PhD, University of Chicago, 1972; MBA, University of Chicago, 1971; BA, University of Chicago, 1968
Outstanding Professor Award, Evening School, 1990
Jeffrey F. Jaffe and Anup Agrawal (1995), Does Section 166 Deter Insider Trading by Target Managers?, Journal of Financial Economics, 39 (Oct./Nov. 1995). 10.1016/0304-405X(95)00833-Z
Abstract: This paper examines empirically whether the short-swing rule (Section 16b of the Securities Exchange Act) deters managers from trading before mergers. Since a merger forces the sale of the target's outstanding equity, insider purchases within six months before the merger cannot escape this rule. We examine the 1941–1961 period when no other insider trading laws were enforced. Consistent with 16b's deterrent effect, managers' purchases drop significantly before the announcement. Before completion, the decrease occurs only in the 1941–1955 period. Surprisingly, pre-announcement sales do not decline, even though 16b cannot punish deferral of planned sales.
Abstract: Earlier evidence concerning the relation between stock returns and the effects of size and earnings to price ratio (E/P) is not clear-cut. This paper re-examines these two effects with (a) a substantially longer sample period, 1951-1986, (b) data that are reasonably free of survivor biases, (c) both portfolio and seemingly unrelated regression tests, and (d) an emphasis on the important differences between January and other months. Over the entire period, the earnings yield effect is significant in both January and the other eleven months. Conversely, the size effect is significantly negative only in January. We also find evidence of consistently high returns for firms of all sizes with negative earnings.
This course provides an introduction to the theory, the methods, and the concerns of corporate finance. The concepts developed in FNCE 100 form the foundation for all elective finance courses. The main topics include: 1) the time value of money and capital budgeting techniques; 2) uncertainty and the trade-off between risk and return; 3) security market efficiency; 4) optimal capital structure, and 5) dividend policy decisions. ACCT 101 + STAT 101 may be taken concurrently.
Integrates the work of the various courses and familiarizes the student with the tools and techniques of research.
This course covers one of the most exciting yet fundamental areas in finance: derivative securities. Financial derivatives can be the most challenging and exotic securities traded by institutional specialists, while at the same time, they can also be the basic securities commonly traded by retail investors such as S&P Index Options, Beyond trading, the basic ideas of financial derivatives serve as building blocks to understand a much broader class of financial problems, such as complex asset portfolios, strategic corporate decisions, and stages in venture capital investing. The main objective of this course is to help students gain the intuition and skills on (1) pricing and hedging of derivative securities, and (2) using derivatives for investment and risk management. In terms of methodologies, we apply the non-arbitrage principle and the law of one price to dynamic models through three different approaches: the binomial tree model, the Black-Scholes-Merton option pricing model, and the simulation-based risk neutral pricing approach. We discuss a wide range of applications, including the use of derivatives in asset management, the valuation of corporate securities such as stocks and corporate bonds with embedded options, interest rate derivatives, credit derivatives, as well as crude oil derivatives. In addition to theoretical discussions, we also emphasize practical considerations of implementing strategies using derivatives as tools, especially when no-arbitrage conditions do not hold. In addition to prerequisites, STAT 613 may be taken concurrently.