Does Stock Return Predictability Affect ESO Fair Value?

Executive Stock Options (ESOs) are modified American options that cannot be valued using standard methods. With a few exceptions, the literature has discussed the ESO fair value by assuming unpredictable stock returns which are not supported by the available empirical evidence. In this paper we obtain the fair value of American ESOs when stock returns are predictable and, specifically, driven by the trending Ornstein-Uhlenbeck process of Lo and Wang (1995). We solve the executive’s portfolio allocation problem for a simple buy-and-hold strategy when his wealth can be distributed between a risk-free asset and a market portfolio. This problem is jointly solved with the executive’s optimal exercise policy. We find that executives tend to wait longer the higher the predictability, independently of the composition of executive’s asset menu. We have also analyzed the implications under the FAS123R proposals for the ESO fair value and found that, even for low autocorrelations, there is a meaningful mispricing when unpredictable returns are erroneously assumed.Executive Stock Options; Risk Aversion; Undiversification; Predictability; FAS123R

Essays on the Role of Managerial Type in Financial Reporting.

In this dissertation, I combine two methodologies to venture a first attempt to explore the effect of managerial type on accounting quality. In an experimental study, I show that incentive compensation and social context (i.e., the behavior of other managers in the firm) are associated with how truthfully managers report their performance. I also document the effect of gender and social value orientation (i.e., how much the manager cares about others); both of these variables can be thought of as capturing managerial type. In two large-scale archival studies, I instrument for managerial type by identifying managers accused of illegal compensation practices. I then compare the reporting behavior of these managers with those of other firms, while controlling for differences in economic fundamentals between the firms. Together these studies provide strong evidence that managerial type influences financial statement quality.

Short-term exuberance and long-term stability: A simultaneous optimization of stock return predictions for short and long horizons

The fundamental interest of investors in econometric modeling for excess stock returns usually focuses either on short- or long-term predictions to individually reduce the investment risk. In this paper, we present a new and simple model that contemporaneously accounts for short- and long-term predictions. By combining the different horizons, we exploit the lower long-term variance to further reduce the short-term variance, which is susceptible to speculative exuberance. As a consequence, the long-term pension-saver avoids an over-conservative portfolio with implied potential upside reductions given their optimal risk appetite. Different combinations of short and long horizons as well as definitions of excess returns, for example, concerning the traditional short-term interest rate but also the inflation, are easily accommodated in our model

Ensayos sobre valoración de stock options

105 p.La valoración tradicional de opciones no es aplicable a la valoración de Executive Stock Options, ya que la condición de un agente bien diversificado no se cumple (Hall y Murphy (2002)). En esta tesis abordamos la valoración de ESOs desde el punto de vista de un agente mal diversificado. Los objetivos de la primera parte de la investigación se centran en la valoración de las ESO¿s cuando consideramos volatilidad estocástica con un modelo tipo Heston (1993).En la segunda parte de la tesis abordaremos el problema de la valoración de ESOs desde el punto de vista del agente restringido averso a las pérdidas, considerando el modelo de Tian (2004)

Ensayos sobre valoración de stock options

105 p.La valoración tradicional de opciones no es aplicable a la valoración de Executive Stock Options, ya que la condición de un agente bien diversificado no se cumple (Hall y Murphy (2002)). En esta tesis abordamos la valoración de ESOs desde el punto de vista de un agente mal diversificado. Los objetivos de la primera parte de la investigación se centran en la valoración de las ESO¿s cuando consideramos volatilidad estocástica con un modelo tipo Heston (1993).En la segunda parte de la tesis abordaremos el problema de la valoración de ESOs desde el punto de vista del agente restringido averso a las pérdidas, considerando el modelo de Tian (2004)

AICPA audit and accounting manual as of July 1, 2007 : nonauthoritative technical practice aid

https://egrove.olemiss.edu/aicpa_guides/1978/thumbnail.jp

Sharing the cost of maximum quality optimal spanning trees

Minimum cost spanning tree problems have been widely studied in operation research and economic literature. Multi-objective optimal spanning trees provide a more realistic representation of different actual problems. Once an optimal tree is obtained, how to allocate its cost among the agents defines a situation quite different from what we have in the minimum cost spanning tree problems. In this paper, we analyze a multi-objective problem where the goal is to connect a group of agents to a source with the highest possible quality at the cheapest cost. We compute optimal networks and propose cost allocations for the total cost of the project. We analyze properties of the proposed solution; in particular, we focus on coalitional stability (core selection), a central concern in the literature on minimum cost spanning tree problems.This work is supported by the Spanish Ministerio de Economía y Competitividad, under project ECO2016-77200-P. Financial support from the Generalitat Valenciana (BEST/2019 Grants) to visit the UNSW is also acknowledged

Institutional Quality and Electricity Supply Growth in a Developing Economy: The Case of Nigeria

Efficient and reliable power sector is a veritable channel for economic growth. Even with abundant electricity production sources, Nigeria’s electricity production and distribution systems are technically weak. However, efforts such as the recent commercialization and privatization of the power sector have been made to solve these problems without significant success. Electricity supply processes may be affected by institutional quality. There are indications that institutional quality in Nigeria is weak and inefficient and this may affect supply of electricity in the country. Hence, this study examines the impact of institutional quality on electricity supply in Nigeria. Based on the Neoclassical Solow-Swan growth model, the study adopted the standard econometric error correction mechanism (ECM) and used time series data from 1981 to 2015. The ADF tests showed that all the variables were stationary and statistically significant and integrated of order one I(1). The Johansen cointegration results indicate existence of long run equilibrium relationships between the variables. ECM result was statistically significant with the correct sign. The speed of adjustment between the short run and long run behaviour of electricity supply variables was 59.73 percent. Institutional quality, with coefficient of -1.23 indicates that institutional quality in the country does not contribute positively to electricity supply growth. Following the above results, the study concludes that institutional quality impacts negatively on electricity supply and therefore inhibit electricity supply growth in Nigeria. The study recommends that to enhance institutional quality and therefore boost electricity supply in Nigeria, policies should be directed at enhancing institutional quality such as policies to encourage contract enforcements, enhance property rights, reduce corruption, enthrone good governance, and improve the legal and security systems. Keywords: Institutional quality, electricity supply, energy, growth, power secto

Marketing plan of Tymbia Solutions

Treball Final de Grau en Administració d'Empreses. Codi: AE1049. Curs 2017-201