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Informed Options Trading Prior to Takeover Announcements: Insider Trading?

Authors: Patrick Augustin, Menachem Brenner, Marti G. Subrahmanyam

Publication: Management Science, May 21, 2019

Abstract:

We quantify the pervasiveness of informed trading activity in target companies' equity options before the announcements of 1,859 U.S. takeovers between 1996 and 2012. About 25% of all takeovers have positive abnormal volumes, which are greater for short-dated out-of-the-money calls, consistent with bullish directional trading before the announcement. Over half of this abnormal activity is unlikely due to speculation, news and rumors, trading by corporate insiders, leakage in the stock market, deal predictability, or beneficial ownership filings by activist investors. We also examine the characteristics of option trades litigated by the SEC for alleged illegal insider trading. While the characteristics of such trades closely resemble the patterns of abnormal option volume in the U.S. takeover sample, we find that the SEC litigates only about 8% of all deals in it.

Diversity in the workplace is essential for Desautels Dean

Dean Isabelle Bajeux was invited by the Canadian Chamber of Commerce in Japan (CCCJ) to share her thoughts on the value of a diverse workplace that incorporates the perspective of women at higher levels, particularly in the finance sector.

A Large-Scale Approach for Evaluating Asset Pricing Models

Author: Laurent Barras

Publication: Journal of Financial Economics, Forthcoming

Abstract:

Recent studies show that the standard test portfolios do not contain sufficient information to discriminate between asset pricing models. To address this issue, we develop a large-scale approach that expands the cross-section to several thousand portfolios. Our novel approach is simple, widely applicable, and allows for formal evaluation/comparison tests. Its benefits are confirmed in empirical tests of CAPM- and characteristic-based models. While these models are all misspecified, we uncover striking performance differences between them. In particular, the human capital and conditional CAPMs largely outperform the CAPM which suggests that labor income and time-varying recession risks are primary concerns for investors.

Desautels makes strides to support gender equality

In a recent interview with La Presse, Dean Bajeux talks about the lack of female representation in the finance industry and how the Desautels Faculty of Management is tackling these prejudices at the university level.

Along the way, she recounts her experience while pursuing her doctorate in mathematics and makes a point to mention the opportunities that were available to her irrespective of her gender.

The Term Structure of CDS Spreads and Sovereign Credit Risk

Author: Patrick Augustin

Publication: Journal of Monetary Economics, Forthcoming

础产蝉迟谤补肠迟:听

Ruslan Goyenko paper "Illiquidity Premia in Equity Option Markets" selected Editor's Choice in Review of Financial Studies

Professor Ruslan Goyenko's paper "Illiquidity Premia in Equity Option Markets" with Peter Christoffersen, Kris Jacobs and Mehdi Karoui was selected as Editor's Choice article in the March 2018 issue of Review of Financial Studies.

Asset Pricing with Countercyclical Household Consumption Risk

Authors: George M. Constantinides and Anisha Ghosh

Publication: Journal of Finance, Vol. 72, No. 1, February 2017

Abstract:

We show that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional moments of household consumption growth. The estimated model 铿乼s well the unconditional cross-sectional moments of household consumption growth and the moments of the risk-free rate, equity premium, price-dividend ratio, and aggregate dividend and consumption growth. The model-implied risk-free rate and price-dividend ratio are procyclical, while the market return has countercyclical mean and variance. Finally, household consumption risk explains the cross section of excess returns.

Read article: Journal of Finance

What Is the Consumption-CAPM Missing? An Information-Theoretic Framework for the Analysis of Asset Pricing Models

Authors:聽Anisha Ghosh, Christian Julliard, Alex P. Taylor

笔耻产濒颈肠补迟颈辞苍:听The Review of Financial Studies, Volume 30, No. 2, February 2017

础产蝉迟谤补肠迟:听

We consider asset pricing models in which the SDF can be factorized into an observable component and a potentially unobservable one. Using a relative entropy minimization approach, we nonparametrically estimate the SDF and its components. Empirically, we find the SDF has a business-cycle pattern and significant correlations with market crashes and the Fama-French factors. Moreover, we derive novel bounds for the SDF that are tighter and have higher information content than existing ones. We show that commonly used consumption-based SDFs correlate poorly with the estimated one, require high risk aversion to satisfy the bounds and understate market crash risk.

Read article: The Review of Financial Studies

Still room for improvement for empowering women in finance

Professor Francesca Carrieri sits down with La Presse to talk about the hurdles that women in finance still face and the initiatives in place at the Desautels Faculty of Management to improve this reality.

For example, the Faculty has launched a task force that aims to show undergraduate women that a career in finance is indeed a viable path through mentorship and internship opportunities.

Professor Brenner on how Asian countries can overcome democratic deficits

In a piece for Asia Times, Professor Reuven Brenner points to history and other geographic contexts to demonstrate how Asian countries, such as Hong Kong and Taiwan, can redress democratic deviances.

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Professor Brenner invited to prestigious panel

Professor Reuven Brenner was invited to present on a panel that discussed venture capital in Quebec鈥檚 biotech and life sciences industry. The high-profile event was attended by Quebec Ministers Mr. Ga茅tan Barrette and Ms. Dominique Anglade, while the discussion was moderated in part by Mr. Pierre-Marc Johnson, former Premier of Quebec.聽

Does marijuana legalization open the door to organized crime?

Following the revelation that many Canadian marijuana producers benefit from offshore financing, Desautels Professor and President of Lester Asset Management, Ken Lester, shares his perspective on marijuana legalization and organized crime, stating that the union of the two is entirely possible.

Business schools and the Fourth Industrial Revolution

In a world destabilised by rapid technological advancement, Dean Bajeux shares how business education can help us thrive amid such unprecedented change.