67 results on '"Andy Naranjo"'
Search Results
2. Sovereign Overhang and the Integration of Equity and Credit Markets Around the World
- Author
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Jongsub Lee, Andy Naranjo, and Stace Sirmans
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History ,Polymers and Plastics ,Business and International Management ,Industrial and Manufacturing Engineering - Published
- 2023
3. Private Equity Real Estate Fund Performance: A Comparison to REITs and Open-End Core Funds
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Thomas R. Arnold, Andy Naranjo, and David C. Ling
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Economics and Econometrics ,Private equity real estate ,business.industry ,media_common.quotation_subject ,Equity (finance) ,Internal rate of return ,Real estate ,Monetary economics ,General Business, Management and Accounting ,Interest rate ,Private equity ,Accounting ,Real estate investment trust ,Alternative investment ,business ,Finance ,media_common - Abstract
We provide a comprehensive examination of the return performance of closed-end, private equity real estate (PERE) funds relative to the performance of listed real estate stocks (real estate investment trusts [REITs]) and the NCREIF ODCE fund index. We first match each PERE fund in our sample and its realized internal rate of return and equity multiple with the return that would have been earned by an LP investor on an investment in the designated benchmark over each fund’s investment horizon. Overall, we find that closed-end PERE funds have underperformed listed REITs. In contrast, we find similar overall performance between PERE and the NCREIF ODCE fund index. We also examine the determinants of the relative performance spread between the PERE funds and the equity REIT index and find that the spread widens with interest rate environment variables (Treasury yields and default spreads) and narrows with broad macroeconomic performance indicators (growth rate of GDP). TOPICS:Real assets/alternative investments/private equity, real estate, private equity, exchange-traded funds and applications, performance measurement Key Findings ▪ Closed-end PERE funds underperform listed REITs—both on average and by the percentages of individual funds. ▪ The performance spread widens with interest rate environment variables (Treasury yields and default spreads) and narrows with broad macroeconomic performance indicators (growth rate of GDP). ▪ The overall performance between PERE and the NCREIF ODCE fund index is similar.
- Published
- 2021
4. CDS Momentum: Slow-Moving Credit Ratings and Cross-Market Spillovers
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Stace Sirmans, Andy Naranjo, and Jongsub Lee
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Economics and Econometrics ,Credit rating ,Momentum (finance) ,Credit default swap ,Sharpe ratio ,Bond ,Financial crisis ,Portfolio ,Monetary economics ,Business ,Finance ,Stock (geology) - Abstract
We show that endogenous information signaling in the CDS market, together with sluggish updates on corporate credit ratings assigned by major rating agencies, creates anomalies such as return momentum within the CDS market and across CDS-to-stock return momentum. Using 5-year credit default swap (CDS) contracts on 1,247 U.S. firms from 2003 to 2011, a three-month formation and one-month holding period CDS momentum strategy yields 52 bps per month with a Sharpe ratio of 0.423. The performance is better for entities with lower credit ratings (83 bps per month), high CDS depth (80 bps per month), and during the financial crisis (97 bps per month). Furthermore, our cross-market tests show that by incorporating past CDS returns into the stock momentum portfolio formation process, traditional stock momentum strategies avoid abrupt losses during the crisis period and improve their performance by a net of 104 bps per month. This joint-market momentum strategy is particularly profitable for entities with high CDS depth. Importantly, we show that both within the CDS market and CDS-to-stock joint-market, momentum profits exist because CDS returns correctly anticipate future credit rating changes. This mechanism completely differentiates CDS momentum from bond return momentum.
- Published
- 2021
5. There is no place like home: Information asymmetries, local asset concentration, and portfolio returns
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Andy Naranjo, David C. Ling, and Benjamin Scheick
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Economics and Econometrics ,Information asymmetry ,Financial economics ,Accounting ,Economics ,Portfolio ,Asset (economics) ,Finance - Published
- 2020
6. The Need for Speed: Internet Infrastructure Location and Real Asset Values
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David C. Ling, Andy Naranjo, and Benjamin Scheick
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- 2022
7. Catering and Return Manipulation in Private Equity
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Blake Jackson, David C. Ling, and Andy Naranjo
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History ,Polymers and Plastics ,Business and International Management ,Industrial and Manufacturing Engineering - Published
- 2022
8. What are the odds? Underdog brands are consumer favorites
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Richard Borghesi, Andy Naranjo, and Michael Ryngaert
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Economics and Econometrics ,Finance - Published
- 2022
9. Guest editorial
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Andy Naranjo
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Business, Management and Accounting (miscellaneous) ,Finance - Published
- 2021
10. Private Equity Real Estate Funds: Returns, Risk Exposures, and Persistence
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Andy Naranjo, Thomas R. Arnold, and David C. Ling
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010407 polymers ,Economics and Econometrics ,Private equity real estate ,business.industry ,media_common.quotation_subject ,Internal rate of return ,Real estate ,Monetary economics ,01 natural sciences ,General Business, Management and Accounting ,Gross domestic product ,0104 chemical sciences ,Interest rate ,03 medical and health sciences ,0302 clinical medicine ,Private equity ,Market risk ,030220 oncology & carcinogenesis ,Accounting ,Capital asset pricing model ,Business ,Finance ,media_common - Abstract
Using performance data through the fourth quarter of 2017 on 467 funds that came to market between 2000 and 2013, the authors of this article first examine the unconditional performance of closed-end, private equity real estate (PERE) funds over time and across various fund characteristics. The performance metrics they use are the internal rate of return, the multiple on invested capital, and a proxy for the public market equivalent. Using conditional sorts, as well as regression procedures with asset pricing specifications, the authors estimate the exposure of PERE performance to fund-level characteristics and macroeconomic environment risk factors and find that both significantly affect PERE performance. More specifically, they find that PERE performance is positively related to fund size, gross domestic product growth changes, private market real estate returns, interest rate changes, and default spread changes and is negatively related to vintage volume. International funds dramatically underperformed relative to domestic funds during our sample period. The authors also find that fund performance is positively associated with the performance of prior funds raised by the same PERE firm. TOPICS:Statistical methods, real estate, risk management, private equity Key Findings • Fund characteristics, market risks, and macroeconomic risk factors significantly predict PERE performance. • Fund performance is positively associated with the performance of prior funds raised by the same PERE sponsor. • Fund performance is negatively associated with vintage volume.
- Published
- 2019
11. Corporate internationalization, subsidiary locations, and the cost of equity capital
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Atanas Mihov and Andy Naranjo
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Economics and Econometrics ,Strategy and Management ,05 social sciences ,Financial market ,Diversification (finance) ,Financial system ,Cost of equity ,International business ,General Business, Management and Accounting ,Internationalization ,Cost of capital ,Multinational corporation ,Management of Technology and Innovation ,0502 economics and business ,Financial crisis ,Economics ,050211 marketing ,Business and International Management ,050203 business & management - Abstract
This study examines the relationship between corporate internationalization and the cost of equity capital. We find that international diversification reduces the cost of equity. The diversification benefits are particularly strong during the 2008 financial crisis and for financially constrained firms. We also find that market-specific factors serve as important channels through which the corporate internationalization effects amplify or attenuate. Overall, our study provides support for theories that multinational companies perform valuable diversification functions to investors in a world with segmented and imperfect financial markets.
- Published
- 2019
12. When do CDS spreads lead? Rating events, private entities, and firm-specific information flows
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Guner Velioglu, Andy Naranjo, and Jongsub Lee
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Economics and Econometrics ,050208 finance ,Credit default swap ,Strategy and Management ,Bond ,Specific-information ,05 social sciences ,Financial market ,Monetary economics ,Price discovery ,Credit rating ,Accounting ,0502 economics and business ,Business ,050207 economics ,Finance ,Stock (geology) ,Credit risk - Abstract
We find that credit default swap (CDS) spreads contribute significantly to price discovery in financial markets when firm-specific credit information is prominent. Using 3,470 S&P rating notch and watch changes for US public and private entities from 2001–2013, we show that CDS prices contain unique firm credit risk information that is not captured by the prices of other related securities such as stocks and bonds of the same firm. Credit information unidirectionally flows from CDS to bonds, particularly for private entities whose stocks are not concurrently trading in markets. We further find that CDS returns significantly predict stock returns, particularly their idiosyncratic components.
- Published
- 2018
13. Asset Location, Timing Ability and the Cross-Section of Commercial Real Estate Returns
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Benjamin Scheick, Andy Naranjo, and David C. Ling
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Economics and Econometrics ,050208 finance ,Financial economics ,05 social sciences ,Time allocation ,Equity (finance) ,Real estate ,Asset location ,Large sample ,Accounting ,Real estate investment trust ,0502 economics and business ,Econometrics ,Economics ,Portfolio ,050207 economics ,Finance - Abstract
This study examines the sensitivity of equity REIT returns to time‐varying MSA allocations of REIT property portfolios. Using a large sample of individual commercial property holdings, we find significant cross‐sectional and time variation in REIT geographic exposures and the ability of these exposures to explain the cross‐section of REIT returns. We further find evidence consistent with REIT managers being able, on average, to time allocation decisions ahead of MSA outperformance. This effect is most prevalent in non‐gateway markets, varies significantly across MSAs and over time, and is concentrated in financially flexible firms with a more diversified geographic portfolio.
- Published
- 2018
14. Waiting to Be Called: The Impact of Manager Discretion and Dry Powder on Private Equity Real Estate Returns
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Thomas R. Arnold, David C. Ling, and Andy Naranjo
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Finance ,Fund of funds ,010407 polymers ,Economics and Econometrics ,Management fee ,050208 finance ,Private equity real estate ,business.industry ,05 social sciences ,Assets under management ,Capital call ,01 natural sciences ,General Business, Management and Accounting ,0104 chemical sciences ,Cost of capital ,Accounting ,Capital (economics) ,0502 economics and business ,Economics ,Capital employed ,business - Abstract
In this article, the authors investigate the performance sensitivity of private equity real estate (PERE) funds to capital deployment speeds, investment horizons, management fees, and investor opportunity costs from uncalled capital. The authors first provide a series of simulation scenarios demonstrating the significant effects of these factors on PERE performance and then use PERE fund data to empirically investigate their performance effects. Using a comprehensive dataset from Cambridge Associates covering a large sample of 497 funds sponsored by 201 managers with aggregate assets under management of $383.9 billion from 2000–2013, the authors find that capital deployment speeds vary significantly across funds and over time and that very little of this variation is incorporated in traditional performance metrics. Importantly, the dilutive effects of management fees are positively related to the time over which capital is deployed and negatively related to the percentage of net capital called from investors and deployed by the fund manager. The authors also model the significant opportunity cost investors incur when reserving funds for uncertain capital calls. This cost of maintaining dry powder for the manager is ignored in reported performance metrics. Taken together, the authors’ results show the importance of accounting for capital deployment speeds, investment horizons, management fees, and uncalled capital in determining PERE fund performance.
- Published
- 2017
15. REIT Leverage and Return Performance: Keep Your Eye on the Target
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Andy Naranjo, David C. Ling, and Emanuela Giacomini
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Economics and Econometrics ,050208 finance ,Leverage (finance) ,Capital structure ,media_common.quotation_subject ,05 social sciences ,Risk–return spectrum ,Monetary economics ,Accounting ,Debt ,Real estate investment trust ,0502 economics and business ,Economics ,050207 economics ,Finance ,media_common - Abstract
This article examines U.S. REIT leverage decisions and their effects on risk and return. We find that the speed at which REITs close the gap between current debt levels and target leverage levels is 17% annually. REITs that are highly levered relative to the average REIT tend to underperform REITs with less debt in their capital structure. However, REITs that are highly levered relative to their target leverage tend to perform better on a risk-adjusted basis than under-levered REITs. Taken together, our results show that REIT leverage has significant return performance effects conditional on deviations from target leverage.
- Published
- 2016
16. Geographic Portfolio Allocations, Property Selection and Performance Attribution in Public and Private Real Estate Markets
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Benjamin Scheick, Andy Naranjo, and David C. Ling
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Finance ,Economics and Econometrics ,050208 finance ,Apartment ,business.industry ,Financial economics ,05 social sciences ,Performance attribution ,Real estate ,Corporate Real Estate ,Accounting ,Real estate investment trust ,0502 economics and business ,Economics ,Portfolio ,050207 economics ,Total return ,business ,Location - Abstract
This paper examines the effects of geographic portfolio concentrations on the return performance of U.S. public REITs versus private commercial real estate over the 1996–2013 time period. We document significant cross-sectional and temporal differences in the geographic concentration of property holdings across exchange-listed public and private real estate markets. Adjusting private market returns for differences in geographic concentrations with public markets, we find that core private market performance falls. This performance drop arises primarily from lower geographically adjusted retail performance. In contrast, geographically adjusted industrial and office property performance rises slightly while apartment performance remains relatively unchanged. Using return performance attribution analysis, we find that the geographic allocation effect constitutes only a small portion of the total return difference between listed and private market returns, whereas individual property selection within geographic locations explains, in part, the documented outperformance of listed versus private real estate market returns. This result also suggests the decision to allocate to a geographic location is relatively less important than the manager's ability to select and manage properties within that location. This article is protected by copyright. All rights reserved
- Published
- 2016
17. Search Costs, Behavioral Biases, and Information Intermediary Effects
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David C. Ling, Milena Petrova, and Andy Naranjo
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Economics and Econometrics ,050208 finance ,media_common.quotation_subject ,05 social sciences ,Real estate ,Urban Studies ,Microeconomics ,Product (business) ,Information asymmetry ,Incentive ,Accounting ,0502 economics and business ,Search cost ,Economics ,ComputingMilieux_COMPUTERSANDSOCIETY ,Price level ,Quality (business) ,050207 economics ,Database transaction ,Finance ,media_common - Abstract
In many markets, buyers, sellers, and their agents have differential information about the quality of heterogeneous assets. We study negotiated transaction prices in the commercial real estate market, which is characterized by heterogeneous assets, illiquidity, and highly segmented local markets, all of which increase the importance of asymmetric information in negotiated pricing outcomes. Using 114,588 industrial, multi-family and office sale transactions that occurred during 1997–2011, we document that distant commercial real estate buyers pay, on average, premiums of 4 % to 15 % relative to local buyers, controlling for individual property characteristics as well as time fixed-effects. We also examine the extent to which the sources of these observed premiums are a product of higher search costs/information asymmetry problems associated with distance (search cost channel) or a result of reference-dependence preference/anchoring based on the price levels in the investors’ local market (behavioral biases channel). Our results suggest the observed price premiums are explained by distant investors who face higher search costs and are at an information disadvantage compared to investors located in closer proximity to the property. In contrast, anchoring plays a more muted role in explaining observed premiums. The use of an intermediary (broker) increases, on average, the acquisition prices of buyers and decreases the disposition prices of sellers by 3 % to 8 %. This result is consistent with the incentive real estate agents have to convince sellers to dispose of their properties too quickly and to convince buyers to search less and therefore pay higher prices.
- Published
- 2016
18. Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk
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Stace Sirmans, Andy Naranjo, and Jongsub Lee
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Economics and Econometrics ,050208 finance ,Credit default swap ,05 social sciences ,Financial risk management ,Financial system ,Information networks ,Sovereignty ,Property rights ,Accounting ,0502 economics and business ,Asset (economics) ,Business ,050207 economics ,Finance ,Credit risk - Abstract
Using five-year credit default swap (CDS) spreads on 2,364 companies in 54 countries from 2004 to 2011, we find that firms exposed to stronger property rights through their foreign asset positions (institutional channel) and firms cross-listed on exchanges with stricter disclosure requirements (informational channel) reduce their CDS spreads by 40 bps for a one-standard-deviation increase in their exposure to the two channels. These channels capture effects beyond those associated with firm- and country-level fundamentals. Overall, we find that firm-level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.
- Published
- 2016
19. Research Note—Cloud Computing Spot Pricing Dynamics: Latency and Limits to Arbitrage
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Andy Naranjo, Zhi Li, and Hsing Kenneth Cheng
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050208 finance ,Information Systems and Management ,Computer Networks and Communications ,05 social sciences ,02 engineering and technology ,Library and Information Sciences ,Relative price ,Management Information Systems ,Error correction model ,Microeconomics ,020204 information systems ,0502 economics and business ,Dynamic pricing ,0202 electrical engineering, electronic engineering, information engineering ,Arbitrage pricing theory ,Econometrics ,Economics ,Arbitrage ,Rational pricing ,Latency (engineering) ,Limits to arbitrage ,Information Systems - Abstract
This study examines cloud computing spot pricing dynamics and the influence of latency on those pricing dynamics. Using the Amazon Elastic Compute Cloud U.S. East and West market spot instance pricing and latency intraday data from April 9, 2010, to May 22, 2011, we find considerable time variation in spot instance prices, and prices are often persistently higher in the West. Bivariate vector autoregressive model results show that within-market autoregressive pricing effects are larger than across-market effects. We also document that over 70% of the relative price discovery occurs in the East market. Our regression results further show that East–West latency differentials have a significantly positive effect on East–West pricing differentials. Latency creates a dynamic pricing wedge that widens or narrows conditional on the latency differentials. Using an error correction model, the speed of adjustment from long-run pricing convergence errors causes the short-run price differential to narrow, but the adjustment does not completely offset the price differential.
- Published
- 2016
20. Empleo de bisfosfonatos en mujeres postmenopáusicas con artritis reumatoide: resultados de un estudio multicéntrico
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Sigrid Talaverano, Fátima Álvarez, Antonio Naranjo, Gran Canaria, Javier Nóvoa-Medina, Soledad Ojeda, and Andy Naranjo
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Gynecology ,medicine.medical_specialty ,Postmenopausal women ,Single visit ,business.industry ,Endocrinology, Diabetes and Metabolism ,medicine ,In patient ,business ,Surgery - Abstract
espanolObjetivos: El objetivo del estudio fue analizar el empleo de bisfosfonatos en mujeres con artritis reumatoide (AR) de las Islas Canarias. Material y metodos: Estudio observacional multicentrico en el que se incluyeron mujeres con una edad igual o superior a 50 anos. En una unica visita se recogieron variables demograficas y de la AR, antecedente de fractura por fragilidad, uso de corticoides, realizacion de densitometria osea (DXA) y tratamiento actual con bisfosfonatos. Se empleo una herramienta FRAX® simplificada y se aplico la recomendacion de profilaxis de osteoporosis por corticoides del American College of Rheumatology (ACR). Resultados: Se incluyeron 192 mujeres con edad promedio de 62 anos. Un total de 91 (48%) pacientes recibian corticoides; 17 de ellas (9%) habian sufrido fractura; a 123 se les habia realizado DXA (66%); y 52 (28%) tomaban bisfosfonatos (el 70% de las pacientes con osteoporosis o fractura y el 45% de aque- llas con criterios de profilaxis de osteoporosis por corticoides). Los factores asociados de manera significativa con el empleo de bisfosfonatos fueron la edad, la duracion de la enfermedad, el cuestionario de capacidad funcional HAQ, el riesgo de fractura determinado por FRAX®, el tratamiento con corticoides, el antecedente de fractura y la realizacion previa de DXA. En el estudio multivariante solo se asociaron de manera significativa la DXA (p=0,03) y el antecedente de fractura (p=0,02). Conclusiones: En las mujeres postmenopausicas con AR de las Islas Canarias la prescripcion de bisfosfonatos podria adecuarse mejor a las guias, especialmente en pacientes que reciben tratamiento con corticoides. EnglishObjective: The objective of this study was to analyse the use of bisphosphonates in women with rheumatoid arthritis (RA) in the Canary Islands. Material and methods: This multicentre observational study included women aged 50 years or over. At a single visit, demographic variables and those relating to the RA, history of fragility fractures, use of corticoids, performance of bone densitometry (DXA) and current treatment with bisphosphonates were recorded. The simplified FRAX ® tool was used and the recommendations of the American College of Rheumatology (ACR) for the prophylaxis of osteoporosis with corticoids were applied. Results: 192 women were included, with an average age of 62 years. A total of 91 (48%) patients were receiving corticoids; 17 of these (9%) had suffered a fracture; 123 (66%) had had a DXA; and 52 (28%) were taking bisphosphonates (70% of the patients with osteoporosis or fracture and 45% of those with criteria for prophylactic use of corticoids for osteoporosis). Those factors having a significant association with the use of bisphosphonates were age, duration of the disease, the HAQ functional capacity questionnaire, the risk of fracture determined by FRAX®, treatment with corticoids, history of fracture and the previous performance of DXA. In the multivariate study only the DXA (p=0.03) and history of fracture (p=0.02) were significantly associated. Conclusions: In postmenopausal women from the Canary Islands with RA the prescription of bisphosphonates could conform better to the guidelines, especially in patients receiving treatment with corticoids.
- Published
- 2015
21. Returns and Information Transmission Dynamics in Public and Private Real Estate Markets
- Author
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David C. Ling and Andy Naranjo
- Subjects
Economics and Econometrics ,Management fee ,Financial economics ,Transparency (market) ,Accounting ,Real estate investment trust ,Economics ,Capital asset pricing model ,Real estate ,Cash flow ,Finance ,Purchasing ,Market liquidity - Abstract
This paper examines U.S. public and private commercial real estate returns at the aggregate level and by the four major property types over the 1994–2012 time period. Returns are carefully adjusted for differences between public and private markets in financial leverage, property type focus and management fees. Unconditionally, we find that passive portfolios of unlevered core real estate investment trusts (REITs) outperformed their private market benchmark by 49 basis points (annualized) over the 1994–2012 sample period. Our baseline vector autoregression results suggest that REIT returns do not embed additional commercial real-estate-specific information useful in predicting private market returns. These results strongly suggest that equity REIT returns react to fundamental (latent) asset pricing information more quickly than private market returns given their greater liquidity and price revelation. REITs therefore serve as a fundamental information transmission channel to private market returns when asset pricing variables are omitted. Investors can hold ownership positions in commercial real estate (CRE) both through direct private investment and public real estate securities. Purchasing individual properties directly in the private market gives investors complete control of the asset: who leases it, who manages it, how much debt financing is used and when it is sold. With publicly traded real estate securities, individuals andinstitutionsinvestcapitalinarealestatecompanywhich,inturn,purchases, manages and holds title to the real estate. In contrast to private real estate markets, exchange-traded real estate securities provide investors with a relatively high degree of liquidity and transparency and relatively low transaction costs. Nevertheless, returns in both private and public CRE markets should be driven, at least in the long run, by the net cash flows derived from leasing space to tenants in local property markets.
- Published
- 2015
22. Leverage and Returns: A Cross-Country Analysis of Public Real Estate Markets
- Author
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David C. Ling, Emanuela Giacomini, and Andy Naranjo
- Subjects
Economics and Econometrics ,Leverage (finance) ,Financial economics ,Leverage, REITs ,Real estate ,Share price ,Market liquidity ,Capitalization rate ,Urban Studies ,Settore SECS-P/11 - ECONOMIA DEGLI INTERMEDIARI FINANZIARI ,LEVERAGE ,Accounting ,Real estate investment trust ,Economics ,Capital asset pricing model ,Capital market ,REITs ,Finance - Abstract
The theoretical literature suggests a positive relation between financial leverage and asset returns, but the empirical evidence on this effect is mixed. We examine leverage effects in public real estate markets across eight countries with active public real estate markets. Cross-country public real estate markets provide an interesting testing ground given the significant use of leverage in real estate markets, the variation in REIT capital structures within and across countries, and the cross-country differences in liquidity, ownership, economic, institutional, and capital market structures. After carefully isolating leverage effects in firm-level returns, we find that leverage has a significant effect on returns both unconditionally and conditionally using standard asset pricing models. In addition, greater use of leverage during the 2007–2008 REIT crisis period is associated with larger share price declines.
- Published
- 2014
23. REIT leverage and return performance. Keep your eye on the target
- Author
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David C. Ling, Emanuela Giacomini, and Andy Naranjo
- Subjects
Settore SECS-P/11 - Economia degli Intermediari Finanziari ,Leverage (finance) ,Capital structure ,Financial economics ,media_common.quotation_subject ,Risk–return spectrum ,REIT, Leverage ,Real estate investment trust ,Debt ,Econometrics ,Business ,Investment performance ,Leverage ,media_common ,REIT - Abstract
This paper examines U.S. REIT leverage decisions and their effects on risk and return. We find that REITs are highly levered relative to industrial firms, with an average market leverage of 46 percent over our 1990-2012 sample period. Using partial adjustment models, we further find that the speed of adjustment at which REITs close the gap between current debt levels and target leverage levels is 17 percent annually, with over-levered REITs tending to adjust more quickly to their target leverage ratios than under-levered REITs. We also find that REITs that are highly levered relative to the average REIT tend to underperform REITs with less debt in their capital structure. However, REITs that are highly levered relative to their target leverage tend to perform better on a risk-adjusted basis than under-levered REITs. Taken together, our results show that REIT leverage has significant return performance effects conditional on deviations from target leverage.
- Published
- 2017
24. There's No Place Like Home: Local Asset Concentration, Information Asymmetries and Commercial Real Estate Returns
- Author
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David C. Ling, Benjamin Scheick, and Andy Naranjo
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Identification (information) ,Information asymmetry ,Financial economics ,education ,Economics ,Capital asset pricing model ,Portfolio ,Asset (economics) ,Robustness (economics) ,health care economics and organizations ,Communication channel ,Large sample - Abstract
We provide robust evidence showing local information plays a significant role in local asset concentrations and return outperformance. Using a unique setting with significant cross-market information asymmetries and large sample of individual commercial property holdings, we find property portfolio managers concentrate an economically significant portion of their portfolios in their headquarter location. We further document a significant positive relation between local concentration and portfolio returns in markets where information asymmetry is most severe. Through numerous robustness and loan-level identification tests, we further confirm an information-based channel of asset concentration and return effects that is distinct from risk-based or behavioral explanations.
- Published
- 2017
25. Going Abroad in a Risky World: Cash Flow Diversification, Institutional Frictions, and Corporate Leverage
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Jongsub Lee, Leming Lin, and Andy Naranjo
- Subjects
Leverage (finance) ,Sample average ,Political risk ,Multinational corporation ,Debt ,media_common.quotation_subject ,Diversification (finance) ,Financial system ,Cash flow ,Business ,Country risk ,media_common - Abstract
Using novel data on detailed country-level sales exposures of U.S. multinational companies (MNCs) and unique identification strategies, we show that international cash flow diversification enhances firm debt capacity, but the magnitude of this effect varies with the innate country institutional frictions to which the firm is exposed. We find that a one standard deviation increase in MNC across-country cash flow diversification results in a 5 percent increase in firm leverage from its sample average. However, across-country institutional quality and tax frictions reduce the MNC geographic diversification benefit by 27 to 55 percent from the debt capacity enhancement without such frictions.
- Published
- 2017
26. When Do CDS Spreads Lead? Rating Events, Private Entities, and Firm-Specific Information Flows
- Author
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Jongsub Lee, Andy Naranjo, and Guner Velioglu
- Subjects
Credit default swap index ,Credit rating ,Bond ,Financial market ,Bond credit rating ,Credit derivative ,Financial system ,Business ,Price discovery ,Credit risk - Abstract
We find that CDS spreads contribute significantly to price discovery in financial markets when firm-specific credit information is prominent. Using 3,470 S&P rating notch and watch changes for U.S. public and private entities from 2001-2013, we show that CDS prices contain unique firm credit risk information that is not captured by the prices of other related securities such as stock and bonds of the same firm. Credit information unidirectionally flows from CDS to bonds, particularly for private entities whose stocks are not concurrently trading in markets. We further find that CDS returns significantly predict stock returns, particularly their idiosyncratic components.
- Published
- 2017
27. Corporate socially responsible investments: CEO altruism, reputation, and shareholder interests
- Author
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Joel F. Houston, Andy Naranjo, and Richard Borghesi
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Economics and Econometrics ,Free cash flow ,Strategy and Management ,Corporate governance ,media_common.quotation_subject ,Shareholder value ,Market economy ,Shareholder ,Goodwill ,Corporate social responsibility ,Business ,Business and International Management ,Social responsibility ,Finance ,Reputation ,media_common - Abstract
Corporate managers often invest in activities that are deemed to be socially responsible. In some instances, these investments enhance shareholder value. However, in other cases, altruistic managers or managers who privately benefit from the positive attention arising from these activities may choose to make socially responsible investments even if they are not value enhancing. Given this backdrop, we investigate the various factors that motivate firm managers to make socially responsible investments. We find that larger firms, firms with greater free cash flow, and higher advertising outlays demonstrate higher levels of corporate social responsibility (CSR). We also find that companies with stronger institutional ownership are less likely to invest in CSR — which casts doubt on the argument that these investments are designed to promote shareholder value. Consistent with the literature that explores how CEO personal attributes influence corporate decision making, we find that female CEOs, younger CEOs, and managers who donate to both Republican and Democratic parties are significantly more likely to invest in CSR. This latter result suggests that CSR investments may not be driven solely for altruistic reasons, but instead may be part of a broader strategy to create goodwill and/or help maintain good political relations. Finally, we find a strong positive connection between the level of media scrutiny surrounding the firm and its CEO, and the level of CSR investment. This finding suggests that media attention helps induce firms to make socially responsible investments.
- Published
- 2014
28. Investor Sentiment, Limits to Arbitrage and Private Market Returns
- Author
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Benjamin Scheick, David C. Ling, and Andy Naranjo
- Subjects
Economics and Econometrics ,Empirical research ,restrict ,Financial economics ,Accounting ,Private market ,Economics ,Real estate ,Arbitrage ,Heuristics ,Limits to arbitrage ,Finance ,Bounded rationality - Abstract
This article examines the relation between investor sentiment and returns in private markets. Relative to more liquid public markets, private investment markets exhibit significant limits to arbitrage that restrict an investor’s ability to counteract mispricing. Using vector autoregressive models, we find a positive and economically significant relation between investor sentiment and subsequent private market returns. We provide further long-horizon regression evidence suggesting that private commercial real estate markets are susceptible to prolonged periods of sentiment-induced mispricing as the inability to short-sell in periods of overvaluation and restricted access to credit in periods of undervaluation prevents arbitrageurs from entering the market. A growing behavioral approach in the economics and finance literature recognizes the bounded rationality and psychological biases of investors who often rely on and are influenced by computational shortcuts, heuristics, frame dependence and intuition when making decisions in a complicated and uncertain world with market frictions (e.g., Kahneman, Slovic and Tversky 1982, Barberis and Thaler 2003). As a result, changes in asset prices may be driven by more than changes in market fundamentals. 1 Furthermore, these temporary price deviations can persist if there are significant limits to arbitrage as shown theoretically by De Long et al. (1990) and Shleifer and Vishny (1997), among others. Recent empirical research suggests this movement away from
- Published
- 2013
29. Introduction to the Special Issue
- Author
-
Wayne Archer, David Ling, and Andy Naranjo
- Subjects
Urban Studies ,Economics and Econometrics ,Accounting ,Finance - Published
- 2013
30. Texas Department of Transportation Fly Ash Database and the Development of Chemical Composition–Based Fly Ash Alkali-Silica Reaction Durability Index
- Author
-
Elizabeth Lukefahr, Andy Naranjo, and Lianxiang Du
- Subjects
Materials science ,Waste management ,Oxide ,Building and Construction ,Durability ,chemistry.chemical_compound ,chemistry ,Mechanics of Materials ,Fly ash ,Correlation analysis ,Alkali–silica reaction ,General Materials Science ,Statistical analysis ,Chemical composition ,Civil and Structural Engineering - Abstract
Chemical compositions of approximately 5,500 fly ash samples from 36 power plants inside and outside Texas, compiled by the Texas Department of Transportation (TxDOT) over 18 years, were statistically analyzed in this study. The variations of oxide contents and their correlations were calculated and compared. Oxide contents of Class F fly ashes were found to be more variable than Class C fly ashes. In general, CaO and MgO contents were higher in Class C fly ashes than in Class F fly ashes, whereas the latter had higher SiO2 content. Other oxide contents of the two classes of fly ashes were comparable. Then, to demonstrate the potential beneficial use of chemical composition information of fly ash, an alkali-silica reaction (ASR) durability index was proposed to predict the comparative performance of fly ash in mitigating ASR in concrete. The index value was calculated using SiO2, Fe2O3, Al2O3, CaO, and equivalent alkali contents. Previously published research on the use of fly ash in mitigating AS...
- Published
- 2013
31. Information, uncertainty, and behavioral effects: Evidence from abnormal returns around real estate investment trust earnings announcements
- Author
-
Frank Gyamfi-Yeboah, Andy Naranjo, and David C. Ling
- Subjects
Earnings response coefficient ,Economics and Econometrics ,Earnings ,Financial economics ,Equity (finance) ,Information processing ,Real estate ,Monetary economics ,Post-earnings-announcement drift ,Real estate investment trust ,Economics ,Market sentiment ,health care economics and organizations ,Finance - Abstract
In this study, we examine the influence of real estate market sentiment, market-level uncertainty, and REIT-level uncertainty on cumulative abnormal earnings announcement returns over the 1995–2009 time period. We first document the relative coverage of analysts' earnings forecasts on U.S. REITs, as well as REITs from several countries (i.e., Australia, Belgium, Canada, France, Hong Kong, Japan, the Netherlands, and UK). We show that coverage outside of the U.S. is limited, and we consequently focus our analysis on U.S. REITs. We find strong evidence that earnings announcements contain pricing relevant information, with positive (negative) earnings surprises relative to analysts' forecasts resulting in significantly positive (negative) abnormal returns around the announcement date. Consistent with the findings from the broader equity market literature, we find limited evidence of a pre-announcement drift in the cumulative abnormal returns. However, in sharp contrast to the existing equity literature, we find no evidence of a post-earnings announcement drift in our aggregate sample or when the sample is restricted to the largest negative surprises. We find evidence of a post-earnings announcement drift for only the largest positive earnings surprises. These results are consistent with REIT returns more quickly impounding information relative to the broader equity market, in part because of the parallel private real estate market and because of the U.S. REIT structure and information environment. Finally, in our conditional regression analysis of cumulative abnormal returns, we find that real estate investor sentiment, market-wide uncertainty, and firm-level uncertainty significantly affect the magnitude of abnormal announcement returns and also influence the effect of unexpected earnings on abnormal returns.
- Published
- 2012
32. Related Securities and the Cross-Section of Stock Return Momentum: Evidence From Credit Default Swaps (CDS)
- Author
-
Andy Naranjo, Stace Sirmans, and Jongsub Lee
- Subjects
Credit default swap ,Stock exchange ,Financial economics ,Sharpe ratio ,Contrarian ,Business ,Restricted stock ,Limits to arbitrage ,Market maker ,Stock (geology) - Abstract
We document that related securities linked through firm fundamentals provide important cross-market return performance information. Using 1,074 firms during 2003-2014, we find stock return momentum for “joint” winners/losers whose past stock and CDS returns are in congruence, whereas return reversal for “disjoint” entities whose past stock returns disagree with their past CDS returns. Stock strategies combining momentum on joint winners/losers with contrarian on disjoint winners/losers outperform traditional stock momentum by 132 bps per month with an annualized Sharpe ratio of 1.11. Relative pricing of credit across related securities explains, in part, the cross-section of stock return momentum.
- Published
- 2016
33. Asset Location, Timing Ability, and the Cross-Section of Commercial Real Estate Returns
- Author
-
David C. Ling, Andy Naranjo, and Benjamin Scheick
- Subjects
Market capitalization ,Property value ,Real estate investment trust ,Equity (finance) ,Econometrics ,Real estate ,Business ,Asset location ,Market timing ,Large sample - Abstract
This study examines the sensitivity of equity REIT returns to the time-varying MSA allocations of REIT underlying property portfolios. Using a large sample of individual commercial property holdings, we find significant cross-sectional and time variation in REIT geographic exposures and the ability of these exposures to explain the cross-section of REIT returns. Importantly, the pattern of MSA exposure effects changes quickly as local market information is incorporated into property values both across MSAs and over time. We further find that REIT managers are able, on average, to both identify MSAs that will outperform in the following year and overcome the costs and delays associated with increasing allocations to these MSAs. The ability to time entry into high performing markets is concentrated in well diversified REITs and those with large market capitalizations and high employee counts. Firms with a larger platform and experience owning and operating properties in multiple markets are better positioned to quickly act on investment opportunities they identify in major MSAs.
- Published
- 2016
34. Derivative usage and firm value: The influence of agency costs and monitoring problems
- Author
-
Larry Fauver and Andy Naranjo
- Subjects
Economics and Econometrics ,Actuarial science ,Strategy and Management ,Corporate governance ,Enterprise value ,Agency cost ,Behavioral economics ,Standard deviation ,Information asymmetry ,Econometrics ,Economics ,Endogeneity ,Business and International Management ,Finance ,Valuation (finance) - Abstract
Using derivative usage data on over 1746 firms headquartered in the U.S. during the 1991 through 2000 time period, we find that firms with greater agency and monitoring problems (i.e., firms that are less transparent, face greater agency costs, have weaker corporate governance, larger information asymmetry problems, and overall poorer monitoring) exhibit a negative association between Tobin's Q and derivative usage. The negative valuation effect is also economically significant with an impact of -8.4% on Tobin's Q from a one standard deviation change in the firm monitoring index. The results are robust to alternative specifications, time varying estimates, econometric procedures that correct for potential clustering of errors, endogeneity problems, and sample selection biases among other robustness checks discussed in the paper. We conclude that derivative usage has a negative impact on firm value in firms with greater agency and monitoring problems.
- Published
- 2010
35. Real Estate Ownership, Leasing Intensity, and Value: Do Stock Returns Reflect a Firm’s Real Estate Holdings?
- Author
-
David C. Ling, Andy Naranjo, and Michael D. Ryngaert
- Subjects
Economics and Econometrics ,Real property ,Cost approach ,Real estate ,Financial system ,Monetary economics ,Corporate Real Estate ,Capitalization rate ,Urban Studies ,Accounting ,Real estate investment trust ,Price on application ,Business ,health care economics and organizations ,Finance ,Income approach - Abstract
Little is known about the effects of real estate ownership and leasing on the stock return characteristics of public firms. In this study, we first examine the sensitivity of retail firm returns to a real estate factor over the period 1998–2008. The retail industry is chosen because of the significant use of real estate in a typical retail firm’s production function. Consistent with our expectations, retail stocks exhibit positive real estate risk exposure, even after controlling for sensitivity to general market risk as well as other standard risk factors. The second part of our analysis examines whether the intensity of real estate ownership and the use of off-balance operating leases to finance real property holdings are reflected in the market and real estate betas of retail stocks. We find that greater use of off-balance sheet operating leases is associated with higher market betas. In fact, the use of operating leases appears to have a larger impact on sensitivity to market risk than does the use of on-balance sheet debt. Our findings also confirm our hypothesis that real estate intensive firms display significantly greater exposure to a real estate factor. Moreover, our results strongly suggest that investors are fully aware of the risk associated with off-balance sheet operating leases.
- Published
- 2010
36. Risk factor and industry effects in the cross-country comovement of momentum returns
- Author
-
Andy Naranjo and Burt Porter
- Subjects
Economics and Econometrics ,Momentum (finance) ,Cross country ,Standard Risk ,Financial economics ,Econometrics ,Economics ,Capital asset pricing model ,Profitability index ,Risk factor (finance) ,Finance ,Factor analysis - Abstract
This paper examines the sources of cross-country comovement of momentum returns over the 1975–2004 period. Using data on more than 17,000 individual firms across 100 industries from 40 countries, we document the profitability of country-neutral individual firm, industry, and industry-adjusted return momentum. We show that country-neutral momentum returns are significantly correlated across countries, the correlation is time-varying, and that comovement among industries cannot explain the comovement of country-neutral momentum returns. However, we find that standard risk factor models do explain a significant portion of the cross-country comovement of momentum returns, even though they do not explain average momentum returns.
- Published
- 2010
37. Institutional Capital Flows and Return Dynamics in Private Commercial Real Estate Markets
- Author
-
Jeffrey D. Fisher, Andy Naranjo, and David C. Ling
- Subjects
Finance ,Economics and Econometrics ,Core business ,Apartment ,business.industry ,Institutional investor ,Real estate ,Monetary economics ,Metropolitan area ,Accounting ,Capital (economics) ,Economics ,National level ,Capital flows ,business - Abstract
This article examines the short- and long-run dynamics among institutional capital flows and returns in private real estate markets. At the aggregate U.S. level, we find evidence that lagged institutional flows significantly influence subsequent returns. When disaggregating by property type at the national level, we find that capital flows predict subsequent returns in the apartment and office sectors, but not in the retail and industrial markets. At the metropolitan level, we find that the flows help explain subsequent returns in a limited number of core business statistical areas (CBSAs), although these CBSAs collectively represent about 30% of institutional capital. We find no evidence that institutional returns are predictive of future capital flows at the national or CBSA level, suggesting that institutional investors are not chasing returns.
- Published
- 2009
38. Split bond ratings and rating migration
- Author
-
Lei Zhou, Andy Naranjo, and Miles Livingston
- Subjects
Economics and Econometrics ,Actuarial science ,Bond ,Statistics ,Economics ,Bond credit rating ,Transition matrices ,Finance - Abstract
This paper examines the relationships between split ratings and ratings migration. We find that bonds with split ratings are more likely to have future rating changes. A one-notch (more-than-one-notch) split rating increases the probability of rating change within one year of initial issuance by about 3% (6%). Furthermore, we find that about 30% of split rated bonds have their two ratings converge after four years of initial issuance. The rating convergence tapers off after three years, and the rating agency with a higher (lower) initial rating generally maintains a higher (lower) rating in subsequent years if the two ratings do not converge. We also show that rating transition estimation can be improved by taking into consideration split ratings. We find that one-year rating transition matrices are significantly different between non-letter-split rated bonds and letter-split rated bonds, and we show that the difference has an economically significant impact on the pricing of credit spread options and VaR-based risk management models. Overall, our results suggest that split ratings contain important information about subsequent rating changes.
- Published
- 2008
39. Commercial Real Estate Valuation: Fundamentals Versus Investor Sentiment
- Author
-
Jim Clayton, David C. Ling, and Andy Naranjo
- Subjects
Economics and Econometrics ,Equity risk ,Financial economics ,business.industry ,Real estate ,Monetary economics ,Investment (macroeconomics) ,Capitalization rate ,Urban Studies ,Renting ,Real estate investment trust ,Accounting ,Economics ,Capital asset pricing model ,business ,Limits to arbitrage ,Finance ,Financial services ,Valuation (finance) - Abstract
This paper investigates the role of fundamentals and investor sentiment in commercial real estate valuation. In real estate markets, heterogeneous properties trade in illiquid, highly segmented and informationally inefficient local markets. Moreover, the inability to short sell private real estate restricts the ability of sophisticated traders to enter the market and eliminate mispricing. These characteristics would seem to render private real estate markets highly susceptible to sentiment-induced mispricing. Using error correction models to carefully model potential lags in the adjustment process, this paper extends previous work on cap rate dynamics by examining the extent to which fundamentals and investor sentiment help to explain the time-series variation in national-level cap rates. We find evidence that investor sentiment impacts pricing, even after controlling for changes in expected rental growth, equity risk premiums, T-bond yields, and lagged adjustments from long run equilibrium.
- Published
- 2008
40. Value, Survival, and the Evolution of Firm Organizational Structure
- Author
-
Andy Naranjo, Richard Borghesi, and Joel F. Houston
- Subjects
Product (business) ,Economics and Econometrics ,Accounting ,Enterprise value ,Control (management) ,Value (economics) ,Organizational structure ,Business ,Monetary economics ,Diversification (marketing strategy) ,Proxy (statistics) ,Weighted arithmetic mean ,Finance - Abstract
We examine corporate product diversification as a dynamic process. Consistent with prior research, we find that the average diversification discount is about 8% when using the standard valuemultiple approach. However we find that a significantportion of the diversification discount arises from benchmark comparisons of value ratios of mature firms with those of very young firms that are more likely to have high value multiples. The magnitude of the diversification discount falls by 15% to 30% when we control for firm age. We also show that diversification reduces the mortality rate offirms, and we provide evidence that mature firms pursue diversification strategies partly as a means to exit stagnant business segments for industries that are more highly valued. Since the 1990s, the relation between corporate product diversification and firm value has received considerable attention. Researchers have shown that firms diversified along product lines trade at a discount on average, compared to focused firms. Consequently, many researchers and practitioners argue that firms should focus their business lines, but a large number of firms remain diversified and many others continue to diversify.' Firms typically begin as focused entities and, as they age, they often expand their business scope, in many cases as a survival response to market pressures. In addition to its impact on the likelihood of diversification, firm age is also likely to affect the measured value of diversification. In the standard Berger and Ofek (1995) imputed-value approach, a weighted average of pure-play market multiples are used to calculate the implied value of diversified firms. However, these multiples may be affected by factors other than the firm's organizational structure. Firm age, for example, may be a useful proxy for growth opportunities and other factors that are likely to have a profound effect on the market multiples of individual firms. Therefore, the estimated value of diversification is likely to vary over time with changes in the average age of publicly traded firms. Indeed, Fama and French (2004) demonstrate that the percentage of new firms and the characteristics of new lists have changed substantially since 1973. In this paper, we examine the influence that firm age has on organizational structure and on the observed average diversification discount, and the influence of organizational structure on firm survival. We demonstrate that 15% to 30% of the estimated diversification discount is a firm age discount and that diversified firms are less likely than focused firms to go out of business.
- Published
- 2007
41. Including emerging markets in international momentum investment strategies
- Author
-
Andy Naranjo and Burt Porter
- Subjects
Economics and Econometrics ,Investment strategy ,Financial economics ,Diversification (finance) ,Portfolio ,Trading strategy ,Profitability index ,Business ,Business and International Management ,Portfolio investment ,Emerging markets - Abstract
Momentum return investment strategies that diversify across countries provide lower portfolio standard deviations and/or increased expected returns. These diversification benefits are larger when adding emerging markets than when adding developed markets, and they are larger than would be suggested by diversifying with long-only portfolios. Using data on almost 16,000 firms from 22 developed and 18 emerging markets over the 1990–2004 period, we confirm the profitability of momentum trading strategies in both developed and emerging markets and document the diversification benefits of including emerging markets in an international momentum portfolio investment strategy.
- Published
- 2007
42. MSA Geographic Allocations, Property Selection, and Performance Attribution in Public and Private Real Estate Markets
- Author
-
David C. Ling, Andy Naranjo, and Benjamin Scheick
- Subjects
Finance ,Apartment ,business.industry ,Financial economics ,Real estate investment trust ,Portfolio ,Performance attribution ,Real estate ,Corporate Real Estate ,business ,Location ,Total return - Abstract
This paper examines the effects of geographic portfolio concentration on the return performance of U.S. public REITs versus private commercial real estate over the 1996-2013 time period. We document significant cross-sectional and temporal differences in the geographic concentration of property holdings across public and private real estate markets. Adjusting private market returns for differences in geographic concentrations with public markets, we find that core private market performance falls. This performance drop arises primarily from lower geographically adjusted retail performance. In contrast, geographically adjusted industrial and office property performance rises slightly while apartment performance remains relatively unchanged. Using return performance attribution analysis, we find that the geographic allocation effect constitutes only a small portion of the total return difference between public and private market returns, whereas individual property selection within geographic locations explains, in part, the documented outperformance of public versus private real estate market returns. This result also suggests that the decision to allocate to a geographic location is relatively less important than the manager‘s ability to select and manage properties within that location.
- Published
- 2015
43. Dedicated REIT Mutual Fund Flows and REIT Performance
- Author
-
Andy Naranjo and David C. Ling
- Subjects
Economics and Econometrics ,business.industry ,Financial economics ,Variance (accounting) ,Vector autoregression ,Urban Studies ,Accounting ,Real estate investment trust ,Economics ,Econometrics ,Capital flows ,business ,Finance ,Mutual fund - Abstract
This study examines the effects of weekly and monthly capital flows into the dedicated REIT mutual fund sector on aggregate REIT returns and, simultaneously, the effects of industry-level REIT returns on subsequent REIT mutual fund flows. The dynamic relation between REIT capital flows and returns is estimated using vector autoregression (VAR) techniques. Unlike static regression techniques, our dynamic model produces estimates of the short-run relationships, long-run relationships, impulse response functions, and forecast variance decompositions. We find evidence that REIT mutual fund flows are positively and significantly related to prior returns, while prior REIT mutual fund flows do not significantly influence REIT returns. However, contemporaneous flows do appear to have an initial positive effect, which is partially reversed one period later. The positive contemporaneous effect, however, is the result of unexpected REIT mutual fund flows, while the expected portion is insignificant.
- Published
- 2006
44. Cross-country evidence on the value of corporate industrial and international diversification
- Author
-
Andy Naranjo, Larry Fauver, and Joel F. Houston
- Subjects
Economics and Econometrics ,Cross country ,business.industry ,Strategy and Management ,Enterprise value ,Diversification (finance) ,Economics ,International trade ,Monetary economics ,Business and International Management ,business ,Domestic market ,Finance - Abstract
We provide evidence on the value of industrial and international diversification for more than 3000 firms from Germany, the U.K., and the U.S. Consistent with prior studies, we find that industrial diversification reduces firm value in the U.K. and the U.S. Furthermore, similar to the recent findings of Denis et al. [J. Finance 57 (2002)], we find that U.S. multinationals trade at a discount relative to firms operating only in the domestic market. This result is robust to different benchmarks used to measure the value of diversification. By contrast, we find that international diversification has no effect on the value of firms headquartered in either Germany or the U.K.
- Published
- 2004
45. The Dynamics of REIT Capital Flows and Returns
- Author
-
and Andy Naranjo and David C. Ling
- Subjects
Economics and Econometrics ,Financial economics ,Accounting ,Real estate investment trust ,Equity (finance) ,Econometrics ,Economics ,Capital flows ,Finance ,Vector autoregression - Abstract
This study examines the effects of capital flows into the REIT sector on REIT returns and, simultaneously, the effects of REIT returns on subsequent REIT capital flows. The dynamic relation between REIT capital flows and returns is estimated using vector autoregression (VAR) techniques. Unlike static regression techniques, our dynamic model produces estimates of the short-run relationships, long-run relationships, impulse response functions and forecast variance decompositions. We find evidence that REIT equity flows are significantly positively related to the prior quarter's flows and negatively related to flows from two quarters ago. The evidence on the responsiveness of flows to prior returns is time-period specific. In the important post-1992 subperiod, REIT returns do not significantly affect REIT flows in any of the VAR model specifications. Simultaneously, REIT capital flows do appear to have a significant influence on equity REIT returns.
- Published
- 2003
46. [Untitled]
- Author
-
Alden L. Toevs and Andy Naranjo
- Subjects
Mortgage yield ,Economics and Econometrics ,Monetary economics ,Prepayment of loan ,Maturity (finance) ,Urban Studies ,Yield spread ,Government-sponsored enterprise ,Loan ,Accounting ,Securitization ,Business ,Volatility (finance) ,Finance - Abstract
In this paper, we investigate the effects of GSE (government sponsored enterprise) activities on mortgage yield spreads and volatility. Using various regression procedures (i.e., vector error correction (VEC) and GARCH models) and controlling for default and prepayment risk, we find that securitizations and purchases of mortgages by GSEs reduce mortgage yield spreads and volatility. In particular, we find that the yield spread between conforming and 10-year constant maturity treasury (CMT) rates decreases by 8.0 bp per $1billion increase in the level of GSE securitizations. Similarly, if GSEs increase mortgage purchases, the yield spread decreases 10.5 bp per $1billion increase of purchases. In addition, we hypothesize and find that GSE activities have a spillover effect to the non-conforming mortgage market; via investor substitutions, GSE purchases and securitizations of conforming loans reduce non-conforming loan rates. Thus, the measured influence of GSE activities is biased downward when measured using the spread of non-conforming loans over conforming loan rates. We also find that purchases of mortgages by GSEs significantly reduce mortgage yield volatility. In sum, our findings show that GSE activities reduce and stabilize mortgage market rates.
- Published
- 2002
47. Internet Appendix for 'Exodus from Sovereign Risk:Global Asset and Information Networks in the Pricing of Corporate Credit Risk'
- Author
-
Andy Naranjo, Stace Sirmans, and Jongsub Lee
- Subjects
Finance ,Actuarial science ,Cross listing ,business.industry ,Property rights ,Multinational corporation ,Financial risk management ,The Internet ,Asset (economics) ,Country risk ,business ,Credit risk - Abstract
This Internet Appendix provides supplementary results to the main analyses in "Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk" by Lee, Naranjo, and Sirmans (2014).The paper to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=2492204
- Published
- 2014
48. Borrowing Beyond Borders: Foreign Assets, Lender Choice, and Loan Pricing in the Syndicated Bank Loan Market
- Author
-
Andy Naranjo, Jennifer Itzkowitz, and Joel F. Houston
- Subjects
040101 forestry ,Economics and Econometrics ,050208 finance ,Cross-collateralization ,Strategy and Management ,05 social sciences ,Loan market ,Borrowing base ,Financial system ,04 agricultural and veterinary sciences ,Monetary economics ,Foreign direct investment ,Boundary (real estate) ,Syndicated loan ,International banking ,Multinational corporation ,Loan ,Capital (economics) ,0502 economics and business ,0401 agriculture, forestry, and fisheries ,Business ,Asset (economics) ,Business and International Management ,Non-conforming loan ,Finance - Abstract
This paper examines the ability of firms to overcome cross-country borrowing barriers through foreign asset connections. We find that firm-level foreign assets are an important mechanism in reducing the boundary between borrowers and lenders and thereby enhancing capital access in the syndicated loan market. Our results suggest that firms with foreign assets are more likely to select a foreign lead lender and that the corresponding loans have better pricing terms. We also find that the institutional and regulatory environment heavily influences the choice of lender, and that borrowers are more likely to partner with bankers with whom they share common cultural and language ties. These results lend support to the hypothesis that foreign presence helps reduce information barriers that may arise across borders.
- Published
- 2014
49. Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk
- Author
-
Stace Sirmans, Andy Naranjo, and Jongsub Lee
- Subjects
Finance ,Credit default swap ,Sovereignty ,Cross listing ,Property rights ,Multinational corporation ,business.industry ,Economics ,Asset (economics) ,Monetary economics ,Country risk ,business ,Credit risk - Abstract
Using 5-year credit default swap (CDS) spreads on 2,364 companies in 54 countries during 2004-2011, we show firms exposed to better property rights institutions through their foreign asset positions (Institutional channel) and firms whose stocks are cross-listed on exchanges with stricter disclosure requirements (Informational channel) reduce their CDS spreads by 40 bps for a one standard deviation increase in their exposure on the two channels. These channels capture distinct effects beyond those associated with firm- and country-level fundamentals. Overall, we find that firm-level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2492206
- Published
- 2014
50. Time Variation of Ex-Dividend Day Stock Returns and Corporate Dividend Capture: A Reexamination
- Author
-
Mahendrarajah Nimalendran, Andy Naranjo, and Michael D. Ryngaert
- Subjects
Economics and Econometrics ,Incentive ,Financial economics ,Accounting ,Tax advantage ,Dividend yield ,Dividend payout ratio ,Economics ,Dividend ,Dividend policy ,Finance ,Stock (geology) ,Corporate tax - Abstract
This paper documents some empirical facts about ex-day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture. We find that average abnormal ex-dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex-day returns during the negotiated commission rates era is consistent with corporate tax-based dividend capture. Ex-day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax-based dividend capture. Copyright The American Finance Association 2000.
- Published
- 2000
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