Richard Kish

Catastrophe bonds, a relatively new entry into the bond market, are a form of reinsurance in which insurance firms are able to offset the financial risks from both natural and man-made catastrophes. Although the primary offset is within the reinsurance market, starting in the 1990s insurance firms started using the financial markets to offset catastrophe risks. Anecdotal evidence shows that the entry of CAT bonds made the reinsurance market more efficient and allowed investors an opportunity to participate in what has been a very profitable investment opportunity. Our analysis shows that on average, CAT bonds have generated high returns but with the advantage of diversification when compared with similarly rated corporate debt. Thus, CAT bonds are a viable investment option withina diversified portfolio.

Since the 1981-1982 recession in the United States, there has been a marked increase in domestic merger and acquisition activity. For example, the number of acquisitions involving U.S. companies was 2,296 and 3,701, respectively, for 1982 and 1987. The value of mergers involving U.S. companies also increased from about $60 billion in 1982 to over $167 billion in 1987. Cross-border acquisitions involving U.S. firms have also become more common, increasing from 364 in 1982 to 553 in 1987. During 1988, the number of cross-border acquisitions involving U.S. firms reached 605. While the number of annual cross-border acquisitions has generally increased over time, the composition of cross-border activity has shifted abruptly in some periods. For example, U.S. acquisitions of non-U.S. firms increased modestly from 149 in 1983 to 177 in 1987 while foreign acquisitions of U.S. firms rose substantially over this same period. In 1983, there were 116 foreign acquisitions of U.S. firms, valued at about $2.2 billion. This increased to 363 foreign acquisitions of U.S. firms valued at about $42 billion in 1987. To put it another way, U.S. firms acted as acquiring firms in about 56 percent of the cross-border acquisitions involving U.S. firms in 1983, versus only about 26 percent in 1987. Some of the more publicized foreign acquisitions of U.S. firms include Sony’s acquisition of CBS Records Group, Bridgestone’s acquisition of Firestone Tire & Rubber Co., Nestle’s acquisition of Carnation, and the Royal Dutch/Shell buyout of Shell Oil.

Gran parte de la literatura financiera de las ultimas cuatro decadas ha girado en torno a distintas teorias que tratan de explicar que es exactamente lo relevante para la determinacion de la estructura de capital. Resumen y valoracion de las principales cuestiones abordadas en esas teorias, poniendo el enfasis en los avances realizados en los ultimos 15 anos.

Forecasting stock returns and bond yields is an important goal of investment management. However, if a random walk process describes stock returns and bond yields, then much of the efforts devoted to forecasting stock returns and bond yields are of questionable value. Research by Fama and French (1996) and others support the hypothesis that stock returns do not follow a pure random walk process. Further support for returns not following a pure random walk is offered by Fleming and Remolona (1997), Clare and Thomas (1992), Campbell and Hamao (1989), and Keim and Stambaugh (1986). These researchers document the predictability of both stock returns and bond yields. Another objective of investment management is the asset allocation process which seeks to develop the mix of assets that provides the optimum risk-return combinations. Surprisingly, little research has been devoted to quantifying the co-movements of stock returns and bond yields, a process useful in the allocation process. T...

Several studies in the past established an association between market and accounting betas. Most of the previous studies are performed using a sample of large established firms for which both accounting and market betas can be computed. In our study, market betas cannot be computed due to the data limitations associated with private firms. Thus, a direct measure of the association between the two betas is impossible. However by relying on the relationship that exists between market betas and the underpricing of the IPOs, we are able to establish the linkage between market and accounting betas. Through this linkage, our results confirm that accounting betas are associated with market betas within the IPO market. Therefore, accounting betas can be used as an ex anti measure for the riskiness of firms entering into the IPO market.

Investors often look for confirmation of a mutual fund’s performance. This paper analyzes whether Morningstar’s rating system adds value within the mutual fund sector for government bonds. The authors confirm that on average Morningstar ratings accurately represent high and low performing mutual funds when measured against Sharpe ratios, Treynor ratios, Jensen’s alphas, Sortino ratios, and M-squared values. Our performance evaluation also shows that some managers, although not all, can add value on a risk-adjusted basis even within the generic government bond mutual fund category.

Forecasting stock returns and bond yields is an important goal of investment management. However, if a random walk process describes stock returns and bond yields, then much of the efforts devoted to forecasting stock returns and bond yields are of questionable value. Research by Fama and French (1996) and others support the hypothesis that stock returns do not follow a pure random walk process. Further support for returns not following a pure random walk is offered by Fleming and Remolona (1997), Clare and Thomas (1992), Campbell and Hamao (1989), and Keim and Stambaugh (1986). These researchers document the predictability of both stock returns and bond yields. Another objective of investment management is the asset allocation process which seeks to develop the mix of assets that provides the optimum risk-return combinations. Surprisingly, little research has been devoted to quantifying the co-movements of stock returns and bond yields, a process useful in the allocation process. T...

ABSTRACT This proposal sets forth a concept for the public/private finance of owner-occupied, single-family homes for first-time homebuyers utilizing federal guarantees and private sector mortgages. Proposed funding requires no new tax revenues. The security that the program revolves around is a Zero-coupon/Interest-only Fixed-rate mortgage (ZIF). The ZIF has the potential to improve the allocation of resources for subsidizing low-income housing, to reduce risk exposure to rapidly declining property values, and to improve the self-esteem of a group of Americans who have been depressed for far too long by making homeownership a reality.

Plastic bag litter generates serious environmental concerns and poses a risk to wildlife. As this does not seem to be a problem which can be resolved by the private sector alone, or by ‘Coasean’ negotiation, legislation is proposed, particularly focusing on ‘one†use’ bags. This article surveys legislation worldwide, while concentrating on lessons from the United States and the United Kingdom. The issues are more complex than is often assumed. While environmentalists argue for restriction and ultimate elimination of one†use bags, manufacturers, especially those that have reformulated the composition of their bags, see legislation as an overreaction to a problem that is already being addressed within the industry. They cite evidence that, when used within a comprehensive recycling programme, plastic bags are not only cost†effective but a sound use of our limited resources. Bans or restrictions can have knock†on effects which can create new problems.

■ This research examines cross-border mergers and acquisitions involving American and Japanese firms within the context of the broad movement toward the internationalization of business and finance which has taken place at an unabated pace since the end of WWII. Our empirical ...

Financial theory claims that issuing callable debt rather than noncallable debt offers substantial advantages to the issuing firms. Yet our evidence shows that a substantial amount of noncallable debt exists, suggesting a deficiency in the theory. Our event study analysis found that market reactions to callable bond issues were not significantly different from zero. Thus, the prevalent claim that callable debt offers an advantage over noncallable debt is not supported. The market was found to reach negatively the issuance of noncallable debt, short-term noncallable debit, short-term callable debt, and short-term debt. Therefore, short-term bonds appear to be a signal of negative private information and long-term debt issues appear to be a signal of positive information.

Abstract Life Cycle funds have been a Qualified Default Investment Option for automatic enrollment for 401(k) retirement plans since 2006. Close examination of these funds and existing benchmarks reveals little transparency or uniformity in allocation, methodology, and timing. Already $340 billion, and growing, these funds' characteristics can have a significant impact on individuals' long-term investment decisions. While many studies of Life Cycle investing use simulation, our contribution is to construct simple benchmarks for empirical analysis of Life Cycle fund performance. Our analysis shows that the funds largely underperform dynamic and static benchmarks across target dates on an absolute and risk-adjusted basis. © 2011 Academy of Financial Services. All rights reserved. JEL classification: G23; G11 Keywords: Mutual funds; Fund performance; Target-date funds; Life Cycle funds; Retirement investments (ProQuest: ... denotes formula omitted.) 1. Introduction Investment has flowed steadily into Life Cycle funds, with net cash inflows of $56 billion in 2007; $41 billion in 2008; $43 billion in 2009; and $44 billion in 2010. Life Cycle fund (also called Target Date fund) investments overall increased 33%, to almost $340 billion, from 2009 to 2010. Of this, $245 billion was invested through defined contribution plans and $65 billion through IRAs. Further, one third of participants in 401(k) plans had some investment in Life Cycle funds as of the end of 2009. Already a popular option in retirement accounts because of their perceived simplicity, Life Cycle funds were designated as one of only three Qualified Default Investment Options for 401(k) plans by the U.S. Government in 2006. This designation is likely to further increase the number of plans offering Life Cycle funds from the 77% who did in 2009.1 Unfortunately, these funds have disclosure problems with respect to allocation, methodology, and timing.2 This absence of transparency is even more of a concern since 401(k) participants in their 20s held 23.5% of their asset allocation in target date funds, compared with 7.6% of their asset allocation for participants in their 60s.3 Investors in the Life Cycle option of 401(k) plans not only tend to be younger, but also to have smaller balances, and in general have less knowledge about the financial markets when compared with 401(k) investors overall, as documented by Mitchell, Mottola, Utkus, and Yamaguchi (2009). Given the relative youth and inexperience of the investor base, our analysis and results have long-term implications for a large number of individual investors. The purpose of this paper is to provide a basis for understanding the asset allocations, fee structure, and risk-adjusted performance of these funds. Another contribution of this paper is to examine some of the benchmarks for Life Cycle funds and assess whether or not the funds have provided investors risk-adjusted return over their history. While many authors have studied simulations of asset allocations over investor life cycles (e.g., Ervin et al., 2009; Kyrychenko, 2008; Meyaard and Templeton, 2002; Pfau, 2010; Schleef and Eisinger, 2007), few have analyzed the indices currently used to benchmark Life Cycle funds. We parse these indices, and construct dynamic and static indices to analyze the performance of Life Cycle funds and common benchmarks. Life Cycle funds (also commonly called Target Date funds) are a subcategory of all-in-one mutual funds that provide diversification and active asset allocation over time. Life Cycle funds are intended to become more conservative systematically as the investor's target retirement date approaches. Life Cycle funds set target retirement dates such as 2010, 2015, 2020, . . . , 2045, 2050, 2055. When a fund is first established, with a long term until the target retirement date, the fund manager invests heavily in equities. With the passage of time, the fund manager gradually shifts the investment mix towards more conservative debt securities. …

This proposal sets forth a concept for the public/private finance of owner-occupied, single-family homes for first-time homebuyers utilizing federal guarantees and private sector mortgages. Proposed funding requires no new tax revenues. The security that the program revolves around is a Zero-coupon/Interest-only Fixed-rate mortgage (ZIF). The ZIF has the potential to improve the allocation of resources for subsidizing low-income housing, to reduce risk exposure to rapidly declining property values, and to improve the self-esteem of a group of Americans who have been depressed for far too long by making homeownership a reality.

Insignificant stock market reactions to debt issues have been well documented in the finance literature. This paper segments debt issues into callable/noncallable and long-term/short-term categories, as well as anticipated and unanticipated issues (8 different categories of debt). A logit model was used to classify the debt issues into anticipated and unanticipated categories. Stock market reactions were insignificant for 7 of the 8 debt categories. Market reactions were sizably negative and highly significant for unanticipated long-term noncallable debt issues. These results support the efficiency of the market and Flannery (1986) conjecture that the issuance of long-term noncallable debt is a signal for identifying bad firms.

The use of financial trading labs within university settings is in a growth phase, with more colleges and universities finding the need to build one just to stay competitive. This paper gives information on the various steps in the development process of the trading lab, key factors for building a lab, and key questions that need to be addressed while in the formulation phase of the lab design. In addition various hardware designs, fund raising opportunities, utilization methods are discussed.

Life Cycle funds have been a Qualified Default Investment Option for automatic enrollment for 401(k) retirement plans since 2006. Close examination of these funds and existing benchmarks reveals little transparency or uniformity in allocation, methodology, and timing. Already $340 billion, and growing, these funds’ characteristics can have a significant impact on individuals’ long-term investment decisions. While many studies of Life Cycle investing use simulation, our contribution is to construct simple benchmarks for empirical analysis of Life Cycle fund performance. Our analysis shows that the funds largely underperform dynamic and static benchmarks across target dates on an absolute and risk-adjusted basis.

Do small- and large-capitalization stock returns differ when there is Democratic, or Republican, or mixed control of the executive and legislative branches of the United States federal government? Do corporate bonds, intermediate- and long-term government bonds, and Treasury bill returns differ in these cases? The authors test various investment strategies that attempt to capitalize on the effects of control of both executive and legislative branches. The results document the differences in returns in four different holding periods by political control. A strategy based solely on political control of the executive branch has gone out of favor since 1976. The dominant trading rule since then relies on political control of Congress.

ABSTRACT This study utilizer systematic risk as measured by its accounting beta to proxy IPO ex ante risk for examining the relationship between risk and underpricing. Unlike the IPO's standard deviation for returns, the risk measure employed by Ritter (1984), a firm's accounting beta is an ex ante factor available to investors before the initial public offering. Utilizing accounting betas from 701 firms, our regression analysis corrected for heteroskedasticity shows a positive relationship between accounting beta and the subsequent degree of underpricing. Thus, our finding suggests that systematic risk, as measured by an accounting beta, is a good proxy for ex ante uncertainty.

DOI: 10.1177/104687819903000109 1999 30: 83 Simulation Gaming Karen M. Hogan and Richard J. Kish Stocks, Bonds, Or Both : An Exercise in Risk/Return Tradeoffs ... On behalf of: Association for Business Simulation & Experiential Learning International Simulation & Gaming ...

Korean and US IPO markets show significant initial underpricing, accounting for dramatic initial price increases. However, unlike its US counterpart, the Korean IPO market shows considerable market adjusted long-run returns. Hypotheses influenced by Korean institutional and regulatory factors, tested to explain the IPO cumulative returns, suggest that some of the theoretical arguments and empirical regularities observed in the US IPO market also apply to the Korean IPO market. However, this is a function of the regulatory environment in the four periods investigated in this study.

Empirically-based financial patterns, the long-term stability of these patterns, and the distribution properties of financial ratios have received a considerable amount of attention in recent years for both U.S. and U.K. firms. However, limited research exists concerning the financial patterns for government-owned firms in Taiwan. Moreover, the prior studies offered little evidence about the probability functions of the actual distributions of financial ratios. Using data from twelve government-owned manufacturing firms in Taiwan during the period 1978–1993, the financial patterns of six classifications are developed. The analysis identifies that these patterns are relatively stable over the empirical period even though the magnitude of many underlying ratios changed. The six major ratios identified are not normally distributed. The distributions are either J-shaped, regular, or skewed, which is consistent with prior studies. The probability functions developed in this study can hel...

Most Korean IPOs show significant initial underpricing which accounts for high initial returns. Our study explores the institutional and regulatory factors that have affected both the offering and after-market pricing mechanisms to test several hypotheses that might explain this underpricing in the Korean IPO market. We find a systematic difference in the initial stock price performance of new issues in an environment where firms have different motives for going public. We also find that in less regulated periods, the explanatory power of the variables relating to both the signaling and ex ante uncertainty hypotheses increase.

Prior research shows that short-sale restrictions during an IPO lead to higher aftermarket prices. Using this and heterogeneous expectations on the factor pricing coefficient, our model sheds additional light on the impact of the short-selling constraint. Like prior research, short-sale restrictions in the IPO market lead to higher aftermarket prices. Importantly, our model predicts that this constraint leads to a

Abstract: The proliferation of mergers during the 70s and 80s has generated voluminous amounts of research with a primary focus on the impact to the shareholders from both the acquired and the acquiring firms. Relatively little research has been placed on the ...

... ESTIMATING THE VALUE OF CALL OPTIONS ON CORPORATE BONDS. Richard J. Kish 1 ,; Miles Livingston 2. Article first published online: 8 APR 2005. DOI: 10.1111/j.1745-6622.1993. tb00238.x. ... 1 RICHARD KISH is an Assistant Professor of Finance at Lehigh University. 2 ...

The Contrarian Investment Strategy (CIS) implies simultaneously buying previous losers and selling previous winners. This paper examines the CIS as first proposed by DeBondt and Thaler (1985)(Journal of Finance 40, 793–808) in an effort to expand and complement existing ...

PurposeThis article proposes an evaluation of capital investments that accounts for not only the initial assets, but also any potential growth options.Design/methodology/approachUsing a piecewise linear approximation, a robust valuation technique is demonstrated for analyzing capital investment opportunities containing expansion options in a finite time horizon.FindingsThis process not only recognizes the option‐like characteristics of the initial investment opportunity, but also recognizes the option‐creating characteristics of the investment. This analysis shows that the value of capacity expansion options created by the initial investment has different dynamic characteristics from the assets in place. Although the growth options do not appear in the early investment premium, its impact on the investment decision is embedded in the investment threshold. When the time to expiration is short and the cost to delaying the assets in place is low, this analysis suggests that the initial...