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Publication Metadata only Aggregate earnings, firm-level earnings, and expected stock returns(Cambridge Univ Press, 2008) Tehranian, Hassan; Demirtaş Özgür; Department of Economics; Bali, Turan; Other; Department of Economics; College of Administrative Sciences and Economics; N/AThis paper provides an analysis of the predictability of stock returns using market-, industry-, and firm-level earnings. Contrary to Lamont (1998), we find that neither dividend payout ratio nor the level of aggregate earnings can forecast the excess market return. We show that these variables do not have robust predictive power across different stock portfolios and sample periods. In contrast to the aggregate-level findings, earnings yield has significant explanatory power for the time-series and cross-sectional variation in firm-level stock returns and the 48 industry portfolio returns. The mean reversion of stock prices as well as the earnings' correlation with expected stock returns are responsible for the forecasting power of earnings yield. These results are robust after controlling for book-to-market, size, price momentum, and post-earnings announcement drift. At the aggregate level, the information content of firm-level earnings about future cash flows is diversified away and higher aggregate earnings do not forecast higher returns.Publication Metadata only Analyzing federal reserve asset purchases: from whom does the Fed buy?(Elsevier Science Bv, 2015) Carpenter, Seth; Ihrig, Jane; Klee, Elizabeth; Department of Economics; Demiralp, Selva; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 42533Asset purchases have become an important monetary policy tool of the Federal Reserve in recent years. To date, most studies of the Federal Reserve's asset purchases have tried to measure the interest rate effects of the purchases, and several provide evidence that these purchases do have important effects on longer-term market interest rates. The theory of how asset purchases work, however, is less well developed. Some of the empirical studies point to "preferred habitat" models in which investors do not have the same objectives, and therefore prefer to hold different types and maturities of securities. To study this more closely, we exploit Flow of Funds data to assess the types of investors that are selling to the Federal Reserve and their portfolio adjustment after these sales, which could provide a view to the plausibility of preferred habitat models and the transmission of unconventional monetary policy across asset markets. We find that the Federal Reserve is ultimately buying from only a handful of investor types, primarily households (which includes hedge funds), with a different reaction to changes in Federal Reserve holdings of longer-term versus shorter-term assets. Although not evident for all investors, the key participants are shown to rebalance their portfolios toward more risky assets during this period. These results can be interpreted as supporting, at least in part, the preferred habit theory and the view that the monetary policy transmission is working across asset markets.Publication Metadata only Bondholder governance, takeover likelihood, and division of gains(Elsevier, 2023) Akdogu, Evrim; Paukowits, Aysun Alp; Department of Business Administration; Çelikyurt, Uğur; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 47082We investigate the effect of creditor rights on the probability of becoming a takeover target by constructing firm-level bond covenant indices. Our primary result is that the more restrictive covenants a firm has, the more likely it is to become the target of an acquisition. This finding is robust to the exclusion of merger-related event-risk covenants which have the opposite impact and appear to reduce takeover likelihood. Furthermore, this effect is not driven by financially distressed firms and rather contained in small, profitable, financially healthy firms with high growth opportunities and low cash holdings. We also find that a higher target covenant index leads to a significant decrease (increase) in target (acquirer) abnormal returns around acquisition announcements and tilts merger gains towards the acquirer, suggesting the presence of a 'cove-nant discount' for potential target firms. Overall, our results are consistent with covenants creating key frictions, and in turn, making firms viable targets for acquirers with possibly deep pockets.Publication Open Access Do physiological and spiritual factors affect economic decisions?(Wiley, 2021) Özbaş, Oğuzhan; Silva, Rui C.; Department of Business Administration; Demiroğlu, Cem; Ulu, Mehmet Fatih; Faculty Member; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 18073; N/AWe examine the effects of physiology and spiritual sentiment on economic decision-making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003 to 2013, we find that small business loans originated during Ramadan are 15% more likely to default within two years of origination. Loans originated in hot Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Despite their worse performance, Ramadan loans have lower credit spreads.Publication Metadata only Four approaches to accounting for diversity in global organisations(Elsevier, 2016) Tatli, Ahu; Ipek, Gulce; Sameer, Mohammad; Department of Business Administration; Özbilgin, Mustafa; Other; Department of Business Administration; College of Administrative Sciences and Economics; N/AThis paper examines four distinct approaches to accounting for diversity outcomes in global organisations: shareholder, stakeholder, regulation and global value chain. Drawing on a study of 22 globally significant organisations, our analyses show that there is a need to move beyond narrow framing of benefits of diversity management based on shareholder and stakeholder perspectives. Our study demonstrates that regulation as well as global value chain is pertinent new perspectives that organisations need to move towards if they are to seriously account for diversity outcomes. Yet, our study shows that such a development is not likely to happen easily due to a number of significant challenges in accounting for diversity outcomes in global organisations.Publication Metadata only Household consumption through recent recessions(Wiley, 2013) Low, Hamish; O'Dea, Cormac; Department of Economics; Crossley, Thomas Fraser; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThis paper examines trends in household consumption and saving behaviour in each of the last three recessions in the UK. The Great Recession' has been different from those that occurred in the 1980s and 1990s. It has been both deeper and longer, but also the composition of the cutbacks in consumption expenditures differs, with a greater reliance on cuts to nondurable expenditure than was seen in previous recessions, and the distributional pattern across individuals differs. The young have cut back expenditure more than the old, as have mortgage holders compared with renters. By contrast, the impact of the recession has been similar across education groups. We present evidence that suggests that two aspects of fiscal policy in the UK in 2008 and 2009 - the temporary reduction in the rate of VAT and a car scrappage scheme - had some success in encouraging households to increase durable purchases.Publication Metadata only Investor networks in the stock market(Oxford University Press (OUP), 2014) Walden, Johan; Yavuz, M. Deniz; Bildik, Recep; Department of Economics; Özsöylev, Han Nazmi; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AWe study the trading behavior of investors in an entire stock market. Using an account level dataset of all trades on the Istanbul Stock Exchange in 2005, we identify investors with similar trading behavior as linked in an empirical investor network (EIN). Consistent with the theory of information networks, we find that central investors earn higher returns and trade earlier than peripheral investors with respect to information events. Overall, our results support the view that information diffusion among the investor population influences trading behavior and returns.Publication Metadata only Ratings quality and borrowing choice(Wiley, 2019) Badoer, Dominique C.; James, Christopher M.; Department of Business Administration; Demiroğlu, Cem; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 18073Past studies document that incentive conflicts may lead issuer-paid credit rating agencies to provide optimistically biased ratings. In this paper, we present evidence that investors question the quality of issuer-paid ratings and raise corporate bond yields where the issuer-paid rating is more positive than benchmark investor-paid ratings. We also find that some firms with favorable issuer-paid ratings substitute public bonds with borrowings from informed intermediaries to mitigate the "lemons discount" associated with poor quality ratings. Overall, our results suggest that the quality of issuer-paid ratings has significant effects on borrowing costs and the choice of debt.Publication Open Access The case against active pension funds: evidence from the Turkish Private Pension System(Elsevier, 2015) Yalçın, Atakan; Department of Business Administration; Gökçen, Umut; Department of Business Administration; College of EngineeringUsing data on private Turkish pension funds we show that most active managers are not able to provide performance beyond what could be achieved by passive indexing. The average fund beats its benchmark by only 26 basis points, before fees. We also observe herding behavior among managers' asset allocation decisions which can potentially explain their lack of overperformance. Our results strongly support the need for low-cost index funds in emerging market countries that are reforming their pension schemes. We further recommend regulatory oversight on the "activeness" of funds and introduction of default plans with more balanced asset allocations.Publication Metadata only Unshrouding: evidence from bank overdrafts in Turkey(Wiley, 2018) Karlan, Dean; Zinman, Jonathan; Department of Economics; N/A; Alan, Şule; Cemalcılar, Mehmet; Faculty Member; Other; Department of Economics; College of Administrative Sciences and Economics; N/A; N/A; N/ALower prices produce higher demand... or do they? A bank's direct marketing to holders of free checking accounts shows that a large discount on 60% APR overdrafts reduces overdraft usage, especially when bundled with a discount on debit card or autodebit transactions. In contrast, messages mentioning overdraft availability without mentioning price increase usage. Neither change persists long after the messages stop. These results do not square easily with classical models of consumer choice and firm competition. Instead, they support behavioral models where consumers underestimate and are inattentive to overdraft costs, and firms respond by shrouding overdraft prices in equilibrium.