1 / 12

Behavioral Finance “Noise Traders and the Limits to Arbitrage” – Part V

Behavioral Finance “Noise Traders and the Limits to Arbitrage” – Part V. Economics 437. Make-Up Class. There is no class on Tuesday, Jan 30 th This class will be made up on Sunday, Feb 11, 2007 at 3:30 PM in the big Wilson Auditorium (Wilson 402). Blackstone – Vornado dual over EOP.

kaye-moon
Télécharger la présentation

Behavioral Finance “Noise Traders and the Limits to Arbitrage” – Part V

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Behavioral Finance“Noise Traders and the Limits to Arbitrage” – Part V Economics 437

  2. Make-Up Class • There is no class on Tuesday, Jan 30th • This class will be made up on Sunday, Feb 11, 2007 at 3:30 PM in the big Wilson Auditorium (Wilson 402)

  3. Blackstone – Vornado dual over EOP • Blackstone bids $ 48.5 per share ($ 20 billion in cash), assume $ 16 billion in debt • Vornado (VNO) counters with $ 52, half stock, half cash • Blackstone counters with $ 54 per share – all cash • Vornado counters with $ 56: part stock, part cash • Morning of shareholder vote: Blackstone sweetens bid to $ 55.5

  4. Blackstone Acquires Equity Office Properties for $ 39 Billion • Terms • Compensation • $ 23 billion in cash ($ 55.50 per share) • Assume $ 16 billion in existing EOP debt • EOP shareholder vote successful on Wed • Closing is Friday, Feb 9 • Announces sale of $ 7 billion (6.5 million square feet of office space in NYC) to Harry Macklowe (who bought the GM Building)

  5. Lessons • Funds, like Blackstone, have an easier time bidding because: • No public shareholders (no votes or notice required before acting) • In real estate market, they have cash while REITs (Real Estate Investment Trusts) do not • Winner’s Curse • Principle/Agent Problems with Funds • But how to explain Macklowe

  6. Other Readings on Noise Trading • Fisher Black’s Presidential Address • Hirshleifer Etal on “Feedback” • Duffie on “Short Selling” • Huravy & Nussair on “Bubbles & Short Selling” • Kondor on “Gap Convergence”

  7. Other Readings on Noise Trading • Fisher Black’s Presidential Address • Hirshleifer Etal on “Feedback” • Duffie on “Short Selling” • Huravy & Nussair on “Bubbles & Short Selling” • Kondor on “Gap Convergence”

  8. Huravy & Nussair • Published in November of 2006 • Deals with bubble experiments that show • Bubbles even when true values are known by all • Question: Will short selling: 1) prevent bubbles; 2) make price equal to correct value • Short selling mainly lowers price • Cash available to buyers can offset and partially return prices to “correct” prices

  9. Other Readings on Noise Trading • Fisher Black’s Presidential Address • Hirshleifer Etal on “Feedback” • Duffie on “Short Selling” • Huravy & Nussair on “Bubbles & Short Selling” • Kondor on “Gap Convergence”

  10. Kondor on “Gap Convergence” • Unpublished paper, circulated widely, based on Univ of Chicago Ph.d. dissertation • Deals with “Royal Dutch Shell” issue • Two “identical securities,” trading at different prices (at a price “gap”) • Shows that arbitrageurs can go broke trying to do the arbitrage • Notice page 17 gap analysis

  11. Page 17 Gap Analysis g*

  12. End

More Related