Portfolio and Security Analysis Commons^™

Stock Market Drivers: Corporate Share Repurchases, Parker Wolf

Business and Economics Honors Papers

Such financial tools as share buybacks are coming under scrutiny by many investment experts. Evidence suggests that share repurchases foster a short-term focus in corporate managers who have a share-based compensation. Recent studies and research draw attention to the negative consequences of corporate share repurchases. While share buybacks were originally intended to create financial value for intrinsically undervalued shares, they are increasingly coming under scrutiny for enabling shareholders to increase their value of wealth at the expense of other stakeholders. With increased stock option plans for corporate executives, the association between increase in open market share buyback activity and compensation ...

Non-Linear Modifications Of Black-Scholes Pricing Model With Diminishing Marginal Transaction Cost, Kaidi Wang

Undergraduate Honors Theses

In the field of quantitative financial analysis, the Black-Scholes Model has exerted significant influence on the booming of options trading strategies. Publishing in their Nobel Prize Work in 1973, the model was generated by Black and Scholes. Using Ito’s Lemma and portfolio management methodology, they employed partial differential equation to provide a theoretical estimate of the price of European-style options.

This paper is interested in deriving non-linear modifications of the Black-Scholes model with diminishing marginal transaction cost.

The Ursinus College Investment Management Company Newsletter, Spring 2020, Scott Deacle, Johnathan Myers

Investment Management Company Newsletter

Inside this issue:

Letter from Professor Scott Deacle

Letter from Johnny Myers '19

At a Glance

Investment Strategies

Endowment at Work

New at UCIMCO

Investment Performance

Endowment Fund Outlook

Stock Selection Fund Picks

Our Team

Supporters

How to Contribute

Permanent Equity: Successfully Finding And Buying A Small Business, Lewis Wang

Senior Theses

This thesis aims to build off the existing research on the advantages of permanent equity within the micro-cap market space. This strategy combines many advantages from private equity, venture capital, small-cap, and value / quality investing in order to generate a differentiated return. While the pros and cons of these various strategies have been explored by previous academic research, not much has been written on the actual implementation and choices practitioners must make when they decide how to deploy capital. In order to dive deeper into implementation, this thesis presents several anecdotes of various firms that invest in this space according ...

Happy Analysts, Ole-Kristian Hope, Congcong Li, An-Ping Lin, Maryjane Rabier

Research Collection School Of Accountancy

This paper is the first to investigate the role of work-life balance in financial analysts’ performance and career advancement. Using a large sample of Glassdoor reviews by financial analysts, we find a significant non-linear relation between work-life balance satisfaction and analyst performance and analyst career advancement. Specifically, when work-life balance satisfaction is relatively low, an increase in work-life balance is associated with better analyst performance and career advancement; however, when perceived work-life balance is already high, a further increase in work-life balance is associated with worse analyst performance and career advancement.

Harmonizing The Disjointed: Economic Integration And Risk Sharing, Samuel Acheampong

Theses and Dissertations--Economics

This dissertation consists of three essays examining the role of risk diversification in European markets. At the economy level the first two essays seek to identify whether economic integration efforts among European countries result in sharing risks to consumption with regional neighbors, as opposed to global partners. At the firm level, the third essay seeks to understand whether managers of large companies in the United Kingdom choose less financial leverage if they are specifically compensated with more cash bonus as opposed to other forms of performance incentives.

In Essay 1, I assess the extent to which European countries diversify consumption ...

Are Green Bonds Just Another Financial Fad Or Are They Here To Stay?, Saloni R. Wadhwa

Wharton Research Scholars

This paper analyses the existence of a greemium i.e., an investor or issuer green bond premium in the primary fixed income and securities market across time. To achieve this, I examine issue yield differentials and issue price differentials between matched samples of green and conventional bonds, which are examined through time series, regression and difference-in-difference analyses. The issuer premium is evaluated in terms of favorable price, while the investor premium is defined in terms of favorable yield. The results suggest that green bonds have had an investor premium based on a positive yield (3.6 basis points). There is ...

How Efficient Is Market Pricing: Can Investors Beat The Market? Further, Are Prices Always Right As Stated In The Efficient Market Hypothesis?, Porter M. Mcmanus

Honors Theses and Capstones

The Efficient Market Hypothesis is a widely accepted economic theory developed by economist Eugene Fama. The theory states that at any given time, an asset’s price reflects all available public information and will always trade at fair value. The motivation for this research is derived from the content taught in undergraduate finance courses. In undergraduate academia finance students are introduced to the idea of market efficiency, as it is a building block for future theory and application. However, this theory is rarely questioned in the world of undergraduate academia, rather just taken as fact by students.

The underlying research ...

Security Analysts And Capital Market Anomalies, Li Guo, Frank Weikai Li, K.C. John Wei

Research Collection Lee Kong Chian School Of Business

We examine whether analysts use information in well-known stock return anomalies when making recommendations. We find results contrary to the common view that analysts are sophisticated information intermediaries who help improve market efficiency. Specifically, when analysts make more favorable recommendations to stocks classified as overvalued, these stocks tend to have particularly large negative abnormal returns ex post. Moreover, analysts whose recommendations are more aligned with anomaly signals are more skilled and elicit greater recommendation announcement returns. Our results suggest that analysts' biased recommendations could be a source of market frictions that impede the efficient correction of mispricing.

Do Institutional Investors Exploit Market Anomalies? New Evidence From Alternative Mutual Funds, Xin Gao, Ying-Chih Wang

WCBT Faculty Publications

This paper investigates the anomaly trading behavior of a sample of mutual funds mimicking hedge fund strategies, namely alternative mutual funds (AMFs), based on both of their long and short equity positions. We document that AMFs trade on anomalies by buying underpriced stocks and short-selling overpriced peers. While AMFs’ buys and sells based on their long positions do not generate superior performance, their short-selling and covering activity based on their short positions significantly negatively predicts future abnormal returns. However, this predictability is mainly attributed to size and the nine anomaly characteristics considered. Overall, the results suggest that AMFs are sophisticated ...

When Family Trusts Affect The Value Of Firms, Singapore Management University

Perspectives@SMU

Share transfer restriction may induce family shirking problems, make family conflicts difficult to resolve, and distort firm decisions

Regulating Retirement: Understanding The Impact Of New Best Interest And Fiduciary Standards On Retail Investors, Michael Lichtmacher

St. Mary's Law Journal

Abstract forthcoming

The Ursinus College Investment Management Company Newsletter, Fall 2019, Scott Deacle

Investment Management Company Newsletter

Inside this issue:

What's New?

Women-in-Finance Program

What are "They" Saying?

New York Field Trip

2019 Fund Performance

Supporters

How Do Interest Rates Affect Market Capitalization Growth Rates In The Us?, Philip Carolin

Undergraduate Economic Review

This paper investigates how interest rates affect the market capitalization growth rate of individual companies in the US. The research will distinguish itself from previous literature as it analyzes company and macroeconomic data after the 2008 recession. This is particularly interesting as interest rates have been historically low in this time period. Previous research suggests that since the Great Recession the effects of interest rate changes have decreased. On the contrary I will argue that the effects of interest rates still appear to be significant and substantial when explaining the market capitalization growth rate.

Non-Gaap Earnings And Stock Price Crash Risk, Charles Hsu, Rencheng Wang, Benjamin C. Whipple

Research Collection School Of Accountancy

Prior research concludes that stock price crash risk is primarily attributable to managers’ withholding of bad news from investors. We extend this literature by investigating whether crash risk can also occur when managers disclose additional information via non-GAAP reporting, which downplays reported bad news by re-directing investors’ attention to other, more positive aspects of performance. We find that the likelihood of crash risk is higher when managers have reported non-GAAP earnings more frequently during the past year. We also find that managers appear to use non-GAAP reporting as a substitute for the more common reason for crash risk in prior ...

Text Sophistication And Sophisticated Investors, Juha Joenvaara, Jari Karppinen, Song Wee Melvyn Teo, Cristian Ioan Tiu

Research Collection Lee Kong Chian School Of Business

We show that two novel measures of text sophistication, applied to hedge fund strategy descriptions, encapsulate incremental information about funds. Consistent with the linguistics literature, hedge funds with lexically diverse strategy descriptions outperform, eschew tail risk, and encounter fewer regulatory problems. In line with the literature, hedge funds with syntactically complex strategy descriptions report more regulatory violations and trigger more severe infractions. Fund investors recognize the dichotomy and direct flows accordingly, but not enough to erode away the alphas of lexically diverse funds. Our findings suggest that text sophistication measures provide texture on the cognitive ability and trustworthiness of sophisticated ...

Swaption Portfolio Risk Management: Optimal Model Selection In Different Interest Rate Regimes, Poh Ling Neo, Chyng Wen Tee

Research Collection Lee Kong Chian School Of Business

We formulate a risk-based swaption portfolio management framework for profit-and-loss (P&L) explanation. We analyze the implication of using the right volatility backbone in the pricing model from a hedging perspective, and demonstrate the importance of incorporating stability and robustness measure as part of the calibration process for optimal model selection. We also derive a displaced-diffusion stochastic volatility (DDSV) model with a closed-form analytical expression to handle negative interest rates. Finally, we show that our framework is able to identify the optimal pricing model, which leads to superior P&L explanation and hedging performance.

Lifeguard: "Providing Safety In An Unsafe World", Lincoln Bent, Morgan Gafford, Will Ransdell

2019 Governor's Scholars Projects

A poster presented by Lincoln Bent, Morgan Gafford and Will Ransdell for the class Business, Accounting and Entrepreneurship: Proposed Business Plans.

Regulations And Brain Drain: Evidence From Wall Street Star Analysts’ Career Choices, Congcong Li, Yuyan Guan, Hai Lu, Franco Wong

Research Collection School Of Accountancy

The Global Settlement, along with related regulations in the early 2000s, prohibits the use of investment banking revenue to fund equity research and compensate equity analysts. We find that all-star analysts from investment banks are more likely to exit the profession or move to the buy side after the regulations. The departed star analysts’ earnings revisions and stock recommendations are more informative than those of the remaining analysts who followed the same companies. To the extent that star analysts are superior to their nonstar counterparts in terms of research ability and ability to inform the market, the exit of star ...

International Welfare Spillovers Of National Pension Schemes, James Staveley-O'Carroll, Olena Staveley-O'Carroll

Economics Department Working Papers

We employ a two-country overlapping-generations model to explore the international dimension of household portfolio choices induced by the asymmetric provision of government-run pensions. We study the resulting patterns of risk-sharing and the corresponding welfare effects on both home and foreign agents. Introducing the defined benefits pay-as-you-go system at home increases the welfare of all other agents at the expense of the home workers and improves the degree of intergenerational risk sharing abroad. Conversely, a defined contributions system leads to welfare losses of both home cohorts accompanied by gains abroad, but does increase the extent of intergenerational risk sharing at home.