nep-fmk New Economics Papers
on Financial Markets
Issue of 2015‒04‒11
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Manager Characteristics and Credit Derivative Use by U.S. Corporate Bond Funds By Dominika Paula Gałkiewicz; ; ;
  2. Underpricing, underperformance and overreaction in initial pubic offerings: Evidence from investor attention using online searches By Vakrman, Tomas; Kristoufek, Ladislav

  1. By: Dominika Paula Gałkiewicz; ; ;
    Abstract: This study provides a comprehensive overview of the use of credit default swaps by U.S. corporate bond funds and analyzes in detail whether certain characteristics of managers, in addition to the fundamentals of a fund, determine how their use these credit derivatives. Results suggest that a manager’s education, age, experience, and skill are positively correlated with a fund’s CDS holdings. In particular, managers holding a master’s degree or educated at prestigious universities prefer using CDS. However, funds with older, more experienced managers or these keeping higher assets under their management are more likely to take on credit risk via selling CDS protection. Younger managers or managers that were educated at prestigious universities rather tend to buy CDS protection possibly due to differing concerns about their careers. If considering the Heckman correction for self-selection of funds into CDS use, the aforementioned findings remain stable.
    Keywords: Manager, manager characteristic, mutual fund, derivative use, credit default swap
    JEL: G23 G28
    Date: 2015–03
  2. By: Vakrman, Tomas; Kristoufek, Ladislav
    Abstract: Online activity of Internet users has proven very useful in modeling various phenomena across wide range of scientific disciplines. In our study, we focus on two stylized facts or puzzles surrounding the initial public offerings (IPOs) - underpricing and long-term underperformance. Using the Internet searches on Google, we proxy the investor attention before and during the day of the offering to show that the high attention IPOs have different characteristics than the low attention ones. After controlling for various effects, we show that investor attention still remains a strong component of the high initial returns (underpricing), primarily for the high sentiment periods. Moreover, we demonstrate that the investor attention partially explains overoptimistic market reaction and thus also a part of the long-term underperformance.
    Keywords: initial public offerings,Google Trends,puzzles
    JEL: E44 G02
    Date: 2015

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