We investigate how share restrictions affect hedge fund performance in crisis and non-crisis periods. Consistent with prior research, we find that in the pre-crisis period more illiquid funds generate a share illiquidity premium compensating investors for limited liquidity. In the crisis period, this share illiquidity premium turns into an illiquidity discount. Hedge funds with more stringent share restrictions invest more heavily in illiquid assets. While share restrictions enable funds to manage illiquid assets effectively in the pre-crisis period, they seem insufficient to ensure effective management of illiquid portfolios in the crisis. In a crisis period, funds holding illiquid portfolios experience lower returns and alphas, also when share restrictions are controlled for. Funds with an asset-liability mismatch perform particularly poorly and experience the strongest outflows. Share restrictions are also a proxy for incentives as investors cannot immediately withdraw their money after poor performance. We show that higher incentive fees can offset the share illiquidity discount in the crisis period.
The new Basel Capital Accord (Basel II) is going to be embedded in the risk management practices at many financial institutions shortly, but the academic and financial world are still discussing about several topics related to the new capital adequacy rules. One of the most important and prominent examples among these topics is the link between loss given default (LGD) and the economic cycle. If this link exists, which is suggested by an extensive literature, the Vasicek model used in the Basel Accord does not take into account systematic correlation between probability of default (PD) and LGD and, to compensate for this deficiency, downturn LGD estimates are required to be used as an input to the model. However, often banks lack an extensive LGD data history covering a full economic cycle, especially for retail assets. In this paper, we propose a simple and realistic solution that can be adopted in order to derive conservative estimates of LGD. Using data covering a set of retail loans (secured and unsecured), we investigate the relation between LGD and the credit cycle over the period from 2002 to 2007. Our results show that when ultimate recoveries instead of recoveries over a few days immediately after the default event are used, the linkage between LGD and the credit cycle is often insignificant (e.g., for two out of three retail asset classes). This implies that the conservatism required by the supervisory authorities should not always be added to LGD estimates used to estimate banks' capital requirements.
Zu den beliebtesten strukturierten Produkten gehören Barrier-Reverse-Convertibles. eben einem attraktiven Coupon bieten sie einen bedingten Kapitalschutz. Doch bei vielen Produkten ist mit den jüngsten Marktturbulenzen der Worst Case eingetreten: Die Lieferungen von Aktien führen meist zu sehr negativen Renditen - trotz Couponzahlung.
We investigate whether the diversification discount occurs partly as an artifact of poor corporate governance. In panel data models, we find that the discount narrows by 16% to 21% when we add governance variables as regression controls. We also estimate Heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance. We find that the diversification discount persists even with these controls for endogeneity. However, in selection models the discount disappears entirely when we introduce governance variables in the second stage, and in dynamic panel GMM models the discount narrows by 37% when we include governance variables.
Zahlreiche Studien belegen, dass die Aktien von Börsenneulingen (Initial Public Offerings, IPO) deutlich schlechter rentieren als jene von etablierten Unternehmen. Dies hängt jedoch allein vom unterschiedlichen Risikoprofil der Unternehmen ab.
Ein häufig vernachlässigter Punkt im Zusammenhang mit Managementoptionen ist
die Unterscheidung zwischen den Kosten einer Option aus der Sicht der gewährenden Unternehmung und dem Wert (Nutzen), den ein Manager der gleichen Option beimisst. Die Kosten-Nutzen-Differenz kann beträchtlich sein.
Was können Investoren von Manager- Transaktionen lernen? Eine Studie von Zürcher Ökonomen (vgl. NZZ vom 18. 9. 06) kam zum Schluss, dass nach Insider-Verkäufen der Kurs des betreffenden Wertpapiers in der Regel zurückgeht. Basler Wissenschafter weisen darauf hin, dass die Ergebnisse von der Dauer des beobachteten Zeitraumes abhängen.
