State Street Global Advisors

About: State Street Global Advisors is a based out in . It is known for research contribution in the topics: Portfolio & Diversification (finance). The organization has 89 authors who have published 154 publications receiving 2910 citations. The organization is also known as: SSgA.

International Evidence on Financial Derivatives Usage

Abstract: Popular theories of financial risk management indicate that nonfinancial corporations may use derivatives to lower the expected costs of financial distress, to coordinate cash flows with investment policy, or because of agency conflicts between managers and owners. Using a new database of 7,319 firms in 50 countries, we show that traditional tests of these explanations result in little explanatory power for determining which firms use derivatives. Instead, risk management choices are determined endogenously with other financial and operating decisions in ways that are intuitive but difficult to attribute to specific theories. This finding has several important implications. First, it explains why identifying specific motivations for financial risk management is difficult. Second, it indicates that derivative usage can have significant effects on other firm decisions such as the level and maturity of debt, dividend policy, holdings of liquid assets, and the degree of operating hedging. Third, it implies that future empirical and theoretical research on corporate risk management needs to examine a broader array of firm characteristics and decisions to better isolate the role derivatives play in financial policy.

International evidence on financial derivatives usage

Abstract: Theory predicts that nonfinancial corporations might use derivatives to lower financial distress costs, coordinate cash flows with investment, or resolve agency conflicts between managers and owners. Using a new database, we find that traditional tests of these theories have little power to explain the determinants of corporate derivatives usage. Instead, we show that derivative usage is determined endogenously with other financial and operating decisions in ways that are intuitive but not related to specific theories for why firms hedge. For example, derivative usage helps determine the level and maturity of debt, dividend policy, holdings of liquid assets, and international operating hedging.

Sources of Momentum Profits: Evidence on the Irrelevance of Characteristics

Abstract: Several recent studies document that sorting stocks first on certain stock-level characteristics and then on past returns results in elevated momentum profits. We show that such strategies enhance momentum profits simply by trading in stocks with more extreme past returns. Adjusted for this effect, elevated momentum profits resulting from characteristics (size, R², turnover, age, analyst coverage, analyst forecast dispersion, market-to-book, price, illiquidity, credit rating) disappear almost entirely. Interaction patterns have been used to support behavioral and limits-to-arbitrage explanations of momentum; our findings imply that explanations of momentum should instead focus on the link between momentum profits and extreme past returns.