bluuebunny/crossref_metadata_2025 huggingface dataset:
A Generalized Simple Formula to Compute the Implied Volatility
Authors: Chance Don M.
Published: March 2005

This paper provides a direct method of obtaining an accurate estimate of the implied volatility of a call option. It adds a quadratic adjustment term to an already‐known formula for at‐the‐money calls, previously developed by Brenner and Subrahmanyam [3]. The adjusted formula is quite accurate for options no more than 20 percent in‐ or out‐of‐the‐money and is simple to program and compute.
Graphical Portfolio Analysis
Authors: Rodriguez Ricardo J.
Published: March 2005

This paper presents a new methodology for portfolio analysis based on the correspondence between the expression for the standard deviation of a two‐asset portfolio and the magnitude of the sum of two complex numbers. This approach offers a geometric alternative to traditional portfolio analysis. The pedagogical advantages of the new framework are illustrated by rederiving many efficient set mathematics results. A previously unrecognized fact is uncovered using the graphical technique that the sum of the maximum and minimum betas for efficient portfolios is 1, so knowledge of one extreme beta implies knowledge of the other.
Financial Distress Costs and Delayed Calls of Convertible Bonds: An Empirical Analysis
Authors: Krishnan V. Sivarama , Rao Ramesh P.
Published: March 2005

Theoretical analysis implies that optimal call policy would be to call the bonds as soon as the conversion value equals the call price. Empirical studies, however, report that firms appear to systematically delay the call and the difference between the conversion value and the call price is large at the time of the call. This study examines convertible bond calls between 1977 and 1993, with a view to explain the large difference between the conversion value and the call‐price at the time of the call. A large majority of the firms calling the bonds have cash‐flow incentive to call the bonds in that the after‐tax interest payments are higher than the dividends on the converted shares. The large difference between the conversion value and the call price is positively related to the risk characteristics of the firm. Evidence seems to support the view that risk aversion and fear of potential financial distress may explain the large difference at the time of call between the conversion value and the call price.
A Test of the Debt‐Monitoring Hypothesis: The Case of Corporate R&D Expenditures
Authors: Zantout Zaher Z.
Published: March 2005

Studies that test for shareholder wealth effects of announcements of plans to increase R&D expenditures find an average positive effect, but also a significant cross‐sectional variation. This study determines whether the effect can be predicted when the announcing firm's capital structure is considered. Results suggest a positive relation between the debt ratio and the R&D induced abnormal stock returns. These results are robust using different industry‐adjusted and unadjusted measures of capital structure and while controlling for several potentially influential variables. In addition, the gains to shareholders do not seem to be wealth transfers from bondholders. This evidence provides support to the debt‐monitoring hypothesis.
The Role of Default Risk in Determining the Market Reaction to Debt Announcements
Authors: Best Ronald W.
Published: March 2005

The stock price reaction to straight debt announcements is examined by differentiating firms on the basis of any subsequent change in their overall default risk. Results indicate that firms that will within six months of straight debt announcements undergo debt rating downgrades experience significant negative abnormal stock returns at the time of the new debt announcements, while firms with bond ratings that are later upgraded exhibit significant positive abnormal returns. Multiple regression analysis shows these results to be robust to the influence of filing size, tax shield effects, relative pre‐announcement long‐term debt levels, and subordination effects.
Regulation and Systematic Risk in the Electric Utility Industry: A Test of the Buffering Hypothesis
Authors: Davidson Wallace N. , Rangan Nanda , Rosenstein Stuart
Published: March 2005

In this paper, the authors test Peltzman's [19] buffering hypothesis—whether regulatory environment impacts systematic risk for regulated electric utilities. The paper differs from previous research in that an exogenously defined measure of regulatory environment, a large sample, and a method that controls for time‐series and crosssectional autocorrelation are used. The results are consistent with the buffering hypothesis but only in years of increasing input factor prices for the utilities. Using causality tests, the results also show that it is the regulatory environment that influences systematic risk and not vice versa.
Tobin's q‐Ratio and Market Reaction to Capital Investment Announcements
Authors: Blose Laurence E. , Shieh Joseph C. P.
Published: March 2005

There is a significant positive relation between Tobin's q‐ratio and the magnitude of stock market reaction to capital investment announcements. The findings have the following implications for capital investment theory: (i) The results provide evidence substantiating the link between the q‐ratio and real investment for industrial firms. For public utilities however, no such link exists, (ii) The study finds that average q and marginal q are correlated but the relation is somewhat more complicated than simple equality as assumed by numerous empirical studies. (iii) The findings suggest that investors can use average Tobin's q‐ratio to identify companies with profitable real capital investment opportunities.
Why Manufacture Offshore? An Empirical Analysis of Valuation Effects
Authors: Ojah Kalu , Seitz Neil E. , Rawashdeh Mufeed
Published: March 2005

In this study, announcements by U.S. firms of offshore joint venture manufacturing during the 1980s are used to provide more comprehensive evidence than past studies on the wealth effects of offshore joint ventures. Evidence shows that the target country's level of economic development and political stability, currency strength of the originating country (U.S. in this study) relative to that of the target country, U.S. firm's mode of entry, and the relative value of the U.S. firm's investment in the joint venture affect the wealth of U.S. firms which engage in offshore joint ventures. The target country's level of economic development, its political stability, and the currency strength of the originating country relative to the target country are shown to be the dominant economic factors. Of particular importance, evidence indicates that the target country's level of economic development is a more important determinant of excess returns than is its political stability.
Mutual to Stock Conversion, Information Cost, and Thrift Performance
Authors: Carhill Mike , Hasan Iftekhar
Published: March 2005

In the 1980s, a large number of thrifts converted from the mutual to the stock form of ownership. The literature has noted that investors in those conversions earned abnormally high short‐term returns. However, over the long run the converters earned very poor returns. The major reason for the poor returns was the extra noninterest operational costs associated with the stock form of ownership. Since those extra operational costs were predictable, the stock offerings may have been overpriced, ex ante as well as ex post.
The Effects of the Method of Payment and the Type of Offer on Target Returns in Mergers and Tender Offers
Authors: Suk David Y. , Sung Hyun Mo
Published: March 2005

This paper re‐examines the effects of the method of payment and type of offer on target abnormal returns around the takeover announcement, controlling for the target firm's institutional ownership. Previous studies suggest the difference in announcement‐period target returns between cash offers and stock exchange offers can be explained by the difference in capital gains tax liabilities of the target shareholders and/or the difference in the information effect of the method of payment. The empirical results indicate no relation between bid premiums (or target abnormal returns) and institutional ownership of the target firm in cash offers and a systematic difference in target returns between mergers and tender offers even after controlling for the method of payment. These results are inconsistent with both the tax hypothesis and the information effect hypothesis. The evidence suggests the likelihood of future competition might be higher in tender offers than in mergers.
Adverse Information and Dealer Spreads: Evidence from Dutch Auction Repurchases
Authors: Forjan James M. , McCorry Michael S.
Published: March 2005

The Dutch auction repurchase has become an increasingly popular alternative to open market repurchases and self‐tender offers for the distribution of earnings to shareholders. In a Dutch auction, the repurchase price is not determined by a managerial decision, but by shareholders. The extent to which a Dutch auction signals private information is tested by examining stock returns and bid‐ask spreads. Stock prices increase and bid‐ask spreads widen during the announcement of a Dutch auction; prices decrease and spreads narrow at expiration. Because of the uncertainty surrounding the final repurchase price, Dutch auctions initially increase the risk to which security dealers are exposed. As information asymmetry among managers, investors, and dealers is reduced at expiration, security dealers no longer need to protect themselves from information trades.
The Causality Effects of the Federal Reserve's Monetary Policy on U.S. and Eurodollar Interest Rates
Authors: Mougoué Mbodja , Wagster John
Published: March 2005

Previous studies argue that U.S. interest rates will become more sensitive to changes in eurodollar rates as international financial‐market integration increases. However, the empirical results of these studies are suspect because they select their subperiods in an ad hoc manner and ignore the different trading hours of the U.S. and London markets.

This study adjusts for the markets' different trading hours and uses Goldfeld and Quandt's switching regression technique to show that the causal relation between U.S. CD rates and eurodollar rates is impacted by the Federal Reserve's monetary policy. Because the latest subperiod exhibits uni‐directional causality (i.e., U.S. interest rates cause changes in eurodollar rates), the results cast doubt on the implicit assumption made in the literature that interest‐rate causality is only affected by increasing levels of financial‐market integration.
International mutual fund selectivity and market timing during up and down market conditions
Authors: Kao G. Wenchi , Cheng Louis T. W. , Chan Kam C.
Published: March 2005

This study examines the selectivity and market‐timing ability of international mutual fund managers. Ninety‐seven international mutual funds with a minimum of five‐year return history selected from the Morningstar OnDisc database are analyzed. Our findings suggest that managers of international mutual funds possess good selectivity and overall performance. We also find weak evidence of poor market‐timing ability. Consistent with prior findings from domestic mutual funds, there is a negative correlation between the international fund managers' selection ability and market‐timing ability. Finally, managers for Europea funds show poorer performance than those managing the other three international fund groups.
Indirect tests of the Haugen‐Lakonishok small‐firm/January effect hypotheses: window dressing versus performance hedging
Authors: Lee Cheng‐few , Porter David C. , Weaver Daniel G.
Published: March 2005

Equity mutual fund data from 1976–1993 is used to test hypotheses that distinguish window dressing from performance hedging. No significant difference is found pre/post 1983 in the number of funds choosing non‐December fiscal year ends or in the percentage of dollars invested when comparing December/non‐December fiscal year ends. Significant differences are found in both January returns for mutual funds with December/non‐December fiscal year ends and in one month returns for funds with/without a fiscal year end in the previous month. Therefore, if the small‐firm/January effect is portfolio manager related, performance hedging, not window dressing, is the more probable source for the “excess” returns.
Stock Returns in Thinly Traded Markets
Authors: Butler Kirt C. , Osborne Richard M.
Published: March 2005

We examine the share price behavior of thinly traded NASDAQ National Market System stocks during periods when financial markets are open but the individual stocks do not trade. The absence of trade allows us to isolate the effect of nontrading from that of market closure. We find that nontrading stocks have negative mean returns and lower variances regardless of whether markets are open or closed. Two‐day returns that include one nontrading day have a mean daily return of ‐0.226% compared to +0.164% for two‐day returns over consecutive trading days. Two‐day returns that include one nontrading day have only 3.8% higher variance than one‐day returns. We conclude that the relation between transaction arrival, mean returns, and volatility depends on whether a stock is trading and not simply on whether the market is open.
Stock Prices and the Secondary Dissemination of Information: The Wall Street Journal's “Insider Trading Spotlight”Column
Authors: Chang Saeyoung , Suk David Y.
Published: March 2005

In this paper we test whether a secondary dissemination of information affects stock prices. We examine stock price reactions to the publication of the “Insider Trading Spotlight”(ITS) column in the Wall Street Journal (WSJ). Since insider trades reported in the ITS column are initially disclosed to the public when insiders’ reports are filed with the Securities and Exchange Commission (SEC), the information contained in the WSJ is a secondary dissemination. Around the WSJ publication day, we find significant abnormal stock performance accompanied by a significant increase in trading volume. Our evidence suggests that a secondary dissemination of information can affect stock prices if the initial public disclosure attracts only limited attention by the market. In addition, we document how insider trading information is conveyed to the market.
Changes in Factor Betas and Risk Premiums Over Varying Market Conditions
Authors: Ahmed Parvez , Lockwood Larry J.
Published: March 2005

We show risk exposures and premiums associated with the Chen, Roll, and Ross (1986) risk factors change over time and depend on stock market and business cycle condition. Findings also indicate that factor risk premiums change sign between January and non‐January, especially during bull markets. These findings serve as a caveat for portfolio managers who allocate assets to match desired exposures to key macroeconomic risk factors.
Sufficiency Conditions For Inclusion of One Asset Over Another in Investment Portfolios
Authors: Trainor William J.
Published: March 2005

By extending Tsiang's (1972) analysis to encompass two risky assets, sufficiency conditions for including one asset over another in any investor's investment portfolio are derived. This derivation stems from the fact that any realistic utility function must have indifference curves with slopes less than one. Using this model's framework, it is found that short‐term Treasury bills in addition to cash balances cannot be a component of investor's investment portfolios. The results have implications for both the risk‐free rate used in portfolio analysis and provide a partial solution to Mehra and Prescott's (1985) equity premium puzzle.
An Examination of Cross‐Sectional Realized Stock Returns using a Varying‐Risk Beta Model
Authors: Howton Shelly W. , Peterson David R.
Published: March 2005

Using the dual‐beta model of Bhardwaj and Brooks (1993), this study examines the cross‐section of realized stock returns. Bull‐market betas are significantly positively related to returns and, except for some models in January, bear‐market betas are significantly negatively related to returns. These relationships are not lost even after other independent variables, including size, book‐to‐market equity, and an earnings‐price ratio, are added to the cross‐sectional regressions. Book‐to‐market equity is an important factor in bear, but not bull, markets. Size is important in January and in bear markets during February through December.
The Effect of Junk Bond Defaults on Common Stock Returns
Authors: Vu Joseph D.
Published: March 2005

This paper examines the effect of junk bond defaults on common stock returns. The evidence indicates that stockholders uncover the signs of financial distress long before the default date. Stock prices fall sharply at the time of the default announcement. Although stocks of fallen angel sample recover slowly and steadily after the default announcement, stocks of the original‐issue junk bond sample continue to decline. On average, bankrupt firms suffer larger negative stock returns than defaulted firms not only at the time of announcement, but also in both pre‐ and post‐event periods.
Pension benefits, wealth accumulation, and capital market equilibrium: a life cycle hypothesis‐based dynamic model
Authors: Lin Winston T , Chen Yueh H.
Published: March 2005

This paper examines the impacts of pension benefits on capital asset pricing in conjunction with wealth accumulation and retirement, and derives and tests a dynamic capital asset pricing model (CAPM) within the framework of a life cycle hypothesis‐based dynamic model. The life cycle hypothesis‐based dynamic model maximizes the expected utility of the individual's lifetime wealth in a continuous time process. An optimal solution of the individual's wealth path, incorporating the ages of retirement and death, is obtained and, based on the optimal wealth path, an analysis of comparative dynamics is pursued. The dynamic CAPM is then derived from the optimal wealth path; simulation and nonparametric tests are undertaken to evaluate the performance of the dynamic CAPM as compared to the traditional model which does not consider the impacts of pension benefits and the static model that incorporates the effects of pension benefits. The test results suggest that the proposed dynamic CAPM closely states the expected rate of return for a capital asset; that the new dynamic CAPM is preferable over the static model that is preferable over the traditional model; and that the three models considered are statistically distinguishable from one another.
The effect of leverage on bargaining with a corporation
Authors: Sarig Oded H.
Published: March 2005

This paper shows that the choice of a capital structure by a firm affects the bargaining posture of its shareholders vis‐a‐vis its suppliers of specialized production factors. The pricing of the firm's securities and the choice of a capital structure are analyzed in light of this effect of debt financing.
Correlated interest rate risk and funding strategies for nonfinancial firms
Authors: McNulty James E. , Smith Stephen D.
Published: March 2005

This paper considers appropriate funding strategies for nonfinancial firms when operating cash flows are correlated with interest rates. An example expression is provided for the optimal funding position when the firm has a two‐period investment horizon. The conclusion is that matching will be the best strategy if the unbiased expectations hypothesis of the term structure holds and operating cash flows are uncorrelated with interest rates. Since the optimal funding position will be the minimum‐risk one if the expectations hypothesis holds, the properties of the minimum‐risk funding strategy are also investigated. The primary result is that maturity matching will not necessarily be the optimal funding strategy even when, on average, the cost of long‐ and short‐term funds is the same. Finally, some empirical estimates of minimum risk funding positions for nonfinancial firms are provided using data from the Quarterly CompuStat files. The data indicate that changes in corporate operating earnings are, on average, significantly positively correlated with changes in short‐term interest rates, but that there is substantial cross‐sectional variation across companies in our sample.
The relationship between mutual fund fees and expenses and their effects on performance
Authors: Dellva Wilfred L. , Olson Gerard T.
Published: March 2005

Fees charged by mutual funds include front‐end load charges, deferred sales charges that decrease over time, redemption fees that are imposed whenever shares are sold, and 12b‐1 fees. Fees may be justified if they allow the fund to lower other costs or improve performance. In this paper, we find that, on average, 12b‐1 fees, deferred sales charges, and redemption fees increase expenses whereas funds with front‐end loads generally have lower expenses. We also find that funds with 12b‐1 fees and redemption fees, on average, earn higher risk adjusted returns but funds with front‐end load charges earn lower risk adjusted returns.
The impact of option introduction on the conditional return distribution of underlying securities
Authors: St. Pierre Eileen F.
Published: March 2005

This paper combines several interesting econometric techniques to examine changes in the conditional return distribution of security returns following option introduction. An EGARCH model is used to characterize the return generating process. An intervention analysis is performed to determine whether the parameters of the EGARCH model shift following initial options listing. This paper finds that the conditional distribution of security returns is unaffected by option introduction. Estimation of a transfer function‐noise model also shows that option introduction has no effect on conditional volatility.
Why electric utility stocks are sensitive to interest rates
Authors: O'Neal Edward S.
Published: March 2005

The determinants of electric utility stock interest rate sensitivity are examined. The bond rating of a utility's debt has a strong influence on its equity sensitivity to interest rates. The common stock of highly rated utilities is more interest rate sensitive than that of lower rated utilities. This finding is consistent with investors valuing utility stocks as predominantly income‐oriented securities. Once the rating of the debt is controlled for, the debt‐level of the utility is positively correlated with interest rate sensitivity. Additionally, larger utilities are found to be more interest rate sensitive than smaller utilities. Evidence is also presented that a utility's proportion of maturing long‐term debt influences interest rate sensitivity. A measure for regulatory lag is developed but appears to have no effect on interest rate sensitivity.
An examination of market efficiency around hurricanes
Authors: Lamb Reinhold P.
Published: March 2005

Hurricane Andrew produced more than $21.5 billion in property damage in Florida and Louisiana. Hurricane Hugo caused about $7 billion in damage in North and South Carolina. Although both hurricanes were large, the magnitudes of their destruction and the geographic concentrations of their paths were markedly different. This study finds that Hugo and Andrew produced substantially different market reactions on property and casualty (P&C) firms. The industry was generally unaffected by Hugo, regardless of whether or not firms had exposure in the Carolinas. Andrew, on the other hand, generated a significant negative impact on firms with exposure in Florida or Louisiana. Other firms were not effected by Andrew. These observations indicate that the market demonstrated an ability to discriminate by the magnitude of hurricane and by P&C firms based on their degree of loss exposure.
Filter Tests In Nasdaq Stocks
Authors: Szakmary Andrew , Davidson Wallace N. , Schwarz Thomas V.
Published: March 2005

This study examines the performance of filter and dual moving‐average crossover trading rules applied to Nasdaq stocks. We find that trading rules conditioned on a stock's past price history perform poorly, but those based on past movements in the overall Nasdaq Index tend to earn statistically significant abnormal returns. Since there is a high level of transaction costs in this market, these abnormal returns are generally not economically significant. However, there are indications that pursuing some of these strategies can be worthwhile in carefully selected subsets of stocks.
Long Memory In Futures Prices
Authors: Barkoulas John T. , Labys Walter C. , Onochie Joseph I.
Published: March 2005

This paper tests for fractional roots in the futures prices for selected commodities, foreign currencies, and stock indexes. The fractional testing method is the spectral regression method suggested by Geweke and Porter‐Hudak (1983). The empirical results suggest the presence of a fractional exponent in the differencing process for several commodity and foreign currency futures prices. The returns series for these commodities and currencies exhibit long range positive dependence. However, differencing of exact order one is sufficient for the stock index futures prices. Implications are drawn concerning theoretical and econometric modeling and price forecasting.
The Industry‐Wide Implications of Dividend Omission and Initiation Announcements and the Determinants of Information Transfer
Authors: Kohers Ninon
Published: March 2005

In examining the industry‐wide implications of dividend omission and initiation announcements, this study finds distinct industry responses for these two events. Specifically, dividend omission announcements have a significantly negative impact on the valuations of industry‐related firms. Factors influencing this industry reaction include the Herfindahl index of the announcing firm's industry, the two‐day abnormal return of the announcing firm, and its trading status (Nasdaq or NYSE/AMEX). Unlike dividend omissions, dividend initiations evoke a competitive (or negative) response from industry‐related firms. The degree of homogeneity in the announcing firm's industry, the announcing firm's abnormal return and its size affect this industry response.
The Reaction of Closed End Funds to Stock Distribution Announcements
Authors: Datar Vinay , Dubofsky David A.
Published: March 2005

This study examines the impact of stock split and stock dividend announcements made by closed end mutual funds. We argue that the asymmetric information / signaling hypothesis does not apply to mutual funds. Therefore, any announcement effects must be attributed to other factors such as the optimal trading range hypothesis. We find that closed end funds react no differently than other firms to stock distribution announcements; also, trading volume and turnover remain unchanged after closed end funds' ex‐stock distribution days, while liquidity declines for other firms that distribute shares.
Examining the Impact of the 1986 Tax Reform Act on Corporate Dividend Policy: A New Methodology
Authors: Casey K. Mike , Anderson Dwight C. , Mesak Hani I. , Dickens Ross N.
Published: March 2005

This article introduces a new methodology to investigate the effects of the 1986 Tax Reform Act (TRA) on corporate dividend policy. The methodology employs a modified version of Rozeff's (1982) model to control for the potential effect of underlying influential variables. The empirical results show there is no widespread reaction to the 1986 TRA passage on the aggregate level of dividends and only modest support for an industry‐related dividend effect. We also find that firm size does not play a significant role in dividend policy reaction to the 1986 TRA.
Comparing the Effectiveness of Traditional and Time Varying Hedge Ratios Using New Zealand and Australian Debt Futures Contracts
Authors: Wilkinson Katherine J. , Rose Lawrence C. , Young Martin R.
Published: March 2005

We apply cointegration methodology to the New Zealand and Australian 90‐day, three‐year and 10‐year debt and futures markets. We compare traditional methods of calculating hedge ratios with those computed by using univariate and multivariate error correction models. We use out‐of‐sample forecasting to determine which approach is the most effective. Contrary to recent research, our results show that univariate and multivariate error correction models do not outperform more traditional methods of constructing hedges.
Price Elasticity of Demand and an Optimal Cash Discount Rate in Credit Policy
Authors: Rashid Muhammad , Mitra Devashis
Published: March 2005

While the provision of a cash discount is equivalent to a reduction in price, the role of price elasticity of demand in determining credit terms has been neglected in the extant literature. In this paper, this role is investigated and it is shown that the optimal cash discount rate is affected by the price elasticity of demand for the firm's product. The comparative effects on the optimal cash discount rate with respect to exogenous changes in the fraction of credit sales paid after taking cash discount, the cost of short‐term funds and the bad debt loss ratio are investigated. A trade‐off between the time value gain and the price elasticity of demand is established. We find that firms which sell in locations having different price elasticities for their products, and/or which face various costs of short‐term funds in different locations, should vary their cash discount terms accordingly.
The Impact of Market Maker Competition on Nasdaq Spreads
Authors: Klock Mark , McCormick D. Timothy
Published: March 2005

This study utilizes a comprehensive database containing monthly information on the number of market makers for about 5,288 Nasdaq securities over an eight‐year period to investigate the impact of competition on spreads. A variety of models are estimated in order to demonstrate the robustness of the results that include four specific findings: (1) the number of market makers has a negative and highly significant impact on spreads; (2) the relation is nonlinear with a decreasing impact by the marginal market maker; (3) Nasdaq spreads have been declining over time; and (4) structural changes in Nasdaq are associated with significant changes in the relationship between spread and the number of market makers. One improvement over the literature includes allowing endogenous competition through the use of instrumental variables.
Multivariate GARCH Modeling of Exchange Rate Volatility Transmission in the European Monetary System
Authors: Kearney Colm , Patton Andrew J.
Published: March 2005

We construct a series of 3‐, 4‐ and 5‐variable multivariate GARCH models of exchange rate volatility transmission across the important European Monetary System (EMS) currencies including the French franc, the German mark, the Italian lira, and the European Currency Unit. The models are estimated without imposing the common restriction of constant correlation on both daily and weekly data from April 1979–March 1997. Our results indicate the importance of checking for specification robustness in multivariate Generalized Autoregressive Conditional Heleroskedasticity (GARCH) modeling, we find that increased temporal aggregation reduces observed volatility transmission, and that the mark plays a dominant position in terms of volatility transmission.
An Examination of the 1992 Increase in the Allowable Carryover of Reserves in the Bank Settlement Process
Authors: Griffiths Mark D. , Winters Drew B.
Published: March 2005

This paper examines the Federal Reserve's increase of the allowable carryover in the bank settlement process to improve bank flexibility in achieving settlement. The implication of increasing flexibility is reduced rate volatility. We find federal funds loan volume increases, but find no evidence of a reduction in federal funds rate volatility. These results are consistent with the increased carryover creating a profitable loan opportunity without changing the incentives that create the identified patterns in federal funds. We believe the difference between our results and the Federal Reserve's intention, derive from the difference in the trading behavior of the marginal and average bank.
Valuing the Potential Transformation of Banks into Financial Service Conglomerates: Evidence from the Citigroup Merger
Authors: Johnston Jarrod , Madura Jeff
Published: March 2005

The merger between Citicorp and Travelers Group on April 6, 1998 could have emitted two relevant signals for firms that provide financial services. The first signal is the endorsement by two prominent financial institutions that benefits from cross‐selling of bank services with insurance services, brokerage services, and other financial services can be realized. The second signal is that regulators will allow the combination of commercial banking with insurance underwriting and full‐service brokerage, paving a path for similar combinations in the future.

We document a favorable share price response for commercial banks, insurance companies, and brokerage firms, which supports the argument that the merger sets a precedent for other combinations between banks and nonbank financial services that will facilitate cross‐selling and efficiencies.
The Impact of Country Diversification on Wealth Effects in Cross‐Border Mergers
Authors: Kiymaz Halil , Mukherjee Tarun K.
Published: March 2005

We posit that country diversification via cross‐border mergers creates wealth by providing benefits for firms that are not available to their shareholders. We hypothesize that these benefits are inversely related to the extent of co‐movement in the economies of the bidder's and target's countries. We examine the wealth effects of U.S. targets and bidders involved in cross‐border mergers with firms in other countries during 1982–1991. We show that wealth effects vary, depending on country affiliations of two merging firms, and are inversely related to the degree of economic co‐movement between the two countries.
Fund Manager Succession in Closed‐End Mutual Funds
Authors: Rowe Wei Wang , Davidson Wallace N.
Published: March 2005

Managing the succession process by the hiring and firing of key executives is one of the important functions of a board of directors. In this research we study successions of fund managers in the closed‐end mutual fund industry. The agency issues inherent in closed‐end mutual funds makes them a unique laboratory for such a study. Our results suggest that while the overall abnormal returns of these manager changes are statistically insignificant, that the returns are more positive for funds with large expense ratios and for funds trading at a discount. We also find the abnormal returns are negatively related to the percentage of inside director stock ownership. Corporate bond funds and international equity funds react more negatively to these announcements than other types of funds. The abnormal returns do not appear to be related to board composition, but board composition does vary across fund type, and may therefore indirectly influence the results.
Market Efficiency in Specialist Markets Before and After Automation
Authors: Freund William C. , Pagano Michael S.
Published: March 2005

Using nonparametric statistical analysis, we measure the degree of market efficiency before and after automation at the New York and Toronto Stock Exchanges. Overall, the results show that the level of informational efficiency remains effectively unchanged during the automation period. Despite several deviations from a random walk process, the returns for stocks on these exchanges do not appear to exhibit consistent patterns that investors can exploit to generate abnormal returns. Automation also coincides with an improvement in market efficiency at the Toronto Stock Exchange when compared to the New York Stock Exchange.
The Impact of the Financial Institutions Reform, Recovery and Enforcement Act On The Risk of Savings Institutions
Authors: Madura Jeff , Wiley Marilyn K.
Published: March 2005

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 was intended to enhance the safety of savings institutions. We develop and test a model showing how institution‐specific characteristics modify the overall effect of FIRREA on the risk of savings institutions. Our model incorporates market risk, interest rate risk, and exposure to real estate conditions. We find that risk shifts vary across savings institutions. Larger institutions exhibit no obvious shift in risk, while smaller institutions show reduced risk since FIRREA. Moreover, the effects are more favorable for institutions that maintained higher capital levels in response to FIRREA's provisions.
Corporate Finance, Incentives, and Strategy
Authors: Noe Thomas H.
Published: March 2005

This study reviews papers from the Eastern Finance Association's Symposium on Corporate Finance, Incentives, and Strategy. I identify the common themes underlying these papers and place the studies in the broader context of contemporary academic finance research. Further, I discuss new directions for future research in corporate finance that are suggested in these studies.
Corporate Bankruptcy in Korea: Only the Strong Survive?
Authors: Bongini Paola , Ferri Giovanni , Hahm Hongjoo
Published: March 2005

We analyze whether the build‐up of financial vulnerabilities led listed Korean companies to bankruptcy. We find that pre‐crisis leverage is systematically high for both poor performing/slow growing firms and for profitable/fast‐growing firms. Pre‐crisis leverage raises the probability of bankruptcy, which is lower for firms: (1) relying more on (renegotiable) bank credit; (2) with less inter‐firm debt; and (3) having higher interest coverage ratios. Finally, none of these liquidity variables help predict bankruptcies for chaebol‐firms, suggesting that liquidity constraints are more stringent for non‐chaebol. Thus, in a systemic crisis it is not only the strong/healthy that survive.
The Effects of the Asian Crisis on Global Equity Markets
Authors: Tuluca Sorin A. , Zwick Burton
Published: March 2005

We investigate the comovement of daily returns from 13 Asian and non‐Asian markets before and after the advent of the Asian crisis in July 1997. For individual pairs of markets, our analysis shows a seven‐fold increase in feedback relations. For the markets as a group, we find a reduction in the number of common factors that generate returns. Since the post‐crisis period included the collapse of the Russian market and attack on the Brazilian real, we also analyze six three‐month subperiods surrounding the crisis. We find that the perceived increase in comovement during the post‐crisis interval was the result of subperiod transitory shocks.
A Multivariate Test of a Dual‐Beta CAPM: Australian Evidence
Authors: Faff Robert
Published: March 2005

I apply a multivariate one‐step testing procedure to investigate a dual‐beta CAPM. I begin by establishing that there is no statistical relation between beta and returns for the standard CAPM. I then re‐cast the one‐step test to accommodate a dual‐beta CAPM under bull and bear market conditions. When the excess market return is negative (positive), I find strong evidence of a negative (positive) relation between beta and returns. The strength of my results suggests that the success of the model is not crucially dependent on the argument for beta instability.
Prevalence and risk of gingival overgrowth in patients treated with diltiazem or verapamil
Authors: Miranda Jaume , Brunet Lluís , Roset Pere , Berini Leonardo , Farré Magí , Mendieta Carlos
Published: March 2005

Objectives: This study was conducted to determine the prevalence and risk factors for gingival enlargement in patients treated with diltiazem or verapamil.

Material and Methods: A cross‐sectional study was conducted and data from 46 patients actually taking diltiazem or verapamil were compared with 49 cardiovascular controls that never received any of these drugs. All patients were examined for the presence of gingival enlargement using two different indices, the vertical gingival overgrowth (GO) index, and horizontal Miranda & Brunet (MB) index in the inter‐dental area. Gingival index, plaque index, and probing depth were also evaluated.

Results: The total study population was 95:32 diltiazem‐treated, 14 verapamil‐treated and 49 cardiovascular control subjects. Gingival enlargement occurred in 31% (GO index) and 50% (MB index) of the patients taking diltiazem. Gingival enlargement in the verapamil‐treated group was 21% for the GO index and 36% for the MB index. The prevalence of gingival enlargement was higher in the diltiazem‐ and verapamil‐treated patients than in controls for both indices. The difference between the diltiazem‐treated group and control was statistically significant (p=0.022 for GO and p=0.001 for MB), while the difference between the verapamil‐treated group and controls was not significant. The risk of gingival enlargement (OR – Odds Ratio) associated with diltiazem therapy was 4.0 (1.2–13.1) for the GO index and of 6.0 (2.1–17.3) for the MB index. When the OR were adjusted for gingival index (GI) values, the risk of gingival enlargement was 3.5 (1.0–12.4) for the GO index and 6.2 (1.9–20.0) for the MB index. In the verapamil‐treated group the OR values were not significant. The level of concordance between GO and MB indices in all three groups showed a κ‐value of 0.72 (p<0.001).

Conclusion: Patients taking diltiazem are at high risk for gingival enlargement and gingivitis has a stronger effect than the drug treatment on gingival enlargement risk.
Classification, reproducibility and prevalence of root proximity in periodontal patients
Authors: Vermylen K. , De Quincey G. N. Th. , Van 't Hof M. A. , Wolffe G. N. , Renggli H. H.
Published: March 2005

Aim: The primary aim of this study is to define and classify root proximity. The secondary aim is to examine the reproducibility of the measurement tools, to study the prevalence per inter‐dental area and to examine whether the distance from the cemento‐enamel junction (CEJ) to the bone crest (BC) differs between sites with root proximity and their contra‐lateral sites without root proximity.

Material and Methods: In order to indicate the location of root proximity, a modification of the Shei ruler was developed, dividing the roots into three equal parts.

A radiographic template was used to measure the distance between the roots, in this way determining the severity of the root proximity. The reproducibility of the measurement tool was tested, the prevalence was calculated and the distances CEJ–BC for root proximity sites and contra‐lateral sites were recorded.

Results: A two‐digit classification was obtained dividing the root into three locations [apical (A), between (B) and coronal (C)], with each location having the possibility of three different severities of root proximity. The described modification of the Shei ruler and the measurement tool for the severities can be considered as reproducible measurement tools. Root proximity was most prevalent in maxillary molars and between central and lateral incisors in the maxilla and mandible. There was no difference in CEJ–BC distance between the root proximity sites and their contra‐lateral sites.

Conclusion: We can conclude that a two‐digit classification for root proximity was established. Root proximity in untreated periodontal patients has no influence on the distance CEJ–BC. However, the location of root proximity becomes important from the moment that periodontal disease has been established at that site. The severity of root proximity is important for choosing treatment options. There is a striking similarity between bone loss patterns and tooth loss and the location of inter‐dental spaces where root proximity is most prevalent.
Experimental gingivitis in type 1 diabetics: a controlled clinical and microbiological study
Authors: Salvi Giovanni E. , Kandylaki Maria , Troendle Amineh , Persson G. Rutger , Lang Niklaus P.
Published: March 2005

Objective: To monitor clinical and microbiological changes during experimental gingivitis in type 1 diabetics and non‐diabetics.

Materials and Methods: Nine type 1 diabetics with good/moderate metabolic control and nine age‐gender matched non‐diabetics were recruited. Probing pocket depths in all subjects did not exceed 4 mm and none were affected by attachment loss. According to the original model, an experimental 3‐week plaque accumulation resulting in experimental gingivitis development and a subsequent 2‐week period of optimal plaque control were staged. Subgingival plaque samples were collected at days 0, 21 and 35 from one site per quadrant, pooled and analysed using checkerboard DNA–DNA hybridization.

Results: Diabetics (mean age 25.6±5.8 standard deviation (SD), range 16–35 years) had a mean HbA1c level of 8.1±0.7% (SD), while non‐diabetics (mean age 24.8±5.7 (SD), range 15–36 years) were metabolically controlled (HbA1c6.5%). Between Days 0, 21 and 35, no statistically significant differences in mean plaque and gingival index scores were observed between diabetics and non‐diabetics. At days 7 and 21, however, diabetics showed statistically significantly higher percentages of sites with gingival index scores 2 compared with non‐diabetics. Mean DNA probe counts of the red and orange complex species increased significantly (p<0.05) between days 0 and 21 and decreased significantly (p<0.05) between days 21 and 35 in both groups.

Conclusion: Both diabetics and non‐diabetics react to experimental plaque accumulation with gingival inflammation. Type 1 diabetics, however, develop an earlier and higher inflammatory response to a comparable bacterial challenge.
Approximal brush head used on a powered toothbrush
Authors: Van Der Weijden G. A. , Timmerman M. F. , Danser M. M. , Piscaer M. , IJzerman Y. , Van Der Velden U.
Published: March 2005

Aim: This study was designed to test whether the approximal efficacy of a powered toothbrush (Braun Oral‐B 3D Plaque Remover) can be improved when a pointed‐shaped brush head (PBH) specifically designed for these approximal areas is used as compared with the standard cup‐shaped brush head (CBH).

Material and Methods: Forty non‐dental students were included. They all received the powered toothbrush and two different brush heads (CBH+PBH). Instructions were given to use each brush head twice every day (2 min. with the CBH followed by 1 min. with the PBH). Two weeks later they received an appointment for the first experiment (Exp 1), prior to which they abstained from all oral hygiene procedures for 48 h. Plaque was assessed at 6 sites/tooth. Next, the dental hygienist brushed for 2 min. (30 s/quadrant) with the CBH. Plaque was scored again. Subsequently, the dental hygienist brushed the approximal areas for another minute: in two randomly selected contra‐lateral quadrants for 30 s with the CBH and in the opposing quadrants for 30 s with the PBH. The next approximal plaque was scored a third time. After 2–3 weeks, Exp 2 was carried out comparable to Exp 1; only this time the panelists brushed themselves.

Results: Exp 1 showed approximal plaque scores at the baseline of 1.70 and 1.72 and at post‐brushing 0.21 and 0.26 for the CBH + PBH and CBH only, respectively (p<0.05). The additional increase in approximal plaque reduction after 30 s of brushing with PBH was 22% and for the CBH 19% (p<0.05). Exp 2 showed approximal plaque scores at baseline of 1.76 and 1.74 and post‐brushing of 0.21 and 0.24 for the CBH+PBH and the CBH, respectively. The additional approximal plaque reduction of 30 s brushing with PBH was 19% and 18% with the CBH (no significant difference).

Discussion/Conclusion: An additional 1 min. showed minor differences (1–3%) between brush heads. The effect of the 1 min. extra brushing (±18%) itself was much larger. It seems therefore beneficial to advise the patient to brush longer. A second different brush head may stimulate to do so.