Sieving rational points on varieties

A sieve for rational points on suitable varieties is developed, together with applications to counting rational points in thin sets, the number of varieties in a family which are everywhere locally soluble, and to the notion of friable rational points with respect to divisors. In the special case of quadrics, sharper estimates are obtained by developing a version of the Selberg sieve for rational points.Comment: 30 pages; minor edits (final version

Hiding behind Writing: Communication in Offering Process and MBS Performance

Abstract Securities Offering Reform (SOR) in 2005 formalized free writing prospectus (FWP) as permittable written communication in the offering process by securities issuers. Using non-agency mortgage deals securitized following SOR, we find the surprising result that MBS deals with more usage of FWPs sufferred up to 20% higher cumulative net loss. Using textual analysis as an identification strategy, we attribute our finding to the more aggressive sales tactic associated with more FWP usage being employed for deals with more adverse information withholding. Consequently, the cumulative net loss on these deals are worse than their reported characteristics. Lending support to this explanation, we find that the FWP effect persists even after controlling for deal initial yield spreads and credit enhancements, and higher usage of FWPs are associated with increased content ambiguity in the final prospectus. The latter is a tactic often used to hedge litigation risk on undisclosed information. Keywords: Written Communication, Free Writing Prospectus, Information withholding, Uncertain Text, MBS Performance * We thank Zhonglan Dai, Jun Li, Tim Loughran, and Han Xia for helpful comments. All three authors are from Naveen Jindal School of Management, University of Texas at Dallas, 800 West Campbell Road, Richardson, Texas, 75080, email: [email protected], [email protected], [email protected] "In many ways, mortgage products such as RMBS were ground zero in the financial crisis. Misrepresentations in connection with the creation and sale of mortgage securities contributed greatly to the tremendous losses suffered by investors once the U.S. housing market collapsed.&quot

Default Risk and Equity Returns: A Comparison of the Bank-Based German and the U.S. Financial System

In this paper, we address the question whether the impact of default risk on equity returns depends on the financial system firms operate in. Using an implementation of Merton's option-pricing model for the value of equity to estimate firms' default risk, we construct a factor that measures the excess return of firms with low default risk over firms with high default risk. We then compare results from asset pricing tests for the German and the U.S. stock markets. Since Germany is the prime example of a bank-based financial system, where debt is supposedly a major instrument of corporate governance, we expect that a systematic default risk effect on equity returns should be more pronounced for German rather than U.S. firms. Our evidence suggests that a higher firm default risk systematically leads to lower returns in both capital markets. This contradicts some previous results for the U.S. by Vassalou/Xing (2004), but we show that their default risk factor looses its explanatory power if one includes a default risk factor measured as a factor mimicking portfolio. It further turns out that the composition of corporate debt affects equity returns in Germany. Firms' default risk sensitivities are attenuated the more a firm depends on bank debt financing

Hiding behind Writing: Communication in the Offering Process of Mortgage-Backed Securities

Abstract Securities Offering Reform (SOR) in 2005 formalized free writing prospectus (FWP) as permittable written communication in the offering process by securities issuers. Using non-agency mortgage deals securitized following SOR, we find the surprising result that MBS deals with more FWP usage suffered up to 2% higher cumulative net loss, accounting for almost 18% of the deal average loss. Examining the contents of FWPs, we uncover that textual FWPs rather than loan data tape played a more significant role for the larger deal losses. More FWPs are associated with increased uncertain text usage in the final prospectus supplements, a tactic often used to hedge litigation risk on undisclosed information. Our findings provide evidence that MBS issuers may have hidden information behind writing for their financial benefits. Keywords: Written Communication, Free Writing Prospectus, Information Withholding, Uncertain Text * We thank Dion Bongaerts, Zhonglan Dai, Kathleen Weiss Hanley, Jun Li, Tim Loughran, Han Xia, and the seminar participants at Erasmus University for helpful comments. All three authors are from Naveen Jindal School of Management, University of Texas at Dallas, 800 West Campbell Road, Richardson, Texas, 75080, email: [email protected], [email protected], [email protected] "In many ways, mortgage products such as RMBS were ground zero in the financial crisis. Misrepresentations in connection with the creation and sale of mortgage securities contributed greatly to the tremendous losses suffered by investors once the U.S. housing market collapsed.&quot

Investor Psychology and Security Market Under- and Overreactions

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/73431/1/0022-1082.00077.pd

Initial Public Offerings and the Firm Location

The firm geographic location matters in IPOs because investors have a strong preference for newly issued local stocks and provide abnormal demand in local offerings. Using equity holdings data for more than 53,000 households, we show the probability to participate to the stock market and the proportion of the equity wealth is abnormally increasing with the volume of the IPOs inside the investor region. Upon nearly the universe of the 167,515 going public and private domestic manufacturing firms, we provide consistent evidence that the isolated private firms have higher probability to go public, larger IPO underpricing cross-sectional average and volatility, and less pronounced long-run under-performance. Similar but opposite evidence holds for the local concentration of the investor wealth. These effects are economically relevant and robust to local delistings, IPO market timing, agglomeration economies, firm location endogeneity, self-selection bias, and information asymmetries, among others. Findings suggest IPO waves have a strong geographic component, highlight that underwriters significantly under-estimate the local demand component thus leaving unexpected money on the table, and support state-contingent but constant investor propensity for risk