An interval portfolio selection problem based on regret functionSilvio Giove,  Stefania Funari,  Carla Nardelli. European Journal of Operational Research. Amsterdam: Apr 1, 2006.Vol.170, Iss. 1;  pg. 253

 » More Like This - Find similar documents Subjects: Portfolio management,  Mathematical programming,  Decision

making,  Stock prices,  Uncertainty,  Operations research,  StudiesClassification Codes 3400   Investment analysis & personal finance ,  2600   Management science/operations

research,  9130   Experimental/theoretical Author(s): Silvio Giove,  Stefania Funari,  Carla NardelliDocument types: FeaturePublication title: European Journal of Operational Research. Amsterdam: Apr 1, 2006. Vol. 170, Iss. 1;  pg. 253Source type: PeriodicalISSN/ISBN: 03772217ProQuest document ID: 908068851Document URL: http://proquest.umi.com/pqdweb?did=908068851&sid=1&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Different approaches, besides the traditional Markowitz's model, have been proposed in the literature to analyze portfolio selection problems. Among them we can cite the possibilistic portfolio models, which treat the expected return rates of the securities as fuzzy or possibilistic variables, instead of random variables. Such models, which are based on possibilistic mathematical programming, describe the uncertainty of the real world as ambiguity and vagueness, rather than stochasticity. Actually, another way to treat the uncertainty in decision making problems consists of assuming that the data are not well defined, but are able to vary in given intervals. Interval analysis is thus appropriate to handle the imprecise input data. In this paper we consider a portfolio selection problem in which the prices of the securities are treated as interval variables. In order to deal with such an interval portfolio problem, we propose the adoption of a minimax regret approach based on a regret function. [PUBLICATION ABSTRACT]

Portfolio selection using hierarchical Bayesian analysis and MCMC methodsAlex Greyserman,  Douglas H Jones,  William E Strawderman. Journal of Banking & Finance. Amsterdam: Feb 2006.Vol.30, Iss. 2;  pg. 669

 » More Like This - Find similar documents Subjects: Studies,  Portfolio investments,  Stochastic models,  Forecasting

techniques,  Hierarchies,  Bayesian analysisClassification Codes 9130   Experimental/theoretical ,  3400   Investment analysis & personal finance Author(s): Alex Greyserman,  Douglas H Jones,  William E StrawdermanDocument types: FeaturePublication title: Journal of Banking & Finance. Amsterdam: Feb 2006. Vol. 30, Iss. 2;  pg. 669Source type: PeriodicalISSN/ISBN: 03784266ProQuest document ID: 991577391Document URL: http://proquest.umi.com/pqdweb?did=991577391&sid=1&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

This paper contributes to portfolio selection methodology using a Bayesian forecast of the distribution of returns by stochastic approximation. New hierarchical priors on the mean vector and covariance matrix of returns are derived and implemented. Comparison's between this approach

and other Bayesian methods are studied with simulations on 25 years of historical data on global stock indices. It is demonstrated that a fully hierarchical Bayes procedure produces promising results warranting more study. We carried out a numerical optimization procedure to maximize expected utility using the MCMC (Monte Carlo Markov Chain) samples from the posterior predictive distribution. This model resulted in an extra 1.5 percentage points per year in additional portfolio performance (on top of the Hierarchical Bayes model to estimate mu and sigma and use the Markowitz model), which is quite a significant empirical result. This approach applies to a large class of utility functions and models for market returns. [PUBLICATION ABSTRACT]

The Analytics of Uncertainty and Information-An Expository SurveyHirshleifer , J . ,  Riley, John G.. Journal of Economic Literature. Nashville: Dec 1979.Vol.17, Iss. 4;  pg. 1375

 » More Like This - Find similar documents Subjects: Utility,  Uncertainty,  Risk,  Research,  Market equilibrium

,  Inventions,  Insurance,  Information,  Functions,  Economic theory,  Decision makingClassification Codes 8200   Insurance industry ,  5400   Research & development ,  1100   Economics Author(s): Hirshleifer , J . ,  Riley, John G.Publication title: Journal of Economic Literature. Nashville: Dec 1979. Vol. 17, Iss. 4;  pg. 1375Source type: PeriodicalISSN/ISBN: 00220515ProQuest document ID: 1162062Document URL: http://proquest.umi.com/pqdweb?did=1162062&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Despite the long-standing recognition by economic thinkers that human endeavors are constrained by man's limited and uncertain knowledge of the world, until recently there was no rigorous foundation for the analysis of individual decision making and market equilibrium under uncertainty.The central underlying ideas related to information and uncertainty are presented in a nontechnical fashion. The theoretical developments that have brought about this intellectual revolution have 2 main foundations: 1. the theory of preference for uncertain contingencies and in particular the ''expected-utility theorem'' of John von Neumann and Oskar Morgenstern, and 2. the formulation of the ultimate goods or objects of choice in an uncertain universe as contingent consumption claims: entitlements to particular commodities or commodity baskets valid only under specified ''states of the world.'' This modern analytical literature on uncertainty and information divides into 2 rather distinct branches. The first branch deals with market uncertainty, and the second deals with technological uncertainty or event uncertainty. This examination is limited to the relatively more tractable topic of event uncertainty.

Competition, cooperation, and conflict in economics and biologyHirshleifer , J . . The American Economic Review. Nashville: May 1978.Vol.68, Iss. 2;  pg. 238

 » More Like This - Find similar documents Subjects: Social sciences,  Political theory,  Equilibrium ,  Economy,  Economic

theory,  Cooperation,  Competition,  BehaviorClassification Codes 1100   Economics Author(s): Hirshleifer , J . Publication title: The American Economic Review. Nashville: May 1978. Vol. 68, Iss. 2;  pg. 238Source type: PeriodicalISSN/ISBN: 00028282

ProQuest document ID: 936051Document URL: http://proquest.umi.com/pqdweb?did=936051&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Sociobiology encompasses the various social sciences, including economics, devoted to the study of man. The subject matter of conventional social science is in essence the field of political economy, and biology is the natural economy. The natural economy and the political economy are subdivisions of the universal general economy. Political economy institutions such as law and government deter the internal fighting that would be disfunctional for society as a whole. But the institutions of the political economy do not displace the underlying realities of the natural economy. Fundamental concepts such as scarcity, equilibrium, competition, and specialization play similar roles in economic and biological systems. The Coase Theorem guarantees Pareto-efficient solutions under ideal political economy institutions. Cooperation takes the form of exchange for mutual gain in the political economy.

THE THEORY OF SPECULATION UNDER ALTERNATIVE REGIMES OF MARKETSHIRSHLEIFER , J . . The Journal of Finance. Cambridge: SEPT. 1977.Vol.32, Iss. 4;  pg. 975

 » More Like This - Find similar documents Subjects: Speculation,  Risk,  Markets,  FactorsClassification Codes 3400   Investment analysis Author(s): HIRSHLEIFER , J . Publication title: The Journal of Finance. Cambridge: SEPT. 1977. Vol. 32, Iss. 4;  pg. 975Source type: PeriodicalISSN/ISBN: 00221082ProQuest document ID: 1164968Document URL: http://proquest.umi.com/pqdweb?did=1164968&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

IT IS THE INTERACTION BETWEEN PRICE RISK AND QUANTITY RISK THAT GOVERNS THE OVERALL HAZARD ACCEPTED OR AVOIDED BY INDIVIDUALS. SPECULATION AND HEDGING CONSIST OF TRADING IN THE PRIOR AND POSTERIOR MARKETS IN SUCH A WAY AS TO ACHIEVE COMPOUND CONSUMPTIVE GAMBLES 'D' THAT DIFFER FROM THE SIMPLE CONSUMPTIVE GAMBLES 'C' THAT WOULD HAVE BEEN ADOPTED IN A NON-INFORMATIVE SITUATION. AMONG THE FACTORS POSSIBLY INVOLVED IN THE SPECULATIVE DECISION ARE - 1. THE INDIVIDUAL'S BELIEF ABOUT THE EMERGENCE AND CONTENT OF NEW INFORMATION, 2. HIS UTILITY FUNCTION, 3. THE SCALE AND COMPOSITION OF HIS ENDOWNMENT, AND 4. THE EXTENT OF THE MARKETS AVAILABLE. SPECULATIVE TRADING IS UNDERTAKEN ONLY BY INDIVIDUALS WHOSE OPINIONS, AS TO THE LIKELIHOOD OF FUTURE STATES OF THE WORLD, DIVERGE FROM REPRESENTATIVE BELIEFS IN THE MARKET. TABLES. EQUATIONS. REFERENCES.

Risk-Premium Curve vs. Capital Market Line: Differences ExplainedLong, Susan W . . Financial Management. Tampa: Spring 1978.Vol.7, Iss. 1;  pg. 60

 » More Like This - Find similar documents Subjects: Security portfolios,  Risk premiums,  Risk,  Return on

investment,  Regression analysis,  Models,  Capital marketsClassification Codes 3400   Investment analysis ,  3100   Debt Management Author(s): Long, Susan W . Publication title: Financial Management. Tampa: Spring 1978. Vol. 7, Iss. 1;  pg. 60Source type: PeriodicalISSN/ISBN: 00463892ProQuest document ID: 1089032Document URL: http://proquest.umi.com/pqdweb?did=1089032&sid=7&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Higher returns are required as the risk of an investment increases. This positive relationship is called the capital market line (CML). The minimal return for riskless assets is called the risk-free rate. By regressing return on risk and risk on return and averaging the results, W. F. Sharpe demonstrated that for the period 1954-1963, "investors required and received 3.8% return on riskless assets and an additional .58% return per annum for each additional 1% of risk. By regressing risk on return, Soldofsky and Miller (S-M) showed there are no risk-free assets. They found that assets with no return had risk levels of 5.6% standard deviation of annual return. To determine what caused the conflicting results, 400 common stocks were randomly selected from the 1975 COMPUSTAT data tapes. Portfolio inefficiency, regressing risk on return, and using geometric measures probably contributed to S-M's positive risk results when Sharpe found it to be negative.

The Regulated Financial FirmMeyer, Robert A., Jr.. The Quarterly review of economics and business.. Urbana: Winter 1980.Vol.20, Iss. 4;  pg. 44

 » More Like This - Find similar documents Subjects: Uncertainty,  Statistical analysis,  Risk aversion,  Reserve

requirements,  Regulation,  Interest rates,  Financial institutions,  CeilingsClassification Codes 8100   Financial services industry ,  4300   Law Author(s): Meyer, Robert A., Jr.Publication title: The Quarterly review of economics and business.. Urbana: Winter 1980. Vol. 20, Iss. 4;  pg. 44Source type: PeriodicalISSN/ISBN: 00335797ProQuest document ID: 1377411Document URL: http://proquest.umi.com/pqdweb?did=1377411&sid=7&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

A model is developed of a regulated financial firm under uncertainty which explicitly incorporates risk aversion. The model is based on the valuation relationship for uncertain income streams developed by W. F. Sharpe and John Lintner which has provided the popular capital asset pricing model widely used in finance. Once a basic solution is characterized, it is used to explore the implicit cost of reserve requirements and, in particular, the effect of differential regulatory requirements on a commercial bank's competitive position. Additional analyses focus on selected regulations such as interest rate ceilings, portfolio restrictions, and the question of deposit insurance versus equity investment.

Divergence of Opinion and RiskBart, John,  Masse, Isidore J.. Journal of Financial and Quantitative Analysis. Seattle: Mar 1981.Vol.16, Iss. 1;  pg. 23, 12 pgs

 » More Like This - Find similar documents Subjects: Uncertainty,  Stocks,  Stock prices,  Securities

analysis,  Securities,  Risk,  Return on investment,  Opinions,  Expectations,  Differences,  AppreciationClassification Codes 3400   Investment analysis Author(s): Bart, John,  Masse, Isidore J.Publication title: Journal of Financial and Quantitative Analysis. Seattle: Mar 1981. Vol. 16, Iss. 1;  pg. 23, 12 pgsSource type: PeriodicalISSN/ISBN: 00221090ProQuest document ID: 1166313Document URL: http://proquest.umi.com/pqdweb?did=1166313&sid=11&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Edward Miller, expanding on the work of Williams, Smith, and Lintner, has proposed a direct relationship between a stock's ''risk'' and its ''divergence of opinion.'' Under conditions of uncertainty, potential investors in a stock reach different assessments of expected return. This difference in expectations is characterized as the stock's divergence of opinion. Miller argues that at a point in time a stock's price does not mirror the expectations of all potential investors, but rather the expectations of only the most optimistic minority who are trading the issue. As long as this minority can absorb the entire supply of stock, an increase (decrease) in divergence of opinion-leaving the average expectation unchanged-will raise (lower) the market clearing

The legacy of modern portfolio theoryFrank J Fabozzi,  Francis Gupta,  Harry M Markowitz . Journal of Investing. New York: Fall 2002.Vol.11, Iss. 3;  pg. 7

 » More Like This - Find similar documents Subjects: Portfolio management ,  Theory,  History,  Studies,  Portfolio

performance,  Rates of returnClassification Codes 9190   United States ,  9130   Experimental/theoretical ,  3400   Investment analysis & personal finance Locations: United States,  USAuthor(s): Frank J Fabozzi  ,  Francis Gupta,  Harry M Markowitz  Document types: FeaturePublication title: Journal of Investing. New York: Fall 2002. Vol. 11, Iss. 3;  pg. 7Source type: PeriodicalISSN/ISBN: 10680896ProQuest document ID: 187618251Document URL: http://proquest.umi.com/pqdweb?did=187618251&sid=16&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Fifty years have passed since the publication of Harry Markowitz's article on portfolio selection, setting forth the ground-breaking concepts that have come to form the foundation of what is now popularly referred to as Modern Portfolio Theory. This article briefly explains the theory underlying MPT and uses illustrations to highlight the application of MPT to the current practice of asset management and portfolio construction. It also surveys most of the relevant research that has directly or indirectly been either an outcome of MPT or has contributed to the implementation of MPT.

The theory and practice of corporate finance: Evidence from the fieldJohn R Graham,  Campbell R Harvey. Journal of Financial Economics. Amsterdam: May/Jun 2001.Vol.60, Iss. 2,3;  pg. 187

 » More Like This - Find similar documents Subjects: Studies,  Capital structure,  Capital costs,  CAPM,  Capital budgeting,  Risk

assessmentClassification Codes 9190   United States ,  9130   Experimental/theoretical ,  3100   Capital & debt management Locations: United States,  USAuthor(s): John R Graham  ,  Campbell R Harvey Document types: FeaturePublication title: Journal of Financial Economics. Amsterdam: May/Jun 2001. Vol. 60, Iss. 2,3;  pg. 187Source type: PeriodicalISSN/ISBN: 0304405XProQuest document ID: 77223127Document URL: http://proquest.umi.com/pqdweb?did=77223127&sid=18&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

This study surveys 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. A surprising number of firms use firm risk rather than project risk in evaluating new investments. This study finds some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transaction costs, free cash flows, or personal taxes.

Management versus equity: A principal-agent problem in a continuous-time stochastic control modelby Clark, Steven Paul, Ph.D., Clemson University, 2003, 54 pages; AAT 3093204

 » More Like This - Find similar documents Advisor: Maloney, Michael T.,  Tamura, RobertSchool: Clemson UniversitySchool Location: United States -- South CarolinaIndex terms(keywords): Management,  Equity,  Principal agent,  Continuous-time,  Stochastic controlSource: DAI-A 64/06, p. 2194, Dec 2003Source type: DISSERTATIONSubjects: Finance,  Cash management,  Stock offerings,  Stochastic models,  StudiesPublication Number: AAT 3093204Document URL: http://proquest.umi.com/pqdweb?did=765982801&sid=18&Fmt=2&clientId=18913&RQT=309&VName=PQDProQuest document ID: 765982801

Abstract (Document Summary)

In this dissertation, we formulate a model prescribing optimal policy for cash disbursements and seasoned equity offerings taking into account the principle-agent problem inherent in these decisions. Specifically, we suppose that stockholders have perfect information about the level of

current free cash flows. In order to discipline managers, stockholders would like to have excess free cash flows disbursed either as cash dividends or through stock repurchases. Managers resist stockholders in this regard since they prefer to have excess free cash flows in order to pursue personal interests and reduce the probability that the company will experience financial distress in the future. However, as a consequence of withholding cash disbursements, managers incur disutility due to the possibility that their control of the firm could be threatened by the market for corporate control. Due to their inability to fully eliminate firm-specific risk managers are generally more risk averse than stockholders. Managers may issue seasoned equity in an attempt to prevent free cash flow from falling below a given level. However, stockholders do not like this practice since it transfers a portion of their ownership rights to new shareholders. We model this situation as a stochastic impulse control problem, and succeed in finding an analytical solution. This is the first research that applies the theory of stochastic impulse control to the determination of optimal policy for cash disbursement and seasoned equity offerings.

TAXES AND THE PRICING OF OPTIONSSCHOLES, MYRON. The Journal of Finance. Cambridge: MAY 1976.Vol.31, Iss. 2;  pg. 319

 » More Like This - Find similar documents Subjects: Writing,  Taxation,  Pricing,  Options trading Classification Codes 4200   Taxation ,  3400   Investment analysis Author(s): SCHOLES, MYRONPublication title: The Journal of Finance. Cambridge: MAY 1976. Vol. 31, Iss. 2;  pg. 319Source type: PeriodicalISSN/ISBN: 00221082ProQuest document ID: 1164818Document URL: http://proquest.umi.com/pqdweb?did=1164818&sid=21&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

THE TAX ADVANTAGES OF WRITING FOR INVESTORS IN HIGH TAX BRACKETS HAVE SEVERAL EFFECTS ON OPTION PRICING AND THE TRADING OF OPTIONS. EMPIRICAL EVALUATIONS OF THE PRICING AND TRADING IN LISTED OPTIONS WILL HAVE TO INCLUDE THESE TAX EFFECTS IN THE EVALUATION METHODOLOGY. IT IS LIKELY THAT OPTIONS THAT ARE IN THE MONEY WILL BE SELLING FOR CLOSE TO INTRINSIC VALUE, AND THEIR TAX BENEFITS WILL BE SHARED BY THE WRITER AND THE BUYER. WHERE IT WAS POSSIBLE TO REDUCE TAXES AT LITTLE RISK, SUCH AS IN THE TAX-EXEMPT BOND CASE, THE GOVERNMENT HAD TO IMPOSE RESTRICTIONS THAT WOULD LIMIT THE ADVANTAGES OF THE TAX-AVOIDANCE PLAN. IT HAS BEEN SHOWN THAT CORPORATE LIABILITIES ARE OPTIONS. THE USE OF THE OPTION PRICING MODEL TO PRICE DEBT AND EQUITY CAN NOW BE EXPANDED TO INCLUDE TAX EFFECTS ON THE PRICING OF RISKY DEBT CLAIMS. REFERENCES.

Pricing options on leveraged equity with default risk and exponentially increasing, finite maturity debtMichael Hanke. Journal of Economic Dynamics & Control. Amsterdam: Mar 2005.Vol.29, Iss. 3;  pg. 389

 » More Like This - Find similar documents Subjects: Studies,  Credit risk,  Economic models,  Valuation,  Stock prices,  Stock options Classification Codes 9130   Experimental/theoretical ,  3400   Investment analysis & personal finance ,  1130   Economic theory Author(s): Michael HankeDocument types: FeaturePublication title: Journal of Economic Dynamics & Control. Amsterdam: Mar 2005. Vol. 29, Iss. 3;  pg. 389Source type: Periodical

ISSN/ISBN: 01651889ProQuest document ID: 800858421Document URL: http://proquest.umi.com/pqdweb?did=800858421&sid=21&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

We extend a modular pricing framework proposed by Ericsson and Reneby (Appl. Math. Finance 5 (1998) 143; Stock options as barrier contingent claims, Working Paper, Stockholm School of Economics; The valuation of corporate liabilities: theory and tests, Working Paper, Stockholm School of Economics) to derive a valuation formula for calls on leveraged equity, similar to Toft and Prucyk (J. Finance LII (1997) 1151). In contrast to their derivation via partial differential equations, we choose a more elegant probabilistic approach using change of numeraire techniques. Considerably extending previous firm-value-based option pricing models, our framework features exponentially increasing, finite maturity coupon debt, along with taxes and deviations from absolute priority. It enables us to study effects of debt maturity and debt growth on prices of equity options. Numerical results provide new insights into possible causes for pricing biases of the Black-Scholes formula. [PUBLICATION ABSTRACT]

The instantaneous capital market lineLars Tyge Nielsen,  Maria Vassalou. Economic Theory. Heidelberg: Aug 2006.Vol.28, Iss. 3;  pg. 651

 » More Like This - Find similar documents Subjects: Studies,  Economic theory,  CAPM,  Investment policyClassification Codes 9130   Experimental/theoretical ,  1130   Economic theory ,  3400   Investment analysis & personal finance Author(s): Lars Tyge Nielsen,  Maria VassalouDocument types: FeaturePublication title: Economic Theory. Heidelberg: Aug 2006. Vol. 28, Iss. 3;  pg. 651Source type: PeriodicalISSN/ISBN: 09382259ProQuest document ID: 875045721Text Word Count 4974DOI: 10.1007/s00199-005-0638-1Document URL: http://proquest.umi.com/pqdweb?did=875045721&sid=22&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

We show that if the intercept and slope of the instantaneous capital market line are deterministic, then investors will not hold any hedge portfolios in the sense of Merton [9, 11]. They will choose portfolios that plot on the capital market line, and they will slide up and down the capital market line over time as their wealth and risk tolerance change. This result allows us to aggregate over investors and derive a single factor CAPM where the first and second moments of security returns may change stochastically over time and markets are potentially incomplete. [PUBLICATION ABSTRACT]

Option Pricing: A Simplified ApproachCox, John C.,  Ross, Stephen A.,  Rubinstein, Mark. Journal of Financial Economics. Amsterdam: Sep 1979.Vol.7, Iss. 3;  pg. 229

 » More Like This - Find similar documents Subjects: Valuation,  Stock prices,  Pricing,  Options,  Models,  Mathematical

models,  ArbitrageClassification Codes 3400   Investment analysis ,  1100   Economics Author(s): Cox, John C.,  Ross, Stephen A.,  Rubinstein, MarkPublication title: Journal of Financial Economics. Amsterdam: Sep 1979. Vol. 7, Iss. 3;  pg. 229Source type: PeriodicalISSN/ISBN: 0304405XProQuest document ID: 1164548Document URL: http://proquest.umi.com/pqdweb?did=1164548&sid=23&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

In 1973, Fischer Black and Myron Scholes presented the first completely satisfactory equilibrium option pricing model. Unfortunately, the mathematical tools employed in the Black-Scholes model are quite advanced and have tended to obscure the underlying economies.The fundamental economic principles of option pricing by arbitrage methods are particularly clear in the simple discrete-time model presented. Its development requires only elementary mathematics, yet it contains as a special limiting case the Black-Scholes model. The basic model readily lends itself to generalization in many ways. Moreover, by its very construction, it gives rise to a simple and efficient numerical procedure for valuing options for which premature exercise may be optimal. It is clear that whenever stock price movements conform to a discrete binomial process or to a limiting form of such a process, options can be priced solely on the basis of arbitrage considerations.

The irrelevance of the MM dividend irrelevance theoremHarry DeAngelo,  Linda DeAngelo. Journal of Financial Economics. Amsterdam: Feb 2006.Vol.79, Iss. 2;  pg. 293

 » More Like This - Find similar documents Subjects: Economic models,  Theory,  Dividends,  Studies,  Investment policy Classification Codes 1130   Economic theory ,  3400   Investment analysis & personal finance ,  9130   Experimental/theoretical Author(s): Harry DeAngelo,  Linda DeAngeloDocument types: FeaturePublication title: Journal of Financial Economics. Amsterdam: Feb 2006. Vol. 79, Iss. 2;  pg. 293Source type: PeriodicalISSN/ISBN: 0304405XProQuest document ID: 974198791Document URL: http://proquest.umi.com/pqdweb?did=974198791&sid=24&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Contrary to Miller and Modigliani [1961. Dividend policy, growth, and the valuation of shares. Journal of Business 34, 411-433], payout policy is not irrelevant and investment policy is not the sole determinant of value, even in frictionless markets. MM ask "Do companies with generous distribution policies consistently sell at a premium above those with niggardly payouts?" But MM's analysis does not address this question because the joint effect of their assumptions is to mandate 100% free cash flow payout in every period, thereby rendering "niggardly payouts" infeasible and forcing distributions to a global optimum. Irrelevance obtains, but in an economically vacuous sense because the firm's opportunity set is artificially constrained to payout policies that fully distribute free cash flow. When MM's assumptions are relaxed to allow retention, payout policy matters in exactly the same sense that investment policy does. Moreover (i) the standard Fisherian model is empirically refutable, predicting that firms will make large payouts in present value terms, (ii) only when payout policy is optimized will the present value of distributions equal the PV of project cash flows, (iii) the NPV rule for investments is not sufficient to ensure value maximization, rather an

analogous rule for payout policy is also necessary, and (iv) Black's [1976. The dividend puzzle. Journal of Portfolio Management 2, 5-8] "dividend puzzle" is a non-puzzle because it is rooted in the mistaken idea that MM's irrelevance theorem applies to payout/retention decisions, which it does not. [PUBLICATION ABSTRACT]

DIVIDEND POLICY, GROWTH, AND THE VALUATION OF SHARESMERTON H MILLER,  FRANCO MODIGLIANI. The Journal of Business (pre-1986). Chicago: Oct 1961.Vol.34, Iss. 4;  pg. 411, 23 pgs

 » More Like This - Find similar documents Author(s): MERTON H MILLER,  FRANCO MODIGLIANIDocument types: articleLanguage:Language: en  Publication title: The Journal of Business (pre-1986). Chicago: Oct 1961. Vol. 34, Iss. 4;  pg. 411, 23 pgsSource type: PeriodicalISSN/ISBN: 00219398ProQuest document ID: 386549431Text Word Count 11831Document URL: http://proquest.umi.com/pqdweb?did=386549431&sid=24&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

THE effect of a firm's dividend policy on the current price of its shares is a

matter of considerable importance, not only to the corporate officials who must set the policy, but to investors planning portfolios and to economists seeking to understand and appraise the functioning of the capital markets.

A general approach to integrated risk management with skewed, fat-tailed risksJoshua V Rosenberg,  Til Schuermann. Journal of Financial Economics. Amsterdam: Mar 2006.Vol.79, Iss. 3;  pg. 569

 » More Like This - Find similar documents Subjects: Studies,  Risk management,  Credit risk,  Methods,  Comparative

analysis,  Financial institutionsClassification Codes 9130   Experimental/theoretical ,  8100   Financial services industry ,  3300   Risk management Author(s): Joshua V Rosenberg,  Til SchuermannDocument types: FeaturePublication title: Journal of Financial Economics. Amsterdam: Mar 2006. Vol. 79, Iss. 3;  pg. 569Source type: PeriodicalISSN/ISBN: 0304405XProQuest document ID: 991581231Document URL: http://proquest.umi.com/pqdweb?did=991581231&sid=3&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

Integrated risk management for financial institutions requires an approach for aggregating risk types (market, credit, and operational) whose distributional shapes vary considerably. We construct the

joint risk distribution for a typical large, internationally active bank using the method of copulas. This technique allows us to incorporate realistic marginal distributions that capture essential empirical features of these risks such as skewness and fat-tails while allowing for a rich dependence structure. We explore the impact of business mix and inter-risk correlations on total risk. We then compare the copula-based method with several conventional approaches to computing risk. [PUBLICATION ABSTRACT]

Should bank runs be prevented?Margarita Samartin. Journal of Banking & Finance . Amsterdam: May 2003.Vol.27, Iss. 5;  pg. 977

 » More Like This - Find similar documents Subjects: Studies,  Liquidity,  Risk,  Banking industry ,  WithdrawalsClassification Codes 9175   Western Europe ,  9130   Experimental/theoretical ,  8100   Financial services industry Locations: EuropeAuthor(s): Margarita SamartinDocument types: FeaturePublication title: Journal of Banking & Finance . Amsterdam: May 2003. Vol. 27, Iss. 5;  pg. 977Source type: PeriodicalISSN/ISBN: 03784266ProQuest document ID: 352407741Document URL: http://proquest.umi.com/pqdweb?did=352407741&sid=4&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

This paper extends Diamond and Dybvig's model [J. Political Economy 91 (1983) 401] to a framework in which bank assets are risky, there is aggregate uncertainty about the demand for liquidity in the population and some individuals receive a signal about bank asset quality. Others must then try to deduce from observed withdrawals whether an unfavorable signal was received by this group or whether liquidity needs happen to be high. In this environment, both information-induced and pure panic runs will occur. However, banks can prevent them by designing the deposit contract appropriately. It is shown that in some cases it is optimal for the bank to prevent runs but there are situations where the bank run allocation may be welfare superior. [PUBLICATION ABSTRACT]

Equilibrium bank runsJames Peck,  Karl Shell. The Journal of Political Economy. Chicago: Feb 2003.Vol.111, Iss. 1;  pg. 103, 21 pgs

 » More Like This - Find similar documents Subjects: Studies,  Economic models,  Game theory,  Equilibrium,  BankingClassification Codes 9130   Experimental/theoretical ,  1130   Economic theory Author(s): James Peck  ,  Karl ShellDocument types: FeaturePublication title: The Journal of Political Economy. Chicago: Feb 2003. Vol. 111, Iss. 1;  pg. 103, 21 pgsSource type: PeriodicalISSN/ISBN: 00223808ProQuest document ID: 293681431Text Word Count 1673Document URL: http://proquest.umi.com/pqdweb?did=293681431&sid=4&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

A banking system is analyzed in which the class of feasible deposit contracts, or mechanisms, is broad. The mechanisms must satisfy a sequential service constraint, but partial or full suspension of convertibility is allowed. Consumers must be willing to deposit, ex ante. The paper shows, by examples, that under the so-called optimal contract, the postdeposit game can have a run equilibrium. Given a propensity to run, triggered by sunspots, the optimal contract for the full predeposit game can be consistent with runs that occur with positive probability. Thus the Diamond-Dybvig framework can explain bank runs as emerging in equilibrium under the optimal deposit contract.

Comment on: Credit risk transfer and contagionTano Santos. Journal of Monetary Economics. Amsterdam: Jan 2006.Vol.53, Iss. 1;  pg. 113

 » More Like This - Find similar documents Subjects: Models,  Insurance industry,  Banking industry,  Credit riskClassification Codes 8200   Insurance industry ,  8100   Financial services industry ,  9190   United States Locations: United States,  USAuthor(s): Tano SantosDocument types: CommentaryPublication title: Journal of Monetary Economics. Amsterdam: Jan 2006. Vol. 53, Iss. 1;  pg. 113Source type: PeriodicalISSN/ISBN: 03043932ProQuest document ID: 978731851Document URL: http://proquest.umi.com/pqdweb?did=978731851&sid=10&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

A salient feature of the model presented by the authors is the fact that both the banking and the insurance sectors are explicitly considered. Insurance companies have had a more active role in areas where their presence was not traditionally felt and it is important to understand what this new role entails for the financial system as a whole. Here, the emphasis of the authors is on the increased role of insurance companies as sellers of credit protection to the banking sector.

Credit risk modeling with affine processesDarrell Duffie. Journal of Banking & Finance. Amsterdam: Nov 2005.Vol.29, Iss. 11;  pg. 2751

 » More Like This - Find similar documents Subjects: Credit risk,  Default,  Correlation analysis,  Studies,  Economic models,  Markov

analysisClassification Codes 9130   Experimental/theoretical ,  3400   Investment analysis & personal finance ,  1130   Economic theory Author(s): Darrell DuffieDocument types: FeaturePublication title: Journal of Banking & Finance. Amsterdam: Nov 2005. Vol. 29, Iss. 11;  pg. 2751Source type: PeriodicalISSN/ISBN: 03784266ProQuest document ID: 898253911Document URL: http://proquest.umi.com/pqdweb?did=898253911&sid=10&Fmt=2&clientId=18913&RQT=309&VName=PQD

Abstract (Document Summary)

This article combines an orientation to credit risk modeling with an introduction to affine Markov processes, which are particularly useful for financial modeling. We emphasize corporate credit risk and the pricing of credit derivatives. Applications of affine processes that are mentioned include survival analysis, dynamic term-structure models, and option pricing with stochastic volatility and jumps. The default-risk applications include default correlation, particularly in first-to-default settings. The reader is assumed to have some background in financial modeling and stochastic calculus. [PUBLICATION ABSTRACT]