An interval portfolio selection problem based on regret function
Silvio Giove, Stefania Funari, Carla Nardelli. European Journal of Operational
Research. Amsterdam: Apr 1, 2006.Vol.170, Iss. 1; pg. 253
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Subjects:
Portfolio management, Mathematical programming, Decision making, Stock
prices, Uncertainty, Operations research, Studies
Classification Codes
3400 Investment analysis & personal finance, 2600 Management science/operations
research, 9130 Experimental/theoretical
Author(s):
Silvio Giove, Stefania Funari, Carla Nardelli
Document types:
Feature
Publication title:
European Journal of Operational Research. Amsterdam: Apr 1, 2006. Vol. 170, Iss. 1; pg. 253
Source type:
Periodical
ISSN/ISBN:
03772217
ProQuest document ID: 908068851
Document URL:
http://proquest.umi.com/pqdweb?did=908068851&sid=1&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
Different approaches, besides the traditional Markowitz's model, have been proposed in the
literature to analyze portfolio selection problems. Among them we can cite the possibilistic portfolio
models, which treat the expected return rates of the securities as fuzzy or possibilistic variables,
instead of random variables. Such models, which are based on possibilistic mathematical
programming, describe the uncertainty of the real world as ambiguity and vagueness, rather than
stochasticity. Actually, another way to treat the uncertainty in decision making problems consists of
assuming that the data are not well defined, but are able to vary in given intervals. Interval analysis is
thus appropriate to handle the imprecise input data. In this paper we consider a portfolio selection
problem in which the prices of the securities are treated as interval variables. In order to deal with
such an interval portfolio problem, we propose the adoption of a minimax regret approach based on a
regret function. [PUBLICATION ABSTRACT]
Portfolio selection using hierarchical Bayesian analysis and MCMC methods
Alex Greyserman, Douglas H Jones, William E Strawderman. Journal of Banking &
Finance. Amsterdam: Feb 2006.Vol.30, Iss. 2; pg. 669
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Subjects:
Studies, Portfolio investments, Stochastic models, Forecasting techniques, Hierarchies, Bayesian
analysis
Classification Codes
9130 Experimental/theoretical, 3400 Investment analysis & personal finance
Author(s):
Alex Greyserman, Douglas H Jones, William E Strawderman
Document types:
Feature
Publication title:
Journal of Banking & Finance. Amsterdam: Feb 2006. Vol. 30, Iss. 2; pg. 669
Source type:
Periodical
ISSN/ISBN:
03784266
ProQuest document ID: 991577391
Document URL:
http://proquest.umi.com/pqdweb?did=991577391&sid=1&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
This paper contributes to portfolio selection methodology using a Bayesian forecast of the distribution
of returns by stochastic approximation. New hierarchical priors on the mean vector and covariance
matrix of returns are derived and implemented. Comparison's between this approach and other
Bayesian methods are studied with simulations on 25 years of historical data on global stock indices.
It is demonstrated that a fully hierarchical Bayes procedure produces promising results warranting
more study. We carried out a numerical optimization procedure to maximize expected utility using the
MCMC (Monte Carlo Markov Chain) samples from the posterior predictive distribution. This model
resulted in an extra 1.5 percentage points per year in additional portfolio performance (on top of the
Hierarchical Bayes model to estimate mu and sigma and use the Markowitz model), which is quite a
significant empirical result. This approach applies to a large class of utility functions and models for
market returns. [PUBLICATION ABSTRACT]
The Analytics of Uncertainty and Information-An Expository Survey
Hirshleifer, J., Riley, John G.. Journal of Economic Literature. Nashville: Dec
1979.Vol.17, Iss. 4; pg. 1375
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Subjects:
Utility, Uncertainty, Risk, Research, Market
equilibrium , Inventions, Insurance, Information, Functions, Economic theory, Decision making
Classification Codes
8200 Insurance industry, 5400 Research & development, 1100 Economics
Author(s):
Hirshleifer, J., Riley, John G.
Publication title:
Journal of Economic Literature. Nashville: Dec 1979. Vol. 17, Iss. 4; pg. 1375
Source type:
Periodical
ISSN/ISBN:
00220515
ProQuest document ID: 1162062
Document URL:
http://proquest.umi.com/pqdweb?did=1162062&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD
Abstract (Document Summary)
Despite the long-standing recognition by economic thinkers that human endeavors are constrained
by man's limited and uncertain knowledge of the world, until recently there was no rigorous
foundation for the analysis of individual decision making and market equilibrium under
uncertainty.The central underlying ideas related to information and uncertainty are presented in a
nontechnical fashion. The theoretical developments that have brought about this intellectual
revolution have 2 main foundations: 1. the theory of preference for uncertain contingencies and in
particular the ''expected-utility theorem'' of John von Neumann and Oskar Morgenstern, and 2. the
formulation of the ultimate goods or objects of choice in an uncertain universe as contingent
consumption claims: entitlements to particular commodities or commodity baskets valid only under
specified ''states of the world.'' This modern analytical literature on uncertainty and information
divides into 2 rather distinct branches. The first branch deals with market uncertainty, and the second
deals with technological uncertainty or event uncertainty. This examination is limited to the relatively
more tractable topic of event uncertainty.
Competition, cooperation, and conflict in economics and biology
Hirshleifer, J.. The American Economic Review. Nashville: May 1978.Vol.68, Iss. 2; pg. 238
» More Like This - Find similar documents
Subjects:
Social sciences, Political theory, Equilibrium , Economy, Economic
theory, Cooperation, Competition, Behavior
Classification Codes
1100 Economics
Author(s):
Hirshleifer, J.
Publication title:
The American Economic Review. Nashville: May 1978. Vol. 68, Iss. 2; pg. 238
Source type:
Periodical
ISSN/ISBN:
00028282
ProQuest document ID: 936051
Document URL:
http://proquest.umi.com/pqdweb?did=936051&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD
Abstract (Document Summary)
Sociobiology encompasses the various social sciences, including economics, devoted to the study of
man. The subject matter of conventional social science is in essence the field of political economy,
and biology is the natural economy. The natural economy and the political economy are subdivisions
of the universal general economy. Political economy institutions such as law and government deter
the internal fighting that would be disfunctional for society as a whole. But the institutions of the
political economy do not displace the underlying realities of the natural economy. Fundamental
concepts such as scarcity, equilibrium, competition, and specialization play similar roles in economic
and biological systems. The Coase Theorem guarantees Pareto-efficient solutions under ideal
political economy institutions. Cooperation takes the form of exchange for mutual gain in the political
economy.
THE THEORY OF SPECULATION UNDER ALTERNATIVE REGIMES OF MARKETS
HIRSHLEIFER, J.. The Journal of Finance. Cambridge: SEPT. 1977.Vol.32, Iss. 4; pg. 975
» More Like This - Find similar documents
Subjects:
Speculation, Risk, Markets, Factors
Classification Codes
3400 Investment analysis
Author(s):
HIRSHLEIFER, J.
Publication title:
The Journal of Finance. Cambridge: SEPT. 1977. Vol. 32, Iss. 4; pg. 975
Source type:
Periodical
ISSN/ISBN:
00221082
ProQuest document ID: 1164968
Document URL:
http://proquest.umi.com/pqdweb?did=1164968&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD
Abstract (Document Summary)
IT IS THE INTERACTION BETWEEN PRICE RISK AND QUANTITY RISK THAT GOVERNS THE
OVERALL HAZARD ACCEPTED OR AVOIDED BY INDIVIDUALS. SPECULATION AND HEDGING
CONSIST OF TRADING IN THE PRIOR AND POSTERIOR MARKETS IN SUCH A WAY AS TO
ACHIEVE COMPOUND CONSUMPTIVE GAMBLES 'D' THAT DIFFER FROM THE SIMPLE
CONSUMPTIVE GAMBLES 'C' THAT WOULD HAVE BEEN ADOPTED IN A NON-INFORMATIVE
SITUATION. AMONG THE FACTORS POSSIBLY INVOLVED IN THE SPECULATIVE DECISION
ARE - 1. THE INDIVIDUAL'S BELIEF ABOUT THE EMERGENCE AND CONTENT OF NEW
INFORMATION, 2. HIS UTILITY FUNCTION, 3. THE SCALE AND COMPOSITION OF HIS
ENDOWNMENT, AND 4. THE EXTENT OF THE MARKETS AVAILABLE. SPECULATIVE TRADING
IS UNDERTAKEN ONLY BY INDIVIDUALS WHOSE OPINIONS, AS TO THE LIKELIHOOD OF
FUTURE STATES OF THE WORLD, DIVERGE FROM REPRESENTATIVE BELIEFS IN THE
MARKET. TABLES. EQUATIONS. REFERENCES.
Risk-Premium Curve vs. Capital Market Line: Differences Explained
Long, Susan W.. Financial Management. Tampa: Spring 1978.Vol.7, Iss. 1; pg. 60
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Subjects:
Security portfolios, Risk premiums, Risk, Return on investment, Regression
analysis, Models, Capital markets
Classification Codes
3400 Investment analysis, 3100 Debt Management
Author(s):
Long, Susan W.
Publication title:
Financial Management. Tampa: Spring 1978. Vol. 7, Iss. 1; pg. 60
Source type:
Periodical
ISSN/ISBN:
00463892
ProQuest document ID: 1089032
Document URL:
http://proquest.umi.com/pqdweb?did=1089032&sid=7&Fmt=2&clientId=18913&RQT=309&VName=PQD
Abstract (Document Summary)
Higher returns are required as the risk of an investment increases. This positive relationship is called
the capital market line (CML). The minimal return for riskless assets is called the risk-free rate. By
regressing return on risk and risk on return and averaging the results, W. F. Sharpe demonstrated
that for the period 1954-1963, "investors required and received 3.8% return on riskless assets and an
additional .58% return per annum for each additional 1% of risk. By regressing risk on return,
Soldofsky and Miller (S-M) showed there are no risk-free assets. They found that assets with no
return had risk levels of 5.6% standard deviation of annual return. To determine what caused the
conflicting results, 400 common stocks were randomly selected from the 1975 COMPUSTAT data
tapes. Portfolio inefficiency, regressing risk on return, and using geometric measures probably
contributed to S-M's positive risk results when Sharpe found it to be negative.
The Regulated Financial Firm
Meyer, Robert A., Jr.. The Quarterly review of economics and business.. Urbana: Winter
1980.Vol.20, Iss. 4; pg. 44
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Subjects:
Uncertainty, Statistical analysis, Risk aversion, Reserve requirements, Regulation, Interest
rates, Financial institutions, Ceilings
Classification Codes
8100 Financial services industry, 4300 Law
Author(s):
Meyer, Robert A., Jr.
Publication title:
The Quarterly review of economics and business.. Urbana: Winter 1980. Vol. 20, Iss. 4; pg. 44
Source type:
Periodical
ISSN/ISBN:
00335797
ProQuest document ID: 1377411
Document URL:
http://proquest.umi.com/pqdweb?did=1377411&sid=7&Fmt=2&clientId=18913&RQT=309&VName=PQD
Abstract (Document Summary)
A model is developed of a regulated financial firm under uncertainty which explicitly incorporates risk
aversion. The model is based on the valuation relationship for uncertain income streams developed
by W. F. Sharpe and John Lintner which has provided the popular capital asset pricing model widely
used in finance. Once a basic solution is characterized, it is used to explore the implicit cost of
reserve requirements and, in particular, the effect of differential regulatory requirements on a
commercial bank's competitive position. Additional analyses focus on selected regulations such as
interest rate ceilings, portfolio restrictions, and the question of deposit insurance versus equity
investment.
Divergence of Opinion and Risk
Bart, John, Masse, Isidore J.. Journal of Financial and Quantitative Analysis. Seattle: Mar
1981.Vol.16, Iss. 1; pg. 23, 12 pgs
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Subjects:
Uncertainty, Stocks, Stock prices, Securities analysis, Securities, Risk, Return on
investment, Opinions, Expectations, Differences, Appreciation
Classification Codes
3400 Investment analysis
Author(s):
Bart, John, Masse, Isidore J.
Publication title:
Journal of Financial and Quantitative Analysis. Seattle: Mar 1981. Vol. 16, Iss. 1; pg. 23, 12 pgs
Source type:
Periodical
ISSN/ISBN:
00221090
ProQuest document ID: 1166313
Document URL:
http://proquest.umi.com/pqdweb?did=1166313&sid=11&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
Edward Miller, expanding on the work of Williams, Smith, and Lintner, has proposed a direct
relationship between a stock's ''risk'' and its ''divergence of opinion.'' Under conditions of uncertainty,
potential investors in a stock reach different assessments of expected return. This difference in
expectations is characterized as the stock's divergence of opinion. Miller argues that at a point in
time a stock's price does not mirror the expectations of all potential investors, but rather the
expectations of only the most optimistic minority who are trading the issue. As long as this minority
can absorb the entire supply of stock, an increase (decrease) in divergence of opinion-leaving the
average expectation unchanged-will raise (lower) the market clearing
The legacy of modern portfolio theory
Frank J Fabozzi, Francis Gupta, Harry M Markowitz. Journal of Investing. New York: Fall
2002.Vol.11, Iss. 3; pg. 7
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Subjects:
Portfolio management, Theory, History, Studies, Portfolio performance, Rates of return
Classification Codes
9190 United States, 9130 Experimental/theoretical, 3400 Investment analysis & personal finance
Locations:
United States, US
Author(s):
Frank J Fabozzi
Document types:
Feature
Publication title:
Journal of Investing. New York: Fall 2002. Vol. 11, Iss. 3; pg. 7
Source type:
Periodical
ISSN/ISBN:
10680896
, Francis Gupta, Harry M Markowitz
ProQuest document ID: 187618251
Document URL:
http://proquest.umi.com/pqdweb?did=187618251&sid=16&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
Fifty years have passed since the publication of Harry Markowitz's article on portfolio selection,
setting forth the ground-breaking concepts that have come to form the foundation of what is now
popularly referred to as Modern Portfolio Theory. This article briefly explains the theory underlying
MPT and uses illustrations to highlight the application of MPT to the current practice of asset
management and portfolio construction. It also surveys most of the relevant research that has
directly or indirectly been either an outcome of MPT or has contributed to the implementation of MPT.
The theory and practice of corporate finance: Evidence from the field
John R Graham, Campbell R Harvey. Journal of Financial Economics. Amsterdam: May/Jun
2001.Vol.60, Iss. 2,3; pg. 187
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Subjects:
Studies, Capital structure, Capital costs, CAPM, Capital budgeting, Risk assessment
Classification Codes
9190 United States, 9130 Experimental/theoretical, 3100 Capital & debt management
Locations:
United States, US
Author(s):
John R Graham
Document types:
Feature
, Campbell R Harvey
Publication title:
Journal of Financial Economics. Amsterdam: May/Jun 2001. Vol. 60, Iss. 2,3; pg. 187
Source type:
Periodical
ISSN/ISBN:
0304405X
ProQuest document ID: 77223127
Document URL:
http://proquest.umi.com/pqdweb?did=77223127&sid=18&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
This study surveys 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large
firms rely heavily on present value techniques and the capital asset pricing model, while small firms
are relatively likely to use the payback criterion. A surprising number of firms use firm risk rather than
project risk in evaluating new investments. This study finds some support for the pecking-order and
trade-off capital structure hypotheses but little evidence that executives are concerned about asset
substitution, asymmetric information, transaction costs, free cash flows, or personal taxes.
Management versus equity: A principal-agent problem in a continuous-time stochastic
control model
by Clark, Steven Paul, Ph.D., Clemson University, 2003, 54 pages; AAT 3093204
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Advisor:
Maloney, Michael T., Tamura, Robert
School:
Clemson University
School Location:
United States -- South Carolina
Index terms(keywords): Management, Equity, Principal agent, Continuous-time, Stochastic control
Source:
DAI-A 64/06, p. 2194, Dec 2003
Source type:
DISSERTATION
Subjects:
Finance, Cash management, Stock offerings, Stochastic models, Studies
Publication Number:
AAT 3093204
Document URL:
http://proquest.umi.com/pqdweb?did=765982801&sid=18&Fmt=2&clientId=18913&RQT=309&VName=P
ProQuest document ID: 765982801
Abstract (Document Summary)
In this dissertation, we formulate a model prescribing optimal policy for cash disbursements and
seasoned equity offerings taking into account the principle-agent problem inherent in these
decisions. Specifically, we suppose that stockholders have perfect information about the level of
current free cash flows. In order to discipline managers, stockholders would like to have excess free
cash flows disbursed either as cash dividends or through stock repurchases. Managers resist
stockholders in this regard since they prefer to have excess free cash flows in order to pursue
personal interests and reduce the probability that the company will experience financial distress in
the future. However, as a consequence of withholding cash disbursements, managers incur disutility
due to the possibility that their control of the firm could be threatened by the market for corporate
control. Due to their inability to fully eliminate firm-specific risk managers are generally more risk
averse than stockholders. Managers may issue seasoned equity in an attempt to prevent free cash
flow from falling below a given level. However, stockholders do not like this practice since it
transfers a portion of their ownership rights to new shareholders. We model this situation as a
stochastic impulse control problem, and succeed in finding an analytical solution. This is the first
research that applies the theory of stochastic impulse control to the determination of optimal policy
for cash disbursement and seasoned equity offerings.
TAXES AND THE PRICING OF OPTIONS
SCHOLES, MYRON. The Journal of Finance. Cambridge: MAY 1976.Vol.31, Iss. 2; pg. 319
» More Like This - Find similar documents
Subjects:
Writing, Taxation, Pricing, Options trading
Classification Codes
4200 Taxation, 3400 Investment analysis
Author(s):
SCHOLES, MYRON
Publication title:
The Journal of Finance. Cambridge: MAY 1976. Vol. 31, Iss. 2; pg. 319
Source type:
Periodical
ISSN/ISBN:
00221082
ProQuest document ID: 1164818
Document URL:
http://proquest.umi.com/pqdweb?did=1164818&sid=21&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
THE TAX ADVANTAGES OF WRITING FOR INVESTORS IN HIGH TAX BRACKETS HAVE
SEVERAL EFFECTS ON OPTION PRICING AND THE TRADING OF OPTIONS. EMPIRICAL
EVALUATIONS OF THE PRICING AND TRADING IN LISTED OPTIONS WILL HAVE TO INCLUDE
THESE TAX EFFECTS IN THE EVALUATION METHODOLOGY. IT IS LIKELY THAT OPTIONS
THAT ARE IN THE MONEY WILL BE SELLING FOR CLOSE TO INTRINSIC VALUE, AND THEIR
TAX BENEFITS WILL BE SHARED BY THE WRITER AND THE BUYER. WHERE IT WAS
POSSIBLE TO REDUCE TAXES AT LITTLE RISK, SUCH AS IN THE TAX-EXEMPT BOND CASE,
THE GOVERNMENT HAD TO IMPOSE RESTRICTIONS THAT WOULD LIMIT THE ADVANTAGES
OF THE TAX-AVOIDANCE PLAN. IT HAS BEEN SHOWN THAT CORPORATE LIABILITIES ARE
OPTIONS. THE USE OF THE OPTION PRICING MODEL TO PRICE DEBT AND EQUITY CAN
NOW BE EXPANDED TO INCLUDE TAX EFFECTS ON THE PRICING OF RISKY DEBT CLAIMS.
REFERENCES.
Pricing options on leveraged equity with default risk and exponentially increasing, finite
maturity debt
Michael Hanke. Journal of Economic Dynamics & Control. Amsterdam: Mar
2005.Vol.29, Iss. 3; pg. 389
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Subjects:
Studies, Credit risk, Economic models, Valuation, Stock prices, Stock options
Classification Codes
9130 Experimental/theoretical, 3400 Investment analysis & personal finance, 1130 Economic theory
Author(s):
Michael Hanke
Document types:
Feature
Publication title:
Journal of Economic Dynamics & Control. Amsterdam: Mar 2005. Vol. 29, Iss. 3; pg. 389
Source type:
Periodical
ISSN/ISBN:
01651889
ProQuest document ID: 800858421
Document URL:
http://proquest.umi.com/pqdweb?did=800858421&sid=21&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
We extend a modular pricing framework proposed by Ericsson and Reneby (Appl. Math. Finance 5
(1998) 143; Stock options as barrier contingent claims, Working Paper, Stockholm School of
Economics; The valuation of corporate liabilities: theory and tests, Working Paper, Stockholm
School of Economics) to derive a valuation formula for calls on leveraged equity, similar to Toft and
Prucyk (J. Finance LII (1997) 1151). In contrast to their derivation via partial differential equations, we
choose a more elegant probabilistic approach using change of numeraire techniques. Considerably
extending previous firm-value-based option pricing models, our framework features exponentially
increasing, finite maturity coupon debt, along with taxes and deviations from absolute priority. It
enables us to study effects of debt maturity and debt growth on prices of equity options. Numerical
results provide new insights into possible causes for pricing biases of the Black-Scholes formula.
[PUBLICATION ABSTRACT]
The instantaneous capital market line
Lars Tyge Nielsen, Maria Vassalou. Economic Theory. Heidelberg: Aug
2006.Vol.28, Iss. 3; pg. 651
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Subjects:
Studies, Economic theory, CAPM, Investment policy
Classification Codes
9130 Experimental/theoretical, 1130 Economic theory, 3400 Investment analysis & personal finance
Author(s):
Lars Tyge Nielsen, Maria Vassalou
Document types:
Feature
Publication title:
Economic Theory. Heidelberg: Aug 2006. Vol. 28, Iss. 3; pg. 651
Source type:
Periodical
ISSN/ISBN:
09382259
ProQuest document ID: 875045721
Text Word Count
4974
DOI:
10.1007/s00199-005-0638-1
Document URL:
http://proquest.umi.com/pqdweb?did=875045721&sid=22&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
We show that if the intercept and slope of the instantaneous capital market line are deterministic,
then investors will not hold any hedge portfolios in the sense of Merton [9, 11]. They will choose
portfolios that plot on the capital market line, and they will slide up and down the capital market line
over time as their wealth and risk tolerance change. This result allows us to aggregate over
investors and derive a single factor CAPM where the first and second moments of security returns
may change stochastically over time and markets are potentially incomplete. [PUBLICATION
ABSTRACT]
Option Pricing: A Simplified Approach
Cox, John C., Ross, Stephen A., Rubinstein, Mark. Journal of Financial Economics. Amsterdam:
Sep 1979.Vol.7, Iss. 3; pg. 229
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Subjects:
Valuation, Stock prices, Pricing, Options, Models, Mathematical models, Arbitrage
Classification Codes
3400 Investment analysis, 1100 Economics
Author(s):
Cox, John C., Ross, Stephen A., Rubinstein, Mark
Publication title:
Journal of Financial Economics. Amsterdam: Sep 1979. Vol. 7, Iss. 3; pg. 229
Source type:
Periodical
ISSN/ISBN:
0304405X
ProQuest document ID: 1164548
Document URL:
http://proquest.umi.com/pqdweb?did=1164548&sid=23&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
In 1973, Fischer Black and Myron Scholes presented the first completely satisfactory equilibrium
option pricing model. Unfortunately, the mathematical tools employed in the Black-Scholes model
are quite advanced and have tended to obscure the underlying economies.The fundamental
economic principles of option pricing by arbitrage methods are particularly clear in the simple
discrete-time model presented. Its development requires only elementary mathematics, yet it
contains as a special limiting case the Black-Scholes model. The basic model readily lends itself to
generalization in many ways. Moreover, by its very construction, it gives rise to a simple and efficient
numerical procedure for valuing options for which premature exercise may be optimal. It is clear that
whenever stock price movements conform to a discrete binomial process or to a limiting form of such
a process, options can be priced solely on the basis of arbitrage considerations.
The irrelevance of the MM dividend irrelevance theorem
Harry DeAngelo, Linda DeAngelo. Journal of Financial Economics. Amsterdam: Feb
2006.Vol.79, Iss. 2; pg. 293
» More Like This - Find similar documents
Subjects:
Economic models, Theory, Dividends, Studies, Investment policy
Classification Codes
1130 Economic theory, 3400 Investment analysis & personal finance, 9130 Experimental/theoretical
Author(s):
Harry DeAngelo, Linda DeAngelo
Document types:
Feature
Publication title:
Journal of Financial Economics. Amsterdam: Feb 2006. Vol. 79, Iss. 2; pg. 293
Source type:
Periodical
ISSN/ISBN:
0304405X
ProQuest document ID: 974198791
Document URL:
http://proquest.umi.com/pqdweb?did=974198791&sid=24&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
Contrary to Miller and Modigliani [1961. Dividend policy, growth, and the valuation of shares.
Journal of Business 34, 411-433], payout policy is not irrelevant and investment policy is not the
sole determinant of value, even in frictionless markets. MM ask "Do companies with generous
distribution policies consistently sell at a premium above those with niggardly payouts?" But MM's
analysis does not address this question because the joint effect of their assumptions is to mandate
100% free cash flow payout in every period, thereby rendering "niggardly payouts" infeasible and
forcing distributions to a global optimum. Irrelevance obtains, but in an economically vacuous sense
because the firm's opportunity set is artificially constrained to payout policies that fully distribute free
cash flow. When MM's assumptions are relaxed to allow retention, payout policy matters in exactly
the same sense that investment policy does. Moreover (i) the standard Fisherian model is
empirically refutable, predicting that firms will make large payouts in present value terms, (ii) only
when payout policy is optimized will the present value of distributions equal the PV of project cash
flows, (iii) the NPV rule for investments is not sufficient to ensure value maximization, rather an
analogous rule for payout policy is also necessary, and (iv) Black's [1976. The dividend puzzle.
Journal of Portfolio Management 2, 5-8] "dividend puzzle" is a non-puzzle because it is rooted in the
mistaken idea that MM's irrelevance theorem applies to payout/retention decisions, which it does not.
[PUBLICATION ABSTRACT]
DIVIDEND POLICY, GROWTH, AND THE VALUATION OF SHARES
MERTON H MILLER, FRANCO MODIGLIANI. The Journal of Business (pre-1986). Chicago: Oct
1961.Vol.34, Iss. 4; pg. 411, 23 pgs
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Author(s):
MERTON H MILLER, FRANCO MODIGLIANI
Document types:
article
Language:
Language:
en
Publication title:
The Journal of Business (pre-1986). Chicago: Oct 1961. Vol. 34, Iss. 4; pg. 411, 23 pgs
Source type:
Periodical
ISSN/ISBN:
00219398
ProQuest document ID: 386549431
Text Word Count
11831
Document URL:
http://proquest.umi.com/pqdweb?did=386549431&sid=24&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
THE effect of a firm's dividend policy on the current price of its shares is a
matter of considerable importance, not only to the corporate officials who must set the policy, but to
investors planning portfolios and to economists seeking to understand and appraise the functioning
of the capital markets.
A general approach to integrated risk management with skewed, fat-tailed risks
Joshua V Rosenberg, Til Schuermann. Journal of Financial Economics. Amsterdam: Mar
2006.Vol.79, Iss. 3; pg. 569
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Subjects:
Studies, Risk management, Credit risk, Methods, Comparative analysis, Financial institutions
Classification Codes
9130 Experimental/theoretical, 8100 Financial services industry, 3300 Risk management
Author(s):
Joshua V Rosenberg, Til Schuermann
Document types:
Feature
Publication title:
Journal of Financial Economics. Amsterdam: Mar 2006. Vol. 79, Iss. 3; pg. 569
Source type:
Periodical
ISSN/ISBN:
0304405X
ProQuest document ID: 991581231
Document URL:
http://proquest.umi.com/pqdweb?did=991581231&sid=3&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
Integrated risk management for financial institutions requires an approach for aggregating risk types
(market, credit, and operational) whose distributional shapes vary considerably. We construct the
joint risk distribution for a typical large, internationally active bank using the method of copulas. This
technique allows us to incorporate realistic marginal distributions that capture essential empirical
features of these risks such as skewness and fat-tails while allowing for a rich dependence structure.
We explore the impact of business mix and inter-risk correlations on total risk. We then compare the
copula-based method with several conventional approaches to computing risk. [PUBLICATION
ABSTRACT]
Should bank runs be prevented?
Margarita Samartin. Journal of Banking & Finance. Amsterdam: May 2003.Vol.27, Iss. 5; pg. 977
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Subjects:
Studies, Liquidity, Risk, Banking industry, Withdrawals
Classification Codes
9175 Western Europe, 9130 Experimental/theoretical, 8100 Financial services industry
Locations:
Europe
Author(s):
Margarita Samartin
Document types:
Feature
Publication title:
Journal of Banking & Finance. Amsterdam: May 2003. Vol. 27, Iss. 5; pg. 977
Source type:
Periodical
ISSN/ISBN:
03784266
ProQuest document ID: 352407741
Document URL:
http://proquest.umi.com/pqdweb?did=352407741&sid=4&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
This paper extends Diamond and Dybvig's model [J. Political Economy 91 (1983) 401] to a
framework in which bank assets are risky, there is aggregate uncertainty about the demand for
liquidity in the population and some individuals receive a signal about bank asset quality. Others
must then try to deduce from observed withdrawals whether an unfavorable signal was received by
this group or whether liquidity needs happen to be high. In this environment, both informationinduced and pure panic runs will occur. However, banks can prevent them by designing the deposit
contract appropriately. It is shown that in some cases it is optimal for the bank to prevent runs but
there are situations where the bank run allocation may be welfare superior. [PUBLICATION
ABSTRACT]
Equilibrium bank runs
James Peck, Karl Shell. The Journal of Political Economy. Chicago: Feb
2003.Vol.111, Iss. 1; pg. 103, 21 pgs
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Subjects:
Studies, Economic models, Game theory, Equilibrium, Banking
Classification Codes
9130 Experimental/theoretical, 1130 Economic theory
Author(s):
James Peck
Document types:
Feature
Publication title:
The Journal of Political Economy. Chicago: Feb 2003. Vol. 111, Iss. 1; pg. 103, 21 pgs
Source type:
Periodical
ISSN/ISBN:
00223808
, Karl Shell
ProQuest document ID: 293681431
Text Word Count
1673
Document URL:
http://proquest.umi.com/pqdweb?did=293681431&sid=4&Fmt=2&clientId=18913&RQT=309&VName=PQ
Abstract (Document Summary)
A banking system is analyzed in which the class of feasible deposit contracts, or mechanisms, is
broad. The mechanisms must satisfy a sequential service constraint, but partial or full suspension of
convertibility is allowed. Consumers must be willing to deposit, ex ante. The paper shows, by
examples, that under the so-called optimal contract, the postdeposit game can have a run
equilibrium. Given a propensity to run, triggered by sunspots, the optimal contract for the full
predeposit game can be consistent with runs that occur with positive probability. Thus the DiamondDybvig framework can explain bank runs as emerging in equilibrium under the optimal deposit
contract.
Comment on: Credit risk transfer and contagion
Tano Santos. Journal of Monetary Economics. Amsterdam: Jan 2006.Vol.53, Iss. 1; pg. 113
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Subjects:
Models, Insurance industry, Banking industry, Credit risk
Classification Codes
8200 Insurance industry, 8100 Financial services industry, 9190 United States
Locations:
United States, US
Author(s):
Tano Santos
Document types:
Commentary
Publication title:
Journal of Monetary Economics. Amsterdam: Jan 2006. Vol. 53, Iss. 1; pg. 113
Source type:
Periodical
ISSN/ISBN:
03043932
ProQuest document ID: 978731851
Document URL:
http://proquest.umi.com/pqdweb?did=978731851&sid=10&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
A salient feature of the model presented by the authors is the fact that both the banking and the
insurance sectors are explicitly considered. Insurance companies have had a more active role in
areas where their presence was not traditionally felt and it is important to understand what this new
role entails for the financial system as a whole. Here, the emphasis of the authors is on the increased
role of insurance companies as sellers of credit protection to the banking sector.
Credit risk modeling with affine processes
Darrell Duffie. Journal of Banking & Finance. Amsterdam: Nov 2005.Vol.29, Iss. 11; pg. 2751
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Subjects:
Credit risk, Default, Correlation analysis, Studies, Economic models, Markov analysis
Classification Codes
9130 Experimental/theoretical, 3400 Investment analysis & personal finance, 1130 Economic theory
Author(s):
Darrell Duffie
Document types:
Feature
Publication title:
Journal of Banking & Finance. Amsterdam: Nov 2005. Vol. 29, Iss. 11; pg. 2751
Source type:
Periodical
ISSN/ISBN:
03784266
ProQuest document ID: 898253911
Document URL:
http://proquest.umi.com/pqdweb?did=898253911&sid=10&Fmt=2&clientId=18913&RQT=309&VName=P
Abstract (Document Summary)
This article combines an orientation to credit risk modeling with an introduction to affine Markov
processes, which are particularly useful for financial modeling. We emphasize corporate credit risk
and the pricing of credit derivatives. Applications of affine processes that are mentioned include
survival analysis, dynamic term-structure models, and option pricing with stochastic volatility and
jumps. The default-risk applications include default correlation, particularly in first-to-default settings.
The reader is assumed to have some background in financial modeling and stochastic calculus.
[PUBLICATION ABSTRACT]