Second Quarter (2006)

Roger M. Stein Volume 4, Number 2, Second Quarter 2006 Users of default prediction models often desire to know how accurate the estimated probabilities are. There are a number of mechanisms for testing this, but one that has found favor due to its intuitive appeal is the examination of goodness of fit between expected and… Read more

Michael T. Cliff and David J. Denis Volume 4, Number 2, Second Quarter 2006 This article reports evidence consistent with the view that initial public offering (IPO) issuers purchase high-quality analyst coverage with greater underpricing of the IPO. Specifically, we report that underpricing is positively related to analyst coverage by the lead underwriter and to… Read more

Courtney H. Edwards, John R. Graham, Mark H. Lang and Douglas A. Shackelford Volume 4, Number 2, Second Quarter 2006 In this paper, we investigate the effect of stock options on the tax position of the firm. We argue that option tax deductions can significantly affect a firm’s marginal tax rate and that the effect… Read more

Honghui Chen, Gregory Noronha and Vijay Singal Volume 4, Number 2, Second Quarter 2006 We find that, on average, firms added to the S&P 500 index experience a permanent price increase, while those deleted from it suffer only a temporary price decline. Existing theories, such as a downward sloping demand curve, liquidity, and information, fail… Read more

Richard Grinold Volume 4, Number 2, Second Quarter 2006 This paper presents a simplified model of dynamic active portfolio management. It is designed to answer questions about product design and provide a guide to better implementation. The model has four inputs: an information ratio that measures the anticipated ability to add value, a risk aversion… Read more