Financial Services Review Volume 18
Abstracts:

| Number 1 |

Volume 18 Number 1, 2009

Who holds foreign stocks and bonds? Characteristics of active investors in foreign securities
(pp. 1-21) Download Full Text Article
Vladyslav Kyrychenko, Pauline Shumb

ABSTRACT
We study the behavior of active individual investors who hold foreign stocks and bonds directly.
Using the Survey of Consumer Finances, we determine the demographic, financial, and behavioral
characteristics that predict the likelihood of direct investments in foreign stocks and bonds. Our main
findings are: (1) while aggregate data indicate substantial home bias, within the group of active individual investors in foreign stocks, there is no evidence of home bias, and (2) age, financial wealth,
and proxies for investor confidence are positively related to direct ownership of foreign stocks and
bonds, while proxies for lack of financial sophistication have a negative effect. © 2009 Academy of
Financial Services. All rights reserved.

The value of stop loss strategies
(pp. 23-51) Download Full Text Article
Adam Y.C. Lei, Huihua Lib

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. © 2009 Academy of Financial Services. All rights reserved.

A new strategy to guarantee retirement income using TIPS and longevity insurance
(pp. 53-68) Download Full Text Article
S. Gowri Shankar

ABSTRACT
Retirees investing their savings in stocks and bonds face the risk of financial ruin even when withdrawing as little as 4% annually. This paper proposes a new investment strategy using Treasury Inflation Protected Securities and longevity insurance that would guarantee real annual withdrawal rates in excess of 5% without any risk of financial ruin. The strategy can be implemented at minimal cost by retirees and their financial advisers. Institutional providers can use this strategy to offer products that would provide inflation adjusted lifetime incomes and allow retirees to retain control over most of their savings in retirement. © 2009 Academy of Financial Services. All rights reserved.

Investing in Mad Money: price and style effects
(pp. 69-86) Download Full Text Article
Paul J. Bolster, Emery A. Trahan

ABSTRACT
Individual investors have an incredible variety of sources for investment guidance. These include internet blogs, financial publications, books, newsletters and, of course, television shows. We examine a relatively new but widely popular source of investment advice, buy, and sell recommendations made by Jim Cramer on his popular nightly Mad Money show on CNBC. Our results suggest that Cramer’s recommendations influence share prices of the companies that he mentions. The effects are short-lived and reverse for buy recommendations, although they persist for sell recommendations, and indicate momentum effects. Our analysis of a Cramer portfolio suggests that factor-adjusted returns are significantly different from zero for some subperiods. Factor analysis suggests that Cramer’s portfolio returns are driven by beta exposure, smaller stocks, value-oriented stocks, and momentum effects. However, factor exposures change significantly during subperiods. Overall, the results suggest that, while Cramer may be entertaining and mesmerizing to many of his viewers, his aggregate or average stock recommendations are neither extraordinarily good nor unusually bad. © 2009 Academy of Financial Services. All rights reserved.

The CAN-SPAM Act of 2003 and stock spam emails
(pp. 87-104) Download Full Text Article
Bill Hub, Thomas McInisha, Li Zengb

ABSTRACT
One goal of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 is to combat pump and dump stock spam email schemes aimed at individual investors. The Act specifies requirements for those who send commercial emails. We find that only 60% of the 40,000 stock spam emails analyzed follow these disclosure requirements and emails that disclose conflicts of interest have a lower market impact. After the peak spam email day, stock prices decline, indicating that individual investors lose money. A Securities and Exchange Commission crackdown in 2007 reduced the impact of stock spam emails. © 2009 Academy of Financial Services. All rights reserved.

From the Editor - 18-1 (2009)
(pp. v-vi) Download Full Text Article