Blog

Our experts frequently write blog posts about the findings of the research we are conducting.

Displaying 81-90 out of 156 results for "JOBS Act".

Municipal Bonds Trading in ETFs

(Aug 2013)

About a month ago, we spent a full week highlighting research conducted at our firm that shows the degree to which investors are harmed by excessive markups in municipal bond trading. In the paper, our colleagues argue that low-cost improvements in disclosure requirements could largely eliminate these transfers of wealth from taxpayers and investors to the brokerage industry.

After the research was completed, we began thinking about other ways investors gain exposure to municipal bonds. For...

Why Banks Are Storing Physical Commodities, and Why it May Matter

(Jul 2013)

Physical commodities -- barrels of oil, bars of gold, bushels of wheat, etc. -- are used for a variety of industrial purposes, but can also be bought and sold in financial markets. Most commodities trading involves futures contracts, as trading the physical commodity itself involves transportation and storage costs. Traditionally, banks who traded commodities were only allowed to deal in derivatives such as futures contracts, rather than dealing in the physical commodity itself.

But since the...

Misrepresentation of Asset Quality in RMBS

(Jul 2013)

Investors in Residential Mortgage Backed Securities (RMBS) have suffered tremendous losses since 2007. Many junior and mezzanine investors were wiped out by the asset pools' delinquency rates coupled with the subordination embedded in these structured securities. Since then, there has been a proliferation of litigation alleging that the underwriters and originators of RMBS misrepresented the risks of these products. An interesting new paper by Professors Piskorski and Witkin of Columbia...

VelocityShares' New Volatility ETFs

(Jul 2013)

You've heard it here before: hedging equity exposure with volatility derivatives is very tricky.

While the CBOE Volatility Index (VIX) and the S&P 500 are negatively correlated suggesting a possible hedging opportunity, you cannot invest in the VIX itself, you have to invest in derivatives (futures or options) linked to the VIX. The simple fact is that this indirect exposure to the VIX does not behave like the VIX itself, making it in the end a rather poor hedge to equities .

But issuers of...

Structured Investments Linked to Proprietary Indices

(Jun 2013)

Structured products are often linked to well known indices like the S&P 500 or the Dow Jones Industrial Average, but recently it has become more and more common for banks to issue structured investments linked to proprietary indices that they create themselves. The use of proprietary indices (also known as 'self-indexing') has begun to arouse suspicion from various sources and so we thought we'd take a step back and talk about the issue for a moment.

Structured products linked to well-known...

Muni Markup Week Wrap Up

(Jun 2013)

Last Friday evening we posted a comprehensive report on municipal bond mark-ups. This week we've had several posts covering topics within our report. We're wrapping up the week with an example which illustrates some of our observations.

In February 2005 the City of Carlsbad issued $33,085,000 in tax exempt bonds underwritten by a Stone & Youngberg. This small San Francisco-based brokerage firm specialized in municipal finance and was recently bought by Stifel Nicholas. The Offering Circular...

Markup Calculation Methodology

(Jun 2013)

Our study looks at markups and markdowns implied by EMMA trade data. My colleagues have shown an example of how we calculate the markups, but I wanted to illustrate the methodology used to handle the more complex cases that arose when analyzing the trade data.

There were effectively four cases that we needed to address. The first case occurs when inter-dealer trades occur on the same business day as the customer trade. In that case we computed the volume weighted average price (VWAP) of the...

Alternative Ways to Gain Municipal Bond Exposure

(Jun 2013)

We've been covering municipal bonds, with a focus on markups, this week on the blog. So far we've discussed some basics, given an example of an excessive markup and introduced SLCG research on excessive markups in municipal bonds . Given that retail investors may be charged excessive markups when purchasing municipal bonds directly, it may make sense for them to purchase municipal bonds indirectly.

Jason Zweig has written a great follow-up to his coverage of the muni markups issue with a...

An Example of an Excessive Muni Markup

(Jun 2013)

This week we've been discussing excessive markups in the municipal bond market. Now that we've outlined what excessive markups are, you might be wondering what such markups actually look like in the EMMA data.

The following figure shows the October 6, 2009 EMMA trading activity in a $6.54 million State of California municipal bond issued in 2009. A customer purchased $1,000,000 of the issue at $113.80, paying $3.507 more than the average inter-dealer price for trades of similar size that...

Retail Investors and the Municipal Bond Market

(Jun 2013)

This week, we will be discussing the buying and selling of municipal bonds by brokers on behalf of retail investors. But to start, let's address some basic questions about the municipal bond market.

What are municipal bonds and how are they traded?

Municipal bonds are simply bonds issued by a state and local government or authorities. Municipal bonds can be general obligation bonds, meaning they are not used to fund specific projects, or they could be issued to finance a new highway, a public...

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