This dissertation consists of two essays. The first, titled “Market Timing in Corporate Finance Decisions: Evidence from Stock Market Anomalies” revisits the question of market timing in corporate finance by using a new mispricing measure based on stock return anomalies. Using this mispricing measure, I show that U.S. firms are 59% more likely to issue equity when overvalued and 28% more likely to repurchase shares when undervalued. Moreover, this market timing behavior is more pronounced as executives gain more personal benefits from these strategies. Executives use market timing strategies in acquisitions as well. I document that executives are more likely to use equity as currency in acquisitions when overvalued and use cash when undervalued. I find consistent evidence using an international dataset that includes 33 countries. These findings provide new evidence about market timing and support the market timing hypothesis. The second essay, titled “Monetary Policy Uncertainty and Asset Price Bubbles” examines the impact of monetary policy uncertainty (MPU) in predicting future asset price bubbles. Using US data from 1926-2019, this paper shows that greater monetary policy uncertainty leads to a greater likelihood of bubbles in industry-level returns. The result is robust to criticisms on the ex-ante identification of bubbles. This paper also documents that including MPU in machine learning models improves the models’ ability to predict bubbles in real-time.

This dissertation consists of two essays. The first, titled “Sweep Order and the Cost of Market Fragmentation” takes a “revealed-preference” approach towards gauging the effects of market fragmentation by documenting the implicit costs borne by traders looking to avoid executing in a fragmented environment. I show that traders use Intermarket Sweep Orders (ISO) to trade “as-if” markets were single-venued and pay a premium to do so. Using a sample of over 2,600 securities over the period January 2019 to April 2021, this premium amounts to 1.3 bps on average (or 40%of the effective spread), amounting to a total of $3 billion over the sample period. I find a positive, robust, and significant relationship between the premium and different measures of market fragmentation, further supporting the interpretation of the premium as a cost of market fragmentation. The second essay, titled “The Profitability of Liquidity Provision” investigates the relationship between the profits realized from providing liquidity and the amount of time it takes liquidity providers to reverse their positions. By tracking the cumulative inventory position of all passive liquidity providers in the US equity market and matching each aggregate position with its offsetting trade, I construct a measure of profits to liquidity provision (realized profitability) and assess how profitability varies with the average time to offset. Using a sample of all common stocks from 2017 to 2020, I show that there is substantial variation in the horizon at which trades are turned around even for the same stock. As a mark-to-market profit, the conventional realized spread—measured with a prespecified horizon—can deviate significantly from the realized profits to liquidity provision both in the cross-section and in the time-series. I further show that, consistent with the risk-return tradeoff faced by liquidity providers as a whole, realized profitability is low for trades that are quickly turned around and high for trades that take longer to reverse.

I propose new measures of investor attention for Mutual Funds. Using the Security and Exchange Commissions’ Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system’s server log files, this study is the first to explore investor attention to specific mutual funds. I find that changes, or spikes, in mutual fund investor attention are associated with funds’ introduction of a new share class, decreases in expense ratio, past performance and volatility. On average, spikes to investor attention predict net inflows into mutual funds which outpace the overall growth of the mutual fund sector. Attention via this EDGAR channel is more important when investors are researching more opaque funds. Moreover, there is a positive relationship between mutual fund investor attention and fund returns. Yet, there is evidence that investors appear to be responding to the acquisition of stale information with flows. I additionally utilize Google Trends data for individual fund tickers and investigate its effects in Mutual Fund Market. I find that Investor Attention to individual mutual funds is concentrated within Equity funds, Index funds, and Institutional funds. Individual fund attention is strongly negatively associated with expense ratios, 12B-1 Fees, and 'broker sold' funds, suggesting that funds with higher fees get less attention than low cost index funds. I find limited support for the controversial convexity in the flow to performance sensitivity in the Mutual Fund market, but only in funds with high levels of individual attention.

The purpose of this paper is to review the effects of the Dodd-Frank Title VII Clearing Regulations on the Over-the-counter (OTC) derivatives market and to analyze if the benefits of the Title VII regulations have outweighed the costs in the OTC derivatives market by reducing systematic(market) risk and protecting market participants or if the Title VII regulations’ costs have made things worse by lessening opportunities in the OTC derivatives market and stifling economics benefits by over regulating the market. This paper strives to examine this issue by explaining how OTC are said to have played a part in the 2008 Financial crisis. Next, we give a general overview of financial securities, and what OTC are. Then we will give a general overview of what the Dodd-Frank Wall Street Reform and Consumer Protection Acts are, which are the regulations to come out of the 2008 Financial crisis. Then the paper will dive into Dodd-Frank Title VII Clearing Regulations and how they regulated OTC derivatives in the aftermath of the 2008 Financial crisis. Next, we discuss the Clearing House industry. Then the paper explores the major change of central clearing versus the previous bilateral clearing system. The paper will then cover how these rules have affected OTC derivatives market by examining the works of authors, who both support the regulations and others, who oppose the regulations by looking at logical arguments, historical evidence, and empirical evidence. Finally, we conclude that based on all the evidence how the Dodd-Frank Title VII Clearing Regulations effects on the OTC derivatives market are inconclusive at this time.

The purpose of this paper is to review the effects of the Dodd-Frank Title VII Clearing Regulations on the Over-the-counter (OTC) derivatives market and to analyze if the benefits of the Title VII regulations have outweighed the costs in the OTC derivatives market by reducing systematic(market) risk and protecting market participants or if the Title VII regulations’ costs have made things worse by lessening opportunities in the OTC derivatives market and stifling economics benefits by over regulating the market. This paper strives to examine this issue by explaining how OTC are said to have played a part in the 2008 Financial crisis. Next, we give a general overview of financial securities, and what OTC are. Then we will give a general overview of what the Dodd-Frank Wall Street Reform and Consumer Protection Acts are, which are the regulations to come out of the 2008 Financial crisis. Then the paper will dive into Dodd-Frank Title VII Clearing Regulations and how they regulated OTC derivatives in the aftermath of the 2008 Financial crisis. Next, we discuss the Clearing House industry. Then the paper explores the major change of central clearing versus the previous bilateral clearing system. The paper will then cover how these rules have affected OTC derivatives market by examining the works of authors, who both support the regulations and others, who oppose the regulations by looking at logical arguments, historical evidence, and empirical evidence. Finally, we conclude that based on all the evidence how the Dodd-Frank Title VII Clearing Regulations effects on the OTC derivatives market are inconclusive at this time.

Reverse leveraged buyouts (RLBOs) are a common practice for private equity firms across the globe and have been on the receiving end of public scrutiny. While the performance of RLBOs has been studied in the past, very few if any works have been published concerning the specific results of reverse leveraged buyout transactions performed by the largest private equity mega-funds specifically. We collected a dataset of 22 transactions and conducted quantitative and qualitative analysis on 18 of the aforementioned transactions in order to determine the magnitude of positive effects that RLBOs had on each company. Less than half of mega-fund RLBOs that had an initial public offerings outperformed the Dow Jones Industrial Average on a compound annual growth (CAGR) basis, post-exit. Even less outperformed the S&P 500 index, and substantially less than that outperformed industry averages. It can clearly be seen that while averages dictate that large scale RLBOs do not seem profitable, there is a noticeable disparity between the success and failure of each deal when looking at price performance. This data makes the argument that while RLBOs are difficult to make successful, if the market receives them well then they can be some of the highest returning transactions.

In January 2016, Chinese regulators announced the use of circuit breakers to stabilize the stock market but suspended this mechanism after two weeks. Researchers want to further understand the unique characteristics of Chinese stock market and measure the feasibility of implementing a circuit breaker in China once again. The thesis provides an overview of China's attempted implementation and its related consequences, followed by possible problems and tentative recommendations. It outlines key characteristics among different nations that are implementing circuit breakers and price limit systems. Circuit breaker policies in the United States and Japan are explained in detail, while policies in other nations are presented as an overall trend.

Leveraged buyouts have gone in and out of popularity over the last four decades. The first wave began in the 1980's with the rising popularity of junk bonds, followed by years of economic downturn, and then a rise and respective fall from the dot com era. However, in the 2000's, attitudes were high and a period of low interest rates, covenant-lite loans, and relaxed lending conditions gave rise to some of the largest leveraged buyouts in US history. As the name implies, leveraged buyouts are predominantly structured with debt, around 70% of the total transaction value. Private equity firms execute leveraged buyouts on companies in strong industries, who have proven, stable cash flows, with the intent of cutting costs, divesting unneeded assets, and making the chain more efficient. After a time period of five to seven years, the private equity firm exits the deal through an initial public offering of the target company, a sale to another buyer, or dividend recapitalization. The Blackstone Group is one of the largest private equity firms in the US, and, with the favorable leveraged buyout conditions, especially in the real estate market, it wanted to build its real estate portfolio with an acquisition of Hilton Hotels & Resorts. At the time of consideration, Hilton was one of the largest hotel companies in the world, but was beginning to lag compared to its competitors Marriott and Starwood. After months of talks, Hilton agreed to be bought out by Blackstone at $47.50/share, for a total purchase price of $26bn. Blackstone had injected $5.7 of its own equity into the deal. The Great Recession caused a lot of investors to worry about Hilton's debt obligations, and Blackstone was able to restructure a significant portion of the debt to benefit both themselves and their creditors. As new CEO, Christopher J. Nassetta was able to strengthen Hilton by rearranging management, increasing franchising fees, expanding its capital-lite segments, and building more rooms internationally, Hilton was able to grow quicker than its competitors from 2007-2013 while minimizing operating expenses. On December 2, 2013, Hilton went public on the NYSE as HLT. Its enterprise value increased from $26bn to $33bn, and Blackstone was able to achieve an internal rate of return of 19%, while continuing to own 75% of Hilton's shares.

The purpose of this paper serves to act as a continuation of a prior study conducted by Gaurav Jetley and Xinyu Ji explaining the decrease in merger arbitrage spread returns for the time period 1990-2007. Based on further research and analysis, it was concluded the merger arbitrage spread has continued to decline for the years 2008-2012. Part of the decline may be explained by a reduction in trading costs associated to merger arbitrage, capacity constraints (given an increase in devoted capital to the merger arbitrage investment strategy with a limited number of deals), as well as decreased risks. The narrowing arbitrage spread can also be attributed to transaction characteristics and their effect on deals' spreads. The findings conclude that a portion of the decline is likely to be permanent, and that investors seeking to invest using the merger arbitrage strategy should consider spread returns from the most recent years and over a shorter time period.

This thesis is a Mergers and Acquisitions (M&A) Pitchbook for the Boston Beer Company (SAM) to acquire the Craft Brew Alliance (BREW). This thesis includes a background on the beer industry, the craft beer industry, SAM and BREW. As well, the thesis includes an analysis of the reasons for the acquisition, potential risks and downsides, a valuation analysis including all of the potential and realistic synergies, conclusions and a recommendation to SAM to acquire BREW before a larger company does.