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Article
Publication date: 1 March 1999

Vincent G. Massaro

Economic fundamentals—such as economic growth, inflationary expectations, and monetary policy—cannot explain the worldwide rise in long‐term interest rates during 1994. The…

65

Abstract

Economic fundamentals—such as economic growth, inflationary expectations, and monetary policy—cannot explain the worldwide rise in long‐term interest rates during 1994. The present paper investigates the extent to which the rise in rates was consistent with economic theory and domestic policies. It finds that it is necessary to introduce institutional factors to account for the widespread nature of the rise and the extent of the rise as well as, for some countries, the fact that long rates rose at all.

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International Journal of Commerce and Management, vol. 9 no. 3/4
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 15 May 2009

G. Glenn Baigent and Vincent G. Massaro

The purpose of this paper is to examine the role of derivative securities in over‐pricing and market corrections.

995

Abstract

Purpose

The purpose of this paper is to examine the role of derivative securities in over‐pricing and market corrections.

Design/methodology/approach

Daily market data from major indices are used to determine if the market was over‐priced in 1987. Then, the literature is examined to show differences in research findings for what caused the bubble and its correction.

Findings

Evidence is found that there was a market bubble in 1987. Examples are provided of how portfolio insurance can lead to the aggregation of traders' idiosyncratic errors and to an increase in the use of leverage, both of which can cause over‐pricing.

Research limitations/implications

Although the analysis is limited to equity markets, the findings should stimulate further research on the relationship between derivatives and asset pricing. Theoretically, derivative prices should be a function of asset prices, but it could be argued that the relationship is symbiotic.

Practical implications

The findings may impact policy makers in establishing regulations regarding the use of derivatives. Moreover, asset managers may be able to better detect conditions of over‐pricing.

Originality/value

The paper demonstrates the important role of derivative securities in market prices.

Details

Review of Accounting and Finance, vol. 8 no. 2
Type: Research Article
ISSN: 1475-7702

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Available. Content available
Article
Publication date: 15 May 2009

G. Glenn Baigent and Vincent G. Massaro

622

Abstract

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Review of Accounting and Finance, vol. 8 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 1 January 2005

G. Glenn Baigent and Vincent G. Massaro

We examine the role of program trading and portfolio insurance in the market crash of 1987. We argue that the only plausible explanation for the sequence and magnitude of the…

1008

Abstract

We examine the role of program trading and portfolio insurance in the market crash of 1987. We argue that the only plausible explanation for the sequence and magnitude of the events in October 1987 is the existence of portfolio insurance. Other explanations such as in vestor behavior are discussed.

Details

Management Research News, vol. 28 no. 1
Type: Research Article
ISSN: 0140-9174

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Article
Publication date: 15 May 2009

Lawrence P. Kalbers

The purpose of this paper is to review, critique, and integrate certain trends, events, and research streams involving earnings management, fraudulent financial reporting…

8031

Abstract

Purpose

The purpose of this paper is to review, critique, and integrate certain trends, events, and research streams involving earnings management, fraudulent financial reporting, corporate governance and ethics.

Design/methodology/approach

The paper provides a brief history of relevant events and trends in financial reporting for the period 1987‐2007. Within this historical context, financial reporting and earnings quality are discussed from the academic and practitioner points of view. The influence of corporate governance and the role of ethics and behavior are introduced as part of an integrated discussion of academic and practitioner viewpoints of earnings management and fraudulent financial reporting. The last section of the paper provides final observations and recommendations for future research.

Findings

The paper concludes that academic research in earnings management and fraudulent financial reporting has become increasingly narrow in addressing important issues and problems in practice.

Research limitations/implications

The paper is limited in its depth of analysis in each individual research stream due to the breadth of research and time period that are addressed. The implications for future research are enhanced by the integration of several streams of research relevant to earnings management and fraudulent financial reporting.

Practical implications

The paper may be useful to regulators and policy makers to better understand the significance and relevance of academic research.

Originality/value

The paper introduces and integrates ethics and behavior as important aspects for understanding earnings management and fraudulent financial reporting.

Details

Review of Accounting and Finance, vol. 8 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 15 May 2009

Ryan McKeon and Jeffry Netter

Purpose − The purpose of this paper is to review an explanation for the causes of the stock market crash in 1987, update the empirical support for that argument, and compare to…

1963

Abstract

Purpose − The purpose of this paper is to review an explanation for the causes of the stock market crash in 1987, update the empirical support for that argument, and compare to recent market developments. Design/methodology/approach − While the market crash on October 19, 1987 was the largest one‐day S&P 500 drop in percentage terms in history (20.47 percent) there was also a large market drop (10.12 percent) in the three trading days before the 1987 crash. Previous research has shown show that the three‐day decline was the largest in more than 40 years, large enough that the drop was news itself (the October 16, 1987 drop immediately before the crash was also an extremely large one‐day decline). The theoretical model of Jacklin et al. show how a surprise significant drop in the market could have provided information to the market that could directly lead to an immediate crash. Findings − The paper follows the stock market for 20 years after 1987, and finds the magnitude of the market decline immediately preceding October 19, 1987 was still a significant outlier − only one three‐day period in the 20 years after 1987 had as large a market decline. The paper documents the large market movements and volatility in the period beginning in fall 2008 and suggests that this “crash” is different than what occurred in 1987. Research limitations/implications − This paper's main limitations lie in the implications drawn about the causes of the 2008 crash. Practical implications − This paper provides evidence on the causes of the 1987 crash and implications for the 2008 decline. The 1987 crash was due in part to characteristics news but also to the market and trading strategy, the 2008 “crash” is more likely a response to fundamental economic news. Originality/value − This paper uses empirical evidence since 1987 to look back on the causes of the 1987 crash.

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Review of Accounting and Finance, vol. 8 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 15 May 2009

Laurence Booth and Sean Cleary

The purpose of this paper is to review the evolution of the Canadian financial environment since the stock market “crash” of 1987.

928

Abstract

Purpose

The purpose of this paper is to review the evolution of the Canadian financial environment since the stock market “crash” of 1987.

Design/methodology/approach

The paper provides a chronological account of significant events in the Canadian economic environment and capital markets, and how they have transformed the financial climate.

Findings

The late 1980s was a turbulent period with many changes in government and economic policies which were initiated at a time when governments were wracked with fiscal deficits, and just as the central bank appointed a dedicated inflation fighter. These changes worked their way through the system to contribute to one of the worst recessions in Canadian history. One of the symbols of disparity during this era was the Stock Market “Crash” of 1987, which was felt in Canada, as well as around the globe. However, for the last decade, the federal government has reported a surplus every year, and Canadians have benefitted from falling tax rates, declining interest rates, a strong stock market, and a rising currency. In fact, until September of 2008, all of these developments had contributed to unprecedented profitability in the financial services industry, until the recent widespread economic crisis in the US spread to Canadian and global economies. However, the Canadian economy seems much better poised to deal with such adversity than it was in October 1987. If the fall of 2008 is any indication, we will find out soon enough.

Originality/value

The paper demonstrates how fallout from the crash of 1987, as well as other subsequent developments, has contributed to significant changes in the financial environment.

Details

Review of Accounting and Finance, vol. 8 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 15 May 2009

James Ang and Carol Boyer

The purpose of this paper is to utilize the initial public offerings (IPO) market to research the effect the stock market crash of 1987 had on the market psyche.

659

Abstract

Purpose

The purpose of this paper is to utilize the initial public offerings (IPO) market to research the effect the stock market crash of 1987 had on the market psyche.

Design/methodology/approach

The paper compares the number of IPOs, as well as accounting data during the years surrounding the 1987 crash to determine if there is a change in financial quality. The underwriting fee structure, underpricing and short term price changes during one year prior to and one year following the 1987 crash are examined, as well as the long term returns surrounding the crash.

Findings

The stock market crash of 1987 did change the market psyche in the short to medium term. Results show greater risk aversion in the post crash period, as evidenced by fewer IPOs from riskier firms. Pricing is found to be more rational – less one day run‐up, less upward adjustment from offering range, and less likely to be overpriced in intermediate and longer terms.

Originality/value

The paper demonstrates the importance of market sentiment and may illuminate the causes of market cycles.

Details

Review of Accounting and Finance, vol. 8 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 1 January 1979

ELISE WALKER

THE CAUSES AND EFFECTS OF DISINTERMEDIATION Disintermediation is a relatively new term on the financial scene in America. The term was first coined in mid‐1966 and has since, to…

509

Abstract

THE CAUSES AND EFFECTS OF DISINTERMEDIATION Disintermediation is a relatively new term on the financial scene in America. The term was first coined in mid‐1966 and has since, to the dismay of many, become part of the daily vocabulary of bankers and economists. Originally, it sprang up to describe the outflow of funds from deposits at financial intermediaries (commercial banks, savings and loan associations and mutual savings banks) to investments yielding a higher return. Since that time, disintermediation, has taken on several additional forms such as fractional disintermediation, which addresses differences between the maximum interest rate that can be paid on a time deposit with a specified maturity at a financial intermediary and the interest rates prevailing on the similar instruments in the open market. Another new form of savings outflow is passbook disintermediation which will be discussed later. No matter which form of disintermediation is addressed, the same difficulty exists for the depository institutions — how to remain competitive when interest rates rise above the maximum ceiling rates allowed by law.

Details

Studies in Economics and Finance, vol. 3 no. 1
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 2 February 2024

Adriana Tiron-Tudor, Stefania Mierlita and Francesca Manes Rossi

The objective of this study is to systematically review the current body of literature in order to gain insights into the progress of research in accounting and auditing of…

649

Abstract

Purpose

The objective of this study is to systematically review the current body of literature in order to gain insights into the progress of research in accounting and auditing of cryptocurrencies, while also highlighting the associated risks and identifying gaps for future exploration.

Design/methodology/approach

To achieve this, a structured literature review was carried out, presenting a thorough and critical assessment of the available studies focused on cryptocurrencies within the accounting and auditing domain.

Findings

The analysis reveals that the majority of the research has concentrated on the reporting and measurement aspects of cryptocurrencies, neglecting the auditing aspect. Regarding the methodology, future investigations should incorporate both theoretical and empirical manners to address this gap. Various spheres require further exploration, as they have the potential to significantly impact practitioners and academics.

Originality/value

The significance of this paper lies in its comprehensive examination of the existing literature, synthesizing and organizing information pertaining to accounting and auditing considerations of crypto transactions. Moreover, it provides valuable insights into best practices and prompts identifying avenues for further research in this field.

Details

The Journal of Risk Finance, vol. 25 no. 2
Type: Research Article
ISSN: 1526-5943

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