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Short Position (short + position)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

The pricing of High Yield Equity Notes

ACCOUNTING & FINANCE, Issue 3 2002
Paul J. Duncan
High Yield Equity Notes are securities that provide the noteholder with a cash flow stream that comprises a fixed yield and a short position in a European put option on the shares of an Australian company. This paper examines the pricing of these securities and finds apparent overpricing compared with expectations given standard pricing relationships. This apparent overpricing is consistent with the low transaction costs incurred by purchasers of High Yield Equity Notes. [source]

Stabilization Activities by Underwriters after Initial Public Offerings

THE JOURNAL OF FINANCE, Issue 3 2000
Reena Aggarwal
Prior research has assumed that underwriters post a stabilizing bid in the aftermarket. We find instead that aftermarket activities are less transparent and include stimulating demand through short covering and restricting supply by penalizing the flipping of shares. In more than half of IPOs, a short position of an average 10.75 percent of shares offered is covered in 22 transactions over 16.6 days in the aftermarket, resulting in a loss of 3.61 percent of underwriting fees. Underwriters manage price support activities by using a combination of aftermarket short covering, penalty bids, and the selective use of the overallotment option. [source]

Value-at-risk for long and short trading positions

JOURNAL OF APPLIED ECONOMETRICS, Issue 6 2003
Pierre Giot
In this paper we model Value-at-Risk (VaR) for daily asset returns using a collection of parametric univariate and multivariate models of the ARCH class based on the skewed Student distribution. We show that models that rely on a symmetric density distribution for the error term underperform with respect to skewed density models when the left and right tails of the distribution of returns must be modelled. Thus, VaR for traders having both long and short positions is not adequately modelled using usual normal or Student distributions. We suggest using an APARCH model based on the skewed Student distribution (combined with a time-varying correlation in the multivariate case) to fully take into account the fat left and right tails of the returns distribution. This allows for an adequate modelling of large returns defined on long and short trading positions. The performances of the univariate models are assessed on daily data for three international stock indexes and three US stocks of the Dow Jones index. In a second application, we consider a portfolio of three US stocks and model its long and short VaR using a multivariate skewed Student density. Copyright © 2003 John Wiley & Sons, Ltd. [source]

The disposition effect and investment performance in the futures market

THE JOURNAL OF FUTURES MARKETS, Issue 6 2009
Hyuk Choe
This study examines whether the disposition effect (DE), i.e., the tendency of investors to ride losses and realize gains, exists in the Korean stock index futures market. Using a unique database, we find strong evidence for the DE and explain this in terms of investor characteristics. We also investigate the effect that the disposition bias has on investment performance. There are four main findings. First, individual investors are much more susceptible to the DE than institutional and foreign investors. Second, sophistication and trading experience tend to reduce the DE. Third, the DE is stronger in long positions than in short positions. Finally, there is a negative relationship between the DE and investment performance. This result is consistent with Odean (1998, Journal of Finance, 53, 1775,1798), but contrasts with Locke and Mann (2005, Journal of Financial Economics, 76, 401,444) who find no evidence of any contemporaneous measurable costs associated with the DE. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:496,522, 2009 [source]

The Economics of IPO Stabilisation, Syndicates and Naked Shorts

EUROPEAN FINANCIAL MANAGEMENT, Issue 4 2007
Tim Jenkinson
G3; G24 Abstract Stabilisation is the bidding for and purchase of securities by an underwriter immediately after an offering for the purpose of preventing or retarding a fall in price. Stabilisation is price manipulation, but regulators allow it within strict limits , notably that stabilisation may not occur above the offer price. For legislators and market authorities, a false market is a price worth paying for an orderly market. This paper compares the rationale for regulators' allowing IPO stabilisation with its effects. It finds that stabilisation does have the intended effects, but that underwriters also seem to have other motives to stabilise, including favouring certain aftermarket sellers and enhancing their own reputation and profits. A puzzling aspect of stabilisation is why underwriters create ,naked short' positions which are loss-making to cover when, as is usual, the aftermarket price rises to a premium. We set up a model to show that the lead underwriter may profit from a naked short at the expense of the rest of the syndicate given the way commissions are apportioned between them. We argue that a naked short mitigates the misalignment of interests which stabilisation causes between issuer and lead underwriter, although it does so at the expense of the non-lead underwriters. [source]