Do asset fire sales exist? An empirical investigation of commercial aircraft transactions

Article Abstract:

This paper uses commercial aircraft transactions to determine whether capital constraints cause firms to liquidate assets at discounts to fundamental values. Results indicate that financially constrained airlines receive lower prices than their unconstrained rivals when selling used narrow-body aircraft. Capital constrained airlines are also more likely to sell used aircraft to industry outsiders, especially during market downturns. Further evidence that capital constraints affect liquidation prices is provided by airlines' asset acquisition activity. Unconstrained airlines significantly increase buying activity when aircraft prices are depressed; this pattern is not observed for financially constrained airlines. (Reprinted by permission of the publisher.)

Scheduled Air Transportation, Intnl & Territorial Air Service, Air Transportation, Scheduled, And Air Courier Services, Scheduled Passenger Air Transportation, Air transportation, scheduled, Domestic Scheduled Air Service, Research, Marketing, Airlines, Domestic airlines, Liquidation, Discounts (Sales), Used aircraft

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Relative pricing of Eurodollar futures and forward contracts

Article Abstract:

Past research explains observed spreads between futures and forward Eurodollar yields as being due to the futures contract's mark-to-market feature. We derive closed form solutions for this yield spread and show that, theoretically, it should be small. Also, differences in liquidity, taxation, and default risk cannot account for the large spreads observed. We also present evidence that the spreads, which are nonnegligible primarily in the first half of the sample period, are likely to be attributable to the mispricing of futures contracts relative to the forward rates and that the mispricing was gradually eliminated over time. (Reprinted by permission of the publisher.)

Eurocurrency market, Futures

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