This paper presents an empirical analysis of firms that are delisted from a major stock exchange. The delisting process is described and stock price movements surrounding delisting are analyzed. For firms with prior announcements, equity values decline by approximately 8.5 percent on announcement day. For firms without prior announcements, a similar adjustment takes place between the last day of trading in the initial market and the close of the first day of trading in the new market. Four hypotheses concerning the decline in firm value are examined. These are the liquidity hypothesis, the management signalling hypothesis, the exchange certification hypothesis, and the downward sloping demand curve hypothesis. Evidence consistent with the liquidity hypothesis is presented in the paper. Unlike evidence onstock exchange listings, returns in the post-delisting period do not appear to be anomalous. © 1990, School of Business Administration, University of Washington. All rights reserved.

This paper examines the pricing of exchange-traded long-term corporate bond portfolios. Observable instruments measuring the term structure of interest rates, levels of bond and stock prices, and a January dummy are found to predict excess returns on corporate bonds. An intertemporal asset pricing model with changing expectations and unobservable factors is then estimated for the predictable excess returns using Hansen's Generalized Method of Moments. The results show that a multibeta linear time-varying model of con? ditional expected returns with constant betas can successfully value corporate bonds. Spe? cifically, the tests indicate the presence of two time-varying hedge portfolios. The data, however, support a single latent variable specification when all January observations are excluded. This result suggests the existence of a strong January seasonal in one of the latent variables.

Despite nonstationarities in the factor betas and factor prices of the Chen, Roll, Ross (1986) multifactor model, investors are rewarded for bearing risks associated with the change in expected inflation and industrial production in non-January months; however, variations in these factors have opposite influences on stock prices. These findings may partially explain why several recent studies fail to detect a significant non-January risk premium in the stock market, but this evidence is only suggestive since theoretical and statistical difficulties prevent precise interpretations of specific pricing relations in the Chen, Roll, Ross model.

Previous studies have found that positive abnormal stock returns are associated with corporate spin-offs and divestitures. Using a simplified model of the process of investor tax trading, we show that an improvement in the value of the tax-timing option component of securities prices is a likely contributing factor to those abnormal returns. The analysis indicates that the same phenomenon also may be part of the explanation for the generally higher returns observed for spin-offs than for divestitures, both when leverage is and is not present in the restructuring transactions.

Cheng F. Lee, Chunchi Wu, K. C. John Wei, The Heterogeneous Investment Horizon and the Capital Asset Pricing Model: Theory and Implications, The Journal of Financial and Quantitative Analysis, Vol. 25, No. 3 (Sep., 1990), pp. 361-376