The Comprehensive Optimal Business Location Model
By Mitchel Gorecki
In order to ensure long run viability, a firm must understand the idea of optimal business location. In the designing of a strategy, it is important to not only evaluate the present market environment but to also account for possible future change. This paper will demonstrate the core ideas behind a comprehensive location model that will predict the optimal location for a business. The effectiveness of the model will be evaluated by using past data from Durham, North Carolina to predict current retail development. The model is determined to be successful by seeing if the trend recognized would be able to correctly identify the present location choices of firms. The model will be further used to predict the future development plans for businesses locating in the Durham area.
Advisor: Charles Becker | JEL Codes: E3, M1, M2,
Book-building versus Auctions: An investigation into which IPO pricing and selling method more effectively promotes the aims of an IPO issuer
by Amrith Krushnakumaar
Abstract
In recent years, book-building has emerged as a method of choice among investment banks in the U.S and around the world for pricing and selling initial public offerings (IPOs). Proponents of the book-building method argue that discriminatory share allocations, the pooling of IPOs and other standard book-building practices price new shares more accurately, thus enabling the issuer to maximize proceeds received from the IPO, and minimize fluctuations in share price immediately after the IPOs. However, in view of the average first-day price increases common among IPOs marketed by the book-building method, and the potential for investment banks to abuse their power when allocating shares, skeptics claim that book-building is inadequate in helping the issuer meet its aims. Amid calls by regulators and critics to reform the existing book-building method, W.R Hambrecht, an investment bank, introduced the auction method of pricing and selling IPOs for the first time in the United States in 1999. This paper aims to determine which method might be more effective in promoting an issuer’s aims by employing a matched methodology to fairly compare more recent book-building and auction IPOs in the U.S.
Professor Edward Tower, Faculty Advisor
Professor Allen H. Huang, Faculty Advisor
JEL Codes: D21, D22, E44, G1,
Multi-Variable Regression Analysis For the Prediction of Equity Returns Over 10 Year Periods
by Arjun Singh Jaswal
Abstract
The use of 5 variables is examined in order to forecast ex ante the total return from holding equities over 10 year periods. The 5 variables are a moving average of Campbell and Shiller’s P/E ratio, Robert B. Barsky and J. Bradford De Long’s log price predictor, a function of James Tobin’s q, the rate of change of GDP over 30 years and the rate of change of cash flow over 10 years. The significance of these variables is explained by considering them individually, simultaneously and finally under the architecture suggested by David Hirshleifer.
Professor Edward Tower, Faculty Advisor
JEL Codes: C3, E22
Assessing the Performance of Actively Managed Global Funds
by Luyuan Fan
Abstract
It has been widely debated whether managed funds outperform their index counterparts. Many scholars have carried out empirical testing for U.S. managed funds, but few have examined global funds. This study compares the total returns and risk-adjusted returns for 29 largest global funds with that of a basket of Vanguard indexes over 5 two-year periods from January 1997 to December 2006. We discover that the global funds outperform the basket of indexes before expenses. Also, the global funds outperform the indexes by an increasing amount in later periods than in earlier ones, implying accumulated experience and improved fund management skills of fund managers over time. Moreover, the average of the return differentials in favor of global funds in five periods is lower than the return differential over the entire 10-year period, indicating fund managers’ superior style-picking skills. After expenses, the indexes win on average, because most global funds have high expense ratios (of up to 2 %.) However, low cost global funds, such as the Vanguard Global Equity, make an exception.
Professor Edward Tower, Faculty Advisor
JEL Codes: E22,
The Value of Unsolicited Buy Recommendations to Investors: Can Investors Trade Profitably Based on E-mail Spam?
by Angela Nicole Aldrich
Abstract
This paper explores the possibility of trading profitably based on information contained in email spam messages advertising certain stock trades. Through careful analysis of a basket of sixteen stocks that were recommended to my advisor and myself via unsolicited email spam, I conclude that the most effective way for investors to trade these stocks is to short-sell immediately upon initial receipt of a recommendation to buy.
Professor Bjorn Eraker, Faculty Advisor
JEL Codes: E2, G11,
Could the Kaminsky-Reinhart Model Have Predicted the 2002 Uruguayan Currency and Banking Crises?
by Steven R. Vickers
Abstract
Because currency and banking crises cause substantial and prolonged disruptions
to an economy, economists have long sought ways to predict these events in advance.
One recent theory advanced is the “leading indicators” approach of Kaminsky (1998) and
Kaminsky and Reinhart (1999). Kaminsky (1998) presents four separate composite
indicators, and Kaminsky and Reinhart (1999) refines the model. This paper provides one
test of this theory by analyzing the currency and banking crises that arose in July 2002 in
Uruguay. This study tests the efficacy of these indicators by analyzing the behavior of
the indicators in the months directly preceding the Uruguayan crises. In general, three
indicators performed reasonably well, while one had exceptional predictive power.
Professor Stephanie Schmitt-Grohé, Faculty Advisor
JEL Codes: E47, G01, G15,
