bluuebunny/crossref_metadata_2025_split huggingface dataset:
Option Pricing with Heterogeneous Expectations
Authors: Guo Chen 
Published: March 2005

AbstractThis paper re‐derives the finite mixture option pricing model of Ritchey (1990), based on the assumption that the option investors hold heterogeneous expectations about the parameters of the lognormal process of the underlying asset price. By proving that the model admits no riskless arbitrage, this paper justifies that the entire family of finite mixture of lognormal distributions is a desirable candidate set for recovering the risk‐neutral probability distributions from contemporaneous options quotes. The parametric method derived from the model is significantly simpler than the nonparametric method of Rubinstein (1994) for recovering the risk‐neutral probability distributions from contemporaneous option prices.
Deterministic nonlinearity in the stock returns of major European equity markets and the United States
Authors: Pandey Vivek , Kohers Theodor , Kohers Gerald 
Published: March 2005

AbstractBy using recently developed statistical tools designed to overcome some of the limitations often associated with financial data, this study attempts to detect low‐dimensional deterministic chaos in five major European stock markets and the United States. Country indexes exhibiting low‐dimensional deterministic chaos may contain some informational inefficiency; thus, it may be possible to use nonlinear dynamics to predict future stock returns. The results do not provide evidence of the existence of low‐dimensional chaotic systems in any of the examined indexes. As such, the notion of market efficiency in the examined indexes is not threatened by the findings of this study.
Determining the implied volatility for American options using the QAM
Authors: Kutner George W. 
Published: March 2005

AbstractThis paper describes an efficient numerical procedure which may be used to determine implied volatilities for American options using the quadratic approximation method. Simulation results are presented. The procedure usually converges in five or six iterations with extreme accuracy under a wide variety of option market conditions. A comparison of American implied volatilities with European model implied volatilities indicates that significant differences may arise. This suggests that reliance on European model volatilities estimates may lead to significant pricing errors.
The Influence of Information Arrival on Market Microstructure: Evidence from Three Related Markets
Authors: Lee Chun I , Mathur Ike 
Published: March 2005

AbstractThis study examines the influence of information arrival on market microstructure for the MMI, NYSE, and S&P 500 stock index futures markets, with special emphasis on the effects of opening and closing of trading and expiration of contracts on price movements and trading activities. The results of the examination show that although the opening of the (MMI) futures market is associated with higher volatility, it is when the spot market opens that volatility reaches its highest level. Similarly, the closing of the futures markets, though more volatile, is not as volatile as the closing of the spot markets. Trading patterns, on the other hand, are distinct from volatility. For MMI, trading declines consistently after the close of the spot market. In contrast, the NYSE and S&P 500 continue to trade and reach a peak at the close of the futures markets. Expiration effects are evidenced by the increase in volatility and trading near the closing of the MMI and the spillover to the NYSE and S&P 500. In sharp contrast, the expirations of the NYSE and S&P 500 are only assooiated with decrease in trading, suggesting that efforts to dampen volatility by changing expiration days from Friday to Thursday and shifting settlement price from Friday close to Friday open, have been successful.
Market Making and Trading in Nasdaq Stocks
Authors: Goldstein Michael A. , Nelling Edward F. 
Published: March 2005

AbstractThis paper examines the relations between the number of market makers, trading activity, and price improvement in Nasdaq stocks, using a model motivated by Grossman and Miller (1988). Results indicate a positive relation between the number of market makers and trading frequency, and that competition among market makers reduces effective bid‐ask spreads. Results estimated using a simultaneous equations framework support the model predictions of Grossman and Miller. Results also indicate that trading frequency may be more important than trade size in determining the number of market makers.
Explicit versus Implicit Contracts: The Case of DIFF and CROSS Futures
Authors: Karagozoglu Ahmet K. 
Published: March 2005

AbstractThis paper investigates the potential success of an explicit futures contract when an implicit one, which can duplicate it, exists. It is hypothesized that the success of the explicit futures contract depends on its value added being greater than that of its implicit counterpart given that sufficient hedging demand exists for it. Following a discussion of value added analysis, hedging effectiveness of the Euro‐rate Differential (DIFF), the Currency Cross‐rate (CROSS) futures contracts, and their implicit counterparts are calculated and tests of relative hedging effectiveness of these contracts are performed. Test results support the hypothesis of the paper and their implications for new futures contract development are discussed.
Managerial Ownership and Agency Conflicts: A Nonlinear Simultaneous Equation Analysis of Managerial Ownership, Risk Taking, Debt Policy, and Dividend Policy
Authors: Chen Carl R. , Steiner Thomas L. 
Published: March 2005

AbstractThis paper uses a nonlinear simultaneous equation methodology to examine how managerial ownership relates to risk taking, debt policy, and dividend policy. The results have implications for our understanding of agency costs. We find risk to be a significant and positive determinant of the level of managerial ownership while managerial ownership is also a significant and positive determinant of the level of risk. The result supports the argument that managerial ownership helps to resolve the agency conflicts between external stockholders and managers but at the expense of exacerbating the agency conflict between stockholders and bondholders. We further observe evidence of substitution‐monitoring effects between managerial ownership and debt policy, between managerial ownership and dividend policy, and between managerial ownership and institutional ownership.
Who Moves the Asia‐Pacific Stock Markets—US or Japan? Empirical Evidence Based on the Theory of Cointegration
Authors: Ghosh Asim , Saidi Reza , Johnson Keith H. 
Published: March 2005

AbstractThis study examines the recent debacle of the Asian‐Pacific stock markets by utilizing the theory of cointegration to investigate which developing markets are moved by the markets of Japan and the United States. The empirical evidence suggests that some countries are dominated by the US, some are dominated by Japan, and the remaining countries are dominated by neither during the time period investigated. The appropriate error correction model is estimated and is used to perform out‐of‐sample forecasting.
Random Walks and Market Efficiency Tests of Latin American Emerging Equity Markets: A Revisit
Authors: Ojah Kalu , Karemera David 
Published: March 2005

AbstractThe few existing studies on equity price dynamics and market efficiency for Latin American emerging equity markets show conflicting results. This study uses multiple varianceratio and auto‐regressive fractionally integrated moving‐average tests and new data (U.S. dollar‐based national equity indices for the 1987–1997 period) to clarify these results. Documented evidence shows that equity prices in major Latin American emerging equity markets — Argentina, Brazil, Chile and Mexico—follow a random walk, and that they are, generally, weak‐form efficient. In sum, therefore, the evidence suggests that international investors in these markets cannot use historical information to design systematically profitable trading schemes because future long‐term returns are not dependent on past returns.
The Effects of Inverted Yield Curves on Asset Returns
Authors: McCown James Ross 
Published: March 2005

AbstractBetween 1954 and 1991, U.S. stocks, long‐term government bonds, and corporate bonds show negative risk premiums during periods preceded by inverted yield curves. Intermediate‐term government bonds do not. Going from safer to riskier asset classes, the negative risk premiums increase in absolute value and statistical significance. The consumption CAPM offers a possible explanation for the negative risk premiums. A negative covariance between the growth rate of consumption and the premium on the risky assets will result in a negative risk premium. Empirical tests of the conditional covariance show that the consumption CAPM does not explain the phenomena.
Bond Immunization for Affine Term Structures
Authors: Barber Joel R. 
Published: March 2005

AbstractThis paper generalizes a number of important immunization theorems. We show that the Fisher and Weil immunization, Bierwag and Khang minimax, Redington multiple liability, and Bierwag, Kaufman, and Toevs coverage theorems can be generalized to the class of affine term structures. This class of term structures contains many models that are commonly used in the finance literature.
The Industry Effects Regarding the Probability of Takeovers
Authors: Akhigbe Aigbe , Madura Jeff 
Published: March 2005

AbstractThis study attempts to determine whether an acquisition announcement signals potential gains to the corresponding industry rivals of the target, and whether these gains can be explained by industry‐specific and rival firm‐specific factors that reflect the likelihood of a takeover.The research finds that the valuation effects of the target, combined acquirer and target, and industry rivals of the target are positive and significant. The mean valuation effects per corresponding industry are significantly related to industry‐specific characteristics that reflect the probability of a takeover. Specifically, industries characterized as having a higher level of free cash flow, a higher level of tangible assets, and a smaller market value experience a more favorable revaluation.A supplemental analysis of the individual rival firms is also conducted, since the variation in the valuation effects between rival firms within each of the industries is distinctly different from the variation of mean industry effect across industries. The analysis of the individual rivals finds that the same rival‐specific variables are significant and in the same direction as the analysis of the industry‐specific variables. In addition, the valuation effects of individual rivals are also inversely related to their previous performance. Overall, the results suggest that industry‐specific and rival firm‐specific characteristics that reflect a higher probability of a takeover are important in explaining acquisition gains and motivation.
An Empirical Examination of The Nasdaq/CHX Dual‐Trading Experiment
Authors: Van Ness Bonnie F. , Van Ness Robert A. , Pruitt Stephen W. 
Published: March 2005

AbstractWe analyze the effects of the SEC's experimental Nasdaq/CHX dual‐trading program. The program, which began in 1987 and continues to the present, establishes an experiment in which the costs and benefits of competition between dealer and specialist market structures can be observed directly. Our primary finding is that the program led to significantly reduced mean quoted and percentage spreads for the dual‐traded issues. Further, even though the CHX specialists quote lower spreads, they are not able to garner a significant number of trades from Nasdaq.
Market‐Making in the Third Market for NYSE‐Listed Securities
Authors: Doran Lynn 
Published: March 2005

AbstractThis paper empirically examines market making in the third market for common stocks that are listed on the NYSE. Although the same non‐NYSE members make a market on both types of stocks, bid‐ask spreads are wider on Rule 19c‐3 stocks than on Rule 390 stocks. Market‐making by NYSE members is minimal and spreads posted by NYSE members are wider than those posted on identical stocks by non‐NYSE members. This suggests that NYSE members do not compete on the basis of spread but use methods such as price matching and the internalization of orders to attract order flow to the third market.
Information Production, Insider Trading, and the Role of Managerial Compensation
Authors: Narayanan Ranga 
Published: March 2005

AbstractWe analyze the information production decision of a manager who can trade on this information and whose compensation is increasing in the stock price. The amount of information produced increases with the stock's volatility and liquidity and decreases with the manager's pay‐performance sensitivity. Insider trading regulations that symmetrically inhibit the manager's ability to buy and sell stock cause her to produce less information. But asymmetric insider trading regulations like the short sales prohibition have an ambiguous effect inducing her to produce more or less information depending on her pay‐performance sensitivity. This contradicts the standard argument made by opponents of insider trading regulations that such regulations always reduce information production.
“Marking‐to‐Market” and Treasury‐Bill Futures Prices: Some Empirical Evidence
Authors: Choi Seungmook , Jameson Mel 
Published: March 2005

AbstractFinancial economists have not found empirical evidence of a “marking‐to‐market” effect in Treasury‐bill futures contracts, despite a firm theoretical basis for its existence. Therefore, we speculate that confounding effects, possibly due to liquidity preferences, influence futures‐forward price spreads. By using an empirical specification that allows for both effects, we present empirical evidence that Treasury‐bill futures‐forward price spreads are sensitive to the volatility of the underlying commodity in ways predicted by the theory of the marking‐to‐market effect.
The “Dogs of the Dow” Myth
Authors: Hirschey Mark 
Published: March 2005

AbstractThe “Dogs of the Dow” (or “Dow Dog”) investment strategy, is a popular investment approach that promises huge abnormal returns for investors in the ten top yielding stocks from the Dow Jones Industrial Average (DJIA). However, periods of evident outperformance are balanced by periods of conspicuous underperformance. When strategy returns are adjusted for taxes and rebalancing costs, Dow Dogs perform in line with the DJIA over the 1961–1998 period. As a result, there is no robust evidence of an average return anomaly tied to Dow Dogs.
Real Activity, Inflation, Stock Returns, and Monetary Policy
Authors: Park Kwangwoo , Ratti Ronald A. 
Published: March 2005

AbstractWe find that contractionary monetary policy shocks generate statistically significant movements in inflation and expected real stock returns, and that these movements go in opposite directions. Since positive shocks to output precipitate monetary tightening, we argue that the countercyclical monetary policy process is important in explaining the negative correlation between inflation and stock returns. Examining the 1979–1982 period, we find that monetary policy tightens significantly in response to positive shocks to inflation, and that the impact of monetary policy shocks on stock returns is negative and volatile. Therefore, we see evidence that an “anticipated policy” hypothesis is at work.
January Anomalies: Implications for the Market's Incorporation of News
Authors: Christie‐David Rohan , Chaudhry Mukesh 
Published: March 2005

AbstractWe examine the responses of five interest rate instruments to the release of macroeconomic announcements to determine whether January returns behave differently from returns in other months when information is released. Our results suggest that in all instruments, returns in January are less sensitive to macroeconomic news, compared with other months. This is true even though the number and type of announcements are much the same in January as in other months. The instruments examined feature important differences in liquidity, maturity, credit risk, and other institutional differences, suggesting that our evidence is robust.
The Predictive Ability of Dividend and Earnings Yields for Long‐Term Stock Returns
Authors: Wu Chunchi , Wang Xu‐Ming 
Published: March 2005

AbstractWe use empirical models to examine the predictive ability of dividend and earnings yields for long‐term stock returns. Results show that dividend and earnings yields share a similar predictive power for future stock returns and growth. We find that the predictive power of dividend yields increases with the return horizon, but that yields forecast future returns and growth over a much longer horizon. Finally, dividend and earnings yields exhibit high autocorrelation and strong contemporaneous relations.
Ownership Structure as a Determinant of Firm Value: Evidence from Newly Privatized Czech Firms
Authors: Makhija Anil K. , Spiro Michael 
Published: March 2005

AbstractUsing a sample of 988 newly privatized Czech firms, with part of the ownership structure exogenously determined prior to voucher privatization, we find that share values are positively related with the ownership stakes of foreigners, insiders, and restituents. While the findings for foreigners and insiders can be attributed to their superior ability to identify more profitable firms, we interpret the findings on restituents as evidence of the beneficial effect of blockholdings. On the other hand, we find that the ownership of the fund with the largest stake is not significantly related with share value, suggesting that the value of external blocks depends on the identity of the owner. However, when the fund is also the largest blockholder in the firm, it has an adverse effect on share value. The negative effect of the dominant block owned by a fund is mitigated when a bank sponsors the fund. Although funds are legally separated from their sponsoring institutions, bank‐sponsored funds may nevertheless have inherited a better access to the innards of these firms, and may be in a better position to monitor them.
The Performance Persistence of Closed‐End Funds
Authors: Bers Martina K. , Madura Jeff 
Published: March 2005

AbstractThe purpose of this study is to extend the research on mutual fund performance persistence to net asset value and market price performance of domestic closed‐end funds. While research has assessed the performance persistence of open‐end mutual funds, it has not assessed the performance persistence of closed‐end funds. Yet, the unique characteristics of closed‐end funds allow stronger arguments for their persistence than the arguments previously submitted for open‐end mutual funds. The results show evidence for risk‐adjusted performance persistence.
Asymmetric Effects of Interest Rate Changes on Stock Prices
Authors: Lobo Bento J. 
Published: March 2005

AbstractThis study examines the stock price adjustment process around announcements of changes in the federal funds rate target in the 1990s using an asymmetric autoregressive exponential GARCH model (ASAR‐EGARCH). We find that target change announcements convey new information to the stock market. Risk aversion increases before the announcement of a rate change, and especially before the announcement of a joint target and discount rate change. The volatility estimates suggest that such joint rate changes send a clearer signal to the stock market about monetary policy objectives relative to unilateral target changes. Our findings are consistent with overreaction in the wake of bad news (rate hikes), and point to a shift in volatility from before to after the rate change announcement since the adoption of the immediate disclosure policy of the Federal Open Market Committee in February 1994.
Open‐Market Stock Repurchase and Stock Price Behavior When Management Values Real Investment
Authors: Isagawa Nobuyuki 
Published: March 2005

AbstractThis paper provides a simple explanation of open‐market stock repurchases and the stock price behavior surrounding them. There is ex ante asymmetry of information with regard to the private benefits that corporate managers can attain from real investments. In our model, open‐market repurchase announcements reveal information about the managers' private benefits when real investment opportunities are unprofitable in terms of firm values. This study differs from previous studies in that we show that announcements of open‐market repurchase programs can be believable without the restriction that the announcements are commitments. Empirically, the model simultaneously predicts that a stock price will drop prior to an open‐market repurchase announcement and will rise in response to the announcement. These predictions are consistent with stylized facts.
Managerial Motives and Merger Financing
Authors: Chang Saeyoung , Mais Eric 
Published: March 2005

AbstractWe examine how managerial motives influence the choice of financing for a sample of 209 completed mergers from 1981–1988. Our evidence indicates that bidding firm management is more likely to finance mergers with cash when target firm ownership concentration is high, preventing the creation of an outside blockholder. This suggests bidding firm managers prefer to keep ownership structure widely diffused to reduce external monitoring. We also find that bidding firm management is more likely to finance mergers with stock when the variance of bidding firm's stock return is high. This suggests managers of risky firms prefer leverage‐reducing transactions to reduce their personal risk.
Forced Versus Voluntary Dividend Reduction: An Agency Cost Explanation
Authors: D'Mello Ranjan , Mukherjee Tarun , Tawatnuntachai Oranee 
Published: March 2005

AbstractWe examine whether the agency cost arising from shareholder‐bondholder conflict is an important determinant of the timing of dividend reduction decisions. Firms forced to reduce dividends owing to bond covenant violations experience lower earnings, more frequent losses, and greater earnings declines around the dividend reduction year than do firms that voluntarily reduce dividends. Relative to voluntary‐reduction firms, forced‐reduction firms have higher debt‐to‐equity ratios and managerial holdings. These findings coupled with the increased dividend payout ratios and lower announcement period returns suggest that financially distressed firms that anticipate poor performance have greater incentives to delay reducing dividends to avoid a wealth transfer to bondholders.
Underwriter Lock‐up Releases, Initial Public Offerings and After‐market Performance
Authors: Keasler Terrill R. 
Published: March 2005

AbstractThe lock‐up agreement between an underwriter and an issuing firm's principals prohibits sale of securities for a period of time following the offering date. Investment banks must support the stock following an offering. The lock‐up assures investors that the restricted shares will not enter the market, at least for a period of time. Negative abnormal returns prior to the lock‐up release show that unrestricted investors liquidate positions prior to the scheduled lock‐up release. Negative abnormal returns are more robust for firms that are not influenced by SEC Rule 144 than for firms that are.