Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2019

Private Company Valuations by Mutual Funds

Si CHENG, Allaudeen HAMEED, Ayako YASUDA, Brad BARBER, Vikas AGARWAL
Mutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV ma...
Keywords: Mutual Funds, Venture Capital, Private valuation, Stale prices, Financial fragility
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Annual Conference

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Investment Finance

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May 2019

Financialization and Commodity Market Serial Dependence

Yubo TAO, Zhi DA, Ke TANG
Recent financialization in the commodity market makes it easier for institutional investors to trade a portfolio of commodities via various commodity index products. Using news-based sentiment measures, we find that such trading can propagate non-fundamental shocks from some commodities to others in...
Keywords: Zhi Da (University of Notre Dame), Yubo Tao (Singapore Management University), Ke Tang (Tsinghua University)
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Annual Conference

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Investment Finance

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May 2019

Credit Default Swaps Around the World

Jennifer CONRAD, Söhnke M. BARTRAM, Jongsub LEE, Marti G. SUBRAHMANYAM
We analyze the impact of the introduction of credit default swaps (CDS) on real decision making within the firm, taking into consideration differences in firms’ local economic and legal environments. We extend the model of Bolton and Oehmke (2011) to take into account uncertainty whether the actio...
Keywords: Credit default swaps, CDS, investment policy, financing policy, creditor rights, property rights, private credit, ownership concentration
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Annual Conference

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Investment Finance

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May 2019

The Pollution Premium

Kai LI, Po-Hsuan HSU, Chi-Yang TSOU
This paper studies the implications of environmental pollution on the cross-section of stock returns. A long-short portfolio constructed from firms with high versus low toxic emission intensity within industry generates an average return of 5.52% per annum. To explain this pollution premium, we deve...
Keywords: Toxic emissions, Regime shift risk, uncertainty, Environmental regulation, Cross-section of stock returns
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2019

Premium for heightened uncertainty: Explaining pre-announcement market returns

Jun PAN, Haoxiang ZHU, Jiang WANG, Grace Xing HU
We find large overnight returns with no abnormal variance before nonfarm payrolls, ISM, and GDP announcements, similar to the pre-FOMC returns. To explain this common pattern, we propose a two-risk model with the uncertainty about the magnitude of the impending news' market impact as an additional r...
Keywords: Pre-Announcement Drift, Macroeconomic Announcements, FOMC, Heightened Uncertainty, VIX
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