bluuebunny/crossref_metadata_2025 huggingface dataset:
PREDICTING INDUSTRIAL BOND RATINGS WITH A PROBIT MODEL AND FUNDS FLOW COMPONENTS
Authors: Gentry James A. , Whitford David T. , Newbold Paul
Published: March 2005

Since 1978, there has been a significant change in new bond offerings with a substantive increase in the number of nonconvertible high risk bonds. This study uses an n‐chotomous multivariate probit model with cash‐based funds flow components and financial ratios to predict industrial bond ratings. The n‐chotomous probit model provides superior information for evaluating the bond classification process. The model determines the probabilities of a bond being rated in one of three risk classes. The distribution of the probabilities for each predicted bond rating provides a wealth of new information for evaluating the accuracy of the actual rating. New and reclassified bond ratings by Moody's in 1983 provide the information base for the model that is used to predict 1984 ratings. Initially the classification and predictive results were slightly lower than previous studies. A careful analysis of the probability distributions showed that results were close to being correct in over 90 percent of the cases. The analysis found five cash flow components to be significant in predicting the bond ratings of reclassified issues. The significant components were inventories, other current liabilities, dividends, long‐term financing, and fixed coverage charges. The likelihood tests indicated that both ratios and funds flow components contributed information that significantly improved the ability of the n‐chotomous multivariate probit model to classify new and revised bond ratings. The study provides valuable insight and nuances concerning the bond‐rating process.
An Empirical Reexamination of the Impact of CBOE Option Initiation on the Volatility and Trading Volume of the Underlying Equities: 1973–1986
Authors: Bansal Vipul K. , Pruitt Stephen W. , Wei K. C. John
Published: March 2005

This study presents an empirical analysis of the impact of Chicago Board Options Exchange (CBOE) option initiation on the price volatility and trading volume of the underlying equities. Virtually every firm with options listed on the CBOE from April 1973 to June 1986 is included in the empirical tests. The results of the tests strongly suggest that option listing leads to decreases in the total (but not systematic) risk of optioned firms. Although total trading volume appears to increase following option listing, securities listed after 1980 show smaller increases in volume than those listed in the early years of option trading.
Intra‐Industry Effects of a Regulatory Shift: Capital Market Evidence from Penn Square
Authors: Karafiath Imre , Glascock John
Published: March 2005

In this paper, we use stock market data to examine the intra‐industry effects of the July 5, 1982, closure of the Penn Square bank. A sample of 54 bank stocks is divided into four portfolios: industry, money center, Texas, and upstream. The latter group consists of banks that had purchased loans directly from Penn Square. Our objective is to determine whether FDIC Chairman Isaac's decision to close, rather than merge, Penn Square had an industry‐wide contagion effect or a firm‐specific information effect. We conclude that the stock market reaction to the Penn Square closure represents a rational investor response to new bank‐specific information.
The Determinants of Systematic Risk: A Synthesis
Authors: Callahan Carolyn M. , Mohr Rosanne M.
Published: March 2005

This paper contains a review and synthesis of the theoretical research that has examined the corporate determinats of systematic risk (beta). By delineating the underlying assumptions and by using a consistent notation to summarize the research results, this review is designed to facilitate the beta assessment efforts of financial managers, investment analysts, and academic researchers.
Dual Bond Ratings: A Test of the Certification Function of Rating Agencies
Authors: Thompson G. Rodney , Vaz Peter
Published: March 2005

Bond researchers have recently observed that issues with split ratings have yields more closely resembling the yields on bonds with the lower of the two ratings. This evidence could lead researchers to question why an issuer ever obtains more than one rating in an environment where two ratings, when split, can never reduce yields, whereas two ratings, when split, can increase yields. This paper explores the rating function in a certification framework and concludes that investors value a second rating. Bond issues with two identical ratings have yields significantly less than issues receiving that rating from only one rating agency.
Inventory Decision under Demand Uncertainty: A Contingent Claims Approach
Authors: Chung Kee H.
Published: March 2005

This study uses the discrete‐time option pricing model for the evaluation of the firm's inventory decision under demand uncertainty. The paper establishes the following optimal inventory decision implications: the optimal order quantity is positively related to the product selling price, product salvage value, interest rate, and the size of the outstanding orders; and negatively related to the product cost. The effect of demand uncertainty on the optimal order quantity is shown to be ambiguous. This study also shows that the maximum present value of profit from the contingent claims approach can be substantially different from that of the modified standard newsboy problem.
Risk‐Adjusted Discount Rates Revisited
Authors: Gallagher Timothy J. , Zumwalt J. Kenton
Published: March 2005

This paper shows that small changes in even slightly negative discount rates can cause substantial changes in present value. Small changes in the discount rate, which may seem appropriate, turn out to have huge effects on present value and are not economically justified. This paper also points out problems associated with large negative discount rates. It is shown that the present value can become discontinuous as the discount rate is lowered and that the present value of the risky cash outflows becomes erratic depending on whether the outflow is discounted an even or odd number of periods.
Institutional Ownership and the Liquidity of Common Stock Offerings
Authors: Szewczyk Samuel H. , Tsetsekos George P. , Varma Raj
Published: March 2005

This paper investigates the extent to which institutional ownership of equity affects the market's response to announcements of new issues of common stock. We find that the absolute magnitude of the share price reaction is negatively related to the level of institutional ownership in the announcing firm. These results are consistent with the argument that the information acquisition activities of institutional investors reduce preannouncement information asymmetries between managers and the capital market.
Implied Volatility in Options Markets and Conditional Heteroscedasticity in Stock Markets
Authors: Choi Seungmook , Wohar Mark E.
Published: March 2005

This study examines whether or not the volatility of stock index returns forecasted by a GARCH‐M specification is consistent with the implied volatility observed in options markets. Recent data for the New York Stock Exchange Composite Index and Standard & Poor's 500 Index and their options are employed. The patterns of the term structure of implied volatility are compared with those of volatility estimates obtained from the GARCH process. The results indicate that the GARCH process appears to partially explain the variation of implied volatilities and the term structure of implied volatilities.
Deviations from Purchasing Power Parity
Authors: Fung Hung‐Gay , Lo Wai‐Chung
Published: March 2005

This study uses univariate and multivariate unit root tests to analyze the random walk behavior of real exchange rates for the period 1979–1989. The univariate test fails to reject the random walk model, but the multivariate test indicates that part of the real exchange rates is predictable, a result supporting purchasing power parity. Further analysis of the random walk component in real exchange rates shows that it is quite persistent: for all currencies it takes about five to eight years for this shock to diminish to half its size.
Risk and Return: A Revisit Using Expected Returns
Authors: Marston Felicia , Harris Robert S.
Published: March 2005

This paper uses direct estimates of expected returns to examine the link between standard measures of financial risk and investor return requirements. The results show that systematic risk commands a significant positive risk premium, much larger than found using historical returns as proxies for expectations. Furthermore, there are nonlinearities in the relationship between risk and return. Finally, we show that expected returns and risk premiums in the equity markets change over time and that these changes are related to changes in interest rates on U.S. government obligations.
Dual Domestic Listing, Market Structure and Shareholder Wealth
Authors: Khan Walayet A. , Baker H. Kent , Kennedy Robert E. , Perry Larry G.
Published: March 2005

This paper examines the impact of dual domestic listing of common stocks on shareholder wealth. The sample contains 137 AMEX‐ and NYSE‐listed companies that dually listed their common stocks on the Pacific and Midwest Stock Exchanges between 1984 and 1988. Because the sample stocks do not have unlisted trading privileges, dual listing changes the market structure in which the stocks traded. Changes in market structure may affect stock returns through the liquidity services provided by the competing markets and through the possible nonhomogeneous clientele across markets. Using standard event methodology to examine stock market behavior around dual listing shows that the net effect of dual listing on returns is negative. Such negative returns suggest that corporate managers have reasons for dual domestic listing other than increasing shareholder wealth.
Regulatory Monitoring and the Impact of Bank Holding Company Dividend Changes on Equity Returns
Authors: Filbeck Greg , Mullineaux Donald J.
Published: March 2005

This paper examines the impact of announcements of dividend changes by bank holding companies (BHCs) on equity returns. Many empirical studies of dividend behavior reveal positive market responses to dividend increases, which have been interpreted as confirmation of the signalling theory of dividend behavior. These studies typically focus on “large” changes, however. We argue that BHCs allow for a stronger test of signalling theory because regulatory monitors, in effect, “certify” dividend signals. Consequently, even “small” dividend increases should result in positive abnormal equity returns. Using the event study methodology, our results generally confirm this hypothesis for a sample covering the period 1973–1987.
The Impact of Company Pre‐Listing Attributes on the Market Reaction to NYSE Listings
Authors: Edelman Richard B. , Baker H. Kent
Published: March 2005

This study examines the market behavior of common stocks transferring from the NASDAQ stock market to the New York Stock Exchange from 1982 to 1989. Using event study methodology, the study tests the joint liquidity‐signaling hypothesis that a stock's pre‐listing liquidity and earnings per share (EPS) growth (a proxy for signaling) affect the market behavior around NYSE listings. The results show that the market responds more favorably to stocks with low liquidity and high signaling than to stocks with high liquidity and low signaling before listing. Stocks in the former group do not have an anomalous pattern of negative post‐listing abnormal returns.
The Impact of Futures Trading on the Spot Market for Treasury Bonds
Authors: Hegde Shantaram P.
Published: March 2005

Critics of futures markets contend that futures trading destabilizes spot prices and raises price levels of the underlying treasury bonds, while the proponents claim that futures trading improves the information content and stability of spot prices. To investigate these conflicting viewpoints, this paper examines the price behavior of treasury bonds at three critical time points: a) as they enter, retain, and exit the cheapest‐to‐deliver status; b) as they approach the futures delivery date; and, c) as they cease to be deliverable. An empirical analysis based on a rich data set of daily bond prices over thirty‐four delivery quarters reveals little support for the critics’ view of futures trading.
Insider Trading Activity, Different Market Regimens, and Abnormal Returns
Authors: Ferreira Eurico J.
Published: March 2005

This paper show that corporate insiders earn abnormal returns by adjusting their own firm's stock trading to future market movements. Insider trading activity in bear markets is characterized by decreases in insider sales and increases in purchases, consistent with the view that those markets are followed by improved economic conditions. Conversely, insider sales increase and purchases decrease in bull markets, consistent with the view that inferior market conditions tend to follow those periods.
January Seasonality in Preferred Stocks
Authors: Chen Carl R.
Published: March 2005

This study documents the existence of January season‐ality in preferred stocks. January seasonality is found in all grades of preferred stock while stronger summer returns are also observed in low‐grade preferred, which resembles findings reported in common equity. Although January seasonality is also found in high‐grade preferred stocks, a size effect‐which is used to explain the January seasonality in low‐grade bonds‐may not be able to account for the same seasonality observed in high‐grade preferred.
Volatility Reversion and Correlation Structure of Returns in Major International Stock Markets
Authors: Theodossiou Panayiotis , Kahya Emel , Koutmos Gregory , Christofi Andreas
Published: March 2005

This paper investigates the stochastic behavior of weekly stock market returns in the U.S., Japan, and the U.K. during the period 1984 to 1994. The analysis is carried out using an augmented version of Bollerslev's [7] multivariate GARCH model with structural dummies to test for differences in the mean, volatility, and covariance structure of returns during the pre‐ and post‐October 1987 crash periods. In addition, the paper explores the issue of the volatility reversion and time‐varying behavior of correlation structure of returns in these markets. Mean‐spillovers exist from the U.S. and Japan to the U.K. The magnitude of these spillovers is, however, low. Volatility spillovers exist from the U.S. and, to a lesser extent, from Japan to the U.K. Mean returns in all three markets and volatility in Japan and the U.K. are the same during the two periods, while volatility in the U.S. is lower during the post‐crash period. With the exception of the correlation of returns between Japan and the U.K., which has doubled since the October 1987 crash, the remaining correlations are statistically similar during the two periods. Simulations performed indicate that volatility is reverting in the sense that, when it departs from its long‐run equilibrium level, it tends to revert back to that level.
Arbitrageur Heterogeneity, Investor Horizon and Arbitrage Opportunities: An Empirical Investigation
Authors: Blenman Lloyd P. , Thatcher Janet S.
Published: March 2005

Evidence is provided that arbitrage profits in integrated currency and credit markets differ according to the initial asset allocation, trading horizon and investment objectives of arbitrageurs. It is shown that several types of profitable one‐way strategies can coexist and profits are differently distributed across maturity horizons. Moreover, there are episodes in the markets where particular strategies are consistently profitable. Strategies using the spot market and two credit transactions to create a synthetic forward contract are most likely to result in profitable arbitrage opportunities. This is directly attributable to the higher level of transactions costs in the forward markets.
The Information Content of Dividend Initiations and Firm Size: An Analysis Using Bid‐Ask Spreads
Authors: Mitra Devashis , Rashid Muhammad
Published: March 2005

The bid‐ask spread of stock prices is examined for a sample of dividend initiating firms. The average percentage and dollar bid‐ask spreads increase significantly on the day preceding the Wall Street Journal Index announcement date, possibly reflecting, on average, the market maker's anticipatory uncertainty. The day ‐1 increase in spread is inversely associated with firm size, an information environment proxy, after considering the simultaneous effects of dividend yield, returns variance, dollar trading volume and share price. The average percentage spread declines significantly on day 0 from its day ‐1 level and remains lower, on average, over a 365 day post‐announcement period than 90 day pre‐announcement levels. Similar results are obtained for dollar spread averages. The post‐announcement percentage spread decline suggests a resolution of uncertainty, and is positively associated with the dividend yield. Dividend initiation announcements appear to reduce informational asymmetry.
The Price Effect of the Introduction of Leaps
Authors: Holland Larry C. , Wingendzr John R.
Published: March 2005

Previous studies have shown a positive price effect on the underlying security with the introduction of short‐term options on an organized exchange. This effect apparently dissipated after the first nine years of the shortterm option market because there is a smaller price effect for new options introduced after 1982. A similar positive price effect occurred with the 1990 introduction of longterm options (Long‐term Equity Anticipation Securities, or LEAPS), but this effect diminished rapidly in the first nine months of the LEAPS market. The evidence in this research suggests that LEAPS are not redundant assets and offer additional market spanning investment possibilities.
Do Investors Learn? Evidence from a Gold Market Anomaly
Authors: McQueen Grant , Thorley Steven
Published: March 2005

This study finds evidence that supports the investor learning hypothesis using data from the gold market. Consistent with conventional wisdom, the prior returns on an equally‐weighted portfolio of gold‐producing stocks are found to predict gold returns. However, the predictive power is shown to have diminished since the first public discussion of the anomaly, a finding consistent with the investor learning hypothesis.
Success and Failure in the Market for Corporate Control: Evidence from the Petroleum Industry
Authors: Byrd John W. , Stammerjohan William W.
Published: March 2005

A sample of firms from the oil industry is used to test whether managerial actions are consistent with the managerial entrenchment or shareholder interest hypothesis. While targeted firms have lower Q‐ratios than non‐targeted firms, not all low Q‐ratio firms become targets. High levels of managerial stock ownership decrease the likelihood of a low Q‐ratio firm being targeted. Managerial resistance to control events is associated with greater share price increases, but a lower likelihood of a control change occurring. Overall, the results are consistent with managers taking actions that protect their positions, possibly at shareholder expense.
The Impact of Antitakeover Devices on the Valuation Consequences of Voluntary Corporate Selloffs
Authors: Loh Charmen , Rathinasamy R. S.
Published: March 2005

This study reveals that there are valuation differences in the announcement effects among firms engaged in interfirm asset sales. Even though, in the aggregate, these selloffs result in significant increases in share prices, there is a group of firms that experience no significant increases in shareholder wealth. These are firms that have adopted antitake‐over devices prior to announcing corporate selloffs. For these firms, public perception about management's intention has been altered to the extent that the selloffs are interpreted as a way to consolidate the antitakeover position of the management.
The Market Reaction to Discontinuing Regular Stock Dividends
Authors: Phillips Aaron L. , Baker H. Kent , Edelman Richard B.
Published: March 2005

This paper investigates the behavior of returns to share‐holders of NYSE and AMEX firms that publicly announce the discontinuance of regular stock dividends. Using event‐type methodology, the results show that the average abnormal return for NYSE and AMEX firms is negative but not statistically significant on the event date. Partitioning the sample by stock‐related characteristics shows that for small firms with low stock prices and low institutional ownership, management's decision to drop regular stock dividends conveys a significantly negative signal, which, in turn, causes stock prices to decline. Firms that drop a stock payment and simultaneously initiate or increase cash dividends experience a significant increase in shareholder wealth. However, firms that drop the stock dividend policy and do not begin a cash dividend policy experience a sharp decline in shareholder wealth.
Properties of time‐series estimates of degree of leverage measures
Authors: Lord Richard A.
Published: March 2005

Empirical studies suggest that time‐series regression estimates of the degrees of operating and financial leverage have a tendency to produce measures less than one. According to ex ante theory, these measures should be greater than one for firms operating above the breakeven point. There have also been suggestions that the biases in these estimates may be attributable to an underlying increase in unit sales. This work presents evidence that these counter‐intuitive measures are produced by changes in the firm's operating parameters (unit price, variable cost, fixed cost and interest payments). It further suggests that attempts to control for the underlying change in unit sales substantially increase the volatility of predicted estimates.
Alternative adjustments to analysts’ earnings forecasts: relative and complementary performance
Authors: Lo May H. , Elgers Pieter T.
Published: March 2005

This study examines the relative and complementary performance of alternative earnings forecast adjustments using a common set of consensus analysts’ earnings forecasts. We document that a simple adjustment to analysts’ earnings forecasts, based solely on cross‐sectional relationships between actual and forecasted earnings in the prior year, performs as well as more complicated adjustment methods, i.e., composite forecasts and persistence adjusted forecasts. A forecast adjustment that is based on prior year earnings and returns, however, provides significant incremental reductions in forecast error and dominates all of the other adjustment methods.
Price discovery around trading halts on the Montreal Exchange using trade‐by‐trade data
Authors: Kryzanowski Lawrence , Nemiroff Howard
Published: March 2005

This paper investigates the price discovery process around exchange‐initiated trading halts using 30 minute trade intervals on the Montreal Exchange. Trading halt price discovery, and regulatory and specialist effectiveness differ over the three time periods studied. Volatility and measures of trade activity increase significantly around trading halts, and return to lower levels in less than two days after the resumption of trading. The number of trades is a good measure of the information flow associated with informed trading pre‐halt and the price discovery process post‐halt.
Leveraged Recapitalizations, Operating Efficiency, and Stockholder Wealth
Authors: Walker M. Mark
Published: March 2005

This research investigates the role that leveraged recapitalizations (recaps) play in disciplining inefficient managers. Accounting ratios are used to evaluate firm operating profitability and efficiency. Matched‐firm‐adjusted returns are used to assess stock market performance. Pre‐recap and post‐recap performance are evaluated separately. The results reveal that 1) recap managers are at least as efficient as matching non‐recap managers prior to recapitalization, 2) recaps do not improve operating profitability and efficiency, and 3) increases in stockholder wealth around recap announcements are transitory. Further analysis indicates that post‐recap stock price performance is correlated negatively with the recap‐induced change in leverage.
Integration of International Long‐Term Interest Rates: A Fractional Cointegration Analysis
Authors: Hsueh L. Paul , Pan Ming‐Shiun
Published: March 2005

In this study, we re‐examine the relationship among interest rates on the long‐term government bonds of five industrialized countries. Using both the variance ratio test and fractional cointegration analysis, we find significant evidence that indicates the five government bond rates are fractionally cointegrated. In specific, our results show that the error correction term of the system of the five interest rates follows a mean‐reverting, fractionally integrated process.
Further Evidence on Equity Market Contagion: the FSLIC's Solvency and the Liquidity Crisis of Financial Corporation of America
Authors: Cooperman Elizabeth S. , Wolfe Glenn A. , Verbrugge James A. , Lee Winson B.
Published: March 2005

Whether pure contagion is more likely to occur when a federal deposit insurer is severely undercapitalized is an unanswered question. This paper provides evidence on this issue by examining the stock market reaction of savings and loans (S&Ls) to the crisis of Financial Corporation of America (FCA) in 1984, when the Federal Savings and Loan Insurance Corporation was fiscally unsound. Consistent with a contingent insurance guarantee hypothesis, the results show large, significant negative abnormal returns (ARs) for a portfolio of high insured deposit S&Ls during FCA's crisis.
Is There Excess Capacity in Rural Banking Markets?
Authors: McNulty James E. , Akhigbe Aigbe
Published: March 2005

The literature indicates that it is difficult to identify and quantify the degree of excess capacity in banking. Economic theory indicates that there are at least three indicators of excess capacity in banking: (a) low loan‐to‐asset ratios, (b) low profitability and (c) high per unit operating expense relative to some norm. If excess capacity exists, it will be easiest to identify, through these indicators, at small rural banks. This paper finds significant evidence of excess capacity at rural Colorado banks using univariate analysis; simultaneous equations analysis reinforces this conclusion. It appears that the “excess capacity effect”outweighs the “market power effect”in these rural banking markets.
Adjustment Process of the Price to Book Ratio for Regulated Utilities
Authors: Nwaeze Emeka T.
Published: March 2005

This study tests whether shifts in the price to book ratio (PB) of electric utilities follow a partial adjustment rather than the pure adjustment process implied by the cost‐plus pricing policy of regulation. The results for utilities are compared to benchmark results for manufacturing firms to highlight the similarity/dissimilarity in the time‐series behavior of PB for regulated and non‐regulated firms. It is shown that shifts in PB follow a partial adjustment process. The adjustment period is longer for utilities than for manufacturing firms and extends well beyond the average regulatory lag. Moreover, shifts in PB are associated with changes in future profits and investments.
Effects of Executive Share Option Plans on Shareholder Wealth and Firm Performance: The Singapore Evidence
Authors: Yeo Gillian H.H. , Chen Sheng‐Syan , Ho Kim Wai , Lee Cheng‐few
Published: March 2005

The main purpose of our paper is to study the institutional nature and characteristics of executive share option plans (ESOPs) in Singapore, a fast‐growing economy and an important investment location in Asia. Our study provides an interesting comparison between the characteristics of ESOPs in Singapore and those in the US. Our paper also investigates the short‐term market reaction to ESOP announcements and the long‐run stock and operating performance of the sample firms following the adoption of the ESOPs. Results indicate weak evidence of a positive abnormal return on the days surrounding the announcement of the ESOPs. However, there is no evidence of long‐term superior stock and operating performance for the ESOP firms relative to benchmarks. The lack of significant incentive effects for the sample firms reflects mainly the unique regulatory environment in Singapore.
Ownership Restrictions and Stock Prices: Evidence from Chinese Markets
Authors: Su Dongwei
Published: March 2005

In this paper, I test a one‐period capital asset pricing model (CAPM) under share ownership restrictions to explain differences in prices and expected excess returns between the classes of shares that can be bought and traded by domestic and foreign investors, respectively, in the Chinese stock markets. I find that cross‐sectional variability in the spread between the expected domestic and foreign share excess returns is related to differences in individual shares' market betas. The empirical results are by and large consistent with the CAPM. After the betas are controlled for, idiosyncratic variance and firm size have no effect.
A Cross‐Sectional Empirical Test of a Dual‐State Multi‐Factor Pricing Model
Authors: Howton Shelly W. , Peterson David R.
Published: March 2005

During empirical testing of the Capital Asset Pricing Model an assumption is typically made that risk is intertemporally constant. However, prior research finds that risk changes over time. We empirically test a conditional dual‐state cross‐sectional model allowing risk to change through prior identification of different market and economic states. We examine relationships between returns and conditional market and economic‐factor betas, size, book‐to‐market equity, and earnings‐price ratios. We find that relationships shift across regimes, suggesting the importance of a conditional, as opposed to unconditional, model. Relationships also change in January.
Changing the Size of a Futures Contract: Liquidity and Microstructure Effects
Authors: Karagozoglu Ahmet K. , Martell Terrence F.
Published: March 2005

We analyze the relation between contract size and liquidity using data from the respecification of Sydney Future Exchange's (SFE) Share Price Index (SPI) and 90‐day Bank Accepted Bill (BAB) futures contracts. Respecification of SPI and BAB contracts presents a unique opportunity to investigate the effects of a change in futures contract size. SFE decreased the size of SPI futures by a factor of four while increasing its minimum tick. The BAB contract was doubled in size with the minimum tick size left unchanged. We find, after controlling for market factors, that the respecification of the SPI futures resulted in higher trading volume, while that of BAB futures decreased trading volume. The results regarding spreads are ambiguous. Based on two cases investigated, we conclude that decreasing the futures contract size was effective in terms of enhancing liquidity while increasing the size resulted in a reduction in liquidity.
Day‐of‐the‐Week Autocorrelations, Cross‐Autocorrelations, and the Weekend Phenomenon
Authors: Higgins Eric James , Peterson David R.
Published: March 2005

This study examines whether autocorrelations or cross‐autocorrelations are more closely associated with the weekend phenomenon. Our results show a significant day‐of‐the‐week pattern in autocorrelations associated with the weekend phenomenon. However, we find no marginal influence of a day‐of‐the‐week pattern in cross‐autocorrelations on the weekend phenomenon.
Market Response to Liquidity Improvements: Evidence from Exchange Listings
Authors: Elyasiani Elyas , Hauser Shmuel , Lauterbach Beni
Published: March 2005

The study examines a sample of 895 stocks that moved from Nasdaq to the New York Stock Exchange or to the American Stock Exchange (Amex) between 1971 and 1994. We show how various measures of liquidity such as the bid‐ask spread, trading volume, and stock price precision improve in somewhat different ways upon transfer to NYSE (Amex). We also find that reductions in trading costs (percentage spread) and in pricing error volatility (Hasbrouck's σ5) can explain most of stock market's positive response to exchange listing. Thus, liquidity has many facets and cannot be represented by the bid‐ask spread alone.
Closed‐End Fund Expenses and Investment Selection
Authors: Malhotra D.K. , McLeod Robert W.
Published: March 2005

Investment returns on closed‐end funds are highly volatile. Because expenses have a definite negative impact on closed‐end fund returns, investors should include the expense ratio as a criterion for fund selection in addition to performance, investment objective, and risk of the fund. This paper constructs a model of the expense ratio of closed‐end funds to explain cross‐sectional differences in the expense ratios for the period between 1989–1996. We relate closed‐end fund expenses to fund characteristics and identify the factors that can help investors choose low expense closed‐end funds.
Industry Distributional Characteristics of Financial Ratios: An Acquisition Theory Application
Authors: Cudd Mike , Duggal Rakesh
Published: March 2005

This study explores the importance of capturing industry‐specific distributional characteristies in analyses based on financial ratios. As a test case, the study replicates Palepu (1986), who employs financial ratios in logit models to investigate the usefulness of six acquisition hypotheses in predicting takeover targets. Without adjustment for industry‐specific distributional characteristics, this study's findings are only consistent with one of the six acquisition hypotheses. After adjusting for distributional properties, the results are consistent with four of the six acquisition hypotheses. Furthermore, the adjusted model produces a classification accuracy significantly greater than chance, as well as significantly greater than that observed for the unadjusted model.
The Impact of Capital Structure on Efficient Sourcing and Strategic Behavior
Authors: Krishnaswami Sudha , Subramaniam Venkat
Published: March 2005

We model the capital structure choice of a firm that operates under imperfect competition. Extant literature demonstrates that debt commits a firm to an aggressive output stance, which is an advantage to the firm under Cournot competition. However, empirical evidence, indicates that debt is a disadvantage under imperfect competition. We reconcile the theory with the evidence by incorporating firms' relations with their suppliers, in a model of strategic firmrival interactions. Under imperfect competition and incomplete contracting, we show that although debt financing improves a firm's input sourcing efficiency it could also benefit the firm's rivals by lowering their input costs. This effect offsets the benefits due to aggressive product market strategies that result from increased debt. Under certain conditions this subsidy effect is sufficiently strong that debt is suboptimal in equilibrium and leads to an increase in rival's shareholder value.
Incentive Compensation and the Stock Price Response to Dividend Increase Announcements
Authors: Lippert Robert L. , Nixon Terry D. , Pilotte Eugene A.
Published: March 2005

Linking executive compensation to stock price performance is predicted to decrease the usual positive price response to dividend increases for two reasons. One, increasing pay‐performance sensitivity (PPS) exacerbates managers' optimistic bias regarding future firm performance, reducing the credibility of dividend signals. Two, increasing pay‐performance sensitivity reduces the need for dividends as a means of reducing agency costs. Consistent with behavioral and agency theories of corporate finance, we find that price response does decrease as pay‐performance sensitivity increases and that this effect is concentrated in firms with low market‐to‐book ratios. Additional findings are most consistent with the agency cost explanation.
Index Options‐Futures Arbitrage: A Comparative Study with Bid/Ask and Transaction Data
Authors: Fung Joseph K.W. , Mok Henry M.K.
Published: March 2005

We can infer from bid/ask quotations and transaction prices that where options contracts are traded under a competitive open‐outcry market‐making system, the options and futures markets are dynamically efficient. Ex‐ante analysis shows that potential arbitrage opportunities disappear within five minutes. Transaction price data understate both the frequency and magnitude of arbitrage opportunities that are signaled by bid/ask quotes. Quotes stale fast, so opportunities are short‐lived and some of the arbitrage opportunities are deceptive. Nonetheless, the evidence suggests that bid/ask quotes provide valuable trading signals to arbitrageurs. Profitability from exploiting the quotes is negatively related to execution delay and execution risk.
An Improved Approach to Computing Implied Volatility
Authors: Chambers Donald R. , Nawalkha Sanjay K.
Published: March 2005

A well‐known problem in finance is the absence of a closed form solution for volatility in common option pricing models. Several approaches have been developed to provide closed form approximations to volatility. This paper examines Chance's (1993, 1996) model, Corrado and Miller's (1996) model and Bharadia, Christofides and Salkin's (1996) model for approximating implied volatility. We develop a simplified extension of Chance's model that has greater accuracy than previous models. Our tests indicate dramatically improved results.
The effect of improved periodontal health on metabolic control in type 2 diabetes mellitus
Authors: Kıran Mine , Arpak Nejat , Ünsal Elif , Erdoğan Murat Faik
Published: March 2005

Objectives: The aim of the present study was to investigate the effect of improved periodontal health on metabolic control in type 2 diabetes mellitus (DM) patients.

Material and Methods: Fourty‐four patients with type 2 DM were selected. Subjects were randomly assigned into two groups.

Data collection: Plaque index (PI), gingival index (GI), probing pocket depth (PPD), clinical attachment levels (CALs), gingival recession (GR) and bleeding on probing (BOP) were recorded at baseline at 1st and 3rd months.

Fasting plasma glucose (FPG), 2‐h post‐prandial glucose (PPG), glycated haemoglobin (HbA1c), total cholesterol (TC), triglyceride (TG), HDL‐cholesterol, LDL‐cholesterol and microalbuminure were analysed at baseline, 3 months following the periodontal therapy. The treatment group received full‐mouth scaling and root planing whereas the control group received no periodontal treatment.

Results: A statistically significant effect could be demonstrated for PI, GI, PPD, CAL and BOP for the treatment group. HbA1c levels in the treatment group decreased significantly whereas the control group showed a slight but insignificant increase for this parameter.

Conclusions: The results of our study showed that non‐surgical periodontal treatment is associated with improved glycaemic control in type 2 patients and could be undertaken along with the standard measures for the diabetic patient care.
Enamel matrix proteins and systemic antibiotics as adjuncts to non‐surgical periodontal treatment: clinical effects
Authors: Mombelli A. , Brochut P. , Plagnat D. , Casagni F. , Giannopoulou C.
Published: March 2005

Objectives: The purpose of the present study was to evaluate the clinical effects of non‐surgical periodontal treatment, supplemented with enamel matrix derivative (EMD) and/or systemic antibiotics, in deep periodontal pockets of patients with chronic periodontitis.

Methods: This was a randomized, placebo‐controlled longitudinal clinical trial of 12 months duration. Using a split‐mouth design, 16 subjects were randomly assigned to scaling and root planing (SRP) with EMD or placebo in contra‐lateral dentition areas. One half of the subjects received 250 mg metronidazole and 375 mg amoxicillin three times a day for 7 days and the other half received a placebo. One inter‐proximal periodontal lesion was chosen as study site in each of the contra‐lateral quadrants.

Results: Subjects treated with systemic antibiotics yielded significantly better clinical results than those treated with placebo. In these cases, probing pocket depth was reduced significantly more after 6 months (3.0±2.1 mm versus 1.6±1.4 mm, p=0.05), and the mean clinical attachment gain was significantly greater after 6 months (2.3±1.9 mm versus 0.7±1.6 mm, p=0.02) and 12 months (2.3±3.5 mm versus 0.4±3.8 mm, p=0.02). Sites treated with the antibiotics plus EMD gained the largest amount of clinical attachment. There was no significant benefit of EMD adjunctive to SRP in subjects not treated with antibiotics.

Conclusions: The present study supports the notion that optimal repair and regeneration of the periodontium requires suppression of the microbiota causing periodontal disease.
Effects of Elevated Free-Stream Turbulence on Actively Controlled Separation Bubble1
Authors: Halfon E. , Nishri B. , Seifert A. , Wygnanski I.
Published: March 2005

The effects of elevated free-stream turbulence (FST) on natural and periodically excited separation bubbles were examined experimentally at low Reynolds numbers. The bubble was formed at the leading edge of a flat plate and the FST level was altered by placing a grid across the flow at different locations upstream of the plate. The mixing across the separated shear-layer increased due to the elevated FST and the two-dimensional periodic excitation, flattening, and shortening the bubble. Periodic excitation at frequencies that were at least an order of magnitude lower than the initial Kelvin–Helmholtz instability of the separated shear-layer were very effective at low FST. The fundamental excitation frequency and its first harmonic were amplified above the bubble. High frequency excitation (F+≈3, based on the length of the natural low FST bubble that served as a reference baseline) affected the flow near the leading edge of the bubble but it rapidly decayed in the reattachment region. Lower frequencies F+≈1 were less effective and they decayed at a slower rate downstream of reattachment. An increase in FST level reduced the net effect of the periodic excitation on mixing enhancement and subsequent reattachment process. This was probably due to a destructive interference between the nominally 2D excitation and the random, in space and in time, FST. High FST is known to reduce the spanwise coherence in free shear layers [e.g., Chandrasuda, C., Mehta, R. D., Weir, A. D., and Bradshaw, P., 1978, “Effects of free-stream turbulence on large structures in turbulent mixing layers,” J. Fluid Mech., 85, pp. 693–704] and therefore also the effectiveness of the current control strategy, this not withstanding 2D periodic excitation accelerated the reattachment process and the recovery rate of the attached boundary layer, reducing its momentum loss.
Calculation of Friction Coefficients for Noncircular Channels
Authors: He S. , Gotts J. A.
Published: March 2005

This paper presents a method for estimating a hydraulic resistance multiplier to enable approximate values of friction coefficients to be calculated for turbulent flows in noncircular channels of arbitrary shape using correlations developed for the circular pipe. Unlike most other methods, no preknowledge on the flow channels, such as the laminar shape factor or characteristic length, is required. Good agreement between predictions using the new method and experiments was achieved.
Robust Performance Limitations and Design of Controlled Delayed Systems
Authors: Yaniv O. , Nagurka M.
Published: March 2005

This paper presents performance limitations and a control design methodology for nonminimum phase plants of the pure delay type subject to robustness constraints. Of interest is the design of a set of controllers, for which the open-loop transfer function is a proportional-integral (PI) controller plus delay, meeting constraints on the magnitude of the closed-loop transfer function and on the plant gain uncertainty. These two specifications are used to characterize the robustness, and are a recommended alternative to the gain and phase margin constraints. A control design plot is presented which allows for selection of controller parameters including those for the lowest sensitivity controller, and graphically highlights gain and phase margin tradeoffs. The paper discusses limitations of performance of such systems in terms of crossover frequency and sensitivity. In addition, expressions and design plots are provided for a simplified approximate solution.
The synthesis of spatially correlated random pressure fields
Authors: Elliott Stephen J. , Maury Cédric , Gardonio Paolo
Published: March 2005

The feasibility is considered of synthesizing a spatially correlated random pressure field having specified statistical properties. Of particular interest is the use of a near-field array of acoustic sources to synthesize a pressure field whose statistical properties are similar to either a diffuse acoustic sound field or to that generated by a turbulent boundary layer (TBL). A formulation based on least-squares filter design is presented. Initially, the more fundamental question is addressed of how many uncorrelated signal components are required to approximate the pressure field. A one-dimensional analysis suggests that two uncorrelated components per acoustic wavelength are required to approximate a diffuse pressure field. Similarly, for a TBL pressure field, about one uncorrelated component per correlation length is required in the spanwise direction and about two uncorrelated components per correlation length are required in the streamwise direction. These estimates are in good agreement with theoretical predictions for an infinite array, based on the Fourier transform of the spatial correlation function. When a full simulation is performed, including the acoustic effect of an appropriately positioned array of monopole sources, it is found that the number of acoustic sources required to reasonably approximate the diffuse or TBL pressure field is only slightly greater than the lower bound on this number, set by the number of uncorrelated components required.
Transverse horizontal spatial coherence of deep arrivals at megameter ranges
Authors: Andrew Rex K. , Howe Bruce M. , Mercer James A. ,   The NPAL Group (J. A. Colosi, B. D. Cornuelle, B. D. Dushaw, M. A. Dzieciuch, B. M. Howe, J. A. Mercer, W. H. Munk, R. C. Spindel, and P. F. Worcester)
Published: March 2005

Predictions of transverse horizontal spatial coherence from path integral theory are compared with measurements for two ranges between 2000 and 3000 km. The measurements derive from a low-frequency (75 Hz) bottom-mounted source at depth 810 m near Kauai that transmitted m-sequence signals over several years to two bottom-mounted horizontal line arrays in the North Pacific. In this paper we consider the early arriving portion of the deep acoustic field at these arrays. Horizontal coherence length estimates, on the order of 400 m, show good agreement with lengths calculated from theory. These lengths correspond to about 1° in horizontal arrival angle variability using a simple, extended, spatially incoherent source model. Estimates of scintillation index, log-amplitude variance, and decibel intensity variance indicate that the fields were partially saturated. There was no significant seasonal variability in these measures. The scintillation index predictions agree quite well with the dataset estimates; nevertheless, the scattering regime predictions (fully saturated) vary from the regime classification (partially saturated) inferred from observation. This contradictory result suggests that a fuller characterization of scattering regime metrics may be required.
Embedding uncertainty into ocean acoustic propagation models (L)
Authors: Finette Steven
Published: March 2005

A probabilistic formalism is proposed for the direct inclusion of environmental uncertainty into an acoustic model that describes propagation in an ocean waveguide. Incomplete environmental knowledge is characterized by a spectral representation of uncertainty using expansions of random processes in terms of orthogonal random polynomials. A brief summary of the method is presented and a set of coupled differential equations describing the propagation of both the acoustic field and its associated uncertainty is derived for the case where the uncertain environment is attributed to a lack of complete information concerning the waveguide’s sound speed distribution.