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JOURNAL OF ACCOUNTING AND FINANCE
The Momentous Ripple Effects in the New Investment Environment
Author(s): Cheng-Huei Chiao, Robert Kao, Xiankui Hu
Citation: Cheng-Huei Chiao, Robert Kao, Xiankui Hu, (2012) "The Momentous Ripple Effects in the New Investment Environment," Vol. 12, Iss. 1, pp. 94 - 122
Article Type: Research paper
Publisher: North American Business Press
Abstract:
In the 2000s, many companies have been financially restructured so that they can be in a better position
to deal with their debt burdens after the high-tech bubble. Investors may respond systematically either
with efficient reactions, under-reactions, or over-reactions to the new financial information. In this paper,
we generated the composite index of the four different group ratios by ranking and aggregating from an
individual company level. We applied the Polynomial Distributed Lag Model to explore the existence of
financial ratios’ ripple effects. The effects displayed in the previous periods of financial ratios may
influence the current PE ratios by investors’ responses. The first difference on the corresponding
composite financial ratios to the PE ratios also has been included in this analysis. The findings prove that
investors possess distinctive and momentous ripple effects spreading across those financial ratios before
and after the high-tech bubble. The results can provide investors’ decision-making on managing their
investment portfolio in the new financial environment.
