Professor Michayluk obtained his Ph.D. at Louisiana State University for his work on intraday price formation and equity bid-ask spread components. He has taught in 5 countries and also holds a CA and CPA designation. He is the Director of the Financial Research Network and he cofounded the International Journal of Managerial Finance. He has consulted for a number of companies including banks, small businesses and securities exchanges and been a director and advisor for several startup businesses. He was appointed Head of the Finance Discipline Group in February 2017.
David holds a Chartered Accountant (CA) and a Certified Public Accountant (CPA) designation.
David works in a diverse range of complementary research areas all with the overarching theme of understanding how people make decisions in financial markets, personal finance, corporate finance and market microstructure. His latest work includes improving how financial literacy is measured and taught, understanding when people make savings decisions and how financial advice is perceived and valued.
Corporate Financial Analysis, Business Finance, Investments / Security Valuation, Corporate Finance, Fixed Income, Entrepreneurial Finance.
Michayluk, D.M., Neuhauser, K. & Walker, S. 2018, 'Are all dividends created equal? Australian evidence using dividend-increase track records', Accounting and Finance.View/Download from: Publisher's site
Over the last decade, the task of liquidity provision in many markets has shifted from traditional market makers to autonomous, computerized trading systems. These automated systems collect, process, and react to market-wide information quicker and more comprehensively than the humans they have replaced. Here, we update the model of Glosten and Milgrom (1985) to analyze how the automation of liquidity provision affects market quality, the transaction costs of market participants, and volatility. To Glosten and Milgrom's original model, we add multiple securities and introduce an automated market maker who prices order flow for all securities contemporaneously. We find that the automated market maker transacts the majority of orders, sets prices that are more efficient, increases informed and decreases uninformed traders' transaction costs, and has no effect on volatility. The model's predictions match very well with recent empirical findings and are difficult to replicate with alternative models.
Michayluk, D.M. & Patel, V. 2016, 'Return predictability following different drivers of large price changes', International Review of Financial Analysis, vol. 45, pp. 202-214.View/Download from: UTS OPUS or Publisher's site
This study uniquely examines return predictability following different drivers of large price changes. We use several novel features of the Australian information generation environment to overcome identification issues of large price changes inherent in earlier studies. In contrast to prior results, we find that large price changes are permanent when they are driven by public information consistent with the semi-strong efficient markets hypothesis and also when driven by private information. For large price changes which do not correspond with information, we show that investors could profit from the subsequent over-reaction in returns.
Kovacevic, A., Hambusch, G., Michayluk, D. & Van de Venter, T. 2016, 'The Effectiveness of Ethics Training on the Development of Moral Judgement in Finance Students', Australasian Journal of Economics Education, vol. 13, no. 2, pp. 1-31.View/Download from: UTS OPUS
This paper reports on the effects of a freestanding ethics course in a university
finance curriculum on the moral development of students. While a number of
studies have examined the effects of such educational initiatives on business and
accounting students, very few studies have focused on the finance discipline. A
Modified Defining Issues Test (MDIT) was thus developed and used in a test-retest
methodology to examine whether students in the Ethics in Finance course at the
UTS Business School possessed enhanced moral development after taking the
course. We find evidence of a statistically significant improvement in moral
reasoning understood from a Kohlbergian perspective. This effect was, however,
more pronounced in males than females with females beginning from a higher base
of moral development and improving only slightly. While a number of suggestions
are made for future research that might improve on the work reported in this paper,
our results justify t
Japanese real estate investment trusts (J-REITs) were established in 2001. They have rapidly grown in number and size and there have been many J-REIT mergers following the Global Financial Crisis (GFC). J-REITs typically have a common ownership that renders most takeovers friendly, therefore the motivation for mergers is likely related to financial hardship. We examine the market response and the post- merger performance of these J-REIT mergers. We find significant abnormal trading volume for both surviving and absorbed J-REITs in the immediate days before the merger. Absorbed J-REITs suffer a significantly negative return in the two days before the merger announcement and there is no observed improvement in the post-merger operating performance. Unlike other mergers in Japan, the merger premium for J-REITs is inversely predictive of post-merger performance.
Plewa, C., Sweeney, J.C. & Michayluk, D. 2015, 'Determining value in a complex service setting', Journal of Service Theory and Practice, vol. 25, no. 5, pp. 568-591.View/Download from: Publisher's site
© 2015, Emerald Group Publishing Limited. Purpose – The purpose of this paper is to capture the richness of customer perceived value by determining its benefit and cost dimensions in a complex service setting. Perceived value is argued as equivalent to value-in-use; that is value that emerges for or is created by the customer. Design/methodology/approach – A series of in-depth interviews was conducted with a diverse group of clients of financial planning services as well as with financial planners in Australia. Findings – Six benefit and four cost dimensions of complex service are identified, namely expertise, education, motivation, support, relationship and convenience benefits, as well as monetary, time and effort, emotional and lifestyle costs. The results also indicate proposed outcomes of these dimensions, along with relevant moderators, leading to a broad conceptual framework for future empirical validation. Originality/value – This study contributes to the sparse conceptual development of value perceptions, or value-in-use, in a complex service context. In particular, the authors identify the benefit and cost dimensions, specifically addressing aspects of value that are linked to the long-term relationship between provider and customer. The authors also develop a conceptual model of value, including both outcomes and situational moderators of the various value dimensions. Finally, the conceptualization of perceived value is discussed with respect to the value co-creation literature.
Many universities are following the shift to online publishing by moving part or
all of their curriculum online in an attempt to reduce costs. While consumers have
been quick to adopt e-books for leisure reading, the attitude of higher education
students towards e-books for academic purposes is not very well known. This
study addresses this deficiency by examining student attitudes in an Australian
postgraduate finance subject towards an e-book and how this perception changes
throughout a teaching semester. We report a high e-book adoption rate, especially
for younger and for working students. Also, students that use public transport spent
on average approximately three times longer accessing the e-book. Although twothirds
of sampled students indicated no greater efficiency attributed to the e-book,
efficiency was perceived to be higher for approximately half of students that solely
relied on the e-book. The monetary value that students placed on the e-book
increased from the start to the end of the semester. While this study employed only
a small sample it suggests two broad conclusions. The first is that printed formats
continue to dominate e-formats in student perceptions even after greater exposure
to and experience with the e-format. The second is that there is some evidence that
the potential advantages of e-formats are real and that these advantages may well
provide the basis for expanded future use.
Michayluk, D. & Zurbruegg, R. 2014, 'Do lead articles signal higher quality in the digital age? Evidence from finance journals', Scientometrics, vol. 98, no. 2, pp. 961-973.View/Download from: Publisher's site
Michayluk, D., Neuhauser, K. & Walker, S. 2014, 'Are Certain Dividend Increases Predictable? The Effect of Repeated Dividend Increases on Market Returns', Journal of Applied Corporate Finance, vol. 26, no. 4, pp. 118-126.View/Download from: UTS OPUS or Publisher's site
The authors report the findings of their study of over 400 stocks of public companies that announced at least 20 consecutive increases in their dividends during the period 1999 and 2009. With the assumption that the stock market learns to anticipate future dividend increases from current patterns, the study was designed to answer the question: How many increases does it take for the market to anticipate, and 'price in, the pattern of dividend increases?
The authors report finding that abnormal returns around the first and second announcements of dividend increases are significant and positive, but are much less significant for the third and further increases. They also find that the size of the dividend increases tends to fall with more increases, and that the largest percentage dividend changes occur early in the sequence.
Cotton, D. & Michayluk, D.M. 2014, 'Ambiguity in markets: A test in an Australian emissions market', ACRN Journal of Finance and Risk Perspectives, vol. 3, no. 4, pp. 99-119.View/Download from: UTS OPUS
Using data from a survey alliance between Kiplinger's Personal Finance Magazine, PBS's Nightly Business Report, and FinaMetrica, this study explores various demographical and attitudinal factors related to financial risk tolerance. Investigating risk tolerance scores of more than 2,000 individuals immediately after the 2008 Global Financial Crisis, we find a positive relationship between risk tolerance and income, investment knowledge and positive stock market expectations. Risk tolerance is found to be lower for females, older individuals, those that currently use a financial advisor and individuals that perceive the stock market to be riskier than two years before.
Van de Venter, G., Michayluk, D. & Davey, G. 2012, 'A longitudinal study of financial risk tolerance', Journal of Economic Psychology, vol. 33, no. 4, pp. 794-800.View/Download from: UTS OPUS or Publisher's site
Academics are divided as to whether financial risk tolerance is an enduring psychological trait and as a consequence is less likely to change over the life of an individual, or a variable psychological state which varies readily in response to internal and external influences. In this study we report the findings of a longitudinal study that investigates the annual change in financial risk tolerance scores of individuals over a 5. year period and the factors that influence such change. Our results indicate a relatively small annual change in individuals' financial risk tolerance. Although our regression model is ineffective in providing a clarification for a change in the financial risk tolerance scores of individual respondents, we find a slight decrease in financial risk tolerance associated with a decrease in household size and an increase in financial risk tolerance after terminating the services of a financial planner. From our results we propose that financial risk tolerance is a stable personality trait and is unlikely to change substantially over the life of an individual.
Lam, D., Lin, B. & Michayluk, D. 2011, 'Demand and Supply and Their Relationship to Liquidity: Evidence from the S&P 500 Change to Free Float', Financial Analysts Journal, vol. 67, no. 1, pp. 55-71.View/Download from: UTS OPUS or Publisher's site
In the context of the switch to free-float weighting in the S&P 500 Index, this study of the effect of the availability of shares on liquidity in the medium term found cross-sectional differences in liquidity and price impact measures that gradually narrowed following each phase of the freefloat adjustment.
Bertin, W., Fowler, P., Michayluk, D. & Prathier, L. 2010, 'An analysis of Australian exchange traded options and warrants', Journal of Economics and Finance, vol. 34, no. 2, pp. 150-172.View/Download from: UTS OPUS or Publisher's site
This study focuses on the price discovery process in Australian option and warrant markets. Characterizing these two markets in terms of their cost structures and institutional features, we formally test competing price discovery hypotheses. The general findings indicate that the warrants market is the dominant market suggesting that their lower trading cost outweigh their less attractive institutional features. Additionally, we find that idiosyncratic differences among firms may result in a clientele effect thus providing justification for the coexistence of these seemingly redundant markets.
One explanation offered for stock splits is that the split signals positive information by reducing the stock price range in expectation of improved future prospects. Price declines also lead to changes in stock price dynamics, but related securities are not subject to these other changes and therefore can be used to provide a separate assessment of the markets interpretation of the split. We examine corporate bond issues around stock splits and find a significant decline in the bond yield spread following stock splits, supporting the signaling hypothesis. We also confirm improvements in forecasted and realized earnings subsequent to stock splits.
Kofman, P., Michayluk, D. & Moser, J.T. 2009, 'Reversing the lead, or a series of unfortunate events? NYMEX, ICE, and Amaranth', Journal of Futures Markets, vol. 29, no. 12, pp. 1130-1160.View/Download from: Publisher's site
A number of studies compare the efficiency and transparency of floor trading with automated/electronic trading systems in the competition for order flow. Although most of these studies find that electronic systems lead price discovery, a few studies highlight the weaknesses of electronic trading in highly volatile market conditions. A series of unusual events in 2006, sparking extreme volatility in natural gas futures trading, provide an ideal setting to revisit the resilience of trading system price leadership in the face of high volatility. We estimate time-varying Hasbrouck-style information shares to investigate the intertemporal and cross-sectional dynamics in price discovery. The results strongly suggest that the information share is time-dependent and contract-dependent. Floor trading dominates price discovery in the less liquid longer-maturity contracts, whereas electronic trading dominates price discovery in the most liquid spot-month contract. We find that the floor trading information share increases significantly with realized volatility. © 2009 Wiley Periodicals, Inc.
Lin, B., Michayluk, D., Oppenheimer, H. & Sabherwal, S. 2009, 'French and U.S. trading of cross-listed stocks around the period of U.S. decimalization: Volume, spreads, and depth effects', International Review of Financial Analysis, vol. 18, no. 5, pp. 223-231.View/Download from: UTS OPUS or Publisher's site
We analyze how U.S. decimalization affects stocks cross-listed in France (Euronext) and the U.S. (NYSE). The French stocks examined are much larger than the non-U.S. stocks examined in prior studies of decimalization, and their U.S. trading is likely to be dominated by institutions. So, we explore whether a reduction in depths in the U.S. due to decimalization makes the U.S. market less competitive for institutions trading these French stocks. We find evidence consistent with the above. First, the average NYSE trade size for these stocks relative to that on Euronext declines substantially after decimalization. Second, we categorize individual trades by the number of shares traded. We find that mainly driven by large trades, the NYSE proportion of trading of French firms declines markedly after decimalization. Third, using regression analysis, we find that the decline in the U.S. share of institutional trading volume is significantly positively related with the decline in NYSE depths relative to Euronext, and the decline is greater for French firms. Overall, we find consistent results indicating a migration of institutional order flow in French firms to France after NYSE decimalization. Also, intraday analysis indicates that the institutional volume in both France and the U.S. is greatest when both the markets are open.
Michayluk, D., Prather, L., Woo, L. & Yip, H. 2009, 'What do options have to do with it?: Inclusion of options market indicators in bid-ask spread decomposition', Asia-Pacific Journal Of Financial Studies, vol. 38, no. 3, pp. 455-489.View/Download from: UTS OPUS or Publisher's site
This paper develops a cross-market model to extend Huang and Stoll (1997) by utilizing information from trade flows in the options market. Empirical tests reveal a significant increase in the estimated adverse information component, which stays consistent irrespective of the degree of option leverage. Further, intraday variation in stock bid-ask spread components is affected by the stock trade size and the extent of imbalance in information-based option trades. Including the options market information in decomposition of the stock bid-ask spread enhances the quality of its estimation.
The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm½s stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.
Lin, B., Michayluk, D., Oppenheimer, H. & Reid, S.F. 2008, 'Hubris amongst Japanese bidders', Pacific-Basin Finance Journal, vol. 16, no. 1-2, pp. 121-159.View/Download from: UTS OPUS or Publisher's site
We consider the issue of hubris in the Japanese mergers and acquisitions (M&A) market. Although prior research suggests that hubris should be and is less severe in the Japanese market, our findings suggest that it still has a significant presence. Using past (excess) market return as a proxy for the likelihood of hubris, we find that high hubris bidders frequently have negative event period abnormal returns, while low hubris bidders have positive event period abnormal returns. Given the importance of keiretsu in Japan and their similarity to Korean chaebols we consider these results in light of the alternative hypothesis of tunneling, which explains similar results in Korea. Finally we consider whether the results are driven by better performing bidders using acquisitions to pay in stock while poorer performing bidders choose to pay in cash. Our results are largely consistent with the hubris hypothesis where over-confident managers may engage in value-destroying M&A.
A single-letter stock ticker symbol is a limited resource - only 26 possibilities are available in a stock universe of over 475,000 possible one-, two-, three- or four-letter ticker symbols. These symbols were first allocated based on trading volume therefore some of the most important companies at the time were initially placed into this group. This paper examines the history of this group of stocks and documents a decline in the importance of these firms due to a natural turnover in commercial leadership and no established mechanism to remove the single-letter designation from firms that lost their prominence.
Michayluk, D. & Neuhauser, K. 2008, 'Is liquidity symmetric? A study of newly listed internet and technology stocks', International Review of Finance, vol. 8, no. 3-4, pp. 159-178.View/Download from: UTS OPUS
Imbedded in liquidity measures is an implicit assumption of symmetry. Although market microstructure models rely on this assumption, there may be directional pressure that creates differences in buy and sell liquidity. This paper develops methods of assessing asymmetric liquidity and empirically examines a sample of newly listed Internet and technology stocks that are hypothesized to be especially subject to asymmetry due to the rapid inflation and deflation of the Internet bubble. Evidence of asymmetric liquidity is observed and the level of asymmetry is found to change over time. These findings suggest that the assumption of symmetry is inconsistent with more precisely constructed market liquidity measures
Most exchanges do not report trade direction thus researchers and traders must deduce whether a trade is buyer or seller initiated since this information is required to evaluate models of bid-ask spread components and to understand the market for immediacy. Algorithms that assign trade direction based on the proximity to bid or ask quotes are easily implemented but ignore information readily discernable from orders, changes in the quoted depth and subsequent price movements. Using the New York Stock Exchange Trades, Orders and Quotes database, systematic biases in existing trade direction algorithms are documented that can be rectified by recognizing that the impact on liquidity is the fundamental characteristic underlying order placement. Although this liquidity-based method is difficult to implement, it more closely captures the actual behavior of market participants (JEL : G 10, G14)
Van de Venter, G. & Michayluk, D. 2008, 'An Insight into Overconfidence in the Forecasting Abilities of Financial Advisers', Australian Journal of Management, vol. 32, no. 3, pp. 545-557.View/Download from: UTS OPUS
Financial market participants exercise judgment in decision making and psychological studies have shown that individuals are overconfident about their ability to evaluate financial securities. Range estimation calibration studies indicate that individuals tend to estimate narrow intervals in their estimation of unknown future quantities, suggesting overconfidence. Financial planners have an inherent duty of care and this may lead these individuals to behave differently in their estimation methodology and behaviour. From a survey of Australian financial planners, we find extensive overconfidence in respondents ability to make judgements under uncertainty as shown by a narrow range of forecasts and a substantial number of inaccurate predictions. The overconfidence is present both when comparing estimates to the ex-post outcome of a predicted quantity and to an interval based on historical return volatility.
Graham, A., Lin, B., Michayluk, D. & Stuerke, P. 2007, 'Sarbannes-Oxley: Some Unintended Consequences', Journal of Business and Economic Perspectives, vol. 33, no. 1, pp. 39-46.View/Download from: UTS OPUS
Mathew, P., Michayluk, D. & Kofman, P. 2007, 'Are Foreign Issuers Complying with Regulation Fair Disclosure?', Journal of International Financial Markets, Institutions and Money, vol. 17, no. 3, pp. 246-260.View/Download from: UTS OPUS or Publisher's site
Regulation Fair Disclosure (RFD) requires that any release of material information be made to the general public rather than to select individuals. The regulation represents an attempt by the Securities and Exchange Commission to restore a level of fairness to the market. Foreign issuers, however, are currently exempt from this rule. We examine liquidity changes around earnings announcements of American Depository Receipts (ADRs) before and after the introduction of RFD. We find that market makers have adjusted spreads to reflect the new, less information asymmetric environment for U.S. issues, but the same changes are not observed for our ADR sample. Similarly, the decline in activity measures of U.S. issues is not observed in our ADR sample. Our results suggest that investors and market makers are not yet convinced that foreign issuers are complying with RFD.
Van de Venter, G. & Michayluk, D. 2007, 'Subjectivity in Judgements: Further Evidence from the Financial Planning Industry', The Journal of Wealth Management, vol. 10, no. 3, pp. 17-24.View/Download from: UTS OPUS or Publisher's site
Asset allocation is a critical component of portfolio performance and is a significant component of the advice provided by financial plan-ners. The fiduciary obligation of financial planners is to provide investment advice that is appropriate to a client's personal circumstances. Academic research has found evidence of inconsistencies in advice provided by financial advisors. Using a survey of 352 Australian financial planners, the article also finds inconsistencies in a hypothetical asset allocation decision. These inconsistencies may be attributed to the presence of subjective judgment in the decision-making process due to the presence of various psychological factors such as expectations, traits, and biases, the lack of any standardized method for collecting information from clients, and different assumptions, perceptions, and interpretations based on the financial planner's own knowledge, experience, intuitions, and skill sets. The choice of financial planners influences the asset allocation and ultimately the investment returns and outcome.
Michayluk, D. & Neuhauser, K. 2006, 'Investor overreaction during market declines: evidence from the 1997 Asian financial crisis', Journal of Financial Research, vol. 29, no. 2, pp. 217-234.View/Download from: UTS OPUS or Publisher's site
Unlike the 1987 stock market crash, the 1997 stock market decline was clearly preceded by new information that affected fundamental values of U.S. firms. We provide a detailed description of U.S. stock returns surrounding the Asian financial crisis. Consistent with the overreaction hypothesis, we find strong evidence of a magnitude effect in short-term return reversals. Additionally, we find evidence of short-term return predictability in the aftermath. Our results are robust to controls for size, price, risk, and bid-ask bounce effects. Overall, the results are indicative of investor overreaction in times of market crisis.
We study the day-end effect on the Paris Bourse, a computerized order-driven market with competing dealers. The day-end return is approximately double the magnitude found in U.S. data and is nearly four times larger for stocks trading with a registered dealer. However, this is largely explained by the time between trades and the bid-ask spread. Unlike the U.S. data, the effect does not decline as stock price increases, probably because of a variable tick size in the Paris market. Finally, a change to a closing call auction in May 1996 for a subset of stocks did not reduce the day-end effect.
Michayluk, D., Wilson, P.J. & Zurbruegg, R. 2006, 'Asymmetric volatility, correlation and returns dynamics between the US and UK securitized real estate markets', Real Estate Economics, vol. 34, no. 1, pp. 109-131.View/Download from: UTS OPUS or Publisher's site
We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior,
Broussard, J.P., Michayluk, D. & Neely, W. 2005, 'The Role of Growth in Long Term Investment Returns', The Journal of Applied Business Research, vol. 21, no. 1, pp. 93-105.View/Download from: UTS OPUS
Stocks with a high valuation compared to fundamental values imply a high growth rate, yet these stocks have typically under-performed in subsequent years supporting Lakonishok, Shleifer and Vishney's (1994) contrarian investment strategies. The precise definition of growth and subtle differences of measuring growth are explored in assessing the role of growth in long-term investment decisions and stock valuation. Results from a later period and with additional tests than employed by LSV indicate that growth is a primary valuation factor, and valuation measures such as E/P and B/M, are imperfect proxies for expected growth. Growth appears mean reverting, but investors do not seem able to discern changes in growth rates and this miss-specification of expected growth may help explain the superiority of value versus growth strategies. In addition, investors' nave extrapolations of past growth provide explanatory power in future holding period returns.
Michayluk, D. & Zurbruegg, R. 2005, 'Editorial introduction: The value and scope of the financing decision process', International Journal of Managerial Finance, vol. 1, no. 1, pp. 5-7.View/Download from: Publisher's site
This paper introduces readers to the International Journal of Managerial Finance, highlighting its value and scope to the academic and professional community. This paper provides opinions of the editors on the nature and context of Managerial Finance as a research field. Managerial Finance incorporates a broad number of subjects and the journal will provide a forum for the timely dissemination of research material in this area. The International Journal of Managerial Finance will actively promote research in the area of managerial finance and support, through conferences and special issues, the growth and interest in researching the financial decisionmaking process. Research in the area of managerial finance will benefit from a journal committed to enhancing and developing research and professional knowhow for managing financial decisions. This introduction provides a synopsis of what the International Journal of Managerial Finance is interested in publishing as well as how it intends to support researchers in this area. © 2005, Emerald Group Publishing Limited
Glascock, J.L., Michayluk, D. & Neuhauser, K. 2004, 'The Riskiness of REITs Surrounding the October 1997 Stock Market Decline', The Journal of Real Estate Finance and Economics, vol. 28, no. 4, pp. 339-354.View/Download from: UTS OPUS or Publisher's site
Real estate investment trusts (REITs) are viewed as low risk/low return stocks that exhibit defensive stock characteristics. The stock market decline of October 1997 provides an excellent opportunity to examine the riskiness of REITs during high levels of market uncertainty. We find that the decline in REIT stock values was about one-half as large as the decline of non-REIT stocks. Additionally, market uncertainty on the event day was shown with an increased bid-ask spread for all stocks. On the following day when the market decline was partially reversed, the bid-ask spreads continued to increase for non-REIT stocks, but declined for REIT stocks. This suggests that REITs, like defensive stocks in general, are less prone to significant declines during market-wide disturbances. Also, we order stocks based on the standard deviation measures of risk and show that this risk measure explains the cross-section of returns for non-REITs but is not valid for REITs.
Firms that undergo a second LBO transaction are unique because they have a second experience in the capital markets after being privately held. Motivations for repeated LBOs may differ from first-time LBOs--because of the past experience, the market may be able to better distinguish the competing motivations that have been suggested in the literature. We find that for repeated LBOs, the market response is more strongly positive than that typically found for first-time LBOs. The market reaction is also strongly related to a variant of Tobin' Q, implying that the timing of the LBO may coincide with a low perception in market value. It is not surprising that the majority of the repeated LBOs were performed following the 1987 stock market crash. It appears that the instigators of the LBO believed the price was undervalued and their experience let them act accordingly.
Lin, B. & Michayluk, D. 2004, 'The liquidity response to auditor reputation concerns', Finance Letters, vol. 2, no. 5, pp. 1-18.
Bertin, W., Michayluk, D. & Prather, L. 2003, 'Trading Costs Surrounding Earnings and Recommendations Announcements', Journal of Accounting and Finance Research, vol. 11, no. 5, pp. 90-107.
Trading halts are designed to protect investors from price fluctuations under conditions of illiquidity, but on the Paris Bourse specific price limits can be used to manipulate prices. Trading is halted when a trader submits an order outside the maximum daily price limit and this feature permits traders, at little cost, to easily close the market intentionally or in error. We document over 300 suspicious halts where unfilled orders halted trading. These halts are suspicious because the unfilled order was on the opposite side of the market. Discovering potentially inefficient procedures is important for the Paris Bourse and also for French and overseas investors who may be impacted by inappropriate prices.
Kosedag, A. & Michayluk, D. 2000, 'Dividend initiations in reverse-LBO firms', Review of Financial Economics, vol. 9, no. 1, pp. 55-63.
This article documents a lack of share price response to dividend initiation announcements by firms that recently completed a reverse-LBO. We identify a group of firms that had recently completed an IPO and report that they experience a positive reaction to dividend initiation announcements as expected based on the prior dividend initiation literature. We rule out a size-based explanation for the abnormal response in reverse-LBOs and offer some potential explanations for our empirical findings. © 2000 Elsevier Science Inc.
Since the late 1980's, considerable research has focused on the behavior of individual versus institutional investors and the potential patterns which may emerge from their trading activities. Miller (1988) and Abraham and Ikenberry (1994) posit that the tendency for negative Monday returns on equity (i.e., the weekend effect) is at least partially explained by the trading behavior of individual investors. Sias and Starks (1995), on the other hand, present empirical evidence showing a dominant role played by institutional traders. This study contributes to the literature by distinguishing between individual versus institutional trading as it relates to the weekend effect. We find that the information-processing hypothesis is consistent with observed institutional trading patterns, thus supporting the results of Sias and Starks (1995). In addition, these results are shown to be robust with respect to market type (i.e., auction and dealer markets).
The holiday effect is one of the most perplexing of all seasonal anomalies. Based on evidence using pre-1987 equity returns, this anomaly has been shown to be responsible for somewhere between 30 to 50% of the total return on the market while exhibiting
Cotton, D. & Michayluk, D. 2015, 'The role of ESG issues in the investment decisions of superannuation funds in Australia', Finance Risk and Accounting Perspectives Conference, Steyr, Austria.
Patel, V.G. & Michayluk, D. 2015, 'Disentangling the different sources of value creation for US divestitures.', Securities Industry Research Centre of Asia-Pacific (SIRCA) Young Researcher Workshop, Sydney, Australia.
Doan, H., Michayluk, D.M. & Putnins, T. 2014, 'Are more liquid markets more informative?', 4th Behavioural Finance and Capital Markets Conference, Behavioural Finance and Capital Markets Conference, Adelaide, Australia.
Gerig, A. & Michayluk, D.M. 2014, 'Automated Liquidity Provision and the Demise of Traditional Market Making', 2014 Conference on High Frequency Data and Derivative Markets, Auckland, New Zealand.
Putnins, T. & Michayluk, D.M. 2014, 'Liquidity provision in limit order book markets', 4th Behavioural Finance and Capital Markets Conference, Behavioural Finance and Capital Markets Conference, Adelaide, Australia.
Gerig, A. & Michayluk, D.M. 2013, 'Automated Liquidity Provision and the Demise of Traditional Market Making', 1st Paris Financial Management Conference, Paris, France.
Michayluk, D.M. & Patel, V. 2013, 'What Drives Large Price Changes and the Subsequent Pattern in Returns?', 1st Paris Financial Management Conference, Paris, France.
Michayluk, D.M., Neuhauser, K. & Walker, S. 2013, 'Rewarding Stability: The Dividend-Increase Repetition Premium', 2013 Financial Management Association Annual Meeting, Chicago, USA.
Patel, V.G. & Michayluk, D. 2013, 'Return predictability following different drivers of large price changes', Behavioural Finance and Capital Markets Conference, Adelaide, Australia.View/Download from: UTS OPUS
Putnins, T.J. & Michayluk, D. 2013, 'Liquidity provision in limit order book markets', Proceedings of the 26th Australasian Finance & Banking Conference, Australasian Finance & Banking Conference, Social Science Research Network, Sydney, Australia, pp. 1-40.
This study examines what drives informed traders to provide liquidity by submitting limit orders versus consuming liquidity by submitting market orders. Based on recent theoretical work on limit order markets, we develop and validate two empirical measures of the relative use of market orders by informed traders: (i) how quickly limit order book quotes reflect changes in the fundamental value compared to trade prices; and (ii) the price impact of limit orders compared to market orders. Using these measures, we find that informed traders are more likely to use limit orders when the market has high uncertainty about the fundamental value (high volatility, wide spreads and low volume). Limit orders are used because when the market is highly uncertain, the informed trader faces a lower risk of mispricing being quickly corrected (lower risk of `price slippage) and thus can trade more patiently to obtain better execution prices. We also find that a greater use of limit orders by informed traders impedes resolution of the markets uncertainty, implying that informed traders order choice acts as an uncertainty multiplier.
Fernandez, L. & Michayluk, D. 2011, 'Continuous disclosure requirements and the timeliness of price discovery in Australia', Edwards Symposium on Financial Markets and Institutions, Saskatoon, Saskatchewan, Canada.
Gerig, A. & Michayluk, D. 2011, 'Automated liquidity provision and the demise of traditional market making', Financial Management Association Annual Meeting, Denver, USA.
Akyol, A. & Michayluk, D. 2010, 'Day end returns on the Istanbul stock exchange', Annual Conference of the Multinational Finance Society, Barcelona, Spain.
Clifton, M. & Michayluk, D. 2010, 'The impact of short selling restrictions and extreme uncertainty on liquidity and order flow: Evidence from the London stock exchange', Annual Conference of the Multinational Finance Society, Barcelona, Spain.
Hall, A.D., Mercorelli, L.R. & Michayluk, D. 2010, 'Modelling adverse selection on electronic order-driven markets', UTS Market Microstructure Conference, Sydney, Australia.
Michayluk, D. 2010, 'Reducing transaction taxes in Shanghai: Increased speculation can improve market quality', 4th Annual University of Sydney Market Microstructure Conference, Sydney, Australia.
Michayluk, D., Neuhauser, K. & Walker, S. 2010, 'Are certain dividend increases predictable? The effect of repeated dividend increases on market returns', Financial Management Association 2010 Meetings, Financial Management Association Annual Meeting, Financial Management Association, New York, USA, pp. 1-38.View/Download from: UTS OPUS
Positive abnormal returns around dividend increase announcements are well documented. The conventional explanation for these abnormal returns is that a dividend increase conveys favorable information about a firms prospects causing the stock price to increase in response to the announcement. This study offers a new perspective by studying a special group of firms that consistently increase their dividends each year. Abnormal returns around each dividend increase announcement are investigated based on the number of consecutive annual increases. In light of survey results that indicate firms endeavor to maintain steady dividend payments, one hypothesis is that after a certain number of dividend increases, a firm may develop a reputation as a dividend-increasing firm and consequently the market will learn to anticipate future dividend increases. Consistent with this hypothesis, we find that abnormal returns are significantly positive for the first and second dividend increase. Returns are not significant for all other increases, with the exception of the ninth consecutive increase. Our results suggest that, by the third consecutive increase, the market has learned to expect further increases. Our findings are robust and provide further evidence that, consistent with other types of corporate announcements, the stock market reacts differently depending on the frequency of an action.
Bertin, W., Michayluk, D., Prather, L., Woo, L. & Yip, H. 2009, 'Decomposing the bid-ask spread of stock options: A trade and risk indicator model', Annual Conference of the Multinational Finance Society, Juen, Crete.
Michayluk, D. 2009, 'Liquidity and the global financial crisis', The 4th International Conference on Business and Management Research - The New World Order After the Crisis, Bali, Indonesia.
Mathew, P. & Michayluk, D. 2008, 'How does bunching affect bid-ask spread component estimation?', Financial Management Association 2008 Annual Meeting, Financial Management Association 2008 Annual Meeting, Financial Management Association, Dallas, Texas, USA.
Mercorelli, L.R., Michayluk, D. & Hall, T. 2008, 'Modeling adverse selection on electronic order-driven markets', Seminar Presentation, UBS, Sydney, Australia.
Bertin, W., Fowler, P., Michayluk, D. & Prather, L. 2007, 'Price discovery in the option and warrant markets', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA.
Bertin, W., Fowler, P., Michayluk, D. & Prather, L. 2007, 'The intraday price behaviour of Australian exchange traded options and warrants', Multinational Finance Society Annual Conference, Thessaloniki, Greence.
Bertin, W., Fowler, P., Michayluk, D. & Prather, L. 2007, 'The intraday price behaviour of Australian exchange traded options and warrants', Pacific Basin Finance, Economics, Accounting and Management Annual Conference, Ho Chi Minh City, Vietnam.
Lam, D., Lin, B. & Michayluk, D. 2007, 'Downward-sloping demand curves and liquidity: Evidence from the S&P 500 change to free float', Financial Management Association Annual Meeting, Orlando, Florida.
Lin, L., Michayluk, D., Oppenheimer, H. & Sabherwal, S. 2007, 'French and U.S. trading of cross-listed stocks around the period of NYSE decimalization: Volume, spreads and depth effects', 43rd Annual Meeting of the Eastern Finance Association, 43rd Annual Meeting of the Eastern Finance Association, Eastern Finance Association, New Orleans, USA, pp. 1-41.
Lin, L., Michayluk, D., Oppenheimer, H. & Sabherwal, S. 2007, 'French and U.S. trading of cross-listed stocks around the period of NYSE decimalization: Volume, spreads and depth effects', 43rd Annual Meeting of the Eastern Finance Association, 43rd Annual Meeting of the Eastern Finance Association, Eastern Finance Association, New Orleans, USA, pp. 1-41.
Mercorelli, L.R., Michayluk, D. & Hall, T. 2007, 'Modelling adverse selection on electronic order-driven markets', Seminar Paper, Reserve Bank of Australia, Sydney, Australia.
Michayluk, D. 2007, 'Liquidity dysfunctionality on the Australian stock market', Investing Strategies and Financial Market Inefficiency Conference, Investing Strategies and Financial Market Inefficiency Conference, Paul Woolley Centre for Capital Market Dysfunctionality, University of technology, Sydney, Sydney, Australia, pp. 1-27.
Michayluk, D. & Neuhauser, K. 2007, 'Is liquidity symmeric? A study of newly listed internet and technology stocks', 43rd Annual Meeting of the Eastern Finance Association, 43rd Annual Meeting of the Eastern Finance Association, Eastern Finance Association, New Orleans, USA, pp. 1-30.
Michayluk, D. & Neuhauser, K. 2007, 'Is liquidity symmetric? A study of newly listed internet and technology stocks', 43rd Annual Meeting of the Eastern Finance Association, New Orleans, USA.
Michayluk, D., Prathier, L., Woo, L. & Yip, H. 2007, 'Decomposing the bid-ask spread of stock options: A trade and risk indicator model', University of Sydney Microstructure Meeting, Sydney, Australia.
Michayluk, D. & Zhao, L. 2007, 'Risk changes subsequent to stock splits', 43rd Annual Meeting of the Eastern Finance Association, 43rd Annual Meeting of the Eastern Finance Association, Eastern Finance Association, New Orleans, USA, pp. 1-32.
Graham, A., Lin, B., Michayluk, D. & Stuerke, P. 2006, 'Sarbanes-Oxley: Some unintended consequences', American Accounting Association Midwest Regional Conference, Chicago, Illinois, USA.
Lin, B., Michayluk, D., Oppenheimer, H. & Sabherwal, S. 2006, 'French and US trading of cross-listed stocks around the period of US decimalization: Volume, spreads and depth effects', Proceedings of the Paris Finance International Meeting, Paris Finance International Meeting, AFFI, Paris, France, pp. 1-41.
Lin, B., Michayluk, D., Oppenheimer, H. & Sabherwal, S. 2006, 'French and US trading of cross-listed stocks around the period of US decimalization: Volume, spreads and depth effects', French Finance Association (AFFI), Paris, France.
Michayluk, D., Prather, L., Woo, L. & Yip, H. 2006, 'Decomposing the bid-ask spread: A cross market model using options data', European Financial Management Association Conference, European Financial Management Association Conference, Madrid, Spain.
Michayluk, D., Prathier, L., Woo, L. & Yip, H. 2006, 'Decomposing the bid-ask spread of stock options: A trade and risk indicator model.', Proceeding if the 2006 FMA Annual Meeting, FMA Annual Meeting, FMA, Salt Lake City, USA, pp. 1-48.
Van de Venter, G. & Michayluk, D. 2006, 'Financial planners' interpretations: A survey of asset allocation recommendations', The 19th Annual Australasian Finance and Banking Conference, Australasian Finance and Banking Conference, Sydney, Australia.
Bertin, W., Lin, B. & Michayluk, D. 2005, 'The impact of immaterial corporate disclosure on market liquidity: Evidence of the disjunction effect', Eastern Finance Association, Norfolk, Virginia, USA.
Graham, A., Lin, B., Michayluk, D. & Stuerke, P. 2005, 'Sarbanes-Oxley: Some unintended consequences', American Accounting Association Northeast Regional Meeting, New York City, NY, USA.
Michayluk, D. & Neuhauser, K. 2005, 'Cross-industry differences in liquidity: evidence from an examination of new issues', 2005 FMA Meetings, FMA Meetings, -, Chicago, USA.
Michayluk, D. & Prather, L. 2005, 'A liquidity motivated algorithm for discerning trade direction', Eastern Finance Association, Norfolk, Virginia, USA.
Bertin, W., Holland, C. & Michayluk, D. 2004, 'Liquidity and the neglected firm effect', Eastern Finance Association Annual Meeting, Mystic, Connecticut, USA.
Lin, B. & Michayluk, D. 2004, 'The impact of immaterial corporate disclosure on market liquidity: Evidence of the disjunction effect', Southern Finance Association annual meeting, Naples, Florida, USA.
Lin, B. & Michayluk, D. 2004, 'The impact of immaterial corporate disclosure on market liquidity: Evidence of the disjunction effect', Proceedings of the 2004 Decision Sciences Institute annual meeting, Annual Meeting of the Decision Sciences Institute, Decision Sciences Institute, Boston, Massachusetts, USA, pp. 1-11.
Mathew, P., Michayluk, D., Prather, L. & Roth, B. 2004, 'Liquidity and the intraday variation in components of the bid-ask spread', Eastern Finance Association Annual Meeting, Mystic, Connecticut, USA.
Michayluk, D. & Neuhauser, K. 2004, 'Overreaction or increased uncertainty: Evidence from the October 1997 stock market decline', Eastern Finance Association Annual Meeting, Mystic, Connecticut, USA.
Michayluk, D. & Neuhauser, K. 2004, 'Overreaction or increased uncertainty: Evidence from the October 1997 stock market decline', Financial Management Association annual meeting, New Orleans, Louisiana, USA.
Kofman, P., Mathew, P. & Michayluk, D. 2003, 'How has regulation fair disclosure affected liquidity?', Financial Management Association annual meeting, Denver, Colorado, USA.
Prather, L., Bertin, W., Raiszadeh, F. & Michayluk, D. 2002, 'The Impact of Announcements on the Bid-Ask Spread', Proceedings - Annual Meeting of the Decision Sciences Institute, pp. 782-785.
This study analyzes the impact of informed trading on the components of the spread surrounding two types of public announcements: anticipated quarterly earnings announcements and unanticipated brokerage firm buy and sell recommendation announcements. Empirical evidence indicates that adverse selection costs increase prior to unanticipated announcements, inventory holding costs increase prior to both types of announcements as does the probability of a trade reversal. Additionally, the impact of information arrival on the market microstructure depends on the market's ability to anticipate an information event and the market maker inventory control may be impeded by the responsibility to provide liquidity and maintain a fair and orderly market.
Mercorelli, L.R., Michayluk, D. & Hall, A.D. 2008, 'Modelling adverse selection on electronic order-driven markets', Research Paper Series, Quantitative Finance Research Centre, University of Technology, Sydney.
Research Paper Number: 220 Abstract: The vast majority of models that decompose the bid/ask spread assume the quote-driven, specialist structure of the NYSE. This paper critically evaluates these models to construct a model specific for an electronic order-driven exchange. The model not only captures adverse selection and the impact of order flows on price discovery but it includes the imbalance of supply and demand inherent in the public limit order book. With this new model we investigate the change to anonymity on the Australian Securities Exchange (ASX). Following the change to anonymity, both adverse selection and the demand/supply imbalance have an increased impact on prices while order flow has a decreased influence, suggesting the change to anonymity has improved market efficiency. The model also uncovers a change in tradersâ behavior once their fear of front-running is reduced. We show that the model is stable and robust across high liquidity stocks as well as stocks with as few as 5 trades per day.
Michayluk, D. & Kofman, P. 2001, 'Market structure and stock splits', Research Paper Series, Quantitative Finance Research Centre, University of Technology, Sydney.
Research Paper Number: 62 Abstract: Enhanced liquidity is one possible motivation for stock splits but empirical research frequently documents declines in liquidity following stock splits. Despite almost thirty years of inquiry, little is known about all the changes in a stock's trading activity following a stock split. We examine how liquidity measures change around more than 2,500 stock splits and find a pervasive decline in most measures. Large stock splits exhibit a more severe liquidity decline than small stock splits, especially on Nasdaq. We also examine a longer time period around stock splits and find that the differences between small and large stocks may be short-lived. Following the 1997 changes in order handling rules and reduction in tick size, liquidity declines following stock splits continue, however, the declines are not as severe on Nasdaq, suggesting the change in order handling rules may have been effective.