Faculty News

Smart money on the slopes

By Andrew Clark

3 April 2012
The Times
© 2012 Times Newspapers Ltd. All rights reserved

It's bound to be quiet on the markets after the Easter holiday next week — but that could be good news for investors. An in-depth study of corporate jet activity has found that share prices are 15 per cent less volatile when chief executives head for the beach or the ski slopes.

David Yermack, a finance professor at New York's Stern School of Business, reckons that public companies go into a kind of purdah when their bosses are on holiday. News announcements drop by 40 per cent. Yermack suggests that if stockholders were very clever, they could build a trading strategy around observing jet take-offs to golf resorts and vineyards.

This wouldn't be unprecedented: back in the 18th century, stocks tended to yo-yo when mailboats put into English ports carrying the latest price changes from Amsterdam, in an early example of the possibilities of timetable-related arbitrage. Stena Line's Harwich-to-Hook-of-Holland service hasn't got quite the same market-moving cachet.

In America, corporate bosses spend an average of 18 business days a year at their holiday homes, a number that dropped sharply in 2008 when the financial crisis bit hard. One unnamed workaholic, though, has taken only three days off in four years.