AN EMPIRICAL MODEL OF CAPITAL STRUCTURE: SOME NEW EVIDENCE

Using a general autoregressive distributed lag model, we estimate the longrun steady state determinants of corporate capital structure. We find that, in the long run, the leverage ratio is related positively to the corporate tax rate and firm size and negatively to future growth opportunities and stock returns. By contrast, there appears to be no relation between leverage and the corporate tax rate on a short-run year to year basis. Our results suggest that prior empirical evidence on capital structure is of questionable value precisely because of its failure to clearly separate the short-run relationship between leverage and its determinants from its long-run relationship.     

PRICING NIKKEI PUT WARRANTS: SOME EMPIRICAL EVIDENCE

The newly created Nikkei put warrants represent a recent innovation in security development. These privately issued puts enable investors to hedge or speculate on price movements in the Japanese market. Understanding the pricing behavior of these new securities provides U.S. investors and issuers with valuable information to assess potential benefits and costs. In this research two alternative pricing models are used to explain the observed prices of several privately issued Nikkei put warrants. While results from the two models indicate some pricing biases, pricing errors are very small overall.     

EXAMINING MERGER SYNERGY WITH THE CAPITAL ASSET PRICING MODEL

This paper analyzes the impact of mergers on the alphas and betas of actual merged firms compared to those of the homemade mergers an investor could have created by buying proportional shares of the two firms. The results provide some evidence of merger synergy. Where alpha and beta shifts were observed, the evidence did not indicate that either the relative size of target firms or concurrent capital structure changes were related to these shifts as current theory suggests. There is weak evidence that nonconglomerate mergers were more frequently synergistic.     

ASSET PRICING WITH IN- AND OUTFLOW CONSTRAINTS: THEORY AND EMPIRICAL EVIDENCE FROM SWEDEN

The paper analyzes asset pricing and portfolio choice when domestic investors collectively cannot hold foreign assets beyond a maximum value. We add the constraint that foreign investors cannot hold more than a fraction of the shares of domestic assets. Consistent with Swedish stock market data, both domestic and foreign investors pay premiums for investing in the other country's assets. Some empirical observations are inconsistent with the CAPM framework.