2,155 research outputs found

    Modeling and Measuring Russian Corporate Governance: The Case of Russian Preferred and Common Shares

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    This paper examines governance explanations for the discount of preferred shares to common shares in the Russian market. conflicts between shareholder classes may help explain the discount. However, for this to be the sole explanation the estimated models suggest that the magnitude of future adverse shareholder events would have to be very high. Nevertheless, evidence of a common factor potentially related to governance seems evident in the date, implying that corporate control issues may at least be partially responsible for the observed preferred share discount

    Closed-End Fund Discounts in a Rational Agent Economy

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    Nearly any standard financial model concludes that two assets with identical cash flows must sell for the same price. Alas, closed-end mutual fund company share prices seem to violate this fundamental tenant. Even when one considers several standard frictions, such as taxes and agency costs, classical financial models cannot explain the large persistent discounts found within the data. While the standard financial markets model may not explain the existence of large closed- end fund discounts, this paper shows that a rather close version of it does. In an otherwise frictionless market, if asset supplies vary randomly over time and agents posses finite lives a closed-end mutual fund's stock price may not track its net asset value. Furthermore, the analysis provides a number of conditions under which these discrepancies will lead to the existence of systematic discounts for the mutual fund's shares. In addition, the model provides predictions regarding the correlation between current closed-end fund discounts and current changes in stock prices and future changes in corporate productivity. As the analysis shows the same parameter values that lead to systematic discounts also lead to other fund price characteristics that resemble many of the results found within empirical studies.Closed-end funds, arbitrage, overlapping generations

    Sharpening Sharpe Ratios

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    It is now well known that the Sharpe ratio and other related reward-to-risk measures may be manipulated with option-like strategies. In this paper we derive the general conditions for achieving the maximum expected Sharpe ratio. We derive static rules for achieving the maximum Sharpe ratio with two or more options, as well as a continuum of derivative contracts. The optimal strategy rules for increasing the Sharpe ratio. Our results have implications for performance measurement in any setting in which managers may use derivative contracts. In a performance measurement setting, we suggest that the distribution of high Sharpe ratio managers should be compared with that of the optimal Sharpe ratio strategy. This has particular application in the hedge fund industry where use of derivatives is unconstrained and manager compensation itself induces a non-linear payoff. The shape of the optimal Sharpe ratio leads to further conjectures. Expected returns being held constant, high Sharpe ratio strategies are, by definition, strategies that generate regular modest profits punctunated by occasional crashes. Our evidence suggests that the 'peso problem' may be ubiquitous in any investment management industry that rewards high Sharpe ratio managers.

    Toehold Strategies and Rival Bidders

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    Prior to the announcement of a tender offer, the bidding firm is legally allowed to acquire shares in the open market, subject to some limitations. These pre-announcement purchases are known as toeholds. This paper presents a simple model that describes the bidder's optimal toehold acquisition strategy, within an environment that closely parallels the present legal institutions. The model shows that toeholds and bids interact in a complex manner even without the presence of asymmetric information. By examining a simple environment the paper provides a useful alternative hypothesis for tests of other, presumably more complex, models. One of the main implications of our model is that if no competing bidders are expected, no toeholds should be purchased. the paper demonstrates that the correct specification of an empirical model can be critical. For example, under some parameter values toehold purchases may exhibit a negative cross-sectional correlation with the pre-announcement run up in the stock price. This occurs even though prices are strictly increasing the size of the toehold. Several implications concerning various aspects of merger legislation are considered. We show that corporate charters that affect the number of shares necessary to complete a merger will have an impact only if competition among bidders is expected. The paper further shows that a rule similar to a 'fair price' provision has the desirable property that a second bidder arrives and winds if and only if he places a higher value on the target than the initial bidder. Several additional comparative statics are derived as well

    Interactions Between Moderate- and Long-Period Giant Planets: Scattering Experiments for Systems in Isolation and with Stellar Flybys

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    The chance that a planetary system will interact with another member of its host star's nascent cluster would be greatly increased if gas giant planets form in situ on wide orbits. In this paper, we explore the outcomes of planet-planet scattering for a distribution of multiplanet systems that all have one of the planets on an initial orbit of 100 AU. The scattering experiments are run with and without stellar flybys. We convolve the outcomes with distributions for protoplanetary disk and stellar cluster sizes to generalize the results where possible. We find that the frequencies of large mutual inclinations and high eccentricities are sensitive to the number of planets in a system, but not strongly to stellar flybys. However, flybys do play a role in changing the low and moderate portions of the mutual inclination distributions, and erase dynamically cold initial conditions on average. Wide-orbit planets can be mixed throughout the planetary system, and in some cases, can potentially become hot Jupiters, which we demonstrate using scattering experiments that include a tidal damping model. If planets form on wide orbits in situ, then there will be discernible differences in the proper motion distributions of a sample of wide-orbit planets compared with a pure scattering formation mechanism. Stellar flybys can enhance the frequency of ejections in planetary systems, but auto-ionization is likely to remain the dominant source of free-floating planets.Comment: Accepted for publication by Ap

    An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems

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    This paper reports the results of a systematic experimental comparison of the effect of alternative arbitration systems on dispute rates. The key to our experimental design is the use of a common underlying distribution of arbitrator "fair" awards in the different arbitration systems. This allows us to compare dispute rates across different arbitration procedures where we hold fixed the amount of objective underlying uncertainty about the arbitration awards. There are three main findings. First, dispute rates are inversely related to the monetary costs of disputes. Dispute rates were much lower in cases where arbitration was not available so that the entire pie was lost in the event of dispute. Second, contrary to conventional wisdom, the dispute rate in a final-offer arbitration system is at least as high as the dispute rate in comparable conventional arbitration system. Third, dispute rates are inversely related to the uncertainty costs of disputes. Dispute rates were lower in conventional arbitration treatments where the variance of the arbitration award was higher and imposed greater costs on risk-averse negotiators. Our results can also be interpreted as providing tentative evidence that the negotiators were risk-averse on average.

    Studying the atmosphere of the exoplanet HAT-P-7b via secondary eclipse measurements with EPOXI, Spitzer and Kepler

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    The highly irradiated transiting exoplanet, HAT-P-7b, currently provides one of the best opportunities for studying planetary emission in the optical and infrared wavelengths. We observe six near-consecutive secondary eclipses of HAT-P-7b at optical wavelengths with the EPOXI spacecraft. We place an upper limit on the relative eclipse depth of 0.055% (95% confidence). We also analyze Spitzer observations of the same target in the infrared, obtaining secondary eclipse depths of 0.098+/-0.017%, 0.159+/-0.022%, 0.245+/-0.031% and 0.225+/-0.052% in the 3.6, 4.5, 5.8 and 8.0 micron IRAC bands respectively. We combine these measurements with the recently published Kepler secondary eclipse measurement, and generate atmospheric models for the day-side of the planet that are consistent with both the optical and infrared measurements. The data are best fit by models with a temperature inversion, as expected from the high incident flux. The models predict a low optical albedo of ~< 0.13, with subsolar abundances of Na, K, TiO and VO. We also find that the best fitting models predict that 10% of the absorbed stellar flux is redistributed to the night side of the planet, which is qualitatively consistent with the inefficient day-night redistribution apparent in the Kepler phase curve. Models without thermal inversions fit the data only at the 1.25 sigma level, and also require an overabundance of methane, which is not expected in the very hot atmosphere of HAT-P-7b. We also analyze the eight transits of HAT-P-7b present in the EPOXI dataset and improve the constraints on the system parameters, finding a period of P = 2.2047308+/-0.0000025 days, a stellar radius of R* = 1.824+/-0.089Rsun, a planetary radius of Rp = 1.342+/-0.068RJup and an inclination of i = 85.7+3.5-2.2 deg.Comment: 21 pages, 8 figures, accepted by the Astrophysical Journa

    Thermal Emission of WASP-14b Revealed with Three Spitzer Eclipses

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    Exoplanet WASP-14b is a highly irradiated, transiting hot Jupiter. Joshi et al. calculate an equilibrium temperature Teq of 1866 K for zero albedo and reemission from the entire planet, a mass of 7.3 +/- 0.5 Jupiter masses and a radius of 1.28 +/- 0.08 Jupiter radii. Its mean density of 4.6 g/cm3 is one of the highest known for planets with periods less than 3 days. We obtained three secondary eclipse light curves with the Spitzer Space Telescope. The eclipse depths from the best jointly fit model are 0.224%0.224\% +/- 0.018%0.018\% at 4.5 {\mu}m and 0.181%0.181\% +/- 0.022%0.022\% at 8.0 {\mu}m. The corresponding brightness temperatures are 2212 +/- 94 K and 1590 +/- 116 K. A slight ambiguity between systematic models suggests a conservative 3.6 {\mu}m eclipse depth of 0.19%0.19\% +/- 0.01%0.01\% and brightness temperature of 2242 +/- 55 K. Although extremely irradiated, WASP-14b does not show any distinct evidence of a thermal inversion. In addition, the present data nominally favor models with day night energy redistribution less than  30%~30\%. The current data are generally consistent with oxygen-rich as well as carbon-rich compositions, although an oxygen-rich composition provides a marginally better fit. We confirm a significant eccentricity of e = 0.087 +/- 0.002 and refine other orbital parameters.Comment: 16 pages, 16 figure
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