The Journal of Finance

Systemic Risk and International Portfolio Choice

Published: 12/2004,  Volume: 59,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2004.00717.x  |  Cited by: 336

SANJIV RANJAN DAS, RAMAN UPPAL

Returns on international equities are characterized by jumps; moreover, these jumps tend to occur at the same time across countries leading to systemic risk . We capture these stylized facts using a multivariate system of jump‐diffusion processes where the arrival of jumps is simultaneous across assets. We then determine an investor's optimal portfolio for this model of returns. Systemic risk has two effects: One, it reduces the gains from diversification and two, it penalizes investors for holding levered positions. We find that the loss resulting from diminished diversification is small, while that from holding very highly levered positions is large.

Common Failings: How Corporate Defaults Are Correlated

Published: 1/11/2007,  Volume: 62,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2007.01202.x  |  Cited by: 411

SANJIV R. DAS, DARRELL DUFFIE, NIKUNJ KAPADIA, LEANDRO SAITA

We test the doubly stochastic assumption under which firms' default times are correlated only as implied by the correlation of factors determining their default intensities. Using data on U.S. corporations from 1979 to 2004, this assumption is violated in the presence of contagion or “frailty” (unobservable explanatory variables that are correlated across firms). Our tests do not depend on the time‐series properties of default intensities. The data do not support the joint hypothesis of well‐specified default intensities and the doubly stochastic assumption. We find some evidence of default clustering exceeding that implied by the doubly stochastic model with the given intensities.

Cross‐Border Listings and Price Discovery: Evidence from U.S.‐Listed Canadian Stocks

Published: 3/21/2003,  Volume: 58,  Issue: 2  |  DOI: 10.1111/1540-6261.00537  |  Cited by: 285

Cheol S. Eun, Sanjiv Sabherwal

We examine the contribution of cross‐listings to price discovery for a sample of Canadian stocks listed on both the Toronto Stock Exchange (TSE) and a U.S. exchange. We find that prices on the TSE and U.S. exchange are cointegrated and mutually adjusting. The U.S. share of price discovery ranges from 0.2 percent to 98.2 percent, with an average of 38.1 percent. The U.S. share is directly related to the U.S. share of trading and to the ratio of proportions of informative trades on the U.S. exchange and the TSE, and inversely related to the ratio of bid‐ask spreads.

APPLICATION OF THE DECOMPOSITION PRINCIPLE TO THE CAPITAL BUDGETING PROBLEM IN A DECENTRALIZED FIRM

Published: 6/1974,  Volume: 29,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1974.tb01485.x  |  Cited by: 8

Willard T. Carleton, Glen Kendall, Sanjiv Tandon

Analysts' Selective Coverage and Subsequent Performance of Newly Public Firms

Published: 5/16/2006,  Volume: 61,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2006.00869.x  |  Cited by: 142

SOMNATH DAS, RE‐JIN GUO, HUAI ZHANG

This study examines the ability of analysts to forecast future firm performance, based on the selective coverage of newly public firms. We hypothesize that the decision to provide coverage contains information about an analyst's underlying expectation of a firm's future prospects. We extract this expectation by obtaining residual analyst coverage from a model of initial analyst following. We document that in the three subsequent years, initial public offerings with high residual coverage have significantly better returns and operating performance than those with low residual coverage. This evidence indicates analysts have superior predictive abilities and selectively provide coverage for firms about which their true expectations are favorable.

Variance‐ratio Statistics and High‐frequency Data: Testing for Changes in Intraday Volatility Patterns

Published: 2/2001,  Volume: 56,  Issue: 1  |  DOI: 10.1111/0022-1082.00326  |  Cited by: 77

Torben G. Andersen, Tim Bollerslev, Ashish Das

Variance‐ratio tests are routinely employed to assess the variation in return volatility over time and across markets. However, such tests are not statistically robust and can be seriously misleading within a high‐frequency context. We develop improved inference procedures using a Fourier Flexible Form regression framework. The practical significance is illustrated through tests for changes in the FX intraday volatility pattern following the removal of trading restrictions in Tokyo. Contrary to earlier evidence, we find nodiscernible changes outside of the Tokyo lunch period. We ascribe the difference to the fragile finite‐sample inference of conventional variance‐ratio procedures and a single outlier.