction during market declines: evidence from the 1997 Asian financial crisis', Journal of Financial Research, vol. 29, no. 2, pp. 217-234.

Bertin, W., Kofman, P., Michayluk, D.M. & Prather, L. 2005, 'Intraday REIT liquidity', Journal of Real Estate Research, vol. 27, no. 2, pp. 155-176.

Broussard, J.P., Michayluk, D.M. & Neely, W. 2005, 'The Role of Growth in Long Term Investment Returns', The Journal of Applied Business Research, vol. 21, no. 1, pp. 93-105.
View description>>

Stocks with a high valuation compared to fundamental values imply a high growth rate, yet these stocks have typically under-performed in subsequent years supporting Lakonishok, Shleifer and Vishney's (1994) contrarian investment strategies. The precise definition of growth and subtle differences of measuring growth are explored in assessing the role of growth in long-term investment decisions and stock valuation. Results from a later period and with additional tests than employed by LSV indicate that growth is a primary valuation factor, and valuation measures such as E/P and B/M, are imperfect proxies for expected growth. Growth appears mean reverting, but investors do not seem able to discern changes in growth rates and this miss-specification of expected growth may help explain the superiority of value versus growth strategies. In addition, investors' naive extrapolations of past growth provide explanatory power in future holding period returns.

Glascock, J.L., Michayluk, D.M. & Neuhauser, K. 2004, 'The Riskiness of REITs Surrounding the October 1997 Stock Market Decline', The Journal of Real Estate Finance and Economics, vol. 28, no. 4, pp. 339-354.
View/Download from: Publisher's site
View description>>

Real estate investment trusts (REITs) are viewed as low risk/low return stocks that exhibit defensive stock characteristics. The stock market decline of October 1997 provides an excellent opportunity to examine the riskiness of REITs during high levels of market uncertainty. We find that the decline in REIT stock values was about one-half as large as the decline of non-REIT stocks. Additionally, market uncertainty on the event day was shown with an increased bid-ask spread for all stocks. On the following day when the market decline was partially reversed, the bid-ask spreads continued to increase for non-REIT stocks, but declined for REIT stocks. This suggests that REITs, like defensive stocks in general, are less prone to significant declines during market-wide disturbances. Also, we order stocks based on the standard deviation measures of risk and show that this risk measure explains the cross-section of returns for non-REITs but is not valid for REITs.

Kosedag, A. & Michayluk, D.M. 2004, 'Repeated LBOs - The Case of Multiple LBO Transactions', Quarterly Journal of Business and Economics, vol. 43, no. 1 & 2, pp. 111-122.
View description>>

Firms that undergo a second LBO transaction are unique because they have a second experience in the capital markets after being privately held. Motivations for repeated LBOs may differ from first-time LBOs--because of the past experience, the market may be able to better distinguish the competing motivations that have been suggested in the literature. We find that for repeated LBOs, the market response is more strongly positive than that typically found for first-time LBOs. The market reaction is also strongly related to a variant of Tobin' Q, implying that the timing of the LBO may coincide with a low perception in market value. It is not surprising that the majority of the repeated LBOs were performed following the 1987 stock market crash. It appears that the instigators of the LBO believed the price was undervalued and their experience let them act accordingly.

Lin, B. & Michayluk, D.M. 2004, 'The liquidity response to auditor reputation concerns', Finance Letters, vol. 2, no. 5, pp. 1-18.

McDonald, C.G. & Michayluk, D.M. 2003, 'Suspicious trading halts', Journal of Multinational Financial Management, vol. 13, no. 3, pp. 251-263.
View/Download from: Publisher's site
View description>>

Trading halts are designed to protect investors from price fluctuations under conditions of illiquidity, but on the Paris Bourse specific price limits can be used to manipulate prices. Trading is halted when a trader submits an order outside the maximum daily price limit and this feature permits traders, at little cost, to easily close the market intentionally or in error. We document over 300 suspicious halts where unfilled orders halted trading. These halts are suspicious because the unfilled order was on the opposite side of the market. Discovering potentially inefficient procedures is important for the Paris Bourse and also for French and overseas investors who may be impacted by inappropriate prices.

Fernandez, L. & Michayluk, D.M. 2009, 'Are short sellers really informed?', Northern Finance Association Annual Meeting, Niagra-on-the-Lake, Canada, September 2009.

Mathew, P. & Michayluk, D.M. 2008, 'How Does Bunching Affect Bid-Ask Spread Component Estimation?', Financial Management Association 2008 Annual Meeting, Dallas, Texas, USA, October 2008 in Financial Management Association 2008 Annual Meeting, ed FMA, Financial Management Association, Dallas, Texas, USA.

Mercorelli, L.R., Michayluk, D.M. & Hall, A.D. 2008, 'Modeling Adverse Selection on Electronic Order-Driven Markets', Seminar Presentation, UBS, Sydney, Australia, May 2008.

Van de Venter, T.W. & Michayluk, D.M. 2008, 'An Empirical Examination of Factors Related to Risk Tolerance', The 47th Annual Southwestern Finance Association Meeting, Houston, USA, March 2008.

Bertin, W., Fowler, P., Michayluk, D.M. & Prather, L. 2007, 'Price discovery in the option and warrant markets', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA, April 2007.

Bertin, W., Fowler, P., Michayluk, D.M. & Prather, L. 2007, 'The intraday price behaviour of Australian exchange traded options and warrants', Multinational Finance Society Annual Conference, Thessaloniki, Greence, July 2007.

Bertin, W., Fowler, P., Michayluk, D.M. & Prather, L. 2007, 'The Intraday Price Behaviour of Australian Exchange Traded Options and Warrants', Pacific Basin Finance, Economics, Accounting and Management Annual Conference, Ho Chi Minh City, Vietnam, July 2007.

Lam, D., Lin, B. & Michayluk, D.M. 2007, 'Downward-Sloping Demand Curves and Liquidity: Evidence from the S&P500 Change to Free Float', 2007 Financial Management Association Annual Meeting, Orlando, Florida, October 2007.

Lin, L., Michayluk, D.M., Oppenheimer, H. & Sabherwal, S. 2007, 'French and U.S. Trading oc Cross-Listed Stocks Around the Period of NYSE Decimalization: Volume, Spreads and Depth Effects', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA, April 2007.

Lin, L., Michayluk, D.M., Oppenheimer, H. & Sabherwal, S. 2007, 'French and U.S. Trading of Cross-Listed Stocks Around the Period of NYSE Decimalization: Volume, Spreads and Depth Effects', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA, April 2007 in 43rd Annual Meeting of the Eastern Finance Association, ed ?, Eastern Finance Association, New Orleans, USA, pp. 1-41.

Mercorelli, L., Michayluk, D.M. & Hall, A.D. 2007, 'Modelling Adverse Selection on Electronic Order-Driven Markets', Seminar Paper, Reserve Bank of Australia, Sydney, Australia, November 2007.

Michayluk, D.M., Prathier, L., Woo, L. & Yip, H. 2007, 'Decomposing the Bid Ask Spread of Stock Options: A Trade and Risk Indicator Model', University of Sydney Microstructure Meeting, Sydney, Australia, March 2007.

Michayluk, D.M. & Neuhauser, K. 2007, 'Is Liquidity Symmeric? A Study of Newly Listed Internet and Technology Stocks', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA, April 2007 in 43rd Annual Meeting of the Eastern Finance Association, ed Simkins, B, Eastern Finance Association, New Orleans, USA, pp. 1-30.

Michayluk, D.M. & Neuhauser, K. 2007, 'Is Liquidity Symmetric? A Study of Newly Listed Internet and Technology Stocks', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA, April 2007.

Michayluk, D.M. 2007, 'Liquidity Dysfunctionality on the Australian Stock Market', Investing Strategies and Financial Market Inefficiency Conference, Sydney, Australia, October 2007 in Investing Strategies and Financial Market Inefficiency Conference, ed -, Paul Woolley Centre for Capital Market Dysfunctionality, University of technology, Sydney, Sydney, Australia, pp. 1-27.

Michayluk, D.M. & Zhao, R. 2007, 'Risk changes subsequent to stock splits', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA, April 2007.

Graham, A., Lin, B., Michayluk, D.M. & Stuerke, P. 2006, 'Sarbanes-Oxley: Some unintended consequences', American Accounting Association Midwest Regional Conference, Chicago, Illinois, USA, March 2006.

Lin, B., Michayluk, D.M., Oppenheimer, H. & Sabherwal, S. 2006, 'French and US Trading of Cross-Listed Stocks around the Period of US Decimalization: Volume, Spreads and Depth Effects', French Finance Association (AFFI), Paris, France, December 2006.

Lin, B., Michayluk, D.M., Oppenheimer, H. & Sabherwal, S. 2006, 'French and US trading of cross-listed stocks around the period of US decimalization: Volume, spreads and depth effects.', Paris Finance International Meeting, Paris, France, December 2006 in Proceedings of the Paris Finance International Meeting, ed -, AFFI, Paris, France, pp. 1-41.

Michayluk, D.M., Prathier, L., Woo, L. & Yip, H. 2006, 'Decomposing the bid-ask spread of stock options: A trade and risk indicator model.', 2006 FMA Annual Meeting, Salt Lake City, USA, October 2006 in Proceeding if the 2006 FMA Annual Meeting, ed -, FMA, Salt Lake City, USA, pp. 1-48.

Michayluk, D.M., Prather, L., Woo, L. & Yip, H. 2006, 'Decomposing the bid-ask spread: A cross market model using options data.', European Financial Management Association Conference, Madrid, Spain, July 2006 in European Financial Management Association Conference.

Michayluk, D.M. & Zhao, R. 2006, 'Risk changes subsequent to stock splits', Southern Finance Association Annual Meeting, Destin, Florida, USA, November 2006.

Van de Venter, T.W. & Michayluk, D.M. 2006, 'Financial planners' interpretations: A survey of asset allocation recommendations', The 19th Annual Australasian Finance and Banking Conference, Sydney, Australia, December 2006 in The 19th Annual Australasian Finance and Banking Conference.

Bertin, W., Lin, B. & Michayluk, D.M. 2005, 'The impact of immaterial corporate disclosure on market liquidity: Evidence of the disjunction effect', Eastern Finance Association, Norfolk, Virginia, USA, April 2005.

Graham, A., Lin, B., Michayluk, D.M. & Stuerke, P. 2005, 'Sarbanes-Oxley: Some unintended consequences', American Accounting Association Northeast Regional Meeting, New York City, NY, USA, April 2005.

Michayluk, D.M. & Prather, L. 2005, 'A liquidity motivated algorithm for discerning trade direction', Eastern Finance Association, Norfolk, Virginia, USA, April 2005.

Bertin, W., Holland, C. & Michayluk, D.M. 2004, 'Liquidity and the neglected firm effect', Eastern Finance Association Annual Meeting, Mystic, Connecticut, USA, April 2004.

Lin, B. & Michayluk, D.M. 2004, 'The impact of immaterial corporate disclosure on market liquidity: Evidence of the disjunction effect', Southern Finance Association annual meeting, Naples, Florida, USA, November 2004.

Mathew, P., Michayluk, D.M., Prather, L. & Roth, B. 2004, 'Liquidity and the intraday variation in components of the bid-ask spread', Eastern Finance Association Annual Meeting, Mystic, Connecticut, USA, April 2004.

Michayluk, D.M. & Neuhauser, K. 2004, 'Overreaction or increased uncertainty: Evidence from the October 1997 stock market decline', Financial Management Association annual meeting, New Orleans, Louisiana, USA, October 2004.

Kofman, P., Mathew, P., Michayluk, D.M. 2003, 'How Has Regulation Fair Disclosure Affected Liquidity?', Financial Management Association annual meeting, Denver, Colorado, USA, October 2003.