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Finance and Financial Management

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2006

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Articles 1 - 30 of 90

Full-Text Articles in Business

Volatility Spillovers Between Stock Prices And Exchange Rates: Empiral Evidence From Six Apec Economies, Lucia Morales, Mary O'Donnell Dec 2006

Volatility Spillovers Between Stock Prices And Exchange Rates: Empiral Evidence From Six Apec Economies, Lucia Morales, Mary O'Donnell

Conference papers

This paper set out to examine the volatility linkages between stock returns and exchange rates in a number of East Asian markets. Overall, our main results indicate that since the Asian financial crises, there exists significant scope for investors and portfolio managers to diversify their assets between stocks and currencies in these markets. In particular, the lack of volatility spillovers between stock markets and exchange rates, and between exchange rates and stock markets in all countries, except Taiwan in the post crises period indicates that there is scope for investors to diversify their investments and to benefit from potential gains …

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Adjusting To The Euro, Gabriel Fagan, Vitor Gaspar Dec 2006

Adjusting To The Euro, Gabriel Fagan, Vitor Gaspar

CRIF Seminar series

In this paper we argue that, for a group of converging economies of the European Union, participation in the euro area has been associated with easier access to financing by domestic economic agents. Easier access to financing was a significant impulse leading to a sharp increase in households' expenditures and a corresponding fall in the savings ratio. Increased expenditure was associated with current account deficits, a sharp fall in the net foreign asset position and an increase in the households' indebtedness. At the same time there was a sizeable increase in the real exchange rate. In this paper, we show …

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An Analytical Approach For Making Management Decisions Concerning Corporate Restructuring, Beixin Lin, Zu Hsu Lee, Richard Peterson Dec 2006

An Analytical Approach For Making Management Decisions Concerning Corporate Restructuring, Beixin Lin, Zu Hsu Lee, Richard Peterson

Department of Accounting and Finance Faculty Scholarship and Creative Works

Internal corporate restructuring activities, such as downsizing, sale or termination of a business line, facility closure, consolidation, or relocation, often occur as part of managerial strategies intended to improve efficiency, control costs, and adapt to an ever-changing business environment. Such actions frequently result in fundamental changes in a business's organization, its strategies, its systems, and its operations. They can unsettle a business and often significantly affect current and future earnings and cash flows. In this paper we propose a novel decision-making model through the use of the dynamic programming technique to illustrate how management can determine the optimal timing and …

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What's Ahead For 2007? Knowledge@Wharton Network Surveys The Globe, Knowledge@Smu Dec 2006

What's Ahead For 2007? Knowledge@Wharton Network Surveys The Globe, Knowledge@Smu

Knowledge@SMU

On the financial front, 2006 has been a pretty good year all around. Stock markets in many countries have rallied, energy prices have fallen, inflation is relatively low and growth in GDP ranges from respectable to robust. But the economies of most countries also face a number of threats -- some predictable, some not -- that could derail recent gains in our increasingly connected global markets. What's ahead for 2007 in the U.S., India, Europe, Latin America, China and other parts of the world? We offer a roundup of reports from the Knowledge@Wharton Network, including India Knowledge@Wharton, Universia Knowledge@Wharton and …

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The Association Between Earnings Quality And Regulatory Report Opinions In The Accounting Industry, Tracey Chunqi Zhang, Katherine Gunny Dec 2006

The Association Between Earnings Quality And Regulatory Report Opinions In The Accounting Industry, Tracey Chunqi Zhang, Katherine Gunny

Research Collection School Of Accountancy

We compare the outcome of two different information systems – self regulation versus private sector regulation – in the accounting industry. Under the Sarbanes-Oxley Act, Public Company Accounting Oversight Board (PCAOB) inspections replaced American Institute of Certified Public Accountants (AICPA) peer reviews of auditors. Peer review opinions are useful with respect to decisions about hiring and firing of auditors (Hilary and Lennox, 2005); therefore, the question remains what are the benefits of incurring the cost to replace a selfregulatory system with a private regulatory agency. We examine the usefulness of these two information systems at distinguishing earnings quality at firms …

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The Effect Of The Options Backdating Scandal On The Stock-Price Performance Of 110 Accused Companies, Gennaro Bernile, Gregg A. Jarrell, Howard Mulcahey Dec 2006

The Effect Of The Options Backdating Scandal On The Stock-Price Performance Of 110 Accused Companies, Gennaro Bernile, Gregg A. Jarrell, Howard Mulcahey

Research Collection Lee Kong Chian School Of Business

Since academic scholars and the Wall Street Journal reported widespread evidence indicating that option grants to executives were backdated, an avalanche of news stories followed documenting this ever-widening corporate scandal. In this study we ask: "How do disclosures of backdating affect shareholder value?" We closely examine 110 companies listed in the Wall Street Journal's Perfect Payday webpage, collecting all news stories related to options backdating. We find that shareholders of these 110 companies suffer on average significant stock-price declines, ranging between 20% and 50%. Moreover, these losses do not seem to be due to temporary overreactions (at least so far). …

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Have Absolute Price Levels Converged For Developed Economies? The Evidence Since 1870, Lein-Lein Chen, Seungmook Choi, John Devereux Nov 2006

Have Absolute Price Levels Converged For Developed Economies? The Evidence Since 1870, Lein-Lein Chen, Seungmook Choi, John Devereux

CRIF Working Paper series

We compare price level and income convergence since 1870 for eleven developed economies using implicit price deflators derived from the GDP data of Maddison (1995, 2001 and 2003). We find that “sigma” and “beta” convergence for prices occurs later and to a lesser extent than income. Price levels converge after 1950 while income convergence begins in the 1880’s. We find no evidence for stochastic convergence or for “club” price convergence. JEL codes F3, F4.

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Measures Of Investor Sentiment: Who Wins The Horse Race?, Arindam Bandopadhyaya Nov 2006

Measures Of Investor Sentiment: Who Wins The Horse Race?, Arindam Bandopadhyaya

Financial Services Forum Publications

Traditional research on asset pricing has focused on firm-specific and economywide factors that affect asset prices. Recently, the finance literature has turned to noneconomic factors such as investor sentiment as possible determinants of asset prices. Some researchers (e.g., Eichengreen and Mody, 1998) suggest that a change in one set of asset prices may change investor sentiment, thus triggering changes in a seemingly unrelated set of asset prices, especially in the short run, giving rise to pure contagion. Fisher and Statman (2000) and Baker and Wurgler (2006) have also recognized that investor sentiment may be an important component of the market …

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Choice Of Currency By East Asia Bond Issuers, David Fernandez, Simon Klassen Nov 2006

Choice Of Currency By East Asia Bond Issuers, David Fernandez, Simon Klassen

Research Collection Lee Kong Chian School Of Business

In discussing bond markets in Asia, academics and policymakers typically begin by noting that the Asian crisis of 1997-98 in part resulted from the underdevelopment of the region’s domestic bond markets and the resultant currency and duration mismatches. When assessing the progress made in developing these markets in the post-crisis years, academics and policymakers usually observe that, while several domestic currency government bond markets have moved ahead, corporate bond markets have lagged (Asian Development Bank (2002), Reserve Bank of Australia (2003)). The policy conclusion is therefore often drawn: to prevent another Asian crisis, Asian bond markets must be further developed.

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2007-2008 Budget Request, Southern University System. Office Of Finance & Administration. Oct 2006

2007-2008 Budget Request, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The Southern University System Administration & Board of Supervisors Budget Request, Fiscal Year Ending June 30, 2008.

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How Can Employers Improve Defined Contribution Plans?, Knowledge@Smu Oct 2006

How Can Employers Improve Defined Contribution Plans?, Knowledge@Smu

Knowledge@SMU

If 401(k)s and similar plans are the main way Americans invest for retirement, how can employers improve them? By making enrollment automatic, minimizing the use of the employer's stock, expanding the role of annuities and improving employees' financial knowledge, according to a set of recommendations issued by the Financial Economists Roundtable, a group of about 50 prominent economists, including several Wharton faculty members.

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Interest Rate Linkages And Capital Market Integration: Evidence From The Americas, Bharat Bhalla, Anand Shetty Oct 2006

Interest Rate Linkages And Capital Market Integration: Evidence From The Americas, Bharat Bhalla, Anand Shetty

CRIF Seminar series

In this paper, we study the long-run co-movement among the real interest rates of the U.S., Canada, and a select group of Latin American countries to assess the extent of financial market integration between these countries during a period of high capital mobility. The findings of the study support a long-run relationship between the short-term U.S. real interest rate and those of the Latin American countries, while it fails to support such a relationship between the U.S. and Canadian real interest rates.

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Implied Binomial Trees In Excel Without Vba, Tom Arnold, Timothy Falcon Crack, Adam Schwartz Oct 2006

Implied Binomial Trees In Excel Without Vba, Tom Arnold, Timothy Falcon Crack, Adam Schwartz

Finance Faculty Publications

We implement a Rubinstein-type (1994) implied binomial tree using an Excel spreadsheet, but without using VBA (Visual Basic Application). We demonstrate both the optimization needed to generate implied ending risk-neutral probabilities from a set of actual option prices and the backwards recursion needed to solve for the entire implied tree. By using only standard Excel spreadsheet functions, and not resorting to VBA, this complicated option pricing technique is now immediately transparent to academics, students, and practitioners alike. The intuition gained from our simple spreadsheet can be applied directly to the estimation of more complicated implied trees using more advanced software. …

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2006-2006 Operating Budget (Final Printing): Southern University And A & M College, Southern University System. Office Of Finance & Administration. Sep 2006

2006-2006 Operating Budget (Final Printing): Southern University And A & M College, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 2006-2007 Operating Budget for the Southern University and A & M College Campus. Final Printing.

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2006-2007 Revised Operating Budget: Southern University At Shreveport, Southern University System. Office Of Finance & Administration. Sep 2006

2006-2007 Revised Operating Budget: Southern University At Shreveport, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The Southern University at Shreveport Campus Revised Operating Budget for the fiscal year 2006-2007.

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2006-2007 Operating Budget: Subr Agricultural Research And Extension Center, Southern University System. Office Of Finance & Administration. Sep 2006

2006-2007 Operating Budget: Subr Agricultural Research And Extension Center, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

2006-2007 Operating Budget of the SUBR Agricultural Research and Extension Center campus.

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2006-2007 Operating Budget: Southern University Law Center, Southern University System. Office Of Finance & Administration. Sep 2006

2006-2007 Operating Budget: Southern University Law Center, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 2006-2007 Fiscal Year Operating Budget of the Southern University Law Center.

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2006-2007 Revised Operating Budget, Southern University System. Office Of Finance & Administration. Sep 2006

2006-2007 Revised Operating Budget, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The Southern University System Board and System Administration Higher Education Operating Fund Budget Fiscal Year Ending June 30, 2007. Revised September 29, 2006.

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Fiscal And Current Account Balances In A Model With Sticky Prices And Distortionary Taxes, G.C. Lim, Paul D. Mcnelis Sep 2006

Fiscal And Current Account Balances In A Model With Sticky Prices And Distortionary Taxes, G.C. Lim, Paul D. Mcnelis

CRIF Working Paper series

This paper examines the interaction of fiscal and current account balances in open economies subject to monopolistic competition with sticky price-setting behavior, adjustment costs for investment, and distortionary labor income taxes. We find that the elasticity of exports with respect to the real exchange rate influences the correlation between the balances. In particular, in simulations with recurring shocks to productivity, we find that the balances are positively correlated for a range of export elasticities. However, for simulations with recurring real government expenditure shocks, we find that the balances are positively correlated under high export elasticity but negatively correlated under low …

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Optimal Liquidation Strategies And Their Implications, Christopher Ting, Mitch Warachka, Yonggan Zhao Sep 2006

Optimal Liquidation Strategies And Their Implications, Christopher Ting, Mitch Warachka, Yonggan Zhao

Business Faculty Articles and Research

This paper studies optimal liquidation when the selling price depends on the rate of liquidation, transaction time, volume, and the asset's intrinsic value. A generic closed-form solution for maximizing the discounted liquidation proceeds is derived. To obtain financial insights, three parametric specifications that proxy for increasingly realistic market conditions are examined. In our framework, maximizing liquidation proceeds and minimizing liquidity costs are equivalent. The optimal strategies imply more rapid liquidations in less liquid markets. We also show that volatility is stochastic when market liquidity is unpredictable.

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The Growing Together Guide: A Companion Resource To The New England Environmental Finance Center/Melissa Paly Film, New England Environmental Finance Center Sep 2006

The Growing Together Guide: A Companion Resource To The New England Environmental Finance Center/Melissa Paly Film, New England Environmental Finance Center

Smart Growth

What local leader or public official wants to be faced with an SOS the “same old story” of public discord and confrontation over growth and development in one’s community? That situation has become a problem for efforts to promote smart growth. Investments are needed in the walkable, compact, traditional‐streetscape and mixed use neighborhoods and developments that are more sustainable and healthy than sprawl, for both people and the landscape. Yet attempts at such change all too often end up mired in costly public controversy and stalemate.

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The Relationship Between The Value Effect And Industry Affiliation, John C. Banko, C. Mitchell Conover, Gerald R. Jensen Sep 2006

The Relationship Between The Value Effect And Industry Affiliation, John C. Banko, C. Mitchell Conover, Gerald R. Jensen

Finance Faculty Publications

We examine industry affiliation and the relationship between stock returns and book‐to‐market equity (the value effect). The robustness of the value effect is supported as a significant value premium is shown to exist in 15 of 21 industries. Both industry and firm‐level value effects are identified; however, the firm‐level effect is the more prominent of the two. Further, the value effect is shown to be strongest in value industries and weakest in growth industries. Finally, we show evidence consistent with the claim that the value premium is due to investors requiring higher returns from firms in distressed conditions.

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Is Stock Price Rounded For Economic Reasons In The Chinese Market, Yan He, Chunchi Wu Sep 2006

Is Stock Price Rounded For Economic Reasons In The Chinese Market, Yan He, Chunchi Wu

Research Collection Lee Kong Chian School Of Business

This paper investigates whether trading and quoting prices are rounded for both economic and cultural reasons on the Shanghai and Shenzhen Stock Exchanges in China. We find that the close, bid, and ask prices of domestic shares are rounded to the nearest 10s and 5s for economic reasons, and the last decimal point of prices clusters on 8 for cultural reasons. The cross-sectional variation in 10-cent and 5-cent rounding can be well explained by price and inverse of square root of trading volume, whereas the clustering on 8 can hardly be ascribed to economic variables. The cross-sectional variation in execution …

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The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross Sep 2006

The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross

Finance Faculty Research and Publications

Local authorities in North Carolina, and subsequently in at least 23 other states, have enacted laws intending to reduce predatory and abusive lending. While there is substantial variation in the laws, they typically extend the coverage of the Federal Home Ownership and Equity Protection Act (HOEPA) by including home purchase and open-end mortgage credit, by lowering annual percentage rate (APR) and fees and points triggers, and by prohibiting or restricting the use of balloon payments and prepayment penalties. Empirical results show that the typical local predatory lending law tends to reduce rejections, while having little impact on the flow (application …

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The Macroeconomic News Cycle And Uncertainty Resolution, Arjun Chatrath, Rohan Christie-David, William T. Moore Sep 2006

The Macroeconomic News Cycle And Uncertainty Resolution, Arjun Chatrath, Rohan Christie-David, William T. Moore

Faculty Publications

We examine the behavior of return volatility and trading at 5-minute intervals in the treasury bond futures market in the context of the monthly macroeconomic news cycle. We advance and confirm the hypothesis that volatility and trading activity are higher in the first half of the month. The data indicate that these patterns arise from at least two sources: (1) a higher level of uncertainty regarding the value of news in announcements in the first half of the month, and (2) improvement in efficiency of macroeconomic forecasts from the first to the second half of the month.

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Which Daily Price Is Less Noisy?, Christopher Ting Sep 2006

Which Daily Price Is Less Noisy?, Christopher Ting

Research Collection Lee Kong Chian School Of Business

The daily efficient price is the price that would prevail if the market were frictionless. I show that volume-weighted average price (VWAP) provides a less noisy estimate for the unobservable efficient price as compared to the closing price. The variance of daily returns computed with VWAPs is smaller than that computed with closing prices. The difference between these two realized variances is economically significant. The volatility of log closing price change tends to understate the beta risk and Sharpe ratio. A higher noise level in the closing price leads to derivative prices that favor option and volatility-related swap writers.

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A Survey Of Demographics And Performance In The Hedge Fund Industry, Arindam Bandopadhyaya, James L. Grant Jul 2006

A Survey Of Demographics And Performance In The Hedge Fund Industry, Arindam Bandopadhyaya, James L. Grant

Financial Services Forum Publications

We investigate hedge fund demographics using data from the Alternative Asset Center (AAC) and then hedge fund performance over the twelve years since inception of the Credit Suisse/Tremont Hedge Fund Indices (HFI, 1994-2005). We find that hedge funds are largely domiciled “offshore” while hedge-fund managers are located primarily in the United States, particularly New York, California, Illinois, Connecticut and Florida. We find that the annualized performance of hedge funds as an “asset class” is about the same as that of U.S. equities (S&P 500). That being said, the real benefit of hedge funds lies in risk management as the volatility …

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Financial Education And Asset Allocation, Steven D. Dolvin, William K. Templeton Jul 2006

Financial Education And Asset Allocation, Steven D. Dolvin, William K. Templeton

Scholarship and Professional Work - Business

We conduct a clinical study on a firm that restructures its 401(k) plan and simultaneously offers financial education seminars to its employees. The restructuring requires each employee to restate allocation percentages, thus we are able to analyze the specific benefits of retirement planning seminars on the asset allocation decision. We find that seminar attendance is associated with increased portfolio diversification and improved risk management. When combined with changes in return, the overall result is that seminar attendees create more efficient portfolios, which implies a better understanding of the retirement planning process.

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Applying Altman's Z-Score In The Classroom, Tom Arnold, John H. Earl Jr. Jul 2006

Applying Altman's Z-Score In The Classroom, Tom Arnold, John H. Earl Jr.

Finance Faculty Publications

Altman's Z-score is introduced in an Excel framework to produce a quick calculation of the Z-score with actual financial data available through the Internet. The lesson plan developed is easily introduced with topics covering ratio analysis, financial risk, bond rating changes, and bankruptcy. Given the wide use of the Z-score in practice to evaluate credit risk (or bankruptcy risk), the lesson plan produces a skill set that is very marketable.

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Adding Depth To The Discussion Of Capital Budgeting Techniques, Tom Arnold, Terry D. Nixon Jul 2006

Adding Depth To The Discussion Of Capital Budgeting Techniques, Tom Arnold, Terry D. Nixon

Finance Faculty Publications

The subject of capital budgeting generally encompasses a significant percentage of any beginning finance course with net present value (NPV) often receiving the most attention. Even after this substantial time allotment, critical assumptions and comparisons of the different techniques (such as payback period, discounted payback period, NPV and IRR) are frequently glossed over due to time constraints. Consequently, the goal of this paper is to present these non-NPV techniques in a manner that allows the beginning finance student to expeditiously see the intuition, inherent assumptions, and any connection with the more popular NPV calculation. A small portion of this paper …

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