bluuebunny/crossref_metadata_2025_split huggingface dataset:
Insider Trading in the OTC Market
Authors: LIN JI‐CHAI , HOWE JOHN S. 
Published: April 2012

ABSTRACTIn this paper, we examine the profitability of insider trading in firms whose securities trade in the OTC/NASDAQ market. Although the evidence suggests timing and forecasting ability on the part of insiders, high transaction costs (especially bid‐ask spreads) appear to eliminate the potential for positive abnormal returns from active trading. By implication, outside investors who mimic the trading of insiders are also precluded from earning abnormal profits. In addition, we provide evidence on the determinants of insiders' profits. The data suggest that insiders closer to the firm trade on more valuable information than insiders removed from the firm.
Capital Structure and the Informational Role of Debt
Authors: HARRIS MILTON , RAVIV ARTUR 
Published: April 2012

ABSTRACTThis paper provides a theory of capital structure based on the effect of debt on investors' information about the firm and on their ability to oversee management. We postulate that managers are reluctant to relinquish control and unwilling to provide information that could result in such an outcome. Debt is a disciplining device because default allows creditors the option to force the firm into liquidation and generates information useful to investors. We characterize the time path of the debt level and obtain comparative statics results on the debt level, bond yield, probability of default, probability of reorganization, etc.
Are the Latent Variables in Time‐Varying Expected Returns Compensation for Consumption Risk?
Authors: FERSON WAYNE E. 
Published: April 2012

ABSTRACTMultibeta asset pricing models are examined using proxies for economic state variables in a framework which exploits time‐varying expected returns to estimate conditional betas. Examples include multiple consumption‐beta models and models where asset returns proxy for the state variables. When the state variables are not specified, the tests indicate two or three time‐varying expected risk premiums in the sample of quarterly asset returns. Conditional betas relative to consumption generate less striking evidence against the model than betas relative to asset returns, but both the consumption and the market variables fail to proxy for the state variables.
Empirical Estimates of Beta When Investors Face Estimation Risk
Authors: CLARKSON PETER M. , THOMPSON REX 
Published: April 2012

ABSTRACTWe examine empirical implications of models of differential information that formalize the following intuition: securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions. The implication that beta risk for low information firms should decline as information increases is confirmed with several data sets. We find such a decline over the first several periods subsequent to initial public offerings and initial listings. There is also an abrupt risk decline at the first annual earnings announcement.
Relative Price Variability, Real Shocks, and the Stock Market
Authors: KAUL GAUTAM , SEYHUN H. NEJAT 
Published: April 2012

ABSTRACTIn this paper, we investigate the effects of relative price variability on output and the stock market and gauge the extent to which inflation proxies for relative price variability in stock return‐inflation regressions. The evidence shows that the negative stock return‐inflation relations proxy for the adverse effects of relative price variability on economic activity, particularly during the seventies, when the U.S. experienced oil supply shocks. Hence, it appears that inflation spuriously affects the stock market in two ways: the aggregate output link of Fama (1981) and the supply shocks reflected in relative price variability.
Evaluating the Performance of International Mutual Funds
Authors: CUMBY ROBERT E. , GLEN JACK D. 
Published: April 2012

ABSTRACTIn this paper, we examine the performance of a sample of fifteen U.S.‐based internationally diversified mutual funds between 1982 and 1988. Two performance measures are used, the Jensen measure and the positive period weighting measure proposed by Grinblatt and Titman. We find no evidence that the funds, either individually or as a whole, provide investors with performance that surpasses that of a broad, international equity index over this sample period.
International Investment Restrictions and Closed‐End Country Fund Prices
Authors: BONSER-NEAL CATHERINE , BRAUER GREGGORY , NEAL ROBERT , WHEATLEY SIMON 
Published: April 2012

ABSTRACTSome closed‐end country funds trade at large premiums relative to their net asset values. This paper examines whether international investment restrictions raise country fund price‐net asset value ratios by segmenting international capital markets. We test whether a relation exists between announcements of changes in investment restrictions and changes in these ratios using weekly data from May 1981 to January 1989. The results provide evidence that some foreign markets are at least partially segmented from the U.S. capital market.
Statistical Properties of the Roll Serial Covariance Bid/Ask Spread Estimator
Authors: HARRIS LAWRENCE 
Published: April 2012

ABSTRACTExact small sample population moments of the standard serial covariance and variance estimators are derived under the assumptions of the Roll bid/ask spread model. Noise explains why serial covariance estimates are often positive in annual samples of daily and weekly returns. Small sample estimator bias partially explains why weekly estimates are more negative than daily estimates. Noise causes the Roll spread estimator to be severely biased by Jensen's inequality. The French‐Roll adjusted variance estimator is unbiased but noisy. Empirical tests confirm the major implications.
The Effect of Executive Stock Option Plans on Stockholders and Bondholders
Authors: DeFUSCO RICHARD A. , JOHNSON ROBERT R. , ZORN THOMAS S. 
Published: April 2012

ABSTRACTExecutive stock option plans have asymmetric payoffs that could induce managers to take on more risk. Evidence from traded call options and stock return data supports this notion. Implicit share price variance, computed from the Black‐Scholes option pricing model, and stock return variance increase after the approval of an executive stock option plan. The event is accompanied by a significant positive stock and a negative bond market reaction. This evidence is consistent with the notion that executive stock options may induce a wealth transfer from bondholders to stockholders.
On Viable Diffusion Price Processes of the Market Portfolio
Authors: BICK AVI 
Published: April 2012

ABSTRACTThe assumption that the market portfolio follows a specified diffusion process implies, in a simple equilibrium framework, that the representative individual must have a certain utility function which is identified in the paper. Not every diffusion process is viable, i.e., can be “endogenized” to be the market portfolio's price process in such an equilibrium model. The paper provides necessary and sufficient conditions for viability which imply that viable diffusion processes constitute a rather restricted family.
Overreaction or Fundamentals: Some Lessons from Insiders' Response to the Market Crash of 1987
Authors: SEYHUN H. NEJAT 
Published: April 2012

ABSTRACTThis paper shows that i) the Crash was a surprise to corporate insiders; ii) insiders became buyers of stock in record numbers immediately following the Crash; iii) stocks that declined more during the Crash were also purchased more by insiders; and iv) stocks that were purchased more extensively by insiders during October 1987 showed larger positive returns in 1988. The overall evidence suggests that overreaction was an important part of the Crash.
Security Pricing and Deviations from the Absolute Priority Rule in Bankruptcy Proceedings
Authors: EBERHART ALLAN C. , MOORE WILLIAM T. , ROENFELDT RODNEY L. 
Published: April 2012

ABSTRACTClaims ultimately awarded to shareholders of firms in reorganization were examined for a sample of 30 filings under the 1978 Bankruptcy Reform Act. We measured the amount paid to shareholders in excess of that which they would have received under the absolute priority rule and found that this amount represents, on average, 7.6% of the total awarded to all claimants. Evidence is also reported that common share values reflect a significant proportion of value ultimately received in violation of absolute priority, suggesting that deviations from the rule were expected by the equity markets.
International Capital Structure Equilibrium
Authors: HODDER JAMES E. , SENBET LEMMA W. 
Published: April 2012

ABSTRACTThis paper develops a theory of capital structure in an international setting with corporate and personal taxes. We generalize the Miller analysis to an international equilibrium characterized by differential international taxation and inflation in otherwise perfect international capital markets. Our analysis highlights the key role that corporate tax arbitrage plays in generating an international capital structure equilibrium, and we set forth a number of mechanisms for tax arbitrage transactions. We close the paper by outlining some implications of our analysis for national differences in capital structure, the International Fisher Effect, and international tax effects on yield differentials.
Determinants of Secondary Market Prices for Developing Country Syndicated Loans
Authors: BOEHMER EKKEHART , MEGGINSON WILLIAM L. 
Published: April 2012

ABSTRACTThis paper presents our investigation of the factors that determine secondary market prices of developing country syndicated loans. Trading volume in this market has almost doubled yearly from 1985 to 1988 while average market prices declined from 73% to 41% of par value during the same period. We find that loan values depend on a country's solvency rather than its liquidity and show that a country's adoption of a debt conversion program significantly decreases its loans' market prices. Furthermore, the debt moratoria by Brazil and Peru, as well as the developing‐country‐specific provisions made by U.S. banks, impact loan prices negatively.
Deposit Insurance and Wealth Effects: The Value of Being “Too Big to Fail”
Authors: O'HARA MAUREEN , SHAW WAYNE 
Published: April 2012

ABSTRACTThis paper investigates the effect on bank equity values of the Comptroller of the Currency's announcement that some banks were “too big to fail” and that for those banks total deposit insurance would be provided. Using an event study methodology, we find positive wealth effects accruing to TBTF banks, with corresponding negative effects accruing to non‐included banks. We demonstrate that the magnitude of these effects differed with bank solvency and size. We also show that the policy to which the market reacted was that suggested by the Wall Street Journal and not that actually intended by the Comptroller.
Changes in Interstate Banking Laws: The Impact on Shareholder Wealth
Authors: BLACK HAROLD A. , FIELDS M. ANDREW , SCHWEITZER ROBERT L. 
Published: April 2012

ABSTRACTThis study examines the impact on shareholder wealth of changes in interstate banking laws. The research demonstrates that changes in state statutes which allow interstate banking have a positive impact on the stock prices of regional banking organizations and a negative impact on the stock prices of money center banks. Interstate banking statutes initially exclude those states in which the money center banks are headquartered. The findings provide evidence that, by excluding money center banks from expansion across state lines, the competition from the regional banks may have an adverse competitive effect on the money center banks.
Corporate Risk Management and the Incentive Effects of Debt
Authors: CAMPBELL TIM S. , KRACAW WILLIAM A. 
Published: April 2012

ABSTRACTThis paper demonstrates how the incentive of manager‐equityholders to substitute toward riskier assets, commonly referred to as the “asset substitution problem,” is related to the level of observable risk in the firm. When observable and unobservable risks are sufficiently positively correlated, increases (decreases) in observable risk generate the incentive for manager‐equityholders to increase (decrease) unobservable risk. Thus, credible commitments to hedge observable risk can benefit the firm's manager‐equityholders by reducing the incentive to shift risk and the associated agency cost of debt. This provides a positive rationale for hedging diversifiable risk at the firm level.
Do Managerial Objectives Drive Bad Acquisitions?
Authors: MORCK RANDALL , SHLEIFER ANDREI , VISHNY ROBERT W. 
Published: April 2012

ABSTRACTIn a sample of 326 US acquisitions between 1975 and 1987, three types of acquisitions have systematically lower and predominantly negative announcement period returns to bidding firms. The returns to bidding shareholders are lower when their firm diversifies, when it buys a rapidly growing target, and when its managers performed poorly before the acquisition. These results suggest that managerial objectives may drive acquisitions that reduce bidding firms' values.
An Examination of the Impact of the Garn‐St. Germain Depository Institutions Act of 1982 on Commercial Banks and Savings and Loans
Authors: CORNETT MARCIA MILLON , TEHRANIAN HASSAN 
Published: April 2012

ABSTRACTThis paper evaluates the effects of events leading to the passage of the Garn‐St. Germain Depository Institutions Act of 1982. The evidence suggests that the call for reform by President Reagan's Housing Commission and the Senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks. Stockholders of small S&Ls and banks, on the other hand, generally experienced negative abnormal returns. Furthermore, when hopes of passage of the Act faded, significant negative (positive) abnormal returns were experienced by stockholders of large (small) S&Ls and banks.
Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects
Authors: LAMOUREUX CHRISTOPHER G. , LASTRAPES WILLIAM D. 
Published: April 2012

ABSTRACTThis paper provides empirical support for the notion that Autoregressive Conditional Heteroskedasticity (ARCH) in daily stock return data reflects time dependence in the process generating information flow to the market. Daily trading volume, used as a proxy for information arrival time, is shown to have significant explanatory power regarding the variance of daily returns, which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns. Furthermore, ARCH effects tend to disappear when volume is included in the variance equation.
Can Futures Market Data Be Used to Understand the Behavior of Real Interest Rates?
Authors: MISHKIN FREDERIC S. 
Published: April 2012

ABSTRACTThis paper examines whether futures market data can be used to understand the behavior of real interest rates. Several ways of examining the data indicate that futures market data are not particularly informative about real interest rates. Not only does this evidence cast some doubt on results in previous research that make use of futures market data to draw inferences about real interest rates, but it also indicates that future research on real interest rates may need to turn to a different line of attack.
Default Risk and the Duration of Zero Coupon Bonds
Authors: CHANCE DON M. 
Published: April 2012

ABSTRACTThis paper applies a contingent claims approach to examine the duration of a zero coupon bond subject to default risk. One replicating portfolio for a default‐prone zero coupon bond contains a long position in the default‐free asset plus a short position in a put option on the underlying assets. The duration of the bond is shown to be a weighted combination of the duration of the default‐free bond and the put option. The duration is less than maturity and is not an immunizing duration. The technique is then extended to subordinated debt.
Stock Dividends, Stock Splits, and Signaling
Authors: MCNICHOLS MAUREEN , DRAVID AJAY 
Published: April 2012

ABSTRACTThis paper provides evidence that firms signal their private information about future earnings by their choice of split factor. Split factors are increasing in earnings forecast errors, after controlling for differences in pre‐split price and firm size. Furthermore, price changes at stock dividend and split announcements are significantly correlated with split factors, holding other factors constant, and with earnings forecast errors. These correlations suggest that management's choice of split factor signals private information about future earnings and that investors revise their beliefs about firm value accordingly. The analysis also suggests, however, that announcement returns are significantly correlated with split factors after controlling for earnings forecast errors. This suggests that earnings forecast errors measure management's private information about future earnings with error, that split factors signal other valuation‐relevant attributes, or that a signaling explanation is incomplete.
Pricing Options with Extendible Maturities: Analysis and Applications
Authors: LONGSTAFF FRANCIS A. 
Published: April 2012

ABSTRACTMany common types of financial contracts incorporate options with extendible maturities. This paper derives closed‐form expressions for options that can be extended by the optionholder and presents a number of applications including the valuation of American options with stochastic dividends, junk bonds, and shared‐equity mortgages. We also derive closed‐form expressions for writer‐extendible options and discuss the writer's economic incentives for extending an out‐of‐the‐money option. We apply these results to show that corporate debtholders have a strong incentive to extend the maturity of defaulting debt if there are liquidation costs. We model and solve the debtholders' optimal extension problem and show that the possibility of an extension can induce shareholders in highly levered firms to accept negative NPV projects.
Using Generalized Method of Moments to Test Mean‐Variance Efficiency
Authors: MACKINLAY A. CRAIG , RICHARDSON MATTHEW P. 
Published: April 2012

ABSTRACTThis paper develops tests of unconditional mean‐variance efflciency under weak distributional assumptions using a Generalized Method of Moments framework. These tests are potentially more robust than commonly employed tests which rely on the assumption that asset returns are normally distributed and temporarily i.i.d. Using returns for size‐based portfolios from 1926 to 1988 we show that the conclusion concerning the mean‐variance effilciency of market indexes can be sensitive to the test considered.
An Exact Solution to a Dynamic Portfolio Choice Problem under Transactions Costs
Authors: DUMAS BERNARD , LUCIANO ELISA 
Published: April 2012

ABSTRACTThe presence of any friction in financial markets qualitatively changes the nature of the optimization problem faced by an investor. It requires one to either act or do nothing, an issue which, of course, does not arise in frictionless situations. The investor considered here accumulates wealth without consuming until some terminal point in time when he consumes all. His objective is to maximize the expected utility derived from that terminal consumption. We postpone the terminal point far into the future to obtain a stationary portfolio rule. The portfolio policy is in the form of two control barriers between which portfolio proportions are allowed to fluctuate. We show how to calculate them.
Corporate Performance, Corporate Takeovers, and Management Turnover
Authors: MARTIN KENNETH J. , MCCONNELL JOHN J. 
Published: April 2012

ABSTRACTThis paper examines the hypothesis that an important role of corporate takeovers is to discipline the top managers of poorly performing target firms. We document that the turnover rate for the top manager of target firms in tender offer‐takeovers significantly increases following completion of the takeover and that prior to the takeover these firms were significantly under‐performing other firms in their industry as well as other target firms which had no post‐takeover change in the top executive. We interpret the results to indicate that the takeover market plays an important role in controlling the nonvalue maximizing behavior of top corporate managers.
Event Risk: An Analysis of Losses to Bondholders and “Super Poison Put” Bond Covenants
Authors: CRABBE LELAND 
Published: April 2012

ABSTRACTTen percent of the investment‐grade industrial bonds that were associated with major capital restructurings between 1983 and 1988 had already been downgraded to speculative grade as of August 1989. In response to these downgrades, and the corresponding wealth losses for bondholders, over 40 percent of recently issued investment‐grade industrial bonds are protected from this type of “event risk” by virtue of specialized covenants. These event‐risk convenants may have initially reduced interest costs for borrowers by roughly 20 to 30 basis points. However, the magnitude of the effect appears to have declined along with the general decline in corporate restructurings.
The Effects of Stock Repurchases on Rival Firms
Authors: HERTZEL MICHAEL G. 
Published: April 2012

ABSTRACTThis paper investigates the stock price behavior of rival firms in the same industry as firms announcing stock repurchase tender offers. Using a sample of 134 repurchase announcements, I find that rival firms on average realize insignificant announcement period abnormal returns. Negative rival stock price performance is detected over longer intervals surrounding the announcement period and for a subset of announcements which ex ante were identified as most likely to affect rivals. This evidence, however, is statistically weak and does little to alter the overall conclusion that the information in repurchase announcements is primarily firm‐specific.
Investor Sentiment and the Closed‐End Fund Puzzle
Authors: LEE CHARLES M. C. , SHLEIFER ANDREI , THALER RICHARD H. 
Published: April 2012

ABSTRACTThis paper examines the proposition that fluctuations in discounts of closed‐end funds are driven by changes in individual investor sentiment. The theory implies that discounts on various funds move together, that new funds get started when seasoned funds sell at a premium or a small discount, and that discounts are correlated with prices of other securities affected by the same investor sentiment. The evidence supports these predictions. In particular, we find that both closed‐end funds and small stocks tend to be held by individual investors, and that the discounts on closed‐end funds narrow when small stocks do well.
The World Price of Covariance Risk
Authors: HARVEY CAMPBELL R. 
Published: April 2012

ABSTRACTIn a financially integrated global market, the conditionally expected return on a portfolio of securities from a particular country is determined by the country's world risk exposure. This paper measures the conditional risk of 17 countries. The reward per unit of risk is the world price of covariance risk. Although the tests provide evidence on the conditional mean variance efficiency of the benchmark portfolio, the results show that countries' risk exposures help explain differences in performance. Evidence is also presented which indicates that these risk exposures change through time and that the world price of covariance risk is not constant.
Production‐Based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations
Authors: COCHRANE JOHN H. 
Published: April 2012

ABSTRACTThis paper describes a production‐based asset pricing model. It is analogous to the standard consumption‐based model, but it uses producers and production functions in the place of consumers and utility functions. The model ties stock returns to investment returns (marginal rates of transformation) which are inferred from investment data via a production function. The production‐based model is used to examine forecasts of stock returns by business‐cycle related variables and the association of stock returns with subsequent economic activity.