Gordon J. Alexander

Corporate Social Responsibility and Stock Market Performance

The article examines the relationship between social responsibility and stock market performance of corporations in the U.S. for the period 1970-1974. Risk measures and differential returns of the ...

International Listings and Stock Returns: Some Empirical Evidence

Segmentation of capital markets produces incentives for firms to adopt countermeasures, one of which is dually listing their stocks on foreign capital markets. In this paper, the behavior of stock returns surrounding such international listings is examined for a sample of firms. Assuming that the capital markets are either completely or “mildly†segmented beforehand, it is hypothesized that the international listing of a security should, in general, accompany a reduction in its expected return. The sample reveals evidence consistent with this hypothesis.

Economic implications of using a mean-VaR model for portfolio selection: A comparison with mean-variance analysis

We relate Value at Risk (VaR) to mean-variance analysis and examine the economic implications of using a mean-VaR model for portfolio selection. When comparing two mean-variance efficient portfolios, the higher variance portfolio might have less VaR. Consequently, an efficient portfolio that globally minimizes VaR may not exist. Surprisingly, we show that it is plausible for certain risk-averse agents to end up selecting portfolios with larger standard deviations if they switch from using variance to VaR as a measure of risk. Therefore, regulators should be aware that VaR is not an unqualified improvement over variance as a measure of risk.

The MIT dictionary of modern economics

The MIT Dictionary of Modern Economics is an up-to-date, authoritative reference designed primarily for students of business and other social sciences and ideal for anyone who wants a brief explanation of an economic concept or institution.In this fourth edition one entry in ten has been revised and one entry in twenty is new. Whereas the third edition increased the coverage of American institutions, this edition breaks new ground by including entries considered important from an Eastern European perspective. It also supplies comparative statistics on major economic variables for selected countries, describes the origins of widely used acronyms, and includes bibliographic references at the end of featured entries.The dictionary answers in a clear and concise way the enduring questions, which economists have considered for two centuries or more, as well as the issues of the moment, such as economic change in Europe, the problems of pollution, or the prospects for greater freedom of trade. With close to 2,800 entries it is comprehensive in its coverage of theory, national and international institutions, schools of thought, and important economists, including recent Nobel Prize winners.The dictionary was compiled initially by an experienced team of economists at Aberdeen University in the United Kingdom, and new authors have been recruited to provide international expertise, reflecting changes in the structure of the international economy. David W. Pearce, general editor, is Professor of Political Economy at University College, London.This fourth edition was prepared by John Cairns, Robert Elliott, Ian McAvinchey, and Robert Shaw, all of the Economics Department, University of Aberdeen.

Mutual fund shareholders: characteristics, investor knowledge, and sources of information

Abstract This paper examines responses from a survey of 2,000 randomly selected mutual fund investors who purchased shares from six different distribution channels. The survey provides data on the demographic, financial, and fund ownership characteristics of mutual fund investors. It also provides data on investors’ knowledge of the costs and investment risks of mutual funds and the information sources these investors use to learn about these costs and risks. Our survey results strongly suggest there is room for improvement in the level of financial literacy of mutual fund investors.

Portfolio Performance Evaluation Using Value at Risk

Developed here is a value at risk-based measure of portfolio performance called the reward-to-VaR ratio. It is demonstrated that, under normality, the reward-to-VaR ratio gives the same ranking for portfolio performance as the frequently used Sharpe ratio. Under non-normality, the reward-to-VaR ratio at one confidence level may give a ranking for portfolio performance different from the ranking obtained at a different confidence level. This indicates that the risk-taking incentives of a portfolio manager in a VaR-based risk management system can be substantially different from the incentives in a Sharpe ratio-based system.

What does Nasdaq's high-yield bond market reveal about bondholder-stockholder conflicts?

We use data from Nasdaq’s FIPS system for reporting transactions in selected high-yield corporate bonds to investigate the relationship between the returns on a firm’s stock and the returns on its publicly traded, high-yield debt. Regression models and analysis of the behavior of the returns around events associated with agency conflict show that the returns follow complex patterns of similarity and divergence. Positive co-movement is the dominant form of the relationship, but opposite movement of the bond and stock returns around those events indicates agency conflicts between bondholders and stockholders.We use data from Nasdaq’s FIPS system for reporting transactions in selected high-yield corporate bonds to investigate the relationship between the returns on a firm’s stock and the returns on its publicly traded, high-yield debt. Regression models and analysis of the behavior of the returns around events associated with agency conflict show that the returns follow complex patterns of similarity and divergence. Positive co-movement is the dominant form of the relationship, but opposite movement of the bond and stock returns around those events indicates agency conflicts between bondholders and stockholders.

From Markowitz to modern risk management

Nobel Laureate Harry Markowitz is often referred to as the ‘founder of Modern portfolio theory’ and deservedly so given his enormous influence on the money management industry.1 However, it is my contention that he should also be referred to as the ‘founder of Modern Risk Management’ since his contributions to portfolio theory formed the basis for how risk is currently viewed and managed. More specifically, Markowitz argued that a portfolio of securities should be viewed through the lens of statistics where the probability distribution of its rate of return is evaluated in terms of its expected value and standard deviation. Since the ultimate selection of a portfolio involves the evaluation and management of risk as measured by standard deviation, it is clear that Markowitzs process of portfolio selection represents the birth of modern risk management whereby risk is quantified and controlled. In this paper, I will first, introduce value-at-risk as a measure of risk and how it relates to standard deviation, the risk measure at the heart of the model of Markowitz. Second, I will similarly introduce conditional value-at-risk (also known as expected shortfall) as a measure of risk and compare it with VaR. Third, I will briefly introduce stress testing as a supplemental means of controlling risk and will then present my conclusions.2

Investment mathematics and statistics

Part 1 Investment mathematics: compound interest fixed-interest bonds equities and real estate real returns index-linked bonds foreign currency investments numerical approximation techniques. Part 2 Statistics: data collection and presentation descriptive statistics probability some particular probability distributions confidence intervals and hypothesis testing correlation and regression. Part 3 More advanced applications: portfolio theory market indices and performance measurement bond portfolio management bond switching curve fitting theoretical pricing of futures and forwards theoretical pricing of options the stochastic approach to the theory of interest.

Does mutual fund disclosure at banks matter? Evidence from a survey of investors.

Abstract This paper examines the responses from a survey of investors who purchased mutual funds from banks and elsewhere. We find that bank-channel investors are less financially literate than those investors purchasing funds through other distribution channels. Using a treatment-effects econometric model, however, we also find that purchasing only through banks actually raised the knowledge level of these investors. This result suggests that the increased focus on disclosure at banks has had a positive effect on investor financial literacy, and that disclosure requirements in the Gramm-Leach-Bliley Act of 1999 are likely to be beneficial. However, investor financial literacy still needs improvement.