La relation rendement en dividendes - risque

Ce mémoire présente une version dividende du Capital Asset Pricing Model (CAPM). Selon le modèle développé ici, il existe une relation à l'équilibre entre le rendement en dividendes et le risque systématique. Cette relation est linéaire et négative et peut-être dérivée dans un monde avec ou sans impôt. Une application de ce modèle est possible lorsqu'on évalue la valeur théorique d'une action ordinaire à l'aide du taux net d'actualisation. Au total, le test empirique indique qu'il y a une concordance observable entre les implications majeures du modèle et les faits.

THE COSTS OF RAISING EQUITY RATIO FOR BANKS Evidence from publicly listed banks operating in Finland

The solvency rate of banks differs from the other corporations. The equity rate of a bank is lower than it is in corporations of other field of business. However, functional banking industry has huge impact on the whole society. The equity rate of a bank needs to be higher because that makes the banking industry more stable as the probability of the banks going under will decrease. If a bank goes belly up, the government will be compensating the deposits since it has granted the bank’s depositors a deposit insurance. This means that the payment comes from the tax payers in the last resort. Economic conversation has long concentrated on the costs of raising equity ratio. It has been a common belief that raising equity ratio also increases the banks’ funding costs in the same phase and these costs will be redistributed to the banks customers as higher service charges. Regardless of the common belief, the actual reaction of the funding costs to the higher equity ratio has been studied only a little in Europe and no study has been constructed in Finland. Before it can be calculated whether the higher stability of the banking industry that is caused by the raise in equity levels compensates the extra costs in funding costs, it must be calculated how much the actual increase in the funding costs is. Currently the banking industry is controlled by complex and heavy regulation. To maintain such a complex system inflicts major costs in itself. This research leans on the Modigliani and Miller theory, which shows that the finance structure of a firm is irrelevant to their funding costs. In addition, this research follows the calculations of Miller, Yang ja Marcheggianon (2012) and Vale (2011) where they calculate the funding costs after the doubling of specific banks’ equity ratios. The Finnish banks studied in this research are Nordea and Danske Bank because they are the two largest banks operating in Finland and they both also have the right company form to able the calculations. To calculate the costs of halving their leverages this study used the Capital Asset Pricing Model. The halving of the leverage of Danske Bank raised its funding costs for 16—257 basis points depending on the method of assessment. For Nordea the increase in funding costs was 11—186 basis points when its leverage was halved. On the behalf of the results found in this study it can be said that the doubling of an equity ratio does not increase the funding costs of a bank one by one. Actually the increase is quite modest. More solvent banks would increase the stability of the banking industry enormously while the increase in funding costs is low. If the costs of bank regulation exceeds the increase in funding costs after the higher equity ratio, it can be thought that this is the better way of stabilizing the banking industry rather than heavy regulation.

THE COSTS OF RAISING EQUITY RATIO FOR BANKS Evidence from publicly listed banks operating in Finland

The solvency rate of banks differs from the other corporations. The equity rate of a bank is lower than it is in corporations of other field of business. However, functional banking industry has huge impact on the whole society. The equity rate of a bank needs to be higher because that makes the banking industry more stable as the probability of the banks going under will decrease. If a bank goes belly up, the government will be compensating the deposits since it has granted the bank’s depositors a deposit insurance. This means that the payment comes from the tax payers in the last resort. Economic conversation has long concentrated on the costs of raising equity ratio. It has been a common belief that raising equity ratio also increases the banks’ funding costs in the same phase and these costs will be redistributed to the banks customers as higher service charges. Regardless of the common belief, the actual reaction of the funding costs to the higher equity ratio has been studied only a little in Europe and no study has been constructed in Finland. Before it can be calculated whether the higher stability of the banking industry that is caused by the raise in equity levels compensates the extra costs in funding costs, it must be calculated how much the actual increase in the funding costs is. Currently the banking industry is controlled by complex and heavy regulation. To maintain such a complex system inflicts major costs in itself. This research leans on the Modigliani and Miller theory, which shows that the finance structure of a firm is irrelevant to their funding costs. In addition, this research follows the calculations of Miller, Yang ja Marcheggianon (2012) and Vale (2011) where they calculate the funding costs after the doubling of specific banks’ equity ratios. The Finnish banks studied in this research are Nordea and Danske Bank because they are the two largest banks operating in Finland and they both also have the right company form to able the calculations. To calculate the costs of halving their leverages this study used the Capital Asset Pricing Model. The halving of the leverage of Danske Bank raised its funding costs for 16—257 basis points depending on the method of assessment. For Nordea the increase in funding costs was 11—186 basis points when its leverage was halved. On the behalf of the results found in this study it can be said that the doubling of an equity ratio does not increase the funding costs of a bank one by one. Actually the increase is quite modest. More solvent banks would increase the stability of the banking industry enormously while the increase in funding costs is low. If the costs of bank regulation exceeds the increase in funding costs after the higher equity ratio, it can be thought that this is the better way of stabilizing the banking industry rather than heavy regulation.

Evidence that risk adjustment is unnecessary in estimates of the User cost of money

Investors value the special attributes of monetary assets (e.g., exchangeability, liquidity, and safety) and pay a premium for holding them in the form of a lower return rate -- The user cost of holding monetary assets can be measured approximately by the difference between the returns on illiquid risky assets and those of safer liquid assets -- A more appropriate measure should adjust this difference by the differential risk of the assets in question -- We investigate the impact that time non-separable preferences has on the estimation of the risk-adjusted user cost of money -- Using U.K. data from 1965Q1 to 2011Q1, we estimate a habit-based asset pricing model with money in the utility function and find that the risk adjustment for risky monetary assets is negligible -- Thus, researchers can dispense with risk adjusting the user cost of money in constructing monetary aggregate indexes

Size anomalies in EU bank stock returns

Mestrado em Finanças

Determinants Of Firm Terminal Value: The Perspective Of North American And European Financial Analysts

Company valuation models attempt to estimate the value of a company in two stages: (1) comprising of a period of explicit analysis and (2) based on unlimited production period of cash flows obtained through a mathematical approach of perpetuity, which is the terminal value. In general, these models, whether they belong to the Dividend Discount Model (DDM), the Discount Cash Flow (DCF), or RIM (Residual Income Models) group, discount one attribute (dividends, free cash flow, or results) to a given discount rate. This discount rate, obtained in most cases by the CAPM (Capital asset pricing model) or APT (Arbitrage pricing theory) allows including in the analysis the cost of invested capital based on the risk taking of the attributes. However, one cannot ignore that the second stage of valuation that is usually 53-80% of the company value (Berkman et al., 1998) and is loaded with uncertainties. In this context, particular attention is needed to estimate the value of this portion of the company, under penalty of the assessment producing a high level of error. Mindful of this concern, this study sought to collect the perception of European and North American financial analysts on the key features of the company that they believe contribute most to its value. For this feat, we used a survey with closed answers. From the analysis of 123 valid responses using factor analysis, the authors conclude that there is great importance attached (1) to the life expectancy of the company, (2) to liquidity and operating performance, (3) to innovation and ability to allocate resources to R&D, and (4) to management capacity and capital structure, in determining the value of a company or business in long term. These results contribute to our belief that we can formulate a model for valuating companies and businesses where the results to be obtained in the evaluations are as close as possible to those found in the stock market

El exceso de confianza y el statu quo dentro de la estructuración de capital: una perspectiva de las finanzas corporativas del comportamiento

El presente artículo, presenta un análisis de las decisiones de estructuración de capital de la compañía Merck Sharp & Dome S.A.S, desde la perspectiva de las finanzas comportamentales, comparando los métodos utilizados actualmente por la compañía seleccionada con la teoría tradicional de las finanzas, para así poder evaluar el desempeño teórico y real. Incorporar elementos comportamentales dentro del estudio permite profundizar más sobre de las decisiones corporativas en un contexto más cercano a los avances investigativos de las finanzas del comportamiento, lo cual lleva a que el análisis de este artículo se enfoque en la identificación y entendimiento de los sesgos de exceso de confianza y statu quo, pero sobre todo su implicación en las decisiones de financiación. Según la teoría tradicional el proceso de estructuración de capital se guía por los costos, pero este estudio de caso permitió observar que en la práctica esta relación de costo-decisión está en un segundo lugar, después de la relación riesgo-decisión a la hora del proceso de estructuración de capital.

Il filtro di Kalman: analisi di serie storiche e applicazione ai dati finanziari

Historia magistra vitae, scriveva Cicerone nel De Oratore; il passato deve insegnare a comprendere meglio il futuro. Un concetto che a primo acchito può sembrare confinato nell'ambito della filosofia e della letteratura, ma che ha invece applicazioni matematiche e fisiche di estrema importanza. Esistono delle tecniche che permettono, conoscendo il passato, di effettuare delle migliori stime del futuro? Esistono dei metodi che permettono, conoscendo il presente, di aggiornare le stime effettuate nel passato? Nel presente elaborato viene illustrato come argomento centrale il filtro di Kalman, un algoritmo ricorsivo che, dato un set di misure di una certa grandezza fino al tempo t, permette di calcolare il valore atteso di tale grandezza al tempo t+1, oltre alla varianza della relativa distribuzione prevista; permette poi, una volta effettuata la t+1-esima misura, di aggiornare di conseguenza valore atteso e varianza della distribuzione dei valori della grandezza in esame. Si è quindi applicato questo algoritmo, testandone l'efficacia, prima a dei casi fisici, quali il moto rettilineo uniforme, il moto uniformemente accelerato, l'approssimazione delle leggi orarie del moto e l'oscillatore armonico; poi, introducendo la teoria di Kendall conosciuta come ipotesi di random walk e costruendo un modello di asset pricing basato sui processi di Wiener, si è applicato il filtro di Kalman a delle serie storiche di rendimenti di strumenti di borsa per osservare se questi si muovessero effettivamente secondo un modello di random walk e per prevedere il valore al tempo finale dei titoli.

Essays on International Asset Allocation and Pricing

Thesis (Ph.D.)--University of Washington, 2016-06

Analytic approximations for multi-asset option pricing

We derive general analytic approximations for pricing European basket and rainbow options on N assets. The key idea is to express the option’s price as a sum of prices of various compound exchange options, each with different pairs of subordinate multi- or single-asset options. The underlying asset prices are assumed to follow lognormal processes, although our results can be extended to certain other price processes for the underlying. For some multi-asset options a strong condition holds, whereby each compound exchange option is equivalent to a standard single-asset option under a modified measure, and in such cases an almost exact analytic price exists. More generally, approximate analytic prices for multi-asset options are derived using a weak lognormality condition, where the approximation stems from making constant volatility assumptions on the price processes that drive the prices of the subordinate basket options. The analytic formulae for multi-asset option prices, and their Greeks, are defined in a recursive framework. For instance, the option delta is defined in terms of the delta relative to subordinate multi-asset options, and the deltas of these subordinate options with respect to the underlying assets. Simulations test the accuracy of our approximations, given some assumed values for the asset volatilities and correlations. Finally, a calibration algorithm is proposed and illustrated.

Moral hazard and nonlinear pricing in a general equilibrium model

The paper analyzes a two period general equilibrium model with individual risk and moral hazard. Each household faces two individual states of nature in the second period. These states solely differ in the household's vector of initial endowments, which is strictly larger in the first state (good state) than in the second state (bad state). In the first period households choose a non-observable action. Higher leveis of action give higher probability of the good state of nature to occur, but lower leveIs of utility. Households have access to an insurance market that allows transfer of income across states of oature. I consider two models of financiaI markets, the price-taking behavior model and the nonlínear pricing modelo In the price-taking behavior model suppliers of insurance have a belief about each household's actíon and take asset prices as given. A variation of standard arguments shows the existence of a rational expectations equilibrium. For a generic set of economies every equilibrium is constraíned sub-optímal: there are commodity prices and a reallocation of financiaI assets satisfying the first period budget constraint such that, at each household's optimal choice given those prices and asset reallocation, markets clear and every household's welfare improves. In the nonlinear pricing model suppliers of insurance behave strategically offering nonlinear pricing contracts to the households. I provide sufficient conditions for the existence of equilibrium and investigate the optimality properties of the modeI. If there is a single commodity then every equilibrium is constrained optimaI. Ir there is more than one commodity, then for a generic set of economies every equilibrium is constrained sub-optimaI.

International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions

We review and extend the core literature on international transfer price manipulation to avoid or evade taxes. Under negotiated transfer pricing with a viable bargaining structure, including performance evaluation disconnected from the transfer price, divisions voluntarily exchange accurate information to obtain firm-wide optimality, a result not dependent on restraint from exercising internal market power. For intangible licenses, a larger optimal profit shift for a given tax rate change strengthens incentives for transfer pricing abuse. In practice, an intangible's arm's length range is viewed as a guideline, a context where incentives for abuse materialize. Transfer pricing for intangibles obliges greater tax authority scrutiny.

Constructing good deals in discrete time arbitrage-free dynamic pricing models

Recent literature has proved that many classical pricing models (Black and Scholes, Heston, etc.) and risk measures (V aR, CV aR, etc.) may lead to “pathological meaningless situations”, since traders can build sequences of portfolios whose risk leveltends to −infinity and whose expected return tends to +infinity, i.e., (risk = −infinity, return = +infinity). Such a sequence of strategies may be called “good deal”. This paper focuses on the risk measures V aR and CV aR and analyzes this caveat in a discrete time complete pricing model. Under quite general conditions the explicit expression of a good deal is given, and its sensitivity with respect to some possible measurement errors is provided too. We point out that a critical property is the absence of short sales. In such a case we first construct a “shadow riskless asset” (SRA) without short sales and then the good deal is given by borrowing more and more money so as to invest in the SRA. It is also shown that the SRA is interested by itself, even if there are short selling restrictions.

The EMU sovereign-debt crisis: Fundamentals, expectations and contagion

We offer a detailed empirical investigation of the European sovereign debt crisis based on the theoretical model by Arghyrou and Tsoukalas (2010). We find evidence of a marked shift in market pricing behaviour from a ‘convergence-trade’ model before August 2007 to one driven by macro-fundamentals and international risk thereafter. The majority of EMU countries have experienced contagion from Greece. There is no evidence of significant speculation effects originating from CDS markets. Finally, the escalation of the Greek debt crisis since November 2009 is confirmed as the result of an unfavourable shift in countryspecific market expectations. Our findings highlight the necessity of structural, competitiveness-inducing reforms in periphery EMU countries and institutional reforms at the EMU level enhancing intra-EMU economic monitoring and policy co-ordination.

Use of neuroenhancement drugs: prevalence, frequency and use expectations in Switzerland

Objective: The present study investigates the use expectations, prevalence and frequency of neuroenhancement drug (ND) use among the Swiss male population, separating college students from others. Methods: Young Swiss men were invited to participate in the Cohort Study on Substance Use Risk Factors. A total of 5,967 participants responded to questions on six types of NDs (wakefulness medication, antidepressants, Alzheimer's disease medication, Parkinson's disease medication, attention deficit-hyperactivity disorder (ADHD) medication, and beta-blockers). The frequency of use depending on five expectations (to enhance wakefulness, attention, memory, concentration and stress reduction) was analyzed for a twelve-month period. Results: (1) About 3% of the sample indicated use of at least one ND; (2) ADHD medication was the most prevalent; (3) The type of ND preferred differed depending on academic status (4). Quantitatively, over the year, college student users used ND much less frequently than other users. Conclusions: Prevalence of ND use is low in Switzerland relative to other countries such as the United States. Patterns of ND use differed depending on academic status, suggesting that while college student ND users tended to do so rarely (probably to enhance cognitive abilities for exams), non-college male users used other NDs more frequently (probably to "get high").