The Journal of Finance

The Cross‐Section of Managerial Ability, Incentives, and Risk Preferences

Published: 5/8/2014,  Volume: 69,  Issue: 3  |  DOI: 10.1111/jofi.12140  |  Cited by: 97

RALPH S.J. KOIJEN

I estimate a dynamic investment model for mutual managers to study the cross‐sectional distribution of ability, incentives, and risk preferences. The manager's compensation depends on the size of the fund, which fluctuates due to fund returns and due to fund flows that respond to the fund's relative performance. The model provides an economic interpretation of time‐varying coefficients in performance regressions in terms of the structural parameters. I document that the estimates of fund alphas are precise and virtually unbiased. I find substantial heterogeneity in ability, risk preferences, and pay‐for‐performance sensitivities that relates to observable fund characteristics.

The Fragility of Market Risk Insurance

Published: 2/25/2022,  Volume: 77,  Issue: 2  |  DOI: 10.1111/jofi.13118  |  Cited by: 105

RALPH S.J. KOIJEN, MOTOHIRO YOGO

Variable annuities, which package mutual funds with minimum return guarantees over long horizons, accounted for $1.5 trillion or 35% of U.S. life insurer liabilities in 2015. Sales decreased and fees increased during the global financial crisis, and insurers made guarantees less generous or stopped offering guarantees to reduce risk exposure. These effects persist in the low‐interest rate environment after the global financial crisis, and variable annuity insurers suffered large equity drawdowns during the COVID‐19 crisis. We develop and estimate a model of insurance markets in which financial frictions and market power determine pricing, contract characteristics, and the degree of market completeness.

Predictive Regressions: A Present‐Value Approach

Published: 7/15/2010,  Volume: 65,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2010.01575.x  |  Cited by: 390

JULES H. Van BINSBERGEN, RALPH S. J. KOIJEN

We propose a latent variables approach within a present‐value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price‐dividend ratios and dividend growth rates to predict future returns and dividend growth rates. We find that returns and dividend growth rates are predictable with  values ranging from 8.2% to 8.9% for returns and 13.9% to 31.6% for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.

Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice

Published: 3/18/2016,  Volume: 71,  Issue: 2  |  DOI: 10.1111/jofi.12273  |  Cited by: 111

RALPH S.J. KOIJEN, STIJN VAN NIEUWERBURGH, MOTOHIRO YOGO

We develop a pair of risk measures, health and mortality delta, for the universe of life and health insurance products. A life‐cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products. We estimate the model to explain the observed variation in health and mortality delta implied by the ownership of life insurance, annuities including private pensions, and long‐term care insurance in the Health and Retirement Study. For the median household aged 51 to 57, the lifetime welfare cost of market incompleteness and suboptimal choice is 3.2% of total wealth.

Optimal Decentralized Investment Management

Published: 7/19/2008,  Volume: 63,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2008.01376.x  |  Cited by: 127

JULES H. Van BINSBERGEN, MICHAEL W. BRANDT, RALPH S. J. KOIJEN

We study an institutional investment problem in which a centralized decision maker, the Chief Investment Officer (CIO), for example, employs multiple asset managers to implement investment strategies in separate asset classes. The CIO allocates capital to the managers who, in turn, allocate these funds to the assets in their asset class. This two‐step investment process causes several misalignments of objectives between the CIO and his managers and can lead to large utility costs for the CIO. We focus on (1) loss of diversification, (2) unobservable managerial appetite for risk, and (3) different investment horizons. We derive an optimal unconditional linear performance benchmark and show that this benchmark can be used to better align incentives within the firm. We find that the CIO's uncertainty about the managers' risk appetites increases both the costs of decentralized investment management and the value of an optimally designed benchmark.

EVALUATING ADEQUACY OF BANK CAPITAL AN ANALYSIS OF THE PROBLEM*

Published: 9/1954,  Volume: 9,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1954.tb01239.x  |  Cited by: 0

Ralph Tillman Green

On the Rate Structure of the American Life Insurance Market

Published: 3/1981,  Volume: 36,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1981.tb03536.x  |  Cited by: 5

RALPH A. WINTER

This article re‐examines the conclusion of previous studies that price dispersion is extreme in the American whole life insurance market. We take an axiomatic approach to the problem of measuring “price” dispersion in the market for the multiparameter whole life contracts, studying the distribution across contract offers of a price index which is uniquely determined by two conditions. In contrast to the accepted wisdom, we find that the derived measure of price dispersion is only 3.6% and that much of this dispersion can be accounted for by measurement error.

POSTWAR EXPERIENCE IN EUROPE*

Published: 5/1961,  Volume: 16,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1961.tb02813.x  |  Cited by: 0

Ralph C. Wood

Executive Careers and Compensation Surrounding Takeover Bids

Published: 7/1994,  Volume: 49,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1994.tb00085.x  |  Cited by: 150

ANUP AGRAWAL, RALPH A. WALKLING

AbstractThis article examines the impact of a takeover bid on the careers and compensation of chief executives of target firms. We find that acquisition attempts occur more frequently in industries where chief executive officers (CEO) have positive abnormal compensation. Target CEOs are more likely to be replaced when a bid succeeds, than when it fails. CEOs of target firms who lose their jobs generally fail to find another senior executive position in any public corporation within three years after the bid. Consistent with Fama's (1980) notion of “ex post settling up”, postbid compensation changes of managers retained after an acquisition attempt are negatively related to several measures of their prebid abnormal compensation. This result is robust to a variety of specifications and does not seem to be caused by mean reversion or selection bias. These findings are consistent with the hypothesis that a takeover bid generates additional information that is used by labor markets to discipline managers.

OPEN MARKET OPERATIONS AND RESERVE SETTLEMENT PERIODS: A PROPOSED EXPERIMENT*

Published: 9/1964,  Volume: 19,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1964.tb02871.x  |  Cited by: 0

Albert H. Cox, Ralph F. Leach

MEASURING THE IMPACT OF CONSUMER CREDIT CONTROLS ON SPENDING*

Published: 5/1952,  Volume: 7,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1952.tb01543.x  |  Cited by: 0

Clarke L. Fauver, Ralph A. Young

DEFENSIVE OPEN MARKET OPERATIONS AND THE RESERVE SETTLEMENT PERIODS OF MEMBER BANKS*

Published: 3/1964,  Volume: 19,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1964.tb00746.x  |  Cited by: 1

Albert H. Cox, Ralph F. Leach

The Role of Options in the Resolution of Agency Problems: A Comment

Published: 12/1986,  Volume: 41,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1986.tb02539.x  |  Cited by: 22

ROGER E. A. FARMER, RALPH A. WINTER

Electing Directors

Published: 9/28/2009,  Volume: 64,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2009.01504.x  |  Cited by: 484

JIE CAI, JACQUELINE L. GARNER, RALPH A. WALKLING

Using a large sample of director elections, we document that shareholder votes are significantly related to firm performance, governance, director performance, and voting mechanisms. However, most variables, except meeting attendance and ISS recommendations, have little economic impact on shareholder votes—even poorly performing directors and firms typically receive over 90% of votes cast. Nevertheless, fewer votes lead to lower “abnormal” CEO compensation and a higher probability of removing poison pills, classified boards, and CEOs. Meanwhile, director votes have little impact on election outcomes, firm performance, or director reputation. These results provide important benchmarks for the current debate on election reforms.

The Distribution of Target Ownership and the Division of Gains in Successful Takeovers

Published: 7/1990,  Volume: 45,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1990.tb05107.x  |  Cited by: 142

RENÉ M. STULZ, RALPH A. WALKLING, MOON H. SONG

This paper presents evidence that the distribution of target ownership is related to the division of the takeover gain between the target and the bidder for a sample of successful tender offers. In the whole sample, the target's gain is negatively related to bidder and institutional ownership. In the sample of multiple‐bidder contests, the target's gain increases with managerial ownership and falls with institutional ownership.