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Relative price performance : the theory and an empirical test Hallam, William P.
Abstract
This study has a twofold purpose. The primary purpose is to examine empirically the hypothesis of relative price performance. This hypothesis states that issues in the stock market which have recorded a price performance superior to the market for a period of time will tend to continue to record a superior price performance relative to the market. Conversely, those issues which have recorded an inferior price performance relative to the market will tend to maintain an inferior relative performance. The secondary purpose of the study is to develop a theoretical framework that attempts to explain how complexity in corporations is a constraint on the analysis of those corporations and is a determinant of security price behavior. The data consisted of a sample of 1214 companies which constituted those stocks included in the four major indices on the Toronto Stock Exchange as of January 1, 1965. The data tested were adjusted monthly stock prices covering the period January, 1965 to November, 1969. The methodology employed was the estimation of regression equations to determine the relationship between historical measures of relative price performance and subsequent relative price performances. The results of the empirical testing provide no support for the hypothesis. In practically every regression equation estimated the significance of the findings was almost negligible. The findings inferred that the hypothesis should be rejected. The development of a theoretical framework involving complexity in corporations and information types demonstrated that trends in security price movement are logically possible but only in certain cases. As a consequence of the two purposes of the study two conclusions were arrived at. Firstly, the hypothesis as tested here must be rejected due to an absence of any support for it. Secondly, recognition of the constraining influence of complexity on the security valuation process revealed that certain categories of companies would tend to exhibit a consistency in their securities' relative price performance. Therefore it was suggested that future research in the field of security price behavior should give consideration to disaggregating the sample into categories of complexity.
Item Metadata
Title |
Relative price performance : the theory and an empirical test
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Creator | |
Publisher |
University of British Columbia
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Date Issued |
1970
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Description |
This study has a twofold purpose. The primary purpose is to examine empirically the hypothesis of relative
price performance. This hypothesis states that issues in the stock market which have recorded a price performance superior to the market for a period of time will tend to continue to record a superior price performance relative to the market. Conversely, those issues which have recorded
an inferior price performance relative to the market
will tend to maintain an inferior relative performance. The secondary purpose of the study is to develop a theoretical
framework that attempts to explain how complexity in corporations is a constraint on the analysis of those corporations
and is a determinant of security price behavior.
The data consisted of a sample of 1214 companies which constituted those stocks included in the four major indices on the Toronto Stock Exchange as of January 1, 1965. The data tested were adjusted monthly stock prices covering
the period January, 1965 to November, 1969. The methodology
employed was the estimation of regression equations
to determine the relationship between historical measures of relative price performance and subsequent relative
price performances.
The results of the empirical testing provide no support for the hypothesis. In practically every regression
equation estimated the significance of the findings was almost negligible. The findings inferred that the hypothesis should be rejected.
The development of a theoretical framework involving
complexity in corporations and information types demonstrated that trends in security price movement are logically possible but only in certain cases.
As a consequence of the two purposes of the study two conclusions were arrived at. Firstly, the hypothesis as tested here must be rejected due to an absence of any support for it. Secondly, recognition of the constraining influence of complexity on the security valuation process revealed that certain categories of companies would tend to exhibit a consistency in their securities' relative price performance. Therefore it was suggested that future research in the field of security price behavior should give consideration to disaggregating the sample into categories
of complexity.
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Genre | |
Type | |
Language |
eng
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Date Available |
2011-05-09
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Provider |
Vancouver : University of British Columbia Library
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Rights |
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
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DOI |
10.14288/1.0093316
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URI | |
Degree | |
Program | |
Affiliation | |
Degree Grantor |
University of British Columbia
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Campus | |
Scholarly Level |
Graduate
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Aggregated Source Repository |
DSpace
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Item Media
Item Citations and Data
Rights
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.