Showing papers in "Review of Financial Economics in 2010"

TL;DR: The authors survey theoretical developments in the literature on the limits of arbitrage, and nest within a simple model, the following costs faced by arbitrageurs: (a) risk, both fundamental and non-fundamental; (b) short selling costs; (c) leverage and margin constraints; and (d) constraints on equity capital.

TL;DR: In this paper, the competitive conditions prevailing in Islamic and conventional global banking markets, and investigate the possible differences in profitability between these markets, using a sample of banks across 13 countries during 2000-2006.

TL;DR: In this article, the authors explore whether terrorism exerts a significant negative impact on daily stock market returns in a sample of 22 countries and find that terrorist activity leads to significantly lower returns on the day of a terrorist attack.

TL;DR: A review of recent research into corporate voting and elections can be found in this paper, where the value of voting rights and how this value can vary in different settings, and some investors have embraced innovative empty voting strategies for decoupling voting rights from cash flow rights, enabling them to mount aggressive programs of shareholder activism.

TL;DR: A review of the literature on Bayesian portfolio analysis can be found in this paper, where asset returns are assumed both independently and identically distributed as well as predictable through time, and a range of applications from investing in single assets and equity portfolios to mutual and hedge funds.

TL;DR: In this paper, the authors present predictability evidence from the difference between implied and expected variances or variance risk premium that: (1) the variance difference measure predicts a significant positive risk premium across equity, bond, and credit markets; (2) the predictability is short-run, in that it peaks around one to four months and dies out as the horizon increases.

TL;DR: The authors summarizes the foundations of portfolio theory and its applications to current issues, such as the choice of criteria for practical risk return analysis, and whether some form of risk-return analysis should be used in fact.

TL;DR: In this article, the authors examined the extent to which the stock market provides a hedge to investors against inflation in African stock markets and showed that the point estimates of the elasticities of stock prices with respect to consumer prices range from 0.015 for Tunisia to 2.264 for South Africa.

TL;DR: A review of the rapidly developing literature on investment performance evaluation can be found in this article, where the authors summarize the significant forces and contributions that have brought this field of research to its current state of knowledge and suggest directions for future research.

TL;DR: In this paper, the interaction between a private firm and a government when they time an investment decision while in a public-private partnership was studied, using a real options framework and considering the degree of sharing in the cost of the investment and the risk in the operation of the project.

TL;DR: The authors reviewed models of ambiguity aversion and showed that such models have implications for portfolio choice and asset pricing that are very different from those of SEU and that help to explain otherwise puzzling features of the data.

TL;DR: In this paper, the authors survey various econometric approaches that have been developed to empirically examine various asset pricing models used to explain the difference in cross-section of security returns.

TL;DR: In this paper, the authors explore and identify inflation as it is embedded in a broad range of asset classes beyond simply TIPS, oil, gold and real estate, and find that achieving stable real returns during hyperinflationary periods is virtually impossible without access to a vast array of short-term fixed income instruments.

TL;DR: In this paper, the authors summarized research examining how privatization programs implemented by governments over the past three decades have changed the size and efficiency of global financial markets, altered the practice of corporate finance in economies that experienced large privatizations, and impacted the returns earned by individual investors who purchased stock in a privatized company.

TL;DR: In this article, the effect of higher counterparty risk on the cost of funding was investigated in the case of the Quezon Power Ltd Co and the results showed that the spread of Quezon's bond and counterparty risks are positively correlated when risk is represented by the daily volatility of the offtaker's stock returns.

TL;DR: In this article, the authors investigate the performance of global and 50 country-specific (28 developed and 22 emerging) fundamentally weighted portfolios compared to capitalization-weighted portfolios and find that superior performance of domestic portfolios diminishes considerably when applying a bootstrap procedure for robust performance testing.

TL;DR: In this paper, a model that incorporates the effects of the management efforts on market outcomes in its framework is proposed, which highlights a set of conditions under which corporations prefer off-balance-sheet project financing.

TL;DR: In this article, the authors review the evolution of the risk-neutral evolution of equity prices and discuss several stochastic processes arising in the description of risk neutral evolution of stock prices.

TL;DR: Empirical validation covering the current financial crisis shows that VaR estimation via the optimization process is relatively reliable and consistent, and generally outperforms the VaR generated by a simple Monte Carlo simulation.

TL;DR: In this paper, the authors study the wealth effect of offshoring by analyzing the announcement-period returns as well as the long-run operating and stock return performance of firms that offshored their activities in the period 2000-2005.

TL;DR: In this article, a Bayesian learning real option (BLRO) model was developed by combining the Bayesian decision-making process with the real options framework to evaluate strategic capital expenditures assuming a decision time horizon and posturing costs.

TL;DR: In this paper, the authors apply a nonlinear structural equation framework to analyze dynamic capital structure choice and test the hypothesis that firms adjust leverage towards a time-varying target, and that this target is determined by solving an optimization problem.

TL;DR: In this article, the implications of prospect theory and the house money effect also hold for the power traders in the energy sector, and the results indicate the possible influence of the recent global crisis on prospect theory.

TL;DR: In this paper, the authors examine asset returns in the context of real dynamic stochastic general equilibrium economies with multiple equilibria (indeterminacy) that allow for aggregate fluctuations due to non-fundamental belief shocks.

TL;DR: This article provided a derivation for the correct result and performed numerical evaluations, and showed that Baum et al. (C.6) is incorrect. But they also proposed a novel approach to dealing with uncertainty through conditional variability, as reflected in their Eq.

TL;DR: Grieves and Marcus as discussed by the authors evaluated the empirical efficacy of their two-relevant-bonds model and compared the maturities of actual cheapest-to-deliver bonds to the prediction of the model and calculate empirical price values of a basis point for Treasury futures contracts to determine whether contract prices display the negative convexity predicted by the model.

TL;DR: In this paper, the relationship between firms' default probability and the amount of bank debt they obtain, evaluating whether and to what extent this link is affected by the degree of competition characterizing the local credit market where firms operate.

TL;DR: In this paper, a discrete time binomial approach to structural credit risk modeling is presented, which enables project financing analysts a more accessible tool to evaluate project loan structures, such as the loan to valuation ratio, loan interest rate, repayment schedules, and fees.

TL;DR: In this article, the authors use an economic lens to offer perspectives on securities regulation and discuss several motives for regulation and highlight some facets of regulatory conflict, competition, and coordination as well as the range of required securities market disclosures.