David R. Kuipers

The legal environment and corporate valuation: Evidence from cross-border takeovers

We examine the cumulative abnormal returns to U.S. targets, their foreign acquirers, and the target-acquirer portfolio in 181 successful cross-border tender offers during the period 1982-1991. We find that the incentive mechanisms created by the degree of shareholder-creditor rights protection and legal enforcement in the acquiring firm country can explain the observed variation in target, acquirer, and portfolio returns. We also find that foreign acquirers overpay for Delaware-incorporated targets. Our results are strengthened after controlling for deal-related effects addressed in the domestic mergers and cross-border investments literature.

The relative pricing of U.S. Treasury STRIPS: empirical evidence

We investigate pricing relations and the potential for arbitrage in the U.S. Treasury STRIPS market, stressing the importance of reconciling quoted Treasury data with actual market pricing conventions. We document that stripping and reconstitution profits in the STRIPS market are fleeting and rarely economically significant; that matched-maturity principal and coupon STRIPS generally have different prices due, at least in part, to richness or cheapness in the underlying note or bond; and that apparent negative forward rates in the STRIPS market are concentrated in certain long-maturity STRIPS that do not actually exist at the time.

The mispricing of callable U.S. treasury bonds: A closer look

INTRODUCTION An ongoing controversy exists concerning the valuation of callable U.S. Treasury bonds. Recent studies by Longstaff (1992) and Edleson, Fehr, and Mason (1993) compare market prices for callable and noncallable Treasury issues in an attempt to estimate the value of the options embedded in the callable bond. Surprisingly, both studies find that negative option values are very common, implying that callable Treasury bonds are significantly overpriced. In contrast, in an expanded analysis, Jordan, Jordan, and Jorgensen (1995) find that negative option values very rarely occur. Most recently, Carayannopoulos (1995) reexamines the issue with a broader sample of callable bonds and, as in Longstaff and in Edleson et al., reports that negative option values are quite frequent, thereby reopening the debate. Furthermore, unlike previous studies, Carayannopoulos (1995) reports that negative implied put values are much more common than negative implied call values. Carayannopoulos also documents a coupon effect indicating that negative option values are concentrated in lower coupon callable bonds.

Bayesian Inference via Filtering Equations for Ultrahigh Frequency Data (II): Model Selection

For the general partially observed framework of Markov processes with marked point process observations proposed in [G. X. Hu, D. R. Kuipers, and Y. Zeng, SIAM/ASA J. Uncertain. Quantif., 6 (2018), pp. 34--60], we develop the corresponding Bayesian model selection via filtering equations to quantify model uncertainty. To achieve this, we derive the unnormalized filtering equation and the system of ratio filtering equations to characterize, respectively, the evolution of the marginal likelihood and the corresponding Bayes factors. We prove a powerful weak convergence theorem, which enables us to employ the Markov chain approximation method to construct consistent, easily parallelizable, recursive algorithms to calculate the related Bayes factors and posterior model probabilities of the candidate models in real time for streaming ultrahigh frequency data. The general model selection theory is again illustrated by the four specific models built for U.S. Treasury notes transactions data from GovPX via simulat...

Bayesian Inference via Filtering Equations for Ultrahigh Frequency Data (I): Model and Estimation

We propose a general partially observed framework of Markov processes with marked point process observations for ultrahigh frequency (UHF) data. The model fits well the stylized facts of UHF data in both macro- and micro-movements, subsumes important existing models, and incorporates the influence of other observable economic or market factors. We develop the corresponding Bayes estimation via a filtering equation to quantify parameter uncertainty. Namely, we derive the normalized filtering equation to characterize the evolution of the posterior distribution, present a weak convergence theorem, and construct consistent, easily parallelizable, recursive algorithms to calculate the joint posteriors and the Bayes estimates for streaming UHF data. Moreover, a sufficient condition for the consistency of the Bayes estimators is provided. The general estimation theory is illustrated by four specific models built for U.S. Treasury notes transactions data from GovPX. We show that in this market, both information-b...

The External Funding of Academic Finance Research

We analyze the external funding of academic finance research. We show that funding is uncommon, particularly for U.S.-based faculty, and is related to predictable attributes of an authors reputational capital. Further, when research is funded we find it is associated with better articles, as measured by publication in the most prestigious journals and the receipt of increased citations over time. Our study has relevance for every stakeholder in the universitys research mission in finance.