During popular prime-time television shows, forensic investigators use specialized but wide-ranging scientific knowledge of chemical trace evidence, bacteria, DNA, teeth, insects, and other specialties to collect and sift evidence of possible crimes. In economics and finance, forensic investigators apply their own specialized knowledge of prices, quantities, timing, and market institutions -- and sometimes discover or substantiate evidence that is used by regulatory or criminal enforcement agencies. In this article, I will discuss four recent topics in forensic finance, all of which have attracted media attention: 1) the late trading of mutual funds, 2) stock option backdating, 3) the allocation of underpriced initial public offerings to corporate executives, and 4) changes in the records of stock analyst recommendations. In most of these cases, once certain practices or patterns have been publicized, financial industry practice has changed.
Volume (Year): 22 (2008)
Issue (Month): 3 (Summer)
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- Eric Zitzewitz, 2003.
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- Zitzewitz, Eric, 2002. "Who Cares About Shareholders? Arbitrage-Proofing Mutual Funds," Research Papers 1749, Stanford University, Graduate School of Business.
- Alexander Ljungqvist & Christopher Malloy & Felicia Marston, 2009. "Rewriting History," Journal of Finance, American Finance Association, vol. 64(4), pages 1935-1960, 08.
- Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
- Zitzewitz Eric W, 2009. "Prosecutorial Discretion in Mutual Fund Settlement Negotiations, 2003-7," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-42, June.
- Rahul Bhargava & Ann Bose & David A. Dubofsky, 1998. "Exploiting International Stock Market Correlations with Open-end International Mutual Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 765-773.
- Zitzewitz, Eric, 2003.
"How Widespread Is Late Trading in Mutual Funds?,"
1817, Stanford University, Graduate School of Business.
- William G. Christie & Paul H. Schultz, 1995. "Policy Watch: Did Nasdaq Market Makers Implicitly Collude?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 199-208, Summer.
- William Goetzmann & Zoran Ivkovich & K. Rouwenhorst, 2000.
"Day Trading International Mutual Funds: Evidence And Policy Solutions,"
Yale School of Management Working Papers
ysm138, Yale School of Management, revised 01 Jun 2001.
- Goetzmann, William N. & Ivković, Zoran & Rouwenhorst, K. Geert, 2001. "Day Trading International Mutual Funds: Evidence and Policy Solutions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(03), pages 287-309, September.
- David Yermack, 1996.
"Good Timing: CEO Stock Option Awards and Company News Announcements,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
96-41, New York University, Leonard N. Stern School of Business-.
- Yermack, David, 1997. " Good Timing: CEO Stock Option Awards and Company News Announcements," Journal of Finance, American Finance Association, vol. 52(2), pages 449-76, June.
- Heron, Randall A. & Lie, Erik, 2007. "Does backdating explain the stock price pattern around executive stock option grants?," Journal of Financial Economics, Elsevier, vol. 83(2), pages 271-295, February.
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