Now showing 1 - 10 of 16
  • Publication
    Demographic Change and Pharmaceuticals' Stock Returns
    (Wiley-Blackwell, 2011-09) ;
    Berchtold, Rachel
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    We analyze how demographic change affected profits and returns across pharmaceutical industries over the last twenty years. Fluctuations in different age group sizes influence the estimated demand changes for age-sensitive drugs, such as antibacterials for young, antidepressants for middle-aged, and antithrombotics for old people. These demand changes are predictable as soon as a specific age group is born. We use consumption and demographic data to forecast future consumption demand growth for drugs caused by demographic changes in the age structure. We find that long-term forecasted demand changes predict abnormal annual pharmaceutical stock returns for more than 60 firms over the time period from 1986 to 2008. An increase by one percentage point of annual demand growth due to demographic changes predicts an increase in abnormal yearly stock returns in the size of 3-5 percentage points. Short-term forecasted demand changes does predict negative abnormal stock returns for a time horizon below 5 years. A trading strategy taking advantage of the demographic information earns a significant abnormal return between 6 and 8 percentage points per year. Our results are consistent with the model by DellaVigna and Pollet (2007), where investors are inattentive with extrapolation in the distant future and overreact to information in the near future. http://ssrn.com/abstract=1428373
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    Scopus© Citations 2
  • Publication
    What Drives the Performance of Convertible-Bond Funds?
    (Elsevier, 2010-11) ;
    Kind, Axel
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    This paper examines the performance of US mutual funds investing primarily in convertible bonds. Although convertible-bond funds are popular investment vehicles, their return process is not well understood. We contribute an analysis of the complete universe of US convertible-bond funds proposing a set of multi-factor models for the return generating process. In spite of the well-known hybrid nature of convertible bonds, the return process of convertible-bond funds cannot be fully explained by factors typically related to stock and bond markets. Thus, we consider additional variables accounting for the option-like character of convertible bonds. Surprisingly, multivariate cross-sectional analyses show the existence of a significant positive relationship between a fund's performance and its asset composition. Similar to Agarwal et al. (2006) we show that this result can be explained by factors related to investment opportunities in the convertible-bond market and trading strategies related to convertible arbitrage, as typically performed by hedge funds. Overall, convertible-bond funds have a performance as measured by alpha that is comparable to passive investment strategies in stocks, bonds, and convertible bonds. This average performance is the result of weak selection skills and successful timing of strategies related to convertible arbitrage. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=967988
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    Scopus© Citations 16
  • Publication
    New Evidence on the Announcement Effect of Convertible and Exchangeable Bonds
    (North-Holland, 2006-02-01) ;
    Fehr, Martin
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    This study investigates the announcement and issuance effects of offering convertible bonds and exchangeable bonds using data for the Swiss and German markets during January 1996 and May 2003. The analysis suggests that announcement effects of convertible bonds and exchangeable bonds are associated with significantly negative abnormal returns. German firms exhibit a stronger reaction than Swiss firms, possibly for institutional reasons.We also investigate the effect of the market return of the announcement effect and find that the negative abnormal returns are significantly more pronounced when previous market returns have been negative. Furthermore, we analyze the relation between the announcement effects and equity components by controlling for the equity signal sent to the market. We find the size of the equity component of an issue to have a strong influence on the announcement effect for convertible but not for exchangeable securities and offer an explanation for this difference. http://www.manuel-ammann.com/pdf/CBExBAnnouncements.pdf
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    Scopus© Citations 32
  • Publication
    Pricing and Hedging Mandatory Convertible Bonds
    (Institutional Investor, 2006-03-01) ;
    This article examines the pricing and hedging of mandatory convertible bonds on the US market using daily market prices for a period of 498 trading days resulting in a sample of over 14,600 daily price observations. We explore the pricing and hedging performance based on a simple contingent claims model. On average, the pricing errors are lower than those found for standard convertible bonds. An analysis of the hedging performance of the model indicates that the model is useful for hedging as, on average, the hedging errors observed are relatively small and mostly unsystematic. [http://www.manuel-ammann.com/pdf/WPS16_MCB_Paper_Jan2006.pdf]
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  • Publication
    Nennwertrückzahlungen am Schweizer Aktienmarkt und ihre Auswirkungen auf den Unternehmenswert
    (Lang, 2006-12-21) ; ;
    Zulauf, Martin
    Die Arbeit untersucht den Ankündigungseffekt und die Outperformance von Schweizer Unternehmen, die zwischen 1992 und 2003 eine Nennwertrückzahlung ausgeschüttet haben und stellt die erste empirische Untersuchung von Nennwertrückzahlungen dar. Es konnte gezeigt werden, dass die Aktienkursreaktion in der Zeitperiode [-1,0] auf die Ankündigung von Nennwertrückzahlungen +1.0% beträgt. Eine weitere Analyse weist darauf hin, dass Nennwertrückzahlungen anstelle Dividendenzahlungen höhere Preisreaktionen bei Ankündigung verursachen. Zudem wurde festgestellt, dass eine Ausschüttungserhöhung mittels einer Nennwertrückzahlung zu einer stärkeren Kursreaktion führt als eine Dividendenerhöhung. Dies unterstützt die Hypothese, dass bei einer Nennwertrückzahlung im Vergleich zu einer Dividendenzahlung die steuerliche Behandlung und die stärkere Signalwirkung ausschlaggebender sind. [http://econpapers.repec.org/article/sesarsjes/2006-iv-1.htm]
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  • Publication
    An IFRS 2 and FASB 123 (R) Compatible Model for the Valuation of Employee Stock Options
    (Springer, 2005-12-01) ;
    We show how employee stock options can be valued under the new reporting standards IFRS 2 and FASB 123 (revised) for share-based payments. Both standards require companies to expense employee stock options at fair value. We propose a new valuation model, referred to as Enhanced American model, that complies with the new standards and produces fair values often lower than those generated by traditional models such as the Black-Scholes model or the adjusted Black-Scholes model. We also provide a sensitivity analysis of model input parameters and analyze the impact of the parameters on the fair value of the option. The valuation of employee stock options requires an accurate estimation of the exercise behavior. We show how the exercise behavior can be modeled in a binomial tree and demonstrate the relevance of the input parameters in the calibration of the model to an estimated expected life of the option. http://www.springerlink.com/content/ynm870p38rj57226/
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  • Publication
    Valuing Employee Stock Options: Does the Model Matter?
    (CFA Institute, 2004-09-01) ;
    In this numerical analysis of models for valuing employee stock options, the focus is on the impact of a model on the resulting option prices and the sensitivity of pricing differences between models with respect to changes in the parameters. For most models, the price reduction relative to standard options is uniquely determined by the expected life of the option. In fact, with the exception of the Financial Accounting Standards Board 123 model, pricing differences are negligible if the models are calibrated to the same expected life of the option. Consequently, the application of models with several hard-to estimate parameters, such as the utility-maximizing model, can he greatly simplified by calibration, because expected life is easier to estimate than utility parameters. http://www.manuel-ammann.com/pdf/PubsAmmann2004EmployeeOptions.pdf
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