Two Essays in Financial Economics

<p><em>In the first chapter of this dissertation, I examine the relationship between hedging and diversification effects on CEO compensation in the Real Estate Investment Trust (REIT) industry. The REIT industry is suitable for this investigation for various reasons; primarily being that the REIT sample represents a relatively clean sample to study the effects of diversification and hedging on compensations. I find a positive and significant relationship between the interaction variable which reflects the effects of both hedging and diversification and CEO pay-for-performance sensitivity. This is consistent with the notion that managers are in a better position to manage firm risk if they use all the available tools and instruments, including hedging and diversification. I also find a positive and significant relationship between hedging and CEO pay-for-performance sensitivity, indicating that CEO compensation is more short term oriented because hedging is a relatively short term risk reduction strategy.</em></p> <p><em>The second chapter of this dissertation examines the relative contribution of regular and e-mini futures market to price discovery of EUR/USD futures contracts on the CME, using intraday data in 2010. The relative contribution to price discovery is estimated using the information share approach proposed by Hasbrouck (1995) and Gonzalo and Granger (1995). Empirical findings indicate that regular futures market accounts for approximately 66.5% of price discovery in the EURO/USD market. This study also examines if the regular future’s information share (IS) can be explained by the positioning of commercial and non-commercial traders. The results support the conclusion that the IS of regular futures can be better explained by non-commercial traders (speculators) than commercial traders (hedgers).</em></p>

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation-Restricted

Discipline thesis:degree_discipline

Economics and Finance

Year

2012

Author dc:creator

• Malhotra, Jatin Ravikant

Contributors dc:contributor

• Wei Peihwang
• Mukherjee Tarun
• Whitney Gerald

• Compensation, diversification, hedging, interaction, Informativeness, trader type
• Corporate Finance
• Finance and Financial Management

Repository record dc:identifier

https://scholarworks.uno.edu/td/1529

OAI identifier oai:identifier

oai:scholarworks.uno.edu:td-2526