DOCSLIB.ORG

Finance Master's Thesis Insider Trading After the Market Abuse Directive

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Finance Master's Thesis Insider Trading After the Market Abuse Directive Msc Business Economics: Finance Master’s Thesis Insider trading after the Market Abuse Directive: Room for Improvement? Supervisor: Candidate: Patrick Tuijp Giovanna Petti 10825320 July 7, 2015 i Statement of originality This document is written by Student Giovanna Petti who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. ii Insider Trading after the Market Abuse Directive: Room for Improvement? Giovanna Petti July 2015 Abstract The scope of this research is investigating the impact of the Market Abuse Directive (MAD I) and Market Abuse Regulation (MAD II) - both implemented on the EU territory by the European Commission respectively in April 2003 and June 2014 - on a measure for market abuse, or more precisely, insider dealing, in the period 2001-2015. Previous literature suggested a positive (decreasing) effect of the Market Abuse Directive onto the insider trading volume, and pointed to a difference in results according to cross-country variation: the variation stands in the different implementation date of the Directive per country, made possible by the nature of the regulation. Together with the cross-country variation, a cross- industry variation is also examined by this research. Results of this analysis suggest that the MAD I significantly increases the amount of insider trading in most of the model specifications. However, there is no significant cross-country, or cross-industry, variation in the MAD I impact on the market. On the other hand, the MAD II is suggested to (non-significantly) increase the insider dealing volume, and does so in all the specifications proposed. This could be due to the fact that the introduction of the MAD II is still too recent to be properly assessed. In either case, the above findings call for further research, to be performed on a longer period after the introduction of the Regulation. Volume of abnormal returns is also examined across time, and it sustains the findings above. Keywords: Insider trading; Market Abuse Directive; MAD; Market Abuse Regulation; MAR; MAD I; MAD II; market manipulation; event study; Europe. iii Acknowledgments I would like to thank everyone who accompanied me along the way of this project, and supported me throughout it all: my supervisor, for guiding me through the fog of my ideas towards concrete goals; fellow students and friends, for listening to my thoughts and sharing their own; and my family and loved ones, for bearing through my rantings about financial matters at unusual times during the day, and reminding me of my enthusiasm and passion for this discipline every time I lost sight of it. Giovanna Petti iv Abbreviations ARs: Abnormal Returns CARs: Cumulative Abnormal Returns CAARs: Cumulative Average Abnormal Returns CSMAD: Criminal Sanction for Market Abuse Directive EU: European Union HFT: High Frequency Trading MAD (I & II): Market Abuse Directive MAR: Market Abuse Regulation M&A: Merger & Acquisition SEC: Security and Exchange Commission TDP: Transparency Directive v vi Table of Contents STATEMENT OF ORIGINALITY II ABSTRACT III ACKNOWLEDGMENTS IV ABBREVIATIONS V Section 1 Introduction 1 Section 2 Literature Review 5 2.1. Insider trading on the economy 5 2.2. Measures of insider trading 8 2.3. On the Market Abuse Directive (MAD) and the Market Abuse Regulation (MAR) 9 Section 3 Data And Descriptive Statistics 14 3.1 On data and sources 14 3.2 Statistics on corporate announcements 16 Section 4 Methodology 22 4.1 Research objectives 22 4.2 Event study approach 22 4.3 Incremental regression approach 24 vii Section 5 Results 28 5.1. Cumulative Abnormal Returns per period 28 5.2. Incremental regression output 30 Section 6 Robustness Checks 36 6.1 Clustered and Newey West Standard Errors 36 Section 7 Conclusion 40 7.1. Discussion 40 7.2. Suggestions for further research 42 REFERENCES 45 APPENDIX A: Other Results 49 APPENDIX B: Additional Lists Of Variables And Sources 56 viii Section 1 Introduction The Market Abuse Directive (MAD), implemented in 2003, was a measure taken by the European Parliament and the Council to establish sanctions for matters like insider trading, unlawful disclosure of information, and market manipulation in all the territories of the European Union. In fact, insider trading in Europe was an issue addressed much later than in the United States: the MAD is the first EU directive focusing on the issue, while the SEC’s rule 10b-5 from the Exchange Act dates back to 1934 (Ventoruzzo, 2014). The Market Abuse Directive condemns almost all forms of insider dealings (Report on the Proposal for a Directive of the European Parliament and of the Council on criminal sanctions for insider dealing and market manipulation), unlawful disclosure of insider information, and market manipulation (meaning transactions giving false or artificial signals to the market). After the recent LIBOR scandal in 2012, the Commission proposed more stringent measures to fight off market abuse forms: amendments of the directive include focus on the manipulation of benchmarks, such as LIBOR and EURIBOR. Even more recent debates on the topic involve the need for a Market Abuse Regulation (MAR), rather than a Directive. The recent financial crisis and scandals (e.g. the previously mentioned LIBOR scandal) triggered an impact assessment of the Directive by a Steering Group of the 1 European Commission: in the text of the impact assessment (European Commission, 2011), the committee concluded that the MAD lacked some application features, such as lack of clarity in defining the target of the sanctions, and not enough powers given to regulators; hence it was not often put in practice by those. In fact, the increase in trading volume of market commodities and other financial instruments made it difficult for regulators to identify the violations of the directives (European Commission, 2011). Thus, the proposal to create a Market Abuse Regulation was born to make up for the lacks of the MAD. In particular, the MAR would act against trading strategies which involve algorithms and automated HFT (Proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse)). Christensen et al. (2010) study the effects of the MAD and the Transparency Directive (TPD) on EU markets' cost of capital and liquidity; they make use of the cross-sectionality of their sample to understand if implementing the regulation later in time, or in a more strictly regulated country, has any effects whatsoever on the market's characteristics. They find that there are indeed some differences, across time and across entity: there is a decrease in cost of capital and liquidity after the entry into force of the two directives; in particular, liquidity decreases more in countries which had stronger prior regulations and regulators quality. My research also makes use of the MAD, as it is conceived as a study on the impact of the Directive: its implementation gives me the opportunity to study the abnormal returns due to insider dealing in EU markets, before and after the enactment of the directive (April, 2003). Hence, my aim is to study the before and after effect of the Market Abuse Directive on measures of insider dealing for countries belonging to the EU: the cross-sectionality of 2 the analysis would allow for an interesting study on the effect of a diversified implementation of the law, across countries and across industry sectors. The hereby proposed hypothesis is that the MAD does indeed reduce insider dealing across countries; however such change in insider trading is not homogeneous, but rather, expected to be different across EU countries and sectors: countries in which the regulation was implemented earlier are expected to be impacted more by the regulation, i.e. insider trading in these countries decreases more – due to the regulation - than in other ones. Results are also supposed to vary across industries: in fact, insider dealing in technology firms is expected to suffer a higher decrease due to the regulation than other industry sectors. Furthermore, the research would be interesting to EU regulators: it would shed further light on the impact of the MAD, and potentially clear their views on the implementation of the MAR. On a bigger scale, exploring this topic could be informative to determine whether such legislative directions can be improved by policy makers: a possible tightening of the regulation may be considered by regulators, in the case in which the hereby examined measure of insider dealing would respond only slightly (or not at all) to the introduction of the laws. Another aspect to be examined is what could be the consequent possible effect on insider gains, and subsequently, on firm value. Insider trading has in fact, shown to decrease overall economic growth, by raising the cost of capital for issuers (Bhattacharya and Daouk, 2002). Moreover, buying a stock as an insider, and then selling it at a higher price on the basis of private information, is: a form of financial arbitrage, that can result in hindering strong-form markets’ efficiency (Dothan, 2008), as there can be no risk-less trading strategies that produce positive excess returns in a strong- 3 form efficient market; a problem of fairness in allocations of benefits across investors (Krawiec, 2001); and a criminal violation (misappropriation), as it implies a breach of confidentiality of secret information within a corporation which gives economic advantages to the person who has knowledge of it (Uniform Trade Secret Act, 1986). Hence, the research could contribute to findings on different economic and legislative levels, by addressing: from a macro-economic point of view, policy makers; and from a micro-economic one, investors and corporations.
Load more

Recommended publications
  • Aegon Alfa Absolute Return Investment Fund
    AEGON ALFA ABSOLUTE RETURN INVESTMENT FUND FUND RULES FUND MANAGEMENT COMPANY AEGON HUNGARY INVESTMENT FUND MANAGEMENT CLOSE COMPANY (H-1091 BUDAPEST, ÜLLŐI ÚT 1.) CUSTODIAN UNICREDIT BANK HUNGARY ZRT. (H-1054 BUDAPEST, SZABADSÁG TÉR 5-6.) EFFECTIVE AS OF: 10TH MARCH 2021. DEFINITION OF TERMS UCITS undertakings for the collective investment in transferable securities UCITS Fund an investment fund management company managing one or more UCITSs as Manager regular business UCITS Directive Directive 2009/65/EC on undertakings for collective investment in transferable securities Fund Aegon Alfa Absolute Return Fund Base currency HUF, i.e. Hungarian Forint. It is the currency in which the Fund records its assets. The Fund may even invest a portion of its assets in securities issued in a currency differing from its base currency. Fund Management Aegon Hungary Investment Fund Management Close Company Company ÁKK Államadósság Kezelő Központ Zártkörűen Működő Részvénytársaság (Government Debt Management Agency Public Ltd in Hungary) Investment Fund a collective investment form set up under the conditions defined in Act XVI of 2014 on collective investment forms and their managers (Collective Investment Act) Investment unit a transferable security issued in series by the Investment Fund as issuer in the manner and with formalities defined in the Collective Investment Act, providing receivables and other rights against the investment fund as defined in the fund rules of the investment fund Investor the holder of an investment unit or any other collective
    [Show full text]
  • Chapter 1 Introduction
    Chapter 1 Introduction 1 Capital Markets In India An Introduction: Capital is often defined as “wealth used in the production of further wealth.” In simple words, it comprises the money value invested in a business unit. Market is that place where buyer and sellers are contact to each other and when these two words are merging together make capital market A business enterprise can raise capital from various sources long-term funds can be raised either through issue of securities or by borrowing from certain institutions. Short- term funds can also be borrowed from various agencies. Thus business units can raise capital from issue of securities or by borrowings (long-term and short-term).The borrowers and lenders are brought together through the financial markets. The term „financial market‟ collectively refers to all those organizations and institutions which lend funds to business enterprises and public authorities. It is composed of two constituents. (i) The money market, (ii) The capital market. While the money market deals with the provision of short-term credit, the capital market deals in the lending and borrowing of medium-term and long-term and long-term credit. Structure of the capital market------------ two constituents. Broadly describe, the capital market can be divided into two constituents. (1) The financial institution:- e.g., IFCI, IDBI, SFCs, LIC, UTI etc. provide long-term and medium-term loan facilities. (2) The Securities Market:- The securities market is divided into (A) the gilt edged market and (B) the corporate securities market. 2 A) Gilt-Edged Market The gilt edged market is the market in government securities or the securities guaranteed (as to both principle and interest) by the government.
    [Show full text]
  • An Institutional Comparison Between European and Japanese Junior Stock Markets
    INNOVATION-FUELLED, SUSTAINABLE, INCLUSIVE GROWTH Working Paper How do financial markets adapt? An institutional comparison between European and Japanese Junior stock markets Caroline Granier Sant’Anna School of Advanced Studies Valérie Revest Université Lyon 2, Triangle, Sant’Anna School of Advanced Studies Alessandro Sapio Parthenope University of Naples, Sant’Anna School of Advanced Studies 11/2017 May This project has received funding from the European Union Horizon 2020 Research and Innovation action under grant agreement No 649186 How do financial markets adapt? An institutional comparison between European and Japanese Junior stock markets Caroline Granier (Sant’Anna School of Advanced Studies, Pisa) Valérie Revest (Université Lyon 2, Triangle & Sant’Anna School of Advanced Studies, Pisa) Alessandro Sapio (Parthenope University of Naples & Sant’Anna School of Advanced Studies, Pisa) ABSTRACT Since the last decade, new Junior stock markets or second-tier stock markets have emerged in various countries, often influenced by the Alternative Investment Market, created by the London Stock Echange in 1995, and considered by numerous economic and political actors as a reference. Junior Markets are characterised by simplified listing processes and customised information standards. The creation of junior stock market segments can be seen as an instance of financialisation and of the spread of market-led financial architectures to economies traditionally characterised by credit-based financial systems, according to the evolutionary taxonomy outlined by Dosi (1990). This begs the question as to whether we are witnessing an increasing convergence towards financial systems that are typical of the Anglo-Saxon world. With these questions in mind, in this paper we perform an institutional comparison of junior stocks markets located in countries characterised by different varieties of capitalism : AIM London, AIM Italy, Alternext, Entry Standard, OMX First North, Mothers, Tokyo AIM, JASDAQ.
    [Show full text]
  • Sustainability-Related Indices Should Be Attuned to the Cohort Driving Growth in Sustainable Investing – Millennials
    Sustainability-Related Indices Should Be Attuned to the Cohort Driving Growth in Sustainable Investing – Millennials The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters Citation Curtis, Daryl. 2019. Sustainability-Related Indices Should Be Attuned to the Cohort Driving Growth in Sustainable Investing – Millennials. Master's thesis, Harvard Extension School. Citable link https://nrs.harvard.edu/URN-3:HUL.INSTREPOS:37365395 Terms of Use This article was downloaded from Harvard University’s DASH repository, and is made available under the terms and conditions applicable to Other Posted Material, as set forth at http:// nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of- use#LAA Sustainability-related Indices Should be Attuned to the Cohort Driving Growth in Sustainable Investing – Millennials Daryl D. Curtis A Thesis in the Field of Sustainability and Environmental Management for the Degree of Master of Liberal Arts in Extension Studies Harvard University April 2019 1 Copyright 2019 Daryl D. Curtis 2 Abstract This research explored to what extent sustainability-related indices are attuned to millennial investor’s interests. Current and projected growth in millennials’ wealth, increases in sustainably-invested assets, millennials’ interests in sustainable investing, ESG integration in the investment profession, and the United Nations’ implementation of sustainability initiatives are amongst several factors which indicate there’s a demand for sustainability-related indexed products for retail and institutional millennial investors. The basis for this research is product issuers can only develop and bring to market sustainability-related index-based products (e.g., Exchanged Traded Funds (ETFs), mutual funds, tracker funds, and derivatives) for the millennial cohort if index providers construct indices based on millennial investors’ interests.
    [Show full text]
  • Q4 & FY 2018 Earnings Call
    Q4 & FY 2018 Earnings Call 2 Forward-Looking Statements The information presented herein may contain forward-looking statements. Such forward-looking statements include all statements other than statements of historical fact, including forecasts of trends. You should not place undue reliance on any forward-looking statements, which speak only as of the date they were made. We undertake no obligation to update any forward-looking statements as a result of any new information, future developments or otherwise. Forward-looking statements are inherently difficult to predict. Accordingly, actual results could differ materially for a variety of reasons, including, but not limited to, the amount and timing of our capital expenditures, results of our ongoing review of strategic initiatives including the possible sale of our e-commerce business, initiatives to improve the performance of our retail business and the recent reduction in our workforce, adverse tax, regulatory or legal developments, competition, and any inability to achieve profitability, generate positive cash flow from operations, raise capital, or borrow funds on acceptable terms. Other risks and uncertainties include, among others, the inherent risks associated with the businesses that Medici Ventures and tZERO are pursuing, including whether tZERO’s joint venture with Box Digital Markets, LLC will be able to achieve its objectives, the regulatory, technical, operational and other obstacles tZERO faces in each of its initiatives, the effects of key business personnel moving from our retail business to our Medici Ventures, Inc. and tZERO businesses or otherwise leaving, our continually evolving business model, difficulties we may have with our infrastructure, our fulfillment partners or our payment processors, including cyber-attacks or data breaches affecting us or any of them, and difficulties we may have with our search engine optimization results.
    [Show full text]
  • List of Stock Exchanges
    List of Stock Exchanges September 2021 List of Stock Exchanges Next you will find a list of stock exchanges. This list was determined according to the ‘ABN AMRO Order Execution A few examples Policy’. For each type of investment product, you will see For instance, the place of execution for shares is determined as the following: follows: ▶ What the most important stock exchanges are; and ▶ The bank executes orders for Dutch shares directly on ▶ Which brokers the bank uses for the execution of Euronext Amsterdam. orders. A broker is an intermediary, such as a bank, ▶ The bank uses the broker Citi for the execution of orders for who can execute orders or instruct third parties to shares within the Europe region (excluding the United Kingdom execute orders. The bank ensures that brokers execute and Euronext Amsterdam). To this end, Citi performs for the orders in correspondence with the bank’s order bank an automated comparison of the prices on the primary execution policy. The bank does this, taking into stock exchange where the shares are traded with the prices account the procedures and rules described in this on three multilateral trading facilities (Chi-X, BATS and policy. Turquoise). Citi uses Smart Order Routing to select the facility offering the best price for the order if the order can be This list is applicable as from September 2021. executed immediately. In this process Citi takes account of the Check the bank’s website (abnamro.nl/beurskenmerken) execution costs. If your order cannot be executed immediately for the latest stock exchange characteristics.
    [Show full text]
  • Law of Georgia on Securities Market
    LAW OF GEORGIA ON SECURITIES MARKET The purpose of this Law is to develop the securities market in Georgia, to protect the interests of investors in the securities market, to ensure the transparency of issuers' information at the time of public offerings of securities, as well as to ensure the transparency of the public trading of securities and to establish fair rules and free competition in the public trading of securities. Chapter I - General Provisions Article 1 - Scope of the Law 1. Matters related to securities shall be regulated under this Law, the Civil Code of Georgia and other legislative acts of Georgia. 2. This Law does not apply to the rules for issuing or publicly offering government securities on behalf of the state of Georgia, and to the rules for securities trading by banks outside a stock exchange. 3. The rules for the disposal of state property are set out in the Law of Georgia on State Property. 4. This Law regulates relations associated with the public offering of securities and their circulation, and determines the rules of activities and responsibilities of stock exchanges, central depositories, securities registrars, brokerage companies, brokers and investment funds on the securities market, as well as additional requirements for the rules of the activities and responsibilities of those companies whose securities are publicly offered and sold. 5. The competences of the Financial Supervision Agency of Georgia ('the Agency') shall be defined under this Law and other legislative and subordinate acts. 6. Financial institutions (except for commercial banks) may, based on the powers granted by the relevant authorities of developed countries, carry out their activities in Georgia, in accordance with the legislation of Georgia, without additional authorisation.
    [Show full text]
  • AECSD Profile 2015
    The Association of Eurasian XIII International Central Securities Depositories AECSD Conference Fall 2016 (date TBA), Georgia AECSD PROFILE Hosted by: Georgian Central Securities Depository AECSD SECRETARIAT National Settlement Depository (NSD) Postal address: 12, Spartakovskaya St. Moscow 105066, Russia Telephone: +7 495 232 0513 Fax: +7 495 956 0938 E-mail: [email protected] Web-site: www.aecsd.org www.aecsd.org 2015 THE ASSOCIATION OF EURASIAN CENTRAL SECURITIES DEPOSITORIES THE ASSOCIATION OF EURASIAN CENTRAL SECURITIES DEPOSITORIES CONTENTS Highlights of the 2014 5 Key developments in the CIS post-trade industry in 2014 5 About AECSD 7 Republic of Armenia Central Depository of Armenia 12 Republic of Azerbaijan The National Depository Center 14 Republic of Belarus Republican Central Securities Depository 16 Georgia Georgian Central Securities Depository 18 Republic of Kazakhstan Central Securities Depository 20 Kyrgyz Republic Central Depository 22 Russian Federation National Settlement Depository 24 Ukraine Settlement Center The National Depository of Ukraine 26 Republic of Uzbekistan State enterprise Central Securities Depository 29 List of member organizations 30 www.aecsd.org 4 THE ASSOCIATION OF EURASIAN CENTRAL SECURITIES DEPOSITORIES THE ASSOCIATION OF EURASIAN CENTRAL SECURITIES DEPOSITORIES 5 HIGHLIGHTS OF THE 2014 • The CSD began providing central clearing RUSSIA and settlement services the same day when • Corporate action reform was launched. transactions concluded at the exchange. • The total value of securities held at AECSD • The great majority of Eurasian CSDs (6 out of 10) • E-proxy voting was launched. members reached over USD 0.6 trillion as of act as national numbering agencies (NNAs), which KAZAKHSTAN end 2014 (48% is equities, 41% is government, means that they are responsible for allocating ISIN • Euroclear and Clearstream entered the corporate • All pension funds were merged into a sole municipal and corporate bonds, 6% is securities and municipal debt market, and then – the equity codes to new securities.
    [Show full text]
  • A Stock Market Is a Market for the Trading of Company Stock, And
    A stock market is a market for the trading of company stock, and derivatives of same; both those securities listed on a stock exchange as well as those only traded privately. Contents 1 Definition 2 Trading 3 Market participants 4 History 5 International markets 6 Importance of stock markets for the global economy 7 Stock market index 8 Derivative instruments 9 Leveraged Strategies 9.1 Short selling 9.2 Margin buying 10 New issuance 11 Investment strategies 12 See also 12.1 Lists 13 External links [edit] Definition Securities Securities Bond Commercial paper Hybrid security Stock Warrant Markets Bond market Stock market Stock exchange Stocks Share Stock Warrant Bonds by coupon Fixed rate bond Floating rate note Zero coupon bond Inflation-indexed bond Bonds by collateral Asset-backed security Collateralized debt obligation Collateralized mortgage obligation Credit linked note Mortgage-backed security Unsecured bond Bonds by issuer Corporate bond Government bond Municipal bond Sovereign bond Although common, the term 'the stock market' is a somewhat abstract concept for the mechanism that enables the trading of company stocks. It is also used to describe the totality of all stocks, especially within one country, for example in the phrase "the stock market was up today", or in the term "stock market bubble". It is distinct from a stock exchange, which is an entity (a corporation or mutual organization) in the business of bringing buyers and sellers of stocks together. For example, 'the stock market' in the United States includes the trading of stocks listed on the NYSE, NASDAQ, and Amex, and also on the OTCBB and Pink Sheets.
    [Show full text]
  • Download Paper
    Swiss Finance Institute Research Paper Series N°18-05 Is Liquidity Risk Priced in Partially Segmented Markets? Ines CHAIEB University of Geneva and Swiss Finance Institute Vihang ERRUNZA McGill University Hugues LANGLOIS HEC Paris Is Liquidity Risk Priced in Partially Segmented Markets?∗ Ines Chaieb Vihang Errunza Hugues Langlois University of Geneva and McGill University HEC Paris Swiss Finance Institute ∗We are thankful for helpful comments from Francesca Carrieri, Joost Driessen, Frank De Jong, Thierry Foucault, Jiro Kondo, Kuan-Hui Lee, Ioanid Rosu, Angelo Ranaldo, Sergei Sarkissian, seminar participants at McGill University and HEC Paris, and participants at FMA Europe 2017, SGF 2017, Emerging market conference at IGIDR 2017, and World Finance Conference 2017. Chaieb is at University of Geneva and Swiss Finance Institute, Geneva, Switzer- land, email: [email protected]. Errunza is at McGill University, Desautels Faculty of Management, Canada, email: [email protected] and Langlois is at HEC Paris, France, email: [email protected]. Chaieb acknowl- edges financial support from the Geneva Finance Research Institute and the Swiss Finance Institute research grant 2012-1-006, Errunza acknowledges financial support from the Bank of Montreal Chair at McGill University, IFM2 and SSHRC. Langlois is grateful for financial support from the Investissements d’Avenir Labex (ANR-11-IDEX- 0003/Labex Ecodec/ANR-11-LABX-0047). 1 Is Liquidity Risk Priced in Partially Segmented Markets? Abstract We develop an asset pricing model to analyze the joint impact of liquidity costs and market segmentation. The freely traded securities command a premium for liquidity level and global market and liquidity risk premiums whereas securities that can only be held by a subset of investors additionally command a local market and liquidity risk premiums.
    [Show full text]
  • Quarterly Investment Outlook
    April 5, 2021 QUARTERLY INVESTMENT OUTLOOK by Robert F. DeLucia, CFA Consulting Economist Academic studies clearly Summary and Major Conclusions: show that major shifts in ▪ Both equity prices and government bond yields trended higher in the first quarter as investors equity market leadership dramatically revised upward their expectations for economic growth in 2021 and 2022. The result was a wide divergence in Q1 returns on common stocks versus bonds. occur at turning points in ▪ There also developed a surge in speculative fervor as the quarter unfolded, reflected in a the economic cycle. The spreading euphoria in a wide range of assets, partially driven by growing fears over rising current cycle should not inflation. deviate from this historical ▪ Risk assets benefited from growing evidence of a looming economic boom, triggered by the passage of President Biden’s American Rescue Plan. Investors also became more hopeful pattern. Value managers, regarding a full reopening of the economy, based upon an acceleration in COVID-19 small-cap stocks, cyclical vaccinations and favorable trends in new infections and hospitalizations. stocks, and international ▪ Far more significant than broad equity market returns were marked shifts in relative performance. Many non-US equity markets outperformed the S&P 500, value stocks stocks should perform best outperformed growth stocks, and small-capitalization stocks outperformed large-cap stocks. over the next one to two ▪ Despite favorable economic prospects, the investment outlook for the next 12 months is years, while traditional challenging because of key long-term economic and policy variables that are highly unpredictable. Adding to the economic and policy challenges are valuation excesses in virtually growth stocks and all asset classes.
    [Show full text]
  • Foreign Fund Unit Offerings
    The following translation is intended solely for the convenience of the reader. This translation has no legal status and although every effort has been made to ensure its accuracy, the ISA does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents. Only the original Hebrew text is binding and reader is advised to consult the authoritative Hebrew text in all matters which may affect them. Israel Securities Authority Draft of amendment to Joint Investments Trust Regulations (Foreign Fund Unit Offerings), 5776 – 2016 Version for public comments Comments will be accepted until January 15th 2021 Contacts: Attorney Ron Klein, Attorney Heli Battan, Attorney Maya Gerti-Gilboa, Attorney Danielle Shimonov; Tel: 02-6556565 Tel: 02-6556456, fax: 02-6513646, email: [email protected] or [email protected] We draw your attention to the manual published by the ISA regarding the initiation of regulation – see: http://www.isa.gov.il/Download/IsaFile_7067.pdf. According to the manual, the main comments from the public will be put into a document with the formulated version of the regulation together with the names of the respondents from the public. See also paragraph 7 of that manual regarding special requests not to publish said names. Explanation As of 2017 and in accordance with Amendment 23 to the Joint Investments Trust Law, 5754 – 1994, foreign funds that meet the requirements specified in the Joint Investments Trust Regulations (Foreign Fund Unit Offerings), 5776 – 2016 (hereafter: “Foreign Fund Regulations”) and have obtained approval from the Israel Securities Authority (ISA) can offer their units to the public in Israel.
    [Show full text]