Investments

My first study proposes that stock price manipulation erodes trust, damages corporate reputation, reorients management towards short-termism, harms entrepreneurial innovation culture, and increases the cost of capital. I tested these ideas by linking stock manipulation data to corporate venture capital data for firms listed on NASDAQ and NYSE. The data indicate CVC investments in entrepreneurial firms are followed by a rise in market manipulation in the short run [-3 months, +3 months], but a decline thereafter. The data further indicates that stock manipulation harms the ability of CVCs to form investment syndicates and reduces the likelihood of successful IPO and acquisition exits. The hazard rate to IPO is 0.54 for CVC-backed firms that face market manipulation. Overall, the theory and evidence provide insights into how firm's manipulation can damage the effectiveness of their venture capital endeavors, ultimately contributing to sustainable growth and innovation.

We consider a portfolio optimization problem in stochastic volatility jump-diffusion model. The model is a mispriced Lévy market that contains informed and uninformed investors. Contrarily to the uninformed investor, the informed investor knows that a mispricing exists in the market. The stock price follows a jump-diffusion process, the mispricing and volatility are modelled by Ornstein-Uhlenbeck (O-U) process and Cox-Ingersoll-Ross (CIR) process, respectively. We only present results for the informed investor whose goal is to maximize utility from terminal wealth over a finite investment horizon under the power utility function. We employ methods of stochastic calculus namely Hamilton-Jacobi-Bellman equation, instantaneous centralized moments of returns and three-level Crank-Nicolson method. We solve numerically the partial differential equation associated with the optimal portfolio. Under the power utility function, analogous results to those obtain in the jump-diffusion model under logarithmic utility function and deterministic volatility are obtained.

In a 2016 comment letter, the SEC summarizes the ongoing debate regarding the
usefulness of market risk disclosures and calls for additional discussion (SEC Concept
Release 2016). In response to the SEC’s call, I investigate whether investors and firms
benefit from market risk disclosures. Prior literature suggests that informative corporate
disclosure is associated with improved liquidity and investment efficiency. I find that
informative textual contents of market risk disclosures improve investors’ information
environment, and as a result, are associated with higher liquidity level, lower liquidity
uncertainty, and improved investment efficiency. My study is relevant to the ongoing
debate regarding the usefulness of market risk disclosures, calls for more detailed
regulatory guidance for market risk disclosures, and contributes to the literature on
liquidity, investment efficiency, and risk factor disclosures.

The form of the partial acquisition provides a unique opportunity to analyze the influence the partial acquirer has on the target firm which is not available in full acquisitions. This dissertation investigates how the subsequent decisions of both the partial acquirer and the partially acquired target affect their own stock valuations and the stock valuations of the other firm. Only partial acquisitions of less than 50% were considered so that the effect of corporate control without overt control could be measured. An event-study methodology is used to measure the stock price reactions of both firms to the announcement of several type of events: (1) acquisition/divestiture strategies, (2) dividend changes and (3) capital structure changes. The observed stock price reactions are then examined cross-sectionally to test whether firm-specific factors of explicit and implicit controls are influential in explaining the stock price reactions. A second goal of this dissertation was to measure the long term valuations of both firms and the combined entity to determine if the form of the partial acquisition is superior to that of a full acquisition. Again, various firm specific factors of explicit and implicit controls are tested cross-sectionally to determine their explanatory power on the long term valuations of both firms. The results of the event studies support the hypotheses that the actions of the partial acquirer do have an effect on the stock valuations of the partially acquired target (and vice versa) without the acquirer possessing a majority ownership position. In addition, several measures of explicit and implicit controls were found to be significant determinants of the short term stock valuations. The long term valuation studies implied that the form of the partial acquisition may not be superior to that of a full acquisition. However, it was determined that certain firm-specific factors (relatedness of the acquirer and target) have a significant effect on the long-term valuations for both firms.

A pre-determined percentage of the assets of mutual funds is extracted from each portfolio's value on a daily basis to cover operating expenses. The nature of the relationship between these fund operating expenses and fund size is the focus of this dissertation. A negative relationship is shown to exist between mutual fund operating expense percentages and mutual fund size. Next, a double-log estimating equation is utilized to generate a measure of the elasticity of mutual fund operating expenses with respect to mutual fund size. This expense-size elasticity (ESE) is estimated to be.961 for the entire cross-sectional sample, indicating that a one percent increase in fund size is associated with a.961% increase in fund operating expenses. Next, the elasticity of mutual fund operating expenses with respect to mutual fund size is calculated for each of five fund size categories. The ESE of the largest fund size category is shown to not differ in a statistically significant manner from those of the smaller categories of mutual fund size. ESEs are then calculated for various investment objective categories and are shown to differ in a statistically significant manner. ESEs also differ between load and no-load funds as well as between open-end and closed-end funds. The lack of statistically significant differences between the ESEs of various size categories is also evident in an analysis performed on a cross-sectional sample of mutual fund families. Further, evidence of the lack of significance of fund size in explaining variation in fund-specific ESES is found in an analysis of time series data for mutual funds in existence from 1976 through 1994.

This study examines the significance and implications of Dividend Reinvestment Plans (DRPs) for the sponsoring company and for the shareholders' wealth from a theoretical and an empirical point of view. It develops a DRP theory, as an extension of dividend and capital structure theories. Furthermore, the study tests empirically several hypotheses related to the market reaction at the announcement of a DRP adoption, to the market reaction at the announcement of a DRP discontinuance and to the performance of the company sponsoring a DRP. The results indicated that the market reaction to the announcement of a DRP establishment is favorable on days 1 and 2, significant only for the latter. In the long-run, DRPs create value for the sponsoring firm and its shareholders (as measured by Tobin's Q). The announcement of a DRP termination is followed by a negative market reaction, consistent with the thesis of this study. Finally, several factors such as the DRP type (Type I and Type II plans), the industry of the sponsoring company (utilities and non-utilities), tax legislation, the discount feature and the dividend payout ratio are examined in relation to the market reaction at the announcement of a DRP adoption. The Type II DRPs create more favorable reaction to Type I plans at the announcement of their introduction. There are significant differences between the market reaction at the DRP introduction of utilities and non-utilities. The tax legislation affects corporate dividend policy and DRPs. Finally, the discount feature is not regarded favorably by investors as it was hypothesized, which explains its elimination from many DRPs in the recent years.

Fads models for stocks under asymmetric information in a purely continuous(GBM) market were first studied by P. Guasoni (2006), where optimal portfolios and maximum expected logarithmic utilities, including asymptotic utilities for the informed and uninformed investors, were presented. We generalized this theory to Lâevy markets, where stock prices and the process modeling the fads are allowed to include a jump component, in addition to the usual continuous component. We employ the methods of stochastic calculus and optimization to obtain analogous results to those obtained in the purely continuous market. We approximate optimal portfolios and utilities using the instantaneous centralized and quasi-centralized moments of the stocks percentage returns. We also link the random portfolios of the investors, under asymmetric information to the purely deterministic optimal portfolio, under symmetric information.