We study the effect of the life settlement market on the structure of long term contracts offered by the primary market for life insurance, as well as the effect on consumer welfare, using a dynamic model of life insurance with one sided commitment and bequest-driven lapsation. We show that the presence of life settlement affects the extent as well as the form of dynamic reclassification risk i...

An asset’s sensitivity to stock market volatility carries a signi…cant risk premium across both equity and …xed income markets. Large-cap and growth stocks have less exposure to volatility risk. Their relatively greater ability to weather volatility surprises, such as those often associated with …nancial crises, accounts for their lower expected returns when compared to small-cap and value stoc...

A new approach to credit risk modelling is introduced that avoids the use of inaccessible stopping times. Default events are associated directly with the failure of obligors to make contractually agreed payments. Noisy information about impending cash flows is available to market participants. In this framework the market filtration is modelled explicitly, and is assumed to be generated by one ...

Rhodes-Kropf and Viswanathan (2004) suggest an adverse selection role of corporate cash reserve. Specifically, if investors know a bidder does not have to issue to invest, an attempt to do so sends a strong pessimistic signal of overvaluation. Despite its intuitiveness, this notion has not been explicitly studied in the empirical literature. Using a sample of acquisitions that are solely financ...

Using a sample of U.K. bidder companies from 1984 through 2007, we find that announcement returns are better for bidders of higher excess cash reserve. This suggests that acquisitions by high excess cash reserve bidders are not necessarily value-decreasing as is suggested by the agency theory and found in the U.S. market. Managers may need cash to ensure that all potential good investment oppor...

In this study, I investigate whether market learning explains the absence of the accrual anomaly in recent years by examining three conditions associated with the presence of the anomaly in prior research: (i) a differential relation between future earnings and cash flows versus accruals, (ii) incorrect weighting of cash flows and accruals by investors when predicting earnings, and (iii) associ...

In this paper, an artificial financial market based on heterogeneous agents is presented. The proposed market is composed of traders with limited amount of cash, one traded asset and a centralized mechanism, the market maker, matching buy and sell orders. The price formation process is given by the intersection of the demand and the supply curve. The artificial financial market has been impleme...

The paper investigates market reaction to announcements of stock repurchases and dividends and determinants of choice between the two payout methods. The analysis uses data on Polish firms with the sample period encompassing a significant tax regulation change. The average announcement period abnormal returns are relatively high and exceed 6% for stock repurchases and 2% for dividend initiation...

Prediction of stock returns has always been one of the most important issues in finance. Investors have attracted to use of Fama-French Five-Factor Model (FFFFM) as one of the powerful methods for pricing financial assets and predicting the stock returns. This research investigates the predictability of stock returns by including some important firms features namely cash holdings, dividend rate...

Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series ana...