bluuebunny/crossref_metadata_2025_split huggingface dataset:
VARIANCE BOUND TESTS OF BOND MARKET EFFICIENCY
Authors: Huang Chao‐Hsi , Ederington Louis H. 
Published: August 2014

AbstractIn this paper we examine variance bound tests of the joint hypothesis that (1) bond markets are efficient and (2) the term structure is determined by the expectations hypothesis. Both the Singleton and Shiller tests are shown to be seriously biased toward rejecting the joint hypothesis in finite samples. Flavin's test is unbiased but has a very high variance leading to many false rejections of the joint hypothesis. When corrected as suggested by Flavin, Shiller's test is unbiased and has a relatively low variance. Unfortunately, it is also sensitive to measurement error.
UNLISTED TRADING PRIVILEGES, LIQUIDITY, AND STOCK RETURNS
Authors: Khan Walayet A. , Baker H. Kent 
Published: August 2014

AbstractIn this study we examine the effect of dual trading through unlisted trading privileges (UTPs) on liquidity and stock returns. Stocks with UTPs trade in a different market structure than stocks listed and traded only on the AMEX and NYSE. Differences in market structure may affect stock returns through liquidity services provided by the competing markets. The sample comprises 852 AMEX and NYSE firms that began unlisted trading on the Philadelphia, Pacific, Midwest, or Cincinnati exchanges between 1984 and 1988. The results show significantly positive abnormal returns around the SEC's announcement of a regional exchange's filing for UTPs. The results also suggest that increased competition improves trading liquidity. Only stocks with low liquidity before UTPs announcements experience significantly improved liquidity and positive stock returns.
DUAL BETAS FROM BULL AND BEAR MARKETS: REVERSAL OF THE SIZE EFFECT
Authors: Bhardwaj Ravinder K. , Brooks LeRoy D. 
Published: August 2014

AbstractSignificant firm‐size‐related differences in abnormal returns and systematic risks occur in bull and bear market months from 1926 to 1988. Potential differential return premiums between recessions and expansions appear to be captured by the varying risk model and not the constant risk model. Using a dual‐beta market model to adjust for risk differences in bull and bear markets, we find that large firm stocks on average earn significant positive excess returns and small firm stocks earn significant negative excess returns. Superior performance of large firm stocks is even more pronounced outside January.
INTRADAY TRADING PATTERNS IN THE EQUITY OPTIONS MARKETS
Authors: Aggarwal Raj , Gruca Edward 
Published: August 2014

AbstractBased on the analysis of data for over two million options transactions on the Chicago Board of Options Exchange, we find significant U‐shaped intraday patterns in trading volume, transaction size, proportion of trades at the ask or bid, and other variables in the equity options market. These previously undocumented intraday temporal patterns are largely consistent with exogenous temporal influences on transactions volume in anticipation of and following nontrading periods. These patterns are also largely consistent with strategic trading endogenous to the market and are related to interactions between informed and liquidity or noise traders.
THE FINANCING AND INVESTMENT OF A LEVERED FIRM UNDER ASYMMETRIC INFORMATION
Authors: Raymar Steven 
Published: August 2014

AbstractThis research extends the literature on financing and investment under asymmetric information by considering the effect of initial leverage. Because decisions affect the value of outstanding bonds, realistic behaviors arise that are absent in extant unlevered analyses. Leverage may induce social improvements in investment. Further, a stock offering may be a positive signal if lower‐value firms face greater default risk and thus have lower debt values. Conditions that support positive reactions to equity funding appear to be present in the early 1990s.
SIMULTANEOUS DEBT AND EQUITY ISSUES AND CAPITAL STRUCTURE TARGETS
Authors: Billingsley Randall S. , Smith David M. , Lamy Robert E. 
Published: August 2014

AbstractNumerous empirical studies find evidence that managers behave as if they pursue target debt ratios. A possible alternative to the use of conventional, separate issuances of debt and equity to effect desired adjustments toward a target ratio is the simultaneous issuance of such securities. We extend prior research on such issues by exploring their use in the pursuit of capital structure targets. We find that the issuance of securities in general and the use of simultaneous issues of debt and equity in particular are at least partially influenced by where a firm's capital structure is relative to the average position in its industry. Further, shareholders' reactions to the announced plan to issue and to the issuance of securities are influenced, in part, by whether the issue moves the firm toward or away from the average capital structure in the industry. We also find evidence that the infrequent use of simultaneous issues relative to unaccompanied debt and equity issues is explained by their comparative flotation costs.
FOREIGN EXCHANGE MARKET REACTION TO THE U.S.‐CANADA FREE TRADE AGREEMENT
Authors: Hogan Kedreth , Sultan Jahangir 
Published: August 2014

AbstractIn this paper we investigate the effect of news about the advent of the U.S.‐Canada Free Trade Agreement (FTA) on the exchange rate between the Canadian dollar and the U.S. dollar. We find evidence that information flows related to the likelihood of the FTA influenced the volatility of the daily spot rate. In particular, information that increased the likelihood of the FTA subsequently diminished exchange rate volatility. In contrast, information that decreased the likelihood of the FTA subsequently increased exchange rate volatility.
CONVERTIBLE DEBT AND INVESTMENT INCENTIVES
Authors: Harikumar T. , Kadapakkam P. , Singer Ronald F. 
Published: August 2014

AbstractIn this paper we examine the effect of convertible debt on the investment incentives facing stockholders. The effect depends critically on the value of existing assets relative to the firm's investment requirements. With a restrictive dividend covenant, convertible debt mitigates the overinvestment incentive associated with risky debt but exacerbates the underinvestment incentive at higher values of existing assets. A less‐restrictive dividend covenant exacerbates overinvestment under straight debt financing but reduces the underinvestment incentive induced by the conversion feature. In this context, a convertible debt contract with a less‐restrictive dividend covenant maximizes firm value.
AN ANALYSIS OF THE UNDERWRITER SELECTION PROCESS FOR INITIAL PUBLIC OFFERINGS
Authors: Wolfe Glenn A. , Cooperman Elizabeth S. , Ferris Stephen P. 
Published: August 2014

AbstractThis study extends previous research that shows prestigious underwriters avoided underwriting smaller, more speculative initial public offerings (IPOs) during a post‐SEC period, 1966–77. Estimating a logit model with a sample of 1,192 IPOs from 1977 to 1988, we evaluate the effect of offering characteristics and prevailing market conditions on the probability a prestigious investment banker will underwrite an IPO. Similar to previous studies, we find that prestigious underwriters avoid smaller, riskier issues. However, we also find stock market volatility, interest rate volatility, and the strength and profitability of the recent market for seasoned new issues to be important determinants of a prestigious underwriter's decision to underwrite an IPO.
CAPITAL STRUCTURE MANAGEMENT AS A MOTIVATION FOR CALLING CONVERTIBLE DEBT
Authors: Emery Douglas R. , Iskandar‐Datta Mai E. , Rhim Jong‐Chul 
Published: August 2014

AbstractUsing a matched‐pairs methodology, we present empirical evidence of systematic changes within a corporation that are associated with calls of convertible debt. We find that calling firms experience significantly greater growth than noncalling firms in the same industry, as measured by retained earnings and long‐term debt. Also, the converted debt provides a significant source of new book equity, and calling firms issue significantly less other new equity. The pattern of growth in balance sheet accounts is consistent with the pecking order hypothesis and supports the notion that some firms call convertible debt to reduce their total cost of obtaining additional external financing. The evidence also shows that, on average, calling firms experience a significant decline in their leverage ratio based on book value but no significant change in their leverage ratio based on market value of equity. This is consistent with the call's being used as part of the firm's management of its capital structure.
PROBABILITY OF PRICE REVERSAL AND RELATIVE NOISE IN STOCK AND OPTION MARKETS
Authors: Gendron Michel , Khoury Nabil , Yourougou Pierre 
Published: August 2014

AbstractIn this paper we take a new approach to the study of the interrelation between stock and option markets by extending Stoll's (1989) model of cost components of the bid‐ask spread to include an error component in prices. Building upon Stoll's estimates of the probability of price reversals, we determine which of the option or stock markets carries more noise. The empirical results indicate that option markets are noisier than stock markets. Such findings are consistent with the view that option markets serve as a testing ground for noisy new information because of their comparative advantage regarding transaction costs, liquidity, and potential leverage.
INTRADAY CHANGES IN TARGET FIRMS' SHARE PRICE AND BID‐ASK QUOTES AROUND TAKEOVER ANNOUNCEMENTS
Authors: Jennings Robert 
Published: August 2014

AbstractThis paper documents changes in share prices, bid‐ask spreads, and quote sizes for target firms during the day a takeover proposal is announced. The mean 21.2 percent announcement‐day return consists primarily of a 19.5 percent return at the announcement. There is little evidence that spreads increase before the announcement, except when trading is suspended because of an order imbalance. Quote sizes show some sign of decreasing just before the announcement. The quoted bid‐ask spread and size increase immediately after the announcement, but spreads quickly return to normal.
REGULARITIES IN THE VARIATION OF SKEWNESS IN ASSET RETURNS
Authors: Alles Lakshman A. , Kling John L. 
Published: August 2014

AbstractThis paper documents regularities in the comparative skewness characteristics across several classes of assets and over time. We find smaller capitalized stock indices are more negatively skewed than larger stock indices. Over time, the skewness of stock indices follows a business‐cycle‐related variation. Skewness is more negative during economic upturns and less negative, even positive, during downturns. Three alternative methods for testing the statistical significance of skewness and for making confidence interval estimates of skewness are presented. These include a bootstrap methodology and a test that allows for nonindependent observations.
REORGANIZATION AND FINANCIAL DISTRESS: AN EMPIRICAL INVESTIGATION
Authors: Datta Sudip , Iskandar‐Datta Mai E. 
Published: August 2014

AbstractPrior studies on financial distress focus on the restructuring of one aspect of the firm. By examining various forms of restructuring, we provide empirical evidence that asset restructuring and governance restructuring play significant roles before bankruptcy filing. Our analysis shows that financial restructuring before bankruptcy is influenced by the holdout problem among creditor groups. Evidence suggests that the fraudulent conveyance provision does not pose a serious impediment to divestitures during the two years before bankruptcy. The evidence also indicates that Chapter 11 reorganization is lenient toward management. Although Chapter 11 allows the firm to breach burdensome executory contracts with employees, our findings suggest that union busting is not an important part of the reorganization process. Finally, we identify various financial characteristics to predict the different types of restructuring a firm may undertake.
THE RELATION AMONG DIVIDEND POLICY, FIRM SIZE, AND THE INFORMATION CONTENT OF EARNINGS ANNOUNCEMENTS
Authors: Mozes Haim , Rapaccioli Donna 
Published: August 2014

AbstractIn this paper we investigate the role of dividends in explaining the size effect. The previous literature concludes that before the firm's earnings announcement, small firm stock prices impound less information than large firm stock prices. This size effect is evidenced by the greater market reaction to small firm earnings announcements than to large firm earnings announcements. We find that if the dividend announcement precedes the earnings announcement, no size effect exists. The implication is that the information conveyed by dividend announcements includes the information conveyed to investors in large firms by other information sources. However, if the firm does not pay dividends or if the firm's earnings announcement precedes its dividend announcement, the size effect exists. The implication is that dividends do not completely explain the size effect. That is, there are information sources other than dividends that are exclusively available to investors in large firms, and the information provided by these sources is reflected in the stock price of large firms before the earnings announcement.
TIME‐TO‐BUILD EFFECTS AND THE TERM STRUCTURE
Authors: Strauss Jack , Zhou Guofu 
Published: August 2014

AbstractThis paper shows that real macroeconomic variables have power to predict movements in the term structure of interest rates. This complements recent evidence that links the term structure to expected stock returns. We find that up to 86 percent of the variation in the term premia are due to the changes in macroeconomic variables. The predictive power can be attributed to the time‐to‐build effect of investments.
MANAGERIAL OWNERSHIP CHANGE AND FIRM VALUE: EVIDENCE FROM DUAL‐CLASS RECAPITALIZATIONS AND INSIDER TRADING
Authors: Hanson Robert C. , Song Moon H. 
Published: August 2014

AbstractWe explore the relation between managerial ownership and firm value by examining a sample of firms that announce dual‐class recapitalizations and the insider trading activity that precedes these announcements. Insider trading activity, unlike recapitalization, requires managers to commit their personal wealth and therefore serves as an indicator of the motivation behind the recapitalization. The recapitalization, in effect, allows managers to magnify the increase in vote ownership that results from insider buying and offsets the decrease in vote ownership that results from insider selling. This study adds to our understanding of dual‐class recapitalizations by linking the wealth effects and changes in ownership concentration with ***manager‐shareholder agency issues that follow from recapitalization and insider trading activity. Results show a positive relation between the change in firm value and ownership for recapitalizations before the 1984 New York Stock Exchange moratorium on delisting dual‐class firms when ownership was high and control was firmly established. Results show a negative relation for recapitalizations since 1984 when ownership levels were lower and voting control was not assured. These results support the notion that more recent recapitalizations entrench managers.
PRICE AND VOLUME EFFECTS ASSOCIATED WITH THE CREATION OF STANDARD & POOR'S MIDCAP INDEX
Authors: Collins M. Cary , Wansley James W. , Robinson Breck 
Published: August 2014

AbstractIn this paper we explore price and volume effects associated with the 1991 creation of Standard & Poor's MidCap 400 index. Prior work on changes in the composition of existing indices finds a significant price response to the announcement. Various authors link the effect to price pressure, information, an outwardly shifting demand curve for securities, and the increased attention that comes with inclusion in an index. Using event study methodology, we find significant price and volume effects during the two weeks leading up to the Standard & Poor's announcement, but no significant effect in the two‐day interval around the event. Apparently, information leakage and/or anticipation preceded the creation of the index. The price run‐up is permanent since the positive abnormal returns leading up through the announcement are not associated with significantly negative abnormal returns after the announcement. In addition, MidCap stocks significantly outperform the market during the fifty‐two weeks following the announcement. Using cross‐sectional regressions, we show that these prior‐period abnormal returns are positively related to abnormal volume and institutional holdings. We also find that firms trading over‐the‐counter had larger price run‐ups than NYSE or AMEX firms.
A NO‐ARBITRAGE MARTINGALE ANALYSIS FOR JUMP‐DIFFUSION VALUATION
Authors: Chang Carolyn W. 
Published: August 2014

AbstractThis study presents a jump‐diffusion valuation framework using the no‐arbitrage martingale approach. Equilibrium conditions needed to support a jump‐diffusion pricing standard process are derived. The results are a generalized jump‐diffusion security market line and its corresponding equilibrium valuation relation that prices both jump and diffusion risk. To value options, a fundamental formula is derived that includes existing jump‐diffusion option valuation formulas as special cases. 1 find Merton's (1976a) assumption of diversifiable jump risk to be consistent with no‐arbitrage only when the aggregate consumption flow does not jump. Simulation shows that Merton's formula undervalues/overvalues options on hedging/cyclical assets. When the jump arrival frequency is larger, the mispricing is larger/smaller for in‐the‐money/out‐of‐the‐money options.
ON ESTIMATING STOCK MARKET VOLATILITY: AN EXPLORATORY APPROACH
Authors: MacDonald John A. , Shawky Hany A. 
Published: August 2014

AbstractTraditional methods of estimating market volatility use daily return observations from a stock index to calculate monthly variance. We break with tradition and estimate stock market volatility using the daily, cross‐sectional standard deviation of returns for all firms trading on the New York Stock Exchange and the American Stock Exchange. We find a significantly positive relation between risk and return. Market volatility is estimated to be about half the volatility level previously reported. The intraday, cross‐sectional market volatility measure provides findings consistent with risk‐return theory.
EVIDENCE ON THE EFFECT OF TAXES ON FIRMS' DECISIONS TO RETIRE DEBT EARLY
Authors: Manzon Gil B. , Porter Thomas L. , Potter Mark E. 
Published: August 2014

AbstractWe examine the effect of marginal tax rates on the decision to retire debt early. Other factors that have been linked to the debt retirement decision are also investigated, including leverage adjustment and the value associated with the immediate recognition of a loss for tax purposes on early retirement. Results indicate that firms that retire debt early have lower marginal tax rates than firms that do not retire debt early. This finding is consistent with the proposition that firms are motivated to retire debt early by an incentive to reduce tax shields that cannot be used efficiently. Further, firms that retire debt early are more highly leveraged than firms that do not retire debt early. Evidence also suggests that some firms retire debt early at a loss to reduce currently taxable income.
MARKET REACTION TO NATIONAL DISCRETION IN IMPLEMENTING THE BASLE ACCORD
Authors: Wagster John , Kolari James , Cooper Kerry 
Published: August 2014

AbstractWe report the wealth effects among banks in the United States, Japan, Canada, and the United Kingdom in reaction to public announcements concerning their respective national implementation of the 1988 Basle Accord, an international risk‐based capital regulatory agreement. Previous survey findings indicate bankers in different countries perceive that national discretion could threaten the competitive equity goals of the new risk‐based capital rules. Based on a multivariate regression model using seemingly unrelated equations, we find significantly positive and negative market reactions by bank investors to individual announcements of different countries' post‐Accord capital rules. However, no particular country's banks were systematically advantaged or disadvantaged with national discretion announcements viewed in aggregate. Although national discretion does affect bank wealth, the evidence does not suggest that national implementation compromises the competitive goals of the Accord.
AN EMPIRICAL STUDY OF A NEW CLASS OF NO‐ARBITRAGE‐BASED DISCRETE MODELS OF THE TERM STRUCTURE
Authors: Sim Ah Boon , Thurston David C. 
Published: August 2014

AbstractWe present empirical tests of the new no‐arbitrage‐based term structure paradigm in discrete time. We derive and test empirical specifications for deterministic one‐factor forward rate volatility models and examine the compatibility of these forward rate volatility functions using term structure dynamics. Our estimation technique uses the generalized method of moments and is based on forward bond price deviations. We do not impose restrictions on the market price of risk, and we incorporate all available term structure information. Our data consist of four sets of pure discount bonds derived from the CRSP bond files and U.S. Treasury bill quotes.
BIVARIATE BINOMIAL OPTIONS PRICING WITH GENERALIZED INTEREST RATE PROCESSES
Authors: Hilliard Jimmy E. , Schwartz Adam L. , Tucker Alan L. 
Published: August 2014

AbstractWe extend existing pricing models and develop a bivariate binomial option pricing technique that accommodates correlated state variables. This technique offers the ability to price American‐style options, thereby accommodating early exercise, despite the existence of two correlated underlying state variables. Our technique is computationally efficient and can be further generalized for multiple‐state variables, albeit with an accompanying rise in computational expense.
DETECTING ABNORMAL RETURNS USING THE MARKET MODEL WITH PRE‐TESTED DATA
Authors: Graham A. Steven , Pirie Wendy L. , Powell William A. 
Published: August 2014

AbstractThe current literature suggests various alternative procedures for increasing the power of tests to detect abnormal returns in event studies. Using randomly constructed portfolios, we simulate events and compare the results of tests using three alternative procedures: traditional, cross‐sectional, and cross‐sectional with standardized residuals. For each test, we compare results when all observations are included with results when the observations with high trading volume are omitted from the estimation period. The simulation results indicate that both the traditional approach with omitted observations and the cross‐sectional approach using standardized residuals with all observations yield approximately the correct test sizes and significantly improve the power of tests to detect abnormal returns. However, the cross‐sectional approach using standardized residuals is clearly dominant among the three procedures.
ADVERSE CONTRACT INCENTIVES AND INVESTMENT BANKER REPUTATION: TARGET FIRM TENDER OFFER FEES
Authors: McLaughlin Robyn M. 
Published: August 2014

AbstractI measure the potential economic importance of fee‐contract incentives and investment banker reputation as factors that can mitigate conflicts of interest between investment bankers and their target firm clients in tender offers. I find that the fee contracts used between target firms and their investment bankers contain incentives that can create substantial conflicts of interest. Simulated losses from these adverse incentives can be large—up to 16.7 percent of target firm value. I also find, however, that when investment banker reputation capital is included in the simulation, losses are substantially reduced.