### Browsing by Author "Morse, Joel N."

Now showing 1 - 20 of 25

###### Results Per Page

###### Sort Options

Item Banking in a Volatile World: Setting Country Lending Limits(Springer, 1983) Morse, Joel N.Banks often make decisions in an organizational framework that attempts to control repayment problems by setting loan limits for each country. A formal mechanism for setting those limits will be proposed. Our motivation is twofold. From the point of view of the lending institution, a more formal decision making system may be desirable. For the purpose of bank regulation this research offers help in quantifying and comparing the risk levels of banks. Country risk analysis has traditionally tried to articulate all the risks associated with a country. This is suspect in light of modern financial theory which holds that investors are rewarded primarily for bearing systematic, or market risk. This paper suggests several measures of risk and reward in international lending markets. First we model this situation with a multicriterion linear programming problem. After finding some drawbacks of that approach we propose a simpler alternative which is consistent with the Capital Asset Pricing Model (Sharpe, 1981). Beta, a measure of systematic risk, is estimated for countries. It is used as an input to a series of constrained optimization problems whose output is country lending limits.Item Changes in the liquidity of closed-end country funds after the introduction of World Equity Benchmarks(Elsevier, 2009-08) Morse, Joel N.; Chen, Honghui; Nguyen, Hoang HuyIn 1996, the first exchange-traded funds (ETFs) designed to track a subset of the Morgan Stanley Capital International country indices were approved under the name World Equity Benchmarks (acronym “WEBS”TM). We examine the impact of early WEBStrading on the liquidity of corresponding closed-end country funds (CECFs), previously one of the main avenues for retail investors to achieve country-specific equity exposure. We document a decline in both the trading volume and the trading frequency for CECFs, suggesting that some investors migrate to WEBS. At the same time, the market depth for CECFs increases and the bid-ask spread for CECFs decreases following the introduction of WEBS. Our results support the hypothesis that despite the decline in volume and trading frequency, the liquidity of CECFs is favorably affected by the advent of WEBS.Item Compound Lotteries; Call Option Spreads in Black-Scholes Markets(Springer, 1981) Morse, Joel N.From the earliest days of risky utility theory decision, theorists have elicited information from decision makers by analyzing their reaction to elementary lotteries, or gambles. The Purpose of the process was to define a mathematical function which could yield an ordering on a set of risky objects of choice. The information processing demands on the DM were minimal; everyone has an intuitive feel for endpoints such as $0 and $100. The purpose of this paper is to develop a reliable means of ordering compound lotteries in which the unaided decision maker does not even know the endpoints. Since the ordering will occur in several dimensions, several concepts from multiple criteria decision making will be used.Item Correspondence "On Scoring Rules in Subjective Assessment"(1977) Morse, Joel N.Item Credit Derivatives(Academy of Taiwan Business Management Review, 2010-08) Morse, Joel N.; Jurenkova, Klara; Prasetiya, AndreasThe objective of this paper is to introduce credit derivatives and their uses in financial markets by institutional investors and corporate financial managers. First, the purpose of credit derivatives and their relationship to different types of credit risk will be explained. Next, several basic terms related to credit derivatives will be introduced, which will be followed by a typology of credit derivatives. Throughout the paper, current and potential uses of credit derivatives will be suggested.Item The Crowdfunding Effect(2015-10-01) Morse, Joel N.; Gaynor, Gregory; Pevzner, MikhailThe U.S. Securities & Exchange Commission (SEC) recently moved to finalize its proposed crowdfunding rule that would enable the use of small amounts of capital from a large number of individuals to finance a new business venture over the Internet. CFOs responsible for raising capital for their companies will cheer this new source of funding, but it also brings with it some challenges. The SEC’s action establishes a framework through which businesses and investors can invest in a company’s stock without being subject to some of the traditional rules governing publicly traded securities. It’s an historic change, but permanently allowing crowdfunding will have broad implications across the U.S. capital markets and their participants, particularly CFOs.Item Duration and Convexity of Inverse Floating Rate Bonds(Journal of Research in Finance, 1999) Morse, Joel N.; Nawalkha, Sanjay K.; Zhang, Jun; Lacey, Nelson J.Inverse floating rate bonds introduce unusual patterns of interest rate risk into a portfolio. To help assess and manage that risk, this paper presents duration and convexity measures for inverse floating rate bonds. Both the duration and the convexity of the inverse floater are shown to be weighted averages of the duration and convexity of an associated portfolio of fixed rate bonds and floating rate bonds. This portfolio of bonds mimics the inverse floater, and the weights are determined by the relative prices and the leverage ratio of the mimicking portfolio. The duration of inverse floating rate bond is greater than the duration of the associated fixed rate bond, and the convexity of inverse floating rate bond is greater than the convexity of the associated fixed rate bond. The time decay patterns of duration and convexity of inverse floating rate bond are shown to be dependent on the time decay patterns of the duration and convexity of the associated fixed rate bond and floating rate bond, as well as on the relative prices of the bonds and the leverage ratio. Finally both the duration and the convexity of the inverse floating rate bond are shown to increase dramatically with the leverage ratio.Item The Effect of Earnings Announcement Timing on Liquidity(People and Global Business Association, 2013) Gaynor, Gregory B; Morton, Richard M; Morse, Joel N.The proportion of after-market-close (AMC) earnings announcements has recently increased to more than 40% of the total number of earnings announcements (Berkman & Truong, 2009). Doyle and Magilke (2009) conclude that managers do not announce AMC to hide bad news; however, they do not directly address other explanations for the AMC announcement increase. Thus, the cause(s) remains an open question. Interestingly, the increase in AMC earnings announcements has coincided with the emergence of a 24/7 news environment and a marked increase in noise trading. We posit that managers are increasingly announcing earnings AMC instead of before-market-open (BMO) to take advantage of this increased noise trading—thereby increasing the liquidity of their stock. We show evidence, after controlling for other factors, that announcing AMC instead of BMO increases liquidity. In addition, the relationship between AMC and liquidity is increasing in analysts’ coverage—consistent with the view that AMC announcements generate the largest increase in liquidity for those stocks with high investor interest.Item The Efficient Market Hypothesis in Personal Finance: Choosing an Adjustable or a Fixed Rate Mortgage(2008) Arsham, Dr. Hossein; Ford, Deborah; Morse, Joel N.Homebuyers and commercial real estate investors who obtain funds using mortgages face the choice of a fixed or an adjustable rate mortgage. Fixed rate mortgages have constant payments, but a high initial rate: adjustable rate, interest-only or hybrid mortgages begin with lower rates, but change at fixed intervals over time. Using a straight forward forecasting model, we find that short rates can be forecasted. However, given the limited duration of the cost advantage in the study period, and the transaction and penalty costs of adjusting a borrowing strategy, the decision may not be economically significant.Item An Examination of the Day-of-The-Week Trading Patterns of Individual and Institutional Investors(People and Global Business Association, 2012) Nguyen, Hoang; Morse, Joel N.This study examines the day-of-the-week trading patterns of individual and institutional investors. Consistent with previous evidence, we find an increase in the proportion of trading volume accounted for by individual investors on Monday. However, we document that this increase in the fraction of trading by individual investors on Monday is a result of a reduction in trading by institutional investors, and not because of an increase in trading by individual investors. In fact, the trading by individual investors is significantly lower on Monday than on any other weekday. We also document that the degree of day-of-the-week variation in trading volume by individual and institutional investors is positively associated with the quality and dissemination of public information proxied by the market capitalization of each company.Item Fiduciary Responsibility and the Use of Listed Options(1993) Morse, Joel N.Item Flexibility and Rigidity in Multicriterion Linear Programming(Springer, 1980) Morse, Joel N.; Lieb, EBOne justification for modeling with multiobjective linear programming (MOLP) is its ability to generate unique managerial information. One drawback of MOLP is the unwieldy nondominated set which it presents to the decision maker. Two new concepts for picking one element of this set are examined in this paper. Flexibility is a universal evaluative criterion which can yield a (partial) ordering of the points in the nondominated set. It is based on the natural desire of planners to choose strategies that are reversible. Rigidity is an inverse concept. It reflects the situation in which planners specifically do not want flexibility in the chosen alternatives. Rigidity has the potential of ordering the nondominated set. Flexibility fits naturally into a financial context. Portfolio selection, for example, is a problem where the frictional costs of changing a decision are readily seen to be brokerage fees. Therefore this data base was used for an empirical study of flexibility. Rigidity, however, does not lend itself so easily to a mathematical approach. It is expressed here in a loose geometrical way. Further research may lead to an algebraic index of rigidity.Item Index Futures and the Implied Volatility of Options(Review of Futures Markets, 1988) Morse, Joel N.This paper examines the relation between the pricing of stock index futures contracts and the implied volatilities of index and individual equity options. For data from the 1986-1988 period, the difference between the implied volatility of calls and puts on the Standard and Poor's 100 index appears to be closely related to variation in the premium or discourse of the major U.S.-traded futures contracts. We construct an argument to support this observation. Reasons are also offered for the finding that index put volatilities exceed those for calls during the entire sample period.Item Intervalling Effects in Hong Kong Stocks(Wiley, 1987) Larson, John C; Morse, Joel N.This paper investigates the intervalling-thinness effect in the Hong Kong stock market and compares the results with previous studies of United States and French data. The approach follows the three pass technique of Cohen, Hawawini, Maier, Schwartz, and Whitcomb. Various functional forms of an intervalling bias decay function are analyzed, both in the aggregate and for individual stocks. Careful modeling of the flattening of the beta profile at a finite interval value leads to robust estimated asymptotic betas.Item An Intraweek Seasonality in the Implied Volatilities of Individual and Index Options(Wiley, 1991) Morse, Joel N.This paper studies intraweek seasonalities in the implied volatilities of options on stock market indices. One-way analysis of variance isolates the daily behavior of implied volatilities. The differential between call implied volatility and put implied volatility tends to drop on Friday and rise on Monday. Relying on a synthetic futures contract created from options, an explanatory model is proposed. The model complements previous research on the difference between the intraweek behavior of stock market indices and that of derivative instruments based on the indices.Item An intraweek seasonality in the implied volatilities of T-bond and T-note options(Elsevier, 1990) Morse, Joel N.This paper initiates the study of intraweek seasonalities in the implied volatilities of options on futures contracts on U.S. Treasury bonds and notes.Item A Multiobjective Expert System for Suppliers of Out-of-the-Money Options(Springer, 1984) Morse, Joel N.The proliferation of telecommunications and computing capability has sparked speculation about dispersing work. The electronic cottage industry approach has potential in the area of office and professional services. This paper proposes that certain functions of a centralized financial market can be decentralized. To relocate an element of an information processing system, its functions as well as its linkages must be duplicated. For that purpose, we draw on the theories of multiple criteria decision making (MCDM), artificial intelligence, and finance. On the trading floors of the world’s options exchanges, people called market-makers provide liquidity; when a buyer cannot find a seller, or a seller cannot find a buyer, these functionaries sometimes fill that void by trading for their own account. The physically grueling work of transacting on the exchange floor is often delegated to lower level employees. These people act with supervision from senior people, or perhaps with a set of decision rules formulated by the suppliers of capital. This paper will attempt to outline the features of an automated, remotely-sited system that emulates the market-making function which is normally performed on the site of centralized options exchanges. To make the task less formidable, I will concentrate on one very specialized market-making function, namely supplying uncovered out-of-the money options. The system is intended to promote useful communication between man and computer. Although it would be presumptuous to say that the system can learn, it can decide to query a human when certain conditions are present. From these situations, a richer array of decision rules will develop.Item A Note on Euroyen and Domestic Yen Interest Rates(Journal of Banking and Finance, 1995) Morse, Joel N.; Lo, Wai-Chung; Fung, Hung-GayThis study examines interest rate transmission between the London Euroyen market and the Japanese domestic CD market. The results, which span 1984 through the beginning of 1993, indicate that these two interest rate series are cointegrated. In the earlier part of the sample period, causality is strongest from the Euroyen market to domestic yen interest rates. However, strong feedback effects are observed in both directions in more recent years. The use of both vector autoregressive modeling and cointegration analysis for forecasting is supported over random walk models.Item Portfolio Selection to achieve a target beta(AFCET, 1984) Mcinish, Thomas H; Saniga, EM; Morse, Joel N.Suppose an investor wishes to construct a portfolio of size k securities from a population of n securities (k≤n) such that a particular portfolio or target beta (β p ) is achieved. Since β p is a random variable, there will be some difference between a portfolio’s realized beta and the target beta. We investigate the problem of finding the combination of k securities that minimizes the variance of β p , or equivalently, minimizes the probability of a particular difference in target and realized beta. We also seek answers to a number of related questions. These are concerned with the effect on the variance of β p of naive selection of securities, of the choice of k, and of the presence of a risk-free asset. We also examine the characteristics of securities included in the optimal portfolio.