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Volume 34 - Numéro 2

June 2013

Underwriting Syndicate Structure and Lead Manager Reputation: An Empirical Study on European Stock Markets - 15 June 2013


Using a comprehensive sample of 1542 initial public offerings
(IPOs) sold on German, French and British stock markets, we investi-
gate the structure of underwriting syndicates in the presence of reputa-
ble lead managers. We consider two aspects of syndicate structure: the
number of syndicate members and the ratio of the total number of
members to the number of lead managers. First, we find that the lead
manager is often the sole bank to perform the underwriting; the lead
manager delegates part of the tasks of distributing shares to other par-
ticipants in only 41% of the IPOs. An important reason is that a large
fraction of the IPOs in Europe are relatively small. Second, we show
that the extent of task delegation increases with lead manager reputa-
tion because it leads to more co-managers and other managers partici-
pating in the syndicate. However, this effect only occurs for larger
issuances; in general, smaller IPOs are left to smaller and less reputa-
ble underwriters, some of whom nevertheless perform a large number
of small deals. Overall, our findings are consistent with the view that
lead manager reputation generates market segmentation between larger
and smaller issuances.

Portfolio choice and financial advice - 15 June 2013


This paper analyzes portfolio allocation decisions of individual
investors. Our dataset records how individuals allocate their money
among risky funds and a money-market fund, and also the characteris-
tics of both the investors and the financial advisors who sell the pro-
ducts. These data offer a unique opportunity to investigate how portfo-
lio decisions are affected by financial advisors. Our empirical strategy
consists in studying the relationship between the share of the total capi-
tal invested in risky funds and the characteristics of buyers and sellers.
Since the dependent variable is bounded between zero and one, we
estimate a fractional response model. We find that the share invested in
risky funds is larger when the advisor is more educated. Furthermore,
male advisors sell larger shares of risky funds than female advisors. We
offer possible explanations for these findings

A scenario-based description of optimal American capital guaran- teed strategies - 15 June 2013


The aim of the paper is to describe portfolio strategies with partial
guarantee of the initial capital. We consider the option-based (OBPI)
and the constant proportion portfolio insurance (CPPI) strategies with
both European and American features. First, we provide explicit for-
mulae for all strategies and contribute to the literature by providing the
value of the American CPPI. Second, relying on both historical data
and path simulations, we show that strategies perform differently in a
bear market. We focus on liquidation values when the market recovers
after a sharp drop. We find that the American CPPI strategy usually
outperforms the American OBPI one due to the Asian component of
the former and despite the lookback feature of the latter. To complete
our analysis, we investigate both deltas and gammas of our strategies.