Finance - Research Publications
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ItemWhy Do Option Prices Predict Stock Returns? The Role of Price Pressure in the Stock Market(Institute for Operations Research and the Management Sciences (INFORMS), 2020-09-01)Stock and options markets can disagree about a stock’s value because of informed trading in options and/or price pressure in the stock. The predictability of stock returns based on this cross-market discrepancy in values is especially strong when accompanied by stock price pressure, and it does not depend on trading in options. We argue that option-implied prices provide an anchor for fundamental stock values that helps to distinguish stock price movements resulting from pressure versus news. Overall, our results are consistent with stock price pressure being the primary driver of the option price-based stock return predictability.
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ItemCan Socially Responsible Firms Survive Competition? An Analysis of Corporate Employee Matching Grant Schemes(Oxford University Press (OUP), 2019-02-01)Employee matching grant schemes are coordination mechanisms that reduce free-riding by socially conscious employee-donors. Matching schemes coupled with lower take-home pay than offered by non-matching firms will survive capital and labor market competition if employee type is not observable and socially conscious employees are more productive or value working together. Matching can enhance employee welfare and raise more for charity without reducing profits. We document that matching firms have higher labor productivity and are more likely to be ranked as one of the “100 Best” employers. The result is robust to managerial entrenchment concerns and is not confined to the high-tech sector.
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ItemDisappearing Call Delay and Dividend-Protected Convertible Bonds(WILEY-BLACKWELL, 2016-02-01)Firms do not historically call their convertible bonds as soon as conversion can be forced. A number of explanations for the delay rely on the size of the dividends that bondholders forgo so long as they do not convert. We investigate an important change in convertible security design, namely, dividend protection of convertible bond issues. Dividend protection means that the conversion value of the convertible bond is unaffected by dividend payments and thus dividend-related rationales for call delay become moot. We document that call delay is near zero for dividend-protected convertible bonds.
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ItemInvestor sentiment, executive compensation, and corporate investment(ELSEVIER SCIENCE BV, 2010-10-01)