Finance Seminar（2016-13）

Topic:Rational Stock Market Catering

Speaker:Murray Z. Frank, University of Minnesota

Time:Wednesday, 25 May, 10:00-11:30

Place:Room 217, Guanghua Building 2

Abstract:

Tests using American data from 1970 to 2015 support the Catering theory of corporate investment. These empirical results are widely interpreted as support for behavioral finance. We present a simple rational model of corporate investment, equity issuance, and dividends. The Catering tests are carried out on data generated by the model. The same pattern of coefficients is obtained using model generated data and using real data. To distinguish the interpretations we examine the cross section of firm decisions during periods of booms, high market sentiment, and mispricing as identified by the behavioral literature. The estimated coefficients do not match the behavioral predictions. The model also shows that the impact of productivity shocks may be more complex than usually assumed, due to interactions between the investor's budget and the firm's source and uses of funds.

Introduction:

Murray Z. Frankis a Professor of Finance at the Carlson School of Management, University of Minnesota. Prior to joining the faculty at the University of Minnesota, Frank was a B.I. Ghert Family Foundation Chair Professor at Sauder School of Business, University of British Columbia. Professor Frank is particularly known for his empirical work on corporate capital structure. He has published in leading academic journals, such asthe Journal of Finance, Management Science, the Review of Economic Studies, Quarterly Journal of Economics, Review of Financial Studies,andthe Journal of Financial Economics,among many others. Professor Frank was a member of the Nominating Committee of the American Finance Association. Professor Frank has also served as the associate editor ofthe Review of Financial Studies, Finance Research Letters, Canadian Journal of Economics,andthe Quarterly Journal of Finance.Professor Frank received his M.A. in Economics from University of Alberta in 1981 and Ph.D. in Economics from Queens University in 1985.

//www.tc.umn.edu/~murra280/Index.htm

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