The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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DISCUSSION
Published: 05/01/1976 | DOI: 10.1111/j.1540-6261.1976.tb01909.x
Alan Kraus
DISCUSSION
Published: 07/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb04989.x
ALAN KRAUS
Efficient Financing under Asymmetric Information
Published: 12/01/1987 | DOI: 10.1111/j.1540-6261.1987.tb04363.x
MICHAEL BRENNAN, ALAN KRAUS
This paper characterizes the conditions under which the adverse‐selection problem, which may prevent a firm from issuing securities to finance an otherwise profitable investment, may be costlessly overcome by an appropriate choice of financing strategy. The conditions are specialized when the information asymmetry may be characterized by either a first‐degree‐stochastic‐dominance or a mean‐preserving‐spread ordering across possible distributions of firm earnings. Possible financing strategies that resolve the information asymmetry are discussed, and the results are related to recent empirical findings concerning security issues.
On the Distributional Conditions for a Consumption‐oriented Three Moment CAPM
Published: 12/01/1983 | DOI: 10.1111/j.1540-6261.1983.tb03830.x
ALAN KRAUS, ROBERT LITZENBERGER
In this paper, we develop sufficient conditions on probability distributions for a three moment (mean, variance, and skewness) consumption‐oriented capital asset pricing model (CAPM) to price correctly a subset of assets. The assumptions that individuals in an allocationally efficient capital market have identical probability beliefs and monotone increasing strictly concave utility functions displaying nonincreasing absolute risk aversion imply an aggregate preference function that exhibits preference for expected return, aversion to variance of return, and preference for positive skewness. For otherwise arbitrary preferences, we show that quadratic characteristic lines are sufficient for a subset of assets to be priced according to a three moment consumption‐oriented CAPM.
Market Created Risk
Published: 07/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb04378.x
ALAN KRAUS, MAXWELL SMITH
We develop a multiperiod rational expectations model of securities market equilibrium in which equilibrium prices may move between periods even though it is common knowledge that no new information has arrived about ultimate security payoffs. This happens because investors know they have imperfect information about the endowments of other investors and this knowledge affects their probability beliefs about the prices that will prevail at the intermediate trading date. These beliefs are reflected in the equilibrium at the initial trading date when investors focus on the probabilities of intermediate capital gains and losses, rather than ultimate payoffs.
DISCUSSION
Published: 05/01/1977 | DOI: 10.1111/j.1540-6261.1977.tb03270.x
Alan Kraus, Irwin Tepper
The Determination of Fair Profits for the Property‐Liability Insurance Firm
Published: 09/01/1982 | DOI: 10.1111/j.1540-6261.1982.tb03594.x
ALAN KRAUS, STEPHEN A. ROSS
Single period and dynamic valuation models in continuous time, under certainty and uncertainty, are developed for a property‐liability insurance contract to determine the “fair” (competitive) premium and underwriting profit. The intertemporal stochastic model assumes that the claim frequency and the price index of claim settlements are functions of a set of underlying state variables which follow a multivariate Wiener process. The competitive premium is shown to be proportional to the claim frequency and the price index for claim settlements at the time the policy is issued. The factor of proportionality varies directly with the claim settlement rate and the length of coverage, and inversely with the risk‐adjusted real interest rate on the dollar‐valued claim rate.