A Tax-Induced Clientele for Index-Linked Corporate Bonds

This paper analyzes the circumstances under which tax considerations favor or disfavor the use of index-linked corporate bonds. Using a model similar to Miller's, investors' choices of assets depend on their tax preferences for interest income versus capital gains and their preferences for the timing of returns. It is concluded that the absence of index-linked bonds in the U.S. cannot be attributed solely to tax reasons. However, following the 1986 Tax Reform Act, the tax code is expected to disfavor the use of index-linked bonds.     

The Pricing Formula for Commodity-Linked Bonds with Stochastic Convenience Yields and Default Risk

At the maturity, the owner of a commodity-linked bond has the right to receive the face value of the bond and the excess amount of spot market value of the reference commodity bundle over the prespecified exercise price. This payoff structure is an important characteristic of the commodity-linked bonds. In this paper, we derive closed pricing formulae for the commodity-linked bonds. We assume that the reference commodity price and the value of the firm (bonds' issuer) follow geometric Brownian motions and that the net marginal convenience yield and interest rate follow Ornstein–Uhlenbech processes. In the appendix, we derive pricing formulae for bonds which are the same as the above commodity-linked bonds, except that the reference commodity price in the definition of the payoff at the maturity is replaced by the value of a special asset which depends on the convenience yield. This revised version was published online in August 2006 with corrections to the Cover Date.     

Tax-Induced Intertemporal Restrictions on Security Returns

This article derives testable restrictions on equilibrium asset prices when investors have the option to time the realization of their capital gains and losses for tax purposes. The tax-timing option alters both the magnitude and timing of equity returns relative to those in a tax-free model. The tax-induced restrictions are empirically examined, and the tax rates and preference parameters are estimated. While the tax-free model can be rejected in favor of the tax-based model as the specified alternative, the tax-based model is still unable to adequately explain cross-sectional differences in asset returns.     

Year-End Tax-Induced Sales and Stock Market Seasonality

The paper relates two phenomena in the stock market: the high return during the month of January and the apparent existence of widespread sales of stocks for tax purposes towards the end of the fiscal year. The findings suggest that, due to the tax-induced sales, the price of many stocks over the last 35 years was temporarily depressed in December but recovered in the following January. This price recovery is a major contributor to the high returns observed in January. The tax effect is present in firms of all sizes but much more pronounced for small firms. The analysis also indicates that a more precise identification of the tax-switch candidates may prove that the tax-induced sales are, in fact, the sole contributor to the high January's returns.     

Tax-Induced Trading and the Turn-of-the-Year Anomaly: An Intraday Study

This study tests the tax-induced trading hypothesis as an explanation of the turn-of-the-year anomaly using Canadian and U.S. intraday data. Since the Canadian tax year-end precedes the calendar year-end by five business days, tax effects may be isolated. We find the anomaly is related to the degree of seller-and buyer-initiated trading and depends upon the incidence of the taxation year-end. Seller-initiated transactions (at bid prices) dominate until the tax year-end after which buyer-initiated trades (at ask prices) dominate. The anomaly is a function of bid-ask prices.     

Tax-Induced Trading of Equity Securities: Evidence from the ADR Market

We examine ex‐dividend date trading of American Depositary Receipts (ADRs) using a sample of 1,043 dividends over the period 1988 to 1995. ADR dividends are often subject to foreign withholding taxes, creating incentives for certain investors to avoid the distribution. ADRs exhibit negative abnormal ex‐dividend day returns, and their prices behave consistently with their related withholding taxes. Abnormal trading volume for taxable issues exceeds 130 percent and 300 percent of normal volume on the cum‐ and ex‐dates, respectively. Abnormal volume is an increasing function of foreign withholding tax rates and decreasing function of transactions costs. This abnormal ex‐date trading activity is consistent with tax‐motivated trading.     

Tax-Induced Trading and the Identity of the Marginal Investor: Evidence from Sweden

Abstract

Changes in the Swedish tax code during the 1990s were structured in a way that offers an opportunity to test whether ex-dividend prices were determined by the taxation of domestic individual investors. The results presented in this paper indicate that ex-dividend prices were not influenced by the relatively large tax changes for domestic individual investors. In addition, there was no evidence that the taxation of domestic individual investors influenced ex-dividend prices for any specific dividend yield group.     

Inflation Risk in Corporate Bonds

We argue that corporate bond yields reflect fears of debt deflation. When debt is nominal, unexpectedly low inflation increases real liabilities and default risk. In a real business cycle model with optimal but infrequent capital structure choice, more uncertain or procyclical inflation leads to quantitatively important increases in corporate log yields in excess of default‐free log yields. A panel of credit spread indexes from six developed countries shows that credit spreads rise by 14 basis points if inflation volatility or the inflation‐stock correlation increases by one standard deviation.     

债券融资发展中的信用评级

信用评级与债券融资相伴而生，并促进了债券融资的发展。从我国资本市场发展的趋势看，无论从客观要求还是完善信用评级自身之需要，加强我国信用评级的建设都极为重要。本从信用评级产生发展的角度，探讨信用评级在债券融资发展中的作用。     

Hedging Corporate Bonds

We examine Treasury bond and stock index futures, the swap curve and two types of hypothetical corporate bond assets as alternative hedging instruments for portfolios of corporate bonds. Conducting ex post and ex ante tests we find evidence that credit quality and maturity are important sources of basis risk when hedging corporate bonds whose credit rating are below triple A. We conclude that a new corporate hedging instrument may be useful for those wishing to hedge corporate bond portfolios provided that transaction costs are not too high relative to existing futures contracts.     

Tax-Induced Trading: The Effect of the 1986 Tax Reform Act on Stock Market Activity

The end of favorable tax treatment for long-term capital gains caused investors to reassess traditional tax-induced trading strategies. This study compares trading behavior in December 1986 and January 1987 with previous years. Our results indicate that these tax code changes had a powerful effect on trading behavior. Relative trading volume was considerably higher in December 1986 for long-term winners but not significantly lower for long-term losers. Results also indicate altered trading patterns based on short-term gains in December 1986 and for long-term winners in January 1987.     

Callable Bonds Revisited

In light of the dramatic changes in the callable bond market, we reexamine the determinants of callable bonds. Using data from 1980-2003, we find that callable bonds are often issued by firms with both information asymmetry and underinvestment problems. However, risk-shifting does not appear to be a major factor. Furthermore, we find that interest rate hedging is an important factor for investment-grade bonds and when interest rates are high but not so for below-investment-grade bonds or when rates are low.     

Hybrid Cat Bonds

Natural catastrophes attract regularly the media attention and have become a source of public concern. From a financial viewpoint, they represent idiosyncratic risks, diversifiable at the world level. But for various reasons, reinsurance markets are unable to cope with this risk completely. Insurance-linked securities, such as catastrophe (cat) bonds, have been issued to complete the international risk transfer process, but their development is disappointing so far. This article argues that downside risk aversion and ambiguity aversion explain their limited success. Hybrid cat bonds, combining the transfer of cat risk with protection against a stock market crash, are proposed to complete the market. The article shows that replacing simple cat bonds with hybrid cat bonds would lead to an increase in market volume.     

债券之王--记Pimco首席投资官比尔·格罗斯

格罗斯是全球最大债券经纪公司Pimco的首席投资官.他管理的核心债券组合自1973年开始,年均增长率为10.6%.要知道,债券投资在各种投资种类里只能算是乌龟而非兔子.但格罗斯的成绩仅稍逊于标准普尔500指数13%的增长率.自他从业以来,其投资组合仅有3年出现市值下滑,年均下滑率为2.25%.与此形成对比,同期的标准普尔年均下滑12.5%.     

地方发债突破

4省市自行发行地方政府债券是解决当前地方财力不足、规范地方债务的重要尝试,然而地方债券偿债能力仍需要赋予地方政府更大财权10月20日,财政部发布通知称,经国务院批准,2011年在上海市、浙江省、广东省和深圳市试点地方政府自行发债。同时,财政部     

Catastrophe Risk Bonds

Abstract

This article examines the pricing of catastrophe risk bonds. Catastrophe risk cannot be hedged by traditional securities. Therefore, the pricing of catastrophe risk bonds requires an incomplete markets setting, and this creates special difficulties in the pricing methodology. The authors briefly discuss the theory of equilibrium pricing and its relationship to the standard arbitrage-free valuation framework. Equilibrium pricing theory is used to develop a pricing method based on a model of the term structure of interest rates and a probability structure for the catastrophe risk. This pricing methodology can be used to assess the default spread on catastrophe risk bonds relative to traditional defaultable securities.     

Inflation-Indexed Bonds and Nominal Bonds: Financial Innovation and Precautionary Motives

This paper introduces a two-period monetary general equilibrium model with proportional transaction costs on nominal and inflation-indexed bonds. This paper demonstrates that financial innovation on indexed bonds causes equilibrium interest rates of the nominal bond to increase when agents have precautionary saving motives. This result implies that ignoring precautionary motives would underestimate savers' welfare gain and overestimate borrowers' welfare gain from innovation on indexed bonds.     

我国地方政府债券和城投债的比较研究

本文在介绍我国地方政府债和城投债的发行情况的基础上,根据统计数据分析了各省份地方政府债和城投债的发行规模和偿债能力,重点比较了这两类债券的要素、风险与监管。最后建议,地方政府债券和城投债都应市场化发行,并且要建立起地方政府的信用评级体系,使投资者能够清楚了解各地区的风险状况和信用等级。