Next week the VGSF is organizing THREE seminars - one on MONDAY, June 12th, and two on TUESDAY, June 13th.
Prof. David Feldman from the University of New South Wales is going to talk about "The CAPM Relation for Inefficient Portfolios" on Monday, June 12th, from 15:30 to 17:00 at the BWZ, Seminar Room 1, Bruennerstr. 72,1210 Wien.
On TUESDAY, June 13th, two seminars by Kai Li, University of British Columbia, and Martijn Cremers, University of Yale, are scheduled. Kai is going to talk about "Corporate Boards and the Leverage and Debt Maturity Choices". The paper presented by Martijn has to be still announced. This double seminar takes place from 16:00 to 19:00 in Lecture Room 2 at the Institute for Advanced Studies (Stumpergasse 56, 1060 Wien).
Information regarding the further schedule of the VGSF research seminar can be found at www.vgsf.ac.at!
Best, Michael Halling
Abstract of "The CAPM Relation for Inefficient Portfolios" ********************************************************** Following empirical evidence that - contrary to CAPM predictions - found little relation between expected rates of return and betas, the relation has been investigated extensively. Roll and Ross (1994) (RR) and Kandel and Stambaugh (1995) are seminal works. In this context, within a Markowitz world (finite number of nonredundant risky securities with finite first two moments), we generally and simply write the theoretical CAPM relation for inefficient (non-frontier) portfolios (CAPMI). We demonstrate that the CAPMI is a well-specified alternative for the widely implemented misspecified CAPM for use with inefficient portfolios. We identify three sources for this misspecification: i) the omission of an addend in the pricing relation, ii) the use of an incorrect risk premiums/beta coefficients (due to of the existence of infinitely many "zero beta" portfolios at all expected returns), and iii) the use of unadjusted betas. We suggest the use of incomplete information equilibria to overcome unobservability of moments of returns. Our results are robust to regressions that produce positive explanatory beta power, including extensions such as multiperiod, multifactor, and the conditioning on time and various attributes.
Abstract of "Corporate Boards and the Leverage and Debt Maturity Choices" ************************************************************************** Debt, and in particular, short-term debt have the potential to discipline managers. We examine the role of the board in making financing decisions that provide this discipline. Specifically, given a firm's characteristics, we predict that stronger boards will force the firm to hold more debt and more shortterm debt, and that the effect of the board on the use of short-term debt is likely to be stronger among low-growth firms than among high-growth firms. Employing a rich dataset of board characteristics and controlling for other aspects of a firm's corporate governance, we find support for these hypotheses. Moreover, the degree to which director tenure on the board exceeds the CEO tenure is the most important driver of board strength in our study. This simple measure of the relative power and true independence of directors relative to the CEO is a robust and promising measure of internal governance.