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Research Papers

Our experts have published extensively in peer-reviewed journals. Pre-publication versions of these papers plus other working papers are available below.

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Puerto Rico Securities Arbitration Settlements and Awards Likely to Exceed $1.25 Billion (Updated May 15, 2019)

By: Craig McCann, Edward O'Neal, Chuan Qin and Mike Yan

SLCG releases its updated Puerto Rico Securities Arbitration Report showing over $600 million paid out so far in settlements and awards with a similar amount likely to be paid out in coming years as a result of brokerage firm customers losses in Puerto Rico.

Reporte de Arbitrajes de Valores en Puerto Rico: entre Acuerdos Transaccionales y Laudos Arbitrales seguramente se excederá de $1.25 billon (15 de may de 2019)

By: Craig McCann, Edward O'Neal, Chuan Qin and Mike Yan

SLCG publica su Informe de Arbitraje de Valores de Puerto Rico actualizado que muestra más de $600 millones pagados hasta el momento en acuerdos y adjudicaciones con una cantidad similar que probablemente se pagará en los próximos años como resultado de las pérdidas de clientes de la firma de corretaje en Puerto Rico.

Rating Brokerage Firms by Their Complaint Histories Rather Than by Their Brokers' Histories

By: Craig McCann, Chuan Qin and Mike Yan

In our previous research, we ranked brokerage firms based on the proportion of their brokers on December 31, 2015 who had been associated with at least one resolved customer complaint. That approach assigns a higher ranking to a firm if a larger proportion of its current brokers have one or more resolved customer complaint in their career, regardless whether the complaints occurred at their current employer or at a prior employer.

Our new research ranks brokerage firms based on the...

Puerto Rico Securities Arbitration Settlements and Awards Sure to Exceed $1 Billion (Updated November 15, 2018)

By: Craig McCann, Edward O'Neal, Chuan Qin and Mike Yan

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 and to fund an unsustainable government deficit caused Puerto Rico tax exempt bond prices to fall substantially.

Puerto Rico brokerage firms' customers held poorly diversified securities accounts, concentrated in Puerto Rico municipal bonds or closed end funds that held leveraged portfolios of Puerto Rico municipal bonds. Often these...

Reporte de Arbitrajes de Valores en Puerto Rico: 2,983 Reclamaciones, $470 millones en Acuerdos Transaccionales y Laudos Arbitrales Hasta la fecha (07 de septiembre de 2018)

By: Craig McCann, Chuan Qin y Mike Yan

SLCG publica su Informe de Arbitraje de Valores de Puerto Rico actualizado que muestra más de $600 millones pagados hasta el momento en acuerdos y adjudicaciones con una cantidad similar que probablemente se pagará en los próximos años como resultado de las pérdidas de clientes de la firma de corretaje en Puerto Rico.

Structured Products and the Mischief of Self-Indexing

By: Geng Deng, Craig McCann and Mike Yan

In recent years, investment banks have issued structured products linked to indexes they create rather than just linking to standardized indexes from Standard & Poor's. In doing so, the issuers create additional difficulties for retail investors to understand these, sometimes complex, investments. We illustrate the potential conflicts of interest created with structured products linked to proprietary volatility indexes although the conflicts are present in other proprietary index based...

How Widespread and Predictable is Stock Broker Misconduct?

By: Craig McCann, Chuan Qin, and Mike Yan

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 with awards or settlements in excess of a threshold amount. Egan, Matvos, and Seru find that 7.8% of current and former brokers have financial misconduct disclosures including customer complaints, awards, and settlements.

We replicate and extend the analysis of broker misconduct in these studies. Qureshi and Sokobin arrive at...

Ex-post Structured Product Returns: Index Methodology and Analysis

By: Geng Deng, Tim Dulaney, Tim Husson, Craig McCann, and Mike Yan

The academic and practitioner literature now includes numerous studies of the substantial issue date mispricing of structured products but there is no large scale study of the ex-post returns earned by structured product investors. This paper augments the current literature by analyzing the ex-post returns of nearly 18,000 individual structured products issued by 13 brokerage firms since 2007. We construct our structured product index and sub-indices for reverse convertibles,...

Efficient Valuation of Equity-Indexed Annuities Under Lévy Processes Using Fourier-Cosine Series

By: Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan

Equity-Indexed Annuities (EIAs) are deferred annuities which accumulate value over time according to crediting formulas and realized equity index returns. We propose an efficient algorithm to value two popular crediting formulas found in EIAs - Annual Point-to-Point (APP) and Monthly Point-to-Point (MPP) - under general Lévy-process based index returns. APP contracts observe returns of referenced indexes annually and credit EIA accounts, subject to minimum and maximum returns. MPP contracts...

Crooked Volatility Smiles: Evidence from Leveraged and Inverse ETF Options

By: Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan

We find that leverage in exchange traded funds (ETFs) can affect the "crookedness" of volatility smiles. This observation is consistent with the intuition that return shocks are inversely correlated with volatility shocks - resulting in more expensive out-of-the-money put options and less expensive out-of-the-money call options. We show that the prices of options on leveraged and inverse ETFs can be used to better calibrate models of stochastic volatility. In particular, we study a...

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