Third Quarter (2004)

Kay Giesecke and Lisa R. Goldberg Volume 2, Number 3, Third Quarter 2004 The Modigliani-Miller theorem describes conditions under which the value of a firm is independent of its leverage ratio. It is one of the cornerstones of finance. A history of this result along with a modern perspective on its derivation is given in… Read more

John J. McConnell and Alexei V. Ovtchinnikov Volume 2, Number 3, Third Quarter 2004 Investment strategies of buying and holding recently spun off companies and their parents have received significant attention from the investment community in the recent past. Despite their popularity, the existing evidence on the attractiveness of spinoffs appears piecemeal. In this paper… Read more

Edward Qian and Ronald Hua Volume 2, Number 3, Third Quarter 2004 One of the underlying assumptions of the Fundamental Law of Active Management is that the active risk of an active investment strategy equates estimated tracking error by a risk model. We show there is an additional source of active risk that is unique… Read more

Jacob Boudoukh, Matthew Richardson, Richard Stanton and Robert F. Whitelaw Volume 2, Number 3, Third Quarter 2004 The standard VaR approach considers only terminal risk, completely ignoring the path of the portfolio value prior to this final horizon. This assumption is unrealistic interim risk may be critical in a mark-to-market environment because interim values of… Read more

Daniel J. Bradley, Bradford D. Jordan, Jay R. Ritter and Jack G. Wolf Volume 2, Number 3, Third Quarter 2004 A newly public company is subject to a “quiet period,” which restricts insiders and affiliated underwriters from issuing earnings forecasts and research reports regarding the firm for a specified period following the initial public offering… Read more