How To Create Cash Flows That Give A Priori IRRs?

We illustrate algebraically the way to numerically derive the cash flows of an investment project yielding a set of desired IRRs. This is significant given the dearth of practice questions with the appropriate cash flow numbers, and their corresponding sign, in widely adopted Finance textbooks that will allow students to find multiple IRRs as learning exercises. The note serves to fill that void by allowing the readers to change the IRR inputs in an Excel spreadsheet and have the corresponding cash flows output ready for an assignment. Instructors can use the Excel codes to create different cash flows that yield multiple IRRs with ease so that students in the same class or those in different semesters need not be given the same set of cash flows where plagiarism could compromise the learning process

Impact Of Changes In Strategic Investments On Shareholder Returns: The Role Of Growth Opportunities

We argue that a firm’s growth opportunity may provide us with guidelines on whether increases or decreases in capital investments may contribute to that firm’s returns to shareholders.  We find consistent empirical support for “good” managerial decisions.  That is, we find that increases in capital investments by firms with growth opportunities enhance their returns to shareholders.  The results indicate that decreases in strategic investments increase the returns to shareholders of those firms lacking in growth opportunities.  The findings, however, are not consonantally significant for “bad” managerial investment decisions - - decreases in investments by firms with growth opportunities or increases in investments by firms lacking in growth opportunities

Trading Costs on the Stock Exchange of Thailand

This study examines the components of trading costs incurred in trading large and liquid stocks listed on the Stock Exchange of Thailand. We find that aggressive orders pay an immediacy price measured by price impact, whereas executed passive orders gain the immediacy price. We also find a sizable opportunity cost from the unexecuted portion of a limit order that more than offsets the benefit obtained from the partial fulfillment of the order. The total trading cost, which includes price impact and opportunity cost, is positively related to order size and stock price volatility, but negatively associated with firm size, stock price, and stock liquidity. The total trading cost has a U-shaped relation with order aggressiveness. Collectively, our study suggests that, to minimize the total trading cost, the optimal strategy is simply to use a limit order submitted at the best quote.Accepted versio

Prospect theory, analyst forecast, and stock returns

See article http://ink.library.smu.edu.sg/lkcsb_research/1158/ or http://dx.doi.org/10.1016/j.mulfin.2004.03.00

Warrants and their underlying stocks: Microstructure evidence from an emerging market

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INSIDER TRADING AND CORPORATE SPINOFFS

The study reported here examines insider trading and the issue of undervaluation as a motive behind corporate spinoffs. The results show an unmistakable increase (decrease) in the number of insider purchases (sales) and net purchases (sales) in the four quarters prior to a spinoff announcement. In addition, relative to a benchmark period, insider selling is significantly lower, and their net purchases significantly higher, in the three quarters prior to a spinoff announcement, as compared to other periods. Furthermore, announcement period excess returns for abnormal net insider purchases are significantly higher than excess returns for abnormal net insider sales. However, only firms with abnormal net insider purchases exhibit significant improvement in their long-run market and operating performance after a spinoff. The results seem to suggest that undervaluation is an important motive behind corporate spinoffs and that it is possible to identify the quality of a spinoff firm based on insider trading behavior prior to its announcement