NBER Publications by Eli Ofek

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Working Papers and Chapters

January 2003Limited Arbitrage and Short Sales Restrictions: Evidence from the Options Markets
with Matthew Richardson, Robert F. Whitelaw: w9423
In this paper, we investigate empirically the well-known put-call parity no-arbitrage relation in the presence of short sale restrictions. We use a new and comprehensive sample of options on individual stocks in combination with a measure of the cost and difficulty of short selling, specifically the spread between the rate a short-seller earns on the proceeds from the sale relative to the standard rate (the rebate rate spread). We find that violations of put-call parity are asymmetric in the direction of short sales constraints, their magnitudes are strongly related to the rebate rate spread, and they are maintained even in the presence of transactions costs both in the options and equity lending market. These violations appear to be related to both the maturity of the option and the level...
December 2001DotCom Mania: The Rise and Fall of Internet Stock Prices
with Matthew Richardson: w8630
This paper provides one potential explanation for the rise, persistence and eventual fall of internet stock prices. Specifically, we appeal to a model of heterogenous agents with varying degrees of beliefs about asset payoffs who are subject to short sales constraints. In this framework, it is possible that 'optimistic' investors overwhelm 'pessimistic' ones, leading to prices not reflecting fundamental values about cash flows summarized by aggregate beliefs. Empirical support for this explanation is provided by exploring the behavior of internet stock prices during the period January 1998 to November 2000. In particular, we document four important elements to our story: (i) the high level of internet stock prices given their underlying fundamentals, (ii) responses of stock prices to a shi...
July 1995Leverage, Investment, and Firm Growth
with Larry Lang, Rene M. Stulz: w5165
We show that there is a negative relation between leverage and future growth at the firm level and, for diversified firms, at the segment level. Further, this negative relation between leverage and growth holds for firms with low Tobin's q, but not for high-q firms or firms in high-q industries. Therefore, leverage does not reduce growth for firms known to have good investment opportunities, but is negatively related to growth for firms whose growth opportunities are either not recognized by the capital markets or are not sufficiently valuable to overcome the effects of their debt overhang.

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info


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