nep-cfn 2014-04-11 papers

on Corporate Finance

Issue of 2014‒04‒11
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

Stock Price Booms and Expected Capital Gains By Klaus Adam; Johannes Beutel; Albert Marcet
FEMALE BANK EXECUTIVES: IMPACT ON PERFORMANCE AND RISK TAKING SUBSTITUTES? By Cindy Truong, Yan Wendy Wu

Stock Price Booms and Expected Capital Gains

By:	Klaus Adam; Johannes Beutel; Albert Marcet
Abstract:	The booms and busts in U.S. stock prices over the post-war period can to a large extent be explained by fluctuations in investors’subjective capital gains expectations. Survey measures of these expectations display excessive optimism at market peaks and excessive pessimism at market throughs. Formally incorporating subjective price beliefs into an otherwise standard asset pricing model with utility maximizing investors, we show how subjective be- lief dynamics can temporarily de-link stock prices from their fundamental value and give rise to asset price booms that ultimately result in a price bust. The model successfully replicates (1) the volatility of stock prices and (2) the positive correlation between the price dividend ratio and expected returns observed in survey data. We show that models imposing objective or ‘rational’price expectations cannot simultaneously account for both facts. Our …findings imply that large part of U.S. stock price fluctuations are not due to standard fundamental forces, instead result from self-reinforcing belief dynamics triggered by these fundamentals.
Keywords:	Stock Price Volatility, learning, survey expectations, internal rationality
JEL:	G12 D84
Date:	2014–01
URL:	http://d.repec.org/n?u=RePEc:bge:wpaper:757&r=cfn

FEMALE BANK EXECUTIVES: IMPACT ON PERFORMANCE AND RISK TAKING SUBSTITUTES?

By:	Cindy Truong, Yan Wendy Wu (LCERPA)
Abstract:	This paper studies the impact of female executives on the performance and risk taking of US banks. With a sample of US banks from 2002 to 2010, we find that the inclusion of female executives increases bank performance after addressing endogeneity and reverse causality issues. We also provide evidence that female executives decrease the risk taking of banks. These results suggest that there is added value to having female executives on the executive team. We also find that a more balanced gender ratio results in a greater impact on bank performance and risk taking. This supports the argument to increase gender diversity in executive level positions for females.
Keywords:	Gender, Bank Executive, Diversity
JEL:	G21 G28 J16 J48
Date:	2014–03–01
URL:	http://d.repec.org/n?u=RePEc:wlu:lcerpa:wm0067&r=cfn

This nep-cfn issue is ©2014 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.

General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.

NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.