Matching Items (14)
Description
In this dissertation, I examine the source of some of the anomalous capital market outcomes that have been documented for firms with high accruals. Chapter 2 develops and implements a methodology that decomposes a firm's discretionary accruals into a firm-specific and an industry-specific component. I use this decomposition to investigate which component drives the subsequent negative returns associated with firms with high discretionary accruals. My results suggest that these abnormal returns are driven by the firm-specific component of discretionary accruals. Moreover, although industry-specific discretionary accruals do not directly contribute towards this anomaly, I find that it is precisely when industry-specific discretionary accruals are high that firms with high firm-specific discretionary accruals subsequently earn these negative returns. While consistent with irrational mispricing or a rational risk premium associated with high discretionary accruals, these findings also support a transactions-cost based explanation for the accruals anomaly whereby search costs associated with distinguishing between value-relevant and manipulative discretionary accruals can induce investors to overlook potential earnings manipulation. Chapter 3 extends the decomposition to examine the role of firm-specific and industry-specific discretionary accruals in explaining the subsequent market underperformance and negative analysts' forecast errors documented for firms issuing equity. I examine the post-issue market returns and analysts' forecast errors for a sample of seasoned equity issues between 1975 and 2004 and find that offering-year firm-specific discretionary accruals can partially explain these anomalous capital market outcomes. Nonetheless, I find this predictive power of firm-specific accruals to be more pronounced for issues that occur during 1975 - 1989 compared to issues taking place between 1990 and 2004. Additionally, I find no evidence that investors and analysts are more overoptimistic about the prospects of issuers that have both high firm-specific and industry-specific discretionary accruals (compared to firms with high discretionary accruals in general). The results indicate no role for industry-specific discretionary accruals in explaining overoptimistic expectations from seasoned equity issues and suggest the importance of firm-specific factors in inducing earnings manipulation surrounding equity issues.
ContributorsIkram, Atif (Author) / Coles, Jeffrey (Thesis advisor) / Hertzel, Michael (Committee member) / Tserlukevich, Yuri (Committee member) / Arizona State University (Publisher)
Created2011
Description
I study the performance of hedge fund managers, using quarterly stock holdings from 1995 to 2010. I use the holdings-based measure built on Ferson and Mo (2012) to decompose a manager's overall performance into stock selection and three components of timing ability: market return, volatility, and liquidity. At the aggregate level, I find that hedge fund managers have stock picking skills but no timing skills, and overall I do not find strong evidence to support their superiority. I show that the lack of abilities is driven by the large fluctuations of timing performance with market conditions. I find that conditioning information, equity capital constraints, and priority in stocks to liquidate can partly explain the weak evidence. At the individual fund level, bootstrap analysis results suggest that even top managers' abilities cannot be separated from luck. Also, I find that hedge fund managers exhibit short-horizon persistence in selectivity skill.
ContributorsKang, MinJeong (Author) / Aragon, George O. (Thesis advisor) / Hertzel, Michael G (Committee member) / Boguth, Oliver (Committee member) / Arizona State University (Publisher)
Created2013
Description
This paper explores the rationale and analysis of a global financial institution and the methodologies used to underwrite a deal between the commercial bank and a middle market client looking to renew existing commercial loans; particularly a real estate term loan, long-term revolving line of credit, guidance line of credit (GLOC), equipment line of credit, and an interest rate swap contract. Typical analysis in the form of risk allowance, collateral due diligence, industry observation, and company-specific financial and operational strength has been performed and the deal has been approved by JPMorgan Chase & Co. Additionally, the frequency of covenant default has been determined by a pro forma income statement simulation based on a combination of both normal and uniform distributions to determine various outcomes for sales and cost of goods sold growth in future years. The results of the simulation are used to determine probability of default on specific financial covenants in the deal to gain a better understanding of the risks associated with the proposed exposure amount and the client's future financial situation.
ContributorsHebert, Troy Thomas (Author) / Boguth, Oliver (Thesis director) / Budolfson, Arthur (Committee member) / Hoyt, Jeffrey (Committee member) / Barrett, The Honors College (Contributor) / Department of Finance (Contributor)
Created2013-05
Description
In 1991, Jay R. Ritter published a paper titled The Long-Run Performance of Initial Public Offerings. In this paper, he found that companies performing an initial public offering (IPO) significantly underperform in comparison to companies that have not issued stock over the previous 5 years. It was in this paper that Ritter made the observation that the first 6 months after IPO and SEO had the closest performance with their matching non-offering firms. This led me to several questions. First, since it has been over 25 years since this research was performed, is this phenomenon still relevant? Second, if this phenomenon is still relevant, does the first 6-month performance after IPO still align with matching firms? Third, if this phenomenon is still relevant, is there a potential arbitrage opportunity for short-term investors?
In this paper, I show that this phenomenon of underperformance is still relevant today for initial public offerings within the technology sector. Additionally, I show that the 6-month performance for IPOs no longer aligns with matching firm performance. The mean performance of companies performing IPOs is significantly less than their matching firms. The average 6-month return of IPO companies was -8.43%, versus an average return of 16.46% for matching firms within the same industry and an average return of 24.22% for matching firms in different industries. Finally, I discuss the potential arbitrage opportunity for short-term investors looking to capitalize on this performance disparity.
In this paper, I show that this phenomenon of underperformance is still relevant today for initial public offerings within the technology sector. Additionally, I show that the 6-month performance for IPOs no longer aligns with matching firm performance. The mean performance of companies performing IPOs is significantly less than their matching firms. The average 6-month return of IPO companies was -8.43%, versus an average return of 16.46% for matching firms within the same industry and an average return of 24.22% for matching firms in different industries. Finally, I discuss the potential arbitrage opportunity for short-term investors looking to capitalize on this performance disparity.
ContributorsErtl, Athan Charles (Author) / Licon, Wendell (Thesis director) / Ikram, Atif (Committee member) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2020-05
Description
My project has been a long journey, one that I have learned a tremendous amount on. The final version of my project has come out to be a booklet teaching first time users of code and python the basic steps of getting started and some vital information that I learned while I was learning the language. I started my thesis with the idea of creating a portfolio of stock, bonds and commodities to determine the best allocation of your money over a 30-year period. To do this, I needed to learn how to code and become proficient quickly so I could create a program that would be powerful enough as well as spit out the correct output in the end. Unfortunately, I fell short of being able to build this portfolio out. I took on the challenge of learning Python on my own with no knowledge of any coding language to see if I could pull the whole project together. I failed, but I learned so much along the way and that I think is more valuable than anything. Since I was unable to complete my code, I shifted my attention to creating a small booklet on the basics of getting started in Python as if you have never looked at a coding language. Many of the tips I discuss in my booklet are problems I struggled with when I began. In the beginning I couldn’t even figure out how to get to a coding platform to begin my work, so I began to research and found many helpful tips that took me quite a while to understand.
ContributorsToumbs, Jason David (Author) / Boguth, Oliver (Thesis director) / Schreindorfer, David (Committee member) / Department of Finance (Contributor, Contributor) / Barrett, The Honors College (Contributor)
Created2019-05
Description
As more countries move toward renewable energy sources, universal acceptance is only a matter of time. It is no longer a question of if, but of when. For now, these types of energy sources can be too expensive or too complex for the average homeowner to acquire. A considerable financial investment and logistical specifications are required. My goal for this project is to create an analysis that will convey the most efficient and cost-effective way to move to a solar energy system without sacrificing output. There are many factors that go into the most practical and efficient strategy. These may include: solar tax credits, subsidies, rebates, panel type, utility company, among others. I hope to create an analysis that will enable anyone interested in taking advantage of solar power. The process outlined here will permit subjects to determine the best option for them, based on personal preferences and other related mitigating factors.
ContributorsStanley, John Richard (Author) / Simonson, Mark (Thesis director) / Ikram, Atif (Committee member) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2019-05
Description
I propose new measures of investor attention for Mutual Funds. Using the Security and Exchange Commissions’ Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system’s server log files, this study is the first to explore investor attention to specific mutual funds. I find that changes, or spikes, in mutual fund investor attention are associated with funds’ introduction of a new share class, decreases in expense ratio, past performance and volatility. On average, spikes to investor attention predict net inflows into mutual funds which outpace the overall growth of the mutual fund sector. Attention via this EDGAR channel is more important when investors are researching more opaque funds. Moreover, there is a positive relationship between mutual fund investor attention and fund returns. Yet, there is evidence that investors appear to be responding to the acquisition of stale information with flows. I additionally utilize Google Trends data for individual fund tickers and investigate its effects in Mutual Fund Market. I find that Investor Attention to individual mutual funds is concentrated within Equity funds, Index funds, and Institutional funds. Individual fund attention is strongly negatively associated with expense ratios, 12B-1 Fees, and 'broker sold' funds, suggesting that funds with higher fees get less attention than low cost index funds. I find limited support for the controversial convexity in the flow to performance sensitivity in the Mutual Fund market, but only in funds with high levels of individual attention.
ContributorsWymbs, Michael (Author) / Aragon, George (Thesis advisor) / Tserlukevich, Yuri (Committee member) / Boguth, Oliver (Committee member) / Arizona State University (Publisher)
Created2021
Description
This paper dives into the economic theory behind credit and lending markets to uncover the driving forces behind financial exclusion in modern finance. It breaks down the market size and demographic of the unbanked population in the United States and highlights the market failures and bad actors responsible for causing financial exclusion in credit markets. Finally, it introduces Zivoe Finance, a new approach to financial inclusion that is designed to expand affordable credit access across the globe. Zivoe is a decentralized credit protocol started in part by the authors of this paper that empowers anyone to fund affordable, inclusive loans in underserved financial sectors. The remainder of this paper is dedicated to understanding Zivoe Finance, how it works, the challenges the authors faced in building it, and how one can participate in its mission moving forward.
ContributorsAbbasi, Thor (Author) / Baca, Dennis (Co-author) / Sopha, Matt (Thesis director) / Ikram, Atif (Committee member) / Barrett, The Honors College (Contributor) / Department of Information Systems (Contributor)
Created2022-12
Description
This paper dives into the economic theory behind credit and lending markets to uncover the driving forces behind financial exclusion in modern finance. It breaks down the market size and demographic of the unbanked population in the United States and highlights the market failures and bad actors responsible for causing financial exclusion in credit markets. Finally, it introduces Zivoe Finance, a new approach to financial inclusion that is designed to expand affordable credit access across the globe. Zivoe is a decentralized credit protocol started in part by the authors of this paper that empowers anyone to fund affordable, inclusive loans in underserved financial sectors. The remainder of this paper is dedicated to understanding Zivoe Finance, how it works, the challenges the authors faced in building it, and how one can participate in its mission moving forward.
ContributorsBaca, Dennis (Author) / Abbasi, Thor (Co-author) / Sopha, Matthew (Thesis director) / Ikram, Atif (Committee member) / Barrett, The Honors College (Contributor) / Department of Finance (Contributor) / Department of Information Systems (Contributor)
Created2022-12
Description
This dissertation consists of two essays. The essay “Is Capital Reallocation Really Procyclical?” studies the cyclicality of corporate asset reallocation and its implication for aggregate productivity efficiency. Empirically, aggregate reallocation is procyclical. This is puzzling given the documented evidence that the benefits of reallocation are countercyclical. I show that this procyclicality is driven entirely by the reallocation of bundled capital (e.g., business divisions), which is highly correlated with market valuations and is unrelated to measures of productivity dispersion. In contrast, reallocation of unbundled capital (e.g., specific machinery or equipment) is countercyclical and highly correlated with dispersion in productivity growth. To gauge the aggregate productivity impact of bundled transactions, I propose a heterogeneous agentmodel of investment featuring two distinct used-capital markets as well as a sentiment component. In equilibrium, unbundled capital is reallocated for productivity gains, whereas bundled capital is also reallocated for real, or perceived, synergies in the equity market. While equity overvaluation negatively affects aggregate productivity by encouraging excessive trading of capital, its adverse impact is largely offset by its positive externality on asset liquidity in the unbundled capital market. The second essay “The Profitability of Liquidity Provision” studies the profitability of liquidity provision in the US equity market. By tracking the cumulative inventory position of all passive liquidity providers and matching each aggregate position with its offsetting trade, I construct a measure of profits to liquidity provision (realized profitability) and assess how profitability varies with the average time to offset. Using a sample of all common stocks from 2017 to 2020, I show that there is substantial variation in the horizon at which trades are turned around even for the same stock. As a
mark-to-market profit, the conventional realized spread—measured with a prespecified horizon—can deviate significantly from the realized profits to liquidity provision both in the cross-section and in the time series. I further show that, consistent with the risk-return tradeoff faced by liquidity providers as a whole, realized profitability is low for trades that are quickly turned around and high for trades that take longer to reverse.
ContributorsYang, Lingyan (Author) / Wahal, Sunil (Thesis advisor) / Boguth, Oliver (Thesis advisor) / Tserlukevich, Yuri (Committee member) / Arizona State University (Publisher)
Created2022