Investor activism and takeovers

Recent work documents large positive abnormal returns when a hedge fund announces activist intentions regarding a publicly listed firm. We show that these returns are largely explained by the ability of activists to force target firms into a takeover. For a comprehensive sample of 13D filings by portfolio investors between 1993 and 2006, announcement returns and long-term abnormal returns are high for targets that are ultimately acquired, but not detectably different from zero for firms that remain independent. Firms targeted by activists are more likely than control firms to get acquired. Finally, activist investors’ portfolios perform poorly during a period in which market wide takeover interest declined.     

Stock price fragility

We study the relation between the ownership structure of financial assets and non-fundamental risk. We define an asset to be fragile if it is susceptible to non-fundamental shifts in demand. An asset can be fragile because of concentrated ownership, or because its owners face correlated or volatile liquidity shocks, i.e., they must buy or sell at the same time. We formalize this idea and apply it to mutual fund ownership of US stocks. Consistent with our predictions, fragility strongly predicts price volatility. We then extend the logic of fragility to investigate two natural extensions: (1) the forecast of stock return comovement and (2) the potentially destabilizing impact of arbitrageurs on stock prices.     

The search for relative value in bonds

Comparing asset swap spreads across bonds is a widely used tool for measuring relative value. This approach leads portfolio managers to increase their risk exposure in ways that are not transparent. Credit default swaps are utilized to demonstrate that viewing wide asset swaps as an indicator of relative value is a mirage. The paper documents the empirical regularities in the term structure of credit spreads and spread volatilities that make this result possible. In addition, we present empirical evidence of the imprint made on corporate bond returns by the widespread use of the asset swaps data.     

The impact of liquidity on option prices

This study illustrates the impact of both spot and option liquidity levels on option prices. Using implied volatility to measure the option price structure, our empirical results reveal that even after controlling for the systematic risk of Duan and Wei ( 2009 ), a clear link remains between option prices and liquidity; with a reduction (increase) in spot (option) liquidity, there is a corresponding increase in the level of the implied volatility curve. The former is consistent with the explanation on hedging costs provided by Cetin, Jarrow, Protter, and Warachka ( 2006 ), whereas the latter is consistent with the “illiquidity premium” hypothesis of Amihud and Mendelson ( 1986a ). This study also shows that the slope of the implied volatility curve can be partially explained by option liquidity. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark     

Environmental Management Systems (EMS) of Tour Operators: Learning from Each Other

This research determined to what extent tour operators in Western Canada who use natural, public-owned assets as a main feature of their business operations have developed formal or informal environmental management systems (EMS)and which EMS elements they use most frequently and most successfully. Furthermore, the research investigated which variables drive the use of EMS elements to ensure good environmental performance. The findings suggest that those operators who seek environmentally related business outcomes, possess supply-side tourism development values, and have more business experience, will have developed more sophisticated EMS and find these systems more useful in ensuring good environmental performance. With this information, park officials can develop a plan for knowledge sharing and the education of all tour operators. Park officials can design appropriate training and development programmes by considering the barriers that they might encounter in encouraging tour operators to implement certain policies and procedures. Tour operators can transfer some elements of EMS, widely recognised as useful, to other tour operators by ‘assimilation’, as few barriers exist to the implementation of these elements. However, if beliefs and attitudes must change before operators will use an element, learning by ‘accommodation’ will be a more appropriate approach.     

Viewpoint: Innovations in the theory and practice of redistribution policy

Abstract We present a survey of key results from second‐best optimal redistribution theory and their implications for tax‐transfer policy. The core results include the Corlett‐Hague theorem, the Deaton conditions, the production‐efficiency theorem, the Atkinson‐Stiglitz theorem, and the Mirrlees‐Saez characterization of the optimal non‐linear income tax system. These have been augmented in recent years by optimal participation tax rates, the implications of involuntary unemployment, the use of unconventional instruments, such as minimum wages, in‐kind transfer, and workfare, and the optimal taxation of capital income and bequests.     

Understanding modal choice for the trip to school

This paper examines the factors that lead parents to select travel modes for their children’s trip to school. It does so with reference to parents whose children attend a suburban school in Auckland, New Zealand, where walking and driving are the two main travel options. Four focus groups were conducted in order to understand parents’ transport decisions. This approach revealed the significance of the following factors: perceived distance and time constraints; concerns about children’s health and fitness, as well as their competence; road safety and congestion issues; and social norms. We conclude that the reasons leading parents to drive are manifold, and, as such, a variety of interventions is needed to promote walking.     

Modeling community support for a proposed integrated resort project

In recent years Mauritius has experienced a rapid increase in integrated resort developments, which have been intended to secure income from new tourism segments and to boost the local economy. Using data on the responses of residents of Le Morne, Mauritius, to a proposal to construct an integrated resort, this study develops and tests a model of community support for the proposed development. The structural model indicates that residents' satisfaction with their own community, their utilization of the resource base, their perceptions of the state of the local economy and their environmental attitudes are antecedents of their views about the costs and benefits of the project. Opinions about the benefits and costs of the project were also found to determine the level of community support. All factors in the model were found to be determinants of the perceived costs and benefits of the project, except for residents' perceptions of the impact of the development on their utilization of the resource base. The theoretical and managerial implications of the study are discussed. The most notable contribution of the study is its findings on the influence of residents' satisfaction with community services on their attitudes and support for tourism development.