Search results: 41.
Tails, Fears, and Risk Premia
Published: 11/14/2011, Volume: 66, Issue: 6 | DOI: 10.1111/j.1540-6261.2011.01695.x | Cited by: 727
TIM BOLLERSLEV, VIKTOR TODOROV
We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof, we identify and estimate a new Investor Fears index. The index reveals large time‐varying compensation for fears of disasters. Our empirical investigations involve new extreme value theory approximations and high‐frequency intraday data for estimating the expected jump tails under the statistical probability measure, and short maturity out‐of‐the‐money options and new model‐free implied variation measures for estimating the corresponding risk‐neutral expectations.
Trading Patterns and Prices in the Interbank Foreign Exchange Market
Published: 9/1993, Volume: 48, Issue: 4 | DOI: 10.1111/j.1540-6261.1993.tb04760.x | Cited by: 258
TIM BOLLERSLEV, IAN DOMOWITZ
The behavior of quote arrivals and bid‐ask spreads is examined for continuously recorded deutsche mark‐dollar exchange rate data over time, across locations, and by market participants. A pattern in the intraday spread and intensity of market activity over time is uncovered and related to theories of trading patterns. Models for the conditional mean and variance of returns and bid‐ask spreads indicate volatility clustering at high frequencies. The proposition that trading intensity has an independent effect on returns volatility is rejected, but holds for spread volatility. Conditional returns volatility is increasing in the size of the spread.
Common Stochastic Trends in a System of Exchange Rates
Published: 3/1989, Volume: 44, Issue: 1 | DOI: 10.1111/j.1540-6261.1989.tb02410.x | Cited by: 428
RICHARD T. BAILLIE, TIM BOLLERSLEV
Univariate tests reveal strong evidence for the presence of a unit root in the univariate time‐series representation for seven daily spot and forward exchange rate series. Furthermore, all seven spot and forward rates appear to be cointegrated; that is, the forward premiums are stationary, and one common unit root, or stochastic trend, is detectable in the multivariate time‐series models for the seven spot and forward rates, respectively. This is consistent with the hypothesis that the seven exchange rates possess one long‐run relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates.
Cointegration, Fractional Cointegration, and Exchange Rate Dynamics
Published: 6/1994, Volume: 49, Issue: 2 | DOI: 10.1111/j.1540-6261.1994.tb05161.x | Cited by: 241
RICHARD T. BAILLIE, TIM BOLLERSLEV
Multivariate tests due to Johansen (1988, 1991) as implemented by Baillie and Bollerslev (1989a) and Diebold, Gardeazabal, and Yilmaz (1994) reveal mixed evidence on whether a group of exchange rates are cointegrated. Further analysis of the deviations from the cointegrating relationship suggests that it possesses long memory and may possibly be well described as a fractionally integrated process. Hence, the influence of shocks to the equilibrium exchange rates may only vanish at very long horizons.
Heterogeneous Information Arrivals and Return Volatility Dynamics: Uncovering the Long‐Run in High Frequency Returns
Published: 7/1997, Volume: 52, Issue: 3 | DOI: 10.1111/j.1540-6261.1997.tb02722.x | Cited by: 312
TORBEN G. ANDERSEN, TIM BOLLERSLEV
Recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean‐reverting fractionally integrated process. Meanwhile, much shorter lived volatility dynamics are typically observed with high frequency intradaily returns. The present article demonstrates, that by interpreting the volatility as a mixture of numerous heterogeneous short‐run information arrivals, the observed volatility process may exhibit long‐run dependence. As such, the long‐memory characteristics constitute an intrinsic feature of the return generating process, rather than the manifestation of occasional structural shifts. These ideas are confirmed by our analysis of a one‐year time series of five‐minute Deutschemark‐U.S. Dollar exchange rates.
Deutsche Mark–Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies
Published: 2/1998, Volume: 53, Issue: 1 | DOI: 10.1111/0022-1082.85732 | Cited by: 835
Torben G. Andersen, Tim Bollerslev
This paper provides a detailed characterization of the volatility in the deutsche mark–dollar foreign exchange market using an annual sample of five‐minute returns. The approach captures the intraday activity patterns, the macroeconomic announcements, and the volatility persistence (ARCH) known from daily returns. The different features are separately quantified and shown to account for a substantial fraction of return variability, both at the intraday and daily level. The implications of the results for the interpretation of the fundamental “driving forces” behind the volatility process is also discussed.
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: 76
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.
Asset Pricing without Garbage
Published: 1/12/2017, Volume: 72, Issue: 1 | DOI: 10.1111/jofi.12438 | Cited by: 100
TIM A. KROENCKE
This paper provides an explanation for why garbage implies a much lower relative risk aversion in the consumption‐based asset pricing model than National Income and Product Accounts (NIPA) consumption expenditure: Unlike garbage, NIPA consumption is filtered to mitigate measurement error. I apply a simple model of the filtering process that allows one to undo the filtering inherent in NIPA consumption. “Unfiltered NIPA consumption” well explains the equity premium and is priced in the cross‐section of stock returns. I discuss the likely properties of true consumption (i.e., without measurement error and filtering) and quantify implications for habit and long‐run risk models.
A MODEL OF THE MARKET FOR LINES OF CREDIT
Published: 3/1978, Volume: 33, Issue: 1 | DOI: 10.1111/j.1540-6261.1978.tb03401.x | Cited by: 41
Tim S. Campbell
When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks
Published: 1/6/2011, Volume: 66, Issue: 1 | DOI: 10.1111/j.1540-6261.2010.01625.x | Cited by: 5271
TIM LOUGHRAN, BILL MCDONALD
Previous research uses negative word counts to measure the tone of a text. We show that word lists developed for other disciplines misclassify common words in financial text. In a large sample of 10‐Ks during 1994 to 2008, almost three‐fourths of the words identified as negative by the widely used Harvard Dictionary are words typically not considered negative in financial contexts. We develop an alternative negative word list, along with five other word lists, that better reflect tone in financial text. We link the word lists to 10‐K filing returns, trading volume, return volatility, fraud, material weakness, and unexpected earnings.
Bids and Allocations in European IPO Bookbuilding
Published: 10/2004, Volume: 59, Issue: 5 | DOI: 10.1111/j.1540-6261.2004.00700.x | Cited by: 158
TIM JENKINSON, HOWARD JONES
This paper uses evidence from a data set of 27 European IPOs to analyze how investors bid and the factors that influence their allocations. We also make use of a unique ranking of investor quality, associated with the likelihood of flipping the IPO. We find that investors perceived to be long‐term holders of the stock are consistently favored in allocation and in out‐turn profits. In contrast to Cornelli and Goldreich (2001), we find little evidence that more informative bids receive larger allocations or higher profits. Our results cast doubt upon the extent of information production during the bookbuilding period.
The Determinants of the Maturity of Corporate Debt Issues
Published: 12/1996, Volume: 51, Issue: 5 | DOI: 10.1111/j.1540-6261.1996.tb05227.x | Cited by: 396
JOSE GUEDES, TIM OPLER
We document the determinants of the term to maturity of 7,369 bonds and notes issued between 1982 and 1993. Our main finding is that large firms with investment grade credit ratings typically borrow at the short end and at the long end and of the maturity spectrum, while firms with speculative grade credit ratings typically borrow in the middle of the maturity spectrum. This pattern is consistent with the theory that risky firms do not issue short‐term debt in order to avoid inefficient liquidation, but are screened out of the long‐term debt market because of the prospect of risky asset substitution.
THE IMPACT OF COMPENSATING BALANCE REQUIREMENTS ON THE CASH BALANCES OF MANUFACTURING CORPORATIONS: AN EMPIRICAL STUDY*
Published: 3/1977, Volume: 32, Issue: 1 | DOI: 10.1111/j.1540-6261.1977.tb03239.x | Cited by: 4
Tim Campbell, Leland Brendsel
The Determinants of Leveraged Buyout Activity: Free Cash Flow vs. Financial Distress Costs
Published: 12/1993, Volume: 48, Issue: 5 | DOI: 10.1111/j.1540-6261.1993.tb05138.x | Cited by: 309
TIM OPLER, SHERIDAN TITMAN
This paper investigates the determinants of leveraged buyout (LBO) activity by comparing firms that have implemented LBOs to those that have not. Consistent with the free cash flow theory, we find that firms that initiate LBOs can be characterized as having a combination of unfavorable investment opportunities (low Tobin's
q
) and relatively high cash flow. LBO firms also tend to be more diversified than firms which do not undertake LBOs. In addition, firms with high expected costs of financial distress (e.g., those with high research and development expenditures) are less likely to do LBOs.
New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor
Published: 6/2002, Volume: 57, Issue: 3 | DOI: 10.1111/1540-6261.00462 | Cited by: 146
Leonie Bell, Tim Jenkinson
This paper examines the impact of a major change in dividend taxation introduced in the United Kingdom in July 1997. The reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the United Kingdom, namely pension funds. We find significant changes in the valuation of dividend income after the reform, in particular for high‐yielding companies. These results provide strong support for the hypothesis that taxation affects the valuation of companies, and that pension funds were the effective marginal investors for high‐yielding companies.
Measuring Readability in Financial Disclosures
Published: 7/18/2014, Volume: 69, Issue: 4 | DOI: 10.1111/jofi.12162 | Cited by: 1377
TIM LOUGHRAN, BILL MCDONALD
Defining and measuring readability in the context of financial disclosures becomes important with the increasing use of textual analysis and the Securities and Exchange Commission's plain English initiative. We propose defining readability as the effective communication of valuation‐relevant information. The Fog Index—the most commonly applied readability measure—is shown to be poorly specified in financial applications. Of Fog's two components, one is misspecified and the other is difficult to measure. We report that 10‐K document file size provides a simple readability proxy that outperforms the Fog Index, does not require document parsing, facilitates replication, and is correlated with alternative readability constructs.
Do Long‐Term Shareholders Benefit From Corporate Acquisitions?
Published: 12/1997, Volume: 52, Issue: 5 | DOI: 10.1111/j.1540-6261.1997.tb02741.x | Cited by: 467
TIM LOUGHRAN, ANAND M. VIJH
Using 947 acquisitions during 1970–1989, this article finds a relationship between the postacquisition returns and the mode of acquisition and form of payment. During a five‐year period following the acquisition, on average, firms that complete stock mergers earn significantly negative excess returns of −25.0 percent whereas firms that complete cash tender offers earn significantly positive excess returns of 61.7 percent. Over the combined preacquisition and postacquisition period, target shareholders who hold on to the acquirer stock received as payment in stock mergers do not earn significantly positive excess returns. In the top quartile of target to acquirer size ratio, they earn negative excess returns.
The New Issues Puzzle
Published: 3/1995, Volume: 50, Issue: 1 | DOI: 10.1111/j.1540-6261.1995.tb05166.x | Cited by: 2546
TIM LOUGHRAN, JAY R. RITTER
Companies issuing stock during 1970 to 1990, whether an initial public offering or a seasoned equity offering, have been poor long‐run investments for investors. During the five years after the issue, investors have received average returns of only 5 percent per year for companies going public and only 7 percent per year for companies conducting a seasoned equity offer. Book‐to‐market effects account for only a modest portion of the low returns. An investor would have had to invest 44 percent more money in the issuers than in nonissuers of the same size to have the same wealth five years after the offering date.
Long‐Term Market Overreaction: The Effect of Low‐Priced Stocks
Published: 12/1996, Volume: 51, Issue: 5 | DOI: 10.1111/j.1540-6261.1996.tb05234.x | Cited by: 65
TIM LOUGHRAN, JAY R. RITTER
Conrad and Kaul (1993) report that most of De Bondt and Thaler's (1985) long‐term overreaction findings can be attributed to a combination of bid‐ask effects when monthly cumulative average returns (CARs) are used, and price, rather than prior returns. In direct tests, we find little difference in test‐period returns whether CARs or buy‐and‐hold returns are used, and that price has little predictive ability in cross‐sectional regressions. The difference in findings between this study and Conrad and Kaul's is primarily due to their statistical methodology. They confound cross‐sectional patterns and aggregate time‐series mean reversion, and introduce a survivor bias. Their procedures increase the influence of price at the expense of prior returns.
Financial Distress and Corporate Performance
Published: 7/1994, Volume: 49, Issue: 3 | DOI: 10.1111/j.1540-6261.1994.tb00086.x | Cited by: 1122
TIM C. OPLER, SHERIDAN TITMAN
Abstract
This study finds that highly leveraged firms lose substantial market share to their more conservatively financed competitors in industry downturns. Specifically, firms in the top leverage decile in industries that experience output contractions see their sales decline by 26 percent more than do firms in the bottom leverage decile. A similar decline takes place in the market value of equity. These findings are consistent with the view that the indirect costs of financial distress are significant and positive. Consistent with the theory that firms with specialized products are especially vulnerable to financial distress, we find that highly leveraged firms that engage in research and development suffer the most in economically distressed periods. We also find that the adverse consequences of leverage are more pronounced in concentrated industries.
Deposit Insurance in a Deregulated Environment
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03669.x | Cited by: 9
TIM S. CAMPBELL, DAVID GLENN
What Drives Investors' Portfolio Choices? Separating Risk Preferences from Frictions
Published: 12/17/2025, Volume: 81, Issue: 1 | DOI: 10.1111/jofi.70013 | Cited by: 4
TAHA CHOUKHMANE, TIM DE SILVA
We study the role of risk preferences and frictions in portfolio choice using variation in 401(k) default options. Patterns of active choice in response to different default funds imply that, absent participation frictions, 94% of investors prefer holding stocks, with an equity share of retirement wealth declining with age—patterns markedly different from observed allocations. We use this quasi‐experiment to estimate a life‐cycle model and find a relative risk aversion of 2.5, elasticity of intertemporal substitution (EIS) of 0.25, and $160 portfolio adjustment cost. The results suggest that low levels of stock market participation in retirement accounts are due to participation frictions rather than nonstandard preferences such as loss aversion.
The Operating Performance of Firms Conducting Seasoned Equity Offerings
Published: 12/1997, Volume: 52, Issue: 5 | DOI: 10.1111/j.1540-6261.1997.tb02743.x | Cited by: 747
TIM LOUGHRAN, JAY R. RITTER
Recent studies have documented that firms conducting seasoned equity offerings have inordinately low stock returns during the five years after the offering, following a sharp run‐up in the year prior to the offering. This article documents that the operating performance of issuing firms shows substantial improvement prior to the offering, but then deteriorates. The multiples at the time of the offering, however, do not reflect an expectation of deteriorating performance. Issuing firms are disproportionately high‐growth firms, but issuers have much lower subsequent stock returns than nonissuers with the same growth rate.
Information Production, Market Signalling, and the Theory of Financial Intermediation: A Reply
Published: 9/1982, Volume: 37, Issue: 4 | DOI: 10.1111/j.1540-6261.1982.tb03602.x | Cited by: 3
TIM S. CAMPBELL, WILLIAM A. KRACAW
Financial Constraints, Competition, and Hedging in Industry Equilibrium
Published: 9/4/2007, Volume: 62, Issue: 5 | DOI: 10.1111/j.1540-6261.2007.01280.x | Cited by: 116
TIM ADAM, SUDIPTO DASGUPTA, SHERIDAN TITMAN
We analyze the hedging decisions of firms, within an equilibrium setting that allows us to examine how a firm's hedging choice depends on the hedging choices of its competitors. Within this equilibrium some firms hedge while others do not, even though all firms are ex ante identical. The fraction of firms that hedge depends on industry characteristics, such as the number of firms in the industry, the elasticity of demand, and the convexity of production costs. Consistent with prior empirical findings, the model predicts that there is more heterogeneity in the decision to hedge in the most competitive industries.
Quid Pro Quo? What Factors Influence IPO Allocations to Investors?
Published: 10/2018, Volume: 73, Issue: 5 | DOI: 10.1111/jofi.12703 | Cited by: 89
TIM JENKINSON, HOWARD JONES, FELIX SUNTHEIM
Using data from all of the leading international investment banks on 220 initial public offerings (IPOs) raising $160 billion between January 2010 and May 2015, we test the determinants of IPO allocations. We compare investors’ IPO allocations with proxies for their information production during bookbuilding and the broking (and other) revenues they generate for bookrunners. We find evidence consistent with information revelation theories. We also find strong support for the existence of a quid pro quo whereby broking revenues are a significant determinant of investors’ IPO allocations and profits. The quid pro quo remains when we control for unobserved investor characteristics and investor‐bank relationships.
Why Don't U.S. Issuers Demand European Fees for IPOs?
Published: 11/14/2011, Volume: 66, Issue: 6 | DOI: 10.1111/j.1540-6261.2011.01699.x | Cited by: 97
MARK ABRAHAMSON, TIM JENKINSON, HOWARD JONES
We compare fees charged by investment banks for conducting IPOs in the United States and Europe. In recent years, the “7% solution,” as documented by
Chen and Ritter (2000)
, has become even more prevalent in the United States, and is now the norm for IPOs raising up to $250 million. The same banks dominate both markets, but European IPO fees are roughly three percentage points lower, are much more variable, and have been falling. We review explanations for the gap in spreads and find the evidence consistent with strategic pricing. U.S. issuers could have saved over $1 billion a year by paying European fees.
The Determinants of Default on Insured Conventional Residential Mortgage Loans
Published: 12/1983, Volume: 38, Issue: 5 | DOI: 10.1111/j.1540-6261.1983.tb03841.x | Cited by: 172
TIM S. CAMPBELL, J. KIMBALL DIETRICH
This paper presents empirical evidence on the determinants of default for insured residential mortgages. A multinomial logit model is specified and estimated for regional aggregates constructed from cross sectional and time series data. The results document the independent statistical significance of contemporaneous payment/income and loan/ value ratios and unemployment rates as well as more commonly studied determinants of default such as age and the original loan/value ratio.
A Comment on Bank Funding Risks, Risk Aversion, and the Choice of Futures Hedging Instrument
Published: 12/1990, Volume: 45, Issue: 5 | DOI: 10.1111/j.1540-6261.1990.tb03738.x | Cited by: 2
TIM S. CAMPBELL, WILLIAM A. KRACAW
Corporate Risk Management and the Incentive Effects of Debt
Published: 12/1990, Volume: 45, Issue: 5 | DOI: 10.1111/j.1540-6261.1990.tb03736.x | Cited by: 69
TIM S. CAMPBELL, WILLIAM A. KRACAW
This paper demonstrates how the incentive of manager‐equityholders to substitute toward riskier assets, commonly referred to as the “asset substitution problem,” is related to the level of observable risk in the firm. When observable and unobservable risks are sufficiently positively correlated, increases (decreases) in observable risk generate the incentive for manager‐equityholders to increase (decrease) unobservable risk. Thus, credible commitments to hedge observable risk can benefit the firm's manager‐equityholders by reducing the incentive to shift risk and the associated agency cost of debt. This provides a positive rationale for hedging diversifiable risk at the firm level.
Depositors' Welfare, Deposit Insurance, and Deregulation
Published: 7/1985, Volume: 40, Issue: 3 | DOI: 10.1111/j.1540-6261.1985.tb05024.x | Cited by: 8
YUK‐SHEE CHAN, KING‐TIM MAK
We develop an analytical model to address the question of optimal deposit insurance policy and to examine the impact of deregulation on depositors' welfare and the soundness of the insurance system. We find that the optimal level of regulation depends critically on the functional relationship between risk and return. We show that in general deregulation of bank activities and/or of deposit rate ceilings will in volve tradeoff between depositors' welfare and the soundness of the insurance system. Our analysis also indicates that risk‐sensitive premium and capital requirement schedules may not be efficient in managing the risk of banks.
Information Production, Market Signalling, and the Theory of Financial Intermediation
Published: 9/1980, Volume: 35, Issue: 4 | DOI: 10.1111/j.1540-6261.1980.tb03506.x | Cited by: 271
TIM S. CAMPBEL, WILLIAM A. KRACAW
Picking Winners? Investment Consultants’ Recommendations of Fund Managers
Published: 9/14/2016, Volume: 71, Issue: 5 | DOI: 10.1111/jofi.12289 | Cited by: 99
TIM JENKINSON, HOWARD JONES, JOSE VICENTE MARTINEZ
Investment consultants advise institutional investors on their choice of fund manager. Focusing on U.S. actively managed equity funds, we analyze the factors that drive consultants’ recommendations, what impact these recommendations have on flows, and how well the recommended funds perform. We find that investment consultants’ recommendations of funds are driven largely by soft factors, rather than the funds’ past performance, and that their recommendations have a significant effect on fund flows. However, we find no evidence that these recommendations add value, suggesting that the search for winners, encouraged and guided by investment consultants, is fruitless.
Going for Broke: Bank Reputation and the Performance of Opaque Securities
Published: 10/6/2025, Volume: 80, Issue: 6 | DOI: 10.1111/jofi.13503 | Cited by: 2
ABE DE JONG, TIM KOOIJMANS, PETER KOUDIJS
Can banks’ reputational concerns improve the quality of opaque, off‐balance sheet securities, such as mortgage‐backed securities? We study this question in a uniquely parsimonious setting. In the 1760s, Dutch banking partnerships securitized West‐Indian plantation mortgages that were risky and opaque. High‐reputation banks originated better mortgages and issued securities that, on average, retained 17.5% more of their value during a market collapse. Reputational effects are attenuated when the managing partners were married into wealth or received a large share of profits in the short term, suggesting that bank reputation only works if bankers are personally exposed to (long‐run) reputational losses.
Block Share Purchases and Corporate Performance
Published: 4/1998, Volume: 53, Issue: 2 | DOI: 10.1111/0022-1082.244195 | Cited by: 327
Jennifer E. Bethel, Julia Porter Liebeskind, Tim Opler
This paper investigates the causes and consequences of activist block share purchases in the 1980s. We find that activist investors were most likely to purchase large blocks of shares in highly diversified firms with poor profitability. Activists were not less likely to purchase blocks in firms with shark repellents and employee stock ownership plans. Activist block purchases were followed by increases in asset divestitures, decreases in mergers and acquisitions, and abnormal share price appreciation. Industry‐adjusted operating profitability also rose. This evidence supports the view that the market for partial corporate control plays an important role in limiting agency costs in U.S. corporations.
Size, Returns, and Value: Do Private Equity Firms Allocate Capital According to Manager Skill?
Published: 4/3/2026, Volume: 81, Issue: 3 | DOI: 10.1111/jofi.70036 | Cited by: 1
REINER BRAUN, NILS DORAU, TIM JENKINSON, DANIEL URBAN
Using a novel data set linking private equity (PE) deals to individual managers, we document evidence of manager skill in terms of generating net present value (NPV), a performance measure that captures both scale and returns. PE firms have strong economic incentives to raise larger funds and execute larger deals. While relative returns decline with scale, NPV persists and even increases. Skilled managers are entrusted with more capital and achieve better career outcomes, and approximately 40% of NPV is attributable to internal capital allocation decisions. These findings highlight the role of PE firms in creating value through performance‐based capital deployment.
Private Equity Performance: What Do We Know?
Published: 9/12/2014, Volume: 69, Issue: 5 | DOI: 10.1111/jofi.12154 | Cited by: 504
ROBERT S. HARRIS, TIM JENKINSON, STEVEN N. KAPLAN
We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. Venture capital funds outperformed public equities in the 1990s, but underperformed in the 2000s. Our conclusions are robust to various indices and risk controls. Performance in Cambridge Associates and Preqin is qualitatively similar to that in Burgiss, but is lower in Venture Economics.
Financial Fragility with SAM?
Published: 12/11/2020, Volume: 76, Issue: 2 | DOI: 10.1111/jofi.12992 | Cited by: 36
DANIEL L. GREENWALD, TIM LANDVOIGT, STIJN VAN NIEUWERBURGH
Shared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from payment relief are mortgage lenders' losses. A general equilibrium model in which financial intermediaries channel savings from saver to borrower households shows that indexation of mortgage payments to aggregate house prices increases financial fragility, reduces risk‐sharing, and leads to expensive financial sector bailouts. In contrast, indexation to local house prices reduces financial fragility and improves risk‐sharing.
Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts
Published: 11/12/2013, Volume: 68, Issue: 6 | DOI: 10.1111/jofi.12082 | Cited by: 321
ULF AXELSON, TIM JENKINSON, PER STRÖMBERG, MICHAEL S. WEISBACH
Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories. Using a large, international sample of buyouts from 1980 to 2008, we find that buyout leverage is unrelated to the cross‐sectional factors, suggested by traditional capital structure theories, that drive public firm leverage. Instead, variation in economy‐wide credit conditions is the main determinant of leverage in buyouts. Higher deal leverage is associated with higher transaction prices and lower buyout fund returns, suggesting that acquirers overpay when access to credit is easier.
Zombie Credit and (Dis‐)Inflation: Evidence from Europe
Published: 4/11/2024, Volume: 79, Issue: 3 | DOI: 10.1111/jofi.13342 | Cited by: 49
VIRAL V. ACHARYA, MATTEO CROSIGNANI, TIM EISERT, CHRISTIAN EUFINGER
We show that “zombie credit”—subsidized credit to nonviable firms—has a disinflationary effect. By keeping these firms afloat, zombie credit creates excess aggregate supply, thereby putting downward pressure on prices. Granular European data on inflation, firms, and banks confirm this mechanism. Markets affected by a rise in zombie credit experience lower firm entry and exit, capacity utilization, markups, and inflation, as well as a misallocation of capital and labor, which results in lower productivity, investment, and value added. If weakly capitalized banks were recapitalized in 2009, inflation in Europe would have been up to 0.21 percentage points higher post‐2012.
The Anatomy of the Transmission of Macroprudential Policies
Published: 8/23/2022, Volume: 77, Issue: 5 | DOI: 10.1111/jofi.13170 | Cited by: 96
VIRAL V. ACHARYA, KATHARINA BERGANT, MATTEO CROSIGNANI, TIM EISERT, FERGAL MCCANN
We analyze how regulatory constraints on household leverage—in the form of loan‐to‐income and loan‐to‐value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Loan‐level data suggest that mortgage credit is reallocated from low‐ to high‐income borrowers and from urban to rural counties. This reallocation weakens the feedback between credit and house prices and slows house price growth in “hot” housing markets. Banks whose lending to households is more affected by the regulatory constraint drive this reallocation, but also substitute their risk‐taking into holdings of securities and corporate credit.