The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Search results: 5.
Risk Management with Derivatives by Dealers and Market Quality in Government Bond Markets
Published: 09/11/2003 | DOI: 10.1111/1540-6261.00591
Narayan Y. Naik, Pradeep K. Yadav
This paper investigates how bond dealers manage core business risk with interest rate futures and the extent to which market quality is affected by their selective risk taking. We observe that dealers use futures to take directional bets and hedge changes in their spot exposure. We find that, cross‐sectionally, a dealer with longer (shorter) risk exposure sells (buys) a larger amount of exposure the next day. However, this risk control takes place via the futures market and not the spot market. Finally, we find strong support for the price effects of capital constraints emphasized by Froot and Stein (1998).
Preferencing, Internalization, Best Execution, and Dealer Profits
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00167
Oliver Hansch, Narayan Y. Naik, S. Viswanathan
The practices of preferencing and internalization have been alleged to support collusion, cause worse execution, and lead to wider spreads in dealership style markets relative to auction style markets. For a sample of London Stock Exchange stocks, we find that preferenced trades pay higher spreads, however they do not generate higher dealer profits. Internalized trades pay lower, not higher, spreads. We do not find a relation between the extent of preferencing or internalization and spreads across stocks. These results do not lend support to the “collusion” hypothesis but are consistent with a “costly search and trading relationships” hypothesis.
Do Inventories Matter in Dealership Markets? Evidence from the London Stock Exchange
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00067
Oliver Hansch, Narayan Y. Naik, S. Viswanathan
Using London Stock Exchange data, we test the central implication of the canonical model of Ho and Stoll (1983) that relative inventory differences determine dealer behavior. We find that relative inventories explain which dealers obtain large trades and show that movements between best ask, best bid, and straddle are highly correlated with both standardized and relative inventory changes. We show that the mean reversion in inventories is highly nonlinear and increasing in inventory levels. We show that a key determinant of variations in interdealer trading is inventories and that interdealer trading plays an important role in managing large inventory positions.
Role of Managerial Incentives and Discretion in Hedge Fund Performance
Published: 09/28/2009 | DOI: 10.1111/j.1540-6261.2009.01499.x
VIKAS AGARWAL, NAVEEN D. DANIEL, NARAYAN Y. NAIK
Using a comprehensive hedge fund database, we examine the role of managerial incentives and discretion in hedge fund performance. Hedge funds with greater managerial incentives, proxied by the delta of the option‐like incentive fee contracts, higher levels of managerial ownership, and the inclusion of high‐water mark provisions in the incentive contracts, are associated with superior performance. The incentive fee percentage rate by itself does not explain performance. We also find that funds with a higher degree of managerial discretion, proxied by longer lockup, notice, and redemption periods, deliver superior performance. These results are robust to using alternative performance measures and controlling for different data‐related biases.
Hedge Funds: Performance, Risk, and Capital Formation
Published: 07/19/2008 | DOI: 10.1111/j.1540-6261.2008.01374.x
WILLIAM FUNG, DAVID A. HSIEH, NARAYAN Y. NAIK, TARUN RAMADORAI
We use a comprehensive data set of funds‐of‐funds to investigate performance, risk, and capital formation in the hedge fund industry from 1995 to 2004. While the average fund‐of‐funds delivers alpha only in the period between October 1998 and March 2000, a subset of funds‐of‐funds consistently delivers alpha. The alpha‐producing funds are not as likely to liquidate as those that do not deliver alpha, and experience far greater and steadier capital inflows than their less fortunate counterparts. These capital inflows attenuate the ability of the alpha producers to continue to deliver alpha in the future.