|Born||16 February 1952|
|Died||13 July 2013|
|Employer||RMIT (2003-2013), Griffith University (1997-2003), University of New South Wales (1995-1997), University of Wollongong (1987-1994), University of Birmingham (1985-1987), University of the South Pacific (1983-1985), Leeds Polytechnic (1976-1982)|
|Known for||Finance, Financial Analysis, Accounting and Economics|
|Corporate Governance, Capital Structure, Initial Public Offerings, Behavioural Finance, Asset Pricing, Trading Strategies, Initial Public Offerings, International Finance, Asian Financial markets, Chinese Economics and Finance|
Tony Naughton (16 February 1952 – 16 July 2013) was a British/Australian financial economist who was the head of the School of Economics, Finance and Marketing at the Royal Melbourne Institute of Technology (RMIT) for over ten years immediately prior to his untimely death in July 2013. He was known for his research into finance and corporate governance and for his contribution to raising the research profile of the School of Economics, Finance and Marketing at RMIT. He was also known for the successful mentoring of a large number of students and colleagues who, as a result, climbed to the top of the academic ladder.
At the core of his research was the behaviour of security prices, which was subsequently extended to cover corporate governance explanations of firm performance, the stock returns of initial public offerings and trading strategies. Much of the empirical work he did pertained to the emerging markets of Asia, particularly China. In recent times he was involved in two major projects, the first of which was to examine the impact of stock market reforms in China, whereas the second was about developing and testing a new instrument to examine behavioural biases in investor decision-making.
Naughton was a fan of West Ham United football club, and had a strong dislike for Tottenham Hotspur football club, in particular their up-and-coming striker, Harry Kane.
Naughton was born in Birmingham (England) on 16 February 1952, then he moved to Ireland at the age of five. He sought independence by leaving home at the age of 16 to undertake a number of jobs, working as a kitchen assistant, a chef, a DJ and a bar tender. He then went through a bit of a hippy phase, rocking the long hair, full beard, leather jacket and flared pants. Before his death he expressed his wish to go to the Glastonbury festival in England at some point in his life. He said that seeing Jimmy Hendrix's final show was one of his most treasured memories. Naughton always had good taste in music.
Naughton was a self-made person. Although he left home with nothing and dropped out of school at 16, he paid for his education by working multiple jobs and managed to become a certified accountant. Following his work as an accountant, he did an MBA at Bradford University and went on to become a lecturer at Leeds Polytechnic. At the age of 30, Naughton went to work at the University of South Pacific in Fiji, where he met his wife, Shahnaz. Soon afterwards came the proposal and they got married in 1986. They went back to Birmingham together before moving to Wollongong, Australia. It was in Wollongong where the couple had their two daughters, Sophie and Jennifer.
Naughton started his academic and professional life as an accountant. In 1975 he obtained membership of the Association of Chartered Certified Accountants and he was elected as a fellow in 1980. Subsequently, he earned a Master of Business Administration (with a major in Financial Management) from the Management Centre, University of Bradford in 1980. At the PhD level he concentrated on banking and finance as he obtained his doctorate from the Department of Accounting and Finance, University of Birmingham, in 1995.
Prior to taking his last position as the head of the School of Economics, Finance and Marketing at RMIT, he held several academic positions in a number of institutions. From 1997 to 2003 he was a professor of international finance and the head of the School of Accounting and Finance, Griffith University. He was a senior lecturer and the head of the School of Banking and Finance, University of New South Wales, from January 1995 to January 1997. During the period July 1987 to December 1994, he was a senior lecturer in finance at the Department of Management, University of Wollongong. He also held the positions of a lecturer in development finance at the University of Birmingham, a lecturer at the School of Social and Economic Development at the University of the South Pacific (Fiji) and a senior lecturer at the School of Accounting and Applied Economics, Leeds Polytechnic.
Naughton held a number of adjunct/visiting positions. He was an adjunct professor at Universitas 21, Singapore, from 2004 until his death in 2013. He was also a visiting professor at the China Europe International Business School (CEIBS), Shanghai, a visiting professor at the Centre for Corporate Governance Research, University of Birmingham, an adjunct professor at the Centre for International Business Research, University of Wollongong, an adjunct senior lecturer at the Graduate School of Business, University of Sydney, a visiting fellow at the School of Banking and Finance, University of New South Wales, a visiting research fellow at Universitas Islam, Indonesia, and a visiting senior research fellow at the Department of Accounting and Finance, University of Birmingham.
Naughton's professional experience was exclusively in accounting. During the period 1976-1982 he had his own auditing and accounting practice, Naughton & Co. Prior to that he had obtained auditing and accounting experience with Touche Ross and Morley & Scott Chartered accountants in Birmingham and London, specializing in the audit of banks and financial institutions.
Naughton made contributions to several areas of finance. Starting with asset pricing, he wrote an article on the Taiwan stock market in which he developed a multifactor asset pricing model incorporating a price limit factor to explain the cross section of asset returns following closely the mimicking portfolio Fama-French methodology.The findings showed that the overall market factor, firm size and price limits capture a cross section of average stock returns in a meaningful manner. In an article on China he compared the performance of the traditional CAPM with the multifactor model of Fama and French for equities listed in the Shanghai Stock Exchange. He also investigated the explanatory power of idiosyncratic volatility and responded to the claim that multifactor model findings can be explained by the turn of the year effect. He conducted further work on Indonesia, Singapore and Taiwan to examine the proposition that the beta in the capital asset pricing model (CAPM) was lacking in cross-sectional explanatory power. By incorporating the two most commonly used additional explanatory factors (size and book to market equity) he tested for evidence of multifactor risk premia. The results showed that the overall market factor was highly significant in all of the markets and that the magnitude of significance of the other two factors (size and book to market equity) varied across countries. He rejected the claim that the multifactor model findings could be explained by the turn of the year effect.
Naughton was an expert on trading strategies. In 2008 he published a paper in which he investigated the profitability of momentum investment strategies for the equities listed on the Shanghai Stock Exchange.He also investigated the role of trading volume to find out if it was related to stock returns. He detected substantial momentum profits during the period 1995 to 2005 and revealed that momentum was a pervasive feature of stock returns. This finding stood as a direct challenge to the validity of the efficient market hypothesis, which has been discredited by the advent of the global financial crisis. In another study of trading strategies he examined the profitability of momentum and contrarian strategies for the equities listed on the Australian Stock Exchange by taking into consideration short-selling restrictions. He revealed significant contrarian profits and showed that it was a persistent feature of the underlying strategies.
One area of corporate finance to which he made a contribution was initial public offerings (IPOs). In a study of IPOs in Australia he provided insights into the short and long-term performance of the IPOs for new economy companies in the period 1995 to 2000.He found that new economy IPOs provided high average initial returns to subscribing investors although there was evidence for severe overpricing. Another area of corporate finance to which he contributed was capital structure. In a study of the determinants of the capital structure of Chinese companies he demonstrated, by using the techniques of extreme bounds analysis (EBA), that some of the firm-specific determinants reported as important in previous studies might be fragile, in the sense that the sign and/or significance of the coefficients on these variables changed, depending on model specification (the variables included in or excluded from the model). For example, he found that although conventional cross-sectional analysis would lend support to the importance of tangibility and stock price performance, these two variables turned out to be fragile.
Another area of Naughton's interest, to which he made a contribution, was corporate governance. In one study he focused on the emerging corporate governance reform in China to investigate the relationship between a range of board characteristics and IPO initial returns and long-term performance.He found evidence indicating that board size is positively related to short-term returns, while a positive long-run relationship existed between performance and the voluntary post-listing separation of the roles of CEO and chair of the board. His results suggested that at least some Chinese listed firms were actively and voluntarily moving towards better governance structures. In another study of corporate governance in China he examined the 2005 policy decision to change the status of non-tradable state and non-state shares into tradable A shares. He envisaged that over time all of these shares would be tradable and potentially transferred to foreign and domestic private sector investors and that those changes had the potential to alter the monitoring and control of the majority of listed firms that until then had been controlled by tightly held blockholders of non-tradable shares. He also studied how parties' formal contracts were underpinned by their ongoing relationship and how welfare changes as the legal system improved.
His work in international finance was no less impressive. In an award-winning paper he attempted to verify the exchange rate regime that China had been following since 21 July 2005 when a policy shift was implemented, presumably taking China from a dollar peg to a basket peg.He demonstrated that while a regime of simple and strict dollar peg had been abandoned, China was on a peg, as it was claimed officially. He suggested that China had shifted to some sort of a discretionary crawling peg against the U.S. dollar. This paper made a significant contribution to the literature on de facto and de jure exchange rate regimes and the problem of exchange rate regime verification.
The diversity of Naughton's research is obvious in a number of other papers. In those papers he investigated the impact of ownership and ownership concentration on the performance of China's listed firms.He also attempted to find out if idiosyncratic volatility is useful in explaining the variation in expected returns and if the findings can be explained by the turn of the year effect. In another paper he sought to extend the mounting evidence against the view that the beta coefficient of the capital asset pricing model is the sole measure of risk. He investigated the relationship between firm performance and corporate governance in China, where performance is measured by Tobin's Q. He also contributed to the literature on trading strategies involving options when he examined the performance of the buy-write option strategy and attempted to find out if such an investment opportunity violated the efficient market hypothesis on the basis of its risk and returns. Contrarian strategies were considered in another paper in which he investigated the profitability of these strategies for the equities listed on the Hong Kong Stock Exchange and the relationship between stock returns and past trading volume. Furthermore, he did some work on the link between performance and changes in the size and stability of a firm's officers and directors and surveyed enterprise reforms in China, making recommendations with respect to the way forward. Most of his contributions had significant practical implications.
Passive management is an investing strategy that tracks a market-weighted index or portfolio. The most popular method is to mimic the performance of an externally specified index by buying an index fund. By tracking an index, an investment portfolio typically gets good diversification, low turnover, and low management fees. With low fees, an investor in such a fund would have higher returns than a similar fund with similar investments but higher management fees and/or turnover/transaction costs.
A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, and precious metals.
A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.
Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors. An IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company. Initial public offerings can be used to raise new equity capital for companies, to monetize the investments of private shareholders such as company founders or private equity investors, and to enable easy trading of existing holdings or future capital raising by becoming publicly traded.
In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional "long" position, where the investor will profit if the value of the asset rises.
An investor is a person that allocates capital with the expectation of a future financial return or to gain an advantage. Types of investments include: equity, debt securities, real estate, currency, commodity, token, derivatives such as put and call options, futures, forwards, etc. This definition makes no distinction between the investors in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. An investor who owns a stock is a shareholder.
The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai. The NSE was established in 1992 as the first dematerialized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facility to the investors spread across the length and breadth of the country. Vikram Limaye is Managing Director & Chief Executive Officer of NSE.
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928, and subsequently developed in their 1934 text Security Analysis.
In finance, statistical arbitrage is a class of short-term financial trading strategies that employ mean reversion models involving broadly diversified portfolios of securities held for short periods of time. These strategies are supported by substantial mathematical, computational, and trading platforms.
The B3- Brasil Bolsa Balcão S.A., formerly BM&FBOVESPA, is a stock exchange located in São Paulo, Brazil, and the second oldest of the country. At the end of 2011 it had a market capitalization of R$2.37 trillion, making it the 13th largest stock exchange in the world. However, owing to the slump in economic growth in Brazil associated with political problems, in addition to the strengthening of the United States dollar against the Brazilian real, the capitalization shrank to R$2.21 trillion by the end of 2015. On May 8, 2008, the São Paulo Stock Exchange (Bovespa) and the Brazilian Mercantile and Futures Exchange (BM&F) merged, creating BM&FBOVESPA. Then at March 30, 2017, BM&FBOVESPA merged with CETIP, creating B3.
Investment management is the professional asset management of various securities and other assets in order to meet specified investment goals for the benefit of the investors. Investors may be institutions or private investors.
In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio. Individuals have different profit objectives, and their individual skills make different tactics and strategies appropriate. Some choices involve a tradeoff between risk and return. Most investors fall somewhere in between, accepting some risk for the expectation of higher returns.
A listed investment company (LIC) is an Australian closed-end collective investment scheme similar to investment trusts in the UK and closed-end funds in the United States. Instead of regularly issuing new shares or canceling shares as investors join and leave the fund, investors buy and sell to each other on the ASX. They are traded like other securities on the Australian stock exchange.
David Dreman is an investor, who founded and is Chairman of Dreman Value Management, an investment company.
The following outline is provided as an overview of and topical guide to finance:
TrimTabs Investment Research, Inc. is a leading independent institutional research firm focused on equity market liquidity based in Sausalito, California.
Ares Management, L.P. is an American publicly traded, global alternative asset manager focused on alternative strategies, including credit, private equity, and real estate activities.
A stock index, or stock market index, is an index that measures a stock market, or a subset of the stock market, that helps investors compare current price levels with past prices to calculate market performance. It is computed from the prices of selected stocks.
The Knight Capital Group was an American global financial services firm engaging in market making, electronic execution, and institutional sales and trading. With its high-frequency trading algorithms Knight was the largest trader in U.S. equities, with a market share of 17.3% on NYSE and 16.9% on NASDAQ. The company agreed to be acquired by Getco LLC in December 2012 after an August 2012 trading error lost $460 million. The merger was completed in July 2013, forming KCG Holdings.
Chinese reverse mergers within the United States are accountable for 85% of all foreign reverse mergers in the early 21st century. A reverse merger, also known as a reverse takeover, is where a private company acquires a publicly traded firm or “shell company” that has essentially zero value on a registered stock exchange. The shell company's securities since becoming dormant are not registered under the Securities Exchange Act of 1934, where transactions on the secondary market are monitored. Reverse mergers in US markets and other countries had occurred in the past, but a large wave of Chinese companies came to the scene in the early 2000s.