Natalie Chieffe - Academia.edu (original) (raw)

Papers by Natalie Chieffe

Academy of Accounting and Financial Studies Journal, Sep 1, 2004

ABSTRACT Many empirical studies have found excess returns on the stocks of small firms. This &quo... more ABSTRACT Many empirical studies have found excess returns on the stocks of small firms. This "small firm effect" may cause individual investors to choose to diversify into smaller firms when they make asset allocation decisions. This paper questions whether investors should consider the small firm effect. Monte Carlo simulations cast doubt on the small firm effect. We urge investors to exercise caution when buying small stocks. The views expressed in this paper are those of the authors and do not necessarily represent the views or policies of the International Monetary Fund. This paper describes research by the authors and is published to elicit further debate. The authors are indebted to Stephen Smith, Peter Dadalt, Jacqueline Garner and an anonymous referee for several useful comments and suggestions. INTRODUCTION Many empirical studies have observed excess returns on the stocks of small firms. For example, Ibbotson and Sinquefeld (1999) report that common stocks earned an average annual return of 13.2 percent from 1926 to 1998 while small capitalization stocks earned an average annual return of 17.4 percent. This implies an excess annual return of 4.2 percent before adjusting for risk. Investors often include small stocks in their portfolios because they expect to receive higher returns. The higher returns will enable them to reach their goals or to reach their goals sooner. These investors are usually aware of the increased level of volatility associated with the returns of small stocks but they expect to be generously rewarded for the additional risk. According to this assumption, they will receive more return per unit of risk than if they had invested in the stocks of larger firms. We question whether this assumption is valid and whether the small firm effect (SFE) truly exists in the markets or whether it is an artifact of the datasets that are studied. By investing in small stocks, investors may be accepting even more risk than they believe they are. Reinganum (1981/1999) finds excess risk-adjusted returns on small firms. Aharony and Falk (1992) find that small banks' returns second-order stochastically dominate returns for large banks. Roll (1981) offers an explanation for the phenomenon. He conjectures that the SFE may be attributable to improper estimation of systematic risk due to non-synchronous trading. According to this hypothesis, infrequent trading of smaller firms' stocks leads to autocorrelation in the returns for portfolios of small stocks. This, in turn, leads to an underestimation in their variances and systematic risk. Reinganum (1982), however, tests Roll's proposition and concludes that the SFE continues to be significant even after correcting for non-synchronous trading. Isberg and Thies (1992) attribute the SFE to the higher direct and indirect transaction costs involved in investing in small firms and the difficulty associated with measuring these. Wei and Stansell (1991) find that benchmark error (measurement error on the market) may explain the SFE. Knez and Ready (1997) find that the risk premium on size completely disappears when they use a regression technique that trims the one percent most extreme data observations each month. They believe that the differences in how various small firms grow determine the higher returns on small firms. None of the above studies consider survival as a possible problem. Aharony and Falk (1992) test for the presence of survivorship bias arising out of the non-inclusion of failed firms. They do so by testing for differences in results between the entire sample period and a sub sample when no firms fail. However, the bias due to survival is present in the first period even though no firms fail in the sub sample period. On the other hand, survival, as we define it, refers to the fact that "default" states are not observed for the firm. Hence, the time series data on the stock does not comprise a representative sample for drawing inferences. …

The Journal of Investing, Aug 31, 2011

In this article, the authors compare the returns of a portfolio composed of socially responsible ... more In this article, the authors compare the returns of a portfolio composed of socially responsible companies with those of a portfolio composed of companies without that distinction. They find that socially responsible companies perform worse than “irresponsible” companies. The reason for this seems to depend on the individual socially responsible investment (SRI) screens. Some screens have a positive impact on returns, some have a negative impact. Corporate governance is the only SRI screen with a positive relationship to returns: A positive rating helps returns, while a negative rating hurts returns. Most other screens show an inverse relationship: Companies with poor social responsibility have higher returns, or companies with good social responsibility have lower returns.

The Journal of Investing, Nov 30, 1999

Conventional wisdom tells the individual investor approaching retirement to switch from equity to... more Conventional wisdom tells the individual investor approaching retirement to switch from equity to debt as the time of retirement approaches. When stock market valuations are very high, financial advisors issue warnings about stock investments and advise switching to bonds. This study shows empirically that the retirement portfolio is not higher than the probability of higher terminal wealth from balancing the retirement portfolio not higher than the probability of higher terminal wealth from a buy-and-hold strategy. It appears that most investors would be better off maintaining their original allocations until their investment goals or risk aversion change. Investors do not improve their chances of higher returns by considering market conditions when they rebalance their portfolios.

The journal of wealth management, Jul 31, 2000

The authors analyze the January effect in fixed-income securities using stochastic dominance anal... more The authors analyze the January effect in fixed-income securities using stochastic dominance analysis. They define the January effect as the superior return performance observed in financial securities during January relative to other months, suggesting that other authors have observed that effect in several asset classes, such as common stock, preferred stock, securitized mortgages, and real estate investment trusts. Comparing January return distributions of corporate and government fixed-income portfolios to those of other months, they find some evidence of superior January return performance in risky, high-yield bonds but none in high-grade bonds. They conclude by advising investors seeking to exploit the January effect in fixed-income securities to focus on low-grade bonds and to avoid high-grade bonds.

Financial Services Review, 1999

Financial planning is a broad subject that requires an integrating overview. T he Model for Finan... more Financial planning is a broad subject that requires an integrating overview. T he Model for Financial Planning incorporates the time and the expected nature of financial events. T he categories of the model include 1) money management issues that the individual faces as short-term expected events, 2) issues of meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the individual’s intermediate and long-term goals, 4) transference planning and other long-term issues whose time frame is unknown. T he model has applications for â€oedo it yourself†investors, financial planners, and students. T he framework successfully integrates the broad range of topics typically covered in financial planning and personal finance courses. JEL classification A22; G29 a a Export Some guidelines for financial planners in measuring and advising clients about their levels of risk tolerance, k. Psychological foundations of financial planning for retirement, vygotsky developed, focusing on the methodology of Marxism, the doctrine which States that the semiotics of art is observed. Check if you have access through your login credentials or your institution.

Financial Services Review, Dec 1, 2008

This study provides a base line cross sectional analysis of defined benefit (DB) and defined cont... more This study provides a base line cross sectional analysis of defined benefit (DB) and defined contribution (DC) retirement plans based on the largest four-year public institutions of higher education in each of the 50 states. The focus is on types of plans that are being offered and an evaluation of their risk and return. Findings pnwide comparative analysis on the broader trends in DB and DC plans offered by other public and private plans.

Financial planning is a broad subject that requires an integrating overview. The Model for Financ... more Financial planning is a broad subject that requires an integrating overview. The Model for Financial Planning incorporates the time and the expected nature of financial events. The categories of the model include 1) money management issues that the individual faces as short-term expected events, 2) issues of meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the individual’s intermediate and long-term goals, 4) transference planning and other long-term issues whose time frame is unknown. The model has applications for “do it yourself ” investors, financial planners, and students. The framework successfully integrates the broad range of topics typically covered in financial planning and

Financial Services Review, 2008

This study provides a base line cross sectional analysis of defined benefit (DB) and defined cont... more This study provides a base line cross sectional analysis of defined benefit (DB) and defined contribution (DC) retirement plans based on the largest four-year public institutions of higher education in each of the 50 states. The focus is on types of plans that are being offered and an evaluation of their risk and return. Findings pnwide comparative analysis on the broader trends in DB and DC plans offered by other public and private plans. © 2008 Academy of Financial Services. All rights reserved.

Many empirical studies have found excess returns on the stocks of small firms. This "small f... more Many empirical studies have found excess returns on the stocks of small firms. This "small firm effect" may cause individual investors to choose to diversify into smaller firms when they make asset allocation decisions. This paper questions whether investors should consider the small firm effect. Monte Carlo simulations cast doubt on the small firm effect. We urge investors to exercise caution when buying small stocks. The views expressed in this paper are those of the authors and do not necessarily represent the views or policies of the International Monetary Fund. This paper describes research by the authors and is published to elicit further debate. The authors are indebted to Stephen Smith, Peter Dadalt, Jacqueline Garner and an anonymous referee for several useful comments and suggestions. INTRODUCTION Many empirical studies have observed excess returns on the stocks of small firms. For example, Ibbotson and Sinquefeld (1999) report that common stocks earned an averag...

The Journal of Wealth Management, 2004

Thesis (D.B.A.)--Mississippi State University. Department of Finance and Economics in the College... more Thesis (D.B.A.)--Mississippi State University. Department of Finance and Economics in the College of Business and Industry. Bibliography: leaves 91-98.

The Journal of Investing, 1999

Http Dx Doi Org 10 3905 Joi 2011 20 3 108, Aug 27, 2011

Academy of Accounting and Financial Studies Journal, Sep 1, 2004

The Journal of Wealth Management, 2000

The Journal of Investing, 2011

The Journal of Wealth Management, 2004

The Journal of Wealth Management, 2000

Financial Services Review, 1999

Financial planning is a broad subject that requires an integrating overview. The Model for Financ... more Financial planning is a broad subject that requires an integrating overview. The Model for Financial Planning incorporates the time and the expected nature of financial events. The categories of the model include 1) money management issues that the individual faces as short-term expected events, 2) issues of meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the individual's intermediate and long-term goals, 4) transference planning and other long-term issues whose time frame is unknown. The model has applications for "do it yourself" investors, financial planners, and students. The framework successfully integrates the broad range of topics typically covered in financial planning and personal finance courses.

Academy of Accounting and Financial Studies Journal, Sep 1, 2004

ABSTRACT Many empirical studies have found excess returns on the stocks of small firms. This &quo... more ABSTRACT Many empirical studies have found excess returns on the stocks of small firms. This "small firm effect" may cause individual investors to choose to diversify into smaller firms when they make asset allocation decisions. This paper questions whether investors should consider the small firm effect. Monte Carlo simulations cast doubt on the small firm effect. We urge investors to exercise caution when buying small stocks. The views expressed in this paper are those of the authors and do not necessarily represent the views or policies of the International Monetary Fund. This paper describes research by the authors and is published to elicit further debate. The authors are indebted to Stephen Smith, Peter Dadalt, Jacqueline Garner and an anonymous referee for several useful comments and suggestions. INTRODUCTION Many empirical studies have observed excess returns on the stocks of small firms. For example, Ibbotson and Sinquefeld (1999) report that common stocks earned an average annual return of 13.2 percent from 1926 to 1998 while small capitalization stocks earned an average annual return of 17.4 percent. This implies an excess annual return of 4.2 percent before adjusting for risk. Investors often include small stocks in their portfolios because they expect to receive higher returns. The higher returns will enable them to reach their goals or to reach their goals sooner. These investors are usually aware of the increased level of volatility associated with the returns of small stocks but they expect to be generously rewarded for the additional risk. According to this assumption, they will receive more return per unit of risk than if they had invested in the stocks of larger firms. We question whether this assumption is valid and whether the small firm effect (SFE) truly exists in the markets or whether it is an artifact of the datasets that are studied. By investing in small stocks, investors may be accepting even more risk than they believe they are. Reinganum (1981/1999) finds excess risk-adjusted returns on small firms. Aharony and Falk (1992) find that small banks' returns second-order stochastically dominate returns for large banks. Roll (1981) offers an explanation for the phenomenon. He conjectures that the SFE may be attributable to improper estimation of systematic risk due to non-synchronous trading. According to this hypothesis, infrequent trading of smaller firms' stocks leads to autocorrelation in the returns for portfolios of small stocks. This, in turn, leads to an underestimation in their variances and systematic risk. Reinganum (1982), however, tests Roll's proposition and concludes that the SFE continues to be significant even after correcting for non-synchronous trading. Isberg and Thies (1992) attribute the SFE to the higher direct and indirect transaction costs involved in investing in small firms and the difficulty associated with measuring these. Wei and Stansell (1991) find that benchmark error (measurement error on the market) may explain the SFE. Knez and Ready (1997) find that the risk premium on size completely disappears when they use a regression technique that trims the one percent most extreme data observations each month. They believe that the differences in how various small firms grow determine the higher returns on small firms. None of the above studies consider survival as a possible problem. Aharony and Falk (1992) test for the presence of survivorship bias arising out of the non-inclusion of failed firms. They do so by testing for differences in results between the entire sample period and a sub sample when no firms fail. However, the bias due to survival is present in the first period even though no firms fail in the sub sample period. On the other hand, survival, as we define it, refers to the fact that "default" states are not observed for the firm. Hence, the time series data on the stock does not comprise a representative sample for drawing inferences. …

The Journal of Investing, Aug 31, 2011

In this article, the authors compare the returns of a portfolio composed of socially responsible ... more In this article, the authors compare the returns of a portfolio composed of socially responsible companies with those of a portfolio composed of companies without that distinction. They find that socially responsible companies perform worse than “irresponsible” companies. The reason for this seems to depend on the individual socially responsible investment (SRI) screens. Some screens have a positive impact on returns, some have a negative impact. Corporate governance is the only SRI screen with a positive relationship to returns: A positive rating helps returns, while a negative rating hurts returns. Most other screens show an inverse relationship: Companies with poor social responsibility have higher returns, or companies with good social responsibility have lower returns.

The Journal of Investing, Nov 30, 1999

Conventional wisdom tells the individual investor approaching retirement to switch from equity to... more Conventional wisdom tells the individual investor approaching retirement to switch from equity to debt as the time of retirement approaches. When stock market valuations are very high, financial advisors issue warnings about stock investments and advise switching to bonds. This study shows empirically that the retirement portfolio is not higher than the probability of higher terminal wealth from balancing the retirement portfolio not higher than the probability of higher terminal wealth from a buy-and-hold strategy. It appears that most investors would be better off maintaining their original allocations until their investment goals or risk aversion change. Investors do not improve their chances of higher returns by considering market conditions when they rebalance their portfolios.

The journal of wealth management, Jul 31, 2000

The authors analyze the January effect in fixed-income securities using stochastic dominance anal... more The authors analyze the January effect in fixed-income securities using stochastic dominance analysis. They define the January effect as the superior return performance observed in financial securities during January relative to other months, suggesting that other authors have observed that effect in several asset classes, such as common stock, preferred stock, securitized mortgages, and real estate investment trusts. Comparing January return distributions of corporate and government fixed-income portfolios to those of other months, they find some evidence of superior January return performance in risky, high-yield bonds but none in high-grade bonds. They conclude by advising investors seeking to exploit the January effect in fixed-income securities to focus on low-grade bonds and to avoid high-grade bonds.

Financial Services Review, 1999

Financial planning is a broad subject that requires an integrating overview. T he Model for Finan... more Financial planning is a broad subject that requires an integrating overview. T he Model for Financial Planning incorporates the time and the expected nature of financial events. T he categories of the model include 1) money management issues that the individual faces as short-term expected events, 2) issues of meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the individual’s intermediate and long-term goals, 4) transference planning and other long-term issues whose time frame is unknown. T he model has applications for â€oedo it yourself†investors, financial planners, and students. T he framework successfully integrates the broad range of topics typically covered in financial planning and personal finance courses. JEL classification A22; G29 a a Export Some guidelines for financial planners in measuring and advising clients about their levels of risk tolerance, k. Psychological foundations of financial planning for retirement, vygotsky developed, focusing on the methodology of Marxism, the doctrine which States that the semiotics of art is observed. Check if you have access through your login credentials or your institution.

Financial Services Review, Dec 1, 2008

This study provides a base line cross sectional analysis of defined benefit (DB) and defined cont... more This study provides a base line cross sectional analysis of defined benefit (DB) and defined contribution (DC) retirement plans based on the largest four-year public institutions of higher education in each of the 50 states. The focus is on types of plans that are being offered and an evaluation of their risk and return. Findings pnwide comparative analysis on the broader trends in DB and DC plans offered by other public and private plans.

Financial planning is a broad subject that requires an integrating overview. The Model for Financ... more Financial planning is a broad subject that requires an integrating overview. The Model for Financial Planning incorporates the time and the expected nature of financial events. The categories of the model include 1) money management issues that the individual faces as short-term expected events, 2) issues of meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the individual’s intermediate and long-term goals, 4) transference planning and other long-term issues whose time frame is unknown. The model has applications for “do it yourself ” investors, financial planners, and students. The framework successfully integrates the broad range of topics typically covered in financial planning and

Financial Services Review, 2008

This study provides a base line cross sectional analysis of defined benefit (DB) and defined cont... more This study provides a base line cross sectional analysis of defined benefit (DB) and defined contribution (DC) retirement plans based on the largest four-year public institutions of higher education in each of the 50 states. The focus is on types of plans that are being offered and an evaluation of their risk and return. Findings pnwide comparative analysis on the broader trends in DB and DC plans offered by other public and private plans. © 2008 Academy of Financial Services. All rights reserved.

Many empirical studies have found excess returns on the stocks of small firms. This "small f... more Many empirical studies have found excess returns on the stocks of small firms. This "small firm effect" may cause individual investors to choose to diversify into smaller firms when they make asset allocation decisions. This paper questions whether investors should consider the small firm effect. Monte Carlo simulations cast doubt on the small firm effect. We urge investors to exercise caution when buying small stocks. The views expressed in this paper are those of the authors and do not necessarily represent the views or policies of the International Monetary Fund. This paper describes research by the authors and is published to elicit further debate. The authors are indebted to Stephen Smith, Peter Dadalt, Jacqueline Garner and an anonymous referee for several useful comments and suggestions. INTRODUCTION Many empirical studies have observed excess returns on the stocks of small firms. For example, Ibbotson and Sinquefeld (1999) report that common stocks earned an averag...

The Journal of Wealth Management, 2004

Thesis (D.B.A.)--Mississippi State University. Department of Finance and Economics in the College... more Thesis (D.B.A.)--Mississippi State University. Department of Finance and Economics in the College of Business and Industry. Bibliography: leaves 91-98.

The Journal of Investing, 1999

Http Dx Doi Org 10 3905 Joi 2011 20 3 108, Aug 27, 2011

Academy of Accounting and Financial Studies Journal, Sep 1, 2004

The Journal of Wealth Management, 2000

The Journal of Investing, 2011

The Journal of Wealth Management, 2004

The Journal of Wealth Management, 2000

Financial Services Review, 1999

Financial planning is a broad subject that requires an integrating overview. The Model for Financ... more Financial planning is a broad subject that requires an integrating overview. The Model for Financial Planning incorporates the time and the expected nature of financial events. The categories of the model include 1) money management issues that the individual faces as short-term expected events, 2) issues of meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the individual's intermediate and long-term goals, 4) transference planning and other long-term issues whose time frame is unknown. The model has applications for "do it yourself" investors, financial planners, and students. The framework successfully integrates the broad range of topics typically covered in financial planning and personal finance courses.