Dr. Brooks' Table of Contents
     in chronological order

• Speculative Bubbles in the S&P 500: Was the Tech Bubble Confined to the Tech Sector?
  by Chris Brooks & Apostolos Katsaris
  October, 2005
   
• The Stock Performance of America's 100 Best Corporate Citizens
  by Chris Brooks, Stephen Brammer, & Stephen Pavelin
  October, 2005
   
• Timing is Everything: A Comparison and Evaluation of Market Timing Strategies
  by Chris Brooks, Apostolos Katsaris, & Gita Persand
  October, 2005
   
• Cross Hedging with Single Stock Futures
  by Chris Brooks, Ryan J. Davies, & Sang Soo Kim
  July 1, 2005
   
• Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures
  by Chris Brooks, Stephen Brammer, & Stephen Pavelin
  June 2005
   
• Decomposing the Price-Earnings Ratio
  by Chris Brooks & Keith P. Anderson
  May 2005
   
• The Long-Term Price-Earnings Ratio
  by Chris Brooks & Keith P. Anderson
  May 2005
   
• Extreme Returns from Extreme Value Stocks: Enhancing the Value Premium
  by Chris Brooks & Keith P. Anderson
  April 2005
   
• Corporate Reputation and Stock Returns: Are Good Firms Good for Investors?
  by Chris Brooks, Stephen Brammer, & Stephen Pavelin
  December 2004
   
• Gambling on the S&P 500's Gold Seal: New Evidence on the Index Effect
  by Chris Brooks, Konstantina Kappou, & Charles W.R. Ward
  December 2004
   
• Regime Switching Models of Speculative Bubbles with Volume: An Empirical Investigation of the S&P 500 Composite Index
  by Chris Brooks & Apostolos Katsaris
  June 2003
   
• The Impact of News on Measures of Undiversifiable Risk: Evidence from the UK Stock Market
  by Chris Brooks & Olan T. Henry
  2002
   
• The Statistical Properties of Hedge Fund Index Returns and their Implications for Investors
  by Chris Brooks & Harry M. Kat
  November 10, 2001
   

Speculative Bubbles in the S&P 500: Was the Tech Bubble Confined to the Tech Sector?
by Chris Brooks & Apostolos Katsaris
City University London, & Caliburn Capital Partners LLP
October, 2005

Abstract
This study tests for the presence of periodically, partially collapsing speculative bubbles in the sector indices of the S&P 500 using a regime-switching approach. We also employ an augmented model that includes trading volume as a technical indicator to improve the ability of the model to time bubble collapses and to better capture the temporal variations in returns. We find that over 70% of the S&P 500 index by market capitalization, and seven of its ten sector component indices exhibited bubble-like behaviour over our sample period. Thus the speculative bubble that grew in the 1990's and subsequently collapsed was pervasive in the US equity market. The bubble affected numerous sectors including energy and industrials, rather than being confined to information technology, telecommunications and the media.

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The Stock Performance of America's 100 Best Corporate Citizens
by Chris Brooks, Stephen Brammer, & Stephen Pavelin
City University London, University of Bath, & University of Reading
October, 2005

Abstract
This study considers the stock performance of America's 100 Best Corporate Citizens following the annual survey by Business Ethics. We examine both possible short-term announcement effects around the time of the survey's publication, and whether longer-term returns are higher for firms that are listed as good citizens. We find some evidence of a positive market reaction to a firm's presence in the top 100 firms that are made public, and that holders of the stock of such firms earn small abnormal returns during an announcement window. Over the year following the announcement, companies in the top 100 yield negative abnormal returns of around 3%. However, such companies tend to be large and with high price-to-book values, which existing studies suggest will tend to perform poorly. Once we allow for these firm characteristics, the poor performance of the highly rated firms largely disappears. We also find companies that are newly listed as good citizens and companies in the top 100 but outside the S&P 500 can provide considerable positive abnormal returns to investors.

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Timing is Everything: A Comparison and Evaluation of Market Timing Strategies
by Chris Brooks, Apostolos Katsaris, & Gita Persand
City University London, Caliburn Capital Partners LLP, & University of Bristol
October, 2005

Abstract
Following early failures, more recent empirical evidence has suggested that timing entries to and exits from equity markets may be feasible. A number of approaches to this most basic form of dynamic asset allocation are available, but which works best? This study investigates the relative profitability of several different methodologies using a very long dataset on the S&P 500. In order to overcome the accusations of data snooping and arbitrary parameter choice that beset much previous work in this area, we carefully consider whether the rule performance is sensitive to the specified user-adjustable parameters. We find that all but one of the approaches are able to beat a buy-and-hold equities strategy in risk-adjusted terms, although a strategy based on the difference between the earnings-price ratio and short term Treasury yields works best.

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Cross Hedging with Single Stock Futures
by Chris Brooks, Ryan J. Davies, & Sang Soo Kim
City University London, Babson College, & University of Reading
July 1, 2005

Abstract
This study evaluates the efficiency of cross hedging with single stock futures (SSF) contracts. We propose a new technique for hedging exposure to an individual stock that does not have options or exchange-traded SSF contracts written on it. Our method selects as a hedging instrument a portfolio of SSF contracts which are selected based on how closely matched their underlying firm characteristics are with the characteristics of the individual stock we are attempting to hedge. We investigate whether using cross-sectional characteristics to construct our hedge can provide hedging efficiency gains over that of constructing the hedge based on return correlations alone. Overall, we find that the best hedging performance is achieved through a portfolio that is hedged with market index futures and a SSF matched by both historical return correlation and cross-sectional matching characteristics. We also find it preferable to retain the chosen SSF contracts for the whole out-of-sample period while re-estimating the optimal hedge ratio at each rolling window.

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Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures
by Chris Brooks, Stephen Brammer, & Stephen Pavelin
City University London, University of Bath, & University of Reading
June 2005

Abstract
This study examines the relationship between corporate social performance and stock returns in the UK. Using a set of disaggregated social performance indicators for environment, employment and community activities, we are able to more closely evaluate the interactions between social and financial performance than would be the case for an aggregate measure. While scores on a composite social performance indicator are significantly negatively related to stock returns, we find that the poor financial reward offered by such firms is attributable to their good social performance on the employment and to a lesser extent the environmental aspects. Interestingly, we find that considerable abnormal returns are available from holding a portfolio of the socially least desirable stocks. These relationships between social and financial performance cannot be rationalised by multi-factor models for explaining the cross-sectional variation in returns or by industry effects.

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Decomposing the Price-Earnings Ratio
by Chris Brooks & Keith P. Anderson
University of Reading - ICMA Centre & City University London - Sir John Cass Business School
May 2005

Abstract
The price-earnings ratio is a widely used measure of the expected performance of companies, and it has almost invariably been calculated as the ratio of the current share price to the previous year's earnings. However, the P/E of a particular stock is partly determined by outside influences such as the year in which it is measured, the size of the company, and the sector in which the company operates. Examining all UK companies since 1975, we propose a modified price-earnings ratio that decomposes these influences. We then use a regression to weight the factors according to their power in predicting returns. The decomposed price-earnings ratio is able to double the gap in annual returns between the value and glamour deciles, and thus constitutes a useful tool for value fund managers and hedge funds.

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The Long-Term Price-Earnings Ratio
by Chris Brooks & Keith P. Anderson
University of Reading - ICMA Centre & City University London - Sir John Cass Business School
May 2005

Abstract
The price-earnings effect has been thoroughly documented and widely studied around the world. However, in existing research it has almost exclusively been calculated on the basis of the previous year's earnings. We show that the power of the effect has until now been seriously underestimated, due to taking too short-term a view of earnings. We look at all UK companies since 1975, and using the traditional P/E ratio we find the difference in average annual returns between the value and glamour deciles to be 6%, similar to other authors' findings. We are able to almost double the value premium by calculating P/E ratios using earnings averaged over the last eight years. Averaging, however, implies equal weights for each past year. We further enhance the premium by optimising the weights of the past years of earnings in constructing the P/E ratio.

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Extreme Returns from Extreme Value Stocks: Enhancing the Value Premium
by Chris Brooks & Keith P. Anderson
University of Reading - ICMA Centre & City University London - Sir John Cass Business School
April 2005

Abstract
Investigations into value-based 'anomalies' such as the P/E effect typically sort shares into quintiles, or at most deciles. These are blunt instruments. We test whether most of the extra value to be found in the lower end of the P/E spectrum is to be found in the very lowest P/E shares, and whether the worst investments are in the few shares with the highest P/E. Using a long-term definition of earnings, and attributing influences on the P/E to company size and sector, we find that small portfolios of value shares give returns of 40%+ per annum, while small portfolios of glamour shares give returns less than the risk-free rate. We thus show that by a more judicious use of the P/E ratio, we can considerably enhance the value premium.

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Corporate Reputation and Stock Returns: Are Good Firms Good for Investors?
by Chris Brooks, Stephen Brammer, & Stephen Pavelin
City University of London, University of Bath, & University of Reading
December 2004

Abstract
This paper examines the relationship between a firm's reputation and the returns on its shares. We employ a unique dataset from the UK based on ten years of surveys conducted for Management Today, where company directors and analysts at leading investment firms are asked to rate each company in their sector. We consider whether there may be a short-term effect around the time of the announcement and whether longer-term returns are superior for highly ranked firms. We find that while there is little evidence for short-term price pressure around the time of the event, investors who purchase stocks with reputation scores that have risen significantly can make abnormal returns. Consistent with the notion that there is no such thing as bad publicity, we find that firm's whose scores have fallen substantially still exhibit positive abnormal returns in both the short and long run when the market index is employed as a benchmark. However, when a more appropriate comparator is used, evidence of out-performance entirely disappears.

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Gambling on the S&P 500's Gold Seal: New Evidence on the Index Effect
by Chris Brooks, Konstantina Kappou, & Charles W.R. Ward
City University of London & University of Reading
December 2004

Abstract
This study examines the abnormal returns, trading activity and long term performance of stocks that were added to the S&P 500 Index during the period 1990 to 2002. By using a three-factor pricing model that allows for firm size and value characteristics as well as market risk, we are able to shed new light on the widely observed 'index effect'. We argue that for the years 1990-1997 in particular, firm size mattered in the long-run and firm size effects cannot be captured by a single factor model for abnormal returns. We also find a transitory increase in trading volume between the announcement and a few days after the effective date. The 'seal' of S&P 500 Index membership has very long term effects and inclusion is not an information-free event.

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Regime Switching Models of Speculative Bubbles with Volume: An Empirical Investigation of the S&P 500 Composite Index
by Chris Brooks & Apostolos Katsaris
City University of London & Caliburn Capital Partners LLP
June 2003

Abstract
In this paper we test for the presence of periodically partially collapsing, positive and negative speculative bubbles in the S&P 500 Composite Index for the period 1888-2003. We extend existing regime - Switching models of speculative behavior by including abnormal volume as an indicator of the probable time of the bubble collapse. Abnormal volume is included as both a classifying variable that helps predict the probability of the bubble surviving, and as a factor of risk in the surviving state equation. Increased volume is considered a signal that market beliefs concerning the future of the bubble are changing. We show that the deviation of actual prices from fundamental values and abnormal volume are significant predictors and classifiers of returns.

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The Impact of News on Measures of Undiversifiable Risk: Evidence from the UK Stock Market
by Chris Brooks & Olan T. Henry
City University of London & University of Melbourne
2002

Abstract
Using UK equity index data, this paper considers the impact of news on time varying measures of beta, the usual measure of undiversifiable risk. The results suggest that beta depends on two sources of news - news about the market and news about the sector. The asymmetric effect in beta is consistent across all sectors considered. Recent research provides conflicting evidence as to whether abnormalities in equity returns are a result of changes in expected returns in an efficient market or an over-reaction to new information. The evidence in this paper suggests that such abnormalities may occur as a result of changes in expected return caused by time-variation and symmetry in beta.

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