This is Paper by Jensen & Meckling
This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears the costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.
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Sabtu, 23 Agustus 2008
Value Versus Growth: The International Evidence
This is Paper by Eugene F. Fama
Value stocks have higher returns than growth stocks in markets around the world. For 1975-95, the difference between the average returns on global portfolios of high and low book-to-market stocks is 7.60% per year, and value stocks outperform growth stocks in 12 of 13 major markets. An international CAPM cannot explain the value premium, but a two-factor model that includes a risk factor for relative distress captures the value premium in international returns.
You can download full paper here
Value stocks have higher returns than growth stocks in markets around the world. For 1975-95, the difference between the average returns on global portfolios of high and low book-to-market stocks is 7.60% per year, and value stocks outperform growth stocks in 12 of 13 major markets. An international CAPM cannot explain the value premium, but a two-factor model that includes a risk factor for relative distress captures the value premium in international returns.
You can download full paper here
Market Efficiency, Long-Term Returns, and Behavioral Finance
Paper by Eugene F. Fama
Market efficiency survives the challenge from the literature on long-term return anomalies. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent over-reaction to information is about as common as under-reaction. And post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Consistent with the market efficiency prediction that apparent anomalies can also be due to methodology, the anomalies are sensitive to the techniques used to measure them, and many disappear with reasonable changes in technique.
You can download full paper here
Market efficiency survives the challenge from the literature on long-term return anomalies. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent over-reaction to information is about as common as under-reaction. And post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Consistent with the market efficiency prediction that apparent anomalies can also be due to methodology, the anomalies are sensitive to the techniques used to measure them, and many disappear with reasonable changes in technique.
You can download full paper here
The Behavior of Interest Rates
Paper by Eugene F. Fama
The evidence in Fama and Bliss (1987) that forward interest rates forecast future spot interest rates for horizons beyond a year repeats in the out-of-sample 1986-2004 period. But the inference that this forecast power is due to mean reversion of the spot rate toward a constant expected value no longer seems valid. Instead, the predictability of the spot rate captured by forward raets seems to be due to mean reversion toward a time-varying expected value that is subject to a sequence of apparently permanent shocks that are on balance positive to mid-1981 and on balance negative thereafter.
You can download full paper here
The evidence in Fama and Bliss (1987) that forward interest rates forecast future spot interest rates for horizons beyond a year repeats in the out-of-sample 1986-2004 period. But the inference that this forecast power is due to mean reversion of the spot rate toward a constant expected value no longer seems valid. Instead, the predictability of the spot rate captured by forward raets seems to be due to mean reversion toward a time-varying expected value that is subject to a sequence of apparently permanent shocks that are on balance positive to mid-1981 and on balance negative thereafter.
You can download full paper here
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