A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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Results 84 resources
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Using deal-level data from transactions initiated by large private equity houses, we find that the abnormal performance of deals is positive on average, after controlling for leverage and sector returns. Higher abnormal performance is related to improvement in sales and operating margin during the private phase, relative to that for quoted peers. General partners who are ex-consultants or ex–industry managers are associated with outperforming deals focused on internal value-creation programs, and ex-bankers or ex-accountants with outperforming deals involving significant mergers and acquisitions. The findings suggest the presence, on average, of positive but heterogeneous skills at the deal-partner level in large private equity transactions.
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What determines the sustainability of sovereign debt? We develop a model where myopic governments seek popularity but can nevertheless commit credibly to service external debt. They do not default when debt is low because they would lose access to debt markets and be forced to reduce spending; they do not default as debt builds up and net new borrowing becomes difficult, because of the adverse consequences from default to the domestic financial sector. More myopic governments default less often, but tax in a more distortionary way and increase the vulnerability of the domestic financial sector to future government debt default.
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We model investment options as intangible capital in a production economy in which younger vintages of assets in place have lower exposure to aggregate productivity risk. In equilibrium, physical capital requires a substantially higher expected return than intangible capital. Quantitatively, our model rationalizes a significant share of the observed difference in the average return of book-to-market-sorted portfolios (value premium). Our economy also produces (1) a high premium of the aggregate stock market over the risk-free interest rate, (2) a low and smooth risk-free interest rate, and (3) key features of the consumption and investment dynamics in the U.S. data.
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We examine the potential for selection bias in voluntarily reported hedge fund performance data. We construct a set of hedge fund returns that have never been reported to a commercial hedge fund database. These returns allow a direct comparison of performance between funds that choose to report to commercial databases and funds that do not. We find that funds that report their performance to commercial databases significantly outperform nonreporting funds. Our results suggest that the voluntarily reported performance in commercial databases suffers from a selection bias that may exaggerate the average skill of the universe of hedge fund managers.
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Using a unique panel data set from a U.K. credit card company, we analyze the interest rate sensitivity of subprime credit card borrowers. In addition to all individual transactions and loan terms, we have access to details of a randomized interest rate experiment conducted by the lender on existing (inframarginal) loans. For the whole sample, we estimate a statistically significant £3.4 reduction in monthly credit demand in response to a five percentage point increase in interest rates. This aggregate response is small, but it masks very interesting heterogeneity in the sample. We find that only low-risk borrowers who fully utilize their credit cards lower their credit demand significantly when faced with an increase in interest rates. We also document that a five percentage point increase in interest rates generates significant additional revenue for the lender without inducing delinquency over a short horizon.
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We propose that fund performance can be predicted by its R-super-2, obtained from a regression of its returns on a multifactor benchmark model. Lower R-super-2 indicates greater selectivity, and it significantly predicts better performance. Stock funds sorted into lowest-quintile lagged R-super-2 and highest-quintile lagged alpha produce significant annual alpha of 3.8%. Across funds, R-super-2 is positively associated with fund size and negatively associated with its expenses and manager's tenure.
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Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than do listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared with premiums in listed markets, the OTC illiquidity premium is several times higher, the size, value, and volatility premiums are similar, and the momentum premium is three times lower. The OTC illiquidity, size, value, and volatility premiums are largest among stocks held predominantly by retail investors and those not disclosing financial information. Theories of differences in investors' opinions and limits on short sales help explain these return premiums. The Authors 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.
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Firm-specific information can affect expected returns if it affects investor uncertainty about risk-factor loadings. We show that a stock's expected return is decreasing in factor-loading uncertainty, controlling for the average level of its factor loading. When loadings are persistent, learning by investors can induce time-series variation in price-dividend ratios, expected returns, and idiosyncratic volatility, even when the aggregate risk-premium is constant and fundamental shocks are homoscedastic. Consistent with our predictions, we estimate that average annual returns of a firm with the median level of factor-loading uncertainty are 400 to 525 basis points lower than a comparable firm without factor-loading uncertainty.
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This paper characterizes when joint financing of two projects through debt increases expected default costs, contrary to conventional wisdom. Separate financing dominates joint financing when risk-contamination losses–that are associated with the contagious default of a well-performing project that is dragged down by the other project's poor performance–outweigh standard coinsurance gains. Separate financing becomes more attractive than joint financing when the fraction of returns lost under default increases and when projects have lower mean returns, higher variability, more positive correlation, and more negative skewness. These predictions are broadly consistent with evidence on conglomerate mergers, spinoffs, project finance, and securitization.
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We show that bond risk premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these uncertainty measures is similar to that by multiple yields. Motivated by this evidence, we develop and estimate a long-run risks model with timevarying volatilities of expected growth and inflation. The model simultaneously accounts for bond return predictability and violations of uncovered interest parity in currency markets. We find that preference for early resolution of uncertainty, time-varying volatilities, and non-neutral effects of inflation on growth are important to account for these aspects of asset markets.
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Journals
Topic
- CEO (7)
- Bond (7)
- Mergers and Acquisitions (3)
- Director (3)
- Capital Structure (2)
Resource type
- Journal Article (84)