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A list of my current working papers is available through the Vita link (the password to open the Curriculum Vitae PDF is "" without the quotation marks). Some of my papers may be downloadable at my Author Page at the Social Science Research Network (SSRN).


"Information Quality and Earnings Enhancement of the Bargain Purchase Gain," 2016,
Journal of Accounting and Finance 16, 105-110. (with Catherine Gaharan)

Abstract: A bargain purchase gain arises for the acquiring company in an acquisition when the fair value of the acquired firm exceeds its purchase price. Since 2009, accounting standards require the excess to be immediately recognized as a bargain purchase gain in the acquiring company’s results of operations. This study examines the bargain purchase gains reported in the financial statements of non-financial firms covered by the SEC EDGAR database from 2009 to 2014. Our findings cast doubt on the informativeness of the reported bargain purchase gains and suggest that different companies may engage the bargain purchases for different reasons.


"Stock Acquisitions, Investor Recognition, and Announcement Returns," 2016,
Managerial Finance 42, 518-535 (lead article). (with Huihua Li)

Abstract: We examine how using stock as the method of payment affects a bidder’s investor base and investor recognition, and the bidder announcement return. We hypothesize that relative to a cash acquisition, a stock acquisition would increase the bidder’s investor base and lower Merton’s (1987) shadow cost, which in turn contributes positively to the bidder announcement return. Our results support this hypothesis and suggest that the less established bidders acquiring private targets in particular benefit from the shadow cost reduction. These findings also provide a complementary explanation for the documented positive bidder returns when bidders use stocks to acquire private targets.


"Portfolio Performance Evaluation Benchmark: A Note," 2015,
Journal of Economics and Finance Education 14, 1-7 (lead article). (with Huihua Li)

Abstract: Jones and Swaleheen (2014) examine the performance of an equity portfolio in a student managed investment fund and document the outperformance of the portfolio relative to the S&P 500 index on an absolute basis. We show that the apparent outperformance of the portfolio is due to using the index without its dividend component. Once we use the S&P 500 total return as the benchmark, the outperformance of the equity portfolio disappears. We explain why the S&P 500 total return should be used in this case, and propose and justify two alternative proxies for the S&P 500 total return.


"Does It Pay to Realize Tax Losses at the Year-End?" 2013,
Financial Services Review 22, 187-209 (lead article). (with Huihua Li)

Abstract: Motivated by the widely touted practice, we examine the effects of realizing tax losses at the year-end on simulated stock portfolios. Our results indicate that the timing of portfolio formation, the cutoff that triggers the loss realization, the length of an investor's holding period, and to a lesser extent, the timing of the tax benefits, all affect the probability that the tax-loss strategy outperforms a simple buy-and-hold strategy. Collectively our findings support the tax-loss strategy in general, but they also suggest that factors other than an investor's applicable tax rate affect the effectiveness of this strategy as well.


"Does Information Production Explain Bidder Liquidity after Takeovers?" 2013,
Managerial Finance 39, 915-937. (with Huihua Li)

Abstract: Information produced in the takeover process and changes in firm characteristics could both affect bidder liquidity after takeovers. We examine bidder liquidity in successful versus unsuccessful takeovers to disentangle the information production hypothesis from the firm characteristics hypothesis empirically. We show that unsuccessful bidders experience no less information production than successful bidders during the takeover process, but only successful bidders enjoy significant liquidity improvements after their takeovers. Whether a takeover is successful or not generally does not have a significant relation with bidder liquidity changes once we control for detailed changes in firm characteristics. Moreover, additional information production reduces information asymmetry for successful Nasdaq bidders but not for NYSE bidders. These findings collectively support the firm characteristics hypothesis and suggest a role of information production for firms facing potentially higher information asymmetry.


"Using Bloomberg Terminals in a Security Analysis and Portfolio Management Course," 2012,
Journal of Economics and Finance Education 11, 17-33. (with Huihua Li)

Abstract: Motivated by an obvious gap between the widespread use of Bloomberg terminals in the finance industry and the scant resources available to an instructor on how to incorporate the available information through the terminal into a finance course, we illustrate our experience using the terminal in an equity-focused security analysis and portfolio management course. Our goal is to enable students inexperienced with the terminal to prepare an analyst report. We identify the most significant challenges we face and provide the corresponding solutions. Our results are also applicable to other finance courses including financial analysis, investments, and student managed investment fund.


"Short-lived Information and Order Strategies: A Clinical Study," 2012,
Managerial Finance 38, 143-164. (with Huihua Li)

Abstract: We examine investor order strategies in response to short-lived information using a natural experiment on September 8, 2008, in which a 2002 bankruptcy story on United Airlines erroneously reappears through Bloomberg terminals and cause significant price changes on the stock. Our results show that investors use intermarket sweep orders (ISOs), a unique type of liquidity-demanding limit orders, in attempts to exploit this information. In particular, those investors show aggressiveness not only in trade speed but also in trade size. These findings support the hypothesis that investors with short-lived information demand immediacy to conserve the value of their information and have important research and practical implications.


"Dealer Attention, the Speed of Quote Adjustment to Information, and Net Dealer Revenue," 2009,
Journal of Banking and Finance 33, 1531-1542. (with Alex Boulatov, Brian Hatch, and Shane Johnson)

Abstract: Using trade and quote data from the NYSE, we examine the relation between dealer attention, dealer revenue, and the probability of informed trade. We find that dealer revenue net of losses to better-informed traders in NYSE stocks is positively related to the speed at which quotes adjust to full information levels. The speed of quote adjustment is faster for stocks with greater dealer attention, as measured by a stock's relative prominence at its post-and-panel location on the NYSE floor. The level of dealer attention in turn is positively related to a stock's probability of information-based trading. The results are consistent with a theoretical model we derive in which dealers trade multiple securities and must optimally allocate their limited attention to monitoring order flow to minimize losses to better-informed traders.


"The Value of Stop Loss Strategies," 2009,
Financial Services Review 18, 23-51. (with Huihua Li)

Abstract: Stop loss strategies can prevent investors from holding their losing investments too long by automatically prompting the sales of losing investments. We examine the impacts of stop loss strategies on the return and risk of individual common stocks. Our results indicate that these strategies neither reduce nor increase investors' losses relative to a buy-and-hold strategy once we extend security returns from past realizations to possible future paths. One unique stop loss mechanism, nevertheless, helps investors to reduce investment risk. These findings suggest that the value of stop loss strategies may come largely from risk reduction rather than return improvement.


"Automatic Investment Plans: Realized Returns and Shortfall Probabilities," 2007,
Financial Services Review 16, 183-195. (with Huihua Li)

Abstract: We compare the realized returns and shortfall probabilities of automatic investment plans with those of lump sum investments. We do not assume a cash position and we use bootstrapping techniques to assess the performance differences. Our results indicate that the levels of realized returns from these two strategies are statistically identical for investment horizons from one year to 40 years, regardless of whether we take return autocorrelations or business cycles into account. Automatic investment plans, nevertheless, have higher shortfall probabilities for intermediate horizons. Investors relying on automatic investment plans should consider these probabilities and adjust their asset allocations accordingly.



Adam Y.C. Lei. All rights reserved.