Showing papers by "Hendrik Bessembinder published in 2016"
TL;DR: In this paper, the authors extend the theory of strategic trading around a predictable liquidation by considering the role of market resiliency, and find that even a monopolist strategic trader improves market quality and increases liquidator proceeds if trades' temporary price impacts are quickly reversed.
54 citations
TL;DR: In this paper, the authors propose that the expected returns estimated from the broad stock market based on firm characteristics provide a useful benchmark for assessing whether returns to certain stocks are abnormal, and demonstrate that the apparently abnormal returns after eight important events, including credit rating and analyst recommendation downgrades, initial and seasoned public equity offerings, mergers and acquisitions, dividend initiations, share repurchases and stock splits, are substantially reduced or eliminated when event stock returns are compared to characteristic-based expected returns.
Abstract: We propose that expected returns estimated from the broad stock market based on firm characteristics provide a useful benchmark for assessing whether returns to certain stocks are abnormal. To illustrate, we document that the apparently abnormal returns after eight important events, including credit rating and analyst recommendation downgrades, initial and seasoned public equity offerings, mergers and acquisitions, dividend initiations, share repurchases and stock splits, are substantially reduced or eliminated when event stock returns are compared to characteristic-based expected returns. A simple five-characteristic specification using firm size, book-to-market ratio, profitability, asset growth, and return momentum performs well for most examined events.
15 citations
TL;DR: In this paper, the authors investigate the "frictional" costs that college and university endowments incur in implementing fossil fuel divestment, including transaction costs and ongoing monitoring and active management costs.
Abstract: Advocacy for fossil fuel divestment has been growing on college campuses nationwide in recent years. In contrast with prior literature, which focuses on the impact of divestment on returns, I investigate the “frictional” costs that college and university endowments incur in implementing fossil fuel divestment, including transaction costs and ongoing monitoring and active management costs. I find that these costs are likely to be substantial, for the following reasons. First, endowments are long-term investors that tend to hold illiquid assets that are costly to sell. Second, endowments frequently invest in mutual funds or commingled funds, which requires them to sell more than just fossil-fuel-related assets in order to divest. Third, since there is no well-defined and agreed-upon list of assets that are fossil-fuel-related, investment managers must undertake a degree of active management in order to maintain compliance with divestment goals. Overall, I estimate a total cost to endowments over 20 years due to the frictional costs of divestment that range between approximately 2 and 12 percent of the endowment’s value, which, for a typical large university endowment, would translate to a decline in value of between $1.4 billion and $7.4 billion.
9 citations