Pierpont and the Capital Market

Authors


  • Philip Brown (philip.brown@unsw.edu.au) is a Professor in the Australian School of Business, The University of New South Wales and the UWA Business School, The University of Western Australia; Andrew Ferguson a Professor in the School of Accounting, University of Technology, Sydney; and Andrew B. Jackson a Lecturer in the Australian School of Business, The University of New South Wales.

  • We gratefully acknowledge the helpful comments of Raymond da Silva Rosa, participants in seminars at the University of New South Wales and the University of Technology, Sydney, and the comments and suggestions of the anonymous reviewer and the editor. We also appreciate the research assistance of Sam Sherry.

Abstract

For almost forty years Trevor Sykes was one of the most recognizable business journalists in Australia. Sykes created his Pierpont character in February 1972 while writing for Australia's leading financial paper, the Australian Financial Review. Pierpont was a take on J. Pierpont Morgan, founder of the J. P. Morgan banking house. Sykes used his Pierpont column to research and reflect on the curious world of Australian business. Articles were mostly in narrative form, comprising an in-depth critique of one or more companies and written with more than a touch of humour. Over the years Pierpont garnered a large following, and it is therefore quite possible his musings influenced investors' beliefs about company fundamentals. We assess this possibility by examining the share price movements of companies around the time they found themselves featured in a Pierpont column. We extend previous work in this area by examining the market reaction to a popular columnist's writings published regularly over a lengthy period, and by implementing an extensive double-coding procedure that allows us to more finely and reliably partition trading recommendations based on the content of each column. In brief, we find evidence that stocks with positive coverage by Pierpont enjoyed abnormal returns averaging 6.4 per cent over thirty days around the publication date, while stocks with negative coverage suffered abnormal losses of 5.5 per cent. Trading volume was also affected.

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