What Makes Individual Investors Exercise Early? Empirical Evidence from Non-Tradable Fixed-Income Products PDF Download
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Author: Mathias Eickholt Publisher: ISBN: Category : Languages : en Pages :
Book Description
This paper studies the early exercise behavior of individual investors in nontradable German governmental putable bonds. Analyzing holding and exercise decisions of more than 220,000 individual investors at a single-account level over 13 years, our major findings are: (i) Individual investors use their early exercise right predominantly at times that are not optimal according to standard option pricing theory. (ii) Only very few attractive exercise opportunities are exploited over time. (iii) Both exercises and failure to exercise differ significantly among investor groups, are related to their personal characteristics as well as product characteristics and environmental circumstances, and are subject to cognitive biases. They tend to be persistent over time on the investor level. (iv) The demand by investors for liquidity and financial flexibility is a more important motive for investment and exercise than performance seeking.
Author: Mathias Eickholt Publisher: ISBN: Category : Languages : en Pages :
Book Description
This paper studies the early exercise behavior of individual investors in nontradable German governmental putable bonds. Analyzing holding and exercise decisions of more than 220,000 individual investors at a single-account level over 13 years, our major findings are: (i) Individual investors use their early exercise right predominantly at times that are not optimal according to standard option pricing theory. (ii) Only very few attractive exercise opportunities are exploited over time. (iii) Both exercises and failure to exercise differ significantly among investor groups, are related to their personal characteristics as well as product characteristics and environmental circumstances, and are subject to cognitive biases. They tend to be persistent over time on the investor level. (iv) The demand by investors for liquidity and financial flexibility is a more important motive for investment and exercise than performance seeking.
Author: Mathias Eickholt Publisher: ISBN: Category : Languages : en Pages :
Book Description
This paper is the first to analyze and value early exercises of Individual Investors in fixed-income investment products. Assuming decision and transaction costs we consider that a continuous decision-making on holding or exercising is not optimal anymore and propose a new approach to modeling exercise decisions, which endogenously determines the optimal decision strategy. Calibrating our model to a unique data set of about 880,000 early exercises in non-tradable putable bonds over a time period of 13 years indicates that Individual Investors (i) act very heterogeneously, (ii) behave as if they face significant individual transaction and decision costs, (iii) react sluggishly, and that (iv) exogenous effects such as taxes or investors' desire for liquidity additionally influence early exercise behavior.
Author: Andrew Ang Publisher: Now Publishers Inc ISBN: 1601984685 Category : Business & Economics Languages : en Pages : 99
Book Description
The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.
Author: Frank J. Fabozzi Publisher: John Wiley & Sons ISBN: 0471785768 Category : Business & Economics Languages : en Pages : 578
Book Description
In order to effectively employ portfolio strategies that can control interest rate risk and/or enhance returns, you must understand the forces that drive bond markets, as well as the valuation and risk management practices of these complex securities. In Advanced Bond Portfolio Management, Frank Fabozzi, Lionel Martellini, and Philippe Priaulet have brought together more than thirty experienced bond market professionals to help you do just that. Divided into six comprehensive parts, Advanced Bond Portfolio Management will guide you through the state-of-the-art techniques used in the analysis of bonds and bond portfolio management. Topics covered include: General background information on fixed-income markets and bond portfolio strategies The design of a strategy benchmark Various aspects of fixed-income modeling that will provide key ingredients in the implementation of an efficient portfolio and risk management process Interest rate risk and credit risk management Risk factors involved in the management of an international bond portfolio Filled with in-depth insight and expert advice, Advanced Bond Portfolio Management is a valuable resource for anyone involved or interested in this important industry.
Author: Aswath Damodaran Publisher: John Wiley & Sons ISBN: 1118235614 Category : Business & Economics Languages : en Pages : 615
Book Description
The guide for investors who want a better understanding of investment strategies that have stood the test of time This thoroughly revised and updated edition of Investment Philosophies covers different investment philosophies and reveal the beliefs that underlie each one, the evidence on whether the strategies that arise from the philosophy actually produce results, and what an investor needs to bring to the table to make the philosophy work. The book covers a wealth of strategies including indexing, passive and activist value investing, growth investing, chart/technical analysis, market timing, arbitrage, and many more investment philosophies. Presents the tools needed to understand portfolio management and the variety of strategies available to achieve investment success Explores the process of creating and managing a portfolio Shows readers how to profit like successful value growth index investors Aswath Damodaran is a well-known academic and practitioner in finance who is an expert on different approaches to valuation and investment This vital resource examines various investing philosophies and provides you with helpful online resources and tools to fully investigate each investment philosophy and assess whether it is a philosophy that is appropriate for you.
Author: Donald R. Chambers Publisher: CFA Institute Research Foundation ISBN: 1944960384 Category : Business & Economics Languages : en Pages : 122
Book Description
Alternative Investments: A Primer for Investment Professionals provides an overview of alternative investments for institutional asset allocators and other overseers of portfolios containing both traditional and alternative assets. It is designed for those with substantial experience regarding traditional investments in stocks and bonds but limited familiarity regarding alternative assets, alternative strategies, and alternative portfolio management. The primer categorizes alternative assets into four groups: hedge funds, real assets, private equity, and structured products/derivatives. Real assets include vacant land, farmland, timber, infrastructure, intellectual property, commodities, and private real estate. For each group, the primer provides essential information about the characteristics, challenges, and purposes of these institutional-quality alternative assets in the context of a well-diversified institutional portfolio. Other topics addressed by this primer include tail risk, due diligence of the investment process and operations, measurement and management of risks and returns, setting return expectations, and portfolio construction. The primer concludes with a chapter on the case for investing in alternatives.
Author: Ayan Bhattacharya Publisher: CFA Institute Research Foundation ISBN: 1944960929 Category : Business & Economics Languages : en Pages : 38
Book Description
Exchange-traded funds (ETFs) revolutionized asset markets by using an innovative structure to make investing in a wide variety of asset classes simpler and cheaper. With their growing importance has come increasing concern that these products pose new risks to market stability and performance. This paper examines whether ETFs affect systemic risks in financial markets and, if they do, what the mechanism is by which this impact occurs and what can be done to keep the risks under control. We review current research and empirical evidence on these issues and discuss some emerging risks in ETFs. We ask whether we have the right “rules of the road” to deal with the new drivers of market behavior.
Author: Scott Stewart Publisher: ISBN: Category : Languages : en Pages : 148
Book Description
Manager selection is a critical step in implementing any investment program. Investors hire portfolio managers to act as their agents, and portfolio managers are then expected to perform to the best of their abilities and in the investors' best interests. Investors must practice due diligence when selecting portfolio managers. They need to not only identify skillful managers, but also determine the appropriate weights to assign to those managers. This book is designed to help investors improve their ability to select managers. Achieving this goal includes reviewing techniques for hiring active, indexed, and alternative managers; highlighting strategies for setting portfolio manager weights and monitoring current managers; and considering the value of quantitative and qualitative methods for successful manager selection.
Author: Lionel Martellini Publisher: John Wiley & Sons ISBN: 0470868228 Category : Business & Economics Languages : en Pages : 662
Book Description
This textbook will be designed for fixed-income securities courses taught on MSc Finance and MBA courses. There is currently no suitable text that offers a 'Hull-type' book for the fixed income student market. This book aims to fill this need. The book will contain numerous worked examples, excel spreadsheets, with a building block approach throughout. A key feature of the book will be coverage of both traditional and alternative investment strategies in the fixed-income market, for example, the book will cover the modern strategies used by fixed-income hedge funds. The text will be supported by a set of PowerPoint slides for use by the lecturer First textbook designed for students written on fixed-income securities - a growing market Contains numerous worked examples throughout Includes coverage of important topics often omitted in other books i.e. deriving the zero yield curve, deriving credit spreads, hedging and also covers interest rate and credit derivatives
Author: Mathias Eickholt
Author: Mathias Eickholt
Author: Mathias Eickholt
Author: Andrew Ang
Author: Frank J. Fabozzi
Author: Aswath Damodaran
Author: Benjamin H. Cohen
Author: Donald R. Chambers
Author: Ayan Bhattacharya
Author: Scott Stewart
Author: Lionel Martellini