The portfolio of high-duration bonds minus low-duration bonds is then formed by computing the difference between the holding-period returns of the basket of equally weighted high-duration bonds and the basket of equally weighted low-duration bonds.
Figure 3 plots the index of cumulative holding-period returns of the HML portfolio.
A-announcement return and T-announcement return are the excess holding-period returns from day -2 to day 0 relative to the Wall Street Journal announcement date for the acquirer and the target, respectively.
This return (and the others we report) is calculated by computing the firm's holding-period return and subtracting from it the holding-period return on an industry portfolio (with daily rebalancing and excluding the sample firm) based on the firm's two-digit SIC industry, as defined by CRSP.
12) Table 5 shows the various statistics of the three different holding-period returns
of the short-maturity straddles from this exercise.
Obviously, if people had perfect foresight about future short-term interest rates, holding-period returns would necessarily be equalized through arbitrage.
According to the expectations hypothesis, when investors expect a recession, they believe that long-term interest rates should fall immediately in order to equalize future expected holding-period returns.
In particular, three-year holding-period returns, compounded monthly, are examined for acquiring firms and for industry-matched firms that did not make acquisitions during the period.
The three-year holding-period returns for bidders making high-tech acquisitions, presented in Table II, address this question.
In all cases, we begin by computing the holding-period returns
for the sample SIPs and the time-period-matched returns on the local, world, and US market indexes.
Consistent with prior studies, we find that firms that issue new equity experience significant positive market-adjusted abnormal holding-period returns
for the 11-month period preceding the announcement, and significant negative abnormal holding-period returns
for the three-year period subsequent to the announcement date.
We study the relation between investment banker reputation and announcement-period returns and between banker reputation and three-year post-issue holding-period returns
for firms that conducted seasoned equity offerings (SEOs) between 1980 and 1994.