This paper tests empirically whether convexity is return enhancing (the traditional view based upon parallel term structure shifts), or return diminishing (the equilibrium view suggesting convexity is priced). Results of empirical tests over different time periods show bond convexity to be...

I analyze the jump frequency in the ABX index of subprime home equity credit default swaps and CME housing futures. Jumps begin to appear prior to 2007, but are more pronounced in the housing futures than the ABX. I can explain nearly 85% of the jumps from news and the housing futures. A 20...

We attempt in this study to estimate the fundamental equity value of a firm by combining two separate capital valuation techniques, namely the corporate debt valuation of Merton (1974) and the rational pricing technique of internet companies of Schwartz and Moon (2000). We use the Black Scholes...

The case of Evergreen Solar (ESLR) suggests counterparty risk exposure be added to the litany of misgivings on the economic efficiency, absolute performance, and governance conflicts of ASRs. Evergreen Solar in July 2008 issues a convertible, enters into an offsetting, broker-backed long...

The current study adds consideration of a $1.7 billion accelerated stock repurchase (ASR) by Hewlett-Packard (HP) to a recent analysis of 2006-2007 ASRs by Applied Materials, Cypress Semiconductor, Linear Technology, and Xilinx. The HP addition to company case studies leaves fundamental findings...

A previous study failed to identify economic benefits to explain the 2006-2007 popularity of accelerated stock repurchase programs (ASRs) funded through issuance of convertible debt. The case study of a $600 million transaction by Cypress Semiconductor did find cosmetic advantages in terms of...

Antigravity introduces a transaction so implausibly attractive it would be deemed impossible were it not that U.S. companies already float an inferior equivalent at a rate of nearly $500 billion per year. A Cashless Buyback(tm) is exactly like a cash buyback minus the risk and should be viewed...

We model dynamic credit portfolio dependence by using default contagion in an intensity-based framework. Two different portfolios (with 10 obligors), one in the European auto sector, the other in the European financial sector, are calibrated against their market CDS spreads and the corresponding...

I show that turnover is unrelated to several alternative measures of liquidity and liquidity risk and that liquidity risk factors cannot explain why higher turnover predicts lower future returns. I find that the aggregate volatility risk factor explains why higher turnover predicts lower future...

The paper shows that small growth firms earn low expected returns because they are a hedge against expected aggregate volatility. Consistent with that, the ICAPM with the aggregate volatility risk factor can explain the small growth anomaly, as well as the new issues puzzle and the cumulative...