No abstract

Although the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, although each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

We investigate whether imputation tax credits are capitalised into Australian stock prices by utilising discounted cash-flow valuation models and examining the relation between earnings yields and imputation credit yields. While imputation credits are valuable to many investors, the evidence that they are reflected in share prices is at best mixed and largely unconvincing. Our results reveal that imputation credits fail to lower realised returns casting doubts over whether imputation credits are priced from the perspective of longer-term buyand-hold investors. If so, such investors can expect to fully benefit from their imputation credits, and imputation effects may not impact on the cost of capital.

This paper applies a disaggregated approach to examine stock volatility at the firm, industry and market level in Australia. We employ the models advanced by Campbell, Lettau, Malkiel and Xu (2001) to carry out this disaggregation, and extend their methodology to incorporate: formal tests of changes in volatility as well as correlations; and the Hodrick-Prescott Filter to identify trends in the series. A trend of decreasing volatility is identified at all levels of aggregation, which is further supported by robust OLS analysis. Results also provide strong support for an increase in correlations between industries over the past 30 years. Coinciding spikes in the volatility and correlation series during periods of market stress has significant implications for portfolio diversification. No support is found for a month-of-the-year effect on volatility or correlations.

No abstract