Browsing by Author "Keef, Stephen P"
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Item Open Access The friday the thirteenth effect in stock prices: international evidence using panel data(Te Herenga Waka—Victoria University of Wellington, 2011) Keef, Stephen P; Khaled, Mohammed SThis examination of the Friday the 13th effect, in 62 international stock indices for the period 2000 to 2008, characterises the degree that the effect is influenced by: (i) the GDP of the economy and (ii) the sign of the return on the prior day. These effects are assessed by the use of an EGLS panel regression model incorporating panel corrected standard errors. The turn of the month effect on Fridays is also examined. Three important results relating to the Friday the 13th effect are observed. First, the depressed Friday the 13th effect is present when the return on the prior day is negative. Second, when the return on the prior day is positive, the depressed Friday the 13th effect is absent. Third, the depressed Friday the 13th effect is independent of the GDP of the country when the returns on control Fridays are used as the yardstick.Item Open Access Miller's (2009) WACC model: An extension(Te Herenga Waka—Victoria University of Wellington, 2011) Keef, Stephen P; Khaled, Mohammed S; Roush, Melvin LMiller (2009a) presents an analysis of the weighted average cost of capital WACC model. The paper attracts debate which uses a variety of repayment schedules to support the arguments raised. We present an extension of Miller's (2009a) WACC model in a world where interest is tax deductible and debt principal is paid at maturity. We also present the corresponding model for the required rate of return on levered equity which is a vital input to the WACC model. Since these models are unwieldy, we explore an alternative definition of the WACC. These models provide insights into the debate on Miller's (2009a) paper.Item Open Access A note resolving the debate on “The weighted average cost of capital is not quite right”(Te Herenga Waka—Victoria University of Wellington, 2011) Keef, Stephen P; Khaled, Mohammed S; Roush, Melvin LMiller (2009a) derives a weighted average cost of capital for the special case where the cash flows to equity and the cashflows to debt are annuities. The paper attracts debate. We show that the weighted average cost of capital is redundant in a world where interest paid is not tax deductible. The required rate of return on unlevered equity will consistently and reliably estimate the net present value of any project no matter the idiocyncratic beliefs of the analyst as to the year-by-year leverage of the project, or of the firm. We recommend that the weighted average cost of capital method is discarded. Our recommendation also applies to a world where interest paid is tax deductible.Item Open Access Tests for weak form market efficiency in stock prices: Monte Carlo evidence(Te Herenga Waka—Victoria University of Wellington, 2011) Khaled, Mohammed S; Keef, Stephen PEfficiency in financial markets is tested by applying variance ratio (VR)tests, but unit root tests are also used by many, sometimes in addition to the VR tests. There is a lack of clarity in the literature about the implication of these test results when they seem to disagree. We distinguish between two different types of predictability, called "structural predictability" and "error predictability". Standard unit root tests pick up structural predictability. VR tests pick up both structural and error predictability.