Oscar Varela

Oscar Varela

PhD Fin, MA Fin, MA & BS Econ
Emeritus Professor of Econ/Fin at Univ of Texas at El Paso, and Emeritus Professor of Fin at Univ of New Orleans

About

69
Publications
12,352
Reads
How we measure 'reads'
A 'read' is counted each time someone views a publication summary (such as the title, abstract, and list of authors), clicks on a figure, or views or downloads the full-text. Learn more
708
Citations
Additional affiliations
August 2007 - July 2021
The University of Texas at El Paso
Position
  • Chair
August 2007 - present
University of New Orleans
Position
  • Professor Emeritus
May 1980 - May 1982
Colorado State University
Position
  • Professor (Assistant)
Education
August 1978 - May 1981
University of Alabama
Field of study
  • Finance

Publications

Publications (69)
Article
Full-text available
Methods to evaluate capital projects under conditions of risk are applied to the acquisition of human capital in organizations, administrations and international relations. These acquisitions in the former two cases depend on the expected value of the acquisition relative to its risk, its correlation with the existing portfolio of human capital in...
Book
Full-text available
This book aims to integrate the concepts of book value, market value and increases in market value in the valuation of the firm. These are fundamental concepts in the literature of finance, and yet address a broad set of concerns for finance professionals, such that an integration of the sort provided in this book can provide synergistic value in h...
Research
Full-text available
I generalize Modigliani-Miller's (1958, 1963) capital structure theory, showing within it a theory for human capital's capital structure that is also more nuanced than for physical capital. This paper integrates Becker's (1962) view of education and Alchian's (2006) on its financing, to considers various scenarios on the tax deductibility of the de...
Article
This paper proposes duration‐adjusted betas for the three‐factor model betas that include risk associated with the firm's dividend policy. It extends Varela (Journal of Portfolio Management, 41, 2015, 122) who shows dividend policy as relevant to the stock's risk even in perfect markets, because the stock's duration is lower when cash dividends are...
Article
This study finds that changes in total factor productivity (TFP) serve as one of the drivers behind the asset growth effect. Firms increase (decrease) assets when there is an increase (decrease) in TFP. And increases (decreases) in TFP also cause corresponding increases (decreases) in earnings and returns. Subsequently, changes in TFP reverse, whic...
Article
Purpose This paper aims to examine the effects of lines of credit on a firm’s market timing behavior and the pricing of its seasoned equity offerings (SEOs). It shows that firms with lines of credit are more likely to time the equity market and receive less underpricing for their SEOs. It also shows that the propensity of firms with lines of credi...
Article
Purpose This study aims to investigate the effect of product market competition on the exposure of firms’ returns to consumption fluctuations (C-CAPM beta). Design/methodology/approach The C-CAPM beta comes from a regression of a stock’s returns against consumption growth, with controls for the Fama–French three factors and momentum. The Herfindah...
Article
Purpose This study examines the effects of product market competition on capital spending (investments) financed by cash flow, and the role of financial constraints on these effects. Design/methodology/approach The Herfindahl-Hirschman index of concentration measures competition. Earnings retention, working capital, the Kaplan and Zingales (1997...
Article
This paper extends Jensen and Meckling's agency cost theory. A clockwise rotation of their budget constraint represents better performance by agents compared to owners and higher firm values. This extension incorporates Alchian and Demsetz's view of the firm, wherein firm values increase when managers are employed. It is then sub-optimal for owner-...
Article
This study finds that competition increases idiosyncratic volatility relative to systematic volatility. Market power facilitates passing on firm specific cost shocks to customers but is irrelevant to passing on market cost shocks. A firm's competitive advantage in an industry is also more affected by changes in firm specific costs when there are ma...
Article
We use Jensen, Treynor and Mazuy, and Henriksson and Merton methodologies, controlled for Carhart four factors and bootstrapped standard errors, with daily and monthly data to examine whether managers of U.S. funds largely invested in China can market time based on the Chinese stock market. We find for our 27 mutual and 8 closed end funds that U.S....
Article
This article addresses the dividend puzzle in the corporate finance literature. It extends existing literature that shows that dividends aren't merely puzzling - they matter for the stock's duration. Treating stocks as a portfolio of dividends and terminal cash flows, the author shows that the durations of dividends and terminal values are not perf...
Article
Older, more experienced and smaller U.S. venture capital firms are most probable to sacrifice proximate distance for new opportunities in foreign, and mostly mature, portfolio companies. These companies are treated differently than the domestic ones, as U.S. venture capital firms collaborate with and delegate monitoring to foreign partners, rather...
Article
Full-text available
JEL classification – G12 – Asset Pricing, G14 – Information and Market Efficiency, G24 – Investment BankingThe authors are grateful to an anonymous referee and Dr Susana Yu (a Guest Editor of Managerial Finance) for valuable suggestions that significantly improved the paper. The authors also wish to thank participants during conference presentation...
Article
Full-text available
Time value of money is a must topic in fundamentals of finance courses. The topic usually begins with a basic illustration of the inter-temporal effects of interest compounding. It evolves into present and future values, including for ordinary annuities and annuity dues, and their amortization schedules. The discussion of interest rate compounding...
Article
Full-text available
Normal trade in goods assumes two sectors that co-exist for reasons such as comparative advantage and interact via trade. Arbitrage trade in goods assumes two markets that artificially exist and converge via trade. Restoration of the law of one price via arbitrage creates one sector out of two, and in general equilibrium, equalizes opportunity cost...
Article
Full-text available
We examine bilateral US- and Thailand-based equity portfolios around the 1997 baht crisis using an extreme value framework for safety-first (SF) portfolio optimisation, with comparisons to the Markowitz mean-variance minimum variance portfolio (MVP). The optimal SF portfolio is invested 100 per cent in the US regardless of the periods considered wh...
Article
Predictability and exploitability of daily anomalies in returns for US-based international mutual funds is this paper's focus. Market timing strategies examined include simple weekend, complex weekday, and restricted weekend strategies, and those related to serial correlation in foreign indexes. All are compared to a buy-and-hold strategy, are adju...
Article
We examine the post-Initial Public Offering (IPO) role of Venture Capitalists (VCs) in their portfolio companies' failures, employing a LOGIT analysis of a matched pair sample of defunct and successful VC-backed companies, and an Ordinary Least Square (OLS) analysis of the lifespan of the defunct set. We find that the reputation and experience of V...
Article
Full-text available
Abstract Purpose – The purpose of this paper is to apply safety-first portfolio principles in an environment where financial risk exists because of the probability of terrorist attacks, where the catastrophic events of September 11, 2001 (911) are the focal point of the analysis. Design/methodology/approach – Safety-first portfolios of US equities...
Article
High volatility can motivate safety-first portfolio optimization in emerging markets. Mexico is a case in point, as the December 1994 Mexico peso crisis followed the high positive expectations from the ratification of NAFTA earlier that year. This study examines safety-first and extreme value optimization for bilateral U.S.–Mexican portfolios in U....
Article
This paper examines for international capital market segmentation by testing for changes (both inter-temporally and inter-beta) in the parameters of the riskreturn pricing relationship caused by the listing of US stocks on the London Stock Exchange (LSE) between 1965 and 1987. It is hypothesized that international listings reduce the negative effec...
Article
The role of venture capitalists to distress and bankruptcy in their publicly traded portfolio firms between 1990-2004 is the focus of this paper. A LOGIT analysis on the full sample of 180 VC-backed firms that declared bankruptcy and 180 VC-backed and non-bankrupt healthy matching firms examines the probability of success/failure of public VC-backe...
Article
Full-text available
The paper examines the size effect reversal in the USA over the period 1970-1999, using data for the ten size deciles in the CRSP tapes during this 40-year period. Betas for small-firm portfolios increase as the return interval analysed increases, and are lower than large-firm portfolios for daily data but higher for monthly and quarterly data. Dif...
Article
Full-text available
The weekend effect is described as the tendency for Monday security returns to be low (or negative) compared to other days of the week. The weekend effect may not be exploited by trading individual stocks because of transactions costs. However, the institutional characteristics of the US-based international open-end mutual funds may allow investors...
Article
Risk averse US investors with safety-first objectives in portfolio optimization hold small weights (maximum 10%) in emerging markets when constructing portfolios of the Standard and Poor's 500 (SP), and the Emerging Markets Composite Global (CG), Asia (AS) and Latin American (LA) indexes, respectively. The Composite Global and Asia weights are even...
Article
This study examines the pre- and post-privatization financial and operating performance of 208 firms privatized in China during the period 1990-97. The full sample results show significant improvements in real output, real assets, and sales efficiency, and significant declines in leverage following privatization, but no significant change in profit...
Article
This research examines the relation between state equity ownership and firm market performance for China's newly privatized firms in 1994 (164 firms), 1995 (175 firms), and 1996 (252 firms). The overall results show that state ownership has a negative effect on firm value. Tobin's Q is convex with respect to state ownership, such that newly privati...
Article
Full-text available
Average returns for small firm size portfolios tend to decrease during the week in January, with Monday returns highest and Friday lowest. More striking are the results after controlling for Mondays and Fridays in the first and the last 3 weeks of January. Monday returns in this first week are significantly positive and inversely related to size. M...
Article
The relation between various ownership types and performance measures for 1036 firms in China is examined. State owned enterprises (SOE) are consistently less profitable than mixed enterprises (ME), collective owned enterprises (COE), joint ventures (JV), and foreign owned enterprises (FOE). The SOEs and FOEs are also less productive than MEs, COEs...
Article
The net asset values for Asian-country mutual funds in the US come from the underlying market's close a half-day earlier and create inefficiencies that improve returns 6 to 12 times in a pure sense. While these are mitigated because of loads, restrictions on trading and fair value pricing, informational biases exist in trading such funds. These can...
Article
The relation between various ownership types and performance measures for 1036 firms in China is examined. State owned enterprises (SOE) are consistently less profitable than mixed enterprises (ME), collective owned enterprises (COE), joint ventures (JV), and foreign owned enterprises (FOE). The SOEs and FOEs are also less productive than MEs, COEs...
Article
Full-text available
This studv investigates the stabilit);. volatility. risk premiums. and persistence ()(volatility in the standardi::ed /988-98 exchange-converted US. dollar equity returns of Argentina. Bra::il. Chile. l'olumhia. Mexico. Peru. and r "ene::uela. All markets. except Argentina. Colombia. and Mexico. have time-varying risk premiums. indicative of risk...
Article
Full-text available
This study investigates the stability, volatility, risk premiums, and persistence of volatility in the standardized 1988-98 exchange-converted U. S. dollar equity returns of Argentina, Brazil, Chile, Columbia, Mexico, Peru, and Venezuela. All markets, except Argentina, Colombia, and Mexico, have time-varying risk premiums, indicative of risk aversi...
Article
This article examines the relation between 15-, 30-, 45-, and 60-day gold, silver, and copper futures, and their realized cash or delivery settle prices, for deliveries on the first, middle, and last business day (FD, MD, and LD, respectively) of the delivery month. Samples of futures prices for gold, silver, and copper, and the realized cash or de...
Article
Full-text available
This study compares and contrasts the single factor, three factor, macrovariable and APT models, using industry portfolios of all available firms on CRSP from 1980 to 1992. Comparatively, the APT is best, macrovariable second best and single factor model worse in pricing securities. Consistently, the market variable is cross sectionally priced in a...
Article
Full-text available
This paper studies the exchange rate exposure of investments by the United States, Japan and Germany in the London International Stock Exchange (LSE) from 1982 to 1991. Japanese and German investments are fully exposed to their own exchange rates, and the US is “supernominally” exposed to its own exchange rate. No significant changes in exposure ar...
Article
This paper simulates forward hedging of foreign exchange risks for U.S. investments in U.K., German and French equities. Rolling OLS and SUR regressions are used to obtain monthly exposure coefficients (hedge ratios), and the micro-market mechanics of the exchange rate bid-ask spread are considered throughout. While the coefficient of variation fav...
Article
Full-text available
The specification and power of mean-adjusted, market and quadratic models in event studies using OLS, Patell, Jaffe and GLS are examined. Simulation is used with security and portfolio returns to capture different cross correlations. The market model is always superior in specification and power compared to the mean-adjusted and quadratic models. T...
Article
By comparing the operating performance (ROE) between a group of firms with proxy contests for control and a matching group of no-contest firms, this study concludes that contest firms generally underperformed matching firms in both pre- and post-contest periods. Lower profit margins of contest firms appear to be the major cause of underperformance....
Article
Full-text available
The effects of a proxy contest for control on a company are examined in this paper over a short, intermediate and long-term post-contest period of time. Major findings are as follows. First, compared to a non-contest matchinggroup of firms, proxy contest for control firms as a whole are poor performers in the immediate post-contest period. Successf...
Article
This paper utilizes a general equilibrium approach to investigate the factor returns and output effects on a regulated and unregulated sector from imposition of a rate of return on investment regulatory constraint. The results differ from those of the ‘traditional’ partial equilibrium model of the regulated firm as originally developed by Averch an...

Network

Cited By