Pages: i-vi | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb00710.x | Cited by: 0
Pages: vii-viii | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb00711.x | Cited by: 0
Pages: ix-ix | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb00712.x | Cited by: 0
Pages: x-xvii | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb00713.x | Cited by: 0
Pages: 483-510 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04565.x | Cited by: 1837
ROBERT C. MERTON
Pages: 511-531 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04566.x | Cited by: 34
Pages: 533-553 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04567.x | Cited by: 327
YAKOV AMIHUD, HAIM MENDELSON
This paper examines the effects of the mechanism by which securities are traded on their price behavior. We compare the behavior of openātoāopen and closeātoāclose returns on NYSE stocks, given the differences in execution methods applied in the opening and closing transactions. Opening returns are found to exhibit greater dispersion, greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns. We study the effects of the bidāask spread and the priceāadjustment process on the estimated return variances and covariances and discuss the associated biases. We conclude that the trading mechanism has a significant effect on stock price behavior.
Pages: 554-555 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04568.x | Cited by: 0
Pages: 557-581 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04569.x | Cited by: 869
WERNER F. M. De BONDT, RICHARD H. THALER
In a previous paper, we found systematic price reversals for stocks that experience extreme longāterm gains or losses: Past losers significantly outperform past winners. We interpreted this finding as consistent with the behavioral hypothesis of investor overreaction. In this followāup paper, additional evidence is reported that supports the overreaction hypothesis and that is inconsistent with two alternative hypotheses based on firm size and differences in risk, as measured by CAPMābetas. The seasonal pattern of returns is also examined. Excess returns in January are related to both shortāterm and longāterm past performance, as well as to the previous year market return.
Pages: 583-599 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04570.x | Cited by: 21
RICHARD J. HERRING, PRASHANT VANKUDRE
We show that growth opportunities which cannot be converted to cash under conditions of financial distress (Gz) are a critical determinant of an intermediary's choice of risk. Financial institutions in which Gz is a low proportion of total assets will be much more likely to engage in goāforābroke behavior. The model leads to a reevaluation of the effectiveness of several traditional remedies for dealing with banks that take excessive risks such as raising insurance premiums, intervening before capital is depleted, and restricting investment options. The model also has implications about a new approach to the examination of financial intermediaries.
Pages: 601-619 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04571.x | Cited by: 3
BRUCE N. LEHMANN
This paper catalogues properties of minimum norm orthogonal portfolios: portfolios which minimize a quadratic objective function and have returns uncorrelated with those of a candidate portfolio that is not meanāvariance efficient. The analysis shows that the dollar versions of these portfolios correspond to estimators of zero beta rates based on alternative statistical criteria and grouping procedures while costless orthogonal portfolios represent candidate meanāvariance efficiency tests. It also develops inference procedures for zero and unit net investment portfolios of individual securities (instead of grouped portfolios) that have zero expected betas. The resulting meanāvariance efficiency tests are reasonably insensitive to the underlying statistical assumptions.
Pages: 620-622 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04572.x | Cited by: 0
Pages: 623-641 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04573.x | Cited by: 32
This paper examines optimal corporate financing arrangements under asymmetric information for different patterns of temporal resolution of uncertainty in the underlying technology. An agency problem, a signalling problem and an agencyāsignalling problem arise as special cases. The associated informational equilibria and the optimal financing arrangements are characterized and compared. In the agencyāsignalling equilibrium the private information of corporate insiders at the time of financing is signalled through capital structure choices which deviate optimally from agencyācost minimizing financing arrangements, which in turn induce riskāshifting incentives in the investment policy. In the pure signalling case the equilibrium is characterized by direct contractual precommitments to implement investment policies which are riskier than paretoāoptimal levels. Empirical implications for debt covenants and the announcement effect of investment policies and leverage increasing transactions on existing stock and bond prices are explicitly derived.
Pages: 643-661 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04574.x | Cited by: 111
JOHN S. STRONG, JOHN R. MEYER
Pages: 661-663 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04575.x | Cited by: 6
ANJAN V. THAKOR
Pages: 665-681 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04576.x | Cited by: 33
VENKAT SRINIVASAN, YONG H. KIM
Financial classification issues, and particularly the financial distress problem, continue to be subject to vigorous investigation. The corporate credit granting process has not received as much attention in the literature. This paper examines the relative effectiveness of parametric, nonparametric and judgemental classification procedures on a sample of corporate credit data. The judgemental model is based on the Analytic Hierarchy Process. Evidence indicates that (nonparametric) recursive partitioning methods provide greater information than simultaneous partitioning procedures. The judgemental model is found to perform as well as statistical models. A complementary relationship is proposed between the statistical and the judgemental models as an effective paradigm for granting credit.
Pages: 681-683 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04577.x | Cited by: 2
ROBERT A. EISENBEIS
Pages: 685-698 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04578.x | Cited by: 3
DAVID MAYERS, CLIFFORD W. SMITH
Certain U.S. Government securities, known as flower bonds, can be redeemed at par plus accrued interest for the purpose of paying estate taxes, if held at the time of death. Thus, a flower bond, selling at a discount, is like a straight bond plus a life insurance policy. An equilibrium derived from a rational flower bond pricing model implies the existence of clienteles: individuals with the highest death probabilities hold the deepest discount flower bonds. The empirical implication, that bonds with the deepest discount should be redeemed at the fastest rate, is tested and the results support the proposition.
Pages: 698-702 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04579.x | Cited by: 0
ROBERT C. WITT
Pages: 703-720 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04580.x | Cited by: 16
RICHARD L. SMITH
Previous research suggests that firms choose negotiated issuance over competitive despite its apparently higher net interest cost. This result is shown to arise partly from failure to correct for a selectivity bias in the choice of issuance procedures. Two stage analysis is used in a model that includes qualitative and limited dependent variables to reāestimate the net interest cost difference between competitive and negotiated issues. Results support the hypothesis that the choice of issuance procedure is consistent with shareholder wealth maximization. Examination of debt issues subject to Rule 50 of the Public Utility Holding Company Act indicates that the regulation, as applied, is not effective.
Pages: 721-739 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04581.x | Cited by: 88
ROBERT R. GRAUER, NILS H. HAKANSSON
This paper applies the multiāperiod investment model to a universe of international securities on the basis of the simple probability assessment approach. Our principal findings are: 1) the gains from including nonāU.S. asset categories in the universe were remarkably large (in some cases statistically significant), especially for the highly riskāaverse strategies, 2) the gains from removing the no leverage constraint were more substantial than they were in the absence of nonāU.S. securities, and 3) there is strong evidence of market segmentation in that the optimal levels of investment in U.S. securities were mostly zero in the presence of the nonāU.S. asset categories.
Pages: 739-741 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04582.x | Cited by: 0
Pages: 743-758 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04583.x | Cited by: 15
YVES BALCER, KENNETH L. JUDD
We examine the impact of capital income taxation, both accrual forms of taxation and taxation of realized capital gains, on total savings and the demand for corporate financial instruments. We find that investors may hold both debt and equity in the face of effective collection of capital gains taxation even in a flat tax system. We also find that the two taxes will have substantially different effects on saving and consumption behavior, making it unlikely that the tax structure can be summarized by any single equivalent accrual tax rate.
Pages: 758-761 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04584.x | Cited by: 0
CHESTER S. SPATT
Pages: 763-797 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04585.x | Cited by: 56
THOMAS E. COPELAND, DANIEL FRIEDMAN
Pages: 799-800 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04586.x | Cited by: 0
Pages: 801-803 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04587.x | Cited by: 0
Pages: 805-808 | Published: 7/1987 | DOI: 10.1111/j.1540-6261.1987.tb04588.x | Cited by: 2
EDWIN J. ELTON, MARTIN J. GRUBER