bluuebunny/crossref_metadata_2025_split huggingface dataset:
Determinants of Thrift Institution Resolution Costs
Authors: BARTH JAMES R. , BARTHOLOMEW PHILIP F. , BRADLEY MICHAEL G. 
Published: April 2012

ABSTRACTThis paper provides a detailed examination of the cost imposed by thrift institutions resolved during the period 1980–1988. A simple model is presented to explain the cost of resolution. This model is tested empirically with a comprehensive data set that permits us to avoid some of the econometric problems present in earlier studies. The empirical evidence suggests that the model that explains resolution costs in the late 1980s is significantly different from the model for either the middle or early 1980s. This evidence is consistent with the changing nature of the thrift crisis and changes in the regulator's closure rule. Our econometric evidence, moreover, is consistent with the hypothesis that, for troubled institutions, tangible net worth systematically understates market‐value net worth. In addition, the importance of including time effects as well as institution effects as determinants of the cost of resolution is revealed.
The Distribution of Target Ownership and the Division of Gains in Successful Takeovers
Authors: STULZ RENÉ M. , WALKLING RALPH A. , SONG MOON H. 
Published: April 2012

ABSTRACTThis paper presents evidence that the distribution of target ownership is related to the division of the takeover gain between the target and the bidder for a sample of successful tender offers. In the whole sample, the target's gain is negatively related to bidder and institutional ownership. In the sample of multiple‐bidder contests, the target's gain increases with managerial ownership and falls with institutional ownership.
Equilibrium Exchange Rate Hedging
Authors: BLACK FISCHER 
Published: April 2012

ABSTRACTWe assume a world like the one that gives the capital asset pricing model, but with many goods and many countries. We assume that investors in a given country have homothetic utility functions with the same weights, and a currency that has a sure end‐of‐period value using a price index with those weights. Siegel's paradox (derived from Jensen's inequality) makes investors want a positive amount of exchange risk. When average risk tolerance is the same across countries, every investor will hold the same mix of market risk (through the world market portfolio of all assets) and exchange risk (in a diversified basket of foreign currencies). In fact, the ratio of exchange risk to market risk is equal to the average investor's risk tolerance. We can write the ratio of exchange risk to market risk (and the fraction of the market's exchange risk that investors hedge) as depending on an average of world market risk premia, an average of world market volatilities, and an average of exchange rate volatilities. The weights in these averages are the same as the weights of the different countries in the currency basket. Given these averages, the ratio (and the fraction hedged) will not depend directly on exchange rate means or covariances. In equilibrium, we can use the ratio of exchange risk to market risk to measure average risk tolerance: in this model, risk tolerance is observable.
Default Risk in Futures Markets: The Customer‐Broker Relationship
Authors: JORDAN JAMES V. , MORGAN GEORGE EMIR 
Published: April 2012

ABSTRACTThe traditional view of the futures clearinghouse as an insurer that eliminates the need for customers to evaluate default risk is inaccurate. A clearinghouse member default in 1985 confirms that the clearinghouse only guarantees payment from member to member, not from customer to customer or member to customer. Thus, non‐defaulting customers are subject to losses as a result of the action of individuals with whom thay have no contractual obligations. This study models the behavior of customers choosing a futures commission merchant (FCM) given the current legal position of the clearinghouse. In a single‐period model with symmetric information, customers can eliminate their exposure to defaults of other customers or of their FCM only by choosing to trade through “boutique” (undiversified) FCMs. In practice, monitoring and rebalancing costs may impede the attainment of zero default risk. However, FCM diversification remains an important factor in customer choice of an FCM. When setting capital requirements, clearinghouses and government regulators need to consider the implications of diversification for both customer and market protection.
Stochastic Convenience Yield and the Pricing of Oil Contingent Claims
Authors: GIBSON RAJNA , SCHWARTZ EDUARDO S. 
Published: April 2012

ABSTRACTThis paper develops and empirically tests a two‐factor model for pricing financial and real assets contingent on the price of oil. The factors are the spot price of oil and the instantaneous convenience yield. The parameters of the model are estimated using weekly oil futures contract prices from January 1984 to November 1988, and the model's performance is assessed out of sample by valuing futures contracts over the period November 1988 to May 1989. Finally, the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time.
Evidence on Tax‐Motivated Securities Trading Behavior
Authors: BADRINATH S. G. , LEWELLEN WILBUR G. 
Published: April 2012

ABSTRACTTax‐loss selling by investors in common stocks near the end of calendar years has been proposed as an explanation for the turn‐of‐the‐year effect in stock returns. Past analyses of this hypothesis have relied on inferential data. We provide here some direct data from a compilation of over 80,000 actual common stock investment round trips by a sample of 3000 individual investors. We find strong evidence of a concentration of loss‐taking trades late in the year and milder evidence of a concentration just prior to the dates when investments become eligible for long‐term tax treatment.
Tobin's Q and the Gains from Takeovers
Authors: SERVAES HENRI 
Published: April 2012

ABSTRACTThis paper analyzes the relation between takeover gains and the q ratios of targets and bidders for a sample of 704 mergers and tender offers over the period 1972–1987. Target, bidder, and total returns are larger when targets have low q ratios and bidders have high q ratios. The relation is strengthened after controlling for the characteristics of the offer and the contest. This evidence confirms the results of the work by Lang, Stulz, and Walkling and shows that their findings also hold for mergers and after controlling for other determinants of takeover gains.
Ex‐Dividend Day Stock Price Behavior: The Case of the 1986 Tax Reform Act*
Authors: MICHAELY RONI 
Published: April 2012

ABSTRACTThis paper analyzes the behavior of stock prices around ex‐dividend days after the implementation of the 1986 Tax Reform Act that dramatically reduced the difference between the tax treatment of realized long‐term capital gains and dividend income in 1987 and completely eliminated the differential in 1988. We show that this tax change had no effect on the ex‐dividend stock price behavior, which is consistent with the hypothesis that long‐term individual investors have no significant effect on ex‐day stock prices during this time period. The results indicate that the activity of short‐term traders and corporate traders dominates the price determination on the ex‐day.
Order Form and Information in Securities Markets
Authors: EASLEY DAVID , O'HARA MAUREEN 
Published: April 2012

ABSTRACTThis paper examines the effects of price‐contingent orders on security prices. We show that a market maker who knows the type and composition of trades will set larger spreads and adjust prices faster than if price‐contingent orders were not allowed. Because traders have rational expectations over the book, we demonstrate that uncertainty over order type reduces the variance of prices but with a corresponding loss in price informativeness. We also show that the sequence property of price‐contingent orders increases the probability of large price movements. This distinction between variance and episodic price volatility has important policy implications.
Convertible Debt: Corporate Call Policy and Voluntary Conversion
Authors: ASQUITH PAUL , MULLINS DAVID W. 
Published: April 2012

ABSTRACTThis paper examines why, in contrast to the predictions of finance theory, firms do not call convertible debt when the conversion price exceeds the call price. The empirical results suggest that the principal reason is because some firms enjoy an advantage of paying less in after‐tax interest than they would pay in dividends were the bond converted. This cash flow incentive is the inverse of an investor's incentive to convert voluntarily if the converted dividends are greater than the bond's coupon. Because of taxation, however, the decisions by investors and firms are not symmetric, and there exist bonds which the firm may not call and an investor will not convert. The results also find that voluntary conversion is significantly related to both the conversion price and the differential between the coupon and the dividends on the converted stock.
Stock Markets, Growth, and Tax Policy
Authors: LEVINE ROSS 
Published: April 2012

ABSTRACTAn extensive literature documents the role of financial markets in economic development. To help explain this relationship, this paper constructs an endogenous growth model in which a stock market emerges to allocate risk and explores how the stock market alters investment incentives in ways that change steady state growth rates. The paper demonstrates that stock markets accelerate growth by (1) facilitating the ability to trade ownership of firms without disrupting the productive processes occurring within firms and (2) allowing agents to diversify portfolios. Tax policy affects growth directly by altering investment incentives and indirectly by changing the incentives underlying financial contracts.
Testing the CAPM with Time‐Varying Risks and Returns
Authors: BODURTHA JAMES N. , MARK NELSON C. 
Published: April 2012

ABSTRACTThis paper draws on Engle's autoregressive conditionally heteroskedastic modeling strategy to formulate a conditional CAPM with time‐varying risk and expected returns. The model is estimated by generalized method of moments. A CAPM that allows mean excess returns to shift in January survives generalized method of moments specification tests for a number of omitted variables. However, a residual dividend yield component is found to remain in the excess returns of smaller firms. We find significant monthly and quarterly components in the risk premia and beta estimates.
On the Good News in Equity Carve‐Outs
Authors: NANDA VIKRAM 
Published: April 2012

ABSTRACTThe announcement of the sale of equity in a wholly owned subsidiary of a corporation is received by the market as good news about the value of the existing equity in the parent corporation. This is in stark contrast to announcements of other forms of public equity financing. We show that the apparent inconsistency between the market response to equity carve‐out announcements and other forms of equity financing can be easily understood in the Myers and Majluf (1984) framework. It is shown that firms that resort to an equity carve‐out will be firms that, on average, are being undervalued by the market.
Predictable Stock Returns in the United States and Japan: A Study of Long‐Term Capital Market Integration
Authors: CAMPBELL JOHN Y. , HAMAO YASUSHI 
Published: April 2012

ABSTRACTThis paper uses the predictability of monthly excess returns on U.S. and Japanese equity portfolios over the U.S. Treasury bill rate to study the integration of long‐term capital markets in these two countries. During the period 1971–1990 similar variables, including the dividend‐price ratio and interest rate variables, help to forecast excess returns in each country. In addition, in the 1980's U.S. variables help to forecast excess Japanese stock returns. There is some evidence of common movement in expected excess returns across the two countries, which is suggestive of integration of long‐term capital markets.
LBOs, Reversions and Implicit Contracts
Authors: IPPOLITO RICHARD A. , JAMES WILLIAM H. 
Published: April 2012

ABSTRACTThe conventional view of going‐private transactions is that they are designed to enhance the efficiency of the firm (for example, Jensen (1986)). A starkly different view is that these and other control transactions are motivated to effect transfers from other stakeholders in the firm to equity holders (Shleifer and Summers (1988)). This study exploits data describing pension terminations as a way to test these theories. We conclude that the efficiency theory can plausibly explain a substantial number of LBO‐related terminations, but not enough to undermine the transfer theory. More specific predictions from the efflciency theory are needed to structure more exacting tests.
Corporate Dividends and Seasoned Equity Issues: An Empirical Investigation
Authors: LODERER CLAUDIO F. , MAUER DAVID C. 
Published: April 2012

ABSTRACTThis paper investigates whether managers rely on dividends to obtain a higher price in a stock offering and whether the stock price reaction to dividend and offering announcements justifies such a coordination. The evidence does not support either conjecture. Issuing firms are not more likely to pay or increase dividends than nonissuing forms. Moreover, there is little evidence that firms time stock offering announcements right after dividend declarations to benefit from the attendant information disclosure. The analysis of dividend and stock offering announcement effects suggests few if any benefits from linking dividend and stock offering announcements.
An Option‐Theoretic Approach to the Valuation of Dividend Reinvestment and Voluntary Purchase Plans
Authors: DAMMON ROBERT M. , SPATT CHESTER S. 
Published: April 2012

ABSTRACTMany firms with dividend reinvestment plans also allow their shareholders to voluntarily invest supplemental funds to purchase additional shares. The purchase price for newly‐issued shares often is determined by the average stock price over a prespecified time period preceding the investment date. This gives the firm's shareholders an option to invest in additional shares only when the stock price exceeds the computed average. This paper uses both theoretical and numerical methods to analyze the value of these voluntary purchase options in theory and practice.
Bankruptcy and Insider Trading: Differences Between Exchange‐Listed and OTC Firms
Authors: GOSNELL THOMAS , KEOWN ARTHUR J. , PINKERTON JOHN M. 
Published: April 2012

ABSTRACTOver the two‐year period prior to the bankruptcy announcement, insider trading is significantly greater for OTC bankrupt firms, but not for exchange‐listed firms, than for an industry‐size matched sample of nonbankrupt firms. In addition, the level of insider selling increases over the final five months leading to the first public announcement of OTC firms. Finally, firms displaying the most negative price reaction over the announcement period are found to have a significantly larger proportion of insider selling than other firms.
A Comparison of Forward and Futures Prices of an Interest Rate‐Sensitive Financial Asset
Authors: MEULBROEK LISA 
Published: April 2012

ABSTRACTThis paper focuses on contractual distinctions as an explanation for the price divergence between futures and forward contracts. Specifically, it investigates the effect of marking‐to‐market on the observed price differences using the pricing model described in Cox, Ingersoll, and Ross (CIR) (1981, Journal of Financial Economics 9, 321–346). Using previously unavailable data, this paper employs Eurodollars, an interest rate‐sensitive financial asset, to test the CIR model. Unlike prior empirical studies, test results support both the weak prediction concerning the sign of the average price difference and the stronger prediction that specific covariances explain the variation in the price differences.
Transformed Securities and Alternative Factor Structures
Authors: HUANG ROGER D. , JO HOJE 
Published: April 2012

ABSTRACTGrinblatt and Titman (1985) reformulate a result of Chamberlain and Rothschild (1983) to show that the approximate factor structure of Chamberlain and Rothschild is asymptotically equivalent to the strict factor structure of Ross (1976) as long as investors can always repackage securities into an equal number of arbitrary portfolios. This paper uses a Procrustes rotation methodology that is compatible with the repackaging interpretation of Grinblatt and Titman to show that the empirical structure of stock prices is consistent with the convergency hypothesis.
The Structure of Corporate Ownership in Japan
Authors: PROWSE STEPHEN D. 
Published: April 2012

ABSTRACTI examine the structure of corporate ownership in a sample of Japanese firms in the mid 1980s. Ownership is highly concentrated in Japan, with financial institutions by far the most important large shareholders. Ownership concentration in independent Japanese firms is positively related to the returns from exerting greater control over management. This is not the case in firms that are members of corporate groups (keiretsu). Ownership concentration and the accounting profit rate in both independent and keiretsu firms are unrelated. The results are consistent with the notion that there exist two distinct corporate governance systems in Japan —one among independent firms and the other among firms that are members of keiretsu.
An Empirical Comparison of Alternative Models of the Short‐Term Interest Rate
Authors: CHAN K. C. , KAROLYI G. ANDREW , LONGSTAFF FRANCIS A. , SANDERS ANTHONY B. 
Published: April 2012

ABSTRACTWe estimate and compare a variety of continuous‐time models of the short‐term riskless rate using the Generalized Method of Moments. We find that the most successful models in capturing the dynamics of the short‐term interest rate are those that allow the volatility of interest rate changes to be highly sensitive to the level of the riskless rate. A number of well‐known models perform poorly in the comparisons because of their implicit restrictions on term structure volatility. We show that these results have important implications for the use of different term structure models in valuing interest rate contingent claims and in hedging interest rate risk.
The January Anomaly: Effects of Low Share Price, Transaction Costs, and Bid‐Ask Bias
Authors: BHARDWAJ RAVINDER K. , BROOKS LEROY D. 
Published: April 2012

ABSTRACTThe January effect is primarily a low‐share price effect and less so a market value effect. In the recent 1977–1986 period, after‐transaction‐cost raw and excess January returns are lower on low‐price stocks than on high‐price stocks. Failure of informed traders to eliminate significantly large before‐transaction‐cost excess January returns on low‐price stocks is potentially explained by higher transaction costs and a bid‐ask bias. At the least, the January anomaly found in prior tests is not persistent, and thereby, not likely to be exploitable by typical investors.
Time and the Process of Security Price Adjustment
Authors: EASLEY DAVID , O'HARA MAUREEN 
Published: April 2012

ABSTRACTThis paper delineates the link between the existence of information, the timing of trades, and the stochastic process of prices. We show that time affects prices, with the time between trades affecting spreads. Because the absence of trades is correlated with volume, our model predicts a testable relation between spreads and normal and unexpected volume, and demonstrates how volume affects the speed of price adjustment. Our model also demonstrates how the transaction price series will be a biased representation of the true price process, with the variance being both overstated and heteroskedastic.
Dual Trading in Futures Markets
Authors: FISHMAN MICHAEL J. , LONGSTAFF FRANCIS A. 
Published: April 2012

ABSTRACTWith dual trading, brokers trade both for their customers and for their own account. We study dual trading and find that customers who are less likely to be informed have higher expected profits with dual trading while customers who are more likely to be informed have higher expected profits without dual trading. We also examine the effects of frontrunning. We test the major empirical implications of our model. Consistent with the model, dual traders earn higher profits than non‐dual traders, and customers of dual‐trading brokers do better than customers of non‐dual‐trading brokers.
Reference Variables, Factor Structure, and the Approximate Multibeta Representation
Authors: REISMAN HAIM 
Published: April 2012

ABSTRACTThe Arbitrage Pricing Theory (APT) implies that if asset returns have a factor structure, then an approximate multibeta representation holds with respect to the factors as reference variables. This paper assumes that asset returns satisfy a factor structure and derives a condition under which the approximate multibeta representation holds with respect to a set of reference variables which may not be the factors. This condition is that the regression matrix of the reference variables on the factors is nonsingular. Implications for the testability of the APT are also discussed.
Inflation and Asset Returns in a Monetary Economy
Authors: MARSHALL DAVID A. 
Published: April 2012

ABSTRACTPostwar U.S. data are characterized by negative correlations between real equity returns and inflation and by positive correlations between real equity returns and money growth. These patterns are closely matched quantitatively by an equilibrium monetary asset pricing model. The model also implies negative correlations between expected asset returns and expected inflation, and it predicts that the inflation‐asset return correlation will be more strongly negative when inflation is generated by fluctuations in real economic activity than when it is generated by monetary fluctuations.
Debt Financing and Tax Status: Tests of the Substitution Effect and the Tax Exhaustion Hypothesis Using Firms' Responses to the Economic Recovery Tax Act of 1981
Authors: TREZEVANT ROBERT 
Published: April 2012

ABSTRACTThis study tests the joint prediction of the substitution effect and the tax exhaustion hypothesis that an increase in non‐debt tax shields leads to a decrease in leverage. Controls are introduced for the debt securability effect, the pecking order theory of financing, and the probability of losing tax shields. Using the relationship between changes in investment tax shields and changes in debt tax shields of firms in response to the Economic Recovery Tax Act of 1981, strong empirical support is found for predictions based on the substitution effect and the tax exhaustion hypothesis.
Information, Asset Prices, and the Volume of Trade
Authors: HUFFMAN GREGORY W. 
Published: April 2012

ABSTRACTA dynamic equilibrium model is constructed in which agents with access to different information sets participate in the capital market. Agents must use the equilibrium price of capital to make optimal forecasts of the return to holding capital. Examples show that the volume of trade, as well as the price of capital, can be highly correlated with a measure of the information content of prices. This measure of information is the difference between the unconditional entropy of the dividend and the entropy of the dividend conditional on observing the price of capital.