2011 Seminars


3rd Mar 2011 - 11:00 am

Venue: DC-Boardroom

Speaker: Tsuneo Sakamoto, Meiji

Title: Manager Remuneration - Linking Corporate Performance to Share Price


10th Mar 2011 - 11:00 am

Venue: Room 397 H04

Speaker: Zoran Ivković, MSU

Title: Political Risk and Discount Rates: Evidence from the Croatian Pension System


11th Mar 2011 - 11:30 am

Venue: DC-Boardroom

Speaker: Rudi Fahlenbrach, EPFL

Title: This time is the same: Using the events of 1998 to explain bank returns during the financial crisis


18th Mar 2011 - 11:30 am

Venue: Room 397 H04

Speaker: Chuan-Yang Hwang, Nanyang Technology University

Title: Is Information Risk Priced? Evidence from the Price Discovery of Large Trades & Information Risk and Momentum Anomalies


23rd Mar 2011 - 11:30 am

Venue: Room 7 DC-School Building

Speaker: Elena Asparouhova, University of Utah

Title: Market Bubbles and Crashes as an Expression of Tension between Social and Individual Rationality: Experiments


1st Apr 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Peter Bossaerts, Caltech

Title: Topic TBA


15th Apr 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Jay Shanken, Emory

Title: Topic TBA


19th Apr 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Ravi Jagannathan, Kellogg Graduate School of Management Northwestern University

Title: The cross-section of hurdle rates for capital budgeting: An empirical analysis of survey data

Whereas Poterba and Summers (1995) find that firms use hurdle rates that are unrelated to their CAPM betas, Graham and Harvey (2001) find that 74% of their survey firms use the CAPM for capital budgeting. We provide an explanation for these two apparently contradictory conclusions. We find that firms behave as though they add a hurdle premium to their CAPM based cost of capital. Following McDonald and Siegel (1986), we argue that the hurdle premium depends on the value of the option to defer investments. While CAPM explains only 10% of the cross-sectional variation in hurdle rates across firms, variables that proxy for the benefits from the option to wait for potentially better investment opportunities explain 35%. Estimates of our hurdle premium model parameters imply an equity premium of 3.8% per year, a figure that is essentially the same as that reported in the survey by Graham and Harvey (2005). Consistent with our model, growth firms use a higher hurdle rate when compared to value firms, even though they have a lower cost of capital.


3rd May 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Harjoat Bhamra, UBC

Title: Asset prices with heterogeneity in preferences and beliefs


6th May 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: David Veredas, Université libre de Bruxelles

Title: Modeling vast panels of volatilities with long-memory dynamic factor models


13th May 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Tarek Hassan, Chicago

Title: The Economic Impact of Social Ties: Evidence from German Reunification


20th May 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Riccardo Palumbo, Professor of Accounting, University G. d'Annunzio

Title: The impact of the mandatory adoption of IFRS on Stock liquidity


27th May 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Stefano Sacchetto, Carnegie Mellon University

Title: Preemptive Bidding, Target Resistance and Takeover Premia; An Empirical Investigation


3rd Jun 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: J. Jimmy Yang, Oregon State University

Title: Reconsidering Price Limit Effectiveness


10th Jun 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Hengjie Ai, Duke

Title: Topic TBA


17th Jun 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Denis Sosyura, Michigan

Title: Divisional Managers and Internal Capital markets

Using hand-collected data on divisional managers at the S&P 500 firms, we provide one of the first studies of their role in the internal capital budgeting. Divisional managers with connections to the CEO receive more capital. Managers' informal connections, such as social ties to the CEO, outweigh measures of managers' informal influence, such as board membership and seniority, and affect both the appointment of managers and subsequent capital allocations in their visions. The impact of connections on investment efficiency depends on the tradeoff between agency and information asymmetry. When governance is weak, connections reduce investment efficiency and erode firm value by fostering favoritism. When information asymmetry is high, managerial ties increase investment efficiency and firm value by facilitating information transfer. Overall, we provide novel evidence on the role of formal and informal managerial influence inside conglomerates.


22nd Jul 2011 - 11:30 am

Venue: DC-Boardroom

Speaker: Lorenzo Garlappi, UBC

Title: Strategic Investments, technological Uncertainty and Expected Return Externalities


5th Aug 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Ralph S. J. Koijen, Chicago

Title: Equity Yields

We study a new data set of prices of traded dividends with maturities up to 10 years across three world regions: the US, Europe and Japan. We use these asset prices to derive equity yields, analogous to bond yields, and decompose these yields into expected dividend growth rates and a risk premium component. We find that both dividend growth rates and the risk premium component exhibit substantial variation over time. Further, equity yields may help predict other measures of economic growth such as consumption growth. We relate the dynamics of growth expectations to recent events such as the financial crisis and the earthquake in Japan.


12th Aug 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Ivan Shaliastovich, Wharton

Title: Volatility, The Macroeconomy and Asset Prices

In this paper we show that volatility news is essential for a coherent economic interpretation and measurement of the underlying risks in the economy, and that ignoring validity can lead to substantial biases in the stochastic discount factor (SDF). We quantify and show that ignoring volatility can have first-order implications for the implied consumption innovations, the SDF, and asset returns. Furthermore, using a VAR based approach we document that accounting for volatility leads to a positive correlation between the return to human capital and the market, while this correlation is negative when volatility is ignored. Our volatility based asset pricing model captures well the levels and differences in the risk premia across value and size portfolios. We further show that accounting for volatility risks is important for correct economic interpretation of the assets┬┐ exposure to the underlying sources of risks.


19th Aug 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Rik Sen, HKUST

Title: Do non-executive employees have information? Evidence from employee stock purchase plans.


26th Aug 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Georgio Skouolakis, Maryland

Title: The Baltic Dry Index as a Predictor of Global Stock Returns, Commodity Returns and Global Economic Activity.

The goal of this paper is to show that the growth rate of the Baltic Dry Index (BDI) has predictive ability for a range of stock markets, which is demonstrated through in-sample tests and out-of-sample statistics.

The documented stock return predictability is also of economic significance, as seen by examining the certainty equivalent returns and Sharpe ratios of portfolio strategies that exploit the BDI growth rate. In addition, the BDI growth rate predicts the returns of commodity indexes, and we find some evidence for joint predictability of stock and commodity returns in a system of predictive regressions. Finally, the BDI growth rate predicts the growth in global economic activity, establishing further BDI's role in revealing a link between the real and financial sectors.


2nd Sep 2011 - 11:30 am

Venue: Room 214/215, H69 - Economics and Business Building

Speaker: Jarrad Harford and Vahap Uysal, Foster School of Business University of Washington

Title: Bond Market Access and Corporate Investment

Prior research has shown that differential access to debt markets significantly affects capital structure. In this paper, we examine the effect of access to debt markets on investment decisions. Using debt ratings to indicate bond market access, we find that firms with access are more likely to undertake acquisitions than those without and that firms with bond market access pay higher premiums for their targets. Furthermore, these firms receive less favourable market reaction to their acquisition announcements relative to those of non-related acquirers. The results are robust to addressing the endogeneity of seeking bond market access. Thus, we document significant effects of access to bond markets on a firm's ability to undertake investment and the quality of those investments. The overall bidder announcement reactions are non-negative on average, supporting the conclusion that lack of debt market access creates underinvestment, rather than simply constraining overinvestment.


16th Sep 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Brandon Julio, LBS

Title: Policy Uncertainty and Cross-Border Flows of Capital

We find that policy uncertainty is an important determinant of fluctuations in cross border flows of capital.

Specifically, we find that fluctuations in policy uncertainty around national elections generate cycles in cross-border flows around the world. FDI flows from US companies to foreign affiliates drop significantly when there is a national election in either the US or the destination country. The election patterns in foreign direct investment are more pronounced in countries with lower measures of government stability and a lower degree of checks and balances in the political system. We also find that elections with more uncertain outcomes lead to larger swings in the DFI flows. The electoral cycles in cross-border capital flows are limited to investments that are relatively irreversible.That is, we find that capital flows are sensitive to policy uncertainty in both high and low-income counties, suggesting that political uncertainty is not only an emerging market phenomenon. These results suggest that policy uncertainty acts as a tax on cross-border investment.


7th Oct 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Sudipto Bhattacharya, LSE

Title: Topic TBA


13th Oct 2011 - 11:30 am

Venue: Darlington Centre, School Building Room 9

Speaker: Viral Acharya, NYU

Title: A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk

We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy by ameliorating the under-investment problem of the financial sector. However, increasing taxation of the non-financial sector to fund the bailout may be inefficient since it weakens its incentive to invest, decreasing growth. Instead, the sovereign may choose to fund the bailout by diluting existing government bondholders, resulting in a deterioration of the sovereign's creditworthiness. This deterioration feeds back to the financial sector, reducing the value of its guarantees and existing bond holdings as well as increasing its sensitivity to future sovereign shocks. We provide empirical evidence for this two-way feedback between financial and sovereign credit risk using data on the credit default swaps (CDS) of the Eurozone countries and their banks for 2007-11. We show that the announcement of financial sector bailouts was associated with an immediate, unprecedented widening of sovereign CDS spreads and narrowing of bank CDS spreads; however, post-bailouts there emerged a significant co-movement between bank CDS and sovereign CDS, even after controlling for banks' equity performance, the latter being consistent with an effect of the quality of sovereign guarantees on bank credit risk.


21st Oct 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Sheng Xiao, University of Minnesota

Title: Topic TBA


28th Oct 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Pedro Matos, USC

Title: The Mutual Fund Industry Worldwide: Explicit and Closet Indexing, Fees, and Performance.

Mutual fund investors face a basic choice between actively-managed funds and index funds with lower expenses. However, the prevalence of indexing is rare in most countries. Rather, actively managed funds in many countries engage in "closet indexing," choosing portfolios that closely match their declared benchmark. The degree of explicit indexing in a country is negatively related to fees, while "closet indexing" is positively associated with fees and negatively with performance. The most actively managed funds charge higher fees but outperform their benchmarks after expenses. The degree of indexing and the ability of active managers to outperform are both associated with competition and fees.


11th Nov 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Antti Petajisto, NYU

Title: Topic TBA


18th Nov 2011 - 11:30 am

Venue: Room 214/215 H69

Speaker: Heitor Almeida, Illinois

Title: Topic TBA


2nd Dec 2011 - 11:30 am

Venue: Room 214/5, Economics and Business Building (H69)

Speaker: Gordon Phillips, University of Maryland and NBER

Title: R&D and the Incentives from Merger and Acquisition Activity

We provide a model and empirical tests showing how an active acquisition market affects firm incentives to innovate and conduct R&D. Our model shows that large firms optimally may decide to purchase smaller innovative firms and conduct less R&D than small firms. The model shows that firm R&D increases with competition, demand and the probability that firms are taken over. Empirically, we document that the R&D responsiveness of firms increases with demand shocks and industry merger and acquisition activity. Both of these effects are stronger for smaller firms than for larger firms. The results also show that firm R&D increases with product-market competition and with the probability a firm is an acquisition target.


9th Dec 2011 - 11:30 pm

Venue: Room 214/215, Economics and Business Building

Speaker: Hengjie Ai, School of Business at Duke University

Title: Moral Hazard, Investment, and Firm Dynamics

We present a dynamic general equilibrium model with heterogeneous firms. Owners of the firms delegate investment decisions to managers, whose consumption and investment decisions are private information. We solve the optimal contracts and characterize the implied general equilibrium. Our calibrated model has implications on the cross-sectional distribution and time-series dynamics of firms' investment, manager compensation and dividend payout policies. Risk sharing requires that managers' equity shares decrease with firm sizes. This in turn implies that it is harder to prevent private benefit in larger firms, where managers have lower equity stake under the optimal contract. Consequently, small firms invest more, pay less dividends, and grow faster than large firms. Despite the heterogeneity in firms decision rules and the failure of Gibrat's law, we show that the size distribution of firms in our model resembles a power law distribution with a slope coefficient about 1.06, as in the data.