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 94 resources
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Asset-pricing models which assume a constant interest rate may misprice contingent claims if the interest rate fluctuates significantly or if the price of the underlying asset is cor-related with the interest rate. A model per-m itting a stochastic interest rate and correlation of the underlying a sset's price with the interest rate is tested with daily closing pric es for Comex gold futures options. The stochastic interest-rate model is superior to a constant interest-rate model in predicting market p rices. The results suggest that interest-rate volatility is an import ant element in contingent-claims valuation.
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This paper characterizes the conditions under which the adverse-selection problem, which may prevent a firm from issuing securities to finance an otherwise profitable investment, may be costlessly overcome by an appropriate choice of financing strategy. The conditions are specialized when the information asymmetry may be characterized by either a first-degree stochastic dominance or a mean-preserving spread ordering across possible distributions of firm earnings. Possible financing strategies which resolve the information asymmetry are discussed and the results are related to recent empirical findings concerning security issues.
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This paper investigates the month-by-month stability of (1) daily returns and correlation coe fficients of stock returns; (2) correlation and covariance matrices; (3) the number of return-generating factors; and (4) the APT pricing relationships. The results show that there is a January effect and a small-firm effect in stock returns. Correlation and covariance matric es are not stable across months and across the sample groups. The num ber of return-generating factors is rather stable with occasional ins tabilities that are related to the average correlation coefficients a mong stocks. The APT pricing relationship does not seem to be support ed by the two-stage process using the maximum likelihood factor analy sis.
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In a model where both investors and securities are subject to different ial taxation, there may be no set of prices that rule out infinite ga ins to trade, or "tax arbitrage." This paper characterizes the join t restrictions on financial-asset returns and investors' tax schedule s that preclude tax arbitrage in the absence of short-sale constraint s. The authors show that if there exists any configuration of margina l tax rates on investors' tax schedules that rule out infinite gains to trade, then "no-tax-arbitrage" prices will exist. They also show that the existence of "no-tax-arbitrage" prices ensures the existe nce of equilibrium prices.
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The bid-ask spread can be decomposed into two parts-one part due to asymmetric informat ion and the other part due to other factors such as monopoly power. T he part due to asymmetric information attenuates statistical biases i n mean return, variance, and serial covariance. Thus, using spread da ta to adjust for biases in return moments requires knowing not only t he spread but the composition of the spread. Furthermore, any spread estimation procedure using transaction prices must estimate two sprea d components.
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An econometric time-series model of off-board trading of NYSE-listed stocks shows that high NYSE commis sion rates were an incentive for third-market trading, but that tradi ng on the regional exchanges, which is most of off-board trading, has been affected very little by commissions or their deregulation. The effects of some changes in the trading organization and rules are est imated, including several that are part of the emerging National Mark et System (NMS). The estimates imply that the NMS has increased compe tition for the NYSE, as Congress intended, and has prompted the NYSE to improve its performance to retain market share.
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This paper studies the impact that margin requirements have on both the existence of arbitrage opportunities and the valuation of ca ll options. In the context of the Black-Scholes economy, margin restr ictions are shown to exclude continuous-trading arbitrage opportuniti es, and with two additional hypotheses, to still allow the Black-Scho les call model to apply. The Black-Scholes economy consists of a cont inuously-traded stock whose price process follows a geometric Brownia n motion and a continuously-traded bond whose price process is determ inistic.
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- Bond (12)
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- Journal Article (94)