David A. Dubofsky

A Market Microstructure Explanation of Ex-Day Abnormal Returns

Several authors have previously determined that abnormal returns exist on ex-cash dividend days and ex-stock dividend days. In other words, stocks do not, on average, fall by the dividend amount, or fully adjust to stock distributions on ex-days. This paper proposes that NYSE Rule 118 and AMEX Rule 132 are a determinant of those ex-day abnormal returns.

Bidder returns in interstate and intrastate bank acquisitions

Returns to bidders are examined for 108 bank acquisitions over the 1981–1987 period. These returns provide evidence on the conflict-of-interest hypothesis and the hubris hypothesis, both of which predict negative returns to bidders, versus the shareholder wealth maximization model that predicts positive (or at least non-negative) returns. Further evidence on these hypotheses is provided from the returns on 18 defensive acquisitions. Consistent with the conflict-of-interest and hubris hypotheses, announcement period returns are negative and statistically significant both for interstate and intrastate acquisitions. However, bidder returns to interstate bank acquisitions do not differ significantly from intrastate mergers.

Options and financial futures : valuation and uses

Introduction to options profit diagrams arbitrage restrictions on option prices put-call parity binomial option pricing model the Black-Scholes option pricing model the importance of delta stock index options other options and applications introduction to financial futures financial futures pricing theory - the cost of carry model hedging with futures contracts stock index futures debt instruments - prices, yields and risk short term interest rate futures treasury bill and eurodollar futures foreign exchange futures futures options, debt options, foreign exchange options and swaps.

Regulatory Change and the Market for Bank Control

This chapter analyzes the returns to stockholders of acquiring banks around the acquisition announcement date, with particular emphasis on the change in the market for bank acquisitions that occurred in mid-1981, following two important court decisions. The decisions were reached in response to petitions from two Texas bank holding companies arguing that the Federal Reserve Board had erred in denying their applications to acquire a commercial bank. These decisions by the Fifth District Court of Appeals in February and June of 1981 restricted the ability of the Federal Reserve to impose competitive requirements more stringent than those specified in the antitrust laws, and hence fundamentally changed the regulating standards governing bank acquisitions.1 In fact, it has been argued by Sayers (1985) that these decisions make it virtually impossible for the Federal Reserve Board to control the increasing concentration that will come with additional market extension mergers. Prior to 1981, the Fed had denied a number of applications that did not violate antitrust statutes (Burke, 1984).

Efficient Selection of Insured Currency Positions: Protective Puts vs. Fiduciary Calls

We examine the empirical results from implementation of portfolio insurance strategies employing currency spot and futures options. Hypotheses are generated from Ogden and Tuckers (1988) generalizations concerning the relative values of American spot currency options and currency futures options. We find that protective puts using futures options are generally dominated by both protective puts that use options on spot currencies and by fiduciary calls on futures contracts. This suggests that the prices of puts on foreign currency futures contracts are too high, relative to foreign currency futures calls and to puts on spot currencies.

The differential impact of two significant court decisions concerning banking consolidation

Abstract Two 1981 court rulings effectively removed the possibility that federal regulatory agencies could apply the theory of probable future competition to block future bank mergers and takeovers. Results show that the impact of this regulatory change, which occured without any contemporaneous public press coverage, led to a significant decline in the wealth of shareholders of banks that had been active acquirers. These findings are consistent with Muellers size maximization and Rolls hubris hypothese.

Defensive acquisitions in the banking industry: The takeover premium hypothesis

We define defensive acquisitions as takeovers made by a firm so as to become so large that it becomes an unattractive target itself. A sample of defensive acquisitions in the banking industry is used to test the takeover premium hypothesis. Under this hypothesis, the defensive acquirers lose because a takeover premium that previously existed in their prices is deflated while the takeover premium increases for smaller competitors because they become more likely targets. We find that the defensive acquirers experience significant negative abnormal returns on the announcement day, and that smaller competitors have positive abnormal returns on the announcements of defensive acquisitions. In contrast, larger competitors do not react to the announcements. The results are consistent with the takeover premium hypothesis.

Limit orders and ex-dividend day return distributions

Abstract NYSE Rule 118 and AMEX Rule 132 specify that on ex-dividend days, the prices given in open limit orders to buy stock be reduced by the dividend amount, and if the result is not a multiple of

Valuation Effects of the International Banking Act on Foreign Banks Operating in the United States

0.125, the limit price is rounded down to the next lowest multiple of

Underreaction or Overreaction: The Post Earnings Announcement Drift

0.125. Prices in open limit sell orders remain unchanged on the ex-day. This paper simulates a simple model of ex-dividend trading. As the number of open limit orders increases, the mean ex-day closing price and return increase for dividends greater than