Search Results
Journal Article
Settlement delays and stock prices
An analysis of whether investors consider the length of the settlement delay between the time a stock trade is executed and the security is delivered. By modeling stock returns and conducting regression tests, the author concludes that stock prices do reflect the effects of the settlement delay.
Working Paper
Market imperfections
Market imperfections affect virtually every transaction in some way, generating costs that interfere with trades that rational individuals make, or would make, in the absence of the imperfection. Understanding these costs gives us insight regarding the total costs of transactions, where to place them, or whether to make them at all. Market imperfections also generate profit opportunities for entrepreneurs who can reduce or eliminate them. Institutions or individuals who can lower costs tracing to imperfections have a competitive advantage and can earn economic rents until competing firms ...
Journal Article
Merchant acquirers and payment card processors: a look inside the black box
Each year, hundreds of millions of credit and debit cardholders make billions of transactions worth trillions of dollars. Yet few consumers are aware that such transactions travel through, and are made possible by a highly evolved group of intermediaries that sign up merchants to accept cards, handle card transactions, manage the dispute-resolution process, and, along with regulatory agencies, set rules that govern card transactions. ; This article demystifies the ?Black Box? of the transactions process for payment cards. After describing a simple transaction with a private-label card, the ...
Working Paper
Expected returns to stock investments by angel investors in groups
Angel investors invest billions of dollars in thousands of entrepreneurial projects annually, far more than the number of firms that obtain venture capital. Previous research has calculated realized internal rates of return on angel investments, but empirical estimates of expected returns have not yet been produced. Although calculations of realized returns are a valuable contribution, expected returns, rather than realized returns, drive investment decisions. We use a new data set and statistical framework to produce the first empirical estimates of expected returns on angel investments. We ...
Working Paper
Asset allocation and section 529 plans
Previous research has concluded that prespecified asset allocations used by many Section 529 college savings plans are suboptimal. We extend this research to show that though it may be true, it is true for reasons other than those asserted in previous research. In addition, it tends to deflect attention from other investment options and strategies.
Working Paper
A generalized method for detecting abnormal returns and changes in systematic risk
The authors generalize traditional event-study techniques to allow for event-induced parameter shifts, shifting variances, and firm-specific event periods. Their method, which nests traditional methods, also permits systematic risk to change gradually during the event period and exit the period at higher or lower levels. The authors use their approach to study 132 banks that acquired other institutions between 1989 and 1995. The authors find a significant change in the systematic risk of the acquiring firms, significant ARCH effects, and an event period that ends before the date of the ...
Working Paper
On flexibility, capital structure, and investment decisions for the insured bank
Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders can respond to market events by adjusting previous investment and leverage decisions. This paper presents a dynamic model of a bank that allows for such behavior. The flexibility of being able to respond dynamically to market information has value to equityholders. The impact and value of this ...
Working Paper
Analyzing imputed financial data: a new approach to cluster analysis
The authors introduce a novel statistical modeling technique to cluster analysis and apply it to financial data. Their two main goals are to handle missing data and to find homogeneous groups within the data. Their approach is flexible and handles large and complex data structures with missing observations and with quantitative and qualitative measurements. The authors achieve this result by mapping the data to a new structure that is free of distributional assumptions in choosing homogeneous groups of observations. Their new method also provides insight into the number of different ...
Working Paper
Capital forbearance and thrifts: an ex post examination of regulatory gambling
This paper estimates the losses embedded in the capital positions of the 996 FSLIC-insured savings and loan institutions that did not meet capital standards at the end of the 1970s. We compare the estimated cost of resolving the insolvencies of these institutions at the end of the 1970s with the actual failure-resolution costs for those that were closed by July 3 1, 1992, and the projected resolution costs for the remaining thrifts that are likely to be closed. Our results show that even when one considers only the direct costs associated with delayed closure of economically failed thrifts, ...