Kenneth A. Froot
André R. Jakurski Professor of Business Administration (Leave of Absence)
Kenneth A. Froot is André R. Jakurski Professor of Business Administration at Harvard University's Graduate School of Business Administration. He teaches courses in Capital Markets, International Finance, and Risk Management. Previously, he served as Director of Research, and held the Industrial Bank of Japan Professorship in Finance and the Thomas Henry Carroll-Ford Foundation Visitor's Chair at Harvard. At MIT, he held the Ford International Development Chair. He has taught executive education programs at MIT, Harvard, Princeton, Dartmouth, and for corporations and institutions in addition to his regular teaching of MBAs and Ph.D.s. Professor Froot received his B.A. from Stanford University and his Ph.D. from the University of California at Berkeley. He spent the 1988-1989 academic year as an Olin Fellow at the National Bureau of Economic Research, where he is Research Associate and Chair of the NBER’s Insurance Group. His research on a wide range of topics in finance, risk management, and international markets has been published in many journals and books. He is Editor of the Journal of International Financial Management and Accounting, Associate Editor of the Journal of International Economics, and of The Financing of Catastrophe Risk, Foreign Direct Investment, and The Transition in Eastern Europe, Vols. 1 and 2. Professor Froot is a founding partner of FDO Partners, LLC and State Street Associates, firms producing investment and knowledge resources for global investors. Froot has worked with companies, countries, and official institutions, including the International Monetary Fund, the World Bank, and the Board of Governors of the Federal Reserve on international financial risk and investment management issues. He has also acted as a Financial Adviser to the Prime Minister of the Republic of Slovenia and to the Finance Minister of Poland, and served on the staff of the US President's Council of Economic Advisers and the Economic Advisory Board of the Export-Import Bank of the US.
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Article
| Journal of Portfolio Management
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How Institutional Investors Frame Their Losses: Evidence on Dynamic Loss Aversion from Currency Portfolios
Kenneth A. Froot, J. Arabadjis, S. Cates and S. Lawrence
Currency investors exhibit a tendency to cut risk by pairing both longs and shorts following losses and a weaker tendency to add risk following gains. By differentiating between position level, portfolio level, and aggregate cross-portfolio losses in currency investments, we demonstrate that this dynamic loss aversion spans multiple frames of reference. Losses are not compartmentalized; rather a loss in one currency may impact trading in another. We also show that while the impact of a loss on subsequent trading decisions does linger, the affect declines sharply after a losing position is closed.
Keywords: Loss aversion;
Decision Choices and Conditions;
Currency;
Investment;
Risk Management;
Behavioral Finance;
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Article
| Risk Management and Insurance Review
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The Intermediation of Financial Risks: Evolution in the Catastrophe Reinsurance Market
Kenneth A. Froot
In this paper, I provide evidence concerning the imperfections in the reinsurance market. I try to get at some of the root causes of these imperfections, e.g., the behavior of ratings firms and the agency problems associated with the corporate form of ownership. I also summarize the recent evolution of intermediation for catastrophic risk. A simple framework for an integrated theory of optimal financial policy for insurers and reinsurers is discussed. Finally, policy implications for intermediation of financial risks in view of evolving financial solutions for catastrophic risk are proposed.
Keywords: Catastrophe Risk;
corporate finance;
Banking and Insurance;
Hedging;
banking;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Cost of Capital;
Asset Pricing;
Insurance Industry;
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Article
| Journal of Financial and Quantitative Analysis
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Style Investing and Institutional Investors
Kenneth A. Froot and Melvyn Teo
This paper explores institutional investors' trades in stocks grouped by style and the relationship of these trades with equity market returns. It aggregates transactions drawn from a large universe of approximately $6 trillion of institutional funds. To analyze style behavior, we assign equities to deciles in each of five style dimensions: , value/growth, cyclical/defensive, sector, and country. We find, first, strong evidence that investors organize and trade stocks across style-driven lines. This appears true for groupings both strongly and weakly related to fundamentals (e.g., industry or country groupings versus size or value/growth deciles). Second, the positive linkage between flows and returns emerges at daily frequencies, yet becomes even more important at lower frequencies. We show that quarterly decile flows and returns are even more strongly positively correlated than are daily flows and returns. However, as the horizon increases beyond a year, we find that the flow/return correlation declines. Third, style flows and returns are important components of individual stock expected returns. We find that nearby style inflows and returns positively forecast future returns while distant style inflows and returns forecast negatively. Fourth, we find strong correlations between style flows and temporary components of return. This suggests that behavioral theories may play a role in explaining the popularity and price impact of flow-related trading.
Keywords: Forecasting and Prediction;
Behavioral Finance;
Stocks;
Investment Return;
Market Transactions;
Performance Expectations;
Personal Characteristics;
Financial Services Industry;
Citation: Froot, Kenneth A., and Melvyn Teo. " Style Investing and Institutional Investors." Journal of Financial and Quantitative Analysis 43, no. 4 (December 2008): 883–906. (Revised from: Equity Style Returns and Institutional Investor Flows, Harvard Business School Working Paper No. 04-048, June 2004.)
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Article
| Journal of Banking & Finance
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On the Pricing of Intermediated Risks: Theory and Application to Catastrophe Reinsurance
K. A. Froot and P. O'Connell
Keywords: Catastrophe Risk;
corporate finance;
Banking and Insurance;
Hedging;
banking;
Insurance;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Cost of Capital;
Asset Pricing;
Insurance Industry;
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Article
| Review of Financial Studies
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Institutional Portfolio Flows and International Investments
K. A. Froot and T. Ramadorai
Keywords: Loss aversion;
international investment;
Portfolio Investment;
Asset allocation;
Decision Choices and Conditions;
Currency;
Investment;
Risk Management;
Behavioral Finance;
Asset Pricing;
Citation: Froot, K. A., and T. Ramadorai. " Institutional Portfolio Flows and International Investments." Review of Financial Studies 21, no. 2 (April 2008): 937–971. (Formerly The Information Content of International Portfolio Flows, revised from NBER Working Paper No. 8472, September 2001, Harvard Business School Working Paper No. 03-006, 2002, revised December 2005.)
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Article
| Journal of Risk and Insurance
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Risk Management, Capital Budgeting and Capital Structure Policy for Insurers and Reinsurers
K. A. Froot
Keywords: Risk Management;
Capital Budgeting;
Cost of Capital;
Policy;
Insurance;
Asset Pricing;
Insurance Industry;
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Article
| Finance Research Letters
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Decomposing the Persistence of International Equity Flows
Kenneth A. Froot and J. Tjornhom Donohue
Keywords: asset pricing;
Equity Investment;
Forecasting and Prediction;
Behavioral Finance;
Stocks;
Investment Return;
Market Transactions;
Performance Expectations;
Personal Characteristics;
Financial Services Industry;
Citation: Froot, Kenneth A., and J. Tjornhom Donohue. "Decomposing the Persistence of International Equity Flows." Finance Research Letters 1, no. 3 (September 2004): 154–170. (Revised from NBER Working Paper no. 9079, July 2002, Harvard Business School Working Paper no. 03-005, July 2002.)
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Article
| Journal of Finance
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Currency Returns, Intrinsic Value, and Institutional Investor Flows
K. A. Froot and T. Ramadorai
Keywords: Currencies;
Exchange rates;
Purchasing power parity;
Real exchange rate;
Forecasting and Prediction;
Behavioral Finance;
Investment Return;
Market Transactions;
Performance Expectations;
Personal Characteristics;
Asset Pricing;
Financial Services Industry;
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Article
| Emerging Markets Review
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The Persistence of Emerging Market Equity Flows
K. A. Froot and J. Donohue
Keywords: asset pricing;
Equity Investment;
Forecasting and Prediction;
Behavioral Finance;
Stocks;
Investment Return;
Market Transactions;
Performance Expectations;
Financial Services Industry;
Citation: Froot, K. A., and J. Donohue. " The Persistence of Emerging Market Equity Flows." Emerging Markets Review 3, no. 4 (December 2002): 338–364. (Revised from NBER Working Paper no. 9241, HBS Working Paper no. 03-035, September 2002.)
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Article
| Geneva Papers on Risk and Insurance: Theory
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The Pricing of Event Risks with Parameter Uncertainty
K. A. Froot and S. Posner
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Insurance;
Decision choice and uncertainty;
Financial Markets;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
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Article
| Journal of Financial Economics
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The Market for Catastrophe Risk: A Clinical Examination
K. A. Froot
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Insurance;
Decision choice and uncertainty;
Financial Markets;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
Citation: Froot, K. A. " The Market for Catastrophe Risk: A Clinical Examination." Journal of Financial Economics 60, nos. 2-3 (May–June 2001): 529–571. (Revised from NBER Working Paper No. 8110, February 2001. Reprinted in The Economics of Natural Hazards, part of the International Library of Critical Writings in Economics series edited by Mark Blaug, Edward Elgar Publishing Limited, 2003.)
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Article
| Journal of Financial Economics
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The Portfolio Flows of International Investors
K. A. Froot, P. O'Connell and M. Seasholes
Keywords: asset pricing;
Equity Investment;
Forecasting and Prediction;
Behavioral Finance;
Stocks;
Investment Return;
Market Transactions;
Performance Expectations;
Personal Characteristics;
Financial Services Industry;
Citation: Froot, K. A., P. O'Connell, and M. Seasholes. " The Portfolio Flows of International Investors." Journal of Financial Economics 59, no. 2 (February 2001): 151–193. (Revised from NBER Working Paper No. 6687 and HBS Working No. Paper 99-006, July 1998. Summarized in the NBER Reporter, 2000. Reprinted in International Capital Markets, R. Stulz and A. Karolyi, eds. Edward Elgar Publishing, 2003.)
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Article
| Risk Management and Insurance Review
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The Evolving Market for Catastrophe Event Risk
K. A. Froot
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
Citation: Froot, K. A. " The Evolving Market for Catastrophe Event Risk." Risk Management and Insurance Review 2, no. 3 (fall 1999): 1–28. (Reprinted in Risk Management: The State of the Art, edited by S. Figlewski and R. Levich, Kluwer Academic Publishers, 2001.)
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Article
| Journal of Financial Economics
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How Are Stock Prices Affected by the Location of Trade?
K. A. Froot and E. Dabora
Keywords: asset pricing;
Market segmentation;
International Markets;
Law of one price;
Behavioral Finance;
Citation: Froot, K. A., and E. Dabora. " How Are Stock Prices Affected by the Location of Trade?" Journal of Financial Economics 53, no. 2 (August 1999): 189–216. (Reprinted in International Capital Markets, R. Stulz and A. Karolyi, eds. Edward Elgar Publishing, 2003. Also reprinted in Advances in Behavioral Finance, Vol. 2, edited by Richard Thaler. New Jersey: Princeton University Press; New York: Russell Sage Foundation, July 2005, 102-129.)
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Article
| Bank of America Journal of Applied Corporate Finance
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A New Approach to Capital Budgeting for Financial Institutions
K. A. Froot and J. Stein
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Insurance;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
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Article
| Journal of Financial Economics
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Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach
K. A. Froot and J. Stein
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
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Article
| Journal of Futures Markets
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New Trading Practices and Short-Run Market Efficiency
Kenneth A. Froot and André Perold
Keywords: institutional investing;
market efficiency;
behavioral finance;
equities;
stock market;
indexing;
Financial Markets;
Asset Pricing;
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Article
| Journal of Portfolio Management
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Hedging Portfolios with Real Assets
K. A. Froot
Keywords: institutional investing;
market efficiency;
behavioral finance;
equities;
stock market;
indexing;
Hedging;
Asset allocation;
commodities;
commodity investing;
real estate;
Financial Markets;
Asset Pricing;
Citation: Froot, K. A. " Hedging Portfolios with Real Assets." Journal of Portfolio Management (summer 1995): 60–77. (Revised from Harvard Business School Working Paper No. 95-045, September 1993.)
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Article
| Journal of Empirical Finance
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Tests of Conditional Mean-Variance Efficiency of the U.S. Stock Market
C. Engel, J. Frankel, Kenneth A. Froot and T. Rodrigues
Keywords: asset pricing;
international finance;
risk aversion;
risk;
international investing;
behavioral finance;
CAPM;
capital asset pricing;
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Article
| Journal of Finance
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Risk Management: Coordinating Corporate Investment and Financing Policies
K. A. Froot, David S. Scharfstein and J. Stein
Keywords: Catastrophe Risk;
corporate finance;
Banking and Insurance;
Hedging;
banking;
Insurance;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Cost of Capital;
Asset Pricing;
Insurance Industry;
Citation: Froot, K. A., David S. Scharfstein, and J. Stein. " Risk Management: Coordinating Corporate Investment and Financing Policies." Journal of Finance 48, no. 5 (December 1993): 1629–1658. (Revised from NBER Working Paper No. 4084, February 1993. Reprinted in RAE-Revista de Administração de Empresas, Management Journal of Fundação Getulio Vargas (FGV-EAESP), Business School for Administration in Sao Paulo, Brazil, volume no. 48, issue no. 1 (January-March 2008): 87-118. Reprinted in Insurance and Risk Management, Volume II, Corporate Risk Management, Part I: Theory on Why and How Firms Manage Risk, Chapter 3, edited by Gregory R. Niehaus, UK: Edward Elgar Publishing Ltd. (October 2008). Also in M.J. Brennan, The Theory of Corporate Finance from The International Library of Critical Writings in Financial Economics, edited by R. Roll, 1995; and in Merton Miller and Chris Culp, eds. Corporate Hedging in Theory and Practice: Lessons from Metallgesellschaft, Risk Books, 1999.)
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Article
| Journal of Finance
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Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation
Kenneth Froot, David S. Scharfstein and Jeremy Stein
Keywords: rational expectations;
Asset Pricing;
Behavioral Finance;
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Article
| American Economic Review
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Intrinsic Bubbles: The Case of Stock Prices
Kenneth A. Froot and M. Obstfeld
Keywords: rational expectations;
equities;
Fundamentals;
behavioral finance;
Price Bubble;
Stocks;
Information;
Asset Pricing;
Citation: Froot, Kenneth A., and M. Obstfeld. " Intrinsic Bubbles: The Case of Stock Prices." American Economic Review 81, no. 5 (December 1991): 1189–1214. (Revised from NBER Working Paper No. 3091, March 1992. Reprinted in Speculation and Financial Markets, edited by M. Taylor and L. Gallagher. Cheltenham: Edward Elgar Publishing, 2001.)
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Article
| Journal of International Economics
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Exchange-rate Dynamics under Stochastic Regime Shifts: A Unified Approach
K. A. Froot and M. Obstfeld
Keywords: Currencies;
Exchange rates;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Asset Pricing;
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Article
| Quarterly Journal of Economics
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Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach
K. A. Froot and Jeremy Stein
Keywords: corporate finance;
Market imperfections;
Foreign Direct Investment;
Markets;
Financial Instruments;
Asset Pricing;
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Article
| Econometrica
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Stochastic Process Switching: Some Simple Solutions
K. A. Froot and M. Obstfeld
Keywords: Currencies;
Exchange rates;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Asset Pricing;
Citation: Froot, K. A., and M. Obstfeld. " Stochastic Process Switching: Some Simple Solutions." Econometrica 59, no. 1 (January, 1991): 241–250. (Revised from NBER Working Paper No. 2998, July 1989. Reprinted in Exchange Rates and Currency Bonds, edited by P. Krugman and M. Miller. London: CEPR, 1991.)
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Article
| Journal of Economic Perspectives
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Anomalies: Foreign Exchange
K. A. Froot and R. Thaler
Keywords: Currencies;
Exchange rates;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Asset Pricing;
Citation: Froot, K. A., and R. Thaler. " Anomalies: Foreign Exchange." Journal of Economic Perspectives 4, no. 3 (June–August 1990): 179–192. (Reprinted in Current Issues in the International Economy: A Reader, edited by L. Goldberg and M. Klein. New York: Harper Collins, 1992; Speculation and Financial Markets, edited by M. Taylor and L. Gallagher. Cheltenham: Edward Elgar, 2001; and in Open Economy Macroeconomics, Volume II, Part I, Article 4 edited by Norman Miller. Cheltenham, U.K. and Northampton, Mass., U.S.: Edward Elgar, March 2006: 74-87.)
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Article
| American Economic Review
|
Chartists, Fundamentalists, and Trading in the Foreign Exchange Market
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates,;
international macroeocnomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Asset Pricing;
Citation: Frankel, J., and K. A. Froot. " Chartists, Fundamentalists, and Trading in the Foreign Exchange Market." American Economic Review 80, no. 2 (May 1990): 181–185. (Reprinted in New Developments in Exchange Rate Economics, edited by L. Sarno and M. Taylor. Edward Elgar, 2001; and in Speculation and Financial Markets, edited by M. Taylor and L. Gallagher. Edward Elgar, 2001.)
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Article
| Journal of Finance
|
LDC Debt: Forgiveness, Indexation, and Investment Incentives
K. A. Froot, D. Scharfstein and J. Stein
Keywords: Debt reduction;
Chapter 7;
Default;
Debt restructuring;
Borrowing and Debt;
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Article
| Journal of International Money and Finance
|
On the Consistency of Short-Run and Long-Run Exchange Rate Expectations
K. A. Froot and T. Ito
This paper examines whether short-term exchange rate expectations 'overreact' by comparing them with long-term expectations. We develop a set of nonlinear restrictions linking expectations at different forecast horizons. The restrictions impose consistency, a property weaker than rationality. We use exchange rate survey data to measure expectations and then test whether consistency holds. The data show that a current, positive exchange rate shock leads investors to expect a higher long-run future spot rate when iterating forward their short-term expectations than when thinking directly about the long run. In this sense short-horizon expectations may overreact to current exchange rate changes.
Keywords: Currencies;
Exchange rates;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Curency areas;
rational expectations;
Asset Pricing;
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Article
| Journal of Financial and Quantitative Analysis
|
Consistent Covariance Matrix Estimation with Cross-Sectional Dependence and Heteroskedasticity in Cross-Sectional Financial Data
K. A. Froot
Keywords: econometrics;
Panel estimation;
Autocorrelation;
Heteroskedasticity;
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Article
| American Economic Review
|
Exchange Rate Pass-Through When Market Share Matters
K. A. Froot and P. Klemperer
Keywords: International trade;
Purchasing power parity;
International Finance;
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Article
| Journal of Finance
|
New Hope for the Expectations Hypothesis of the Term Structure of Interest Rates
K. A. Froot
Keywords: rational expectations;
Yield curve;
Interest Rates;
Asset Pricing;
Behavioral Finance;
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Article
| International Economic Review
|
Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief
K. A. Froot
Keywords: Chapter 7;
Debt reduction;
Default;
Sovereign debt;
Debt crisis;
Debt restructuring;
Borrowing and Debt;
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Article
| Quarterly Journal of Economics
|
Forward Discount Bias: Is It an Exchange Risk Premium?
K. A. Froot and J. Frankel
Keywords: Currencies;
Exchange rates;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Asset Pricing;
Citation: Froot, K. A., and J. Frankel. " Forward Discount Bias: Is It an Exchange Risk Premium?" Quarterly Journal of Economics 104, no. 1 (February 1989): 139–161. (Revision of "Findings of Forward Discount Bias Interpreted in Light of Exchange Rate Survey Data," NBER Working Paper No. 1963 and Sloan Working Paper No. 1906-87, August 1987. Reprinted in Advances in Behavioral Finance, edited by Richard Thaler. New York: Russell Sage Foundation, 1993: 359-382 and in Speculation and Financial Markets, edited by M. Taylor and L. Gallagher. Cheltenham: Edward Elgar Publishing, 2001.)
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Article
| Journal of International Economics
|
Credibility, Real Interest Rates, and the Optimal Speed of Trade Liberalization
K. A. Froot
Keywords: International trade;
Trade policy;
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Article
| American Economic Review
|
Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Data and Data Sets;
Finance;
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Article
| Economic Record
|
Understanding the U.S. Dollar in the Eighties: The Expectations of Chartists and Fundamentalists
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
History;
Performance Expectations;
Economics;
United States;
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Article
| Journal of the Japanese and International Economies
|
Short-term and Long-term Expectations of the Yen/Dollar Exchange Rate: Evidence from Survey Data
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Japan;
United States;
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Article
| Marcus Wallenberg Papers on International Finance
|
The Dollar as an Irrational Speculative Bubble: A Tale of Fundamentalists and Chartists
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Citation: Frankel, J., and K. A. Froot. "The Dollar as an Irrational Speculative Bubble: A Tale of Fundamentalists and Chartists." Marcus Wallenberg Papers on International Finance 1 (1986): 27–55. (Revised from NBER Working Paper No. 1854, March 1986.)
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Book
| 1999
The Financing of Catastrophe Risk
Kenneth A. Froot
Keywords: Catastrophe Risk;
corporate finance;
Banking and Insurance;
Hedging;
banking;
Insurance;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Cost of Capital;
Asset Pricing;
Insurance Industry;
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Book
| 1995
The Global Financial System: A Functional Perspective
D. B. Crane, K. A. Froot, Scott P. Mason, André Perold, R. C. Merton, Z. Bodie, E. R. Sirri and P. Tufano
Keywords: corporate finance;
Imperfect markets;
behavioral finance;
Asset Pricing;
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Book
| 1994
The Transition in Eastern Europe. v.2: Restructuring
O. Blanchard, K. Froot and J. Sachs
Keywords: Transition;
Europe;
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Book
| 1994
The Transition in Eastern Europe. v.1: Country Studies
O. Blanchard, K. Froot and J. Sachs
Keywords: Transition;
Europe;
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Book
| 1993
Foreign Direct Investment
K. Froot
Keywords: corporate finance;
Market imperfections;
Foreign Direct Investment;
Financial Instruments;
Markets;
Asset Pricing;
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Book
| 1990
Market-Based Debt Reduction for Developing Countries: Principles and Prospects
K. Froot, S. Claessens, I. Diwan and P. Krugman
Keywords: Debt reduction;
Chapter 7;
Default;
Debt restructuring;
Sovereign debt;
Debt crisis;
Borrowing and Debt;
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Chapter
| The Irrational Economist: Making Decisions in a Dangerous World
| 2010
Lessons from Catastrophe Reinsurance
Kenneth A. Froot
Of the 20 most costly catastrophes since 1970, more than half have occurred since 2001. Is this an omen of what the 21st century will be? How might we behave in this new, uncertain, and more dangerous environment? Will our actions be rational or irrational? A select group of scholars, innovators, and Nobel Laureates was asked to address challenges to rational decision making both in our day-to-day life and in the face of catastrophic threats such as climate changes, natural disasters, technological hazards, and human malevolence. At the crossroads of decision sciences, behavioral and neuro-economics, psychology, management, insurance, and finance, their contributions aim to introduce readers to the latest thinking and discoveries. The Irrational Economist challenges the conventional wisdom about how to make the right decisions in the new era we have entered. It reveals a profound revolution in thinking as understood by some of the greatest minds in our day and underscores the growing role and impact of economists and other social scientists as they guide our most important personal and societal decisions.
Keywords: Decision Making;
Insurance;
Risk and Uncertainty;
Natural Disasters;
Behavior;
Citation: Froot, Kenneth A. "Lessons from Catastrophe Reinsurance." Chap. 20 in The Irrational Economist: Making Decisions in a Dangerous World, edited by Erwann Michel-Kerjan, and Paul Slovic, 171–182. New York: PublicAffairs Books, 2010.
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Article
| IFCI Geneva Research Paper
|
Bank Capital and Risk Management: Issues for Banks and Regulators
Kenneth A. Froot
Keywords: bank capital and risk management;
issues for banks and regulators;
Citation: Froot, Kenneth A. "Bank Capital and Risk Management: Issues for Banks and Regulators." IFCI Geneva Research Paper, no. 8 (April 2001). (International Financial Risk Institute.)
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Chapter
| The Financing of Catastrophe Risk
| 1999
The Limited Financing of Catastrophe Risk: An Overview
K. Froot
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Natural Disasters;
Insurance;
Risk Management;
Financial Markets;
Policy;
Insurance Industry;
Citation: Froot, K. "The Limited Financing of Catastrophe Risk: An Overview." In The Financing of Catastrophe Risk, edited by Kenneth A. Froot, 1–22. Chicago: University of Chicago Press, 1999. (Revised from NBER Working Paper No. 6025, May 1997, and HBS Working Paper No. 98-023, September 1997.)
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Chapter
| The Financing of Catastrophe Risk
| 1999
The Pricing of US Catastrophe Reinsurance
K. Froot and P. O'Connell
Keywords: Financial Markets;
Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Insurance;
Natural Disasters;
Policy;
Risk Management;
Insurance Industry;
United States;
Citation: Froot, K., and P. O'Connell. "The Pricing of US Catastrophe Reinsurance." In The Financing of Catastrophe Risk, edited by Kenneth A. Froot, 195–232. Chicago: University of Chicago Press, 1999. (Revised from NBER Working Paper No. 6043, May 1997, and HBS Working Paper No. 98-018, September 1997.)
-
Article
| Viewpoint
|
The Emerging Asset Class: Insurance Risk
K. A. Froot, B. Murphy, A. Stern and S. Usher
Keywords: Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
Citation: Froot, K. A., B. Murphy, A. Stern, and S. Usher. "The Emerging Asset Class: Insurance Risk." Viewpoint 24, no. 3 (summer 1995): 19–28. (Was originally "Special Report from Guy Carpenter and Company, Inc.," July 1995.)
-
Chapter
| Handbook of International Economics
| 1995
Perspectives on PPP and Long-Run Real Exchange Rates
K. Froot and K. Rogoff
Keywords: Purchasing power parity;
commodities;
International Finance;
Citation: Froot, K., and K. Rogoff. " Perspectives on PPP and Long-Run Real Exchange Rates." Chap. 32 in Handbook of International Economics, edited by G. M. Grossman, and K. Rogoff, 1647–1688. Elsevier Science, 1995. (Revised from Harvard Business School Working Paper No. 95-038.)
-
Chapter
| The Global Financial System: A Functional Perspective
| 1995
Incentive Problems in Financial Contracting: Impacts on Corporate Financing, Investment, and Risk Management Policies
K. Froot
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
Citation: Froot, K. "Incentive Problems in Financial Contracting: Impacts on Corporate Financing, Investment, and Risk Management Policies." Chap. 7 in The Global Financial System: A Functional Perspective, by D. B. Crane, K. A. Froot, Scott P. Mason, André Perold, R. C. Merton, Z. Bodie, E. R. Sirri, and P. Tufano, 225–261. Boston: Harvard Business School Press, 1995. (Revised from Harvard Business School Working Paper No. 95-020.)
-
Chapter
| The Effects of Taxation on Multinational Corporations
| 1995
Interest Allocation Rules, Financing Patterns, and the Operations of US Multinationals
K. Froot
Keywords: Corporation taxation;
Interest deductibility;
cost of capital;
corporate finance;
Accounting;
Borrowing and Debt;
Financing and Loans;
Interest Rates;
-
Chapter
| Taxing Multinational Corporations
| 1995
The Tax Treatment of Interest and the Operations of U.S. Multinationals
Kenneth A. Froot
Keywords: Corporation taxation;
Interest deductibility;
cost of capital;
corporate finance;
Accounting;
Borrowing and Debt;
Financing and Loans;
Interest Rates;
-
Chapter
| Securities Transaction Taxes: False Hopes and Unintended Consequences
| 1994
Securities Transaction Taxes: What about International Experiences Migrating Markets?
K. Froot and J. Campbell
Keywords: Corporation taxation;
Interest deductibility;
cost of capital;
corporate finance;
Accounting;
Borrowing and Debt;
Financing and Loans;
Interest Rates;
Citation: Froot, K., and J. Campbell. "Securities Transaction Taxes: What about International Experiences Migrating Markets?" In Securities Transaction Taxes: False Hopes and Unintended Consequences, edited by Suzanne Hammond. Chicago: Irwin Professional Publishing, 1994. (Reprinted in Inversión y Finanzas, 1996.)
-
Article
| Harvard Business Review
|
A Framework for Risk Management
K. Froot, David S. Scharfstein and J. Stein
Keywords: Catastrophe Risk;
corporate finance;
cost of capital;
Banking and Insurance;
asset pricing;
Hedging;
banking;
Insurance;
Decision choice and uncertainty;
Financial Markets;
Insurance;
Policy;
Risk Management;
Natural Disasters;
Insurance Industry;
Citation: Froot, K., David S. Scharfstein, and J. Stein. " A Framework for Risk Management." Harvard Business Review 72, no. 6 (November–December 1994): 59–71. (Revised from "Developing a Risk Management Strategy," Harvard Business School Working Paper No. 95-021. Reprinted in Bank of America Journal of Applied Corporate Finance 7, no. 3 (fall 1994): 22-32; Marsh & McLennan Companies' Viewpoint 24 (spring 1995): 21-37; and in Corporate Risk: Strategies and Management, edited by Greg Brown and Don Chew, London: Risk Books, December 1999.)
-
Chapter
| The Internationalization of Equity Markets
| 1994
International Experiences with Securities Transaction Taxes
K. A. Froot and J. Campbell
Keywords: Corporation taxation;
Interest deductibility;
cost of capital;
corporate finance;
Accounting;
Borrowing and Debt;
Financing and Loans;
Interest Rates;
Citation: Froot, K. A., and J. Campbell. "International Experiences with Securities Transaction Taxes." In The Internationalization of Equity Markets, edited by J. Frankel, 277–308. University of Chicago Press, 1994. (Revised from NBER Working Paper No. 4587, December 1993; also featured in The NBER Digest, May 1994.)
-
Article
| Cuadernos económicos de I.C.E.
|
On the Speculative Efficiency of the Foreign Exchange Market
K. A. Froot
Keywords: Markets;
International Finance;
-
Chapter
| The Transition in Eastern Europe (Restructuring)
| 1994
Foreign Direct Investment in Eastern Europe: Some Economic Considerations
K. Froot
Keywords: foreign direct investment;
markets;
asset pricing;
corporate finance;
Market imperfections;
Foreign Direct Investment;
Europe;
Citation: Froot, K. "Foreign Direct Investment in Eastern Europe: Some Economic Considerations." In The Transition in Eastern Europe (Restructuring). Vol. 2, edited by O. Blanchard, K. Froot, and J. Sachs, 293–318. Chicago: University of Chicago Press, 1994.
-
Chapter
| The Transition in Eastern Europe (Restructuring)
| 1994
Introduction and Overview: The Transition Economies of Eastern Europe
K. A. Froot, O. Blanchard and J. Sachs
Keywords: International trade;
international finance;
-
Chapter
| Regionalism and Rivalry: Japan and the United States in Pacific Asia
| 1993
Trading Blocs and the Incentive to Protect: Implications for Japan and East Asia
K. A. Froot and D. B. Yoffie
Keywords: International trade;
international finance;
Citation: Froot, K. A., and D. B. Yoffie. "Trading Blocs and the Incentive to Protect: Implications for Japan and East Asia." In Regionalism and Rivalry: Japan and the United States in Pacific Asia, edited by J. Frankel, and M. Kahler, 125–156. Chicago, IL: University of Chicago Press, 1993.
-
Chapter
| U.S.-Japan Economic Forum
| 1992
U.S.-Japan Trade Today
Kenneth A. Froot
Keywords: International trade;
international finance;
Citation: Froot, Kenneth A. "U.S.-Japan Trade Today." In U.S.-Japan Economic Forum. Vol. 2, edited by M. Feldstein, and Y. Kosai. National Bureau of Economic Research, 1992.
-
Article
| International Spectator
|
Strategic Trade Policies in a Tripolar World
Kenneth A. Froot and D. B. Yoffie
Keywords: International trade;
international finance;
Citation: Froot, Kenneth A., and D. B. Yoffie. " Strategic Trade Policies in a Tripolar World." International Spectator 26, no. 3 (July–September 1991): 3–28. (Reprinted in The Political Economy of International Cooperation, NIRA Research Output, Vol. 5, No. 1, 1992.)
-
Article
| Continental Bank Journal of Applied Corporate Finance
|
Shareholder Trading Practices and Corporate Investment Horizons
Kenneth A. Froot, André Perold and J. Stein
Keywords: institutional investing;
market efficiency;
behavioral finance;
equities;
stock market;
indexing;
Financial Markets;
Asset Pricing;
-
Chapter
| Macroeconomics Annual 1991
| 1992
The EMS, the EMU and the Transition to a Common Currency
K. A. Froot and K. Rogoff
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Citation: Froot, K. A., and K. Rogoff. "The EMS, the EMU and the Transition to a Common Currency." In Macroeconomics Annual 1991, edited by O. Blanchard, and S. Fischer, 269–327. Cambridge: MIT Press, 1992. (Revised from NBER Working Paper No. 3684, January 1992.)
-
Article
| Kinyu Journal
|
U.S.—Japan Trade Developments
K. A. Froot
Keywords: International trade;
international finance;
Citation: Froot, K. A. "U.S.—Japan Trade Developments." Part 1. Kinyu Journal 9 (1991): 55–61. (Part 2 appeared in Kinyu Journal 10 (1991): 45-49.)
-
Chapter
| International Business Reader
| 1992
Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Citation: Frankel, J., and K. A. Froot. "Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market." In International Business Reader, edited by D. Duta. London: Oxford University Press, 1992. (Revised from IMF Working Paper No. 90/43 and NBER Working Paper No. 3470, October 1990.)
-
Chapter
| U.S.-Japan Economic Forum
| 1991
Japanese Foreign Direct Investment
K. A. Froot
Keywords: financial instruments;
foreign direct investment;
markets;
asset pricing;
corporate finance;
Market imperfections;
Citation: Froot, K. A. "Japanese Foreign Direct Investment." In U.S.-Japan Economic Forum. Vol. 1, edited by M. Feldstein, and Y. Kosai. National Bureau of Economic Research, 1991. (Revised from NBER Working Paper No. 3737, June 1991.)
-
Article
| Market Volatility and Investor Confidence: Report to the Board of Directors of the New York Stock Exchange, Inc.
|
New Trading Practices and the Short-run Predictability of the S&P 500
André Perold, Kenneth A. Froot and James F. Gammill Jr.
Keywords: Financial Markets;
asset pricing;
institutional investing;
market efficiency;
behavioral finance;
equities;
stock market;
indexing;
Citation: Perold, André, Kenneth A. Froot, and James F. Gammill Jr. "New Trading Practices and the Short-run Predictability of the S&P 500." Market Volatility and Investor Confidence: Report to the Board of Directors of the New York Stock Exchange, Inc. (June 7, 1990): G1: 1–27.
-
Chapter
| International Policy Coordination and Exchange Rate Fluctuations
| 1990
Multinational Corporations, Exchange Rates, and Direct Investment
K. A. Froot
Keywords: corporate finance;
Market imperfections;
Financial Instruments;
Foreign Direct Investment;
Markets;
Asset Pricing;
Citation: Froot, K. A. "Multinational Corporations, Exchange Rates, and Direct Investment." In International Policy Coordination and Exchange Rate Fluctuations, edited by W. Branson, J. Frankel, and M. Goldstein, 307–346. Chicago: University of Chicago Press, 1990.
-
Chapter
| Private Behaviour and Government Policy in Interdependent Economies
| 1990
Chartists, Fundamentalists, and the Demand for Dollars
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Citation: Frankel, J., and K. A. Froot. "Chartists, Fundamentalists, and the Demand for Dollars." In Private Behaviour and Government Policy in Interdependent Economies, edited by Anthony Courakis, and Mark Taylor, 73–128. Oxford: Clarendon Press, 1990. (Reprinted in Greek Economic Review 10 (June 1988): 49-102; and translated in Cuadernos Economicos de ICE, No. 38 (1988): 195-242.)
-
Chapter
| Papers and Proceedings of the Fourth Economic Planning Agency International Symposium
| 1988
Adjustment of the U.S. and Japanese External Imbalances
K. A. Froot
Keywords: International trade;
international finance;
Citation: Froot, K. A. "Adjustment of the U.S. and Japanese External Imbalances." In Papers and Proceedings of the Fourth Economic Planning Agency International Symposium, edited by M. Yoshitomi, 287–304. Economic Planning Agency (Japan), 1988.
-
Chapter
| Macroeconomics, Agriculture, and Exchange Rates
| 1988
Explaining the Demand for Dollars: International Rates of Return, and the Expectations of Chartists and Fundamentalists
J. Frankel and K. A. Froot
Keywords: Currencies;
Exchange rates;
asset pricing;
International macroeconomics;
monetary policy;
Currency controls;
Fixed exchange rates;
Floating exchange rates;
Currency bands;
Currency zones;
Currency areas;
rational expectations;
Citation: Frankel, J., and K. A. Froot. " Explaining the Demand for Dollars: International Rates of Return, and the Expectations of Chartists and Fundamentalists." In Macroeconomics, Agriculture, and Exchange Rates, edited by R. Chambers, and P. Paarlberg, 25–88. Boulder, CO: Westview Press, 1988.
-
Government Testimony
| 2001
Terrorist Risk Insurance: Hearing before the Committee on Banking, Housing, and Urban Affairs
Kenneth A. Froot
-
Comment
| The Regionalization of the World Economy
| 1998
Regional Patterns in the Law of One Price
K. A. Froot
Keywords: Price;
Citation: Froot, K. A. Comment on "Regional Patterns in the Law of One Price." The Regionalization of the World Economy, edited by J. Frankel, 184–186. University of Chicago Press, 1998.
-
Comment
| International Corporate Taxation
| 1996
The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock
K. A. Froot
Keywords: Foreign Direct Investment;
International Finance;
Capital;
Trade;
Citation: Froot, K. A. Comment on "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock." International Corporate Taxation, edited by J. Hines. University of Chicago Press, 1996.
-
Comment
| Stabilization, Economic Reform and Growth
| 1994
Economic Crises: Necessary for Trade Liberalization and Fiscal Reform?
K. A. Froot
Keywords: Business Cycles;
Financial Crisis;
Trade;
Government and Politics;
Governing Rules, Regulations, and Reforms;
Citation: Froot, K. A. Comment on "Economic Crises: Necessary for Trade Liberalization and Fiscal Reform?" Stabilization, Economic Reform and Growth, edited by R. Dornbusch, and S. Edwards, 73–75. University of Chicago Press, 1994.
-
Comment
| Exchange Rates and Corporate Performance
| 1994
Exchange Rates and Corporate Strategic Management
K. A. Froot
Keywords: Currency Exchange Rate;
Corporate Strategy;
International Finance;
Citation: Froot, K. A. Comment on "Exchange Rates and Corporate Strategic Management." Exchange Rates and Corporate Performance, edited by Y. Amihud, and R. Levich, 253–256. New York: Irwin Professional Publishing, 1994.
-
Article
| Continental Bank Journal of Applied Corporate Finance
|
Roundtable on U.S. Risk Capital and Innovation (With a Look at Eastern Europe)
G. Baty, W. Bygrave, D. Chew, P. Finegan, K. A. Froot, T. Gray, J. Kensiger, G. W. Loveman, S. Magee and J. Martin
Keywords: Risk and Uncertainty;
Capital;
Innovation and Invention;
United States;
Europe;
Citation: Baty, G., W. Bygrave, D. Chew, P. Finegan, K. A. Froot, T. Gray, J. Kensiger, G. W. Loveman, S. Magee, and J. Martin. " Roundtable on U.S. Risk Capital and Innovation (With a Look at Eastern Europe)." Continental Bank Journal of Applied Corporate Finance 4, no. 4 (winter 1992): 48–78.
-
Chapter
| Do Taxes Matter? The Impact of the Tax Reform Act of 1986
| 1990
Comment on 'The Impact of the Tax Reform Act of 1986 on Foreign Direct Investment to and from the United States'
K. A. Froot
Keywords: Taxation;
Laws and Statutes;
Foreign Direct Investment;
United States;
Citation: Froot, K. A. "Comment on 'The Impact of the Tax Reform Act of 1986 on Foreign Direct Investment to and from the United States'." In Do Taxes Matter? The Impact of the Tax Reform Act of 1986, edited by J. Slemrod, 198–200. Cambridge, MA: MIT Press, 1990.
-
Article
| NBER Reporter
|
Asset Price Expectations: A Summary
K. A. Froot
Keywords: Assets;
Price;
Performance Expectations;
-
Chapter
| Dealing with the Debt Crisis
| 1989
Do the Secondary Markets Believe in Life after Debt? A Comment on Hajivassiliou
K. A. Froot
Keywords: Financial Markets;
Borrowing and Debt;
-
Chapter
| Trade Policies for International Competitiveness
| 1989
Labor Market Distortions as a Case for Export Subsidies: Comment on Katz and Summers
K. A. Froot
Keywords: Trade;
Employment;
Policy;
Government and Politics;
Citation: Froot, K. A. "Labor Market Distortions as a Case for Export Subsidies: Comment on Katz and Summers." In Trade Policies for International Competitiveness, edited by R. Feenstra, 117–120. Chicago: University of Chicago Press, 1989.
-
Book Review
| Journal of International Economics
|
Review of How Open is the U.S. Economy? edited by R.W. Hafer. Lexington Books, 1986
K. A. Froot
Keywords: Economy;
-
Other Unpublished Work
| 2004
Capital and Value of Risk Transfer: Presented at Actuarial Approach for Financial Risks (AFIR) Colloquium, Boston, MA, November
K. Froot, G. Venter and J. Major
Keywords: Capital;
Risk and Uncertainty;
-
Working Paper
| HBS Working Paper Series
| 2003
The Risk Tolerance of International Investors
Kenneth A. Froot and Paul G. J. O'Connell
Keywords: asset pricing;
international finance;
risk aversion;
risk;
international investing;
Citation: Froot, Kenneth A., and Paul G. J. O'Connell. "The Risk Tolerance of International Investors." Harvard Business School Working Paper, No. 04–034, January 2004. (Also NBER Working Paper No. 10157, December 2003.)
-
Working Paper
| HBS Working Paper Series
| 1996
The Determinants of Optimal Currency Hedging
Kenneth Froot and André Perold
Keywords: currency;
Hedging;
asset pricing;
transaction costs;
Exchange rates;
international finance;
International Markets;
Citation: Froot, Kenneth, and André Perold. "The Determinants of Optimal Currency Hedging." Harvard Business School Working Paper, No. 97–011, October 1996.
-
Working Paper
| HBS Working Paper Series
| 2001
The Law of One Price Over 700 Years
K. A. Froot, M. Kim and K. Rogoff
Keywords: Purchasing power parity;
international finance;
commodities;
Citation: Froot, K. A., M. Kim, and K. Rogoff. "The Law of One Price Over 700 Years." Harvard Business School Working Paper, No. 95–086, May 1995. (NBER Working Paper Series, No. 5132, May 1995.)
-
Other Unpublished Work
| 1994
Interest Allocation Rules and the Changing Cost of Debt Finance
K. A. Froot and J. Hines
Keywords: Corporation taxation;
Interest deductibility;
cost of capital;
corporate finance;
Accounting;
Interest Rates;
Borrowing and Debt;
Financing and Loans;
Citation: Froot, K. A., and J. Hines. "Interest Allocation Rules and the Changing Cost of Debt Finance." Harvard University, 1994.
-
Other Unpublished Work
| 1994
Losing Interest: Interest Allocation Rules and the Cost of Debt Finance
K. A. Froot and J. Hines
Keywords: accounting;
Corporation taxation;
Interest deductibility;
cost of capital;
corporate finance;
Borrowing and Debt;
Financing and Loans;
Interest Rates;
Citation: Froot, K. A., and J. Hines. "Losing Interest: Interest Allocation Rules and the Cost of Debt Finance." Harvard University, 1994.
-
Working Paper
| 1993
Currency Hedging Over Long Horizons
K. A. Froot
This paper reexamines the widely-held wisdom that the currency exposure of international investments should be entirely hedged. It finds that the previously documented ability of hedges to reduce portfolio return variance holds at short horizons, but not at long horizons. At horizons of several years, complete hedging not only does not lower return variance, it actually increases the return variance of many portfolios. Hedge ratios chosen to minimize long-run return variance are not only low, they also have no perceptible impact on return variance. The paper reports and explores these results, their apparent causes, and investigates their implications for hedging practice.
Keywords: currency;
Hedging;
asset pricing;
transaction costs;
Exchange rates;
international finance;
International Markets;
Real exchange rate;
Purchasing power parity;
Citation: Froot, K. A. "Currency Hedging Over Long Horizons." NBER Working Paper Series, No. 4355, May 1993. (Featured in the NBER Digest, October 1993. Harvard University, April 1993.)
-
Other Unpublished Work
| 1992
Government Consumption and the Real Exchange Rate: The Empirical Evidence
K. A. Froot and K. Rogoff
Keywords: public sector;
Currencies;
Exchange rates;
currency union;
eurozone;
the euro;
Currency Exchange Rate;
Citation: Froot, K. A., and K. Rogoff. "Government Consumption and the Real Exchange Rate: The Empirical Evidence." Harvard University, January 1992.
-
Working Paper
| 1990
Short Rates and Expected Asset Returns
K. A. Froot
Keywords: asset pricing;
international finance;
risk aversion;
risk;
international investing;
behavioral finance;
-
Working Paper
| 1987
Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets
K. A. Froot
Simple regression tests that have power against the alternatives that asset prices and expected future asset returns are excessively volatile are developed and performed for the foreign exchange and stock markets. These tests have a number of advantages over alternative, variance bounds techniques. We find evidence that both exchange rates and stock prices are excessively volatile and that expected returns on foreign exchange and stocks move too much. We also investigate whether these findings can be attributed to time-varying risk premia, but in our tests the data provide little support for such an alternative hypothesis.
Keywords: asset pricing;
international finance;
risk aversion;
risk;
international investing;
behavioral finance;
Citation: Froot, K. A. "Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets." NBER Working Paper Series, No. 2362, August 1987.
-
Other Unpublished Work
| 1986
Capital Flight, Policy Credibility, and the Option Value of Foreign Exchange
K. A. Froot and S. van Wijnbergen
Keywords: Trade policy;
capital controls;
liberalization;
Currency;
International Finance;
Capital;
Citation: Froot, K. A., and S. van Wijnbergen. "Capital Flight, Policy Credibility, and the Option Value of Foreign Exchange." Massachusetts Institute of Technology (MIT), 1986.
-
Other Unpublished Work
| 1986
Currency Values in a Continuous Time Capital Asset Pricing Model Driven by Asset Supplies
K. A. Froot
Keywords: Currency;
Asset Pricing;
Capital;
Citation: Froot, K. A. "Currency Values in a Continuous Time Capital Asset Pricing Model Driven by Asset Supplies." Massachusetts Institute of Technology (MIT), 1986.
-
Case
| HBS Case Collection
|
2012
(Revised from original 2010 version)
Innovating into Active ETFs: Factor Funds Capital Management LLC
Kenneth A. Froot, Lauren Cohen and Scott Waggoner
Kishore Karunakaran, President and COO of FFCM, faces a variety of challenges in launching an innovative investment management business in the rapidly evolving ETF space.
Keywords: investment management;
institutional investments;
entrepreneurial finance;
Financial Management;
Investment Funds;
Innovation Strategy;
Financial Strategy;
Capital Markets;
Management Teams;
Financial Services Industry;
Boston;
-
Teaching Note
| HBS Case Collection
|
2013
(Revised from original 2012 version)
Innovating into Active ETFs: Factor Funds Capital Management LLC (TN)
Lauren Cohen, Kenneth Froot and Timothy Gray
-
Case
| HBS Case Collection
|
2011
(Revised from original 2011 version)
BlackRock Solutions
Kenneth A. Froot and Scott Waggoner
The BlackRock Solutions case examines the different functions and economics of a global asset manager's value chain, with particular emphasis on the "money management" and the "investment systems platform" businesses. Students analyze why BlackRock decided to unbundle its Aladdin investment platform and if the firm should consider expanding the platform in the future. Students also explore the resulting "dual-mission" challenges of servicing both internal and external Aladdin clients during a period of rapid growth within BlackRock and significant change in the global financial landscape.
Keywords: investment management;
strategic vision;
organizational behavior;
economies of scale and scope;
unbundling of services;
Financial Management;
Financial Strategy;
Corporate Strategy;
Competitive Advantage;
Asset Management;
Value;
Investment;
Organizational Culture;
Strategic Planning;
Risk Management;
Citation: Froot, Kenneth A., and Scott Waggoner. " BlackRock Solutions." Harvard Business School Case 211-082, September 2011. (Revised from original April 2011 version.)
-
Case
| HBS Case Collection
|
2011
(Revised from original 2011 version)
BlackRock Solutions
Kenneth A. Froot and Scott Waggoner
The BlackRock Solutions case examines the different functions and economics of a global asset manager's value chain, with particular emphasis on the "money management" and the "investment systems platform" businesses. Students analyze why BlackRock decided to unbundle its Aladdin investment platform and if the firm should consider expanding the platform in the future. Students also explore the resulting "dual-mission" challenges of servicing both internal and external Aladdin clients during a period of rapid growth within BlackRock and significant change in the global financial landscape.
Keywords: investment management;
strategic vision;
organizational behavior;
economies of scale and scope;
unbundling of services;
Financial Management;
Financial Strategy;
Corporate Strategy;
Competitive Advantage;
Asset Management;
Value;
Investment;
Organizational Culture;
Strategic Planning;
Risk Management;
Citation: Froot, Kenneth A., and Scott Waggoner. " BlackRock Solutions." Harvard Business School Case 211-082, September 2011. (Revised from original April 2011 version.)
-
Case
| HBS Case Collection
|
2010
(Revised from original 2009 version)
BlackRock Money Market Management in September 2008 (A)
Kenneth A. Froot and David Lane
This case highlights the issues around money market mutual funds in the financial crisis of 2008.
Keywords: BlackRock;
mutual funds;
money market;
investment management;
bank runs;
2008 financial crisis;
government intervention in the markets;
GRG;
Financial Crisis;
Financial Management;
Investment Funds;
Crisis Management;
Financial Services Industry;
-
Case
| HBS Case Collection
|
2010
(Revised from original 2009 version)
BlackRock Money Market Management in September 2008 (A)
Kenneth A. Froot and David Lane
This case highlights the issues around money market mutual funds in the financial crisis of 2008.
Keywords: BlackRock;
mutual funds;
money market;
investment management;
bank runs;
2008 financial crisis;
government intervention in the markets;
GRG;
Financial Crisis;
Financial Management;
Investment Funds;
Crisis Management;
Financial Services Industry;
-
Supplement
| HBS Case Collection
|
2010
(Revised from original 2009 version)
BlackRock Money Market Management in September 2008 (B)
Kenneth A. Froot and David Lane
This case highlights the issues surrounding money market mutual funds in the financial crisis of 2008.
Keywords: BlackRock;
mutual funds;
money market;
investment management;
bank runs;
2008 financial crisis;
government intervention in the markets;
GRG;
Financial Crisis;
Investment Funds;
-
Supplement
| HBS Case Collection
|
2010
(Revised from original 2009 version)
BlackRock Money Market Management in September 2008 (B)
Kenneth A. Froot and David Lane
This case highlights the issues surrounding money market mutual funds in the financial crisis of 2008.
Keywords: BlackRock;
mutual funds;
money market;
investment management;
bank runs;
2008 financial crisis;
government intervention in the markets;
GRG;
Financial Crisis;
Investment Funds;
-
Teaching Note
| HBS Case Collection
|
2009
UAL, 2004: Pulling Out of Bankruptcy (TN)
Daniel Baird Bergstresser, Kenneth A. Froot and Darren Robert Smart
Teaching Note for [205090].
Keywords: Air Transportation Industry;
-
Background Note
| HBS Case Collection
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2008
Measuring Investment Performance
Andre F. Perold and Kenneth A. Froot
Examines various approaches to measuring investment performance. The approaches include the use of risk exposure and the Sharpe and Information Ratios. Applies the approaches to a variety of mutual funds to demonstrate the effect of using different metrics to measure fund performance.
Keywords: Financial Management;
Investment;
Management Analysis, Tools, and Techniques;
Measurement and Metrics;
Performance;
Risk and Uncertainty;
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Case
| HBS Case Collection
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2007
(Revised from original 2006 version)
Nephila: Innovation in Catastrophe Risk Insurance
Kenneth A. Froot and Michael Heinrich
At the cross-section of capital markets and the catastrophe insurance space stands the hedge fund Nephila. Nephila must decide how best to take advantage of the newly presented market opportunities post hurricanes Katrina, Wilma, and Rita. Nephila has a plethora of options as it brings capital markets understanding to the insurance space. Nephila can easily trade in and out of insurance products and is not subject to regulatory restrictions. Yet, Nephila only capitalizes 1% of the entire catastrophe reinsurance market. What is the best way to grow?
Keywords: hedge fund;
investment management;
uncertainty;
Capital Markets;
Insurance;
Risk Management;
Natural Disasters;
Corporate Strategy;
Investment;
Innovation Strategy;
Financial Services Industry;
Insurance Industry;
Bermuda;
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Case
| HBS Case Collection
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2007
(Revised from original 2006 version)
Nephila: Innovation in Catastrophe Risk Insurance
Kenneth A. Froot and Michael Heinrich
At the cross-section of capital markets and the catastrophe insurance space stands the hedge fund Nephila. Nephila must decide how best to take advantage of the newly presented market opportunities post hurricanes Katrina, Wilma, and Rita. Nephila has a plethora of options as it brings capital markets understanding to the insurance space. Nephila can easily trade in and out of insurance products and is not subject to regulatory restrictions. Yet, Nephila only capitalizes 1% of the entire catastrophe reinsurance market. What is the best way to grow?
Keywords: hedge fund;
investment management;
uncertainty;
Capital Markets;
Insurance;
Risk Management;
Natural Disasters;
Corporate Strategy;
Investment;
Innovation Strategy;
Financial Services Industry;
Insurance Industry;
Bermuda;
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Supplement
| HBS Case Collection
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2007
(Revised from original 2005 version)
Pacific Salmon Company, Inc. (CW)
Nabil N. El-Hage and Kenneth A. Froot
RRR, a $1 billion private equity fund, is trying to decide how much to bid for Pacific Salmon Inc. and how to finance the acquisition.
Keywords: food;
bids;
Mergers and Acquisitions;
Private Equity;
Financing and Loans;
Bids and Bidding;
Food and Beverage Industry;
Citation: El-Hage, Nabil N., and Kenneth A. Froot. " Pacific Salmon Company, Inc. (CW)." Harvard Business School Spreadsheet Supplement 205-711, March 2007. (Revised from original March 2005 version.)
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Case
| HBS Case Collection
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2006
(Revised from original 2004 version)
Pacific Salmon Company, Inc.
Nabil N. El-Hage, Kenneth A. Froot and Christopher Edward James Payton
RRR, a $1 billion private equity fund, is trying to decide how much to bid for Pacific Salmon Inc. and how to finance the acquisition.
Keywords: food;
bids;
Private Equity;
Decision Making;
Financing and Loans;
Bids and Bidding;
Acquisition;
Corporate Finance;
Financial Services Industry;
Citation: El-Hage, Nabil N., Kenneth A. Froot, and Christopher Edward James Payton. " Pacific Salmon Company, Inc." Harvard Business School Case 205-031, May 2006. (Revised from original December 2004 version.)
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Case
| HBS Case Collection
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2006
(Revised from original 2005 version)
UAL, 2004: Pulling Out of Bankruptcy
Daniel Baird Bergstresser, Kenneth A. Froot and Darren Robert Smart
UAL is a large air transportation company with roots that go back to the 1920s. As a legacy carrier, going back to before the 1978 deregulation of air transportation markets, United Airlines is burdened with cost structures that make it difficult to compete with newer competitors. In addition, UAL has the burden of $7.6 billion in unfunded pension obligations and $2 billion in unfunded retiree health obligations. In June 2004, UAL is still operating under Chapter 11 bankruptcy protection, which began December 2002. It has needed extensions of the exclusivity period from the bankruptcy court. UAL's plan of reorganization is predicated on receiving $1.8 billion in loan guarantees from the Air Transport Stabilization Board (ATSB). But its request for loan guarantees from the ATSB was recently rejected. The company must decide what to do next and how to emerge from bankruptcy.
Keywords: bankruptcy;
compensation;
costs;
loans;
reorganization;
Air Transportation;
Insolvency and Bankruptcy;
Restructuring;
Financing and Loans;
Compensation and Benefits;
Air Transportation Industry;
United States;
Citation: Bergstresser, Daniel Baird, Kenneth A. Froot, and Darren Robert Smart. " UAL, 2004: Pulling Out of Bankruptcy." Harvard Business School Case 205-090, June 2006. (Revised from original February 2005 version.)
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Case
| HBS Case Collection
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2006
(Revised from original 2005 version)
UAL, 2004: Pulling Out of Bankruptcy
Daniel Baird Bergstresser, Kenneth A. Froot and Darren Robert Smart
UAL is a large air transportation company with roots that go back to the 1920s. As a legacy carrier, going back to before the 1978 deregulation of air transportation markets, United Airlines is burdened with cost structures that make it difficult to compete with newer competitors. In addition, UAL has the burden of $7.6 billion in unfunded pension obligations and $2 billion in unfunded retiree health obligations. In June 2004, UAL is still operating under Chapter 11 bankruptcy protection, which began December 2002. It has needed extensions of the exclusivity period from the bankruptcy court. UAL's plan of reorganization is predicated on receiving $1.8 billion in loan guarantees from the Air Transport Stabilization Board (ATSB). But its request for loan guarantees from the ATSB was recently rejected. The company must decide what to do next and how to emerge from bankruptcy.
Keywords: bankruptcy;
compensation;
costs;
loans;
reorganization;
Air Transportation;
Insolvency and Bankruptcy;
Restructuring;
Financing and Loans;
Compensation and Benefits;
Air Transportation Industry;
United States;
Citation: Bergstresser, Daniel Baird, Kenneth A. Froot, and Darren Robert Smart. " UAL, 2004: Pulling Out of Bankruptcy." Harvard Business School Case 205-090, June 2006. (Revised from original February 2005 version.)
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Case
| HBS Case Collection
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2006
(Revised from original 2006 version)
Geeli
Li Jin, Kenneth A. Froot and Si Ping May Yu
A well-performing Chinese manufacturer faces major impediments raising funding to grow. Highlights various imperfections that shape the financing decision.
Keywords: Capital costs;
Emerging Markets;
Expansion;
Financial Instruments;
Financial Strategy;
International Finance;
Manufacturing Industry;
Hong Kong;
Citation: Jin, Li, Kenneth A. Froot, and Si Ping May Yu. " Geeli." Harvard Business School Case 206-105, April 2006. (Revised from original March 2006 version.)
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Case
| HBS Case Collection
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2006
(Revised from original version)
Global Equity Markets: The Case of Royal Dutch and Shell
Kenneth A. Froot and Andre F. Perold
Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and U.S. markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch/Shell relative price moves positively with the Netherlands and U.S. markets and negatively with the U.K. market. The ability to arbitrage these disparities and their causes are major case focal points.
Keywords: international equity markets;
international cost of capital;
cross-border valuation;
International Finance;
Equity;
Cost of Capital;
Valuation;
Cash Flow;
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Teaching Note
| HBS Case Collection
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2006
Geeli (TN)
Li Jin and Kenneth A. Froot
Citation: Jin, Li, and Kenneth A. Froot. " Geeli (TN)." Harvard Business School Teaching Note 207-074, October 2006.
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Teaching Note
| HBS Case Collection
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2006
(Revised from original 2001 version)
Global Equity Markets: The Case of Royal Dutch and Shell TN
Kenneth A. Froot and Maciej Cuchra
Teaching Note for (9-296-077).
Keywords: Financial Services Industry;
United States;
Netherlands;
United Kingdom;
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Supplement
| HBS Case Collection
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2006
Geeli (CW)
Kenneth A. Froot and Li Jin
A well-performing Chinese manufacturer faces major impediments raising funding to grow. Highlights various imperfections that shape the financing decision.
Keywords: Capital costs;
Growth and Development Strategy;
Financial Strategy;
Financing and Loans;
Manufacturing Industry;
China;
Citation: Froot, Kenneth A., and Li Jin. " Geeli (CW)." Harvard Business School Spreadsheet Supplement 206-710, March 2006.
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Supplement
| HBS Case Collection
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2012
(Revised from original 2005 version)
UAL 2004: Pulling Out of Bankruptcy (CW)
Daniel Baird Bergstresser, Kenneth A. Froot and Darren Robert Smart
UAL is a large air transportation company with roots that go back to the 1920s. As a legacy carrier, going back to before the 1978 deregulation of air transportation markets, United Airlines is burdened with cost structures that make it difficult to compete with newer competitors. In addition, UAL has the burden of $7.6 billion in unfunded pension obligations and $2 billion in unfunded retiree health obligations. In June 2004, UAL is still operating under Chapter 11 bankruptcy protection, which began December 2002. It has needed extensions of the exclusivity period from the bankruptcy court. UAL's plan of reorganization is predicated on receiving $1.8 billion in loan guarantees from the Air Transport Stabilization Board (ATSB). But its request for loan guarantees from the ATSB was recently rejected. The company must decide what to do next and how to emerge from bankruptcy.
Keywords: bankruptcy;
compensation;
costs;
loans;
reorganization;
Air Transportation;
Insolvency and Bankruptcy;
Restructuring;
Financing and Loans;
Compensation and Benefits;
Air Transportation Industry;
United States;
Citation: Bergstresser, Daniel Baird, Kenneth A. Froot, and Darren Robert Smart. " UAL 2004: Pulling Out of Bankruptcy (CW)." Harvard Business School Spreadsheet Supplement 205-709, November 2012. (Revised from original February 2005 version.)
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Case
| HBS Case Collection
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2004
(Revised from original 1993 version)
PepsiCo Bottling in Mexico
Kenneth A. Froot
This case describes Pepsico's program to restructure its Mexican bottling network. It wants to work with existing bottlers and find an organizational arrangement that will allow the bottlers to grow and change with the Mexican soft drink industry.
Keywords: joint ventures;
bottling;
Mergers and Acquisitions;
Joint Ventures;
Multinational Firms and Management;
International Finance;
Valuation;
Programs;
Organizational Design;
Food and Beverage Industry;
Mexico;
Citation: Froot, Kenneth A. " PepsiCo Bottling in Mexico." Harvard Business School Case 293-137, June 2004. (Revised from original May 1993 version.)
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Supplement
| HBS Case Collection
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2004
(Revised from original 2004 version)
Innovation at the Treasury: Treasury Inflation-Protection Securities (B)
Kenneth A. Froot, Peter A. Hecht and Christopher Edward James Payton
In 1997, the U.S. Treasury was deciding whether to proceed with a proposal to issue inflation-indexed bonds. This case explores the challenges facing innovation in the financial markets as the Treasury tries to determine whether to introduce Treasury Inflation-Protection Securities.
Keywords: inflation;
innovation;
Federal government;
securities;
Financial Markets;
Inflation and Deflation;
Financial Institutions;
Government and Politics;
Financial Instruments;
Innovation and Invention;
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Case
| HBS Case Collection
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2004
(Revised from original 2004 version)
Innovation at the Treasury: Treasury Inflation-Protection Securities (A)
Kenneth A. Froot, Peter A. Hecht and Christopher Edward James Payton
In 1997, the U.S. Treasury was deciding whether to proceed with a proposal to issue inflation-indexed bonds. This case explores the challenges facing innovation in the financial markets as the Treasury tries to determine whether to introduce Treasury Inflation-Protection Securities.
Keywords: inflation;
innovation;
Federal government;
securities;
Sovereign Finance;
Capital Markets;
Bonds;
Investment Portfolio;
Innovation Strategy;
Inflation and Deflation;
Risk Management;
Government and Politics;
Public Administration Industry;
United States;
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Teaching Note
| HBS Case Collection
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2004
Innovation at the Treasury: Treasury Inflation-Protection Securities (TN) (A) and (B)
Kenneth A. Froot, Peter A. Hecht and Christopher E.J. Payton
Teaching Note to (9-204-112) and (9-204-113).
Keywords: Public Administration Industry;
United States;
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Case
| HBS Case Collection
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1999
(Revised from original 1998 version)
Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables
Kenneth A. Froot and Ivan G. Farman
Commercial Financial Services (CFS) is a company that buys charged-off credit card receivables, securitizes them, and then attempts to collect on the receivables. The case deals with how the firm makes money and the limits of securitization as an efficient financing strategy.
Keywords: financing;
asset-back finance;
financial policy;
securitization;
Credit;
Financial Strategy;
Business Strategy;
Policy;
Financial Services Industry;
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Case
| HBS Case Collection
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1999
(Revised from original 1998 version)
Collateralized Loan Obligations and the Bistro Trust
Kenneth A. Froot and Ivan G. Farman
This case examines a large bank trying to protect itself from the risks and capital requirement created by its loan portfolio. Considers a variety of ways available to the firm to offload the risks.
Keywords: banking;
loan evaluation;
financing strategy;
Credit;
Risk Management;
Banks and Banking;
Financing and Loans;
Financial Strategy;
Banking Industry;
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Case
| HBS Case Collection
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1999
American International Group, Inc.
Kenneth A. Froot and Heidi Cruz
American International Group, Inc. (AIG), one of the world's largest and most innovative insurers and financial intermediaries, is considering new strategies in an era of new competition and Internet distribution.
Keywords: Insurance;
Competitive Strategy;
Internet;
Distribution;
Innovation and Invention;
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Case
| HBS Case Collection
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1999
(Revised from original 1996 version)
1994-95 Mexican Peso Crisis, The
Kenneth A. Froot and Matthew McBrady
Explores the peso crisis of 1994-95 and why it occurred. Students must examine Mexico's policies, the capital market's reactions, and the implications of devaluation for future capital flows and growth.
Keywords: Exchange rates;
International capital markets;
Devaluation;
Currency Exchange Rate;
Financial Markets;
International Finance;
Capital;
Mexico;
Citation: Froot, Kenneth A., and Matthew McBrady. " 1994-95 Mexican Peso Crisis, The." Harvard Business School Case 296-056, December 1999. (Revised from original January 1996 version.)
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Case
| HBS Case Collection
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1998
(Revised from original 1997 version)
Mid Ocean Limited: Trading Catastrophe Index Options
Kenneth A. Froot and Markus Mullarkey
An insurance industry executive must evaluate the potential of a set of newly-offered catastrophe insurance derivatives. The background addresses the roles of traditional reinsurance and securitization efforts in providing risk transfer and risk financing in the "cat" insurance field. The benefits and difficulties involved in commoditizing a new asset class are explored as well.
Keywords: commodity market;
derivatives;
Insurance;
Capital Markets;
Natural Disasters;
Risk Management;
Financial Management;
Financial Strategy;
Performance Evaluation;
Insurance Industry;
Bermuda;
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Case
| HBS Case Collection
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1998
(Revised from original 1997 version)
Mid Ocean Limited: Trading Catastrophe Index Options
Kenneth A. Froot and Markus Mullarkey
An insurance industry executive must evaluate the potential of a set of newly-offered catastrophe insurance derivatives. The background addresses the roles of traditional reinsurance and securitization efforts in providing risk transfer and risk financing in the "cat" insurance field. The benefits and difficulties involved in commoditizing a new asset class are explored as well.
Keywords: commodity market;
derivatives;
Insurance;
Capital Markets;
Natural Disasters;
Risk Management;
Financial Management;
Financial Strategy;
Performance Evaluation;
Insurance Industry;
Bermuda;
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Teaching Note
| HBS Case Collection
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1998
Mid Ocean Limited: Trading Catastrophe Index Options, Teaching Note
Kenneth A. Froot and Markus Mullarkey
Teaching Note for (9-298-073).
Keywords: Insurance Industry;
Bermuda;
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Case
| HBS Case Collection
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1997
(Revised from original 1997 version)
USAA: Catastrophe Risk Financing
Kenneth A. Froot and Mark Seasholes
Describes the first major risk financing using catastrophe bonds. Provides a basis for discussing the securitization of insurance risks.
Keywords: Financial Management;
Insurance;
Capital Markets;
Natural Disasters;
Risk Management;
Bonds;
Insurance Industry;
Financial Services Industry;
United States;
Citation: Froot, Kenneth A., and Mark Seasholes. " USAA: Catastrophe Risk Financing." Harvard Business School Case 298-007, September 1997. (Revised from original July 1997 version.)
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Case
| HBS Case Collection
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1997
(Revised from original 1997 version)
USAA: Catastrophe Risk Financing
Kenneth A. Froot and Mark Seasholes
Describes the first major risk financing using catastrophe bonds. Provides a basis for discussing the securitization of insurance risks.
Keywords: Financial Management;
Insurance;
Capital Markets;
Natural Disasters;
Risk Management;
Bonds;
Insurance Industry;
Financial Services Industry;
United States;
Citation: Froot, Kenneth A., and Mark Seasholes. " USAA: Catastrophe Risk Financing." Harvard Business School Case 298-007, September 1997. (Revised from original July 1997 version.)
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Case
| HBS Case Collection
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1997
(Revised from original 1996 version)
Grupo Sidek (A)
Kenneth A. Froot and Alberto Moel
A large Mexican conglomerate, active in tourism, real estate, and steel, is faced with difficult macroeconomic conditions beginning with the Peso crisis of December 1994. The conglomerate had extensive dollar-indexed liabilities and was caught in a crunch when the Mexian Peso lost half its value against the dollar in late 1994. Even though a large portion of its revenues were also dollar-indexed, thus ostensibly providing a foreign exchange hedge, most of the conglomerate's customers were Mexican nationals. With the ensuing recession in 1995, the revenue base dried up, but the dollar liabilities were still outstanding. The case covers the period from late 1994 to February 1995 and deals with the financial and operational decision that Sidek had to face at that time.
Keywords: foreign exchange;
real estate;
debt policy;
tourism;
steel;
Business Conglomerates;
Macroeconomics;
Currency Exchange Rate;
Crisis Management;
Valuation;
Mexico;
Citation: Froot, Kenneth A., and Alberto Moel. " Grupo Sidek (A)." Harvard Business School Case 297-022, July 1997. (Revised from original September 1996 version.)
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Background Note
| HBS Case Collection
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1997
(Revised from original version)
Cross-Border Valuation
Kenneth A. Froot and W. Carl Kester
Provides a review of valuation techniques used to assess cross-border investments. Discusses the discounting of free cash flows with a weighted average cost of capital and the use of adjusted present value. Special concerns such as foreign-exchange risk, country risks, and international diversification are also discussed. Unlike Note on Cross-Border Valuation, this note contains no discussion of valuing real options. A rewritten version of an earlier note.
Keywords: Valuation;
Cross-Cultural and Cross-Border Issues;
Citation: Froot, Kenneth A., and W. Carl Kester. " Cross-Border Valuation." Harvard Business School Background Note 295-100, August 1997. (Revised from original January 1995 version.)
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Case
| HBS Case Collection
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1997
(Revised from original version)
Syscom Computers
Kenneth A. Froot, Peter Tufano and Chris L Marshall
Discusses a company deciding what it should do to manage its worldwide hedging operations.
Keywords: Decisions;
Currency Exchange Rate;
Information Management;
Management Practices and Processes;
Risk Management;
Operations;
Citation: Froot, Kenneth A., Peter Tufano, and Chris L Marshall. " Syscom Computers." Harvard Business School Case 295-094, May 1997. (Revised from original January 1995 version.)
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Case
| HBS Case Collection
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1996
Telmex PRIDES
Kenneth A. Froot and Mark Seasholes
The case examines an issue by a Mexican development bank of PRIDES written on Telmex stock. PRIDES are a dividend-enhanced security which are exchangeable into shares of the underlying stock. The focus is on pricing these instruments, which involve large peso-denominated payments at maturities beyond that of the Mexican yield curve. Further, the optionality of the PRIDES is interesting to analyze.
Keywords: financial derivatives;
securities;
International Finance;
Banks and Banking;
Financial Instruments;
Valuation;
Mexico;
Citation: Froot, Kenneth A., and Mark Seasholes. " Telmex PRIDES." Harvard Business School Case 296-009, March 1996.
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Supplement
| HBS Case Collection
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1996
(Revised from original 1996 version)
Grupo Sidek (B)
Kenneth A. Froot and Alberto Moel
Supplements the (A) case. Designed to be handed out midway through class.
Keywords: foreign exchange;
real estate;
debt policy;
tourism;
steel;
Crisis Management;
Citation: Froot, Kenneth A., and Alberto Moel. " Grupo Sidek (B)." Harvard Business School Supplement 297-023, November 1996. (Revised from original September 1996 version.)
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Case
| HBS Case Collection
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1996
(Revised from original version)
Futures on the Mexican Peso
Kenneth A. Froot, Matthew McBrady and Mark Seasholes
The Chicago Mercantile Exchange needs to decide how to design, and whether and when to introduce, a futures contract on the Mexican peso.
Keywords: Exchange rates;
money markets;
futures market;
country analysis;
International Finance;
Financial Markets;
Futures and Commodity Futures;
Financial Services Industry;
Chicago;
Mexico;
Citation: Froot, Kenneth A., Matthew McBrady, and Mark Seasholes. " Futures on the Mexican Peso." Harvard Business School Case 296-004, October 1996. (Revised from original August 1995 version.)
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Background Note
| HBS Case Collection
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1996
(Revised from original 1992 version)
Note on Commodity Futures
Kenneth A. Froot, Jay O. Light and Nancy Donohue
Describes how commodity futures work, what products and exchanges are available, and who the players in the commodity markets are. Also presents a careful discussion of the pricing of futures in commodity markets, focusing on cost of carry and risk premium approaches, and explaining backwardation and contango markets.
Keywords: Futures and Commodity Futures;
Citation: Froot, Kenneth A., Jay O. Light, and Nancy Donohue. " Note on Commodity Futures." Harvard Business School Background Note 293-018, May 1996. (Revised from original July 1992 version.)
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Case
| HBS Case Collection
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1995
(Revised from original 1993 version)
La Nacional and the Huites Dam Project
Kenneth A. Froot
Keywords: emerging market finance;
Cost of Capital;
Infrastructure;
Investment;
Mexico;
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Case
| HBS Case Collection
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1995
(Revised from original 1992 version)
An Investment Linked to Commodity Futures
Kenneth A. Froot, Jay O. Light and Nancy Donohue
Describes a new investment which is linked to an index of commmodity futures prices. Explores how the index is constructed, how commodity futures (as opposed to other futures and spot prices) behave, and what the portfolio impacts of such an investment might be.
Keywords: commodity market;
investment management;
portfolio management;
Financial Markets;
Investment;
Investment Portfolio;
Futures and Commodity Futures;
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Case
| HBS Case Collection
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1995
(Revised from original 1992 version)
An Investment Linked to Commodity Futures
Kenneth A. Froot, Jay O. Light and Nancy Donohue
Describes a new investment which is linked to an index of commmodity futures prices. Explores how the index is constructed, how commodity futures (as opposed to other futures and spot prices) behave, and what the portfolio impacts of such an investment might be.
Keywords: commodity market;
investment management;
portfolio management;
Financial Markets;
Investment;
Investment Portfolio;
Futures and Commodity Futures;
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Case
| HBS Case Collection
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1994
Alco Holdings Limited
Kenneth A. Froot and Xin Chen
Keywords: financing;
foreign exchange;
consumer products;
foreign investment;
International Finance;
Electronics Industry;
Hong Kong;
Citation: Froot, Kenneth A., and Xin Chen. " Alco Holdings Limited." Harvard Business School Case 294-131, June 1994.
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Case
| HBS Case Collection
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1994
Investing in China
Kenneth A. Froot, Jay O. Light and Jon Headley
Keywords: Investment;
China;
Citation: Froot, Kenneth A., Jay O. Light, and Jon Headley. " Investing in China." Harvard Business School Case 295-025, September 1994.
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Case
| HBS Case Collection
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1993
(Revised from original 1992 version)
Intel Corp.--1992
Kenneth A. Froot
Intel Corp., the world's dominant designer and manufacturer of microprocessors (the "brains" of the personal computer), has accumulated a large amount of cash (net of debt). Furthermore, it expects to continue to accumulate cash at an unprecedented rate. Has the company grown up to the extent that it can begin disbursing cash to its shareholders? What kind of disbursement policy should it choose? Intel will continue to face competition from imitators of its processors in the future, yet it is not clear whether its cash holdings can or will be a competitive weapon in this competitive battle. The case focuses on financial policy issues and on how they then interact with a very unusual and dynamic form of product-market competition and innovation. Can be used as a one- or two-day exploration of the following issues: complementarity externalities and costs of finance, appropriability of returns on investments, the role of finance in high-tech and rapidly innovating sectors, the strategic uses of cash, analysis of capital structure and cash disbursement policies, the use of financial policy as a competitive weapon, and timing in the sale and purchase of equity-linked instruments.
Keywords: dividends;
Financial Management;
Competition;
Multinational Firms and Management;
Cash;
Technological Innovation;
Capital Structure;
Investment Return;
Equity;
Financial Strategy;
Corporate Finance;
Semiconductor Industry;
United States;
Citation: Froot, Kenneth A. " Intel Corp.--1992." Harvard Business School Case 292-106, March 1993. (Revised from original February 1992 version.)
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Teaching Note
| HBS Case Collection
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1993
Intel Corporation, 1992 TN
Kenneth A. Froot
Teaching Note for (9-292-106).
Keywords: Semiconductor Industry;
United States;
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