Corporate speculation and CEO characteristics

Author(s):

Alessandro Beber

 et al.
Topic:
Finance
Industry:
Banking

Managers are acknowledged to have their own style when taking corporate decisions. Personal characteristics of CEOs are empirically important determinants of a large range of corporate variables. However, there are still a number of unexplored research questions. One of these is to what extent the corporate risk management policies of non-financial firms departs from textbook hedging.

In this paper, Cass researchers study to what extent CEO personal beliefs and individual characteristics explain the time-series variation of foreign currency derivatives beyond industry, firm, and market fundamentals.

Updated: 14/01/2013
Comments:
Views: 3,838

Winners and losers: German equity mutual funds

Author(s):

Dirk Nitzsche

 et al.
Topic:
Finance
Industry:
Banking

The performance of individual US and UK mutual funds has been extensively analysed across a range of research.

Many newspapers and trade journals present performance results in the form of league tables, so they too emphasise funds in the tails of the cross-section distribution. The contribution of this paper is to derive the empirical distributions for individual funds in the tails of the performance distribution, for a large number of German equity mutual funds using 20 years (1990-2009) of monthly data.

Updated: 14/01/2013
Comments:
Views: 3,634

Beware fund managers bearing gifts: developments in human capital and investment

Author(s):

Chris Rowley

 et al.


After the post-2008 global financial crisis, people are much more interested in knowing more about human capital as a key indicator of future value in firms. Investors increasingly need to see early warning signs of failure or growth prospects in their investments. For bankers, lending proposals are either accepted or rejected on the basis of set financial ratios, such as debt to equity and loan to valuation.

Do these ratios tell the real story of the value which is being created, or destroyed, within a company? Is it dangerous for investors to rely on quantitative measures alone?

Updated: 14/01/2013
Comments: 1
Views: 3,945

Learning from prices, liquidity spillovers, and market segmentation

Author(s):

Giovanni Cespa

 et al.
Topic:
Finance
Industry:
Banking

Dealers use prices of other securities as a source of information. As prices of less liquid securities convey less precise information, a drop in liquidity for one security raises the uncertainty for dealers in other securities, thereby affecting their liquidity.

This working paper looks at causes for the occurrence of liquidity (or illiquidity) spillovers across markets and proposes a novel theoretical explanation that provides interesting insights into recent events, for example the 'Flash Crash' of May 2010.

Updated: 14/01/2013
Comments:
Views: 3,814

Credit rating migration risk and business cycles

Author(s):

Elena Kalotychou

 et al.
Topic:
Finance
Industry:
Banking

The recent global financial crisis has served as a stark reminder of the crucial role of systematic stress testing of financial institutions' portfolios, particularly, their lending books. In response to the regulatory deficiencies thus revealed, Basel III is seeking to achieve the broader macroprudential goal of protecting the banking sector from periods of excess credit growth by requesting longer horizon default probabilities, downturn loss-given-default measures and improved calibration of risk models.

A Mixture of Markov Chains (MMC) approach is proposed to estimate credit rating migration risk that controls for the business-cycle evolution during the relevant time horizon in order to ensure adequate capital buffers both in good and bad times.

Updated: 14/01/2013
Comments:
Views: 9,652

Money market freezes and central banks

Author(s):

Max Bruche

 et al.
Topic:
Finance
Industry:
Banking

During the global crisis central banks were accused of undertaking unconventional measures that some commentators claimed went beyond their mandate. This article focuses on central banks intervening in the money markets as a middle man. It argues that such actions can be welfare improving, but are unlikely to be fiscally neutral, thus raising questions about whether they should be left to a central bank.

Updated: 06/02/2013
Comments:
Views: 3,515

The market valuation of bonus distributions in an inflationary environment

Author(s):

Meziane Lasfer

Topic:
Finance
Industry:
Banking

In inflationary environments, companies can avoid paying cash dividends to their shareholders. Instead they give them free shares, referred to as bonus distributions. This issue has not been analysed in previous studies, partly because the inflation in many western countries is relatively low and stable.

In this study, the market valuation of this unusual form of stock dividends was assessed, this was carried out by transferring the accumulated equity reserves, mainly the inflation revaluation equity reserves, to paid-in capital leaving the total equity unchanged.

Updated: 06/02/2013
Comments:
Views: 3,912

Accruals, disclosure and the pricing of future earnings in the European market

Author(s):

Ivana Raonic

 et al.
Topic:
Accounting
Industry:
Banking



The present study examines the role of disclosure in assisting market participants to form expectations of future earnings from the accrual (i.e., the non cash) content of reported earnings. Prior research has shown that, in general, disclosure is able to enhance future earnings information in current stock returns.

In this paper, it is shown that the role of disclosure in revealing relevant information on the prospects of the firm depends on the nature of the accruals appearing in the financial statements.

Updated: 06/02/2013
Comments:
Views: 12,802

What does equity sector orderflow tell us about the economy?

Investors rebalance their portfolios as their views about expected returns and risk change.

In this study empirical measures of portfolio rebalancing were used to back out investors' views, specifically their views about the state of the economy.

Contrary to many theories of price formation, did trading activity therefore contain information that that is not entirely revealed by resulting relative price changes?

Updated: 14/01/2013
Comments:
Views: 3,874