HML_Dur] is the holding-period return on the HML portfolio; %[DELTA]AggDur is the percentage change in aggregate ten-year-equivalent duration outstanding; %[DELTA]FV is the percentage change in the aggregate face value of U.
Finally, we include the holding-period return on the market portfolio of all bonds to control for the fact that the high-duration bonds are more sensitive, by construction, to shifts in the yield curve.
This return (and the others we report) is calculated by computing the firm's holding-period return and subtracting from it the holding-period return on an industry portfolio (with daily rebalancing and excluding the sample firm) based on the firm's two-digit SIC industry, as defined by CRSP.
Model 2 includes the acquirer's excess holding-period return around the deal's announcement in the Wall Street Journal (A-announcement return).
The expectations hypothesis would suggest that this slope is due to either (1) a persistently incorrect belief that the interest rate will begin to fall about twenty years from now or (2) a decrease in the risk premium for bonds with maturities beyond twenty years, even though the uncertainty of the holding-period return for thirty-year bonds is greater than that for twenty-year bonds.
For now, focus on the holding-period return on a one-period bond, which is known in advance since the one-period bond delivers one dollar without fail next period (see the table).
Under this theory, if long-term rates, such as the 7-year rate, did not fall today, then the expected holding-period return
over the next four years would be higher for those who held long-term bonds than for those who held a succession of short-term bonds throughout the period.
We calculate the total holding-period return
earned by an investor purchasing the shares of a SIP by using the first available closing market price after the initial offering date.
Our measure of long-term abnormal performance is the abnormal long-term holding-period return
and is calculated as follows:
Our measure of issuing firm abnormal post-issue l ong-run stock price performance is the holding-period return
for the issuing firm minus the holding-period return
for its reference portfolio over the same period (henceforth the portfolio-adjusted return).
In particular, three-year holding-period returns
, compounded monthly, are examined for acquiring firms and for industry-matched firms that did not make acquisitions during the period.
12) Table 5 shows the various statistics of the three different holding-period returns
of the short-maturity straddles from this exercise.