Using a fast numerical technique, we investigate a large database of investor suboptimal nonexercise of short maturity American call options on dividend-paying stocks listed on the Dow Jones. The correct modelling of the discrete dividend is essential for a correct calculation of the early exercise boundary as confirmed by theoretical insights. Pricing with stochastic volatility and jumps instead of the Black-Scholes-Merton benchmark cuts by a quarter the amount lost by investors through suboptimal exercise. The remaining three quarters are largely unexplained by transaction fees and may be interpreted as an opportunity cost for the investors to monitor optimal exercise.
The search for PD-MCI biomarkers has employed an array of neuroimaging techniques, but still yields divergent findings. This may be due in part to MCI's broad definition, encompassing heterogeneous cognitive domains, only some of which are affected in Parkinson's disease. Most domains falling under the MCI umbrella include fronto-dependent executive functions, whereas others, notably learning, rely on the basal ganglia. Given the deterioration of the nigrostriatal dopaminergic system in Parkinson's disease, it has been the prime target of PD-MCI investigation. By testing well defined cognitive deficits in Parkinson's disease, distinct functions can be attributed to specific neural systems, overcoming conflicting results on PD-MCI. Apart from dopamine, other systems such as the neurovascular or noradrenergic systems are affected in Parkinson's disease. These factors may be at the basis of specific facets of PD-MCI for which dopaminergic involvement has not been conclusive. Finally, the impact of both dopaminergic and noradrenergic deficiency on motivational states in Parkinson's disease is examined in light of a plausible link between apathy and cognitive deficits.
Contrary to what traditional asset pricing would imply, a strategy that bets against beta, by going long in low beta stocks and short in high beta stocks, tends to outperform the market. We consider a market in which diversity is maintained, i.e. no single stock can dominate the entire market, and we show that beta-arbitrage strategies mechanically out-perform the market portfolio. We provide empirical support to our explanation on equity country indices, equity sectors, individual stocks, and stock portfolios. Finally, we show how to construct optimal beta- arbitrage strategies that maximize the expected return relative to a given benchmark.
We use payroll data in the Austrian, German, and Swiss banking sector to identify incentive pay in the critical banking segments of treasury/capital market management and investment banking for 67 banks. We document an economically significant correlation of incentive pay with both the level and volatility of bank trading income - particularly for the pre-crisis period 2003 – 2007, in which incentive pay was strongest. This result is robust if we instrument the bonus share in the capital market divisions with the strength of incentive pay in unrelated bank divisions like retail banking.Moreover, pre-crisis incentive pay appears too strong for an optimal tradeoff between trading income and risk, which maximizes the net present value of trading income. Further analyses indicate that the bonus moderation during the crisis has removed excessive pre-crisis incentive pay.
This paper theoretically and empirically investigates how debt structure and strategic interaction among shareholders and debt holders in the event of default affect expected stock returns. The model predicts that expected stock returns are higher for firms that face high debt renegotiation difficulties and that have a large fraction of secured or convertible debt. Using a large sample of publicly traded U.S. firms for the period 1985–2012, the paper presents new evidence on the link between debt structure and stock returns that is supportive of the model’s predictions.
We revisit the apparent historical success of technical trading rules on daily prices of the DJIA index from 1897 to 2011, and use the False Discovery Rate as a new approach to data snooping. The advantage of the FDR over existing methods is that it selects more outperforming rules which allows diversifying against model uncertainty. Persistence tests show that, even with the more powerful FDR technique, an investor would never have been able to select ex ante the future best-performing rules. Moreover, even in-sample, the performance is completely o set by the introduction of low transaction costs. Overall, our results seriously call into question the economic value of technical trading rules that has been reported for early periods.
This article analyzes the effect of liquidity risk on the performance of equity hedge fund portfolios. Similarly to Avramov, Kosowski, Naik, and Teo (2007),(2011), we observe that, before accounting for the effect of liquidity risk, hedge fund portfolios that incor- porate predictability in managerial skills generate superior performance. This outperfor-mance disappears or weakens substantially for most emerging markets, event-driven, and long/short hedge fund portfolios once we account for liquidity risk. Moreover, we show that the equity market-neutral and long/short hedge fund portfolios’ “alphas” also entail rents for their service as liquidity providers. These results hold under various robustness tests.
Market liberalization may not result in full market integration if implicit barriers are important. We test this proposition for investable and non-investable segments of twenty- two emerging markets (EMs). We also measure the degree of integration for six major developed markets (DMs) as a meaningful benchmark. We find that while the DMs are close to fully integrated, both EM segments are not effectively integrated with the global economy. We quantify the importance of implicit barriers and show that better institutions, stronger corporate governance, and more transparent markets in EMs would jointly contribute to a higher degree of integration by about 20% to 30%. (JEL G15, F30, G30)
We investigate the evolution from 2000 to 2015 in the proportion of papers published by authors with a European affiliation in the three main international real estate journals. Then, we analyze papers with at least one European author and/or concentrating on Europe published from 2008 to 2015 in the two main European real estate journals by authors’ country of affiliation, by country of study and by theme. Finally, we analyze linkages between country of affiliation and country of study and theme, respectively. Our results show that the proportion of papers published by European authors in the three main international real estate journals has increased during the 2000-2015 period. Our analyses of papers published in the two European real estate journals suggest that U.K.-based researchers are the most prolific. There is also a strong ‘home bias’ in that authors largely focus on the country in which they are based. The interest in housing and valuation increased markedly during the period. Finally, we report linkages between country of affiliation and theme.
