Curb Your Enthusiasm: The Rise of Hedge Fund Activist Shareholders and the Duty Of Loyalty

Shareholder activism has been a growing problem in the corporate world, creating numerous dilemmas for the board of directors of companies. Activist shareholders can unsettle a company, pressuring the directors to make decisions according to the course of business the activists would prefer, and thus interfering with the traditional role of directors as the decision-makers of a company. With this new development in the business world, legal scholars have been debating if this activism needs to be controlled and, if so, what measures can be taken to reach a balance. This Note examines the traditional corporate principles such as the shareholder primacy theory and the principle of “one share, one vote,” evaluating the benefits and the costs of adhering to these theories amidst the changing landscape in the business and legal world. This Note then proposes that the traditional concept of the duty of loyalty can be applied to activist shareholders, much like it has been applied to the directors and majority shareholders in the past, based on a fact-by-fact analysis

A New Look at Copper Markets: A Regime-Switching Jump Model

GARCH-jump models of metal price returns, while allowing for sudden movements (jumps), apply the same specification of the jump component in both 'bear'and 'bull' markets. As a result, the more frequent but relatively small jumps that occur in both bear and bull markets dominate the characterization of the jump process. Given that large jumps, although less frequent, are still quite common in copper (and other metal) markets, this is a potential shortcoming of current models. More flexibility can be added to the modeling process by allowing for regime-switching. In this paper we specify a model that allows for switching across two separate regimes, with the possibility of different jump sizes and frequencies under each regime, along with a regime-specific GARCH process for the conditional variance. This model is applied to daily copper futures prices over the period of January 2 1980 through the end of July 2007. The model is estimated both with and without factors such as interest and exchange rate movements entering into the specification of the state-dependent mean of the conditional jump size. In some respects, a Regime Switching GARCH-Jump Model performs well when applied to the copper returns data. The results are mixed in terms of whether or not variations of the model that allow jump sizes to be a function of interest or exchange rates offer much of an advantage over a pure time series approach to the modeling of copper returns over the past three decades.regime switching; Poisson jump; GARCH volatility; copper futures