Wednesday Link Dump

We've had guests at the Unknown Household the last two days, but they left today. So, it's back to work, cycling, and blogging.

I've been working on a fairly intensive project that requires me to merge data from five different databases, and two of the databases are pretty large (13 and 60 gigabytes in size, respectively). I'd done much of the work in the last couple of weeks, and then realized that I was using the wrong date to merge things by. I redid some of my programs that had accessed the different databases individually so that they now pulled all the data in one pass. But it took 9 hours to run. It reminds me of the old days in grad school programming on a mainframe when I'd submit the program as I left for the night and would let it run overnight.

But enough wonkery. It's time to clean out my files. And that means a Link Dump:

Hedge Funds and Private Equity

It's been a rough couple of weeks for hedge funds that use statistical arbitrage and merger arbitrage strategies. Abnormal Returns has it's usual great roundup of links on the topic.

You know it's a private equity bubble when you see this

Investing

Here are two pieces on insider trading: The New York Times discusses recent research by Najat Seyhun (the "academic god" of insider trading research) on his new approach to weighting insider trading data. His conclusion is that insiders aren't nearly a bearish as we'd thought. And here the Wall Street Journal (online subscription required) reports that executives have been pretty bullish following the recent market correction.

A good example of a stock spam scam (say that three times fast if you can).

Academic Research and Academia

The reputational effects for Directors from Financial Fraud by Fich and Shivdasani

CXO Advisory Blog reports on research by James Doran, David Peterson and Colby Wright on academics views on market efficiency. They find that while most finance professors believe that markets are semi-strong form efficient, about 20% use strategies that seem to fly in the face of that view.

Humor

Raging bull (HT: The Big Picture)

Slate has a good primer on How to speak hedgie that could have been written by Ambrose Bierce.

That's enough for now. Back to torturing data.

Wednesday (Birthday) Link Dump

Sometimes having kids can be hazardous to your health. Today's my 49th birthday (in another year I suppose I'll start getting those AARP mailings), and I faked being asleep this morning when the kids came up to wake me up. So, the 8 year-old Unknown Son puts his mouth to my ear and shouts "WAKE UP". This was followed by the classic:

Happy Birthday to you
Happy Birthday to you
You Look Like a Monkey
And Smell Like A Zoo

Now that my ears have stopped ringing, I figure it's time for a Link Dump (it's been a while, and I've been taking a bit of a slacker's vacation from blogging). So, in no particular order:

Barry Ritholtz at The Big Picture has been finding and posting some pretty cool visuals (thanks - they'll be used in my classes this fall) on the slicing and dicing of mortgages, here and here.

Businessweek.com highlights a new study by Westphal and Clement that finds that top executives try to temper analysts negative reports by currying favor. Not surprising, really, but still a good read.

According to a study by Christopher Clifford of Arizona State university, large block (> 5%) investments by activist hedge funds result in significant operational improvements by target companies.

Joe Carter at Evangelical Outpost lists and explains Five Logical Fallacies
in part 3 of his "How Not To Argue" series.

Here's a very cool YouTube video of a guy repairing high voltage wires from a helicopter. I'll take my current job, thank you very much.

The Wall Street Journal (online subscription required) reports on the sub-par performance of long-short and market-neutral funds.

Enough blogging - back to work.

Friday Link Dump

It's back in the saddle again in the Unknown Household. The Unknown Kids and Unknown Wife are at the beach, and I'm here working on research (ah, to be tenured). Since stuff has been piling up in my feed reader, it's time for a link dump to get rid of all the things I didn't post over my vacation:

Investing
The DK report has a good piece on market timing indicators. I question their usefulness, but it's interesting nonetheless.

The Aleph Blog is fast becoming one of my favorite sites. In this piece, it presents
twenty five ways to reduce investment risk. It also has nice piece explaining the Fed Model and Price-Book/ROE analysis.

Bespoke Investing has been researching patterns in analyst upgrades and downgrades over the last few years.

The NY Times reports on the rising popularity of 130/30 funds.

Here's a macabre but very interesting example of financial engineering - "Death bonds". The actual industry-preferred term is "life settlement backed securities". They are securities backed by the death benefits of life insurance polities. I think they're a good thing.

Academic Research

Keeping up with the Jones also seems to happen in the investing world. The NY Times reports on research by Illinois professors Zoran Ivkovich and Scott Weisbenner. They find that your investment choices are affected by what your neighbors are doing.

How does politics affect the stock market? According to this study by Tomasz Wisniewski titled "Can Political Factors Explain the Behavior of Stock Prices Beyond the Standard Present Value Models?", stocks tend to be overvalued (undervalued) when Democrats (Republicans) hold the Presidency, and high (low) when Presidential approval ratings are high (low). (HT: CXO Advisory Group)


Private Equity and Hedge Funds
In what's probably not a good sign for the PE market, there are increasing numbers of financing deals that are getting postponed or cancelled. TheDeal.com reports.

Marketbeat lets us in on a technique activist investors use to bring more pressure on target firms. They increase their voting power over and above their actual stock holdings levels by using swaps and other derivatives.

Here's a new term (for me at least) - Pier Loans, compliments of Calculated Risk.

Enough for now. Back to work.

Saturday Link Dump

Along with riding more frequently (did a fairly hard 20 miler today), I'm trying to empty my bloglines account at least every couple of days. So, it's time for a link dump:

Many investors know that expense ratios on mutual funds are important. IndexUniverse reports on academic research (by Edelen, Evans, and Kadlec) that shows how trading costs can be an even bigger drag on performance -- another good argument in favor of indexing.

A little while ago I posted some information on Investment Banking Compensation. Here's some related stuff (from Institutional Investor) on what hedge Fund analysts make.

While not as glamorous as the hedge-fund world, according to the Washington Post, accounting graduates are also raking in pretty good salaries. I know we don't have much trouble placing our undergraduate accounting majors here at unknown University.

The Mises Economics Blog relays some of Ambrose Bierce's (author of the Devil's Dictionary) best political definitions.

Do women talk more than men? According to this study published in the journal Science and mentioned by the New York Times, probably not. However, the study has some flaws.

Vegreville came up with rules to follow if you want to be a loser.

That's enough for now - Bloglines in empty, and work awaits.

Monday Link Dump

It's time to clean out my bloglines account, so here we go with today's Link Dump:

Abnormal Returns has a nice collection of links on options as an asset class, and in a related piece, CXO Advisory Group looks at the returns to writing index put options.

Bloomberg reports on the increasing use of options as a venue for illegal insider trades.

The Contrarian Perspective dissects one of the oldest scams around-- the "Pump and Dump".

The New York Times reports on people with an interesting habit-- abusing the Nigerian 411 Scamsters.

And in our painful Japanese video of the day, Craig Newmark links to a game show I think I'll pass on. Ouch.

That's all for today, folks. Time to do something productive before my coauthors start hounding me.

Link Dump

It's been a while, so I thought I'd do a short Link Dump to clean out my Bloglines account:

• CXO Advisory Group has don w number of interesting pieces. Here they highlight on research showing that institutional investors aren't really all that good at hiring and firing money managers. In This piece, they review research on the value of Return on Invested Capital (ROIC) as a factor that explains stock returns
• Both DealBook and Going Private discuss an op-ed piece by Steven Rattner on a likely bad ending to the private equity boom
• Want to know more about cognitive biases? Barry Ritholtz points to a Wikipedia piece that lists the 26 most studied and widely accepted cognitive biases.
• Need to send a large file (and you or the person you're sending it to uses an email service that can't handle it)? Use DropSend or YouSendIt. The first service requires a small bit of personal info, but also offers some storage.
  

That's enough for know - the June cleaning is now done.

Saturday Link Dump

Now that the summer's in full swing, it's time to empty out the old Bloglines account and do a link dump. I've been letting things build up, so this is a good opportunity to clean it out while SAS chews through the overly-large data set I'm torturing. So, without further ado, here are some links for your avoidance-behavior use:

Investing and Markets
CXO Advisory Group has posted some interesting pieces lately. In one, they report on a study by David Blitz and Pim van Vliet titled The Volatility Effect: Lower Risk without Lower Return. The study finds evidence that investors overpay for the most volatile stocks (i.e. they underperform on a risk-adjusted basis).

In another piece, they highlight work by Alex Edmans titled "Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices". Edmans finds that companies on Fortune magazine's annual list of the "100 Best Companies to Work for in America" outperform the market.

And finally, they discuss work by Ben Marshall, Rochester Cahan and Jared Cahan titled Does Intraday Technical Analysis in the U.S. Equity Market Have Value?. Their answer seems to be a pretty resounding "no" - they use some pretty rigorous statistically analysis (bootstrapping tests) to examine some 7,846 trading rules from five rule families (Filter, Moving Average, Support and Resistance, Channel Breakouts, and On-Balance Volume). They find that (after adjusting for what's called "data snooping bias") that none of the rules are profitable.

Hal Varian discusses how "A company's stock often does better than the investor who buys the stock".

Dealbreaker discusses issues surrounding insider trading in the credit default swap market.

Private Equity
Bargeron, Schlingemann, Stulz, and Zutter (a group of college professors, not a law firm) recently conducted a study on the differences in gains to target shareholders for takeovers by private vs. publicly owned firms. They find that private acquirers leave less on the table (i.e. the targets get a lower announcement return when the acquirer is a private company). The answer seems to be that private firms' ownership structures lead to better decisions.

Academia
Craig Newmark links to a great paper on student evaluations. It's specifically geared towards law school, but it's pretty generalizable, and has a lot of citations to prior work on factors that seem to drive evaluations.

Humor
How not to defend your dissertation (HT: Greg Mankiw)

We hold this to be self evident - the Trunk Monkey is hilarious.

Mixed bag
Nobel Laureate Vernon Smith talks about Asperger's Syndrome (HT: Craig Newmark).

Sunday Link Dump - More on PE and Hedge Funds

The semester continues its march to the last day of classes (I have a total of 7 teaching days left until finals). So, I'm in my office on a Sunday getting ready for the final push. I leave for the Eastern Finance Association Meetings in New Orleans Wednesday after class, so I have to get a bit ahead of things (I still haven't written my quiz for my sub, or finished my presentation, or even started on my discussants comments).

So while I toil away, here are three links (again, on hedge funds and PE firms - I seem to be in a rut) to keep you busy:

All About Alpha interviews Tom Schneeweis of UMASS on hedge funds, alpha, and risk. Here's the money quote: "I really do believe that most hedge fund managers want to believe they are wizards. When in reality, all they are doing is accepting certain types of risk. "

According to this Fortune magazine article on the distribution of PE firms, the majority of PE funds are well under$1 Billion in size - in fact, the average fund (once the top ten are excluded) has an average size of $180 million, if you don't count the top 10 firms.

Here's an overview of hedge funds (in PDF format), compliments of Michael Covel.

Enough blogging - my grading beckons.

Thursday Link Dump

The last couple of posts have been humorous (or at least, in some cases, tasteless), so I guess it's time for a link dump.

Private Equity & Hedge Funds
First off, there are a troika of pieces on PE-bond relationships: Accrued Interest breaks down the implications of takeovers for bondholders, Floyd Norris at NY Times discusses how debt is used to fund payouts in PE deals, and Marketwatch relates the woes of bondholders in LBOs.

Via FT Alphaville: activist hedge funds are using the Web to convince shareholders to their way of thinking.

According to this Financial Times piece, Hedge Funds are taking positions in bankrupt firms.

Curious about who the big dogs are in the PE worked? LBO wire reports.

Investments
Felix Salmon discusses "Debt arbitrage". He's been writing some great pieces lately - time to update my links.

Mark Hurlbert at presents the latest insider buy/sell ratios - they're still mildly bullish.

New York Magazine has a (fairly typical) piece on how top executives are making TOOOO MUUUCCCHHH MONEY (both coming and going).

MarketBeat reports on "accelerated share repurchases.

Barry Ritholtz at The Big Picture presents a bit of a history lesson and examines Historical Bear Market Contractions

CXO Advisory Group reports on some interesting pieces. One describes historical patterns of the value premium (the additional return earned by high book/market firms over their low book/market peers), and another examines factor models and finds that "A model combining market return, liquidity and coskewness ... explains individual stock returns in 35 out of 40 years.

Humor
Joe Carter has his latest installment of the Yak Shaving Razor series up at Evangelical Outpost.

Craig Newmark links to a corporate finance version of the old "you have two cows" joke.

Enough blogging - I've cleared out my bloglines account, and it's time to get back to something productive.

Monday Link Dump

It's been a hectic week, so I haven't posted much. As a result, there's a number of interesting pieces that have been sitting in my bloglines account (some for a while). So, it's time for another link dump:

Investing:

We were just talking in class about the "neglected firm" effect, where firms with less (or no) analyst coverage earn higher risk-adjusted returns. CXO Advisory Group just highlighted a paper on a variant of this phenomenon. In "Media Coverage and the Cross-Section of Stock Returns", Fang and Peress find "stocks with no media coverage outperform stocks with high media coverage, rebalanced monthly, by 0.23% per month (3% per year) after adjusting for market, size, book-to-market, momentum and liquidity factors.

And in another piece, CXO reports on a paper by Hur and Sharma titled "Stock Market Returns and Size Premium". This paper indicates that the "Size Premium" (where smaller firms earn abnormal risk-adjusted returns is driven by down markets. In other words, small firms earn a "fair" risk adjusted return in up markets, buy have positive risk adjusted returns in down markets.

Private Equity and Corporate Finance:

The Wall Street Journal reports on the increasing trend where companies use leveraged recapitalizations as "do it yourself LBOs" in "How Borrowing Yields Dividends For Many Firms" (note: online subscription required).

For those who can't get enough of the world of Private Equity, there's a blog called BlogginBuyouts (HT: Abnormal Returns)

Fun:

David Tufte at VoluntaryXchange links to the Movie Cliche of The Day

Enough bloggery - back to work.

Thursday Link Dump

Since I took yesterday off to see a matinee, today is a research day, with lots of statistical and computing goodness in store (mmmmm, data).

So, here are some links to keep you busy while I torture data:

With the election cycle starting to heat up a bit, I'll probably be logging more often about prediction markets. Slate.com has a short guide to them if you're interested.

According to a UBS Investment Bank study, acquisitions of high market/book targets perform better.

Joe Carter at Evangelical Outpost has posted the latest installment of his Yak Shaving Razor Series.

For you movie buffs, Craig Newmark has a transcript of Danny Devito's classic speech as Larry The Liquidator in Other people's Money.

Dan Melson at Searchlight Crusade has written an excellent guide to shopping of a mortgage. Read it - the advice on his blog has saved me thousands of dollars. Hey - I may be a finance professor, but he lives with this stuff every day.

Enough bloggery. Back to work.

Friday/Spring Break Link Dump

It's the last day at Unknown University before Spring Break. I have one class to teach at 11, but it's a minimal prep, since it's on Modern Portfolio Theory, a topic that takes little prep (I've taught it many times). In addition, it's snowing outside to beat the band, so the over-and-under bet for attendance in today's class (it's at 11, so the little darlings can sleep in) is about at 50%.

I realized I haven't been doing as many Link Dumps as usual lately, so here's one to keep you busy while I get something productive done:

Private Equity:

Equity Private at Going Private gives a response to the folks who are predicting the imminent demise of the PE party. The link's about a week old, but since the same story keeps popping up, you an just reread it periodically.

And in a somewhat related piece, Business Week highlights some smaller PE shops that don't generate the same publicity as the big boys. They nevertheless make very nice returns for their investors by focusing on smaller deals.

Investing & Markets:

Barry Ritholtz of The Big Picture and Davig Gaffen of MarketBeat comment on the role buybacks play in market returns.

CXO Advisory Group highlights three studies by Keith Anderson and Chris Brooks on approaches to adjusting P/E ratios. They find that the value-growth premium ( the amount by which low P/E outperform high P/E stocks) widens when they sort by adjusted P/E ratios rather than by "raw" ones.

10B-1 plans are intended to be essentially "insider stock sales on autopilot." They're a way for insiders to sell shares on a prearranged schedule and thereby avoid the taint of "informed trading". BusinessWeek reports on a recent study by Stanford Accounting Professor Alan Jagolinzer that provides evidence that insiders use these plans to exploit private information after all. It seems the SEC is now investigating these plans.

Brad Setser at REG Monitor links to a primer on some of the CDO and CDS (i.e. collateralized debt securities) products.

Trader Mike provides a list of short/inverse ETF's. For the uninitiated, these are essentially short (and sometime) leveraged bets on common indexes.

Miscellaneous:

It's always great when you can find a freeware program that's useful. But navigating some freeware sites can be a pain. Sound Money Tips links to a couple of helpful and well organized sites.

Craig Newmark found a link that provides origins of the names of rock bands.

Enough bloggery for now. It's back to editing a paper. We hope to get it done and submitted this weekend. Then it's on to newer projects. In particular, I've got loads of analyst forecast data to torture.

It's like Torquemada said: "Give me an hour with a man in a room and I can make him confess to anything".

Update: Unknown University just cancelled classes because of the snow. Woo Hoo!

Friday Link Dump

It's the weekend, so it's time to clear out my Bloglines account. Here are the things that have been accumulating for the last few days (in no particular order):

The Wall Street Journal has a piece today on how ETFs affect the float (shares outstanding) for smaller stocks.

The New York Times highlights the SEC's Operation Spamalot, aimed at investment scam spam.

In travel-related pieces, Sound Money Tips discusses travel-related search engines, and Craig Newmark links to 7 Amazing Travel Secrets.

Joe Carter at Evangelical Outpost has put up the latest installment of his Yak Shaving Razor Series

Finally, Abnormal Returns has a collection of links on the theme that correlations in asset classes increase in times of market drops.

That's enough for now - time to kick back with some colleagues at the local tavern to celebrate the end of the week.