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Asset Value (asset + value)
Kinds of Asset Value Selected AbstractsInterest Rates, Stock Returns and Credit Spreads: Evidence from German EurobondsECONOMIC NOTES, Issue 1 2005Niklas Wagner We investigate daily variations in credit spreads on investment-grade Deutschemark-denominated Eurobonds during the challenging 1994,1998 period. Empirical results from a Longstaff and Schwartz (1995) two-factor regression, extended for correlated spread changes and heteroskedasticity, indicate strong persistence in spread changes. Consistent with theory and previous findings, changes in spreads are significantly negatively related to the term-structure level while, contrary to theory, the proxy for asset value does not yield a significant negative contribution. We even find a significant positive relation for Eurobonds with long maturity. Tentative interpretations are portfolio-rebalancing activities or differing risk factor sensitivities on short- vs. long-maturity bonds. [source] The Performance Persistence of Closed-End FundsFINANCIAL REVIEW, Issue 3 2000Martina K. Bers G20/G23 Abstract The purpose of this study is to extend the research on mutual fund performance persistence to net asset value and market price performance of domestic closed-end funds. While research has assessed the performance persistence of open-end mutual funds, it has not assessed the performance persistence of closed-end funds. Yet, the unique characteristics of closed-end funds allow stronger arguments for their persistence than the arguments previously submitted for open-end mutual funds. The results show evidence for risk-adjusted performance persistence. [source] Is prior performance priced through closed-end fund discounts?INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2010Michael Bleaney Abstract In open-end mutual funds (unit trusts), there is a strong positive cross-sectional relationship between net inflows to individual funds and past performance, as if investors attributed performance to managerial skill. Performance shows only very weak persistence, however, so at first sight investors do not appear to gain anything by responding to past performance information. This behaviour can be explained by the fact that past performance is effectively unpriced in the unit trust market, since management fees are unresponsive to demand. If investors believe that there is a non-zero probability that future performance will turn out to be positively correlated with past performance (i.e. that there is an element of managerial skill in performance), but a zero probability that this correlation will be negative, it is rational to prefer funds with better past performance when performance is not priced. In other words, it costs nothing to insure against the possibility of some managerial skill effect. If this explanation of the flow,performance relationship in unit trusts is correct, one would expect the relationship between investor demand and past fund performance to be much weaker if past performance were to be priced. We test this hypothesis in the market for closed-end funds (investment trusts). Because closed-end funds do not trade at net asset value, but at a price determined in the market, strong demand will raise the ratio of price to net asset value (known as the premium). Since it is well established that premiums are mean-reverting, future shareholder returns on funds currently on high premiums tend to be depressed by the reversion of the premium to the mean. In the closed-end fund market, as for open-end funds, there is little evidence of performance persistence, and therefore, to the extent that funds with good past performance are pushed to higher premiums, the expected return on them is less than on the average fund. This implicit pricing mechanism should mean that demand is a declining function of the premium, so that, even if demand is an increasing function of past performance for a given premium, any effect on the premium itself will be muted. We test this hypothesis for closed-end funds traded in the US and the UK. We find that there is a statistically significant effect of past performance on the premium in both countries. However, consistent with the hypothesis, it has limited economic significance, since it represents only a small component of premium variability. Copyright © 2008 John Wiley & Sons, Ltd. [source] The Impact of Standard Setting on Relevance and Reliability of Accounting Information: Lower of Cost or Market Accounting Reforms in ChinaJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2005Ziyun Yang During the period from 1998 to 2000, China implemented several new asset write-down regulations that mandate lower of cost or market accounting (LCM) for most non-cash assets. This is a study of the relevance and reliability of those regulations for investors in China. The study measures the association of net asset value with market value of equity and the association of accounting income with stock return, on both a historical cost accounting (HCA) basis and on an LCM basis. A fixed-effects model controlling both year and firm effects is used in a balanced panel sample. The panel regressions show high levels of explanatory power. LCM values can be relevant but may be measured with sufficient error that they do not improve the prediction of firm values. Reliability is measured using non-nested, overlapping model comparison tests (J and Cox). The paper also considers whether discretionary motivations influence the amount of write-down. The study supports the relevance of LCM reforms, but finds that reliability is not increased over HCA during the period under study. Reliability appears to be reduced by the voluntary nature of LCM provisions during part of the period and by the effects of opportunism for some firms in the sample. [source] PRICING CORPORATE SECURITIES UNDER NOISY ASSET INFORMATIONMATHEMATICAL FINANCE, Issue 3 2009Rüdiger Frey This paper considers the pricing of corporate securities of a given firm, in particular equity, when investors do not have full information on the firm's asset value. We show that under noisy asset information, the pricing of corporate securities leads to a nonlinear filtering problem. This problem is solved by a Markov chain approximation, leading to an efficient finite-dimensional approximative filter for the asset value. We discuss several applications and illustrate our results with a simulation study. [source] Portfolio theory and how parent birds manage investment riskOIKOS, Issue 10 2009Scott Forbes Investment theory is founded on the premise that higher returns are generally associated with greater risk, and that portfolio diversification reduces risk. Here I examine parental investment decisions in birds from this perspective, using data from a model system, a 16-year study of breeding red-winged blackbirds Agelaius phoeniceus. Like many altricial birds, blackbirds structure their brood into core (first-hatched) and marginal (later-hatched) elements that differ in risk profile. I measured risk in two ways: as the coefficient of variation in growth and survival of core and marginal offspring from a given brood structure; and using financial beta derived from the capital asset pricing model of modern portfolio theory. Financial beta correlates changes in asset value with changes in the value of a broader market, defined here as individual reproductive success vs. population reproductive success. Both measures of risk increased with larger core (but not marginal) brood size; and variation in growth and survival was significantly greater during ecologically adverse conditions. Core offspring showed low beta values relative to marginal progeny. The most common brood structures in the population exhibited the highest beta values for both core and marginal offspring: many parent blackbirds embraced rather than avoided risk. But they did so prudently with an investment strategy that resembled a financial instrument, the call option. A call option is a contingent claim on the future value of the asset, and is exercised only if asset value increases beyond a point fixed in advance. Otherwise the option lapses and the investor loses only the initial option price. Parents created high risk marginal progeny that were forfeited during ecological adversity (the option lapses) but raised otherwise (the option called); at the same time parents maintained a constant investment and return in low risk core progeny that varied little with changes in brood size or ecological conditions. [source] Children's Economic Roles in the Maya Family Life Cycle: Cain, Caldwell, and Chayanov RevisitedPOPULATION AND DEVELOPMENT REVIEW, Issue 3 2002Ronald D. Lee This article examines the relationship between household demographic pressure and interage transfers for a group of Maya subsistence agriculturists in Yucatán, Mexico. The authors use data from a field study conducted in 1992,93 on individual time allocation, relative productivity by age and sex, and caloric costs of activities to estimate age schedules of average consumption and production. Using these, they investigate the net costs of children to their parents and find that children have a negative net asset value up to the time they leave home. The direction of net wealth flows in this group is downward, from older to younger, and in economic terms the internal rate of return to children is highly negative up to the time they leave home. Nonetheless, children play a critically important role in the family's economic life cycle. On average, girls offset 76 percent of their consumption costs before leaving home at age 19, and boys offset 82 percent before leaving home at 22. Without the contributions from children as a group, parents would have to double or triple their work effort during part of the family life cycle if they were to raise the same number of children. By the thirteenth year of the family life cycle, children as a group produce more than half of what they consume in every year, and after the twentieth year children produce more than 80 percent of what they as a group consume. The authors also find that the elderly in the sample, ages 50 to 65, produce more than they consume. Thus while children have a negative net asset value to parents, the timing of their children's economic contribution across the family life cycle plays a key role in underwriting the cost of large families. [source] Price Formation Under Small Numbers Competition: Evidence from Land Auctions in SingaporeREAL ESTATE ECONOMICS, Issue 1 2006Joseph T.L. Ooi This article examines the price formation process under small numbers competition using data from Singapore land auctions. The theory predicts that bid prices are less than the zero-profit asset value in these first-price sealed-bid auctions. The model also shows that expected sales price increases with the number of bidders both because each bidder has an incentive to offer a higher price and because of a greater likelihood that a high-value bidder is present. The empirical estimates are consistent with auction theory and show that the standard land attributes are reflected in auction prices as expected. [source] Optimal Valuation of Noisy Real AssetsREAL ESTATE ECONOMICS, Issue 3 2002Paul D. Childs We study the optimal valuation of real assets when true asset values are unobservable. In our model, the observed value cointegrates with the unobserved true asset value to cause serial correlation in the time series of observed values. Autocorrelation as well as total variance in the observed value are used to calculate an efficient unbiased estimate of the true asset value (the time,filtered value). The optimal value estimate is shown to have three time,weighted terms: a deterministic forward value, a comparison of observed values with previously determined time,filtered values, and a convexity correction for incomplete information. The residual variance measures the precision of the value estimate, which can increase or decrease monotonically over time as well as display a linear or nonlinear time trend. We also show how to revise time,filtered estimates based on the arrival of new information. Our results relate to work on illiquid asset markets, including appraisal smoothing, tests of market efficiency, and the valuation of options on real assets. [source] Optimal Valuation of Claims on Noisy Real Assets: Theory and an ApplicationREAL ESTATE ECONOMICS, Issue 3 2002Paul D. Childs A theory for valuing claims on noisy real assets is developed and applied. Central to the theory is determination of the dynamics for the best estimate of real asset value. The dynamics of the value estimate are shown to differ from the dynamics of the true asset value only in the arrival rate of information. The rate of information arrival in the value estimate can be faster or slower than information arrival in the true asset value, which can lead to unexpected outcomes in the valuation and exercise of options on noisy real assets. The theory we develop is illustrated through an application. An imperfectly competitive market for real estate development is examined, in which agents compete over the timing of lead investment. Information spillover and free,rider incentives are shown to cause significant delay in lead investment. Delay together with a competitive response once lead investment has occurred explain observed patterns of development in gentrified urban land markets and multistage development projects. [source] Estimation of the Investment Thresholds of Large Japanese ManufacturersTHE JAPANESE ECONOMIC REVIEW, Issue 4 2000Yuzo Honda We approximate the investment threshold by the point at which a logistic curve has the largest curvature of convexity. Our threshold estimates are 1.82 and 1.51 in Tobin's marginal Q for machinery manufacturers and chemical/metal manufacturers, respectively. These numbers lie in between the two estimates calculated by Barnett and Sakellaris for US manufacturers. Our estimates exceed one in all industries, which also agrees with Dixit and Pindyck's analytic result. The threshold for the electrical machinery industry is higher than the others. An increase in uncertainty raises the investment threshold, while an appreciation in asset value lowers it. JEL Classification Numbers: C23, E22. [source] CONVERTIBLE DEBT AND RISK-SHIFTING INCENTIVESTHE JOURNAL OF FINANCIAL RESEARCH, Issue 4 2009Assaf Eisdorfer Abstract I argue that convertible debt, in contrast to its perceived role, can produce shareholders' risk-shifting incentives. When a firm's capital structure includes convertible debt, every investment decision affects not only the distribution of the asset value but also the likelihood that the debt will be converted and thereby the distribution of the firm's leverage. This suggests that managers can engage in risk-increasing projects if a higher asset risk generates a more favorable distribution of leverage. Empirical evidence using 30 years of data supports my argument. [source] Pension funding problem with regime-switching geometric Brownian motion assets and liabilitiesAPPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 2 2010Ping Chen Abstract This paper extends the pension funding model in (N. Am. Actuarial J. 2003; 7:37,51) to a regime-switching case. The market mode is modeled by a continuous-time stationary Markov chain. The asset value process and liability value process are modeled by Markov-modulated geometric Brownian motions. We consider a pension funding plan in which the asset value is to be within a band that is proportional to the liability value. The pension plan sponsor is asked to provide sufficient funds to guarantee the asset value stays above the lower barrier of the band. The amount by which the asset value exceeds the upper barrier will be paid back to the sponsor. By applying differential equation approach, this paper calculates the expected present value of the payments to be made by the sponsor as well as that of the refunds to the sponsor. In addition, we study the effects of different barriers and regime switching on the results using some numerical examples. The optimal dividend problem is studied in our examples as an application of our theory. Copyright © 2009 John Wiley & Sons, Ltd. [source] Why Study Large Projects?EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2004An Introduction to Research on Project Finance G32; G34; L22; G31 Abstract Despite the fact that more than $200 billion of capital investment was financed through project companies in 2001, an amount that grew at a compound annual rate of almost 20% during the 1990s, there has been very little academic research on project finance. The purpose of this article is to explain why project finance in general and why large projects in particular merit separate academic research and instruction. In short, there are significant opportunities to study the relationship among structural attributes (i.e., high leverage, contractual details, and concentrated equity ownership), managerial incentives, and asset values, as well as improve current practice in this rapidly growing field of finance. [source] Arbitrage, Liquidity, and the Valuation of Exchange Traded FundsFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 5 2008Lucy F. Ackert This paper investigates the performance of U.S. and country exchange traded funds currently traded in the United States and provides new insight into their pricing. While the U.S. funds are priced closely to their net asset values, the country funds are not and can exhibit large, positive autocorrelations in fund premium. The mispricing of country funds is related to momentum, illiquidity, and size effects. We also find an inverted U-shaped relationship between fund premium and market liquidity, which suggests that more active trading does lead to lower mispricing but only after a certain level of liquidity is reached. [source] Forecasting outcomes in spread betting markets: can bettors use ,quarbs' to beat the book?JOURNAL OF FORECASTING, Issue 2 2005David Paton Abstract In this paper, we examine a relatively novel form of gambling, spread (or index) betting that overlaps with practices in conventional financial markets. In this form of betting, a number of bookmakers quote bid,offer spreads about the result of some future event. Bettors may buy (sell) at the top (bottom) end of a spread. We hypothesize that the existence of an outlying spread may provide uninformed traders with forecasting information that can be used to develop improved trading strategies. Using data from a popular spread betting market in the United Kingdom, we find that the price obtaining at the market mid-point does indeed provide a better forecast of asset values than that implied in the outlying spread. We further show that this information can be used to develop trading strategies leading to returns that are consistently positive and superior to those from noise trading. Copyright © 2005 John Wiley & Sons, Ltd. [source] Optimal Valuation of Noisy Real AssetsREAL ESTATE ECONOMICS, Issue 3 2002Paul D. Childs We study the optimal valuation of real assets when true asset values are unobservable. In our model, the observed value cointegrates with the unobserved true asset value to cause serial correlation in the time series of observed values. Autocorrelation as well as total variance in the observed value are used to calculate an efficient unbiased estimate of the true asset value (the time,filtered value). The optimal value estimate is shown to have three time,weighted terms: a deterministic forward value, a comparison of observed values with previously determined time,filtered values, and a convexity correction for incomplete information. The residual variance measures the precision of the value estimate, which can increase or decrease monotonically over time as well as display a linear or nonlinear time trend. We also show how to revise time,filtered estimates based on the arrival of new information. Our results relate to work on illiquid asset markets, including appraisal smoothing, tests of market efficiency, and the valuation of options on real assets. [source] Information, Trading, and Product Market Interactions: Cross-sectional Implications of Informed TradingTHE JOURNAL OF FINANCE, Issue 1 2008HEATHER E. TOOKES ABSTRACT I present a simple model of informed trading in which asset values are derived from imperfectly competitive product markets and private information events occur at individual firms. The model predicts that informed traders may have incentives to make information-based trades in the stocks of competitors, especially when events occur at firms with large market shares. In the context of 759 earnings announcements, I use intraday transactions data to test the hypothesis that net order flow and returns in the stocks of nonannouncing competitors have information content for announcing firms. [source] Forecast Dispersion and the Cross Section of Expected ReturnsTHE JOURNAL OF FINANCE, Issue 5 2004TIMOTHY C. JOHNSON ABSTRACT Recent work by Diether, Malloy, and Scherbina (2002) has established a negative relationship between stock returns and the dispersion of analysts' earnings forecasts. I offer a simple explanation for this phenomenon based on the interpretation of dispersion as a proxy for unpriced information risk arising when asset values are unobservable. The relationship then follows from a general options-pricing result: For a levered firm, expected returns should always decrease with the level of idiosyncratic asset risk. This story is formalized with a straightforward model. Reasonable parameter values produce large effects, and the theory's main empirical prediction is supported in cross-sectional tests. [source] CAN INEFFICIENT TRADERS CREATE VALUE?THE JOURNAL OF FINANCIAL RESEARCH, Issue 4 2004C. N. V. Krishnan Abstract I examine the aggregate expected profit generated by informed traders of diverse ability in a competitive market. I assume that efficient traders get perfect information on asset values whereas inefficient traders get noisy information. In the presence of order size restrictions, I show that the aggregate expected profit generated by efficient and inefficient traders together can be higher than that generated by efficient traders alone. Thus, inefficient traders can create value in a constrained trading environment. [source] Climate change and the Australian agricultural and resource industriesAUSTRALIAN JOURNAL OF AGRICULTURAL & RESOURCE ECONOMICS, Issue 1 2010Ross Garnaut There is a limited case for assisting trade-exposed emissions-intensive industries during a transitional period during which Australian resource industries but not all of their major competitors are subject to emissions constraints. There is no case for protecting Australian industry from all adjustment and loss of asset values during the transition. The valid case is analogous to anti-dumping assistance, being confined to the case where weaker emissions constraints elsewhere would force adjustments that would be reversed later. The case for assistance is limited by the effect of others' weaker emissions constraints on global resource prices. [source] A model of price discovery and market design: Theory and empirical evidenceTHE JOURNAL OF FUTURES MARKETS, Issue 12 2004Michael T. ChngArticle first published online: 11 OCT 200 Price discovery is an essential function performed by derivative markets. For a derivative exchange, its markets' ability to incorporate information into prices to "derive" the underlying asset's value is a key objective of market design. The J. Hasbrouck (1991a) model is applied to examine the design and price discovery of a futures market. First, the model is extended to consider a comprehensive dynamic interaction between the price-size coordinates of orders and trades. Second, floor and screen tick data from LIFFE's FTSE 100 index futures market is used to estimate the two models. The significance of order size variables in the extended model suggests that order flow transparency, which is supported by an electronic trading platform, improves price discovery. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:1107,1146, 2004 [source] | |||||||||||||||||||||||||