Matching Items (14)

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Where's My Free Lunch? Investigating the Bitcoin Arbitrage Premium

Description

The purpose of this thesis is to investigate the history of the Bitcoin arbitrage premium to see if the possibility of 'risk-free' gains existed previously and whether or not the

The purpose of this thesis is to investigate the history of the Bitcoin arbitrage premium to see if the possibility of 'risk-free' gains existed previously and whether or not the opportunity is still present today. It investigates market structure and price discrepancies in $147B of trading volume across 53 different exchanges between July 2010 and February 2017. This paper aggregates exchange trading into five minute buckets of transaction volume in order to see what exchange volume could have been successfully arbitraged within the context of two cases. The first requires trades to close within the same 5-minute interval and the second requires a 10-minute delay before the position is closed. It finds that the monthly average spreads of these cases have fallen below 3% in 2017 from nearly 10% in 2010. Once exchange fees are included, these spreads fall below 2% on average.

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Created

Date Created
  • 2017-05

Exploring Financial Credit Contracts Using Natural Language Processing Techniques

Description

Natural Language Processing (NLP) techniques have increasingly been used in finance, accounting, and economics research to analyze text-based information more efficiently and effectively than primarily human-centered methods. The literature is

Natural Language Processing (NLP) techniques have increasingly been used in finance, accounting, and economics research to analyze text-based information more efficiently and effectively than primarily human-centered methods. The literature is rich with computational textual analysis techniques applied to consistent annual or quarterly financial fillings, with promising results to identify similarities between documents and firms, in addition to further using this information in relation to other economic phenomena. Building upon the knowledge gained from previous research and extending the application of NLP methods to other categories of financial documents, this project explores financial credit contracts, better understanding the information provided through their textual data by assessing patterns and relationships between documents and firms. The main methods used throughout this project is Term Frequency-Inverse Document Frequency (to represent each document as a numerical vector), Cosine Similarity (to measure the similarity between contracts), and K-Means Clustering (to organically derive clusters of documents based on the text included in the contract itself). Using these methods, the dimensions analyzed are various grouping methodologies (external industry classifications and text derived classifications), various granularities (document-wise and firm-wise), various financial documents associated with a single firm (the relationship between credit contracts and 10-K product descriptions), and how various mean cosine similarity distributions change over time.

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Date Created
  • 2020-05

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Algorithmic Trading in the Crypto-currency Financial Sector

Description

This report is a summary of a long-term project completed by Ido Gilboa for his Honors Thesis. The purpose of this project is to determine if an arbitrage between different

This report is a summary of a long-term project completed by Ido Gilboa for his Honors Thesis. The purpose of this project is to determine if an arbitrage between different crypto-currency exchanges exists, and if it is possible to acts upon such triangular arbitrage. Bitcoin, the specific crypto-currency this report focuses on, has become a household name, yet most do not understand its origin and patterns. The report will detail the process of collecting data from different sources, manipulating it in order to run the algorithms, explain the meaning behind the algorithms, results and important statistics found, and conclusion of the project. In addition to that, the report will go into detail discussing financial terms such as triangular arbitrage as well as information system concepts such as sockets and server communication. The project was completed with the assistance of Dr. Sunil Wahal and Dr. Daniel Mazzola, professors in the W.P. Carey School of business. This project has been stretched over along period of time, spanning from early 2013 to fall of 2015.

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Created

Date Created
  • 2015-12

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Extending Profitability to 1927-1953

Description

In this paper we conduct an out-of-sample test on gross profitability and investment in the same manner as Davis, Fama, and French (2000) for the pre-Compustat period (1926-1955). We hand-collect

In this paper we conduct an out-of-sample test on gross profitability and investment in the same manner as Davis, Fama, and French (2000) for the pre-Compustat period (1926-1955). We hand-collect financial statement data from Moodys Industrial Manuals using the company PERMNO list first created by DFF. In total, we collect data from 1,291 firms, largely industrial firms but with some utilities. We then run Fama-Macbeth (1973) regressions using gross profit, scaled operating profit, scaled net income, and investment along with existing variables like book-to-market, market equity, one-month reversal, and one-year momentum. We find that the premiums on gross profitability and investment are not significant for any part of our sample period. For the overall sample period as well as the first half (before the 1933 Securities Act), our accounting data is often missing or cross-sectionally inconsistent. Despite the better-quality data in the period after 1935, however, neither gross profitability not investment have significant Fama-Macbeth slopes. We believe this is caused by inconsistent and incomplete accounting data, chiefly the number of firms that combine SG&A and COGS data into one "cost" number and the inclusion of investment-like costs, like R&D, in COGS or SG&A. This causes gross profitability to not reflect direct economic profitability as closely as in prior research. However, net income has significantly positive coefficients during this period and is not subsumed by gross profitability; this contradicts prior research for the post-1962 period. More data cleaning and analysis is needed in order to form firm conclusions on the gross profitability, net income, and investment premiums during this period.

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Created

Date Created
  • 2016-05

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401(k) Plans: Do You Get What You Pay For?

Description

This paper looks at defined contribution 401(k) plans in the United States to analyze whether or not participants have plans with better plan characteristics defined in this study by paying

This paper looks at defined contribution 401(k) plans in the United States to analyze whether or not participants have plans with better plan characteristics defined in this study by paying more for administration services, advisory services, and investments. By collecting and analyzing Form 5500 and audit data, I find that there is no relation between how much a plan and its participants are paying for recordkeeping, advisory, and investment fees and the analyzed characteristics of the plan that they receive in regards to active/passive allocation, revenue share, and the performance of the funds.

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Date Created
  • 2015-05

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High-frequency quoting, trading, and the efficiency of prices

Description

We examine the relation between high frequency quotation and the behavior of stock prices between 2009 and 2011 for the full cross section of securities in the US. On average,

We examine the relation between high frequency quotation and the behavior of stock prices between 2009 and 2011 for the full cross section of securities in the US. On average, higher quotation activity is associated with price series that more closely resemble a random walk, and significantly lower cost of trading. We also explore market resiliency during periods of exceptionally high low-latency trading: large liquidity drawdowns in which, within the same millisecond, trading algorithms systematically sweep large volume across multiple trading venues. Although such large drawdowns incur trading costs, they do not appear to degrade the price formation process or increase the subsequent cost of trading. In an out-of-sample analysis, we investigate an exogenous technological change to the trading environment on the Tokyo Stock Exchange that dramatically reduces latency and allows co-location of servers. This shock also results in prices more closely resembling a random walk and a sharp decline in the cost of trading.

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Date Created
  • 2015-05-01

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Value creation of private equity funds: practices in China

Description

Based on multiple case studies of the transactions in China by private equity funds, this paper attempts to explore the value-creation capabilities of private equity funds at the transaction/deal level.

Based on multiple case studies of the transactions in China by private equity funds, this paper attempts to explore the value-creation capabilities of private equity funds at the transaction/deal level.

Previous studies on financial performance of PE funds utilized data collected from publically traded companies in European/US markets. By measuring financial performance of both “pre- and post-transactions,” these studies researched two questions: 1) Do buyout funds create value? 2) If they do, what are the sources of value creation? In general, studies conclude that private equity/buyout funds do create value at both the deal level and investor level. They also identified four possible sources of such value creation: 1) undervaluation, 2) leverage effect, 3) better governance, and 4) operational improvement.

However, relatively little is known about the process of value creation. In this study, I attempt to fill that gap, revealing the “secret recipe” of value creation.

By carefully looking into the process of value creation, this study suggests five propositions covering capabilities at 1) deal selection/screening, 2) deal structuring, 3) operational improvement, 4) investment exit, and 5) Top Management Team (TMT). These capabilities at private equity/buyout funds are critical factors for value creation. In a thorough review of the value-creation process, this paper hopes to:

1) Share real-life experiences and lessons learned on private equity transactions in China as a developing economy.

2) Reveal the process of deal/transaction to observe measures taken place within deal/transaction for value creation.

3) Show how well-executed strategies and capabilities in deal selection/screening, deal structuring, operational improvement, and investment exit can still create value for private equity firms without financial leverage.

4) Share the experience of State-Owned Enterprises (SOE) reform participated in by private equity firms in China. This could provide valuable information for policy makers in China.

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Created

Date Created
  • 2016

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Research of Dynamic Relationship between the Price of Alternative Investment Products and Macro-Economy

Description

This paper studies the dynamic relationship between the pricing of Alternative Asset Management products and macroeconomic variables. It does so using an index of Alternative Asset Management products, employing a

This paper studies the dynamic relationship between the pricing of Alternative Asset Management products and macroeconomic variables. It does so using an index of Alternative Asset Management products, employing a VAR framework and examining the implied impulse response functions. I find a bivariate causal relation between the expected rate of return on Alternative Asset Management products and the growth rate of industrial value added. I also find that the CPI, the yield on one-year national debt, the weighted average yield of bond repurchases in interbank bond market, and the one-year loan interest rate can influence the expected return rate of Alternative Asset Management products. An analysis of the variance decomposition suggests that macroeconomic variables have a different impacts on forecast errors variance.

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Created

Date Created
  • 2016

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Essays in Finance and Macroeconomics: Household Financial Obligations and the Equity Premium

Description

This dissertation is a collection of three essays relating household financial obligations to asset prices. Financial obligations include both debt payments and other financial commitments.

In the first essay, I investigate

This dissertation is a collection of three essays relating household financial obligations to asset prices. Financial obligations include both debt payments and other financial commitments.

In the first essay, I investigate how household financial obligations affect the equity premium. I modify the standard Mehra-Prescott (1985) consumption-based asset pricing model to resolve the equity risk premium puzzle. I focus on two channels: the preference channel and the borrowing constraints channel. Under reasonable parameterizations, my model generates equity risk premiums similar in magnitudes to those observed in U.S. data. Furthermore, I show that relaxing the borrowing constraint shrinks the equity risk premium.

In the Second essay, I test the predictability of excess market returns using the household financial obligations ratio. I show that deviations in the household financial obligations ratio from its long-run mean is a better forecaster of future market returns than alternative prediction variables. The results remain significant using either quarterly or annual data and are robust to out-of-sample tests.

In the third essay, I investigate whether the risk associated with household financial obligations is an economy-wide risk with the potential to explain fluctuations in the cross-section of stock returns. The multifactor model I propose, is a modification of the capital asset pricing model that includes the financial obligations ratio as a ``conditioning down" variable. The key finding is that there is an aggregate hedging demand for securities that pay off in periods characterized by higher levels of financial obligations ratios. The consistent pricing of financial obligations risk with a negative risk premium suggests that the financial obligations ratio acts as a state variable.

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Created

Date Created
  • 2017

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Activist Investors and Firm Performance Empirical Evidence From Chinese A Share Market

Description

Shareholder Activism is a mechanism by which investors who hold a significant but

non-majority percentage of a company’s stock, exercise their voting rights, participate in

corporate governance and influence operational decisions of

Shareholder Activism is a mechanism by which investors who hold a significant but

non-majority percentage of a company’s stock, exercise their voting rights, participate in

corporate governance and influence operational decisions of target companies. The

purpose is improve corporate governance, increase firm performance and boost share

-holders’ returns. Existing studies of shareholder activism, based largely in mature

capital markets like the US, come to different conclusions regarding its impact on firm

performance.

In this paper, I collect data on shareholder activism events in the China A Share

market between 2006 and 2016. The sample includes 60 companies targeted by 42

activist investors over this period. I find that institutional investors, typically industrial

capital and private funds, playing an increasingly important role in corporate governance

of Chinese listed companies through activism. The disclosure of the holdings of activists

results in large gains in the target firm. I also find subsequent improvements in long

-term operational performance of target firms. Activist investors in China focus on

smaller targets and those characterized by higher agency costs and lower operating

performance. Activists appear to be largely concerned with improvements in business

strategy and M&A activity. Non-hostile behavior is more likely to be related to successful

activism in China. In addition to statistical evidence, I present case studies of the

“BaoWan dispute” and the activist investment of Butterfly Capital in two firms,

“Guonong” and “Xiuqiang”. The case studies highlight the mechanism employed by these

firms to influence performance.

I conclude with policy recommendations and direction for further research.

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Created

Date Created
  • 2017