In the present paper, by applying the theory of stochastic processes and interacting particle systems and models, including stopping time theory and stochastic voter model, we model a financial stock price model that contains two types of investors, and we use this financial model to describe the behavior and fluctuations of a stock price process in a stock market. In the financial model, besid...

The old adage about putting all of one’s eggs in one basket was thought wise long before the advent of modern portfolio theory and the important results of Markowitz (1959) and others. However, despite the anecdotal imperative to investors to diversify their portfolios, the empirical reality is that diversification rarely takes place as recommended by portfolio theory. In this paper, I demonstr...

We examine the relation between stock price performance and the identity of the investors buying the shares in private placements of equity. We find that although the shareholders not participating in the placement experience post-issue negative long-term abnormal returns, the participating investors purchase the shares at a discount and earn normal returns. For the non-participating investors,...

This paper presents an empirical analysis of whether independent and dependent private equity investors affect the underpricing of firms which went public on the Nouveau Marché and on the Neuer Markt between 1997 and 2000. In the sample of the Neuer Markt, the involvement of private equity investors reduces the underpricing of the firms' shares only if private equity investors sell a part of th...

Using a data set for 162 largest Hungarian firms during the period of 1994-1999 this paper explores the determinants of equity shares held by foreign investors and by Hungarian institutional investors.. We find evidence of a post-privatisation evolution towards more homogeneus equity structures, where dominant categories of owners aim at achieving controlling stakes. Here, the foreign investors...

This chapter provides an empirical analysis of interactions between FDI flows and domestic investment in capacity. As a motivation for the empirical analysis, I provide highlights of a new theory of FDI. The theory captures unique feature: hands-on management standards, that enable investors to react in real time to ongoing changes in the economic environment, which surrounds investors. Equippe...

Using a large sample of institutional investors’ private equity investments in venture and buyout funds, we estimate the extent to which investors’ skill affects returns from private equity investments. We first consider whether investors have differential skill by comparing the distribution of investors’ returns relative to the bootstrapped distribution that would occur if funds were randomly ...

We study multi-period trading strategies of institutional investors who plan to trade the same security during some finite time horizons. Investors who trade large volumes face a price impact that depends on their trading volumes simultaneously, and is usually represented as a function, the so called price-impact function. We show through a numerical example that a trading strategy, optimal for...

This paper examines the relation between the choice of the destination market for cross-listing and the home bias of investors. We use two measures of home bias, the domestic bias (the degree of overinvestment in the home market), and the foreign bias (the degree of over-/underinvestment in a foreign market). First, we find a strong relation between the domestic bias of investors and cross-list...

The paper discusses a theory of FDI, which captures a unique feature: hands-on management standards to react in real time to a changing economic environment in the firms that FDI investors gain control. Equipped with superior managerial skills, foreign direct investors outbid portfolio investors for the top productivity firms in a particular industry in which they have specialized in the source...