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The purpose of this article is to explain the spread between spot rates on corporate and government bonds. We find that the spread can be explained in terms of three elements: (1) compensation for expected default of corporate bonds (2) compensation for state taxes since holders of corporate bonds pay state taxes while holders of government bonds do not,… (More)
1 We are very grateful to Kumar Visvanathan for graciously sharing the data on foreign currency derivatives. We also greatly appreciate comments received Abstract We examine whether ¯rms use foreign currency derivatives for hedging or for speculative purposes. Using the sample of all S&P 500 non¯nancial ¯rms for 1993, we ¯nd strong evidence that ¯rms use… (More)
and the BSI Gamma Foundation for financial support. We also thank Lipper Inc. and, in particular, Jeffrey C. Keil for supplying incentive fee and fund data. In addition, we would like to thank Deepak Agrawal, Gordon Alexander, and participants in the 2001 meeting of the European Finance Association (Barcelona) for helpful comments. All errors are our own.
Financial theory is often based on the belief that the actions of rational investors determine prices, which leads to the elimination of dominated financial instruments. Recently a series of articles have been published which question the rationality of investor behavior. Standard and Poor's 500 index funds represent one of the simplest vehicles for… (More)
We would like to thank the UAI Foundation for financial support for this project.
This paper investigates the effect of shareholder control on bondholder wealth. While stronger shareholder control can benefit bondholders by disciplining managers, it also increases the likelihood of events that can hurt bondholders, e.g. hostile takeovers. We hypothesize that shareholder control can have contrasting effects on bond yields depending on the… (More)
This paper examines problems in the CRSP Survivor Bias Free U.S. Mutual Fund Database ~CRSP, 1998! and compares returns contained in it to those in Morning-star. The CRSP database has an omission bias that has the same effects as survi-vorship bias. Although all mutual funds are listed in CRSP, return data is missing for many and the characteristics of… (More)
This study examines the degree to which the well-known Morningstar rating system is a predictor of out-of-sample mutual fund performance, an important issue given that high-rated funds receive the lion's share of investor cash inflow. We use a data set based on growth mutual funds that is free from survivorship bias and adjusted for load fees to examine the… (More)