Vinay Datar - Academia.edu (original) (raw)
Papers by Vinay Datar
Journal of Financial Markets, 1998
European Financial Management, 1998
Several studies in finance and accounting literature have measured security returns subsequent to... more Several studies in finance and accounting literature have measured security returns subsequent to some economic events over long horizons by cumulating the returns over time. It is well known that when single period returns are cumulated over long horizons, the bid-ask error in the measured returns could be very high. One way of estimating the bid-ask error is by simulation. This paper offers an alternative to the simulation approach and provides a closed form expression for the bid-ask error in cumulated returns. Our analytical approach has two main advantages over the traditional simulation method; first it quantifies the bias precisely and second, it is computationally simpler by several orders of magnitude.
International Business & Economics Research Journal (IBER), 2011
When raising equity capital through the recently opened Shanghai stock exchange, Chinese companie... more When raising equity capital through the recently opened Shanghai stock exchange, Chinese companies can issue stock to Chinese nationals (A shares) or to non-Chinese nationals (B shares). Between 1990 and 1996 40 issuances of B shares took place, often by firms that had previously issued A shares. These class B initial offerings are found to exhibit underpricing relative to first day trading prices, but to a much less severe degree than class A share IPOs. Indeed, the extent of underpricing of class B shares is found to be in line with underpricing in the U.S. This is surprising because for the most part these offerings are hybrids of IPOs and seasoned equity offerings, representing offerings of old (traded) claims in a new market setting. We examine a variety of standard explanations for underpricing of IPOs finding either no empirical support for the hypotheses, or that many of these explanations are not relevant to the characteristics of the Chinese market.Two features of Chinese ...
Analysis using the Exchange-Traded Funds This article examines the intraday returns and liquidity... more Analysis using the Exchange-Traded Funds This article examines the intraday returns and liquidity patterns of the Standard & Poor's Depositary Receipts (SPY) and the iShares Morgan Stanley Capital International Inc. (MSCI) Japan Index Fund (EWJ). These exchange traded funds seemingly have very different holdings namely, US stocks and Japanese stocks. We make several observations that suggest some commonality in returns and liquidity of these apparently different assets. First, there are intraday, daily and monthly patterns in measures of liquidity for both funds. Second, the measures of liquidity are correlated across these two assets. Third, there is evidence of intraday spillover in mean, volatility and depth from the SPY to the EWJ but daily spillover is not observed. Our study extends two evolving strands of the literature: one strand that deals with the integration of world markets in terms of returns behavior; and the other strand suggests that liquidity may have a system...
L'invention concerne des systemes, des procedes, et des produits de programme informatique de... more L'invention concerne des systemes, des procedes, et des produits de programme informatique destines a la modelisation de benefices futurs. Selon ledit procede, la modelisation de benefices futurs commence par la definition d'un taux de croissance du produit pour chaque segment de temps d'une periode de temps comportant plusieurs segments de temps. Un niveau d'incertitude du produit est ensuite determine pour chaque segment de temps. Une distribution de benefices est alors determinee a la fin de chaque segment de temps sur la base de taux de croissance et du niveau d'incertitude du segment de temps respectif. Finalement, une valeur de benefices est selectionnee a la fin de chaque segment de temps par selection aleatoire de chaque valeur de benefices sur la base d'une distribution de benefices respective, de maniere a modeliser des benefices futurs sur la periode de temps. Par consequent, ledit procede autorise des variations du taux de croissance et/ou du nive...
We propose an intuitive method that is algebraically equivalent to the Black-Scholes formula. The... more We propose an intuitive method that is algebraically equivalent to the Black-Scholes formula. The main advantage of this method is its simplicity and transparency. Further, the method implicitly adjusts the discount rate to account for the underlying risk. Our approach relies on information that is available in the traditional project analysis using the net present value technique. When Black-Scholes assumptions are compromised in real projects, our method may provide a better approximation of call value. Our preliminary results suggest that our method provides a reasonable approximation for both binomial and jump diffusion processes where the terminal distributions need not be log-normal.
Pittsburgh Journal of Environmental and Public Health Law, Mar 24, 2015
Boeing Company and holds twelve joint patents for valuation methods using Real Options, sponsored... more Boeing Company and holds twelve joint patents for valuation methods using Real Options, sponsored by the Boeing Company. Dr. Datar has published fifteen articles in several academic journals, including the
The Journal of Investing
The authors study the extent to which macroeconomic risk (i.e., the innovations in macroeconomic ... more The authors study the extent to which macroeconomic risk (i.e., the innovations in macroeconomic variables) drives the positive cross-sectional relationship between future stock returns and relative firm value, using such measures as the book-to-market ratio and earnings-to-price ratio. The authors provide evidence that value stocks are riskier than growth stocks. They show that value stocks have higher risk loadings than growth stocks on the growth rate of industrial production, the term premium, and the default premium. They also find that the risk loadings and risk premiums account for more than half of the average return spreads between value and growth portfolios. The evidence suggests that risk plays an important role in explaining the value effect, which has implications for value and growth investment.
Banking and Finance Review, Jun 29, 2012
ABSTRACT We study the fundamental, operational, and aftermarket characteristics of special purpos... more ABSTRACT We study the fundamental, operational, and aftermarket characteristics of special purpose acquisition companies (SPACs) created in the U.S. during the years 2003-2008. We compare the characteristics of the 156 firms that chose to merge with SPACs to become a public company with the 794 firms that chose the traditional initial public offering (IPO) route. In addition, we analyze the changes in SPAC and IPO firms’ operational performance and stock market returns in the year following the floatation of new shares. This is the first study that focuses on the long-term financial and operational performance of SPAC firms. Operational performance of SPAC firms is significantly inferior to their industry peers and to contemporaneous IPO firms. SPAC firms carry more debt, are smaller, invest less, and have lower growth opportunities than the firms that conduct a conventional IPO. While excess stock returns for both IPO and SPAC firms are negative, they are substantially more negative for SPAC firms. In light of the substantially negative investment performance of SPACs that is uncovered in this study, investors should be wary of participating in SPAC transactions.
The Financial Review, 1999
This study examines the impact of stock split and stock dividend announcements made by closed end... more This study examines the impact of stock split and stock dividend announcements made by closed end mutual funds. We argue that the asymmetric information / signaling hypothesis does not apply to mutual funds. Therefore, any announcement effects must be attributed to other factors such as the optimal trading range hypothesis. We find that closed end funds react no differently than other f m s to stock distribution announcements; also, trading volume and turnover remain unchanged after closed end funds' ex-stock distribution days, while liquidity declines for other firms that distribute shares.
Review of Quantitative Finance and Accounting, 2008
Journal of Financial Markets, 1998
European Financial Management, 1998
Several studies in finance and accounting literature have measured security returns subsequent to... more Several studies in finance and accounting literature have measured security returns subsequent to some economic events over long horizons by cumulating the returns over time. It is well known that when single period returns are cumulated over long horizons, the bid-ask error in the measured returns could be very high. One way of estimating the bid-ask error is by simulation. This paper offers an alternative to the simulation approach and provides a closed form expression for the bid-ask error in cumulated returns. Our analytical approach has two main advantages over the traditional simulation method; first it quantifies the bias precisely and second, it is computationally simpler by several orders of magnitude.
International Business & Economics Research Journal (IBER), 2011
When raising equity capital through the recently opened Shanghai stock exchange, Chinese companie... more When raising equity capital through the recently opened Shanghai stock exchange, Chinese companies can issue stock to Chinese nationals (A shares) or to non-Chinese nationals (B shares). Between 1990 and 1996 40 issuances of B shares took place, often by firms that had previously issued A shares. These class B initial offerings are found to exhibit underpricing relative to first day trading prices, but to a much less severe degree than class A share IPOs. Indeed, the extent of underpricing of class B shares is found to be in line with underpricing in the U.S. This is surprising because for the most part these offerings are hybrids of IPOs and seasoned equity offerings, representing offerings of old (traded) claims in a new market setting. We examine a variety of standard explanations for underpricing of IPOs finding either no empirical support for the hypotheses, or that many of these explanations are not relevant to the characteristics of the Chinese market.Two features of Chinese ...
Analysis using the Exchange-Traded Funds This article examines the intraday returns and liquidity... more Analysis using the Exchange-Traded Funds This article examines the intraday returns and liquidity patterns of the Standard & Poor's Depositary Receipts (SPY) and the iShares Morgan Stanley Capital International Inc. (MSCI) Japan Index Fund (EWJ). These exchange traded funds seemingly have very different holdings namely, US stocks and Japanese stocks. We make several observations that suggest some commonality in returns and liquidity of these apparently different assets. First, there are intraday, daily and monthly patterns in measures of liquidity for both funds. Second, the measures of liquidity are correlated across these two assets. Third, there is evidence of intraday spillover in mean, volatility and depth from the SPY to the EWJ but daily spillover is not observed. Our study extends two evolving strands of the literature: one strand that deals with the integration of world markets in terms of returns behavior; and the other strand suggests that liquidity may have a system...
L'invention concerne des systemes, des procedes, et des produits de programme informatique de... more L'invention concerne des systemes, des procedes, et des produits de programme informatique destines a la modelisation de benefices futurs. Selon ledit procede, la modelisation de benefices futurs commence par la definition d'un taux de croissance du produit pour chaque segment de temps d'une periode de temps comportant plusieurs segments de temps. Un niveau d'incertitude du produit est ensuite determine pour chaque segment de temps. Une distribution de benefices est alors determinee a la fin de chaque segment de temps sur la base de taux de croissance et du niveau d'incertitude du segment de temps respectif. Finalement, une valeur de benefices est selectionnee a la fin de chaque segment de temps par selection aleatoire de chaque valeur de benefices sur la base d'une distribution de benefices respective, de maniere a modeliser des benefices futurs sur la periode de temps. Par consequent, ledit procede autorise des variations du taux de croissance et/ou du nive...
We propose an intuitive method that is algebraically equivalent to the Black-Scholes formula. The... more We propose an intuitive method that is algebraically equivalent to the Black-Scholes formula. The main advantage of this method is its simplicity and transparency. Further, the method implicitly adjusts the discount rate to account for the underlying risk. Our approach relies on information that is available in the traditional project analysis using the net present value technique. When Black-Scholes assumptions are compromised in real projects, our method may provide a better approximation of call value. Our preliminary results suggest that our method provides a reasonable approximation for both binomial and jump diffusion processes where the terminal distributions need not be log-normal.
Pittsburgh Journal of Environmental and Public Health Law, Mar 24, 2015
Boeing Company and holds twelve joint patents for valuation methods using Real Options, sponsored... more Boeing Company and holds twelve joint patents for valuation methods using Real Options, sponsored by the Boeing Company. Dr. Datar has published fifteen articles in several academic journals, including the
The Journal of Investing
The authors study the extent to which macroeconomic risk (i.e., the innovations in macroeconomic ... more The authors study the extent to which macroeconomic risk (i.e., the innovations in macroeconomic variables) drives the positive cross-sectional relationship between future stock returns and relative firm value, using such measures as the book-to-market ratio and earnings-to-price ratio. The authors provide evidence that value stocks are riskier than growth stocks. They show that value stocks have higher risk loadings than growth stocks on the growth rate of industrial production, the term premium, and the default premium. They also find that the risk loadings and risk premiums account for more than half of the average return spreads between value and growth portfolios. The evidence suggests that risk plays an important role in explaining the value effect, which has implications for value and growth investment.
Banking and Finance Review, Jun 29, 2012
ABSTRACT We study the fundamental, operational, and aftermarket characteristics of special purpos... more ABSTRACT We study the fundamental, operational, and aftermarket characteristics of special purpose acquisition companies (SPACs) created in the U.S. during the years 2003-2008. We compare the characteristics of the 156 firms that chose to merge with SPACs to become a public company with the 794 firms that chose the traditional initial public offering (IPO) route. In addition, we analyze the changes in SPAC and IPO firms’ operational performance and stock market returns in the year following the floatation of new shares. This is the first study that focuses on the long-term financial and operational performance of SPAC firms. Operational performance of SPAC firms is significantly inferior to their industry peers and to contemporaneous IPO firms. SPAC firms carry more debt, are smaller, invest less, and have lower growth opportunities than the firms that conduct a conventional IPO. While excess stock returns for both IPO and SPAC firms are negative, they are substantially more negative for SPAC firms. In light of the substantially negative investment performance of SPACs that is uncovered in this study, investors should be wary of participating in SPAC transactions.
The Financial Review, 1999
This study examines the impact of stock split and stock dividend announcements made by closed end... more This study examines the impact of stock split and stock dividend announcements made by closed end mutual funds. We argue that the asymmetric information / signaling hypothesis does not apply to mutual funds. Therefore, any announcement effects must be attributed to other factors such as the optimal trading range hypothesis. We find that closed end funds react no differently than other f m s to stock distribution announcements; also, trading volume and turnover remain unchanged after closed end funds' ex-stock distribution days, while liquidity declines for other firms that distribute shares.
Review of Quantitative Finance and Accounting, 2008