Research / Research Papers

DATE

2016
2015
2014
2013
2012 & Earlier

INVESTMENT TYPE

Structured Product
Stock/Preferred Stock
Mutual Fund
Fixed Income

 

ETF
Annuities
Alternative Investments

TOPIC

Portfolio Management
Securities Law
Valuation

Research Papers

Puerto Rico Securities Arbitration Report: 1,974 Arbitration Filings, $274 million in Settlements and Awards so far (Updated June 9, 2017)

By Craig McCann, Chuan Qin and Mike Yan 2017-02-22

In 2013, a shrinking economy and the government's loss of continued access to capital markets necessary to make interest payments, refinance principal coming due
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Reporte de Arbitrajes de Valores en Puerto Rico: 1,974 Reclamaciones de Arbitraje, $274 millones en Acuerdos Transaccionales y Laudos Arbitrales Hasta la fecha (9 de junio de 2017)

By Craig McCann, Chuan Qin y Mike Yan 2017-02-22


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Structured Products and the Mischief of Self-Indexing

Published in The Journal of Index Investing, Spring 2017, Vol. 7, No. 4, pp. 16-29.

By Geng Deng, Craig McCann and Mike Yan 2016-10-19

In recent years, investment banks have issued structured products linked to indexes they create rather than just linking to standardized indexes from Standard &
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How Widespread and Predictable is Stock Broker Misconduct?

By Craig McCann, Chuan Qin, and Mike Yan 2016-04-21

In this paper we reconcile widely diverging recent estimates of broker misconduct. Qureshi and Sokobin report that 1.3% of current and past brokers are associated
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Craig McCann's NASAA 2015 Presentation, Investments Through Time

By Craig McCann 2015-09-28

Investments Through Time: The Evolution of Investment Products and How They are
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Securities-Based Lending

By Paul F. Meyer 2015-06-24

A perfect storm of soaring equity values and historically low interest rates has sparked a borrowing binge among securities investors. Securities-based loans
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Fiduciary Duties and Non-traded REITs

Published in the Investments & Wealth Monitor, July/August 2015.

By Craig McCann 2015-06-10

A summary of SLCG's analysis of investor returns in 81 non-traded REITs. Investors are at least $45.5 billion worse off as a result of investing in the 81
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An Empirical Analysis of Non-Traded REITs

Published in the Journal of Wealth Management, 19(1):83-94, Summer 2016.

By Brian Henderson, Joshua Mallett, and Craig McCann 2015-06-01

We find that returns to 81 non-traded REITs which had listed, been acquired by or merged with a listed REIT or had updated per share values average 6.3% annually
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Ex-post Structured Product Returns: Index Methodology and Analysis

Published in The Journal of Investing, Summer 2015, Vol. 24, No. 2: pp. 45-58.

By Geng Deng, Tim Dulaney, Tim Husson, Craig McCann, and Mike Yan 2014-04-02

The academic and practitioner literature now includes numerous studies of the substantial issue date mispricing of structured products but there is no large scale
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Efficient Valuation of Equity-Indexed Annuities Under Lévy Processes Using Fourier-Cosine Series

Forthcoming in The Journal of Computational Finance.

By Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan 2014-04-01

Equity-Indexed Annuities (EIAs) are deferred annuities which accumulate value over time according to crediting formulas and realized equity index returns. We
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The Fall of Willow

Published in the PIABA Bar Journal, 21 (1): 71-90, 2014.

By Geng Deng and Craig McCann 2014-03-04

From May 8, 2000 until June 30, 2007, the UBS Willow Fund was invested in distressed obligations with offsetting but smaller cash and synthetic short debt positions
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Valuation of Structured Products

Published in The Journal of Alternative Investments, Spring 2014, Vol. 16, No. 4: pp. 71-87.

By Geng Deng, Tim Husson, and Craig McCann 2014-02-03

The market for structured products has grown dramatically in the past decade. Their diversity and complexity has led to the development of many diff erent
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Valuation of Reverse Convertibles in the VG Economy

Published in the Journal of Derivatives & Hedge Funds 19, 244-258 (November 2013).

By Geng Deng, Tim Dulaney, and Craig McCann 2014-01-07

Prior research on structured products has demonstrated that equity-linked notes sold to retail investors in initial public off erings are typically issued at above
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Crooked Volatility Smiles: Evidence from Leveraged and Inverse ETF Options

Published in the Journal of Derivatives & Hedge Funds 19, 278-294 (November 2013).

By Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan 2014-01-07

We find that leverage in exchange traded funds (ETFs) can a ffect the "crookedness" of volatility smiles. This observation is consistent with the intuition that
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Modeling a Risk-Based Criterion for a Portfolio with Options

Published in the Journal of Risk, Vol. 16, No. 6.

By Geng Deng, Tim Dulaney, and Craig McCann 2013-12-13

The presence of options in a portfolio fundamentally alters the portfolio's risk and return pro files when compared to an all equity portfolio. In this paper, we
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Robust Portfolio Optimization with VaR Adjusted Sharpe Ratio

Published in the Journal of Asset Management, 14(5):293-305, 2013.

By Geng Deng, Tim Dulaney, Craig McCann, and Olivia Wang 2013-11-05

We propose a robust portfolio optimization approach based on Value-at-Risk (VaR) adjusted Sharpe ratios. Traditional Sharpe ratio estimates using a limited series
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Large Sample Valuations of Tenancies-in-Common

Published in the Journal of Real Estate Portfolio Management, Vol. 20, No 2, 2014.

By Tim Husson, Craig McCann, Edward O'Neal, and Carmen Taveras 2013-10-28

In this paper, we value a large sample of tenant-in-common (TIC) investments based on cash flow projections found in 194 private placement memoranda. Our sample of
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The Priority Senior Secured Income Fund

Published in the PIABA Bar Journal, 20 (2): 191-206, 2013.

By Tim Dulaney, Tim Husson, and Craig McCann 2013-09-23

Retail investors are being sold increasingly obscure non-conventional investments. With the Priority Senior Secured Income Fund (PSSI), issuers may have finally
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Structured Product Based Variable Annuities

Published in the Journal of Retirement, Winter 2014, Vol. 1, No. 3: pp. 97-111.

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2013-09-11

Recently, a new type of variable annuity has been marketed to investors which is based on structured product-like investments instead of the mutual fund-like
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Private Placement Real Estate Valuation

Published in the Journal of Business Valuation and Economic Loss Analysis Volume 9, Issue 1, January 2014.

By Tim Husson, Craig McCann, Edward O'Neal, and Carmen Taveras 2013-09-03

As a result of the Securities and Exchange Commission's relaxation of its prohibition against the marketing of private placements, investors will soon be exposed to
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Structured Certificates of Deposit: Introduction and Valuation

Published in the Financial Services Review, Volume 23, Number 3, 2014.

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2013-07-30

This paper examines the properties and valuation of market-linked certificates of deposit (structured CDs). Structured CDs are similar to structured products --
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Using EMMA to Assess Municipal Bond Markups

Published in the PIABA Bar Journal, 20 (1): 99-122, 2013.

By Geng Deng and Craig McCann 2013-06-07

In the past, assessment of the reasonableness of municipal bond markups depended on anecdotal recollection of markups and subjective judgment about what was
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The Rise and Fall of Apple-linked Structured Products

By Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan 2013-01-25

The rise in Apple's market capitalization in 2012 coincided with a dramatic increase in single-observation reverse convertibles, reverse convertibles and
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What is a TIC Worth?

Published in the PIABA Bar Journal, 19 (3): 373-392, 2012.

By Tim Husson, Craig McCann, and Carmen Taveras 2013-01-04

Tenants-in-common interests are passive real estate investments which are sold based on two claimed benefits: stable "cash on cash" returns and deferral of capital
[read more] [download][view video]

Dual Directional Structured Products

Published in the Journal of Derivatives & Hedge Funds, (5 June 2014).

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2013-01-03

We analyze and value dual directional structured products - or simply dual directionals (DDs) - which have been issued in large amounts since the beginning of
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Are VIX Futures ETPs Effective Hedges?

Published in The Journal of Index Investing, Winter 2012, Vol. 3, No. 3, pp. 35-48.

By Geng Deng, Craig McCann, and Olivia Wang 2012-06-27

Exchange-traded products (ETPs) linked to futures contracts on the CBOE S&P 500 Volatility Index (VIX) have grown in volume and assets under management in recent
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Isolating the Effect of Day-Count Conventions

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2012-05-01

Day-count conventions are a ubiquitous but often overlooked aspect of interest-bearing investments. While many market traded securities have adopted fixed or
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Optimizing Portfolio Liquidation Under Risk-Based Margin Requirements

Published in the Journal of Finance and Investment Analysis, 2(1): 121-153, 2013.

By Geng Deng, Tim Dulaney, and Craig McCann 2012-04-06

This paper addresses a situation wherein a retail investor must liquidate positions in her portfolio -- consisting of assets and European options on those assets --
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A Primer on Non-Traded REITs and other Alternative Real Estate Investments

Published in the Alternative Investment Analyst Review, 2014.

By Tim Husson, Craig McCann, and Carmen Taveras 2012-03-07

In this paper we provide a brief overview of the ways to achieve real estate exposure and focus our analysis on alternative real estate investments. The term
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CLOs, Warehousing, and Banc of America's Undisclosed Losses

By Tim Husson, Craig McCann, and Olivia Wang 2012-01-31

Collateralized Loan Obligations (CLOs) are issued by trusts which in turn invest the proceeds from issuing the CLO securities in portfolios of bank loans. This note
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Valuing Partial Interests in Trusts

By Geng Deng, Tim Husson, and Craig McCann 2011-12-15

The financial interests of a trust's beneficiaries are often diametrically opposed and conflict among trust beneficiaries is common. Although applicable law
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Rethinking the Comparable Companies Valuation Method

By Paul Godek, Craig McCann, Dan Simundza, and Carmen Taveras 2011-11-01

This paper studies a commonly used method of valuing companies, the comparable companies method, also known as the method of multiples. We use an intuitive
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The Properties of Short Term Investing in Leveraged ETFs

Published in the Journal of Financial Transformation, Fall 2012, Journal 35.

By Geng Deng and Craig McCann 2011-07-26

The daily returns on leveraged and inverse-leveraged exchange-traded funds (LETFs) are a multiple of the daily returns of a reference index. Because LETFs rebalance
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The VXX ETN and Volatility Exposure

Published in the PIABA Bar Journal, Vol. 18, No. 24, pp. 235-252.

By Tim Husson and Craig McCann 2011-06-16

Exposure to the CBOE Volatility Index (VIX) has been available since 2004 in the form of futures and since 2006 in the form of options, but recently new
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Modeling Autocallable Structured Products

Published in the Journal of Derivatives & Hedge Funds 17, 326-340 (November 2011).

By Geng Deng, Joshua Mallett, and Craig McCann 2011-03-15

Since first introduced in 2003, the number of autocallable structured products in the U.S. has increased exponentially. The autocall feature immediately converts
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Futures-Based Commodities ETFs

Published in The Journal of Index Investing, Summer 2011, Vol. 2, No. 1: pp. 14-24.

By Ilan Guedj, PhD, Guohua Li, PhD, and Craig McCann, PhD 2011-01-28

Commodities Exchange Traded Funds (ETFs) have become popular investments since first introduced in 2004. These funds offer investors a simple way to gain exposure
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Leveraged Municipal Bond Arbitrage: What Went Wrong?

Published in The Journal of Alternative Investments, Spring 2012, Vol. 14, No. 4: pp. 69-78.

By Geng Deng and Craig McCann 2010-10-25

In this article, we explain that, while marketed as an arbitrage strategy, the leveraged municipal bond strategy was simply an opaque high-cost, highly leveraged
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Auction Rate Securities

By Craig McCann and Edward O'Neal 2010-10-22

Auction Rate Securities (ARS) were marketed by broker-dealers to investors, including individuals, corporations and charitable foundations as liquid, short-term,
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Leveraged ETFs, Holding Periods and Investment Shortfalls

Published in the Journal of Index Investing, Winter 2010, Vol. 1, No. 3: pp. 45-57.

By Ilan Guedj, Guohua Li, and Craig McCann 2010-08-09

Leveraged and Inverse Leveraged ETFs replicate the leveraged or the inverse of the daily returns of an index. Several papers have established that investors who
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The Anatomy of Principal Protected Absolute Return Notes

Published in the Journal of Derivatives, Vol. 19, No. 2, pp. 61-70, 2011

By Geng Deng, Ilan Guedj, Joshua Mallett, and Craig McCann 2010-07-30

Principal Protected Absolute Return Barrier Notes (ARBNs) are structured products that guarantee to return the face value of the note at maturity and pay interest
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What TiVo and JP Morgan teach us about Reverse Convertibles

By Geng Deng, Craig McCann, and Edward O'Neal 2010-06-22

Reverse convertibles are short term, unsecured notes issued by brokerage firms including JP Morgan, Barclays, Citigroup, Morgan Stanley, Wachovia, Lehman Brothers,
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The Risks of Preferred Stock Portfolios

By Guohua Li, Craig McCann, and Edward O'Neal 2010-06-02

Preferred stocks are a hybrid of debt and equity. In this paper, we examine preferred stocks with an emphasis on the risks of holding portfolios of preferred
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Oppenheimer Champion Income Fund

By Geng Deng and Craig McCann 2010-05-14

During the second half of 2008, Oppenheimer's Champion Income Fund lost 80% of its value - more than any other mutual fund in Morningstar's high-yield bond fund
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What Does a Mutual Fund's Term Tell Investors?

Published in the Journal of Investing, Summer 2011, Vol. 20, No 2: pp. 50-57.

By Geng Deng, Craig McCann, and Edward O'Neal 2010-04-14

In a previous article, we highlighted a flaw in the average credit quality statistic frequently reported by bond mutual funds. That statistic understates the credit
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What Does a Mutual Fund's Average Credit Quality Tell Investors?

Published in the Journal of Investing, Winter 2010, Vol. 19, No. 4: pp. 58-65.

By Geng Deng, Craig McCann, and Edward O'Neal 2009-11-30

The SLCG study explains that the Average Credit Quality statistic as typically calculated by the mutual fund companies and by Morningstar significantly overstates
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Structured Products in the Aftermath of Lehman Brothers

By Geng Deng, Guohua Li, and Craig McCann 2009-11-04

SLCG's prior research showed that structured products were poor investments because they were significantly overpriced when offered and were, at best, thinly traded
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Charles Schwab YieldPlus Risk

By Geng Deng, Edward O'Neal, and Craig McCann 2009-07-20

From June 2007 through June 2008, investors in YieldPlus (SWYSX and SWYPX) lost 31.7% when other ultra short bond funds had little or no losses. Schwab had marketed
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Regions Morgan Keegan: The Abuse of Structured Finance

By Craig McCann 2009-01-20

Investors in six Regions Morgan Keegan (RMK) bond funds lost $2 billion in 2007. The RMK funds held concentrated holdings of low-priority tranches in structured
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An Economic Analysis of Equity-Indexed Annuities

By Craig McCann 2008-09-11

At the request of the North American Securities Administrators Association, Dr. McCann authored a White Paper on equity-indexed annuities in support of the SEC's
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A CMO Primer: The Law of Conservation of Structured Securities Risk

By Craig McCann 2007-06-30

The collapse of Brookstreet Securities and bailout of two Bear Stearns hedge funds have focused attention on collateralized mortgage obligations (CMOs). These
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Closed-end Fund IPOs

By Edward O'Neal 2007-06-29

Dr. O'Neal describes a pattern of consistent losses relative to NAV observed after the IPO of closed end funds. Closed-end funds IPO at a 5% premium to their NAVs
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Corporate and Municipal Bonds

By Michael Piwowar 2007-06-28

Corporate and municipal bonds are substantially more expensive for retail investors to trade than similar-sized trades in common stocks. Trading costs including
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Mandatory Arbitration of Securities Disputes

By Edward O'Neal and Dan Solin 2007-06-13

Dr. O'Neal and attorney/author Dan Solin today released a statistical analysis of the results of the mandatory arbitration process during the 1995 - 2004 period.
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Are Structured Products Suitable for Retail Investors?

By Craig McCann and Dengpan Luo 2006-12-02

Equity-linked notes - a type of structured product - are securities issued by brokerage firms and traded in the secondary markets like shares of common stock. These
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An Overview of Equity-Indexed Annuities

By Craig McCann and Dengpan Luo 2006-06-01

Equity-indexed annuities are complex investments sold by insurance companies that pay investors part of the capital appreciation in a stock index and guarantee a
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Annuities

By Craig McCann and Kaye A. Thomas 2005-12-10

Regulatory scrutiny of variable annuity sales practices and private litigation have focused on the investment risk of subaccounts, on annuity 'switching' and on the
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Optimal Exercise of Employee Stock Options and Securities Arbitrations

By Craig McCann and Kaye A. Thomas 2005-06-01

In this paper, Craig McCann and Kaye Thomas extend previous analyses of employee stock options and evaluate advice to hold unexercised
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Concentrated Investments, Uncompensated Risk and Hedging Strategies

By Craig McCann and Dengpan Luo 2004-12-01

In this paper, Dr. McCann and Dr. Luo explore the risk of holding concentrated investments and explain and evaluate risk management
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The Use of Leveraged Investments to Diversify a Concentrated Position

Published in the Securities Arbitration 2004 Handbook PLI.

By Craig McCann and Dengpan Luo 2004-06-01

Brokerage firms recently recommended that investors holding a concentrated position in a single stock borrow and invest in a portfolio of additional stocks to
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Mutual Fund Share Classes and Conflicts of Interest between Brokers and Investors

By Edward O'Neal 2003-12-24

Dr. O'Neal describes the various mutual fund share classes and explains how differences in commissions to brokers and costs to investors across share classes can
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Churning - Revisited: Trading Cost and Control

Published in the Securities Arbitration 2003 Handbook PLI.

By Craig McCann and Dengpan Luo 2003-09-01

In a previous paper, Dr. McCann outlined the portfolio approach to assessing the excessiveness of trading in churning cases. In this paper, Dr. McCann and Dr. Luo
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Detecting Personal Trading Abuses

By Craig McCann 2003-06-01

Recent actions by the New York State Attorney General have highlighted abusive personal trading practices by mutual fund portfolio managers. In this paper, Dr.
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Securities Class Action Lawsuits

By Craig McCann, Ph.D., CFA 2002-12-01

Investors sometimes sue publicly traded companies, executives, accountants and underwriters alleging that important information concerning the companies was omitted
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The Suitability of Exercise and Hold

By Craig McCann and Dengpan Luo 2002-06-01

Hundreds of lawsuits are currently working their way through the courts and arbitration panels over a strategy referred to as exercise and hold. The advice to
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Churning

By Craig McCann 2001-12-01

In this paper, Dr. McCann improves upon traditional indicators of churning and demonstrates that, properly calculated, the trading costs estimate of damages closely
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Bid-Ask Spread, Sales Credits and Brokers' Compensation

By Craig McCann and Richard G. Himelrick 2001-06-01

In this working paper, co-authored with Richard Himelrick, Esq., Dr. McCann explains the role of market makers and the provision of sales credits as a basis for
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McCann On Trading Models

By Craig McCann 2000-06-01

Stock trading models are used by economists to estimate damages in securities class action lawsuits. In this note, we explain the three types of models used by
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