Download or read book Essays on Asymmetries Uncertainty and Investment written by Woojin Youn and published by . This book was released on 1998 with total page 366 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Investment Under Uncertainty and Asymmetric Information written by Kirill Valerievich Zavodov and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Firm Behaviors and Performance Under Information Asymmetry and Uncertainty written by HoWook Shin and published by . This book was released on 2016 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays exploring firm behaviors and performance under information asymmetry and uncertainty. While the first two essays examine investment in firms and divestment by firms respectively by depending on real options theory, the final essay investigates determinants of performance of microenterprises receiving microfinance funds. In the first essay (Chapter 1), I examine the determinants of private investments in firms newly going public through reverse mergers (RMs). Using real options theory, I argue that reverse merger firms (i.e., firms going public through reverse merger) with institutional and industrial backgrounds, indicating a wider distribution of potential future values, will attract larger investments. I further examine how an institutional change reducing the cost of initial public offerings (IPOs), which is the more lucrative alternative to the reverse merger, affects investment in reverse merger firms. I thus argue that the influence of those backgrounds on the investment size in RM firms will be weaker. Using data of reverse mergers in the United States from 2009 to 2014, I found empirical support for my arguments. My second essay (Chapter 2) explores the determinants of foreign subsidiary divestment by multinational corporations (MNCs). I argue that MNCs with higher operational flexibility and/or cultural diversity will be less likely to divest their foreign subsidiaries even if those subsidiaries confront host country economic downturn. Using a panel data of 511 Korean MNCs and event history analysis, I found empirical support for our arguments. In my third essay (Chapter 3), I investigate the determinants of performance improvement of microenterprises receiving microfinance funds. I argue that damage from a natural disaster that increases a microenterprise’s risks of going out of business will provide entrepreneurs with self-control incentives to use microfinance funds effectively. Thus, the entrepreneurs’ self-control incentives will be positively associated with microenterprises’ post-funding performance improvement. I also contend that cash is more effective than in-kind funds in improving microenterprise performance by generating fewer moral hazards. Using a sample of Sri Lankan microenterprises that experienced a tsunami and difference-in-difference estimations, I found empirical support for my arguments.

Download or read book Essays on Uncertainty and Asymmetric Information in Financial Markets written by Seungmoon Park and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Effects of Asymmetric Information written by Mario Ramirez Basora and published by . This book was released on 2012 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: It can be easily argued that most, if not all, real economic settings are asymmetric in nature. Particularly, it is often the case that one or several agents possess more or better information than the rest when agreeing upon an economic transaction. Although the information economics revolution of the 1970s laid out the majority of the theoretical foundations, the effects of asymmetric information are subtle and have not been studied in some very interesting contexts, which motivate this thesis. In the first essay, which is based on joint work with Antonio Bento and Benjamin Ho, we study the problem of an uninformed regulator who wishes to use a voluntary price instrument under varying degrees of uncertainty, specifically in the context of a carbon offset market. In this scenario, a regulator offers private land owners a contract that compensates them for producing carbon offsets while minimizing adverse selection and welfare losses. The model shows that monitoring should decrease as the uncertainty of offset quality decreases, but should increase as uncertainty over agricultural productivity increases. Also, in response to those who argue that the problem of additionality is so large that carbon offsets should not be allowed in carbon regulation, the model quantifies the amount of additionality and finds that even in the case of a regulator with no information, welfare is improved by allowing offset contracts. Finally, the model offers guidance for calculating the optimal offset price as a function of the regulator's information. The second essay consists of a cardinal tournament used by a representative firm to choose its next CEO. Candidates are managers of different types: they are heterogeneous over levels of ability and risk aversion. The managers have private information about their ability. In this context, a two-dimensional solution set of levels of ability and risk aversion corresponding to each possible mean of cash flow realization is identified. Using two different specifications (CARA preferences with normally distributed cash flows, and CRRA preferences with log-normally distributed cash flows), the trade-off between managerial ability and risk aversion is found to be characterized by a concave function. Furthermore, for better levels of technology, the relative importance of risk aversion with respect to ability increases, while for worse levels of technology, the reverse holds. Finally, in the third essay, using a model based on the optimal consumption and investment models from the operations research literature, I study how the CEO characteristics studied in Chapter 2 impact dividend policy and the longrun evolution of the firm. Specifically, when assuming CRRA preferences and a concave trade-off between ability and risk aversion, I find that the optimal dividend policy of the CEO is non-monotonic with respect to risk aversion. In other words, CEOs with a combination of both high (or low) ability and risk aversion, will pay out lower dividend yields than CEOs with a more balanced combination of ability and risk aversion. Furthermore, firm survival is a function of the dividend yield and is also non-monotonic: while the probability of firm survival converges to either zero or one as risk aversion (and, by extension, ability) converges to either zero or infinity, there exists a range for which lower investment counteracts a potentially higher dividend yield, and the resulting change in the probability of survival is ambiguous.

Download or read book Essays on Investment Decisions Under Large Uncertainty written by Natasa Bilkic and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recently increased number of social conflicts, natural disasters and economic turbulences has shown that many stochastic events are rare but have a devastating impact on economic activity. Many economic agents suffered from huge losses, which increased the attention of professional interest to develop new evaluation methods of investment projects. As the literature discussion of this thesis emphasizes, for a long time disasters were not regarded as an essential element of investment decisions and only their recent impact changed this practice. The central question that arises in this context is how decision makers can account for large variability. This doctoral thesis sheds further light onto this question by developing methods for evaluating marginal and non-marginal stochastic shocks for non-sequential and sequential investment decisions. Furthermore, it provides an analysis of their effects on investment behaviour as well as statements about optimal investment decisions. ; eng

Download or read book Four Essays in the Theory of Uncertainty and Portfolio Choice written by Jonathan Eaton and published by . This book was released on 1976 with total page 434 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Industry Investment and Financial Markets written by Bongseok Choi and published by . This book was released on 2011 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates asymmetries of financing patterns, depending on group characteristics - firm size or riskiness, which have shown in the empirical literature. The dissertation consists of two essays. This first essay, Financial innovation, Firm size and Growth, proposes a model of Schumpeterian growth endogeneizing the disproportionate impact of financial innovation on small firm sectors. Entrepreneurial skill on a continuum of types is private information. Hence, the severity of adverse selection problems between investors and entrepreneurs varies based on firm size. In the absence of financial innovation, the arrival of a new technology frontier renders existing screening technology obsolete, thereby making it more challenging for an investor to design a truth-telling mechanism, particularly with small firm (and size-dispersed) sectors. Thus, successful financial innovation is more pronounced in such sectors. The link between financial innovation and the small firm (and size-dispersed) sectors is weak in financially developing countries. I test my model prediction by using cross-country and cross-sector data at the European industry level. This result is consistent with my prediction. The second essay, Firm risks, Capital allocation frictions and the Business cycles, attempts to address new findings in business cycles: the cross-sectional standard deviation of firm level investment rate (investment dispersion) is at most acyclical or procyclical. This differs from the dispersion of productivity, output, and interest rates, which is countercyclical. I develop a dynamic stochastic general equilibrium model of physical capital matching frictions between heterogeneous firms and investors. In the mode, economic fluctuations are caused mainly by shocks to heterogeneity in firms' risks. One main feature is that investors search firms with priority given to loans to safe firms. Because safe firms are most likely to benefit from capital accumulation, this setting drives asymmetric patterns of firm-level business cycles - output, investment rate, and interest rates in a unified framework. In essence, the uncertainty in heterogeneous risks across firms generates the pro- or a-cyclical behavior of investment dispersions which is the data demonstrates.

Download or read book Oil Price Uncertainty written by Apostolos Serletis and published by World Scientific Publishing Company Incorporated. This book was released on 2012 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: The relationship between the price of oil and the level of economic activity is a fundamental issue in macroeconomics. There is an ongoing debate in the literature about whether positive oil price shocks cause recessions in the United States (and other oil-importing countries), and although there exists a vast empirical literature that investigates the effects of oil price shocks, there are relatively few studies that investigate the direct effects of uncertainty about oil prices on the real economy. The book uses recent advances in macroeconomics and financial economics to investigate the effects of oil price shocks and uncertainty about the price of oil on the level of economic activity.

Download or read book Essays on Economic Decisions Under Uncertainty written by Jacques Drèze and published by CUP Archive. This book was released on 1990-05-25 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt: Professor Dreze is a highly respected mathematical economist and econometrician. This book brings together some of his major contributions to the economic theory of decision making under uncertainty, and also several essays. These include an important essay on 'Decision theory under moral hazard and state dependent preferences' that significantly extends modern theory, and which provides rigorous foundations for subsequent chapters. Topics covered within the theory include decision theory, market allocation and prices, consumer decisions, theory of the firm, labour contracts, and public decisions.

Download or read book Essays in Corporate Finance and Investment written by Lin William Cong and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of two essays that examine several problems in corporate finance and mechanism design. The central theme is endogenous agency conflicts and their impact on dynamic investment decisions. The first essay features auctions of assets and projects with embedded real options, and subsequent exercises of these investment options. The essay shows timing and security choice of auctions endogenously misalign incentives among agents and derives the optimal auction design and exercise strategy. The second essay studies implications of endogenous learning on irreversible investment decisions, in particular, how learning gives rise to asymmetric information between managers and shareholders in decentralized firms. Depending on the quality of the project, the optimal contract between principal and agent distorts investments in ways that has not been examined in the literature. Specifically, in Chapter 1 of the dissertation, I study how governments and corporations auction real investment options using both cash and contingent bids. Examples include sales of natural resource leases, real estate, patents and licenses, and start-up firms with growth options. I incorporate both endogenous auction initiation and post-auction option exercise into the traditional auctions framework, and show that common security bids create moral hazard because the winning bidder's real option differs from the seller's. Consequently, investment could be either accelerated or delayed depending on the security design. Strategic auction timing affects auction initiation, security ranking, equilibrium bidding, and investment; it should be considered jointly with security design and the seller's commitment level. Optimal auction design aligns investment incentives using a combination of down payment and royalty payment, but inefficiently delays sale and investment. I also characterize informal negotiations as timing and signaling games in which bidders can initiate an auction and determine the forms of bids. I show that post-auction investments are efficient and bidding equilibria are equivalent to those of cash auctions. However, in this setting, bidders always initiate the informal auctions inefficiently early. In addition, I provide suggestive evidence for model predictions using data from the leasing and exploration of oil and gas tracts, which leads to several ongoing empirical studies. Altogether, these results reconcile theory with several empirical puzzles and imply novel predictions with policy relevance. In Chapter 2, I examine learning as an important source of managerial flexibility and how it naturally induces information asymmetry in decentralized firms. Timing of learning is crucial for investment decisions, and optimal strategies involve sequential thresholds for learning and investing. Incentive contracts are needed for learning and truthful reporting. The inherent agency conflicts alter investment behavior significantly, and are costly to investors and welfare. But contracting on learning restores efficiency with low future uncertainty or sufficient liquidity. Unlike prior studies, the moral hazard of learning accelerates good projects and delays bad projects. Even the best type's investment is distorted, and only when learning is contractible can adverse selection dominate learning.

Download or read book Essays on Asymmetric Information and Environmental Regulation Through Disclosure written by Jorge García and published by Goteborg University. This book was released on 2007 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Financial Economics written by Rita Biswas and published by Emerald Group Publishing. This book was released on 2019-10-24 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume, dedicated to John W. Kensinger, explores a variety of topics in financial economics, including firm growth, investment risks, and the profitability of the banking industry. With its global perspective, Essays in Financial Economics is a valuable addition to the bookshelf of any researcher in finance.

Download or read book The Known the Unknown and the Unknowable in Financial Risk Management written by Francis X. Diebold and published by Princeton University Press. This book was released on 2010-05-09 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt: A clear understanding of what we know, don't know, and can't know should guide any reasonable approach to managing financial risk, yet the most widely used measure in finance today--Value at Risk, or VaR--reduces these risks to a single number, creating a false sense of security among risk managers, executives, and regulators. This book introduces a more realistic and holistic framework called KuU --the K nown, the u nknown, and the U nknowable--that enables one to conceptualize the different kinds of financial risks and design effective strategies for managing them. Bringing together contributions by leaders in finance and economics, this book pushes toward robustifying policies, portfolios, contracts, and organizations to a wide variety of KuU risks. Along the way, the strengths and limitations of "quantitative" risk management are revealed. In addition to the editors, the contributors are Ashok Bardhan, Dan Borge, Charles N. Bralver, Riccardo Colacito, Robert H. Edelstein, Robert F. Engle, Charles A. E. Goodhart, Clive W. J. Granger, Paul R. Kleindorfer, Donald L. Kohn, Howard Kunreuther, Andrew Kuritzkes, Robert H. Litzenberger, Benoit B. Mandelbrot, David M. Modest, Alex Muermann, Mark V. Pauly, Til Schuermann, Kenneth E. Scott, Nassim Nicholas Taleb, and Richard J. Zeckhauser. Introduces a new risk-management paradigm Features contributions by leaders in finance and economics Demonstrates how "killer risks" are often more economic than statistical, and crucially linked to incentives Shows how to invest and design policies amid financial uncertainty

Download or read book Geopolitical Risk on Stock Returns Evidence from Inter Korea Geopolitics written by Seungho Jung and published by International Monetary Fund. This book was released on 2021-10-22 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.

Download or read book Essays on Risk and Uncertainty in Economics and Finance written by Jorge Mario Uribe Gil and published by Ed. Universidad de Cantabria. This book was released on 2022-11-22 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book adds to the resolution of two problems in finance and economics: i) what is macro-financial uncertainty? : How to measure it? How is it different from risk? How important is it for the financial markets? And ii) what sort of asymmetries underlie financial risk and uncertainty propagation across the global financial markets? That is, how risk and uncertainty change according to factors such as market states or market participants. In Chapter 2, which is entitled “Momentum Uncertainties”, the relationship between macroeconomic uncertainty and the abnormal returns of a momentum trading strategy in the stock market is studies. We show that high levels of uncertainty in the economy impact negatively and significantly the returns of a portfolio of stocks that consist of buying past winners and selling past losers. High uncertainty reduces below zero the abnormal returns of momentum, extinguishes the Sharpe ratio of the momentum strategy, while increases the probability of momentum crashes both by increasing the skewness and the kurtosis of the momentum return distribution. Uncertainty acts as an economic regime that underlies abrupt changes over time of the returns generated by momentum strategies. In Chapter 3, “Measuring Uncertainty in the Stock Market”, a new index for measuring stock market uncertainty on a daily basis is proposed. The index considers the inherent differentiation between uncertainty and the common variations between the series. The second contribution of chapter 3 is to show how this financial uncertainty index can also serve as an indicator of macroeconomic uncertainty. Finally, the dynamic relationship between uncertainty and the series of consumption, interest rates, production and stock market prices, among others, is analized. In chapter 4: “Uncertainty, Systemic Shocks and the Global Banking Sector: Has the Crisis Modified their Relationship?” we explore the stability of systemic risk and uncertainty propagation among financial institutions in the global economy, and show that it has remained stable over the last decade. Additionally, a new simple tool for measuring the resilience of financial institutions to these systemic shocks is provided. We examine the characteristics and stability of systemic risk and uncertainty, in relation to the dynamics of the banking sector stock returns. This sort of evidence is supportive of past claims, made in the field of macroeconomics, which hold that during the global financial crisis the financial system may have faced stronger versions of traditional shocks rather than a new type of shock. In chapter 5, “Currency downside risk, liquidity, and financial stability”, downside risk propagation across global currency markets and the ways in which it is related to liquidity is analyzed. Two primary contributions to the literature follow. First, tail-spillovers between currencies in the global FX market are estimated. This index is easy to build and does not require intraday data, which constitutes an important advantage. Second, we show that turnover is related to risk spillovers in global currency markets. Chapter 6 is entitled “Spillovers from the United States to Latin American and G7 Stock Markets: A VAR-Quantile Analysis”. This chapter contributes to the studies of contagion, market integration and cross-border spillovers during both regular and crisis episodes by carrying out a multivariate quantile analysis. It focuses on Latin American stock markets, which have been characterized by a highly positive dynamic in recent decades, in terms of market capitalization and liquidity ratios, after a far-reaching process of market liberalization and reforms to pension funds across the continent during the 80s and 90s. We document smaller dependences between the LA markets and the US market than those between the US and the developed economies, especially in the highest and lowest quantiles.

Download or read book Wise Choices written by Richard Zeckhauser and published by Harvard Business School Press. This book was released on 1996 with total page 478 pages. Available in PDF, EPUB and Kindle. Book excerpt: Experts in economics, psychology, statistics, and decision theory explore the question of how to make wise choices that improve the welfare of individuals and society