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Deviations from normality in financial return series have led to the development of alternative portfolio selection models. One such model is the downside risk model, whereby the investor maximizes his return given a downside risk constraint. In this paper we empirically observe the international equity allocation for the downside risk investor using 9 international markets’ returns over the last 34 years. The results are stable for various robustness checks. Investors may think globally, but instead act locally, due to greater downside risk. The results provide an alternative view of the home bias phenomenon, documented in international financial markets. JEL Classification: G11, G12, G15
We examine the empirical predictions of a real option-pricing model using a large sample of data on mergers and acquisitions in the U.S. banking sector. We provide estimates for the option value that the target bank has in waiting for a higher bid instead of accepting an initial tender offer. We find empirical support for a model that estimates the value of an option to wait in accepting an initial tender offer. Market prices reflect a premium for the option to wait to accept an offer that has a mean value of almost 12.5% for a sample of 424 mergers and acquisitions between 1997 and 2005 in the U.S. banking industry. Regression analysis reveals that the option price is related to both the price to book market and the free cash flow of target banks. We conclude that it is certainly in the shareholders best interest if subsequent offers are awaited. JEL Classification: G34, C10
Recent studies have suggested increased plasticity of differentiated cells within the intestine to act both as intestinal stem cells (ISCs) and tumour-initiating cells. However, little is known of the processes that regulate this plasticity. Our previous work has shown that activating mutations of Kras or the NF-κB pathway can drive dedifferentiation of intestinal cells lacking Apc. To investigate this process further, we profiled both cells undergoing dedifferentiation in vitro and tumours generated from these cells in vivo by gene expression analysis. Remarkably, no clear differences were observed in the tumours; however, during dedifferentiation in vitro we found a marked upregulation of TGFβ signalling, a pathway commonly mutated in colorectal cancer (CRC). Genetic inactivation of TGFβ type 1 receptor (Tgfbr1/Alk5) enhanced the ability of KrasG12D/+ mutation to drive dedifferentiation and markedly accelerated tumourigenesis. Mechanistically this is associated with a marked activation of MAPK signalling. Tumourigenesis from differentiated compartments is potently inhibited by MEK inhibition. Taken together, we show that tumours arising in differentiated compartments will be exposed to different suppressive signals, for example, TGFβ and blockade of these makes tumourigenesis more efficient from this compartment.