This week's COTC is up at Selling To Small Business. As usual, there are a lot of posts. But, since I'm still digging through the boxes (let's just say that the movers had a VERY creative system for labeling), I'll just mention two this time around: Searchlight Crusade on Loan Cosigners in Real Estate - A Lot of Risk For Not Much Gain, and Steve Bainbridge on Duties of Directors of an Insolvent Corporation.
Again, these are just my preferences - yours may be different, so look around. There's always a wide variety of things at the COTC.
Are Deal Makers On Wall Street Leaking Secrets? (from the WSJ)
In the July 28 WSJ, an article asks whether larger deals (particularly those involving hedge funds and private equity groups) are more prone to pre-deal information leaks:
Read the whole thing here (online subscription required).
It seems plausible that there could be an increase in "leakage"for larger deals. Bigger transactions are more likely to be done by (big surprise here) consortiums with larger numbers of firms. In addition, recent deals are taking longer to be consummated than in years past, which further increases the likelihood of leaks.
It might make for an interesting study (for any academics listening) to see if there's more stock price runup, spikes in trading volume, and/or abnormal options-related activity surrounding deals with a greater number of players and/or private equity/hedge fund involvement.
As the boom in corporate takeovers continues, unusual trading in obscure investments or via offshore accounts is raising concerns about insider trading.Suspicious trading patterns -- including increased activity and well-timed bets -- have cropped up in several companies' securities in advance of news of their involvement in big transactions, suggesting Wall Street's deal-making machine may be leaking confidential information.
The list includes deals both mammoth and modest: the just-announced $21 billion leveraged buyout of hospital operator HCA Inc.; the $1.7 billion buyout of Petco Animal Supplies Inc.; the $2.6 billion sale of Maverick Tube Corp. to Tenaris SA; and Anadarko Petroleum Corp.'s $21 billion offer for both Kerr-McGee Corp. and Western Gas Resources Inc.
Some of the trading is in a corner of the financial markets that hardly existed during past takeover waves, which featured questionable trades mainly in plain-vanilla stocks, bonds and options. In advance of the HCA deal, there was a notable uptick in trading in financial contracts tied to HCA's bonds -- derivatives known as credit-default swaps.
It seems plausible that there could be an increase in "leakage"for larger deals. Bigger transactions are more likely to be done by (big surprise here) consortiums with larger numbers of firms. In addition, recent deals are taking longer to be consummated than in years past, which further increases the likelihood of leaks.
It might make for an interesting study (for any academics listening) to see if there's more stock price runup, spikes in trading volume, and/or abnormal options-related activity surrounding deals with a greater number of players and/or private equity/hedge fund involvement.
IPOs as a Predictor of Future Market Returns
Mark Hulbert of the NY Times discusses some recent research by Jay Ritter, who is far and away the most well respected academic currently studying IPOs. Ritter finds a correlation between IPO pricing and future market-wide returns:
Read the whole thing here.
It was difficult to find good data on the percentage of firms withdrawing IPOs back to the 80s. So what Ritter did instead is calculate the percentage of firms successfully going public in a given month with a final price below the midpoint of their offering range. He then related this percentage to subsequent stock market returns.
The basic logic behind the supposed relationship is that withdrawals of IPOs (or those that come in priced at the low end of their range) leads subsequent IPOs by other firms to be conservatively priced. A lot of low priced IPOs could serve as the impetus for subsequent higher market wide returns.
The relationship between the fraction of IPOs priced below midpoint and subseqeuent market returns is statistically significant at the 5% level (this means that association between the two variables would show up at these levels by random chance less than 5% of the time). So, it meets the cutoff statisticians typically use to determine whether it's significant.
Whether or not you can make money trading on it, who knows?
Note: Barry Ritholtz at the Big Picture has some interesting thoughts on the matter.
HT: Abnormal Returns.
Worldwide in June, more companies withdrew or postponed their initial public offerings than in any other month since March 2001, according to Dealogic, a firm based in London that monitors the new-issue market. That March 2001 trough came less than halfway through the 2000-2 bear market, leading many investors to worry that the current gloom in the new-issues market is a harbinger of much lower prices for stocks.But the stock market'’s continuing decline in the months after the March 2001 I.P.O. bust was probably an anomaly, says Jay R. Ritter, a finance professor at the University of Florida who specializes in I.P.O. research.
An analysis of initial offerings market since 1980 suggests that, all else being equal over the next 12 months, the market between now and the summer of 2007 is likely to produce above-average returns.
It was difficult to find good data on the percentage of firms withdrawing IPOs back to the 80s. So what Ritter did instead is calculate the percentage of firms successfully going public in a given month with a final price below the midpoint of their offering range. He then related this percentage to subsequent stock market returns.
The basic logic behind the supposed relationship is that withdrawals of IPOs (or those that come in priced at the low end of their range) leads subsequent IPOs by other firms to be conservatively priced. A lot of low priced IPOs could serve as the impetus for subsequent higher market wide returns.
The relationship between the fraction of IPOs priced below midpoint and subseqeuent market returns is statistically significant at the 5% level (this means that association between the two variables would show up at these levels by random chance less than 5% of the time). So, it meets the cutoff statisticians typically use to determine whether it's significant.
Whether or not you can make money trading on it, who knows?
Note: Barry Ritholtz at the Big Picture has some interesting thoughts on the matter.
HT: Abnormal Returns.
Welcome to Another Finance Prof Blogger
Since there are so few of us around, I thought I'd mention the newest addition to the rolls of finance professor blogs -- The Finance Blog, run by Peter Went, a finance prof at Bucknell University.
Stop over and give it a look, and add it to your feed reader.
Stop over and give it a look, and add it to your feed reader.
Saturday Linkfest
The last week I've only had a few minutes here and there to get online. So, I've mostly been marking interesting item for later use to keep my bloglines account from exploding out of control. Since my home is presently a mess, I figured I could at least do some cleaning out of my account. So, from the finance/business side of the blogosphere:
Abnormal Returns talks about the problems with benchmarking and "Radical Diversification "And from the non-business side of things:
Equity Private has another great analogy - this time between Narcotrafficing and Private Equity. And the Debt Bitch puts in another memorable appearance here (always worth reading).
Jack Sielieski of the Accounting Observer tells companies to Stop Giving Earnings Guidance.
The always-worth-a-read James Hamilton at Econbrowser has a primer on the the expectations hypothesis and its relationship to the yield curve. I wish I could explain things half as well as him.
Dan Melson at Searchlight Crusade discusses Zero Cost Loans, Good Faith Estimates, and Truth In Lending And APRs.
Floyd Landis was accused of doping following his Tour-de France win. Lynne Kiesling provides some statistical commentary on these tests.Ah - I feel much better now.
Alex Tabarrok of Marginal Revolution gives us the market for butts.
From the Onion: Professor Pressured To Sleep With Student For Good Course Evaluation.
Settling In To The New House and Neighborhood
We'll be unpacking boxes for quite a while -- I counted over 100, along with about 30-40 plastic bins. The Unknown In-Laws came over and stayed the night (the kids already refer to the guest bedroom as "Grandma and Grampa's room) to help with the unpacking, and will be coming over again next week. So, we made a pretty good dent in things - kitchen's done, and a lot of the kid's bedrooms. But we'll be unpacking for the next month or so, I'm sure.
We love our development. It's on a cul-de-sac with only 30 houses total, so there's little traffic. Since the development is only 2 years old, there are no cliques because everyone's new to the neighborhood. Best of all for the Unknown Wife and Unknown Kids, there's about a dozen children below the age of 12, and a number of elementary teachers and stay-at-home moms. So, there's lots going on during the day.
Even though we only moved in on Monday, Unknown Wife and Unknown kids have already gone to the neighbors once for a "Water Fun" afternoon (two wading pools, a slip-and-slide, and 6 other kids) and a Movie Night with about ten other kids and a few of the parents. And the Unknown Wife has been invited to join the neighborhood ladies group (the "Birchwood Babes"). She doesn't have any other information about the group except that it involves regular nights out and Margaritas, but that seems like a good start.
I realize it's still the honeymoon phase, but all in all, it feels like we've moved to Shangri la.
We love our development. It's on a cul-de-sac with only 30 houses total, so there's little traffic. Since the development is only 2 years old, there are no cliques because everyone's new to the neighborhood. Best of all for the Unknown Wife and Unknown Kids, there's about a dozen children below the age of 12, and a number of elementary teachers and stay-at-home moms. So, there's lots going on during the day.
Even though we only moved in on Monday, Unknown Wife and Unknown kids have already gone to the neighbors once for a "Water Fun" afternoon (two wading pools, a slip-and-slide, and 6 other kids) and a Movie Night with about ten other kids and a few of the parents. And the Unknown Wife has been invited to join the neighborhood ladies group (the "Birchwood Babes"). She doesn't have any other information about the group except that it involves regular nights out and Margaritas, but that seems like a good start.
I realize it's still the honeymoon phase, but all in all, it feels like we've moved to Shangri la.
It's Official - We've Moved!
It's official - we've moved.
There was a bit more fun and games with the mover, but we're in our new house. It's amazing how many things we take for granted - like towel racks or TOILET PAPER HOLDERS. It's a new house, so I have lots of "Tim The Tool Man" things to do.
Luckily, there's a Home Depot a 15 minute ride away (they're going to get to know me very well). So, it's off to spend more money.
I've got a Faculty meeting later today. We're meeting with candidates for the Dean's slot for my college. But now I have a 2 mile commute, so it' s easy getting in and out.
While I'm there at the University, I'll do the Human Resources Dance and fill out about a pound of paperwork.
More to come later. We won't get wireless connected in our house for about a week, so posting may be sporadic. At great personal sacrifice, I'm currently blogging from a local coffeehouse (it is a college town, after all) with a wireless hotspot.
There was a bit more fun and games with the mover, but we're in our new house. It's amazing how many things we take for granted - like towel racks or TOILET PAPER HOLDERS. It's a new house, so I have lots of "Tim The Tool Man" things to do.
Luckily, there's a Home Depot a 15 minute ride away (they're going to get to know me very well). So, it's off to spend more money.
I've got a Faculty meeting later today. We're meeting with candidates for the Dean's slot for my college. But now I have a 2 mile commute, so it' s easy getting in and out.
While I'm there at the University, I'll do the Human Resources Dance and fill out about a pound of paperwork.
More to come later. We won't get wireless connected in our house for about a week, so posting may be sporadic. At great personal sacrifice, I'm currently blogging from a local coffeehouse (it is a college town, after all) with a wireless hotspot.
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