摘要:

AbstractThis paper examines, in a Canadian context, the effect of short sales regulation on the risk‐return relationship. It shows that, theoretically, the opportunity cost induced by short sales regulation is positively related to the dispersion of agents' beliefs and negatively related to the security's liquidity level. The model is tested over the sixty‐month period from January 1985 through December 1989. All the 13,079 observations are pooled into a time series cross‐sectional model. The results corroborate that a negative linear relationship links expected risky asset returns and the divergence of agents' beliefs. This negative relationship is consistent with the presence of opportunity costs resulting from short sales regulation when return beliefs are heterogeneous. However, the negative relationship between security returns and dispersion of beliefs is essentially confined to illiquid securities, that is, those monitored by a small number of ana

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00850.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractThis paper evaluates the impact of sampling errors on portfolio decisions using mean‐variance and stochastic dominance rules where riskless borrowing and lending opportunities exist. The paper establishes criteria for comparing the alternative decision rules (for example, mean variance versus stochastic dominance) according to their effectiveness and the cost (in sampling error terms). Normal distributions are simulated using various assumed means, standard deviations, correlations, and sample sizes. These simulations enable one to evaluate the impact of sampling errors on the potential effectiveness of the empirical stochastic dominance and mean variance rules that include borrowing and lending of a riskless asse

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00851.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractThis paper distinguishes between testing approach (parametrict, sign, cross‐sectional rank, and longitudinal rank) and test type (conventional, standardized, and weighted least squares). Similar tests (i.e., tests of the same type) are compared for each testing approach using constant and unequal shift models. Thus the results given here are free of confounding effects present in prior comparisons of dissimilar tests. While all the tests compared are sensitive to the underlying location shift model, if the shift is independent of the security standard deviation, then the weighted least squares longitudinal rank test is most. powerfu

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00852.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractThe net benefits resulting from credit policy decisions can be evaluated based on either the opportunity cost approach or the net present value (NPV) approach. It is known that the two approaches are equivalent in that they provide the same accept/reject decision. Consequently, most text books cover the opportunity cost approach which is much simpler to formulate. This paper reexamines the equivalent relationship based on the NPV models formulated under a capital budgeting framework, and shows that the equivalent relationship only holds for very restrictive conditions. Also, the discount rate for the NPV models is examined along with other models.

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00853.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractThis work develops and empirically estimates models of bond yields subject to default risk. Parameters for the probability of survival and the recovery rate subsequent to default are included in a model of corporate bond yields that allow a study of interactions among them. The municipal version of the model includes the tax rate as an additional factor. Empirical evidence is found that supports the notion that both dimensions of default, considered jointly, are related to bond quality. In addition, statistically significant differences in tax rates suggest that higher tax rates are associated with higher grade municipal bonds.

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00854.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractTypical after‐tax bond yield‐to‐maturity calculations do not accurately reflect the timing of tax payments for the cash basis tax payer. The best of the methods gives reasonable yield estimates when the first coupon payment date is around May 15. As payment dates vary from May 15, bond values are affected by tax deferrals relating solely to the non‐simultaneity of coupon interest and tax payments. These valuation effects, which are not measured by conventional bond models, can be significant, as demonstrated by model simulation and empirical tests which show that the bond market does price the coupon timing tax deferrals predicted by th

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00855.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractA convertible bond (CB) is a hybrid security containing elements of both common stock and straight debt. Still, empirical investigations on CB issue announcements have failed to discern any pattern in the stock market reaction that is consistent with announcements of either common equity or straight debt issues. This study shows that (a) motives for issuing the CB and (b) its rating (and to a less extent the riskiness of the issuing firm) help explain the stock market reaction to CB issue announcements. Specifically, announcement of a CB issue with an explicitly stated motive for the use of proceeds, when coupled with a high (low) bond rating, generates a stock market response similar to a straight debt (common stock) issue. On the other hand, the preference of CB holders is dictated by the motive for the use of proceeds and the conversion premium. These findings highlight the critical importance of the motive of issue in determining reactions in both the stock and bond markets.

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00856.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractThis paper uses a model similar to the Boyle‐Vorst and Ritchken‐Kuo arbitrage‐free models for the valuation of options with transactions costs to determine the maximum price to be charged by the financial intermediary writing an option in a non‐auction market. Earlier models are extended by recognizing that, in the presence of transactions costs, the price‐taking intermediary devising a hedging portfolio faces a tradeoff: to choose a short trading interval with small hedging errors and high transactions costs, or a long trading interval with large hedging errors and low transactions costs. The model presented here also recognizes that when transactions costs induce less frequent portfolio adjustments, investors are faced with a multinomial distribution of asset returns rather than a binomial one. The price upper bound is determined by selecting the trading frequency that will equalize the marginal gain from decreasing hedging errors and the marginal cost of tra

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00857.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractSeveral studies have used spectral analysis to analyze stock market data and conclude that the spectrum of price changes is “white noise” or very nearly so. This paper argues that such results are an artifact of improperly analyzing the data. For a random sample of twenty stocks from the NYSE, it is shown that stock price changes are not even approximately white noise, and the spectra of individual stocks vary substantially. Additionally, cross spectral analysis reveals marked differences between the interaction of price change and volume, and contradicts “stylized facts” from time domain analyses of the price‐volume

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00858.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY

摘要:

AbstractThis paper addresses the relationship between the capital structure and the systematic risk of common equity for a firm whose capital structure includes convertible securities. Adding warrants to the capital structure reduces the systematic risk of equity, which is consistent with the fact that warrants dampen the volatility of equity by reducing the upside potential gains of existing stockholders. Expressions showing the impact of conversion features in debt and preferred stock on the systematic risk of equity are derived, and contrasted with the systematic risk effects of non‐convertible debt or non‐convertible preferred stock financing. Failure to incorporate conversion features may lead to serious errors in assessing the impact of financing alternatives on the risk of equ

ISSN:0732-8516    

DOI:10.1111/j.1540-6288.1995.tb00859.x

出版商:Blackwell Publishing Ltd    

年代:1995

数据来源: WILEY