discounting and divergence of opinion the objective of this paper is to adopt a general equilibrium model and determine the socially efficient discount factor risk free rate and discount rate when there are heterogeneous anticipations about the growth of the economy as well as heterogeneous time preference rates among others we tackle the following questions is the socially efficient discount factor an arithmetic average of the individual subjectively anticipated discount factors more generally can the arrow debreu prices the risk free rates the subjectively expected socially efficient discount factors and discount rates be obtained as an average of the individual subjectively anticipated ones can beliefs dispersion be analyzed as a sort of additional risk or uncertainty leading to possibly lower discount rates is it socially efficient when diversity of opinion is taken into account to reduce the discount rate per year for more distant horizons if so what is the trajectory of the decline

shareholder information and partial tender offers abstract the raider faces a winners curse problem when the target shareholders have private information about the post takeover value using marquez and yilmaz 2008 framework we show that this problem can be partly mitigated by using partial tender offers

non convexities and the efficiency of equilibria in insurance markets with asymmetric information abstract the nature of the efficiency frontier in models with adverse selection has not been studied in the literature we show that this frontier cannot always be strictly concave we obtain however that there is always a one to one correspondence between market equilibrium and second best efficiency whatever the shape of the efficiency frontier the results are illustrated with an insurance example

on the optimality of partial tender offers abstract this paper analyzes the optimality of partial tender offers in acquisition of firms we show that partial offers have no impact on the acquirer s expected profit under complete information

raiders or saviors the evidence on six controversial investors abstract carl icahn irwin jacobs carl lindner david murdock victor posner and the late charles bluhdorn are usually portrayed as corporate raiders the evidence here however shows that between 1977 and 1982 when it was first announced that they had purchased stock in a given firm stock prices on average increased significantly the investors activities in target firms for the two years following the initial stock purchase are likewise inconsistent with raiding we discuss two hypotheses that are consistent with the evidence first these investors improve the management of target firms second they are systematically able to identify under priced stocks

the efficiency of competitive equilibria in insurance markets with asymmetric information abstract this paper addresses the relationship between competitive equilibria and efficient allocations in an insurance market with asymmetric information using the definition of second best efficiency proposed by harris and townsend 1981 for environments characterized by informational assmmetry the efficiency properties of several proposed market equilibria are examined we find an analogue to the first optimality theorem a miyazaki wilson equilibrium always results in a second best allocation

central bank secrecy in the foreign exchange market abstract this paper argues that with sticky goods prices and a forward looking exchange rate the central bank will only want a partial dissemination of its information about shocks to the economy it is shown that in such a model the central bank may prefer to intervene secretly in the foreign exchange markets when responding in anticipation of future shocks but openly when reacting to current shocks the model thus provides a rationale for secrecy in central bank foreign exchange operations the model also elucidates the relationship between the signaling and portfolio balance channels of sterilized intervention

ownership structure speculation and shareholder intervention an institution holding shares in a firm can use information about the firm both for trading speculation and for deciding whether to intervene to improve firm performance intervention increases the value of the institution s existing shareholdings but intervention only increases the institution s trading profits if it enhances the precision of the institution s information relative to that of uninformed traders thus the ability to speculate can increase or decrease institutional intervention we examine key factors that affect the intervention decision the usefulness of short swing provisions and restricted shares in encouraging institutional intervention and implications for ownership structure across different firms institutional investors hold an ever greater fraction of corporate america s equity traditionally these institutions were stock pickers who tried to beat the market through trading if a firm whose stock they held seemed headed for trouble these investors headed for the door the wall street rule more recently some of these institutions have been using the ownership rights attached to their shares to pressure firms to act in the shareholders interest some have even argued that there is a synergy between gathering information for use in trading shares speculation and intelligently pressuring firms to improve performance intervention we argue that these motives can also conflict analyzing these motives allows us to predict which firms are most likely to attract institutional intervention which in turn has crosssectional implications for firm ownership structure recent examples suggest that institutional investors with large stakes sometimes intervene and sometimes follow the wall street rule so that there is indeed a choice to be studied in the early 1990s there was a wave of activism by a variety of large institutional investors among them calpers the california public employees pension fund putnam management a mutual fund manager and j p morgan a bank holding company these institu

risk arbitrage in takeovers this article studies the role of risk arbitrageurs in takeovers and the source of their advantage we show how the presence of arbitrageurs affects the value of the target shares since arbitrageurs are more likely to tender therefore an arbitrageur has the informational advantage of knowing he bought shares in equilibrium the number of arbitrageurs buying shares and the price they pay are determined endogenously we also present several empirical implications including the relationship among trading volume takeover premium liquidity of the shares and the number of risk arbitrageurs investing in one particular deal copyright 2002 oxford university press

optimal risk sharing under adverse selection and imperfect risk perception the present paper thoroughly explores second best efficient allocations in an insurance economy with adverse selection we start with a natural extension of the classical model assuming less than perfect risk perception we characterize the con straints on efficient redistribution and we summarize the incidence of incentives on the economy with the notions of weak and strong adverse selection finally we show in what sense improving risk perception enhances welfare a typical situation where the risk perception of the insurer and that of policy holders differ is one in which each party knows something that the other does not the insurer may correctly assess the impact on risk of an individual s character istics without observing them all whereas policyholders may know all their characteristics without relating them correctly to their risks these simple obser vations call for a modelling of imperfect risk perception and adverse selection

the information content of short interest a natural experiment an increase in the cost of selling short should increase the bearish information content of short interest announcements by driving relatively uninformed short sellers out of the market we extend the diamond and verrecchia 1987 model to include short selling against the box and test the extended model using a natural experiment based around the taxpayer relief act of 1997 tra97 tra97 made short selling more costly for those shorting against the box consistent with the implications of our extended model this increase in short selling costs strengthens the negative relationship between short interest and subsequent stock price performance post tra97

information and efficiency in tender offers we analyze tender offers where privately informed shareholders are uncertain about the raider s ability to improve firm value the raider suffers a lemons problem in that for any price offered only shareholders who are relatively pessimistic about the value of the firm tender their shares consequently the raider finds it too costly to induce shareholders to tender when their information is positive in the limit as the number of shareholders gets arbitrarily large when private benefits are relatively low the tender offer is unsuccessful if the takeover has the potential to create value the takeover market is therefore inefficient in contrast when private benefits of control are high the tender offer allocates the firm to any value increasing raider but may also allow inefficient takeovers to occur unlike the case where all information is symmetric shareholders cannot always extract the entire surplus from the acquisition

informed speculation with imperfect competition competitive rational expectations models have the unsatisfactory property dubbed the schizophrenia problem by hellwig that each trader takes the equilibrium price as given despite the fact that he influences that price an examination of information aggregation in a non competitive rational expectations model using a nash equilibrium in demand functions shows that the schizophrenia problem is avoided by having each trader take into account the effect his demand has on the equilibrium price given a distribution of private information across traders prices reveal less information than in the competition equilibrium and prices no longer become fully informative in the limit as noise trading vanishes or as traders become risk neutral with small traders the model may become one of monopolistic competition not perfect competition in contrast to the competitive model a reasonable model of endogenous acquisition of costly private information is obtained even when traders are risk neutral

an options based approach to forecast competing bids evidence for canadian takeover battles during takeover battles a tender offer provides a call option right to the target s shareholders it guarantees the offered price but maintains the chance of a higher offer we present an options based approach to estimate the probability and expected value of higher competing takeover bids using target stock price data analysing canadian takeover battles in the period 1997 to 2007 we find that during the 5 trading days prior to the occurrence of an increased takeover bid the estimated probability of a higher bid exceeds 80 on average and the expected value of a potential competing bid almost matches the realized value

scientific progress and irreversibility an economic interpretation of the precautionary principle abstract we consider the problem of the optimal use of a good whose consumption can produce damages in the future scientific progress is made over time that provides information on the distribution of the intensity of damages we show that this progress induces earlier prevention effort only if prudence is larger than twice absolute risk aversion this paper thus identifies the class of quite restrictive but plausible conditions such that scientific uncertainties justify an immediate reduction of the consumption of a potentially toxic substance

price regulation in insurance markets with asymmetric information abstract the paper presents and discusses a regulatory policy in insurance markets it is based upon a two sided rule each company must propose at least one contract with full coverage and a ceiling is imposed on the level of premiums

increases in prudence and increases in risk aversion abstract this paper determines necessary and sufficient conditions for increases in absolute prudence to lead to increases in risk aversion and vice versa

freeze out mergers do freeze out mergers mitigate the free rider problem of corporate takeovers we study this question in a tender offer model with finitely many shareholders under a freeze out merger minority shareholders expect to receive the original offer price whether or not they tender their shares we show that the ability to freeze out shareholders increases the raider s expected profit however as the number of shareholders gets arbitrarily large the raider s expected profit in equilibrium converges to zero for any freeze out clause with an ownership threshold that is strictly above simple majority in this sense freeze out mergers do not solve the free rider problem received september 17 2016 editorial decision june 3 2018 by editor francesca cornelli

information in tender offers with a large shareholder we study takeovers of firms whose ownership structure is a mixture of minority block holders and small shareholders we show that the combination of dispersed private information on the side of small shareholders and the presence of a large shareholder can facilitate profitable takeovers furthermore our analysis implies that even if some model of takeovers predicts a profit for the raider for example due to private benefits the profit will be underestimated unless the large shareholder and the dispersion of information among the small shareholders are modeled

noise trading and takeovers a model of takeovers is investigated in which noise trading provides camouflage that makes it possible for a large corporate outsider to purchase enough shares at favorable prices so that takeovers become profitable although the model accommodates the possibility of dilution grossman and hart 1980 and a large incumbent shareholder shleifer and vishny 1986 neither dilution nor a large incumbent shareholder is necessary for costly takeovers to be profitable noise trading tends to encourage costly takeovers that otherwise would not occur and to discourage beneficial takeovers that otherwise would occur

precautionary saving in the small and in the large the theory of precautionary saving is shown to be isomorphic to the arrow pratt theory of risk aversion making possible the application of a large body of knowledge about risk aversion to precautionary saving and more generally to the theory of optimal choice under risk in particular a measure of the strength of the precautionary saving motive analogous to the arrow pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the dreze modigliani substitution effect copyright 1990 by the econometric society

forecasting annual gross electricity demand by artificial neural networks using predicted values of socio economic indicators and climatic conditions case of turkey abstract in this work the annual gross electricity demand of turkey was modeled by multiple linear regression and artificial neural networks as a function population gross domestic product per capita inflation percentage unemployment percentage average summer temperature and average winter temperature among these the unemployment percentage and the average winter temperature were found to be insignificant to determine the demand for the years between 1975 and 2013 next the future values of the statistically significant variables were predicted by time series ann models and these were simulated in a multilayer perceptron ann model to forecast the future annual electricity demand the results were validated with a very high accuracy for the years that the electricity demand was known 2007 2013 and they were also superior to the official predictions done by ministry of energy and natural resources of turkey the model was then used to forecast the annual gross electricity demand for the future years and it was found that the demand will be doubled reaching about 460 tw h in the year 2028 finally it was concluded that the approach applied in this work can easily be implemented for other countries to make accurate predictions for the future