A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 89 resources
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We investigate the role of information‐based trading in affecting asset returns. We show in a rational expectation example how private information affects equilibrium asset returns. Using a market microstructure model, we derive a measure of the probability of information‐based trading, and we estimate this measure using data for individual NYSE‐listed stocks for 1983 to 1998. We then incorporate our estimates into a Fama and French (1992) asset‐pricing framework. Our main result is that information does affect asset prices. A difference of 10 percentage points in the probability of information‐based trading between two stocks leads to a difference in their expected returns of 2.5 percent per year.
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This paper provides an analysis of the nature and evolution of a dealer market for Nasdaq stocks. Despite size differences in sample stocks, there is a surprising consistency to their trading. One dealer tends to dominate trading in a stock. Markets are concentrated and spreads are increasing in the volume and market share of the dominant dealer. Entry and exit are ubiquitous. Exiting dealers are those with very low profits and trading volume. Entering market makers fail to capture a meaningful share of trading or profits. Thus, free entry does little to improve the competitive nature of the market as entering dealers have little impact. We find, however, that for small stocks, the Nasdaq dealer market is being more competitive than the specialist market.
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I examine the sources of exchange rate dynamics by focusing on the information structure of FX trading. This structure permits the existence of an equilibrium distribution of transaction prices at a point in time. I develop and estimate a model of the price distribution using data from the Deutsche mark/dollar market that prroduces two striking results: (1) Much of the short‐term volatility in exchange rates comes from sampling the heterogeneous trading decisions of dealers in a distribution that, under normal market conditions, changes comparatively slowly; (2) public news is rarely the predominant source of exchange rate movements over any horizon.
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Personal projects, such as a private business or the purchase of a home, influence individuals portfolio choice. We conduct a theoretical analysis of this influence when financial assets are required to provide liquidity to personal projects. Due to this liquidity consideration, individuals behave in a more riskaverse fashion when there is a large penalty for discontinuing or underinvesting in the final stages of the projects. In addition, using data from the 1995 Survey of Consumer Finances, we find that households that are saving to invest in their own businesses or in their own homes indeed have significantly safer financial portfolios.
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We estimate the equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. Our estimates for 1951 to 2000, 2.55 percent and 4.32 percent, are much lower than the equity premium produced by the average stock return, 7.43 percent. Our evidence suggests that the high average return for 1951 to 2000 is due to a decline in discount rates that produces a large unexpected capital gain. Our main conclusion is that the average stock return of the last half‐century is a lot higher than expected.
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Many firms deploy takeover defenses when they go public. IPO managers tend to deploy defenses when their compensation is high, shareholdings are small, and oversight from nonmanagerial shareholders is weak. The presence of a defense is negatively related to subsequent acquisition likelihood, yet has no impact on takeover premiums for firms that are acquired. These results do not support arguments that takeover defenses facilitate the eventual sale of IPO firms at high takeover premiums. Rather, they suggest that managers shift the cost of takeover protection onto nonmanagerial shareholders. Thus, agency problems are important even for firms at the IPO stage.
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Heteroskedasticity biases tests for contagion based on correlation coefficients. When contagion is defined as a significant increase in market comovement after a shock to one country, previous work suggests contagion occurred during recent crises. This paper shows that correlation coefficients are conditional on market volatility. Under certain assumptions, it is possible to adjust for this bias. Using this adjustment, there was virtually no increase in unconditional correlation coefficients (i.e., no contagion) during the 1997 Asian crisis, 1994 Mexican devaluation, and 1987 U.S. market crash. There is a high level of market comovement in all periods, however, which we call interdependence.
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We study shareholder returns for firms that acquired five or more public, private, and/or subsidiary targets within a short time period. Since the same bidder chooses different types of targets and methods of payment, any variation in returns must be due to the characteristics of the target and the bid. Results indicate bidder shareholders gain when buying a private firm or subsidiary but lose when purchasing a public firm. Further, the return is greater the larger the target and if the bidder offers stock. These results are consistent with a liquidity discount, and tax and control effects in this market.
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If arbitrage is costly and noise traders are active, asset prices may deviate from fundamental values for long periods of time. We use a sample of 158 closed‐end funds to show that noise‐trader sentiment, as proxied by retail‐investor flows, leads to fluctuations in the discount. Nevertheless, we reject the hypothesis that noise‐trader risk is the cause of the long‐run discount. Instead we find that funds which are more difficult to arbitrage have larger discounts, due to: (1) the censoring of the discount by the arbitrage bounds, and (2) the freedom of managers to increase charges when arbitrage is costly.
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We examine the investment behavior of firms before and after being spun off from their parent companies. Their investment after the spin‐off is significantly more sensitive to measures of investment opportunities (e.g., industry Tobin's Q or industry investment) than it is before the spin‐off. Spin‐offs tend to cut investment in low Q industries and increase investment in high Q industries. These changes are observed primarily in spin‐offs of firms in industries unrelated to the parents' industries and in spin‐offs where the stock market reacts favorably to the spin‐off announcement. Our findings suggest that spin‐offs may improve the allocation of capital.
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