Business Commons^™

Project Options Valuation With Net Present Value And Decision Tree Analysis, Bert De Reyck, Zeger Degraeve, Roger Vandenborre

Research Collection Lee Kong Chian School Of Business

Real options analysis (ROA) has been developed to correctly value projects with inherent flexibility, including the possibility to abandon, defer, expand, contract or switch to a different project. ROA allows computing the correct discount rate using the replicating portfolio technique or risk-neutral probability method. We propose an alternative approach for valuing Real Options based on the certainty-equivalent version of the net present value formula, which eliminates the need to identify market-priced twin securities. In addition, our approach can be extended to the case of multinomial trees, a useful tool for modeling uncertainty in projects. We introduce within decision tree analysis …

On Nonlinearities In Kse 100 Index Stock Return, Khurshid M. Kiani

Business Review

This research investigates possible existence of asymmetries in business cycle fluctuations in Karachi Stock Exchange (KSE) 100 index over money market rates. I model the relationship between excess stock return in KSE 100 index using a number of nonlinear time series models for constructing linearity tests for testing linearity in KSE 100 excess returns. These tests include Keenan test, Ramsay RESET test, and its improved versions i.e. RESET1 and RESET2 tests. The results based on Keenan test show statistically significant evidence of nonlinearities in KSE 100 excess returns. Likewise the results from Ramsay RESET test confirm this behavior. However, the …

Forecasting Default With The Merton Distance To Default Model, Sreedhar T. Bharath, Tyler Shumway

Faculty Publications

We examine the accuracy and contribution of the Merton distance to default (DD) model, which is based on Merton's (1974) bond pricing model. We compare the model to a "nai:ve" alternative, which uses the functional form suggested by the Merton model but does not solve the model for an implied probability of default. We find that the nai:ve predictor performs slightly better in hazard models and in out-of-sample forecasts than both the Merton DD model and a reduced-form model that uses the same inputs. Several other forecasting variables are also important predictors, and fitted values from an expanded hazard model …

What Role Should Subsidies Play For Microfinance Institutions, Emily Anne Cormaney

Honors Program Theses

Muhammad Yunus and the Grameen Bank of Bangladesh were awarded the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below" [Sengupta and Aubuchon 2008, 9]. The so-called "microfinance revolution" has come a long way since the establishment of the Grameen Bank in 1983. At present, it is estimated that there are between 1,000 and 2,500 microfinance institutions (MFIs) serving 67.6 million clients [Sengupta and Aubuchon 2008, 10].

MFIs provide financial services, such as loans, savings, and insurance, to the poor. The hope is that the services MFis provide will allow the poor to escape …

A Simplified Approach To Understanding The Kalman Filter Technique, Tom Arnold, Mark J. Bertus, Jonathan Godbey

Finance Faculty Publications

The Kalman filter is a time series estimation algorithm that is applied extensively in the field of engineering and recently (relative to engineering) in the field of finance and economics. However, presentations of the technique are somewhat intimidating despite the relative ease of generating the algorithm. This article presents the Kalman filter in a simplified manner and produces an example of an application of the algorithm in Excel. This scaled-down version of the Kalman filter can be introduced in the (advanced) undergraduate classroom as well as the graduate classroom.

Essay 1: Does Ownership Structure Matter? Essay 2: Asset Sale In Mutual Fund Industry, Fan Chen

LSU Doctoral Dissertations

The dissertation studies two aspects of the U.S. registered investment companies. The first essay analyzes the ownership and organizational structure aspect while the second essay investigates the restructure events of those investment companies. We find sellers from mutual fund asset sales are mainly financial conglomerates. Funds under management of those conglomerates experience poor performance during the period prior to asset sales. On the other hand, acquirers are generally highly focused mutual fund companies. Funds acquired by these focused entities experience improvement in both fund performance and operational efficiency. From the analysis of organizational structure, funds managed by focused mutual fund …

Implied Measures Of Relative Fund Performance, Steve Hogan, Mitch Warachka

Business Faculty Articles and Research

We evaluate the relative performance of funds by conditioning their returns on the cross-section of portfolio characteristics across fund managers. Our implied procedure circumvents the need to specify benchmark returns or peer funds. Instead, fund-specific benchmarks for measuring selection and market timing ability are constructed. This technique is robust to herding as well as window dressing and mitigates survivorship bias. Empirically, the conditional information contained in portfolio weights defined by industry sectors, assets, and geographical regions is important to the assessment of fund management. For each set of portfolio characteristics, we identify funds with success at either selecting securities or …

The Archway Investment Fund Semi Annual Report, December 2007, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Value Discount Of Business Groups Surrounding The Asian Financial Crisis: Evidence From Korean Chaebols, James Jinho Chang, Young Jun Cho, Won Kang, Hyun-Han Shin

Research Collection School Of Accountancy

We examine the effect of business group membership on firm value in each pre-and postcrisis Korea. Consistent with prior studies, results show that group affiliated chaebol firms suffer value discount relative to non-chaebol firms in the precrisis period. However, we also find that chaebol firms experience an improvement in firm value relative to non-chaebol firms after the financial crisis. These findings imply that the value discount of business groups reported in prior studies is not an inevitable consequence of diversification, but can be alleviated or overcome by structural reforms in business practices or economic conditions.

Lessons From The Sub-Prime Crisis, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

We show that there is significant variation in performance across hedge funds during the subprime crisis. Hedge funds that (i) invested in Asia, (ii) had equity exposure, (iii) adopted directional strategies, or (iv) allowed for frequent redemptions, underperformed other funds. Moreover, leveraged funds did not fare significantly worse than their non-leveraged counterparts. Our results suggest that credit market illiquidity was not directly responsible for the bloodshed amongst hedge funds. Rather, funds were hurt by an increase in global risk aversion and by fire sales conducted in anticipation of redemptions.

Is Direct Method Cash Flow Reporting Better At Predicting Future Performance?, Knowledge@Smu

Knowledge@SMU

“Cash is king” goes the saying. Even companies enjoying brisk business have been known to fail because of unhealthy cash flows. The accounting profession is split over the benefits of the direct method (DM) versus the indirect method (IM) of preparing cash flow reports. In a study of over 100 US-based companies which used direct cash flow statements, Singapore Management University accounting professor Yoonseok Zang shows conclusively that the direct method does better at predicting future performance and earnings. --------------------------------------------------------------------------------

Complementary And Alternative Medicine: Opportunities And Challenges, William Martin, Hugh Long

College of Business Faculty and Staff Works

Health care finance is complex in all sectors of the health care industry. This article highlights both the challenges and opportunities of financing and reimbursing care with a focus on CAM providers and CAM provider organizations.

Information Opacity, Credit Risk, And The Design Of Loan Contracts For Private Firms, Lucy Ackert, Rongbing Huang, Gabriel G. Ramirez

Faculty Articles

This paper examines the structure and cost of a large sample of bank loans to private firms. Compared to public firms, private firms are more informationally opaque and riskier. The results suggest that the design of a loan to a private firm is significantly different from that to a public firm. Bank loans to private firms are more likely to be by a sole lender, collateralized, and have sweep covenants than loans to public firms. The cost of borrowing is higher for a private firm than for a public firm, even after holding constant firm and loan characteristics.

The Change In Corporate Transparency Of Korean Firms After The Asian Financial Crisis: An Analysis Using Analysts' Forecast Data, Jinho Chang, Young Jun Cho, Hyun-Han Shin

Research Collection School Of Accountancy

Using analysts' forecast error and forecast dispersion of firms covered by the I/B/E/S database, this study examines the change in information asymmetry of Korean firms around the financial crisis of 1997. Results show that the information asymmetry of Korean firms is lower after the financial crisis than before, implying that corporate transparency did, in effect, improve with the change in business environment. In addition, this study finds that chaebol firms have higher information asymmetry than non-chaebol firm, and also that the corporate transparency improvement of chaebol firms is not higher than that of non-chaebol firms in the post-crisis period despite …

The Association Between Corporate Governance And Audit Fees, Cindy K. Harris

Business and Economics Faculty Publications

The Sarbanes-Oxley Act of 2002 (“SOX”) established not only corporate governance reform but also legislated significant changes to the practice of auditing publicly held corporations. Rules implemented by the Securities and Exchange Commission (“SEC”) further reinforced stronger corporate governance standards. The effect of these reforms on the cost of public audits is indisputable: the initial rise in audit fees was dramatic as corporations complied with the new provisions. This paper examines the relationship between corporate governance characteristics and audit fees for a random sample of 100 publicly traded corporations drawn from the 2005 Fortune 500 list. The data is obtained …

Top Performing Hedge Funds: Does Geography Make A Difference?, Knowledge@Smu

Knowledge@SMU

Do hedge funds earn above-average returns? Is there a way to identify these top performers? Where hedge funds are located makes the difference, according to Singapore Management University finance professor Melvyn Teo, who is also director of the university’s BNP Paribas Hedge Fund Centre. Teo puts forward evidence for the hypothesis that locally-managed hedge funds are better able to monitor their investments and, therefore, generate superior returns.

Patterns Of District Performance In Student Achievement: Connecting Resources To Student Achievement, Peter Simpson, Robert K. Gable, Stacey L. Kite

School Finance and Student Achievement

This presentation is the first sequence of a three-phase study using a mixed method sequential explanatory strategy (Creswell, 2003). The study is research in-progress that investigates how resources can increase or diminish the value resources as they move through the education delivery system contributing in variations in its overall performance (Porter, 1985). The study is unique, because it combines, and is based on microeconomic and complex adaptive theories to examine resource utilization within school districts. This first sequence has two analytical goals and steps: (1) to verify the significant correlation, but with patterns of variability for district performance measured by …

Fil News, Fall 2007, Illinois State University, Department Of Finance, Insurance, And Law

FIL News

Newsletter of the Department of Finance, Insurance, and Law

Minimum Profitability Ruling A Boon Or Bane? Some Lessons From China, Knowledge@Smu

Knowledge@SMU

China’s Securities Regulatory Commission (CSRC) stands out in its approach to tighten restrictions for listed companies wanting to initiate rights issues or seasoned equity offerings (SEOs). The country’s experience, relevant to other emerging markets, is the subject of a research paper published recently in the International Journal of Accounting, co-authored by Kevin C.W. Chen, accounting professor at the Hong Kong University of Science and Technology and Singapore Management University accounting professor Jiwei Wang. --------------------------------------------------------------------------------

Interest Rates In The Sub-Prime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross

Finance Faculty Research and Publications

No abstract provided.

An Empirical Examination Of Jump Risk In U.S. Equity And Bond Markets, Lee M. Durham, Geoffrey C. Friesen

Department of Finance: Faculty Publications

ABSTRACT
Actuaries manage risk, and asset price volatility is the most fundamental parameter in models of risk management. This study utilizes recent advances in econometric theory to decompose total asset price volatility into a smooth, continuous component and a discrete (jump) component. We analyze a data set that consists of high-frequency tick-by-tick data for all stocks in the S&P 100 Index, as well as similar futures contract data on three U.S. equity indexes and three U.S. Treasury securities during the period 1999–2005. We find that discrete jumps contribute between 15% and 25% of total asset risk for all equity index …

The Microcredit Impact: The Evaluation And Effects Of Microloans On Caboclos Communities Of The Tapajós River, Robert Chew

Independent Study Project (ISP) Collection

In 2002, Projeto Saúde e Alegria, an NGO dedicated to improving the health, education and socio-economic situation of rural caboclos communities of the greater Santarém region of Pará, began a microcredit program to facilitate the creation of alternative sources of income and poverty reduction within the communities. Three years later in 2005, the program was cancelled indefinitely due to low repayment rates. The following study attempts to identify and analyze what problems occurred within the microcredit program that led to the project’s eventual failure. Additionally, speculation into whether the program helped certain communities reduce poverty will also be investigated to …

European Venture Capital Market: Scaling Beyond Current Boundaries, Gerard George, Eva Nathusius

Research Collection Lee Kong Chian School Of Business

This study systematically documents the perceptions of LPs, venture capitalists and entrepreneurs and their views of the trends and challenges facing the European venture capital market. The interest from LPs in European venture capital funds was found to be neutral to marginally negative because of historical returns. However, buoyancy in the supply of high quality opportunities at reasonable valuations has the potential to improve this outlook. The findings suggest that European venture capitalists still face structural barriers in the form of heterogeneous consumer preferences, improving but weak exit and fundraising environments, and the scarcity of LPs of significant size. The …

2007-2008 Operating Budget: Southern University Law Center, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 2007-2008 Fiscal Year Operating Budget of the Southern University Law Center. Final Printing.

2007-2008 Operating Budget (Final Printing): Southern University And A & M College, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 2007-2008 Operating Budget of the Southern University and A & M College Campus. Final Printing.

2007-2008 Operating Budget (Final Printing): Southern University At Shreveport, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The Southern University at Shreveport Operating Budget for the fiscal year 2007-2008, and Actuals for 2006-2007. Include the Intercollegiate Athletic Budget.

2007-2008 Operating Budget Final Printing, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The Southern University System, Southern System Office Operating Budget 2007-2008 Final Printing.

Some Perspectives On The Actuarial Adequacy Of The Pension Benefit Guarantee Corporation, Andrew Frank Thompson

UNIversitas: Journal of Research, Scholarship, and Creative Activity

This paper analyzes the actuarial adequacy of PBGC in providing insurance coverage to employees participating in single employer, defined benefit pension plans. The first part of this investigation examines the micro and macro economic factors that impact the financial stability and actuarial viability of PBGC. A second section discusses externalities that may contribute to suboptimal premiums and adverse selection for PBGC. A linear control model is introduced to analyze the most effective way PBGC might use its $100 million credit line with the Department of the Treasury. In addition, a model based on the economic theory of clubs develops relationships …

Mission Drift Understand It, Avoid It, James Copestake

Journal of Microfinance / ESR Review

No abstract provided.

Center News, Esr Review

Journal of Microfinance / ESR Review

No abstract provided.