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Publication Metadata only A dynamic asset pricing model with time-varying factor and idiosyncratic risk(Oxford University Press (OUP), 2009) Department of Economics; Glabadanidis, Paskalis; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThis paper uses a multivariate GaRCH model to account for time variation in factor loadings and idiosyncratic risk in improving the performance of the CaPM and the three-factor Fama-French model. I show how to incorporate time variation in betas and the second moments of the residuals in a very general way. Both the static and conditional CaPM substantially outperform the three-factor model in pricing industry portfolios. Using a dynamic CaPM model results in a 30% reduction in the average absolute pricing error of size/book-to-market portfolios. ad hoc analysis shows that the market beta of a value-minus-growth portfolio decreases whenever the default premium increases as well as during economic recessions.Publication Metadata only A note on the valuation of compound options(John Wiley & Sons Inc, 2002) N/A; Department of Economics; Lajeri-Chaherli, Fatma; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThe value of a compound option, an option on an option, has been derived by Geske (1976) using Fourier integrals. This article presents two alternative proofs to derive the value of a compound option. One proof is based on the martingale approach, which provides a simple and powerful tool for valuing contingent claims, The second proof uses the expectation of a truncated bivariate normal variable. These proofs allow for an intuitive interpretation of the three elements constituting the value of a compound option.Publication Metadata only Aggregate investor preferences and beliefs: a comment(Elsevier Science Bv, 2013) Kopa, Milos; N/A; Post, Gerrit Tjeerd; Other; Graduate School of Business; N/AA recent study in this journal presents encouraging results of a daunting simulation analysis of the statistical properties of a centered bootstrap approach to stochastic dominance efficiency analysis. However, by relying on the first-order optimality condition in a situation where multiple optima may occur, the empirical analysis draws the questionable conclusion that some of the toughest data sets in empirical asset pricing can be rationalized by the representative investor maximizing an S-shaped utility function, consistent with the so-called Prospect Stochastic Dominance criterion. Further research could be directed to developing global optimization algorithms and consistent re-sampling methods for statistical inference for general risky choice problems.Publication Metadata only Firm complexity and post-earnings announcement drift(Springer) Barinov, Alexander; Park, Shawn Saeyeul; Department of Business Administration; Yıldızhan, Çelim; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 328466We show that the post-earnings announcement drift (PEAD) is stronger for conglomerates than single-segment firms. Conglomerates, on average, are larger than single segment firms, so it is unlikely that limits-to-arbitrage drive the difference in PEAD. Rather, we hypothesize that market participants find it more costly and difficult to understand firm-specific earnings information regarding conglomerates, as they have more complicated business models than single-segment firms. This in turn slows information processing about them. In support of our hypothesis, we find that, compared to single-segment firms with similar firm characteristics, conglomerates have relatively low institutional ownership and short interest, are covered by fewer analysts, and these analysts have less industry expertise and make larger forecast errors. Finally, we find that an increase in organizational complexity leads to larger PEAD and document that more complicated conglomerates have even greater PEAD. Our results are robust to an extensive list of alternative explanations of PEAD as well as alternative measures of firm complexity.Publication Metadata only Hedging under gamma constraints by optimal stopping and face-lifting(Blackwell Publishing, 2007) Touzi, Nizar; Department of Mathematics; Soner, Halil Mete; Faculty Member; Department of Mathematics; College of Sciences; N/AA super-replication problem with a gamma constraint, introduced in Soner and Touzi, is studied in the context of the one-dimensional Black and Scholes model. Several representations of the minimal super-hedging cost are obtained using the characterization derived in Cheridito, Soner, and Touzi. It is shown that the upper bound constraint on the gamma implies that the optimal strategy consists in hedging a conveniently face-lifted payoff function. Further an unusual connection between an optimal stopping problem and the lower bound is proved. A formal description of the optimal hedging strategy as a succession of periods of classical Black-Scholes hedging strategy and simple buy-and-hold strategy is also provided.Publication Metadata only Identity realization, multiple logics and legitimacy: organizational foundings during the emergence of the Dutch accounting industry(Pergamon-Elsevier Science Ltd, 2020) Boone, Christophe; van Witteloostuijn, Arjen; Department of Business Administration; Divarcı Çakmaklı, Anıl; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 198542N/APublication Metadata only Imported machinery for export competitiveness(Oxford University Press (OUP), 2002) Mody, Ashoka; Department of Economics; Yılmaz, Kamil; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 6111This article analyzes the relationship between export competitiveness and investment in machinery, allowing for imperfect substitution between domestically produced and imported machinery. A translog export price function is estimated for developed, exportoriented developing, and import-substituting developing economies in a panel data setting. Between 1967 and 1990 imported machinery helped lower export prices for export-oriented developing economies. Moreover, throughout the period imported machinery was not a substitute for domestic machinery. Import-substituting developing economies were unable to harness imported machinery to reduce costs early in the period, but from about the early 1980s, with the opening of their trade regimes, they were able to benefit from the cost-reducing effect. The results imply that innovative effort based on imported technologies can be a precursor to the development of domestic innovation capabilities.Publication Metadata only Investment intensity of currencies and the random walk hypothesis: cross-currency evidence(2011) Chuluun, Tuugi; Eun, Cheol S.; Department of Economics; Kılıç, Rehim; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThis paper studies the cross-currency and temporal variations in the random walk behavior in exchange rates. We characterize currencies with relatively large investment flows as investment intensive and conjecture that the more investment intensive a currency is, the closer its exchange rate adheres to random walk. Using 29 floating bilateral USD exchange rates, we find that the higher the investment intensity, the less likely it is to reject random walk and the smaller the deviation from random walk is. However, the effect of investment intensity is non-monotonic. Application of threshold models shows that after investment intensity reaches the estimated thresholds, the level of investment intensity has no further effect on the deviation from random walk. These findings help reconcile the previous conflicting results on the random walk in exchange rates by focusing on the effect of cross-currency and temporal variations in investment intensity.Publication Metadata only Labor unions and post-acquisition integration capability: evidence from goodwill impairment(Wiley) Jang, Youngki; Jung, Boochun; Warsame, Hussein; Department of Business Administration; Kallousa, Najlaa Ahmed; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; N/AWe examine whether operating inflexibility posed by labor unions affects goodwill impairment. We predict such inflexibility hinders resource reallocation after acquisition, thereby preventing the acquiring firm from realizing synergies included in goodwill. Consistent with this prediction, we find that the strength of labor unions is positively associated with the likelihood and magnitude of goodwill impairment losses. Our results are robust to a battery of tests that address the potential endogeneity. Furthermore, we find that managers who possess superior ability mitigate the negative consequences of labor unions on goodwill impairment. Overall, our findings suggest that operating inflexibility posed by labor unions is an important determinant of goodwill impairment that indicates a failure to realize the expected synergy from the acquisition.Publication Metadata only Long memory and nonlinearity in conditional variances: a smooth transition FIGARCH model(Elsevier Science Bv, 2011) N/A; Department of Economics; Kılıç, Rehim; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThis paper introduces the Smooth Transition version of FIGaRCH model which is designed to account for both long memory and nonlinear dynamics in the conditional variance. Nonlinearity is introduced via a logistic transition function. the model can capture smooth changes in the volatility across different regimes as well as asymmetric response to negative and positive shocks and allows for nonzero thresholds. Simulations find that the Smooth Transition FIGaRCH model outperforms the standard FIGaRCH model when nonlinearity is present, and ignoring nonlinearity in the data may induce considerable costs in terms of bias and efficiency. applications to exchange rate and stock market data show that the proposed model performs well both in-sample fit as well as in forecasting one-day ahead volatility. (c) 2010 Elsevier B.V. .