References

Question 1

Blanchard and Watson 1982

Answer 1

Explanation for bubbles - grow at a rational profit maximising rate before collapsing back at 1-q rate. excludes negative bubbles or multiple bubbles

Question 2

Van norden and Shaller 1999

Answer 2

periodic partially collapsing bubbles with a time varying probability of collapse - mathematical models explain investors are maximising and shirt selling - they are periodic. In extreme cases they are irrational

Question 3

Kindleberger 2012

Answer 3

Not periodic supports irrationality, factors such as bank credit, financial innovation and displacement are linked to bubble formation which are random events. Minsky model

Question 4

Aragon 2007

Answer 4

Hedge funds are highly illiquid, alpha is a liquidity premium - reward fr being highly illiqyid

Question 5

Sadka 2010

Answer 5

Santa effect - higher returns in December significantly higher than other months, only for liquid funds.

Question 6

Hasanhodzic and lo 2007

Answer 6

liquidity, back fill bias, survivorship bias and tail events, changing factor loadings

Question 7

Anderson et al 2016

Answer 7

hedge funds change their factor loadings as they are adaptable not transparent so can change their portfolio composition during bad times to reduce exposure to elements of risk.

Question 8

roell 1996

Answer 8

why firms go public - equity capital cashing in, liquidity and lower cost of capital

Question 9

ritter 1987

Answer 9

why they don’t - expensive Costa if admin, agency and stewardship

Question 10

ibbotson et al 1994

Answer 10

the costs of underwriting are 18% money left on the table

Question 11

chemmanur and Fulghieri 1999

Answer 11

disperse ownership after growth - venture capitalist is undiversified, higher info costs of selling privately so go public to access broader market and it’s benefits to a large company

Question 12

lucas and macdonald 1990

Answer 12

market timing theories - asymmetric info is why firms go public as they can sell their stock over priced, price run ups have been empirically observed. Issues follow a market rise.

Question 13

Pagano et al 1998

Answer 13

higher book value to market value me likely to go public - shows heavy investment then go public because this puts their price up

Question 14

ibbotson 1975 and Ritter and Welch 2002

Answer 14

underpricing costs shown by a positive 11% gain in first day. 2-6 months is efficient. R and W show 70% IPOS up on first day

Question 15

Hanley 1993

Answer 15

Bookbuilder theory - assumes demand is understated so underwriters don’t fully adjust their prices upwards to keep price on low side to stop investor clients from understating demand

Question 16

Ritter and Welch 2002

Answer 16

Equally weighted portdolio of IPOS 1990-2001 significantly underperformed the market. Value weighted portfolio did much better in this period.

Question 17

Miller 1977

Answer 17

reasons for underperformance - heterogenous expectations causes the price to deviate as the market cannot decide (volatility) and short selling constraints stop IPOS from being arbitrage to find the mean price as they have no historic price data.

Question 18

jensen and ruback

Answer 18

tender 30 4

merger 20 0

Question 19

loughran and vijh 1997

Answer 19

acquirers 18.5
acquirers unfriendly cash 62
acquirers using stock -24
all acquirers -6.5

Question 20

Harford 2005

Answer 20

economic regulatory technological

Question 21

shell and texeco

Answer 21

example of merger industry concolidation

Question 22

Hayward and hawbrick 1997

Answer 22

recent share performance 
board vigilance
media praise ceo
ceo self importance
subjective

Question 23

schleifer and vishny 2003

Answer 23

stock market misvaluations and managers act rationally towards it

Question 24

Rhodes et al

Answer 24

merger activity correlated with high valuations

Question 25

twitter

Answer 25

ipod at 26 but closed at 45- underpricing

Question 26

vonage

Answer 26

easier to apply reassure on public companies - vonage failed to take ipo orders from customers but still charged them