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Daniel Bergstresser's
Scholarly Papers
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Total Downloads
8,562 |
Total
Citations
421 |
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1.
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Daniel B. Bergstresser Harvard Business School John M. R. Chalmers University of Oregon Peter Tufano Harvard Business School
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08 Nov 05
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02 Oct 07
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3,673 (469)
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22
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Abstract:
Many investors purchase mutual funds through intermediated channels, paying brokers or financial advisors for fund selection and advice. This paper attempts to quantify the benefits that investors enjoy in exchange for the costs of these services. We study broker-sold and direct-sold funds from 1996 to 2004, and fail to find that brokers deliver substantial tangible benefits. Relative to direct-sold funds, broker-sold funds deliver lower risk-adjusted returns, even before subtracting distribution costs. These results hold across fund objectives, with the exception of foreign equity funds. Further, broker-sold funds exhibit no more skill at aggregate-level asset allocation than do funds sold through the direct channel. Our results are consistent either with substantial non-tangible benefits delivered by the broker-distributed sector or with conflicts of interest between brokers and their clients.
mutual funds, distribution channels
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2.
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Daniel B. Bergstresser Harvard Business School Thomas Philippon New York University - Department of Finance
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02 Feb 05
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13 Jan 09
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1,820 (1,734)
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123
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We provide evidence that the use of discretionary accruals to manipulate reported earnings is more pronounced at firms where the CEO's potential total compensation is more closely tied to the value of stock and option holdings. In addition, during years of high accruals, CEOs exercise unusually large amounts of options and CEOs and other insiders sell large quantities of shares.
Earnings management, Stock options, CEO compensation
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3.
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Earnings Manipulation, Pension Assumptions and Managerial Investment Decisions
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Daniel B. Bergstresser Harvard Business School Joshua D. Rauh Northwestern University - Department of Finance Mihir A. Desai Harvard Business School - Finance Unit
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Posted:
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29 May 04
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13 Jan 09
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1,784 ( 1,785) |
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Daniel B. Bergstresser Harvard Business School Joshua D. Rauh Northwestern University - Department of Finance Mihir A. Desai Harvard Business School - Finance Unit
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18 Jun 04
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13 Jan 09
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283
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Managers appear to manipulate firm earnings through their characterizations of pension assets to capital markets and alter investment decisions to justify, and capitalize on, these manipulations. Managers are more aggressive with assumed long-term rates of return when their assumptions have a greater impact on reported earnings. Firms use higher assumed rates of return when they prepare to acquire other firms, when they issue equity, when they are near critical earnings thresholds and when their managers exercise stock options. Changes in assumed returns, in turn, influence pension plan asset allocations. Instrumental variables analysis indicates that 25 basis point increases in assumed rates are associated with 5 percent increases in equity allocations.
earnings manipulation, pensions, asset allocation,
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Daniel B. Bergstresser Harvard Business School Joshua D. Rauh Northwestern University - Department of Finance Mihir A. Desai Harvard Business School - Finance Unit
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29 May 04
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13 Jan 09
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1,501
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32
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Abstract:
Managers appear to manipulate firm earnings through their characterizations of pension assets to capital markets and alter investment decisions to justify, and capitalize on, these manipulations. Managers are more aggressive with assumed long-term rates of return when their assumptions have a greater impact on reported earnings. Firms use higher assumed rates of return when they prepare to acquire other firms, when they issue equity, when they are near critical earnings thresholds and when their managers exercise stock options. Changes in assumed returns, in turn, influence pension plan asset allocations. Instrumental variables analysis indicates that 25 basis point increases in assumed rates are associated with 5 percent increases in equity allocations.
Earnings, Manipulation, Pensions, Defined Benefit Plans, Asset Allocation, Mergers
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4.
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Asset Allocation and Asset Location: Household Evidence from the Survey of Consumer Finances
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Daniel B. Bergstresser Harvard Business School James M. Poterba Massachusetts Institute of Technology (MIT) - Department of Economics
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11 Oct 02
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26 Nov 03
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424 ( 17,865) |
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Daniel B. Bergstresser Harvard Business School James M. Poterba Massachusetts Institute of Technology (MIT) - Department of Economics
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11 Oct 02
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11 Oct 02
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The rapid growth of assets in self-directed tax-deferred retirement accounts has generated a new set of financial decisions for many households. In addition to deciding which assets to hold, households with substantial assets in both taxable and tax-deferred accounts must decide where to hold them. This paper uses data from the Survey of Consumer Finances to assess how many households have enough assets in both taxable and tax-deferred accounts to face significant asset location choices. It also investigates the asset location decisions these households make. In 1998, 45 percent of households had at least some assets in a tax-deferred account, and more than ten million households had at least $25,000 in both a taxable and a tax-deferred account. Many households hold equities in their tax-deferred accounts but not in their taxable accounts, while also holding taxable bonds in their taxable accounts. Most of these households could reduce their taxes by relocating heavily-taxed fixed income assets to their tax-deferred account. Asset allocation inside and outside tax-deferred accounts is quite similar, with about seventy percent of assets in each location invested in equity securities. For nearly three quarters of the households that hold apparently tax-inefficient portfolios, a shift of less than $10,000 in financial assets can move their portfolio to a tax-efficient allocation. Asset location decisions within IRAs appear to be sensitive to marginal tax rates; we do not find evidence for such sensitivity in other tax-deferred accounts.
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Daniel B. Bergstresser Harvard Business School James M. Poterba Massachusetts Institute of Technology (MIT) - Department of Economics
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15 Oct 02
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26 Nov 03
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396
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Abstract:
The rapid growth of assets in self-directed tax-deferred retirement accounts has generated a new set of financial decisions for many households. In addition to deciding which assets to hold, households with substantial assets in both taxable and tax-deferred accounts must decide where to hold them. This paper uses data from the Survey of Consumer Finances to assess how many households have enough assets in both taxable and tax-deferred accounts to face significant asset location choices. It also investigates the asset location decisions these households make. In 1998, 45 percent of households had at least some assets in a tax-deferred account, and more than ten million households had at least $25,000 in both a taxable and a tax-deferred account. Many households hold equities in their tax-deferred accounts, but not in their taxable accounts, while also holding taxable bonds in their taxable accounts. Most of these households could reduce their taxes by relocating heavily-taxed fixed income assets to their tax-deferred account. Asset allocation inside and outside tax-deferred accounts is quite similar, with about seventy percent of assets in each location invested in equity securities. For nearly three quarters of the households that hold apparently tax-inefficient portfolios, a shift of less than $10,000 in financial assets can move their portfolio to a tax-efficient allocation. Asset location decisions within IRAs appear to be sensitive to marginal tax rates; we do not find evidence for such sensitivity in other tax-deferred accounts.
Asset Location, Retirement Saving, Capital Income Taxation, 401(k)
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5.
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Do After-Tax Returns Affect Mutual Fund Inflows?
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Daniel B. Bergstresser Harvard Business School James M. Poterba Massachusetts Institute of Technology (MIT) - Department of Economics
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Posted:
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05 May 00
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13 Jan 09
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380 ( 20,556) |
46
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Daniel B. Bergstresser Harvard Business School James M. Poterba Massachusetts Institute of Technology (MIT) - Department of Economics
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14 Dec 00
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13 Jan 09
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341
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This paper explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds. Previous studies have documented that funds with high pretax returns attract greater inflows. This paper investigates the relative predictive power of pre-tax and after-tax returns for explaining annual fund inflows. The empirical results, based on a large sample of equity mutual funds over the period 1993-1998, suggest that after-tax returns have more explanatory power than pretax returns in explaining inflows. In addition, funds with large "overhangs" of unrealized capital gains experience smaller inflows, all else equal, than funds without such unrealized gains. By disaggregating net fund inflows into gross inflows and gross redemptions, the paper also provides some insight on how after-tax returns and prospective capital gain realizations affect investor behavior.
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Daniel B. Bergstresser Harvard Business School James M. Poterba Massachusetts Institute of Technology (MIT) - Department of Economics
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05 May 00
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13 Mar 08
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39
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Abstract:
This paper explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds. Previous studies have documented that funds with high pretax returns attract greater inflows. This paper investigates the relative predictive power of pre-tax and after-tax returns for explaining annual fund inflows. The empirical results, based on a large sample of equity mutual funds over the period 1993-1998, suggest that after-tax returns have more explanatory power than pretax returns in explaining inflows. In addition, funds with large 'overhangs' of unrealized capital gains experience smaller inflows, all else equal, than funds without such unrealized gains. By disaggregating net fund inflows into gross inflows and gross redemptions, the paper also provides some insight on how after-tax returns and prospective capital gain realizations affect investor behavior.
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6.
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Daniel B. Bergstresser Harvard Business School
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29 Oct 08
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13 Jan 09
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145 (58,358)
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This paper estimates the relationship between banking market concentration and high-risk portfolio strategies at commercial banks. I use the unprecedented changes in the degree of competition in local banking markets that occurred after 1980 to estimate the impact of market competition on the risk profile of commercial bank lending. I find evidence that increasing concentration has been associated with reductions in the flow of bank capital to construction and land development loans, the highest-risk category of commercial bank loans. The magnitude of this effect is large: an increase in concentration from the 25th to the 75th percentile of the sample distribution is associated with a 15 percent drop in the share of bank lending going to construction loans. Robustness to a variety of econometric strategies supports a causal interpretation of this empirical relationship. Increasing concentration also appears to increase average bank capitalization, raise the average share of assets loaned out to borrowers, and reduce bank failure rates during this period. Because the Federal Deposit Insurance Corporation assumes the assets and liabilities of failing banks, changes in bank portfolio risk affect the value of the government's contingent liability to the banking sector, as well as the health and stability of the larger economy.
Banks, market structure, risk
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7.
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Daniel B. Bergstresser Harvard Business School Thomas Philippon New York University - Department of Finance
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03 Nov 08
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Last Revised:
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13 Jan 09
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89 (85,788)
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122
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Abstract:
We provide evidence that the use of discretionary accruals to manipulate reportedearnings is more pronounced at firms where the CEO s potential total compensation is more closely tied to the value of stock and option holdings. In addition, during years of high accruals, CEOs exercise unusually large amounts of options and CEOs and other insiders sell large quantities of shares.
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8.
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Daniel B. Bergstresser Harvard Business School Joshua D. Rauh Northwestern University - Department of Finance Mihir A. Desai Harvard Business School - Finance Unit
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17 Jun 04
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Last Revised:
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17 Jun 04
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85 (88,458)
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Abstract:
Managers appear to manipulate firm earnings when they characterize pension assets to capital markets and alter investment decisions to justify, and capitalize on, these manipulations. We construct a measure of the sensitivity of reported earnings to the assumed long-term rate of return on pension assets. Managers are more aggressive with assumed long-term rates of return when their assumptions have a greater impact on reported earnings. Managers also increase assumed rates of return as they prepare to acquire other firms and as they exercise stock options, further confirming the opportunistic nature of these increases. Decisions about assumed rates of return, in turn, influence asset allocation within pension plans. Instrumental variables results suggest that a 25 basis point increase in the assumed rate of return is associated with a 5% increase in equity allocation. Taken together, these results suggest that earnings manipulation arising from managerial motivations influences significant managerial investment decisions.
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9.
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Daniel B. Bergstresser Harvard Business School
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29 Oct 08
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13 Jan 09
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76 (95,025)
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Abstract:
Consumer borrowing is a large and growing part of the American financial landscape, amounting to over $1.5 trillion in 2000, or 15 percent of GDP. This credit helps households improve the timing of consumption expenditure, allowing consumers to purchase goods and services when they are needed. Still, many households report being credit constrained, with requests for credit rejected or discouraged by potential lenders. Stiglitz and Weiss (1981) formalize models where credit is rationed in equilibrium, and Petersen and Rajan (1995) extend this model to banking markets with varying degrees of local competition. Local banking market competition can be thought of as one element of the more general set of factors influencing the 'captivity' of a bank's consumer borrowers. This paper uses data from the 1983 Survey of Consumer Finances to empirically test the relationship between banking market concentration and households' self-reported measures of credit rationing and constraint. There is strong evidence that more concentrated markets have fewer constrained borrowers, a result consistent with the Petersen-Rajan model of credit markets. Interest rates on consumer borrowing appear to decrease more sharply with age in competitive markets than in concentrated markets. This result is consistent with the cross-subsidization between new and existing borrowers that is central to the Petersen-Rajan model.
Banks, market structure, consumption, credit constraints
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10.
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John Beshears National Bureau of Economic Research (NBER) Daniel B. Bergstresser Harvard Business School
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05 Nov 09
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05 Nov 09
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37 (134,069)
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We find evidence that households selecting Adjustable Rate Mortgages (ARMs) during the recent decade were disproportionately those who were less suspicious or who may have had difficulty understanding complicated ARM features that became commonplace prior to the financial crisis.
Mortgages, ARMs
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11.
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Daniel B. Bergstresser Harvard Business School Jeffrey E. Pontiff Boston College - Department of Finance
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25 Jul 09
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25 Jul 09
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33 (139,494)
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2
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Taxes have a first-order impact on portfolio returns. Most research mistakenly assumes that portfolios command similar tax burdens, or that tax burdens are proportional to dividend yields. Portfolio strategies differ in the pace of capital gains realization. We use the federal tax codes from 1926 through 2006 to construct the after-tax returns that individual investors, corporations, and broker-dealers would have generated on a set of benchmark portfolios. For an individual at the 99th income percentile, the effective tax rates on SMB and HML, respectively, are 7 and 15 times greater than the tax rate on the market premium.
taxes, portfolio performance
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12.
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Daniel B. Bergstresser Harvard Business School Jeffrey E. Pontiff Boston College - Department of Finance
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18 Mar 06
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23 Jul 09
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16 (178,683)
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2
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Abstract:
Taxes have a first-order impact on portfolio returns. Most research mistakenly assumes that portfolios command similar tax burdens, or that tax burdens are proportional to dividend yields. Portfolio strategies differ in the pace of capital gains realization. We use the federal tax codes from 1926 through 2006 to construct the after-tax returns that individual investors, corporations, and broker-dealers would have generated on a set of benchmark portfolios. For an individual at the 95th income percentile, the effective tax rates on SMB and HML, respectively, are 3 and 17 times greater than the tax rate on the market premium.
Taxes, Portfolio Style, Investment Performance
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13.
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Daniel B. Bergstresser Harvard Business School Robin Marc Greenwood Harvard Business School James Quinn Harvard Business School
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11 Nov 09
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11 Nov 09
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0 (0)
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Abstract:
Washington Mutual issued 6 billion Euro of covered bonds in 2006. The objective of the case is to ask whether these bonds are mispriced in late 2008. The case is set in September 2008, and Washington Mutual is facing considerable distress due to mounting losses on its mortgage portfolio. Following investment bank Lehman Brother's Chapter 11 bankruptcy protection filing in mid September, the price of Washington Mutual's covered bonds has fallen to 75 per 100 of face value. As these bonds are overcollateralized, the case asks students to evaluate the underlying collateral portfolio in the event of liquidation, as well as assessing the likelihood of different outcomes. The case takes place during a period of considerable uncertainty in the global capital markets.
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14.
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Daniel B. Bergstresser Harvard Business School John M. R. Chalmers University of Oregon Peter Tufano Harvard Business School
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28 Sep 09
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Last Revised:
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28 Sep 09
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0 (0)
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23
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Abstract:
Many investors purchase mutual funds through intermediated channels, paying brokers or financial advisors for fund selection and advice. This article attempts to quantify the benefits that investors enjoy in exchange for the costs of these services. We study broker-sold and direct-sold funds from 1996 to 2004, and fail to find that brokers deliver substantial tangible benefits. Relative to direct-sold funds, broker-sold funds deliver lower risk-adjusted returns, even before subtracting distribution costs. These results hold across fund objectives, with the exception of foreign equity funds. Further, broker-sold funds exhibit no more skill at aggregate-level asset allocation than do funds sold through the direct channel. Our results are consistent with two hypotheses: that brokers deliver substantial intangible benefits that we do not observe and that there are material conflicts of interest between brokers and their clients.
G2, G11, G24
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15.
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Daniel B. Bergstresser Harvard Business School Shawn Allen Cole Harvard Business School Siddharth Bhaskar Shenai Harvard Business School
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01 Jul 09
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Last Revised:
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05 Oct 09
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0 (0)
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Abstract:
UBS, a global financial services company, must decide whether to continue to support the market for Auction Rate Securities in the face of a growing financial crisis. These instruments, underwritten by UBS, were marketed to clients as highly liquid and safe alternatives to cash. UBS decision becomes urgent when Citigroup, another leading underwriter of ARS, decides to let their auctions fail, leaving clients with illiquid assets of uncertain value. The case explores theoretical and practical aspects of liquidity risk, and challenges students to evaluate the benefits of honoring implicit commitments to customers against the costs of acquiring billions of dollars in illiquid assets. The (B) and (C) cases consider the implications of UBS decision.
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16.
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Daniel B. Bergstresser Harvard Business School Shawn Allen Cole Harvard Business School Siddharth Bhaskar Shenai Harvard Business School
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01 Jul 09
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Last Revised:
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01 Jul 09
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0 (0)
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Abstract:
UBS, a global financial services company, must decide whether to continue to support the market for Auction Rate Securities in the face of a growing financial crisis. These instruments, underwritten by UBS, were marketed to clients as highly liquid and safe alternatives to cash. UBS' decision becomes urgent when Citigroup, another leading underwriter of ARS, decides to let their auctions fail, leaving clients with illiquid assets of uncertain value. The case explores theoretical and practical aspects of liquidity risk, and challenges students to evaluate the benefits of honoring implicit commitments to customers against the costs of acquiring billions of dollars in illiquid assets. The (B) and (C) cases consider the implications of UBS decision.
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17.
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Daniel B. Bergstresser Harvard Business School Shawn Allen Cole Harvard Business School Siddharth Bhaskar Shenai Harvard Business School
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01 Jul 09
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Last Revised:
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01 Jul 09
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0 (0)
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Abstract:
UBS, a global financial services company, must decide whether to continue to support the market for Auction Rate Securities in the face of a growing financial crisis. These instruments, underwritten by UBS, were marketed to clients as highly liquid and safe alternatives to cash. UBS' decision becomes urgent when Citigroup, another leading underwriter of ARS, decides to let their auctions fail, leaving clients with illiquid assets of uncertain value. The case explores theoretical and practical aspects of liquidity risk, and challenges students to evaluate the benefits of honoring implicit commitments to customers against the costs of acquiring billions of dollars in illiquid assets. The (B) and (C) cases consider the implications of UBS decision.
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