Saving the Bed from the Fed

We estimate the reaction of the United States hotel and restaurant industries to the monetary policy actions of the U.S. Federal Reserve. We find that a portfolio of hotel industry stocks react strongly to unexpected changes in the federal funds target rate. Specifically, for a hypothetical surprise 25-basis-point rate cut, the value-weighted hotel industry stock portfolio registers a one-day gain of 245 basis points (or 2.45 percent). This response is 78-percent stronger than that of the overall equity market in the U.S. In addition, the price impact is stronger at times of policy reversals. On the other hand, the restaurant industry is not as responsive to unexpected changes in the monetary policy. To “save the bed from the Fed,” investors should first recognize the sensitivity of hotel stocks to changes in Fed policy and then engage in appropriate risk management activities, including hedging portfolio risk in the futures market

Who’s Next? An Analysis of Lodging Industry Acquisitions

The years 2004 through 2007 witnessed a rush of takeover deals in the lodging industry, in which numerous publicly traded hotel companies and hotel real estate investment trusts (REITs) were acquired—mostly by private equity firms, in many cases, Blackstone Group. Notwithstanding the suspension of such activities in the past two years, this article analyzes what factors determine the choice of the targets during that period in the lodging industry. An examination of these takeover deals determined that targets were most likely to: (1) be either a large hotel company or a relatively small REIT; (2) have a high percentage of fixed assets and a low level of debt; (3) have a mismatch between growth prospects and available resources; and (4) be in their middle age as publicly traded firms. Conditions that permit acquisitions, including availability of credit, will eventually return, making this analysis useful to current and future owners, investors, and executives in the lodging industry. Those who want to be acquired, for instance, can adjust their corporate profile to be more attractive, and those who wish to discourage acquisition can take on debt and spin off assets to be less attractive

The Sound of Silence: What Do We Know When Insiders Do Not Trade?

We examine the phenomenon of insider silence, periods when corporate insiders do not trade. Our evidence strongly supports the jeopardy hypothesis that regulations inhibit insiders from trading on extreme information, implying a relation between insider silence and extreme future returns. First, insiders of merger targets refrain from buying in the months before the merger announcement, and insiders of bankruptcy firms refrain from selling before the bankruptcy filing. Second, among firms that are likely to have bad news, insider silence predicts significant negative future returns, which are even lower than when insiders net sell. Further, the negative information in insider silence is gradually incorporated into stock prices, and a significant portion of it is released around quarterly earnings announcements. Finally, the price inefficiency due to insider silence is pervasive, and market frictions make it worse

What is common among return anomalies? Evidence from insider trading decisions

Conventional wisdom suggests that insiders buy shares on positive, and sell on negative, information. Under regulations of insider trading, however, insiders keep silent while possessing extreme information. We find that this phenomenon of insider silence is systematically related to a broad set of anomalies, particularly in the short legs. Specifically, among firms in the short legs, those whose insiders kept silent in the past experience significant negative future returns, which are even lower than when insiders net sold. On average, insider silence accounts for 64% of the short-leg abnormal returns. Our paper provides quantitative evidence of mispricing for return anomalies

Blockholder Characteristics and Earnings Quality

This study focuses on the impact of blockholder characteristics on earnings quality. Most of the studies inliterature make the implicit assumption that blockholders are a homogeneous group. This study is one offew studies that acknowledges the heterogeneity of blockholders and attempts to understand theunexplained proportion of blockholder heterogeneity. Earnings quality is calculated using the modifiedDechow and Dichev (2002) model with fixed effects (FDD model) by Lee and Masulis (2009), and it isregressed on various blockholder characteristics. The results show that earnings quality is lower forfirms with market-driven and multilateral blockholders

Business Cycle and Asset Valuation in the Gaming Industry

This study values takeover targets in the gaming industry and finds that privately held takeover targets command lower valuations than publicly traded firms. On average valuation multiples are 46% lower for private targets relative to public firms. This finding has significant implications for owners of privately held gaming companies who may consider a takeover as an option to maximize shareholder value. The study examines the effect of recessions and expansions on valuation. The discount of private targets relative to public targets is present at all stages of the business cycle. Acquisition targets receive lower valuations in recessions and the relative discount for private gaming firms deepens further in recessions. Jointly, the results suggest that recessions have an important impact on the market for corporate control in the gaming industry

Economic and Capital Market Antecedents of Venture Capital Commitments (1960-2010)

Using vector autoregression technique, we examine the interrelation between venture capital flows, economic development, capital market fund-raising activities, and capital market valuation, based on annual data of the United States over the past half-century. We find that venture capital commitments appear to be correlated with GDP and capital market valuation. While capital market fund-raising activities (Initial Public Offerings and Seasoned Equity Offerings) are also correlated with venture capital flows, these effects are subsumed by GDP, indicating that the overall economy drives both venture capital flows and capital market financing activities. Analyses from impulse response functions suggest that shocks to GDP have a permanent effect on venture capital flows, while the impact of capital market valuation (Standard & Poor 500 returns) on venture capital flows is rather short lived. Overall, both economy-wide development and financial market fluctuations seem to impact venture capital flows

Construction of Vascular Tissues with Macro-Porous Nano-Fibrous Scaffolds and Smooth Muscle Cells Enriched from Differentiated Embryonic Stem Cells

Vascular smooth muscle cells (SMCs) have been broadly used for constructing tissue-engineered blood vessels. However, the availability of mature SMCs from donors or patients is very limited. Derivation of SMCs by differentiating embryonic stem cells (ESCs) has been reported, but not widely utilized in vascular tissue engineering due to low induction efficiency and, hence, low SMC purity. To address these problems, SMCs were enriched from retinoic acid induced mouse ESCs with LacZ genetic labeling under the control of SM22α promoter as the positive sorting marker in the present study. The sorted SMCs were characterized and then cultured on three-dimensional macro-porous nano-fibrous scaffolds in vitro or implanted subcutaneously into nude mice after being seeded on the scaffolds. Our data showed that the LacZ staining, which reflected the corresponding SMC marker SM22α expression level, was efficient as a positive selection marker to dramatically enrich SMCs and eliminate other cell types. After the sorted cells were seeded into the three-dimensional nano-fibrous scaffolds, continuous retinoic acid treatment further enhanced the SMC marker gene expression level while inhibited pluripotent maker gene expression level during the in vitro culture. Meanwhile, after being implanted subcutaneously into nude mice, the implanted cells maintained the positive LacZ staining within the constructs and no teratoma formation was observed. In conclusion, our results demonstrated the potential of SMCs derived from ESCs as a promising cell source for therapeutic vascular tissue engineering and disease model applications

A Novel Role of Matrix Metalloproteinase-8 in Macrophage Differentiation and Polarization

This work forms part of the research themes contributing to the translational research portfolio of Barts and the London Cardiovascular Biomedical Research Unit, which is supported and funded by the National Institute of Health Research