IU Southeast Open Access Works

Permanent link for this collectionhttps://hdl.handle.net/2022/34707

This collection contains unsorted deposits from faculty and staff affiliated with Indiana University Southeast. Please visit the Indiana University Southeast community page to additional works in our collections.

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Now showing 1 - 6 of 6

Does Market Timing Beat Dollar Cost Averaging?
(Academy of Finance, 2022-10-12) He, Yan; Wang, Junbo
This paper explores several methods for investing a series of monthly cash contributions in an equity index, such as the S&P 500 or the Nikkei 225. The dollar cost averaging (DCA), three variations of market timing (MT1, MT2, and MT3), and 12-month perfect foresight (PF) are examined, and they are built on the same assumptions, such as monthly cash inflows, no borrowing of cash, and no selling of equity. The PF outcomes, unachievable by human beings, serve as the optimal boundaries. Our results show that in both the U.S. and Japanese markets, the PF dominates the DCA, while the MTs tend to deliver similar results as the DCA. Thus, the DCA seems an effective investment method.
Earnings Growth Forecast for ETFs
(Academy of Finance, 2025-10-15) He, Yan; Wang, Junbo
We forecast earnings growth in the next 5 years for stock-market-indexed exchange-traded funds (ETFs). Our methods include the P/E and P/B cross-sectional regression-implied (RI) estimates and the earnings growth random-walk (RW) estimates. Our results show that compared with the actual earnings growth, both the RI and RW forecasts of earnings growth are unbiased for the U.S. ETFs but biased for the foreign ETFs. In addition, the RI method generates smaller forecast errors than the RW method for the U.S. ETFs but holds no advantage over the RW method for the foreign ETFs. Therefore, the RI forecast may be a useful method for the U.S. ETFs during our sample period of 2000-2023 but may not be so for the foreign ETFs.
Superior vs. Inferior Voting Shares: Price Premium or Discount?
(David Publishing Company, 2016-06-28) He, Yan; Wang, Junbo; Wu, Chunchi
This paper analyzes the price difference between superior voting (SV) and inferior voting (IV) shares for three dual-class firms: Farmer Mac as a big price discount case, Fox as a price similarity case, and Heico as a big price premium case. We show that the price difference is mainly affected by the control benefit, while voting power and liquidity are also relevant factors. We suggest that the control benefit can be revealed by examining share accumulation and firm performance.
DCF Valuation of Nonprofit Universities
(Redfame Publishing, 2020-02-01) He, Yan; Long, Frank
We conduct the Discounted Cash Flow (DCF) valuation of two nonprofit organizations: Syracuse University and Indiana University. We transform nonprofits to for-profits by converting nonprofit social benefit to net earnings and by adopting for-profit cost of equity and tax rate. These adjustments attempt to capture considerable hidden value to equityholders. We find that in the best scenario, the net worth (market value of equity) could be about 2 times the book equity for both universities in June 2017.
Do Treasury Nominal Securities and Treasury Inflation-Protected Securities Deliver Equivalent Returns?
(Science and Education Publishing, 2024-02-20) He, Yan; Wang, Junbo; Dufrene, Uric
We analyze the investment returns of Treasury Nominal Securities (TNS) and Treasury Inflation-Protected Securities (TIPS) of the U.S. from January 2003 to December 2021. We find that the month-by-month rolling investments in 5-year TNS and TIPS create similar returns, in line with the equivalence between the month-by-month rolling 5-year breakeven (BE) and Consumer Price Index for all urban consumers (CPIU) inflation rates. However, the rolling investments in 10-year TNS generate significantly higher returns than those in 10-year TIPS, consistent with the rolling 10-year BE inflation rates significantly exceeding their respective CPIU counterparts.
Does Market Timing Work Well in China’s Mature and Emerging Stock Markets
(Science Publishing Group, 2025-02-26) He, Yan
China’s Hang Seng Index (HSI) represents the mature market, and its Shanghai Stock Exchange Composite Index (SSE), the emerging market. I utilize six market timing (MT) methods and one dollar cost average (DCA) method to invest in the two stock indexes respectively. It is assumed that investors make a series of monthly cash contributions to an equity index in the long term. They do not possess lump-sum cash and cannot borrow cash. They buy and hold equity till the end of an investment period. The DCA method is simple, and it is to invest every monthly cash contribution immediately in an equity index. The six MT methods are complicated, and they are to invest more (less) than the monthly cash contribution, under the cash constraint, if the equity price has declined (risen). Empirical tests have been conducted for the 5-year, 10-year, and 20-year rolling investments during 1991-2022. My findings show that for both the HSI and SSE, the net returns generated by the six MTs are similar to those created by the DCA. In addition, the differences (MT-DCA) in the average monthly returns and modified Sharpe ratios are either statistically insignificant or negative and significant. Therefore, regardless the differences between the Hong Kong and mainland China markets, the complicated MTs do not outperform the simple CA in China’s mature and emerging stock indexes.

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