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Volume 39: Issue 3 (July 1984)


Front Matter

Pages: i-vii  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb00831.x  |  Cited by: 0


ASSOCIATION MEETINGS

Pages: viii-ix  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03691.x  |  Cited by: 0


ANNOUNCEMENTS

Pages: x-x  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03692.x  |  Cited by: 0


AUTHOR INDEX

Pages: xi-xi  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb00832.x  |  Cited by: 0


STYLE INSTRUCTIONS

Pages: xii-xii  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb00833.x  |  Cited by: 0


Back Matter

Pages: xiii-xiii  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb00834.x  |  Cited by: 0


Optimal Financial Policy and Firm Valuation

Pages: 593-607  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03647.x  |  Cited by: 73

MICHAEL J. BRENNAN, EDUARDO S. SCHWARTZ


DISCUSSION

Pages: 607-609  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03648.x  |  Cited by: 0

DAVID EMANUEL


Contingent Claims Analysis of Corporate Capital Structures: an Empirical Investigation

Pages: 611-625  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03649.x  |  Cited by: 260

E. PHILIP JONES, SCOTT P. MASON, ERIC ROSENFELD


DISCUSSION

Pages: 625-627  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03650.x  |  Cited by: 0

LAWRENCE FISHER


Estimation of Implicit Bankruptcy Costs

Pages: 629-642  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03651.x  |  Cited by: 4

ROBERT E. KALABA, TERENCE C. LANGETIEG, NIMA RASAKHOO, MARK I. WEINSTEIN

This paper presents a new methodology, quasilinear estimation, for efficiently estimating economic variables reflected in the prices of corporate securities. For example, ex ante bankruptcy costs are not directly observable, however, if these costs are sufficiently large, then current security prices are affected and bankruptcy costs can be indirectly measured. When bankruptcy costs and other relevant parameters are known, there are many numerical solution techniques that can be used to determine security prices. One technique, the method of lines, is compatible with quasilinear estimation, which has been employed extensively in the physical sciences for the estimation of coefficients in differential equation models. We demonstrate that quasilinear estimation is a potentially reliable and efficient technique for the estimation of corporate bankruptcy costs and the asset variance from security prices.


DISCUSSION

Pages: 643-645  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03652.x  |  Cited by: 0

RICHARD RUBACK


Hedging Performance and Basis Risk in Stock Index Futures

Pages: 657-669  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03654.x  |  Cited by: 153

STEPHEN FIGLEWSKI


THE BEHAVIOR OF U.S. SHORT-TERM INTEREST RATES SINCE OCTOBER 1979

Pages: 671-682  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03655.x  |  Cited by: 9

RICHARD H. CLARIDA, BENJAMIN M. FRIEDMAN

Short‐term interest rates in the United States have been “too high” since October 1979 in the sense that both unconditional and conditional forecasts, based on an estimated vector autoregression model summarizing the prior experience, underpredict short‐term interest rates during this period. Although a nonstructural model cannot directly answer the question of why this has been so, comparisons of alternative conditional forecasts point to the post‐October 1979 relationship between the growth of real income and the growth of real money balances as closely connected to the level and pattern of short‐term interest rates. This finding is consistent with the authors' earlier conclusion, based on analysis of a small structural macroeconometric model, that the high average level of interest rates has been due to a combination of slow growth of (nominal) money supply and continuing price inflation, which together have kept real balances small in relation to prevailing levels of economic activity.


DISCUSSION

Pages: 682-683  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03656.x  |  Cited by: 0

ROGER CRAINE


Expectations, Surprises and Treasury Bill Rates: 1960-82

Pages: 685-696  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03657.x  |  Cited by: 1

PATRIC H. HENDERSHOTT

Changes in six‐month bill rates over semiannual periods in the 1960s and 1970s are successfully related to expected changes and to surprises. The latter include unanticipated changes in expected inflation, in the growth of industrial production and base money, and in inflation uncertainty. Estimation of the basic equation through the middle of 1983 does not suggest any change in structure. Moreover the equation “explains” 60 percent of the extraordinarily high level of real rates since late 1980, largely owing to an excess of unexpected net increases in anticipated inflation over actual increases.


DISCUSSION

Pages: 696-698  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03658.x  |  Cited by: 0

DONALD J. MULLINEAUX


Inflation and Real Interest Rates on Assets with Different Risk Characteristics

Pages: 699-712  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03659.x  |  Cited by: 28

JOHN HUIZINGA, FREDERIC S. MISHKIN


DISCUSSION

Pages: 712-714  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03660.x  |  Cited by: 0

WARD S. CURRAN


Purchasing Power Parity as a Trading Strategy

Pages: 715-724  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03661.x  |  Cited by: 5

JOHN F. O. BILSON


DISCUSSION

Pages: 724-725  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03662.x  |  Cited by: 0

BRADFORD CORNELL


International Corporate Diversification, Market Valuation, and Size-Adjusted Evidence

Pages: 727-743  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03663.x  |  Cited by: 23

VIHANG R. ERRUNZA, LEMMA W. SENBET


DISCUSSION

Pages: 743-745  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03664.x  |  Cited by: 0

JAMES L. BICKSLER


Term Premia on Euro Rates

Pages: 747-755  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03665.x  |  Cited by: 0

DENNIS E. LOGUE, RICHARD JAMES SWEENEY


DISCUSSION

Pages: 755-757  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03666.x  |  Cited by: 0

RICHARD J. HERRING


Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition

Pages: 759-772  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03667.x  |  Cited by: 2

EDWARD J. KANE

Product lines of traditionally heterogeneous financial institutions are rapidly fusing into a homogeneous blend. Institutions and market structures are reshaping themselves to lower the cost of serving customer demand for financial services. This paper contends that contemporary adaptations exploit scope economies rooted in technological change and deposit‐insurance subsidies to innovative forms of risk‐bearing.


DISCUSSION

Pages: 772-773  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03668.x  |  Cited by: 1

DAVID S. KIDWELL


Deposit Insurance in a Deregulated Environment

Pages: 775-785  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03669.x  |  Cited by: 7

TIM S. CAMPBELL, DAVID GLENN


DISCUSSION

Pages: 785-787  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03670.x  |  Cited by: 0

PAUL M. HORVITZ


Consequences of Deregulation for Commercial Banking

Pages: 789-803  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03671.x  |  Cited by: 5

GEORGE G. KAUFMAN, LARRY R. MOTE, HARVEY ROSENBLUM

In recent years, many of the restrictions on banking activities adopted following the banking collapse of the 1930s have been eroded by improvements in technology and high interest rates, which led to increasing direct competition from unregulated institutions. Beginning in the 1970s, the regulatory agencies, state legislatures, and the Congress have moved to liberalize these restrictions. Based on research on economies of scale and scope, the experience of the conglomerate merger movement of the 1950s and 1960s, the observed effects of changes in state laws governing branches and holding companies, foreign experience, and experience in other industries that underwent deregulation, banking deregulation is likely to lead to reductions in the number of banks and increases in their efficiency, geographic scope, and product diversification. Such an outcome is consistent with the survival of a large number and variety of financial institutions and need not endanger the safety of the banking system.


DISCUSSION

Pages: 803-805  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03672.x  |  Cited by: 0

ROBERT A. EISENBEIS


Anomalies in Security Returns and the Specification of the Market Model

Pages: 807-815  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03673.x  |  Cited by: 2

STEPHEN J. BROWN, CHRISTOPHER B. BARRY

We examine the hypothesis originally advanced by Roll [12] that observed anomalies in excess returns can be explained by misspecification of the market model used to estimate systematic risk. We find substantial misspecifications in the model systematically related to size and period of listing of the securities in question. There is some evidence that these misspecifications are associated with systemic biases in measured betas used to construct excess returns.


DISCUSSION

Pages: 815-817  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03674.x  |  Cited by: 0

KENNETH R. FRENCH


A Further Investigation of the Weekend Effect in Stock Returns

Pages: 819-835  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03675.x  |  Cited by: 246

DONALD B. KEIM, ROBERT F. STAMBAUGH

This study uses a longer time period and additional stocks to further investigate the weekend effect. We find consistently negative Monday returns (1) for the S & P Composite as early as 1928, (2) for Exchange‐traded stocks of firms of all sizes, and (3) for actively traded over‐the‐counter (OTC) stocks. The OTC results are based on bid prices and therefore appear to reject specialist‐related explanations. For the 30 individual stocks of the Dow Jones Industrial Index, the average correlation between Friday and Monday returns is positive and the highest of all pairs of successive days. The latter finding is inconsistent with fairly general measurement‐error explanations.


DISCUSSION

Pages: 835-837  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03676.x  |  Cited by: 0

RICHARD J. ROGALSKI


DISCUSSION: WHAT THE ANOMALIES MEAN

Pages: 837-840  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03677.x  |  Cited by: 5

MARC R. REINGANUM


How Big is the Tax Advantage to Debt?

Pages: 841-853  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03678.x  |  Cited by: 39

ALEX KANE, ALAN J. MARCUS, ROBERT L. McDONALD

This paper uses an option valuation model of the firm to answer the question, “What magnitude tax advantage to debt is consistent with the range of observed corporate debt ratios?” We incorporate into the model differential personal tax rates on capital gains and ordinary income. We conclude that variations in the magnitude of bankruptcy costs across firms can not by itself account for the simultaneous existence of levered and unlevered firms. When it is possible for the value of the underlying assets to jump discretely to zero, differences across firms in the probability of this jump can account for the simultaneous existence of levered and unlevered firms. Moreover, if the tax advantage to debt is small, the annual rate of return advantage offered by optimal leverage may be so small as to make the firm indifferent about debt policy over a wide range of debt‐to‐firm value ratios.


DISCUSSION

Pages: 853-855  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03679.x  |  Cited by: 0

RONALD W. MASULIS


On the Existence of an Optimal Capital Structure: Theory and Evidence

Pages: 857-878  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03680.x  |  Cited by: 648

MICHAEL BRADLEY, GREGG A. JARRELL, E. HAN KIM


DISCUSSION

Pages: 878-880  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03681.x  |  Cited by: 0

WAYNE H. MIKKELSON


Benefits of Bank Diversification: The Evidence from Shareholder Returns

Pages: 881-892  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03682.x  |  Cited by: 20

ROBERT A. EISENBEIS, ROBERT S. HARRIS, JOSEF LAKONISHOK


DISCUSSION

Pages: 893-894  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03683.x  |  Cited by: 1

STEPHEN J. BROWN


External Financing and Liquidity

Pages: 895-908  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03684.x  |  Cited by: 15

GUR HUBERMAN

We explain the observed negative relation between market value of firms and their fund raising activities. Ours is not a signalling model. The firm's objective is to maximize the present value of its income. Considerations of cash availability (liquidity) and unfolding of uncertainty drive our model. Income from operations is an important source of liquidity. Low earnings are associated with low liquidity. Whether earnings are low or not is known to some extent in advance of the realization itself. External financing is pursued in anticipation of the earnings' realization in order to maintain a desired level of liquidity. Therefore, anticipated low earnings are associated with a high level of external financing. Of course, an anticipation of low earnings is also accompanied by a decrease in the firm's value. The empiricist who looks at time series of a firm's value and of its dividend/external financing announcements would then record positive correlation between value and cash distributions and negative correlation between value and external financing.


DISCUSSION

Pages: 908-910  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03685.x  |  Cited by: 0

ANDREW H. CHEN


Non-Standard C.A.P.M.'s and the Market Portfolio

Pages: 911-924  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03686.x  |  Cited by: 4

EDWIN J. ELTON, MARTIN J. GRUBER


Minutes of the Annual Membership Meeting December 29, 1983

Pages: 925-926  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03687.x  |  Cited by: 0

Robert G. Hawkins


Report of the Executive Secretary and Treasurer for the Year Ending September 30, 1983

Pages: 927-929  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03688.x  |  Cited by: 0

Robert G. Hawkins


Report of the Managing Editors of theJournal of Financefor 1983

Pages: 931-935  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03689.x  |  Cited by: 0

EDWIN J. ELTON, MARTIN J. GRUBER


Dates and Locations of Forthcoming Annual Meetings of the American Finance Association

Pages: 937-937  |  Published: 7/1984  |  DOI: 10.1111/j.1540-6261.1984.tb03690.x  |  Cited by: 0