For investors who are more risk averse than the representative investor, the horizon effect in dynamic asset allocation is substantially larger than suggested in previous models that assume a constant risk-free rate. The illustrations here use a market setting with a representative investor who has a multiperiod horizon and a constant degree of relative risk aversion. If the market portfolio is mean-reverting, then the risk-free rate is not constant, and the market risk premium reflects the Merton intertemporal risk of unexpected changes in the market portfolio’s expected return.
{"title":"Horizon Effects That Are Larger than You Think: Dynamic Allocation with a Representative Investor","authors":"Thomas J. O'Brien","doi":"10.2139/ssrn.2806537","DOIUrl":"https://doi.org/10.2139/ssrn.2806537","url":null,"abstract":"For investors who are more risk averse than the representative investor, the horizon effect in dynamic asset allocation is substantially larger than suggested in previous models that assume a constant risk-free rate. The illustrations here use a market setting with a representative investor who has a multiperiod horizon and a constant degree of relative risk aversion. If the market portfolio is mean-reverting, then the risk-free rate is not constant, and the market risk premium reflects the Merton intertemporal risk of unexpected changes in the market portfolio’s expected return.","PeriodicalId":442064,"journal":{"name":"UConn: Finance (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125801264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates, in a conceptual way, the intrinsic valuation of sports futures wagers and, given the absence of a viable secondary market, strategies for locking in pre-expiration value by hedging with the existing set of futures wagers, proposition wagers, and game wagers. An interesting finding is that effective hedging with game wagers generally involves games of teams other than the futures team, in addition to the futures-team’s games. The paper also shows how to use current game odds and futures odds to find the implicit projected odds on future games, conditional on the match-ups to be determined by the outcomes of current games.
{"title":"Valuation and Hedging of Sports Futures Wagers","authors":"Thomas J. O'Brien, Reinhold P. Lamb","doi":"10.2139/ssrn.2790631","DOIUrl":"https://doi.org/10.2139/ssrn.2790631","url":null,"abstract":"This study investigates, in a conceptual way, the intrinsic valuation of sports futures wagers and, given the absence of a viable secondary market, strategies for locking in pre-expiration value by hedging with the existing set of futures wagers, proposition wagers, and game wagers. An interesting finding is that effective hedging with game wagers generally involves games of teams other than the futures team, in addition to the futures-team’s games. The paper also shows how to use current game odds and futures odds to find the implicit projected odds on future games, conditional on the match-ups to be determined by the outcomes of current games.","PeriodicalId":442064,"journal":{"name":"UConn: Finance (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130553399","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the effect of corporate governance on equity carve-out decisions during the period of 1990 to 2014. Consistent with the notion that managerial incentives drive corporate decisions, we find that firms where the CEO and management have larger stock ownership are more likely to carve-out their subsidiaries. Larger firms with prior poor performance are also more likely to carve-out their divisions. Among equity carve-out parents, larger firms with higher profitability, higher managerial ownership and CEO incentive-based compensation tend to retain higher portions of their subsidiaries. We finally demonstrate that for wealth-enhancing strategic decisions such as equity carve-outs CEO tenure and classified board are negatively related to value, while outsider dominated boards are perceived positively by the investors. Our results offer new insights on the role of managerial incentive and corporate governance in asset restructuring.
{"title":"The Role of Managerial Incentive and Corporate Governance in Asset Restructuring: New Perspectives from Equity Carve-Outs","authors":"Chinmoy Ghosh, Milena T. Petrova","doi":"10.2139/ssrn.2558298","DOIUrl":"https://doi.org/10.2139/ssrn.2558298","url":null,"abstract":"We investigate the effect of corporate governance on equity carve-out decisions during the period of 1990 to 2014. Consistent with the notion that managerial incentives drive corporate decisions, we find that firms where the CEO and management have larger stock ownership are more likely to carve-out their subsidiaries. Larger firms with prior poor performance are also more likely to carve-out their divisions. Among equity carve-out parents, larger firms with higher profitability, higher managerial ownership and CEO incentive-based compensation tend to retain higher portions of their subsidiaries. We finally demonstrate that for wealth-enhancing strategic decisions such as equity carve-outs CEO tenure and classified board are negatively related to value, while outsider dominated boards are perceived positively by the investors. Our results offer new insights on the role of managerial incentive and corporate governance in asset restructuring.","PeriodicalId":442064,"journal":{"name":"UConn: Finance (Topic)","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123974513","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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