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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jbankfin.2009.06.005 Byline: An-Sing Chen (a), Lee-Young Cheng (a), Kuang-Fu Cheng (a)(b) Keywords: Stock market bubbles; Prediction; Forecasting; Granger causality Abstract: Results of research on whether changes in earnings can predict future stock returns are inconclusive. We add to this debate by using long-term data from 1871 to 2004 to examine the predictive power of changes in earnings in periods of intrinsic bubbles and in periods absent intrinsic bubbles. Our results show that accounting for bubbles is important in whether changes in earnings can predict future stock returns. In periods of no bubble, we find that changes in earnings Granger-cause future returns, whereas in periods of bubble, this Granger causality from changes in earnings to future returns cannot be found. We conclude that changes in earnings can predict future stock returns, but only in periods absent bubbles. Author Affiliation: (a) National Chung Cheng University, Department of Finance, 168 University Rd., Min-Hsiung, Chia-Yi, Taiwan, ROC (b) Kao Yuan University, Department of International Business, 1821 Jhongshan Rd., Lu-Jhu, Kao-Hsiung, Taiwan, ROC Article History: Received 6 August 2008; Accepted 3 June 2009

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jbankfin.2005.07.016 Byline: An-Sing Chen, Bi-Shia Hong Keywords: Institutional ownership; Analysts' earnings forecast; Herding; Feedback trading Abstract: Traditional data sources do not have institutional holding data on a daily basis. Because of this, most prior empirical studies of institutional herding have focused on quarterly or annual data. The problem, however, with using quarterly or annual data on institutional holdings is that these data may not reveal institutional herding if it occurs over a shorter time interval. For this study, we make use of data from the Taiwan Stock Exchange (TSE). Unlike traditional data sources, the TSE provides daily institutional holdings information. The use of this detailed data allows us to make more interesting analysis and inferences. In this study, we examine the relationship between institutional ownership changes and returns localized around analysts' earnings forecast release events. Analysis of institutional ownership and return data around the earnings release event allows us to investigate institutional herding and feedback behavior in a different level. Our major results are as follows: (1) there exists a relation between company specific attributes and institutional herding, (2) observed changes in institutional ownership and contemporaneous return are mainly the results of inter-day price impact of herding, (3) institutional investors show evidence of being informed traders in buying but not selling. Author Affiliation: National Chung Cheng University, Department of Finance, Ming Hsiung, Chia-Yi 621, Taiwan, ROC Article History: Received 6 September 2004; Accepted 4 July 2005

The viability of econometric models to evaluate option pricing is examined.