Updating Expectations: An Analysis of Post-9/11 Returns

This study analyzes how three groups of market participants - insiders, analysts, and investors - revised their expected returns on New York Real Estate Investment Trusts (REITs) in response to the catastrophic events of September 11, 2001. The attack on the WTC represents a unique experimental setting to evaluate financial markets’ reaction to external shocks for several reasons. First, these events, of a totally unanticipated and unprecedented nature, could not have been built into the market’s expectations; hence, market participants had to learn something new rather than just recalibrate their expectations on past occurrences. Second, unlike other studies of market reactions, the impact of the terrorist attacks on REIT returns was ambiguous, since it was uncertain if the effect of reduced supply of office space in New York would outweigh the impact of the negative shocks to the local and national economy on its demand. Finally, the period of market closure that followed 9/11 gave these players ample opportunity to reassess their expectations. Our analysis reveals that, on the day when markets reopened, REITs with significant exposure to the New York area outperformed a broad REIT office index by 4.1%. However, we find that, according to several metrics of real market behavior, this anticipated superior performance of New York office properties did not materialize. Consistent with notions of market efficiency, we find that insiders were the first to lower their expectations (99.9% of their trades in REITs with New York exposure were sales in the month following 9/11), followed by analysts (the vast majority of them revised downward their expectations of NY REIT performance in the first weeks of November 2001), and finally market prices adjusted to reflect the underlying real market behavior; indeed, abnormal REIT returns had disappeared by mid November 2001

Preferred Stock: Some Insights into Capital Structure

This study analyzes the reactions of equity holders and bondholders to the announcement of 427 preferred stock issues. We document an average equity announcement effect of −0.65%. This reaction is positively influenced by a number of measures of firm creditworthiness and transparency and is higher for bank issuers. The equity market reaction is negatively influenced by convertibility (and the moneyness of the embedded option) and by the firm\u27s accounting treatment of the issue (specifically if the issue is classified as equity). We find that average credit default swap spreads decrease by 50 basis points after the issue announcement. This decrease is also larger for more creditworthy and transparent firms. Convertibility and the moneyness of the embedded option further decrease the CDS spread. In aggregate, the decrease in equity value is much smaller than the increase in the value of the issuer\u27s debt

Updating Expectations: An Analysis of Post-9/11 Returns

This study analyzes how three groups of market participants—insiders, analysts, and all other investors—revised their expectations on New York Real Estate Investment Trusts (REITs) in response to the catastrophic events of September 11, 2001. Our analysis reveals that, on the day when markets reopened, REITs with significant exposure to the New York area outperformed a broad REIT office index by 4:1%. However, we find that, according to several metrics of real market behavior, this anticipated superior performance of New York office properties did not materialize. Further analysis of market participants’ activity in office REIT stocks indicates that insiders were the first to lower their expectations (e.g., 99:9% of their trades in REITs with New York exposure were sales in the month following 9/11), followed by analysts (the vast majority of them revised downward their expectations of NY REIT performance in the first weeks of November 2001, albeit heterogeneously so), and finally market prices adjusted to reflect the underlying real market behavior; indeed, abnormal REIT returns had disappeared by mid-November 2001. These dynamics are consistent with theories arguing that the cross-sectional correlation of insiders and analysts’ information is an important determinant of trading and pricing patterns in semi-strong efficient market settings

On the Price Comovement of U.S. Residential Real Estate Markets

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/106069/1/reec12022.pd

Limited Partnerships and Reputation Formation

This paper analyzes the optimal quality decision of a producer in a multi-period setting with reputation effects. Using a unique database of returns on real estate limited partnerships (RELPs), we empirically examine alternative theoretical predictions of optimal producer strategy. In particular, we test whether the producers in our market invest in reputation building by initially selling high quality goods and then lowering quality. Using a variety of statistical tests, we find evidence for reputation building, both in the aggregate and for individual developers

Limited Partnerships and Reputation Formation

This paper analyzes the optimal quality decision of a producer in a multi-period setting with reputation effects. Using a unique database of returns on real estate limited partnerships (RELPs), we empirically examine alternative theoretical predictions of optimal producer strategy. In particular, we test whether the producers in our market invest in reputation building by initially selling high quality goods and then lowering quality. Using a variety of statistical tests, we find evidence for reputation building, both in the aggregate and for individual developers

An Examination of the Asian Crisis: Regime Shifts in Currency and Equity Markets

Using a nonparametric technique for the identification of regime shifts, we find breaks in the structural relations between currency and equity returns and return volatility in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand during the recent Asian crisis. Volatility breaks occurred in late 1994 and 1997, while return breaks were concentrated in early 1998. After the estimated breaks, many Asian equity markets became more responsive to the volatility of the corresponding domestic exchange rate. We find that information spillover and portfolio rebalancing, rather than common information shocks, represented major channels for the transmission of breaks across countries

Analysis of Senior-Subordinated Structures Backed by Private-Label Mortgages

This paper does a valuation analysis of senior-subordinated struc ture tranches backed by non-agency mortgages. The valuation is done using Monte Carlo simulation and employs the CIR interest rate process in conjunction with an empirical model estimated for non-agency mortgage prepayments and defaults. The sensitivity of the value of tranches to a number of variables are analyzed. We find that the interest rate process parameters significantly affect prepayments and defaults but not the relative value of the senior tranche. It is found that with the shifting o f prepayments, the senior tranche does not dominate all the junior tranches at all interest rates. The shifting of prepayments has the unintended effect of providing stability to the junior tranches by making their cashflows less sensitive to prepayments. Our main conclusion is that while the shifting o f prepayments increases protection from default to the senior tranche for a given level of subordination, it has the unwanted effect of lowering its value through increased contraction risk. This value loss should be taken into account in determining the optimum level of subordination

Limited Partnerships and Reputation Formation

This paper analyzes the optimal quality decision of a producer in a multi-period setting with reputation effects. Using a unique database of returns on real estate limited partnerships (RELPs), we empirically examine alternative theoretical predictions of optimal producer strategy. In particular, we test whether the producers in our market invest in reputation building by initially selling high quality goods and then lowering quality. Using a variety of statistical tests, we find evidence consistent with reputation building, both in the aggregate and for individual developers

El acceso abierto (en la Universidad del Minho - UMinho - y en el mundo): donde estamos y por donde vamos?

O acesso aberto à literatura científica, que se definiu e formalizou, tal como hoje o entendemos, há 12 anos através da Declaração de Budapeste, conheceu um significativo desenvolvimento na última década. A Universidade do Minho foi uma das instituições pioneiras na implementação do acesso aberto. O seu repositório institucional ̶ o RepositóriUM, criado em 2003 ̶ afirmou-se e consolidou-se, dentro e fora da instituição, como um caso de sucesso, para o qual contribuiu decisivamente o estabelecimento de uma política institucional de autoarquivo da sua produção científica. A partir da experiência da Universidade do Minho nos últimos dez anos, bem como da análise do desenvolvimento global do acesso aberto no mesmo período, este artigo pretende avaliar e discutir o atual momento do acesso aberto em todo o mundo. Afirmamos que o acesso aberto se afigura já como inevitável, mas que existe ainda muita incerteza sobre a forma e o ritmo da transição para o acesso aberto e que essa transição poderá ser dirigida pela comunidade científica e as suas instituições ou pela indústria da publicação científica. Concluímos apresentando algumas das principais orientações da estratégia para o acesso aberto que a Universidade do Minho irá prosseguir nos próximos anos.Open access, which has been defined, as we know it today, twelve years ago through the Budapest Declaration, had a significant development in the last decade. University of Minho was one of the pioneering institutions in the implementation of open access. Its institutional repository (RepositóriUM), created in 2003, has grown and established itself within and outside the institution as a success story. The establishment of an institutional policy of self-archiving of UMinho scientific production has contributed decisively to this success. Taking into consideration the experience of the University of Minho in the last ten years, as well as the analysis of the overall development of open access in the same period, this article aims to review and discuss the current situation of open access worldwide. We affirm that open access already appears to be inevitable, but there is still much uncertainty about the shape and pace of the transition to it. This transition can be driven by the scientific community and its institutions, or by the scientific publishing industry. We conclude by presenting some of the main directions of the strategy for open access that UMinho will continue in the coming years