芬蘭留學生金融方面碩士課程作業：Production functions and productivity of family firms: Evidence from the S&P 500
07-15, 2013
芬蘭留學生金融方面碩士課程essay：Production functions and productivity of family firms: Evidence from the S&P 500
1. Research objectives
The research objective of the study was to examine whether there was a positive relationship between the profitability and valuation of family firms and their production technologies and production efficiency.
2. Literature review about founding-family ownership and its effects on the valuation, performance, financing costs, diversification and board behavior
Many scholars have investigated and pointed out that the positive effects of founding-family ownership indeed existed. About the explanations for he positive effects of founding-family ownership, there were several different points of view. A kind of viewpoint thought that families tend to have long investment horizons because they viewed their firms as an asset to be passed on to their heirs as a going concern. There was also a suggestion that founding-family ownership was conducive to the reduction of agency conflicts and the improvement of the efficiency of enterprise management. The alternative view was that founding families may hope to produce high quality products because they hoped to maintain their reputation and improve long-term performance of the firm through it. In addition, the productivity was proved to be fundamentally important to the economy and associated with firm valuation. In addition, a positive link between productivity and firm value has been greatly recognized in many literatures, although there were some exceptions. 許多學者研究指出，創始家族所有權確實存在正的影響。關于解釋他積極影響的創始家族所有權，有幾個不同的觀點。一種觀點認為，家庭傾向于長期投資的視野，因為他們認為他們的公司被傳遞給他們的繼承人作為一個持續的關注資產。還有一個建議，創始家族所有權有利于減少代理沖突與企業管理效率的改進。另一種觀點是，成立家庭可能希望生產出高質量的產品，因為他們希望保持自己的聲譽，通過提高企業長期績效。此外，生產力是最重要的與公司價值相關。此外，從生產力與公司價值已被許多文獻廣泛認可的一種積極的聯系，但是也有例外。
3. Empirical models used in the study and relative analysis results
3.1. Research methods recitation
Productivity is typically defined as the ratio of output to input. In this paper, the total factor productivity (TFP) was used to measure the firm productivity, according to previous literatures, which was defined as output per unit of total input, where total input was a weighted sum of the individual inputs. The modified equations used in this paper can be expressed as followed:#p#分頁標題#e#
ln(Yi) = α ln(Li) + β ln(Ki) + θ FamFirmi + ei
Where Y denotes output; L denotes labor input; and K denotes capital input; FamFirmi is an indicator variable and ei is an i.i.d. error term.
3.2. Main empirical results
3.2.1. Productivity estimating models and relative descriptive analysis
Through descriptive statistics analysis and t-value testing, Tobin’s Q (Sum of market value of equity; book value of debt; and the book value of preferred stock divided by the book value of total asses) and return on assets measures appeared to be higher for family-firms than for non-family firms. In addition, Panel C verified higher profitability of family firms reported in previous documents.
3.2.2. The variance analysis between production functions of family and non-family firms
Through the insignificant F-statistics, it was proved that there were no significant differences between production technologies of family firms and non-family firms, which also indicated that he production function framework can be used to compare production efficiency between family firms and non-family firms.
3.2.3. The effects of founding-family ownership on production efficiency
The higher productivity of family firms was reflected in the accounting measures of performance through a series of analysis such as F-statistics.
3.2.4. Conclusions
To sum up, the production output has been proved to higher for family-owned than for non-family firms. In addition, there were no differences between production technologies of family-owned and non-family firms. Therefore, a conclusion can be draw that family firms are significantly more productive than on-family firms, due to their ore efficient use of labor and capital resources.
4. Practical relevance of the study
The findings in this paper indicated the causes of relative higher productivity of family firms, which was also conducive to the improvement and progress of other firms, particularly non-family firms. The finding in the paper reminded the non-family firms the gap between them and family firms, so that they can improve themselves effectively.
5. Prospect of research #p#分頁標題#e#
Production functions and productivity of family firms in other areas should be further probed into. Because there may be different situation between different countries or areas, or the results of this study a universally effective. In addition, the production functions and productivity of family firms and non-family firms in different industry can be probed into.
Should there exist secondary markets for executive stock options?
1. Research objectives
1.1. The potential disadvantages of the secondary markets for the ESOs have been investigated
1.2. Managers’ personal portfolio management issues and the use of inside information which might make influences on their selling decisions have been investigated
2. Literature review about executive stock options (ESOs) and potential effects of secondary markets on ESOs
The stock-price-related compensation plans have been commonly assumed to be preferable to those firms based on accounting income. And the most popular form of the stock-price-related is Executive stock options (ESO). However, a great difference between the cost and the compensation of ESO plans exists because the executives usually can only cash their options by exercising them, losing the remaining time value of the ESOs. In order to resolve this problem, ESO should be able to be sold on secondary markets instead of exercising them by its holders. Therefore, the ESO secondary markets have evident benefits. Everything has two sides, ESO is no exception. If there is a secondary market for the ESO as the ESO owners can recover the total value of their options instead of the intrinsic value, ESO may use their (inside) information regarding the future prospects of the firm to maximize their personal wealth rather than that of the owners of the firm.
2.1. Literature review about managers’ motives for cashing their ESOs before maturity
The managers’ motives for cashing their ESOs by exercising can be divided into three categories according to previous literature such as ESO holders’ personal portfolio management motives (i.e. need to rebalance portfolio); the use of in-side information on the future performance of employer’s stock price; personal liquidity needs or tax management purposes. In general, managers’ motive for selling ESOs as soon as it is possible is positively related to the risk of the ESO and the weight/value of the ESO in the managers’ personal investment portfolios. #p#分頁標題#e#
In addition, the relation between ESO exercising activity and the decrease/increase in future stock prices was reported to be somewhat contradictory in current documents.
2.2. The description about Finland’s unique system which allows managers to sell their ESOs on the secondary market
The secondary markets for ESOs have already existed since the late 1980s. In addition, ESO subscription prices in Finland typically include a dividend adjustment in which all dividends distributed during the timespan of the ESO are to be deducted from the subscription price. On the other hand, the great majority of ESOs are issued as warrants, entitling to subscription of new shares in the company for its legislative environment. In addition, the trading of ESOs is restricted by insider regulations, rules and provisions.
3. Empirical models used in the study and relative analysis results
3.1. Research methods recitation
The ESO selling volume was regressed on the delta and volatility of the ESO firm size and the current and 1 month lagged stock returns in order to examine the managers’ motives for cashing their ESOs before maturity.
3.2. Main empirical results
3.2.1. Managers ’ motives for selling ESOs after the vesting period
The investigation about the managers’ motives for cashing their ESOs after the vesting period (60, 90 and 120 days after the end of the vesting period) by F –statistic testing implied that managers of large firms are less willing to sell their ESOs shortly after the end of the vesting period than managers of small firms.
3.2.2. The examination about whether inside information would be used to determine the selling time of their ESOs
ESO selling activity was proved to be not related to future stock price behavior regarding the use of inside information.
3.2.3. Conclusions
The investigation in the paper indicated managers prefer to sell their ESOs when holding an ESO is equivalent to holding the underlying stock, which was in accordance with the traditional portfolio diversification hypothesis. In addition, managers of large firms were proved to be less willing to sell their ESOs shortly after the end of the vesting period than managers of small firms and ESO selling activity is not related to future stock price behavior.#p#分頁標題#e#
4. Practical relevance of the study
The results in the paper indicated that existence of secondary markets for ESOs does not weaken the usefulness of ESOs. Secondary markets for ESOs have a necessary position. Secondary markets for ESOs
5. Discussions
Secondary markets for executive stock options in other regions should be further investigated. The organizational forms of the stock option market for different countries and regions are not the same. And the answers to whether should secondary markets for executive stock options exist are may different.
Integration of 22 emerging stock markets: A three-dimensional analysis
1. Research objectives
The research objective of this study was to examine the co-movement of 22 emerging stock markets from Americas, Europe, Asia and Middle East/Africa with the U.S. stock market in order to probe into the integration of these stock markets.
2. Literature review about global stock market integration and its analysis methods
2.1. Global stock market integration
An internationally diversification portfolio has been proved to produce higher rates of return or lower variances relative to a purely national diversification of assets by several scholars, which has heightened the interest of both finance academics and practitioners to evaluate the level of stock market integration. The co-movement of international stock prices has been widely examined in literatures concerning the global stock market integration. Low co-movement of market returns between countries has been reported in early literature, while an increase in international co-movement of stock returns in global markets has been documented by the more contemporary literature. In addition, countries with smaller cultural distance were proved to have higher stock market co-movement as well as the degree of co-movement was varied over time.
2.2. The squared coherency of the wavelet analysis for stock market integration measurement
The co-movements between two time-series of stock market indexes depended upon the wavelet methodology in the paper, which is based on the wavelet transform.
3. #p#分頁標題#e#Empirical models used in the study and relative analysis results
3.1. Research methods recitation
The wavelet methodology used in the paper is based on the wavelet transform, thus it was unavoidable to be affected by noise during the conversion process.
3.2. Main empirical results
A high degree of co-movement at relatively lower frequencies over the entire sample period between MSCI USA and the MSCI indexes for emerging America countries has been reported in this paper. But the variation strength in different countries was diverse. In addition, there were some important differences between the short-term and the long-term co-movements for the integration of the U.S. and the emerging Europe countries stock markets, suggesting the presence of significant short-term diversification benefits for the U.S. investor.
4. The practical implications of the study
4.1. Risk assessment of portfolio across the diverse emerging regions
The finding in this paper implied that it would be beneficial for U.S. investors to invest in emerging markets, especially for short-term investment horizons.
4.2. Risk assessment of asset allocation decisions across the diverse emerging regions
5. Discussions
The finding in this paper has important reference value for international investors to reduce investment risks and make effective risk assessment about asset allocation decisions across the diverse emerging regions in order to increase long-term earning rates and avoid risk.
Relative Importance of Scheduled Macroeconomic News for Stock Market Investors
1. Research objectives
The relative importance of macroeconomic news releases for stock valuation has been investigated in this study.
2. Literature review
2.1. The significance of scheduled macroeconomic news
The significance of the information content of scheduled announcements in pricing financial assets in different countries has been widely examined in recent document, focusing on the laws of fluctuations of financial assets following scheduled announcements and the amplitude of fluctuation. The effect of release day of the month on the importance of macroeconomic news has also been investigated. #p#分頁標題#e#
2.2. The description about Implied Volatilities adopted for the measurement of the relative importance of scheduled announcements
The stock is fluctuation, thus there is a great deal of uncertainty and disagreement about the content of the coming announcement. Therefore, actual asset price movement tends to be higher than normal on scheduled news announcement days, which has been documented by many scholars. Implied volatility is commonly used to measure uncertainty in the stock market from index option prices, which can be defined as a market’s expectation of the average return volatility over the remaining life of the option contract. To some extent, the implied volatility can reflect the uncertainty around a scheduled news release.
3. Empirical models used in the study and relative analysis results
The empirical models used in this paper contains several hypothesizes, i. e. implied volatility is assumed to gradually increase prior to the scheduled macroeconomic news announcements selected in this paper. The model used to investigate the effect of release day of the month on the importance of macroeconomic news is the same. Therefore, the model belongs to the idealized model. Therefore, there is certain gap the model results and the actual situation.
3.1. Research methods recitation
Implied standard deviation (ISD) calculated from option prices, namely the daily closing values of the CBOE Market Volatility Index (VIX) was used in this paper to measure the uncertainty, which has been proved to be able to mitigate most of the problems associated with the measurement of implied volatilities.
3.2. Conclusions
11 macroeconomic announcements were selected based on the previous literature and the Bureau of Labor Statistics classifications of major economic indicators to investigate the relative importance of macroeconomic news releases for stock valuation in this study. Through the analysis, author pointed out that stock valuation was significantly affected by 5 out of these 11 macroeconomic announcements, namely Employment Report, NAPM (manufacturing), Producer Price Index, Import and Export Price Indices, and Employment Cost Index. Moreover, the Employment Report and NAPM (manufacturing) have the greatest impact on stock valuation in five announcements. In addition, it was pointed out that the first announcements of the month can be assumed to be more valuable than the later announcements.
4. #p#分頁標題#e#Practical relevance of the study
The study is conducive to help traders to know the importance of Scheduled Macroeconomic News for Stock Market Investors and effectively analysis the news in order to obtain effective information for their investments.
5. Prospect of research
The models implied volatility is assumed to gradually increase prior to the scheduled macroeconomic news announcements used in this paper, therefore, the results in the end were the results for the real state, which may have a large deviation from the actual situation, therefore, Hence, the models being more precise, more close to the reality should be further and applied in the similar study.
Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 through August 31, 1978
1. Research objectives
The mathematical structure of several alternative Option Pricing Models were made a separate test in this study.
2. Literature review about the biases between Black-Scholes option pricing model values and market prices
Most empirical work designed to test these alternative failed to provide a separate test of the mathematical structure of option pricing formulas due to problems of input measurement, severe limitations created by use of closing option and stock prices, and limited samples of calendar time or underlying stocks. Therefore, there is no consensus about biases from Black-Scholes values.
3. Empirical methods used in the study and relative analysis results
3.1. Research methods recitation
3.1.1. Alternative Option Pricing Formula
Five competing alternative option pricing models such as pure jump model; mixed diffusion-jump mode; constant elasticity of variance diffusion model; compound option diffusion model and displaced diffusion model have been developed through the relaxation of two assumptions of Black-Scholes option pricing formula, namely the continuity assumption and the volatility constancy assumption.
3.1.2. Options Data Base#p#分頁標題#e#
The Market Data Report of the CBOE were taken for the options data, which contained almost all reported trades and quotes on the floor of the CBOE from August 23, 1976 through August 31, 1978. In addition, the option data was consolidated in order to reduce the data size. In addition, in order to various sources of statistical noise, a subset of the Berkeley Options Data Base was selected.
3.1.3. Variables measurement
Eight variables such as option market price; implied volatility; future ex-dividend dates prior to expiration; interest rates; the underlying stock price; time to expiration; striking price; future cash dividends prior to expiration were measured.
3.2. Main empirical results
For options with a ratio of the current stock price and the striking price higher 0.75 but lower 0.95, the shorter the time to expiration, the higher its implied volatility; but there was a sole exception. For options with a ratio of the current stock price and the striking price higher 0.95 but lower 1.05, the longer the time to expiration, the higher the option's implied volatility in the first period; while the shorter the time to expiration, the higher the option's implied volatility in the second period, which was somewhat weaker. In addition, there was a sole exception for options with a ratio of the current stock price and the striking price higher 0.75 but lower 0.95, namely the lower the striking price, the higher an option's implied volatility.
3.3. Conclusions
Although the statistical significance of the biases observed in this paper seemed unquestionably strong but their economic significance was not sure for all investors.
4. Practical relevance of the study
The significance of the biases observed in this paper was considered to be valuable depending upon what the investors plan to do with options, which may can bright them long-term profits and help them to reduce risk.
5. Prospect of research
A composite model may be constructed in order to explain all of our observations across time. However, this may also be difficult to capture in our formula the cross-over striking price bias we have observed. There is additional analysis may be effective，namely the bias observed in any period with the level of some macroeconomic variable can be correlated. #p#分頁標題#e#
Comparative Performance of the Black-Scholes and Roll-Geske-Whaley Option Pricing Models
1. Research objectives
A direct comparison of the performance of the modified Black-Scholes (BS) and Roll-Geske-Whaley (RGW) models was implemented.
2. Literature review about BS and RGW models
The BS model initially does not take account of divided payments, but it is considered can be modified to take account of dividends. Three scholars Roll, Geske and Scholes modified original BS model solving the option pricing problem. However, Sterk pointed out that the original uncorrected Roll model was closer to actual market prices than the pseudo-American BS prices. In addition, it was pointed out that there were no significant differences between the Roll-Geske-Whaley (RGW) and BS models through regressing actual market prices against model prices. In addition, the RGW formula was pointed out to be a better representation of actual market prices but not significantly closer to market prices by Whaley.
3. Empirical models used in the study and relative analysis results
3.1. Research methods recitation
Percentage deviations (PD) of market prices from model prices calculated for both models were used to make a direct comparison between these two models. In addition, a nonparametric method, the Wilcoxon matched-pairs ranked-sign test was used to the comparison due to the asymmetry of both models. This method is simple, direct and convenient on the whole.
3.2. Comparative Performance of the BS and RGW models
Through the study, the author pointed out that the RGW model performed as well as or better than the pseudo-American. Particularly, the RGW model performed distinctly better when there was an increase of dividend on the underlying stock. In addition, the RGW model performed distinctly better only for values of the dividend measure between 2.5 and 4 as the sample was stratified in accordance with the standardized dividend measure, which accorded with probabilities of early exercise between 30 percent and 68 percent, respectively. In general, new options are issued as close to in-the-money as possible and the probability of early exercise for these options is likely to range from 0.3 to 0.68.
4. The practical implications of the study #p#分頁標題#e#
A model can not be used for every market or for every period. Therefore, to select a model suiting to particular market or specific time is very important. And this study is conducive to help traders to make correct option pricing under given conditions.
5. Discussions
The study made a comparative performance of the Black-Scholes and Roll-Geske-Whaley Option Pricing Models, which has a practical reference value for traders. The traders can select appropriate model to help them to make option pricing. However, things are always progressing. A model suiting for a period of time or a regional market could not be widely used. Therefore, more effective models should be developed, which is important both for academic researches or practices. 該研究提出了比較性能柏力克 - 舒爾斯和殘疾人Geske惠利期權定價模型，貿易商，擁有一支具有實際的參考價值。交易者可以選擇適當的模型，以幫助他們做出期權定價。然而，事物總是在進步。模型相適應一段時間或一個區域市場無法得到廣泛應用。因此，應該更有效的模型開發，這都是很重要的學術研究或實踐。
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