bluuebunny/crossref_metadata_2025 huggingface dataset:
A universal semigroup
Authors: Morris Sidney A.
Published: April 2009

J.H. Michael recently proved that there exists a metric semigroup U such that every compact metric semigroup with property P is topologically isomorphic to a subsemigroup of U; where a semigroup S has property P if and only if for each x, y in S, x ≠ y, there is a z in S such that xs ≠ yz or zx ≠ zy

A stronger result is proved here more simply. It is shown that for any set A of metric semigroups there exists a metric semigroup U such that each S in A is topologically isomorphic to a subsemigroup of U. In particular this is the case when A is the class of all separable metric semigroups, or more particularly the class of all compact metric semigroups.
Rings with orthogonality relations
Authors: Davis G.
Published: April 2009

The rings of this paper are assumed to have relations of orthogonality defined on them. Such relations are uniquely determined by complete boolean algebras of ideals. Using the Stone space of these boolean algebras, and following J. Dauns and K.H. Hofmann, a sheaf-theoretic representation is obtained for rings with orthogonality relations, and the rings of global sections of these sheaves are characterized. Baer rings, f–rings and commutative semi-prime rings have natural orthogonality relations and among these the Baer rings are isomorphic to their associated rings of global sections. A special type of ideal is singled out in commutative semi-prime rings and following G. Spirason and E. Strzelecki, in an unpublished note, a characterization of a class of such rings is obtained.
The weak density of the non-invertible elements of a commutative Banach algebra
Authors: Graham Colin C.
Published: April 2009

This is proved: if B is a commutative Banach algebra with identity, then the non-invertible elements of B are weakly dense in B if and only if the maximal ideal space of B is infinite.
On properties of countable character
Authors: Sabbagh Gabriel
Published: April 2009

It is proved that if a class X of algebras of countable similarity type is closed under isomorphism and ultrapower, then the class of subalgebras of direct products of elements of X is of countable character.
Generalization of Hall planes of odd order
Authors: Kirkpatrick P.B.
Published: April 2009

Some properties of projective planes having a certain type of collineation group are proved, and a class of these planes which properly contains the class of all Hall planes of odd order is explicitly constructed.
Geodesies of an affine connection and electromagnetism with radiation reaction
Authors: Burman R.R.
Published: April 2009

This paper deals with the motion of a point test charge in an external electromagnetic field with the effect of electromagnetic radiation reaction included. The equation of motion applicable in a general Riemannian space-time is written as the geodesic equation of an affine connection. The connection is the sum of the Christoffel connection and a tensor which depends on, among other things, the external electromagnetic field, the charge and mass of the particle and the Ricci tensor. The affinity is not unique; a choice is made so that the covariant derivative of the metric tensor with respect to the connection vanishes. The special cases of conformally flat spaces and the space of general relativity are discussed.
Certain non-algebras in harmonic analysis
Authors: Butler Lynette M. , Edwards R.E.
Published: April 2009

Given qo ∈ [1, 2), functions and are constructed such that fgqAq for every q ∈ [1, qo]. In particular, if p ∈ (1, 2), AP is not an algebra.
The interrelations among various spaces of distributions
Authors: Jeyamma S.
Published: April 2009

In this paper we discuss the interrelations among various spaces of distributions and show that none of them can be linearly and differentiably homeomorphic to the space of Mikusiński operators. It is also shown that the distributions of Mikusiński-Sikorski can also be defined by the method described by Temple as the completion of the space of continuous functions after introducing a weaker notion of convergence in this space.
Self adjoint operators and matrix measures
Authors: Browne Patrick J.
Published: April 2009

Given a self adjoint operator, T, on a Hilbert space H, and given an integer n ≥ 1, we produce a collection , N ∈ L, of n × n positive matrix measures and a unitary map U: such that UTU−1, restricted to the co-ordinate space , is the multiplication operator F(t) → tF(t) in that space. This is a generalization of the spectral representation theory of Dunford and Schwartz, Linear operators, II (1966).
On an infinite integral linear group
Authors: Farouqi I.H. , Neumann Hanna
Published: April 2009

This paper investigates the normal subgroup structure of the automorphism group Γ of a free abelian group A of countably infinite rank. The finitary automorphisms, that is those acting non-trivially only on a direct summand of A of finite rank, form a normal subgroup Φ of Γ; the sublattice of all normal subgroups of Γ contained in Φ is in fact the sublattice of normal subgroups of Φ and has a quite transparent structure. By contrast there is a profusion of normal subgroups of Γ not contained in Φ. For example, the collection of certain types of these normal subgroups, defined as generalizations of the congruence subgroups of finite dimensional integral linear groups, if partially ordered by inclusion, can be shown to contain infinitely many chains of the order type of the continuum.
Just non-finitely-based varieties of groups
Authors: Newman M.F.
Published: April 2009

A variety of groups is just non-finitely-based if it does not have a finite basis for its laws while all its proper subvarieties do have a finite basis. Recent work of Ol'šanskiiˇ, Vaughan-Lee and Adjan guarantees the existence of at least one just non-finitely-based variety. In this note an infinite number of just non-finitely-based varieties are shown to exist by proving that for every prime p there is a non-finitely based variety of p–groups.
Homogeneous Lie algebras
Authors: Świerczkowski S.
Published: April 2009

It is shown that the automorphism group of a real Lie algebra operates transitively on the set of its one-dimensional subspaces iff the Lie algebra is abelian, or isomorphic to the algebra of skew-symmetric 3 × 3 real matrices. This allows to conclude that R, S0(2), S0(3) and Spin(3) are the only connected Lie groups such that:
(1) the conjugates of every connected set containing e cover a neighbourhood of e,
(2) every point sufficiently close to e lies on exactly one 1-parameter subgroup.
Homomorphisms of sharply transitive projective planes
Authors: Row Don
Published: April 2009

We construct projective planes having non-degenerate homomorphic images, the homomorphisms preserving certain sharply transitive collineation groups.
On soluble groups of prime-power exponent
Authors: Brisley Warren , Kovács L.G.
Published: April 2009

Let p be a prime and the variety of elementary abelian by elementary abelian p-groups. A result of Brisley and Macdonald is generalized as follows. If H is a finite group in and G is a soluble group of p–power exponent such that no section of G is isomorphic to H, then G is nilpotent and its class is bounded by a function of three variables: H, the exponent of G, and the soluble length of G. It is a corollary that if the variety generated by a soluble group G of finite exponent contains , then each finite group in is isomorphic to some section of G.
Maximal sum-free sets in cyclic groups of prime-power order
Authors: Street Anne Penfold
Published: April 2009

A subset S of an additive group G is called a maximal sum-free set in G if (S+S) ∩ S = ø and |S| ≥ |T| for every sum-free set T in G. In this paper, the maximal sum-free sets in cyclic p–groups are characterized to within automorphism.
Locally finite varieties of groups arising from Cross varieties: Corrigendum
Authors: Macdonald Sheila Oates
Published: April 2009

One condition on D was omitted from the statement of Theorem B in the paper [1], namely that (and the corresponding condition in Theorem A). The proof of the theorem clearly requires that this be so and it is not difficult to see that such a D can always be chosen. However, Dr R.M. Bryant has pointed out that not only is the theorem true as it stands, but indeed the conditions can be relaxed slightly to allow D to be any group such that

.
Maximal sum-free sets in finite abelian groups, II
Authors: Yap H.P.
Published: April 2009

Maximal sum-free sets in groups Zn, where n is any positive integer such, that every prime divisor of n is congruent to 1 modulo 3, are completely characterized.
Torsion topological groups with minimal open sets
Authors: Thornton M.C.
Published: April 2009

Torsion topological groups with the additional property that the intersection of open sets is open are considered and their topological structure is determined:

1) the topology is uniquely determined by a normal subgroup;

2) each group is uniquely an extension of an indiscrete group by a discrete group;

3) the topology may be changed within limits without changing the dual group.
Finitely generated cyclic extensions of free groups are residually finite
Authors: Baumslag Gilbert
Published: April 2009

We establish the result that a finitely generated cyclic extension of a free group is residually finite. This is done, in part, by making use of the fact that a finitely generated module over a principal ideal domain is a direct sum of cyclic modules.
On varieties of soluble groups
Authors: Groves J.R.J.
Published: April 2009

We show that, under certain conditions, a soluble variety of groups which does not contain the variety of all metabelian groups is a finite exponent by nilpotent by finite exponent variety.
A family of non-invertible prime links: Corrigendum
Authors: McPherson James M.
Published: April 2009

Wilbur Whitten has pointed out to me that there exist invertible links amongst my family of allegedly non-invertible links [3], and a letter from Neville Smythe has confirmed that the error lies in the third paragraph from the bottom of page 106. Professor Smythe also suggested that the use of F-isotopy was possibly a red herring and, accordingly, I have devised a simpler proof of the existence of infinitely many non-invertible prime links in S3 (although Wilbur Whitten's paper [4] makes such a proof redundant).
Improved classical limit analogues for Galton-Watson processes with or without immigration
Authors: Heyde C.C. , Leslie J.R.
Published: April 2009

It has recently emerged that the central limit theorem and iterated logarithm law for random walk processes have natural counterparts for Galton-Watson processes with or without immigration. Much of the work on these counterparts has previously involved the imposition of supplementary moment conditions. In this paper we show how to dispense with these supplementary conditions and in so doing make the analogy with the random walk results complete.
On the differential equations for tide-well systems
Authors: Brown A.
Published: April 2009

The paper discusses the differential equation

from a fresh point of view, to supplement an earlier discussion by Noye. In particular, for n = 1 the equation can be transformed to the equation for a pendulum with viscous damping, with corresponding to critical damping. At the end of the paper, some related equations are considered.
A finite set covering theorem
Authors: Brace Alan , Daykin D.E.
Published: April 2009

Let n, s, t be integers with s > t > 1 and n > (t+2)2S−t−l We prove that if n subsets of a set S with s elements have union S then some t of them have union S. The result is best possible.
On product varieties of groups
Authors: Vaughan-Lee M.R.
Published: April 2009

An example is given of a finitely based variety of groups such that is not finitely based.

Let be the variety of groups determined by the laws
(1) [[x1, x2], [x3, x4, [x5, x6]],
(2) [[x1, x2, x3], [x4, x5]] [[x1x2], [x4, x5, x3]]−1,
[[x1, x2, x3], [x1, x2]]. Then is not finitely based.
Self propulsion due to oscillations on the surface of a cylinder at low Reynolds number
Authors: Blake J.R.
Published: April 2009

The two-dimensional flow around an infinite cylinder at low Reynolds number has interested fluid dynamicists for many years. In this paper it is shown that an infinite cylinder can propel itself through a viscous fluid (for example micro-organisms) if it has certain undulations on its surface.
Rings with a few more zero-divisors
Authors: Christensen C.
Published: April 2009

It is well-known that every finite ring with non-zero-divisors has order not exceeding the square of the order n of its left zero-divisor set. Unital rings whose order is precisely n2 have been described already. Here we discuss finite rings with relatively larger zero-divisor sets, namely those of order greater than n3/2. This is achieved by describing the class of all finite rings with left composition length two at most, and using a theorem relating the left composition length of a finite ring to the size of its left zero-divisor set.
The sub-near-field structure of finite near-fields
Authors: Dancs Susan
Published: April 2009

The sub-near-field structure of finite near-fields is analogous to the sub-field structure of finite fields. A finite near-field of order pln contains a unique sub-near-field of order pλ if and only if λ divides ln.
On subparacompact and countably subparacompact spaces
Authors: Singal M.K. , Jain Pushpa
Published: April 2009

A space is said to be subparacompact if every open covering of it has a σ-discrete closed refinement. Subparacompactness is equivalent to Fσ -screenability of McAuley and also to σ-paracompactness of Arhangel'skiĭ. Some properties of these spaces have been obtained in this note. Countably subparacompact spaces, which can be defined in an analogous manner, have also been studied.
On the analyticity of generalized minimal surfaces
Authors: Trudinger Neil S.
Published: April 2009

Strongly differentiable solutions of the minimal surface equation are shown to be classical solutions and consequently locally analytic. A global regularity result is also proved.
Remark on ordered abelian groups
Authors: Minassian Donald P.
Published: April 2009

Let N be a subgroup of the torsion-free abelian group G. Then a partial order for N is contained in one, two or uncountably many full orders for G, and a full order for nonzero N is contained in one or uncountably many full orders for G.
Weak Uniqueness for Elliptic Operators in ℝ3 with Time-Independent Coefficients
Authors: Giannotti Cristina
Published: April 2009

The author gives a proof with analytic means of weak uniqueness for the Dirichlet problem associated to a second order uniformly elliptic operator in ℝ3 with coefficients independent of the coordinate x3 and continuous in ℝ2 {0}.
Distance of a Bloch Function to the Little Bloch Space
Authors: Tjani Maria
Published: April 2009

Motivated by a formula of P. Jones that gives the distance of a Bloch function to BMOA, the space of bounded mean oscillations, we obtain several formulas for the distance of a Bloch function to the little Bloch space, β0. Immediate consequences are equivalent expressions for functions in β0. We also give several examples of distances of specific functions to β0. We comment on connections between distance to β0 and the essential norm of some composition operators on the Bloch space, β. Finally we show that the distance formulas in β have Bloch type spaces analogues.
B.H. Neumann's Question on Ensuring Commutativity of Finite Groups
Authors: Abdollahi A. , Azad A. , Hassanabadi A. Mohammadi , Zarrin M.
Published: April 2009

This paper is an attempt to provide a partial answer to the following question put forward by Bernhard H. Neumann in 2000: “Let G be a finite group of order g and assume that however a set M of m elements and a set N of n elements of the group is chosen, at least one element of M commutes with at least one element of N. What relations between g, m, n guarantee that G is Abelian?” We find an exponential function f(m,n) such that every such group G is Abelian whenever |G| > f(m,n) and this function can be taken to be polynomial if G is not soluble. We give an upper bound in terms of m and n for the solubility length of G, if G is soluble.
On Positivity of Fourier Transforms
Authors: Tuck E.O.
Published: April 2009

This note concerns Fourier transforms on the real positive line. In particular, we seek conditions on a real function u(x) in x > 0, that ensure that its Fourier-cosine transform v(t) = u(x) cos xt dx is positive. We prove first that this is so for all t > 0, if u"(x) > 0 for all x > 0, that is, that everywhere-convex functions have everywhere-positive Fourier-cosine transforms. We then obtain a complex-plane criterion for some types of non-convex u(x). Finally we consider criteria on u(x) that imply positivity of v(t) for t > t0, for some t0 > 0.
Brand Perceptions and the Market for Common Stock
Authors: Frieder Laura , Subrahmanyam Avanidhar
Published: April 2009

This paper investigates the effect of company brand perceptions on investor propensities to hold stocks. We find that, after controlling for other determinants of stockholdings, there is a negative and significant cross-sectional relation between institutional holdings and brand visibility, which is consistent with the notion that individual investors prefer to invest in stocks with easily recognized products. Furthermore, we find that institutional holdings are positively related to firm size and beta. Our analysis supports the notion that institutional portfolios eschew relatively neglected small firms, whereas individuals prefer holding stocks with high recognition and, consequently, greater information precision.
Firm Performance, Capital Structure, and the Tax Benefits of Employee Stock Options
Authors: Kahle Kathleen M. , Shastri Kuldeep
Published: April 2009

This paper analyzes the relation between the capital structure of a firm and the tax benefits realized from the exercise of stock options. Theory suggests that firms with tax benefits from the exercise of stock options should carry less debt since tax benefits are a non-debt tax shield. We find that both long- and short-term debt ratios are negatively related to the size of tax benefits from option exercise. Moreover, one-year changes in long-term leverage are negatively related to changes in the number of options exercised. Such a relation does not exist for changes in short-term leverage. Finally, firms with option-related tax benefits tend to issue equity, with the net amount of equity issued an increasing function of these tax benefits.
Packaging Liquidity: Blind Auctions and Transaction Efficiencies
Authors: Kavajecz Kenneth A. , Keim Donald B.
Published: April 2009

The costs of implementing investment strategies represent a significant drag on the performance of mutual funds and other institutional investors. It is the responsibility of institutional investors, and in the interests of the individual investors they represent, to seek market mechanisms that mitigate trading costs. We investigate an example of one such liquidity provision mechanism whereby liquidity demanders auction a set of trades as a package directly to potential liquidity providers. A critical feature of the auction is that the identities of the securities in the package are not revealed to the bidder. We demonstrate that this mechanism provides a transactions cost savings relative to more traditional trading mechanisms for the liquidity demander as well as an efficient way for liquidity suppliers to obtain order flow. We argue that the cost savings afforded this new mechanism are due to the potential for low cost crosses with the bidder's existing inventory positions and through the longer trading horizon, and superior trading ability, of the bidders. This research suggests that the ability to innovate via new liquidity provision mechanisms can provide market participants with transaction cost savings that cannot be easily duplicated on more traditional exchanges.
Information vs. Entry Costs: What Explains U.S. Stock Market Evolution?
Authors: Peress Joel
Published: April 2009

I investigate whether changes in stock market participation costs can explain the long-term increase in the number of U.S. stockholders. I separate these costs into two components: an information cost (the cost of collecting market information), and an entry cost (all other costs, including commissions and fees), and disentangle their general equilibrium implications in a noisy rational expectations economy. While a falling information cost cannot explain the observed increase in stock market participation, a falling entry cost can account for this plus several other features of the U.S. economy, including the falling equity premium, rising return variances, and the boom in passive relative to active investing.
Information Quality, Learning, and Stock Market Returns
Authors: Li George
Published: April 2009

This paper studies how the precision of noisy public information that investors receive about the expected aggregate dividend growth rate affects stock market returns. I show that less precise information can increase the risk premium and stock return volatility. The numerical results from my calibrated model also show that noisy information can significantly increase the risk premium and stock return volatility. My finding implies that the presence of noisy information may help explain the large average risk premium and return volatility in the U.S. financial market. In addition, my finding suggests it is optimal for firms to disclose to investors more precise information to reduce the cost of equity capital.
Bayesian Analysis of Stochastic Betas
Authors: Jostova Gergana , Philipov Alexander
Published: April 2009

We propose a mean-reverting stochastic process for the market beta. In a simulation study, the proposed model generates significantly more precise beta estimates than GARCH betas, betas conditioned on aggregate or firm-level variables, and rolling regression betas, even when the true betas are generated based on these competing specifications. Our model significantly improves out-of-sample hedging effectiveness. In asset pricing tests, our model provides substantially stronger support for the conditional CAPM relative to competing beta models and helps resolve asset pricing anomalies such as the size, book-to-market, and idiosyncratic volatility effects in the cross section of stock returns.
Stock Splits, Broker Promotion, and Decimalization
Authors: Kadapakkam Palani-Rajan , Krishnamurthy Srinivasan , Tse Yiuman
Published: April 2009

Stock split ex-dates are associated with both an increased intensity of small investor buying and a positive abnormal return. The broker promotion hypothesis suggests that the increase in relative spread after a split induces brokers to promote splitting stocks to small investors. The trading inconvenience hypothesis ascribes the ex-split effects to inconveniences such as investors' aversion to dealing with due bills, which is unrelated to relative spreads. The reduction in the bid-ask spread due to decimalization allows us to disentangle these two hypotheses. During the 1/8th pricing period, we show that after the ex-date, the relative spread increases significantly. The average buy order size decreases and the frequency of small transactions increases after the split. After decimalization, these changes are smaller in magnitude. We observe significant positive abnormal returns around the ex-date during the 1/8th pricing period, but not in the decimal pricing period. These results support the broker promotion hypothesis.
The Sources of Debt Matter Too
Authors: Liu Yang
Published: April 2009

This paper examines the effects of different types of private debt on firm cash balances, equity risk, and investment. Firms with more bank loans have more cash and investment, but lower equity risk. Firms with more nonbank private debt have more cash, lower equity risk, and less investment. Firms with more unused credit lines have less cash and lower equity risk, but greater investment. Results suggest that financial intermediaries' monitoring intensity increases with loan size. Depending on type, private debt mitigates information asymmetry or asset substitution, or both. Deposit relations associated with bank borrowing also contribute to banks' information advantage.
Top Management Incentives and the Pricing of Corporate Public Debt
Authors: Ortiz-Molina Hernan
Published: April 2009

This article examines managerial ownership structure and at-issue yield spreads on corporate bonds. There is a positive relation between managerial ownership and borrowing costs, and this relation is weaker at higher levels of ownership. In addition, managerial stock options have a larger effect on yield spreads than stock ownership. These effects exist after controlling for firm and bond characteristics, and are robust to endogeneity and sample selection concerns. The evidence suggests that rational bondholders price new debt issues using the information about a firm's future risk choices contained in managerial incentive structures, and that lenders anticipate higher risk-taking incentives from managerial stock options than from equity ownership.
Firm Growth and Disclosure: An Empirical Analysis
Authors: Khurana Inder K. , Pereira Raynolde , Martin Xiumin
Published: April 2009

Extant theoretical research posits that information asymmetry and agency issues affect the cost of external financing and hence impact the ability of firms to finance their growth opportunities. In contrast, the literature on disclosure policy posits that expanded and credible disclosure lowers the cost of external financing and improves a firm's ability to pursue potentially profitable projects. An empirical implication is that disclosure can help firms grow by relaxing external financing constraints, thereby allowing capital to flow to positive net present value projects. This paper empirically evaluates this prediction using firm-level data over an 11-year period. As anticipated by theory, we find a positive relation between firm disclosure policy and the externally financed growth rate, after controlling for other influences.
Earnings Management and Stock Performance of Reverse Leveraged Buyouts
Authors: Chou De-Wai , Gombola Michael , Liu Feng-Ying
Published: April 2009

This study provides further evidence of earnings management around security offerings. We find positive and significant discretionary current accruals coincident with offerings of reverse LBOs. Issuers in the most aggressive quartile of earnings management have a one-year aftermarket return that is between 15% and 25% less than the most conservative quartile. We also find a negative and significant relation between abnormal accruals and post-issue abnormal returns within the first year after the offering. The relation remains after controlling for book-to-market ratio, firm size, offering size, and involvement of buyout specialists or management. Although earnings management has been used to explain post-issue long-term underperformance of IPOs and SEOs, our study shows that earnings management can explain post-offering returns of reverse LBOs, even in the absence of post-offering underperformance.
The Empirical Failure of the Expectations Hypothesis of the Term Structure of Bond Yields
Authors: Sarno Lucio , Thornton Daniel L. , Valente Giorgio
Published: April 2009

This paper tests the expectations hypothesis (EH) using U.S. monthly data for bond yields spanning the 1952–2003 sample period and ranging in maturity from one month to 10 years. We apply the Lagrange multiplier test developed by Bekaert and Hodrick (2001) and extend it to increase the test power by introducing economic variables as conditioning information and by using more than two bond yields in the model and testing the EH jointly on more than one pair of yields. While the conventional bivariate procedure provides mixed results, the more powerful testing procedures suggest rejection of the EH throughout the maturity spectrum examined.
Bayesian Learning in Financial Markets: Testing for the Relevance of Information Precision in Price Discovery
Authors: Hautsch Nikolaus , Hess Dieter
Published: April 2009

Bayesian learning claims that the strength of the price impact of unanticipated information depends on the relative precision of traders' prior and posterior beliefs. In this paper, we test for this implication of Bayesian models by analyzing intraday price responses of T-bond futures to U.S. employment announcements. By employing additional detailed information in addition to the widely used headline figures, we extract release-specific precision measures. We find that the price impact of more precise information is significantly stronger, even after controlling for an asymmetric price response to “good” and “bad” news. This result strengthens previous findings that differences in earnings response coefficients across companies are related to proxies for the credibility of the reported financial information.
Generalized Analytical Upper Bounds for American Option Prices
Authors: Chung San-Lin , Chang Hsieh-Chung
Published: April 2009

This paper generalizes and tightens Chen and Yeh's (2002) analytical upper bounds for American options under stochastic interest rates, stochastic volatility, and jumps, where American option prices are difficult to compute with accuracy. We first generalize Theorem 1 of Chen and Yeh (2002) and apply it to derive a tighter upper bound for American calls when the interest rate is greater than the dividend yield. Our upper bounds are not only tight, but also converge to accurate American call option prices when the dividend yield or strike price is small or when volatility is large. We then propose a general theorem that can be applied to derive upper bounds for American options whose payoffs depend on several risky assets. As a demonstration, we utilize our general theorem to derive upper bounds for American exchange options and American maximum options on two risky assets.
Term Structure Forecasts of Long-Term Consumption Growth
Authors: Berardi Andrea , Torous Walter
Published: April 2009

Relying on a simple general equilibrium model of the term structure, we show that both nominal yields and real consumption growth rates can be affine in the unobservable state variables. We can then express real consumption growth rates in terms of nominal yields rather than the unobservable state variables with the coefficients of the resultant forecasting relation being endogenously determined by the term structure model. Using term structure data over the 1985 to 2000 sample period, the empirical evidence is consistent with our model more accurately predicting real consumption growth rates than a regression model based on the term spread.
Determinants of Board Size and Composition: A Theory of Corporate Boards
Authors: Raheja Charu G.
Published: April 2009

This paper models the interaction of firm insiders and outsiders on a corporate board and addresses the question of the board's ideal size and composition. In the model, the board is responsible for monitoring projects and making CEO succession decisions. Inside directors are better informed regarding the quality of firm investment projects, but outsiders can use CEO succession to motivate insiders to reveal their superior information and help the board implement higher value projects. The optimal board structure is determined by the trade-off between maximizing the incentive for insiders to reveal their private information, minimizing coordination costs among outsiders and maximizing the ability of outsiders to reject inferior projects. I show that optimal board size and composition are functions of the directors' and the firm's characteristics. I also develop testable implications for crosssectional variations in the optimal board structure across firms.
How Do Analyst Recommendations Respond to Major News?
Authors: Conrad Jennifer , Cornell Bradford , Landsman Wayne R. , Rountree Brian R.
Published: April 2009

We examine how analysts respond to public information when setting stock recommendations. We model the determinants of analysts' recommendation changes following large stock price movements. We find evidence of an asymmetry following large positive and negative returns. Following large stock price increases, analysts are equally likely to upgrade or downgrade. Following large stock price declines, analysts are more likely to downgrade. This asymmetry exists after accounting for investment banking relationships and herding behavior. This result suggests recommendation changes are “sticky” in one direction, with analysts reluctant to downgrade. Moreover, this result implies that analysts' optimistic bias may vary through time.
Analysts, Industries, and Price Momentum
Authors: Boni Leslie , Womack Kent L.
Published: April 2009

This paper examines the value of analysts as industry specialists. We show analysts create value in their recommendations mainly through their ability to rank stocks within industries. An industry-based recommendation strategy substantially improves the return to risk ratio and reduces price momentum tilt relative to portfolios that ignore industry information. An examination of the links among analyst information, aggregated at the industry level, and industry returns and industry momentum shows that industry returns precede industry-aggregated analyst upgrades and downgrades, and the short-term industry price momentum phenomenon is partly explained by returns of firms with more analyst coverage leading those with less in that industry. Recommendation information is not valuable for predicting future relative industry returns, however.
Returns to Acquirers of Listed and Unlisted Targets
Authors: Faccio Mara , McConnell John J. , Stolin David
Published: April 2009

We examine announcement period abnormal returns to acquirers of listed and unlisted targets in 17 Western European countries over the interval 1996–2001. Acquirers of listed targets earn an insignificant average abnormal return of –0.38%, while acquirers of unlisted targets earn a significant average abnormal return of 1.48%. This listing effect in acquirers' returns persists through time and across countries and remains after controlling for the method of payment for the target, the acquirer's size and Tobin's Q, pre-announcement leakage of information about the transaction, whether the acquisition created a blockholder in the acquirer's ownership structure, whether the acquisition was a cross-border deal, and other variables. The fundamental factors that give rise to this listing effect, which has also been documented in U.S. acquisitions, remain elusive.
Are Observed Capital Structures Determined by Equity Market Timing?
Authors: Hovakimian Armen
Published: April 2009

Contrary to Baker and Wurgler (2002), I find that the importance of historical average market-to-book ratios in leverage regressions is not due to past equity market timing. Although equity transactions may be timed to equity market conditions, they do not have significant long lasting effects on capital structure. Debt transactions exhibit timing patterns that are unlikely to induce a negative relation between market-to-book ratios and leverage. I also find that historical average market-to-book ratios have significant effects on current financing and investment decisions, implying that they contain information about growth opportunities not captured by current market-to-book ratios.
When Labor Has a Voice in Corporate Governance
Authors: Faleye Olubunmi , Mehrotra Vikas , Morck Randall
Published: April 2009

Equity ownership gives labor both a fractional stake in a firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. Therefore, we propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than toward, shareholder value maximization.
Investor Protection and Real Investment by U.S. Multinationals
Authors: Kelley Eric , Woidtke Tracie
Published: April 2009

In spite of the growing research concerning investor protection, the relation between investor protection and real investment by foreign multinationals is largely unexplored. Recognizing this relation, however, is especially important in light of the surge in cross-border activity in recent decades and the potential impact cross-border investment can have on a country's economic development. We find that U.S. multinational foreign investment is significantly greater both when shareholder protection is poor and when creditor protection is poor. Consistent with existing literature, our results suggest that U.S. firms have greater comparative advantages when local firms in poor investor protection countries either i) invest suboptimally due to agency problems or ii) have constrained access to debt capital. The increased investment by U.S. multinationals in poor investor protection countries is of particular interest, because it suggests an important way in which adverse outcomes related to poor investor protection may be mitigated.
Organizational Complexity and Succession Planning
Authors: Naveen Lalitha
Published: April 2009

This study uses a large sample of firms to examine how human capital considerations affect the process of CEO succession. Costs and benefits of succession planning are affected by a firm's level of operational complexity and human capital requirements; firms that are more complex incur greater costs to transferring firm-specific knowledge and expertise to an outsider, and should be more likely to groom an internal candidate for the CEO position. Consistent with this, I find that a firm's propensity to groom an internal candidate for the CEO position is related to firm size, degree of diversification, and industry structure. My results also suggest that succession planning is associated with a higher probability of inside succession and voluntary succession and a lower probability of forced succession. I also provide evidence that horizon problems are mitigated to some extent by having a succession plan.
Are Bank Loans Special? Evidence on the Post-Announcement Performance of Bank Borrowers
Authors: Billett Matthew T. , Flannery Mark J. , Garfinkel Jon A.
Published: April 2009

Unlike seasoned equity or public debt offerings, bank loan financing elicits a significantly positive announcement return, which has led financial economists to characterize bank loans as “special.” Here, we find that firms announcing bank loans suffer negative abnormal stock returns over the subsequent three years. In the long run, bank loans appear no different from seasoned equity offerings or public debt issues. Our evidence suggests that larger loans (relative to borrower equity) are followed by worse stock performance. We also find that lender protection is negatively related to borrower performance, suggesting the lender is somewhat shielded from the poor performance.
Do Institutions Receive Favorable Allocations in IPOs with Better Long-Run Returns?
Authors: Boehmer Beatrice , Boehmer Ekkehart , Fishe Raymond P. H.
Published: April 2009

We analyze allocations to institutional and retail investors in 441 initial public offerings (IPOs). In addition to the well-known favorable first-day returns, we show that institutions also obtain more allocations in IPOs with better long-term performance. We find that initial institutional flips help predict future returns, suggesting that at least some institutions retain valuable private information about IPO firms. Collectively, these findings illustrate the importance of aftermarket relations between underwriters and investors and that underwriters have discretionary means to compensate IPO investors beyond first-day returns and price stabilization.
Stock Market Performance and the Term Structure of Credit Spreads
Authors: Demchuk Andriy , Gibson Rajna
Published: April 2009

We build a structural two-factor model of default where the stock market index is one of the stochastic factors. We allow the firm to adjust its leverage ratio in response to changes in the business climate for which the past performance of the stock market index acts as a proxy. We assume that the firm's log-leverage ratio follows a mean-reverting process and that the past performance of the stock index negatively affects the firms target leverage ratio. We show that for most credit ratings our model may explain actual yield spreads better than other well-known structural credit risk models. Also, our model shows that the past performance of the stock index returns and the firm's assets beta have a significant impact on credit spreads. Hence, our model can explain why credit spreads may be different within the same credit rating groups and why spreads are lower during economic expansions and higher during recessions.
The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions
Authors: Antoniou Antonios , Guney Yilmaz , Paudyal Krishna
Published: April 2009

The paper investigates how firms operating in capital market-oriented economies (the U.K. and the U.S.) and bank-oriented economies (France, Germany, and Japan) determine their capital structure. Using panel data and a two-step system-GMM procedure, the paper finds that the leverage ratio is positively affected by the tangibility of assets and the size of the firm, but declines with an increase in firm profitability, growth opportunities, and share price performance in both types of economies. The leverage ratio is also affected by the market conditions in which the firm operates. The degree and effectiveness of these determinants are dependent on the country's legal and financial traditions. The results also confirm that firms have target leverage ratioswith French firms being the fastest in adjusting their capital structure toward their target level and Japanese firms the slowest. Overall, the capital structure of a firm is heavily influenced by the economic environment and its institutions, corporate governance practices, tax systems, the borrower-lender relation, exposure to capital markets, and the level of investor protection in the country in which the firm operates.
An Explicit, Multi-Factor Credit Default Swap Pricing Model with Correlated Factors
Authors: Chen Ren-Raw , Cheng Xiaolin , Fabozzi Frank J. , Liu Bo
Published: April 2009

With the recent significant growth in the single-name credit default swap (CDS) market has come the need for accurate and computationally efficient models to value these instruments. While the model developed by Duffie, Pan, and Singleton (2000) can be used, the solution is numerical (solving a series of ordinary differential equations) rather than explicit. In this paper, we provide an explicit solution to the valuation of a credit default swap when the interest rate and the hazard rate are correlated by using the “change of measure” approach and solving a bivariate Riccati equation. CDS transaction data for the period 2/15/2000 through 4/8/2003 for 60 firms are used to test both the goodness of fit of the model and provide estimates of the influence of economic variables in the market for credit-risky bonds.
Stock Market Participation and the Internet
Authors: Bogan Vicki
Published: April 2009

Theory indicates that frictions (e. g., information and transaction costs) could account for the lower than expected stock market participation rates. This paper examines the hypothesis that there has been a fundamental change in participation and links this change to the reduction of these frictions by the advent of the Internet. Using panel data on household participation rates over the past decade, the results show computer/Internet using households raised participation substantially more than non-computer using households. The increased probability of participation was equivalent to having over $27,000 in additional household income or over two more mean years of education.
Order Imbalances and Market Efficiency: Evidence from the Taiwan Stock Exchange
Authors: Lee Yi-Tsung , Liu Yu-Jane , Roll Richard , Subrahmanyam Avanidhar
Published: April 2009

Data from the Taiwan Stock Exchange identify the originator of each submitted order, and there are no designated dealers or specialists. We study marketable order imbalances, i.e., the net order flow resulting from trades that demand immediacy. We distinguish imbalances by trader type (individuals, domestic institutions, foreign institutions) and by the usual size of each trader's order. Day-to-day persistence in order imbalance is strongest for small foreign institutions and weakest for large individual traders. Such persistence emanates both from splitting orders over time and from herding, and there is little evidence that aggregate price pressures from such persistence last beyond a trading day, indicating that de facto market making is quite effective. We attempt to discern which types of traders are de facto liquidity providers, which are likely to be informed, and which trade for liquidity reasons. The evidence indicates that all trader classes are successful market makers, large domestic institutions conduct the most informed trades, and large individuals are noise or liquidity traders.
The Economic Value of Predicting Stock Index Returns and Volatility
Authors: Marquering Wessel , Verbeek Marno
Published: April 2009

In this paper, we analyze the economic value of predicting stock index returns as well as volatility. On the basis of simple linear models, estimated recursively, we produce out-of-sample forecasts for the return on the S&P 500 index and its volatility. Using monthly data, we examine the economic value of a number of alternative trading strategies over the period 1970–2001. It appears easier to forecast returns at times when volatility is high. For a mean-variance investor, this predictability is economically profitable, even if short sales are not allowed and transaction costs are quite large. The economic value of trading strategies that employ market timing in returns and volatility exceeds that of strategies that only employ timing in returns. Most of the profitability of the dynamic strategies, however, is located in the first half of our sample period.
Executive Loans
Authors: Kahle Kathleen M. , Shastri Kuldeep
Published: April 2009

This paper analyzes the characteristics and impact of loans made to executives for stock purchase, option exercise, and relocation. We find that loans made to assist executives in purchasing stock or exercising options are larger and have higher interest rates than relocation loans. All types of loans, however, are issued at below-market interest rates, on average. We also find that while stock purchase loans are given to managers with low existing ownership, option exercise loans are given to managers with high existing ownership and high cash compensation. Finally, our results indicate that executive stock ownership increases following stock purchase and option exercise loans. For managers as a whole, a loan that enables a manager to buy 100 shares of stock results in only an eight share increase in ownership. However, the relation between ownership changes and stock purchase loans is much stronger for low ownership managers.