Reg-FD and the competitiveness of all-star analysts

We examine the impact of Regulation Fair Disclosure on the competitive advantage of All-Star analysts as measured by turnover in the rankings. Institutional Investor All-Americans, chosen by votes of institutional investors based on overall helpfulness, experienced a significant increase in turnover as Reg-FD was implemented. Non-US analysts and US analysts ranked solely on the basis of public stock recommendations did not. Within a few years, however, All-American turnover returned to pre-Reg-FD levels, suggesting that the new All-Americans built a competitive advantage stressing aspects of performance less dependent on privileged communication.     

Trading imbalances,predictable reversals,and cross-stock price pressure

We test the implications of a multi-asset equilibrium model in which a finite number of risk-averse liquidity providers accommodate non-informational trading imbalances. These imbalances generate predictable reversals in stock returns. An imbalance in one stock also affects the prices of other stocks. The magnitude of the cross-stock price pressure depends on the correlations of the stocks’ underlying cash flows. The model implies that non-informational trading increases the volatility of stock returns. We confirm the model's implications using data from the Taiwan Stock Exchange.     

Further analysis of the expectations hypothesis using very short-term rates

Longstaff [Longstaff, F., 2000. The term structure of very short-term rates: new evidence for the expectations hypothesis. Journal of Financial Economics 58, 397–415] finds support for the expectations hypothesis at the very short end of the repurchase agreement (repo) term structure while other studies find calendar-time-based regularities cause rejection of the expectations hypothesis. Using Longstaff’s methods on a sample of repo rates that pre-dates Longstaff’s sample, we reject the expectations hypothesis for every maturity. The pre-Longstaff-sample repo data comes from a time period where the behavior of short-term interest rates is similar to the long-run average behavior of short-term interest rates. Our results imply that expectations hold when rates are less volatile and/or that we may be entering a period of lower volatility.     

Incentives and invention in universities

We show that universities in the United States that provide stronger royalty incentives to faculty scientists generate greater license income, controlling for university characteristics. We use pre‐sample data on university patenting to control for the potential endogeneity of royalty shares. Faculty responds to royalties both in the form of cash and research lab support, indicating both pecuniary and intrinsic research motivations. The impact of incentives is larger in private than in public universities, and we provide new survey evidence on the organization and objectives of university licensing offices to explain this difference. Royalty incentives work both by raising faculty effort and sorting scientists across universities. The primary impact of incentives is to increase the quality rather than the quantity of inventions.     

Who Charges More: Hedge Funds or Mutual Funds?*

Explicit mutual fund fees are typically less than 1% of the assets under management. By comparison, the typical hedge fund charges a base fee of 2% plus a performance fee equal to 20% of net profits. Thus, hedge funds appear to charge far more for even comparable performance—unless one takes account of the following:

• ? For most mutual funds, a very high percentage of performance is driven by its passive exposure to the market, even though the fee is applied to the total fund.
• ? Many hedge funds are designed to provide returns that are completely independent of market performance.

Using these two assumptions, the author provides a simple example that shows that a representative mutual fund's performance can be replicated by combining an index fund, which represents the mutual fund's passive component, with a hedge fund, representing the mutual fund's active component. When analyzed in this way, the fee of the combined fund turns out to be remarkably close to the actual fee of the mutual fund. This in turn suggests that the implicit fee for the mutual fund's small active component is comparable to the fees of the hedge fund.     

The new leader's guide to diagnosing the business

Incoming CEOs and general managers don't have much time to show what they can do to improve a business's performance. (In 2006, for instance, about 40% of CEOs who left their jobs had lasted an average of just 1.8 years--and many of them were ushered out the door.) Within a few years at most, leaders must find ways to boost profitability, increase market share, overtake a competitor--whatever the key tasks may be. But they can't map out specific objectives and initiatives until they have accurately assessed their companies' distinctive strengths and weaknesses and the particular threats and opportunities they face. In this article, Bain consultants Gottfredson, Schaubert, and Saenz provide a diagnostic template to help organizations figure all that out so they can decide which goals are reasonable and where to focus performance-improvement efforts. The template is built on four widely accepted principles. First, costs and prices almost always decline; second, your competitive position determines your options; third, customers and profit pools don't stand still; and fourth, simplicity gets results. Along with each principle, the authors offer diagnostic questions and analytic tools. Of course, each manager will emphasize certain elements of the template and de-emphasize others, based on his or her business situation. This process will show incoming CEOs and general managers where they are starting from (their point of departure) and help them establish their performance objectives (their point of arrival) as well as the change initiatives that will take them where they want to go.     

Constraints on Loan Sales and the Price of Liquidity

In the syndicated loan market, borrowers and syndicate arrangers sometimes employ contractual restrictions that influence a loan’s liquidity. We analyze two types of constraints on loan resales: (1) prior consent constraints implemented by the borrower or the syndicate’s lead arranger and (2) a minimum denomination requirement for loan sales. We hypothesize that constraints could be mechanisms for fostering relationships and/or facilitating the resolution of financial distress and find some support for each notion. We find that resale constraints are more likely when borrowers are small and have relatively poor credit ratings. We also find that loans with any type of constraint have higher all-in-spreads and are more likely to be secured than unconstrained loans and that the marginal cost of constraining liquidity is relatively high.

“Every today was a tomorrow”: An integral method for indexing the social mediation of preferred futures

The visions we hold of the future, whether they are of utopias or dystopias, are not simply a matter of personal imagination. Our conceptions of the future are mediated to us as much as they are privately created by us. To this point, futures studies have not developed an integrative and broad-based framework for considering the social mediation of futures. Understanding how social mediation impacts on our futures visioning requires an interpretive framework that can cope with the multilayered nature of futures visions, the worldviews that are associated with them and a theory of mediation that can be applied within such a context of ‘depth’. Using theory-building methodology, the current paper attempts this task by describing a theory of social mediation that builds on the integral futures framework. An application of the framework explores the relationship between various scenarios of health care futures, their associated worldviews and the mediational factors that influence our visions of future health care systems.     

Litigation Patterns in Automobile Bodily Injury Claims 1977–1997: Effects of Time and Tort Reforms

This study uses data from the Insurance Research Council to investigate changes in the use of attorneys and in the filing of legal claims to resolve automobile third‐party bodily injury claims between 1977 and 1997. We find results consistent with the general public perception that the use of attorneys and the filing of legal claims have increased over the study period. In addition, we find evidence that tort reforms enacted by the states have slowed the rates of increase in the use of attorneys and in the filing of legal claims to resolve automobile insurance claim disputes.     

Negative Libor rates in the swap market model

We apply Stroock and Varadhan’s support theorem to show that there is a positive probability that within the Swap Market Model the implied Libor rates become negative in finite time. Mataix-Pastor received support from the Instituto Credito Oficial (ICO), Spain, and Fundación Caja Madrid.