Pages: v-v | Published: 2/1999 | DOI: 10.1111/1540-6261.00096 | Cited by: 0
Pages: 1-34 | Published: 2/1999 | DOI: 10.1111/0022-1082.00097 | Cited by: 213
Michael J. Barclay, William G. Christie, Jeffrey H. Harris, Eugene Kandel, Paul H. Schultz
Pages: 35-66 | Published: 2/1999 | DOI: 10.1111/0022-1082.00098 | Cited by: 47
Eugene Kandel, Leslie M. Marx
We present a model of Nasdaq that includes the two ways in which marketmakers compete for order flow: quotes and direct payments. Brokers in our model can execute small trades through a computerized system, preferencing arrangements with marketmakers, or vertical integration into market making. The comparative statics in our model differ from those of the traditional model of dealer markets, which does not capture important institutional features of Nasdaq. We also show that the empirical evidence is inconsistent with the traditional model, which suggests that preferencing and vertical integration are important components in understanding Nasdaq.
Pages: 67-121 | Published: 2/1999 | DOI: 10.1111/0022-1082.00099 | Cited by: 142
Ľuboš Pástor, Robert F. Stambaugh
Costs of equity for individual firms are estimated in a Bayesian framework using several factor‐based pricing models. Substantial prior uncertainty about mispricing often produces an estimated cost of equity close to that obtained with mispricing precluded, even for a stock whose average return departs significantly from the pricing model's prediction. Uncertainty about which pricing model to use is less important, on average, than within‐model parameter uncertainty. In the absence of mispricing uncertainty, uncertainty about factor premiums is generally the largest source of overall uncertainty about a firm's cost of equity, although uncertainty about betas is nearly as important.
Pages: 123-163 | Published: 2/1999 | DOI: 10.1111/0022-1082.00100 | Cited by: 38
This paper investigates Euler equations involving security prices and household‐level consumption data. It provides a useful complement to many existing studies of consumption‐based asset pricing models that use a representative‐agent framework, because the Euler equations under investigation hold even if markets are incomplete. It also provides a useful complement to simulation‐based studies of market incompleteness. The empirical evidence indicates that the theory is rejected by the data along several dimensions. The results therefore indicate that some well‐documented asset‐pricing puzzles do not result from aggregation problems for the preferences under investigation.
Pages: 165-201 | Published: 2/1999 | DOI: 10.1111/0022-1082.00101 | Cited by: 1269
John D. Lyon, Brad M. Barber, Chih‐Ling Tsai
We analyze tests for long‐run abnormal returns and document that two approaches yield well‐specified test statistics in random samples. The first uses a traditional event study framework and buy‐and‐hold abnormal returns calculated using carefully constructed reference portfolios. Inference is based on either a skewness‐adjusted t‐statistic or the empirically generated distribution of long‐run abnormal returns. The second approach is based on calculation of mean monthly abnormal returns using calendar‐time portfolios and a time‐series t‐statistic. Though both approaches perform well in random samples, misspecification in nonrandom samples is pervasive. Thus, analysis of long‐run abnormal returns is treacherous.
Pages: 203-235 | Published: 2/1999 | DOI: 10.1111/0022-1082.00102 | Cited by: 196
Raymond Kan, Chu Zhang
In this paper we investigate the properties of the standard two‐pass methodology of testing beta pricing models with misspecified factors. In a setting where a factor is useless, defined as being independent of all the asset returns, we provide theoretical results and simulation evidence that the second‐pass cross‐sectional regression tends to find the beta risk of the useless factor priced more often than it should. More surprisingly, this misspecification bias exacerbates when the number of time series observations increases. Possible ways of detecting useless factors are also examined.
Pages: 237-268 | Published: 2/1999 | DOI: 10.1111/0022-1082.00103 | Cited by: 461
John R. Graham
A model is developed which implies that if an analyst has high reputation or low ability, or if there is strong public information that is inconsistent with the analyst's private information, she is likely to herd. Herding is also common when informative private signals are positively correlated across analysts. The model is tested using data from analysts who publish investment newsletters. Consistent with the model's implications, the empirical results indicate that a newsletter analyst is likely to herd on Value Line's recommendation if her reputation is high, if her ability is low, or if signal correlation is high.
Pages: 269-305 | Published: 2/1999 | DOI: 10.1111/0022-1082.00104 | Cited by: 63
Wolfgang Bühler, Marliese Uhrig‐Homburg, Ulrich Walter, Thomas Weber
Our main goal is to investigate the question of which interest‐rate options valuation models are better suited to support the management of interest‐rate risk. We use the German market to test seven spot‐rate and forward‐rate models with one and two factors for interest‐rate warrants for the period from 1990 to 1993. We identify a one‐factor forward‐rate model and two spot‐rate models with two factors that are not significantly outperformed by any of the other four models. Further rankings are possible if additional criteria are applied.
Pages: 307-317 | Published: 2/1999 | DOI: 10.1111/0022-1082.00105 | Cited by: 39
William J. Crowder, Mark E. Wohar
Are nominal bonds appropriately discounted for taxes? Empirical estimates of the response of nominal interest rates to changes in inflation, the Fisher effect, have failed to produce a definitive answer. Four reasons have been put forward as possible explanations: (i) Tobin effects, (ii) fiscal illusion, (iii) peso problems, and (iv) different estimators. Utilizing data on taxable and tax‐exempt bond interest rates and several different estimators, we find that the Fisher effect estimates are always larger for the taxable bond relative to the tax‐exempt bond, suggesting that fiscal illusion and different estimators cannot account for the previous results.
Pages: 319-339 | Published: 2/1999 | DOI: 10.1111/0022-1082.00106 | Cited by: 393
Randall Morck, Masao Nakamura
Using a large sample of Japanese firm level data, we find that Japanese banks act primarily in the short term interests of creditors when dealing with firms outside bank groups. Corporate control mechanisms other than bank oversight appear necessary in these firms. When dealing with firms in bank groups, banks may act in the broader interests of a range of stakeholders, including shareholders. However, our findings are also consistent with banks “propping up” troubled bank group firms. We conclude that bank oversight need not lead to value maximizing corporate governance.
Pages: 341-357 | Published: 2/1999 | DOI: 10.1111/0022-1082.00107 | Cited by: 66
This paper analyzes junk bond defaults during 1980 to 1991 to determine which factors affect the length of time spent in default. Bondholder holdouts are not a significant problem, as firms with proportionately more bonds have shorter default spells. In contrast, bank debt is associated with slower restructurings. Bargaining problems arising from contingent liabilities, lawsuits, and size delay the process, although multiple bond classes do not. Neither information problems nor firm value appear to matter. HLTs do not resolve their defaults at a significantly faster pace. Defaults tend to take less time in the 1990s, despite Drexel's disappearance from the market.
Pages: 359-375 | Published: 2/1999 | DOI: 10.1111/0022-1082.00108 | Cited by: 84
Dong‐Hyun Ahn, Jacob Boudoukh, Matthew Richardson, Robert F. Whitelaw
This article provides an analytical solution to the problem of an institution optimally managing the market risk of a given exposure by minimizing its Value‐at‐Risk using options. The optimal hedge consists of a position in a single option whose strike price is independent of the level of expense the institution is willing to incur for its hedging program. This optimal strike price depends on the distribution of the asset exposure, the horizon of the hedge, and the level of protection desired by the institution. Moreover, the costs associated with a suboptimal choice of exercise price are economically significant.
Pages: 377-402 | Published: 2/1999 | DOI: 10.1111/0022-1082.00109 | Cited by: 172
Peter Ritchken, Rob Trevor
In this paper, we develop an efficient lattice algorithm to price European and American options under discrete time GARCH processes. We show that this algorithm is easily extended to price options under generalized GARCH processes, with many of the existing stochastic volatility bivariate diffusion models appearing as limiting cases. We establish one unifying algorithm that can price options under almost all existing GARCH specifications as well as under a large family of bivariate diffusions in which volatility follows its own, perhaps correlated, process.
Pages: 403-420 | Published: 2/1999 | DOI: 10.1111/0022-1082.00110 | Cited by: 176
Ian Domowitz, Robert L. Sartain
Qualitative choice models of consumers' decisions to file for bankruptcy and their choice of bankruptcy chapter are estimated jointly, combining choice‐based sampling techniques with a nested estimation procedure. Medical and credit card debt are found to be the strongest contributors to bankruptcy, with homeownership playing an important role with respect to both the decision to declare bankruptcy and the choice of bankruptcy alternative. The potential effects of legal changes relating to property exemptions and dischargeable debt categories are found to encourage debt repayment through Chapter 13.
Pages: 421-428 | Published: 2/1999 | DOI: 10.1111/1540-6261.00111 | Cited by: 0
Michael Keppler and Martin Lechner, Emerging Markets: Research, Strategies and Benchmarks
Pages: 421-428 | Published: 2/1999 | DOI: 10.1111/1540-6261.t01-1-00111 | Cited by: 0
Pages: 429-430 | Published: 2/1999 | DOI: 10.1111/1540-6261.00112 | Cited by: 0
Pages: 431-432 | Published: 2/1999 | DOI: 10.1111/j.1540-6261.1999.tb00747.x | Cited by: 0
Pages: 433-434 | Published: 2/1999 | DOI: 10.1111/j.1540-6261.1999.tb00748.x | Cited by: 0