The Journal of Finance

Market Uncertainty and the Least‐Cost Offering Method of Public Utility Debt: A Note

Published: 9/1988,  Volume: 43,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1988.tb02620.x  |  Cited by: 1

FRANK J. FABOZZI, EILEEN MORAN, CHRISTOPHER K. MA

The Resiliency of the High‐Yield Bond Market: The LTV Default

Published: 9/1989,  Volume: 44,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1989.tb02641.x  |  Cited by: 1

CHRISTOPHER K. MA, RAMESH P. RAO, RICHARD L. PETERSON

This paper investigates the resiliency of the new‐issue high‐yield bond market by examining the changes in implied default rates of such bonds before and after the largest high‐yield bond default, i.e., the LTV bankruptcy. Specifically, the paper compares implied default probabilities of high‐yield bonds during the post‐LTV period calculated from actual new‐issue yields with instrumental default probabilities calculated on the assumption that the default had not occurred. A comparison of these probabilities reveals that the market's perception of default on the high risk segment of the bond market increased significantly after the LTV bankruptcy. However, the effect was transitory, lasting only six months. Thus, the market was resilient to a major default.

Holiday Trading in Futures Markets

Published: 3/1994,  Volume: 49,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1994.tb04432.x  |  Cited by: 45

FRANK J. FABOZZI, CHRISTOPHER K. MA, JAMES E. BRILEY

In this paper, we find significantly higher preholiday returns in futures contracts compared to nonholiday returns. The findings are consistent with the inventory adjustment hypothesis, since higher preholiday returns associated with lower trading volume are most pronounced for exchange‐closed holidays. There is evidence of positive postholiday returns associated with higher trading volume for exchange‐open holidays. This is consistent with positive holiday sentiments. The holiday effect is uniquely independent: The magnitude of excess holiday returns is the largest among all seasonal variations.

Bank Debt Restructurings and the Composition of Exchange Offers in Financial Distress

Published: 6/1996,  Volume: 51,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1996.tb02700.x  |  Cited by: 67

CHRISTOPHER JAMES

This article examines the relation between bank debt forgiveness and the structure of public debt exchange offers in financial distress. I find that the structure of exchange offers and the likelihood of an offer's success are significantly related to whether the bank participates in the restructuring transaction. Exchange offers made in conjunction with bank concessions are characterized by significantly greater reductions in public debt outstanding and significantly less senior debt offered to bondholders. Overall, the results suggest that the structure of a firm's public and private claims significantly affects the firm's ability to modify its capital structure in financial distress.

The Losses Realized in Bank Failures

Published: 9/1991,  Volume: 46,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1991.tb04616.x  |  Cited by: 294

CHRISTOPHER JAMES

This paper examines the losses realized in bank failures. Losses are measured as the difference between the book value of assets and the recovery value net of the direct expenses associated with the failure. I find the loss on assets is substantial, averaging 30 percent of the failed bank's assets. Direct expenses associated with bank closures average 10 percent of assets. An empirical analysis of the determinants of these losses reveals a significant difference in the value of assets retained by the FDIC and similar assets assumed by acquiring banks.

Relationship‐Specific Assets and the Pricing of Underwriter Services

Published: 12/1992,  Volume: 47,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1992.tb04686.x  |  Cited by: 96

CHRISTOPHER JAMES

This paper investigates the effect of setup costs on the pricing of investment banking services. The existence of setup costs is predicted to result in lower underwriter spreads in IPOs for firms that are expected to issue again. Consistent with this prediction, I find significantly lower spreads for firms that make subsequent issues. I also find that a firm's likelihood of changing underwriters in a subsequent offer is related to the time between offerings and the underwriter's pricing performance in the IPO. These results suggest that the deviations from optimal IPO pricing carry a penalty for the underwriter.

An Analysis of Bank Loan Rate Indexation

Published: 6/1982,  Volume: 37,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1982.tb02225.x  |  Cited by: 13

CHRISTOPHER JAMES

This paper examines the economic rationale for the use of bank loan commitments and the effect on the allocation of bank credit of indexing the loan rate offered through the commitment to the prime. A simple model of the loan market is constructed and used to examine the effect changes in loan demand and the cost of bank funds have on the allocation of bank credit under indexation. It is shown that indexing implies changes in the relative cost of borrowing for certain groups of bank customers. For nonprime customers, an increase in the cost of bank funds results in a decline in the relative cost of borrowing under commitments. The pattern of commitment use is found to be consistent with the predictions of the model.

Nonfinancial Firms as Cross‐Market Arbitrageurs

Published: 8/27/2019,  Volume: 74,  Issue: 6  |  DOI: 10.1111/jofi.12837  |  Cited by: 98

YUERAN MA

I demonstrate that nonfinancial corporations act as cross‐market arbitrageurs in their own securities. Firms use one type of security to replace another in response to shifts in relative valuations, inducing negatively correlated financing flows in different markets. Net equity repurchases and net debt issuance both increase when expected excess returns on debt are particularly low, or when expected excess returns on equity are relatively high. Credit valuations affect equity financing as much as equity valuations do, and vice versa. Cross‐market corporate arbitrage is most prevalent among large, unconstrained firms, and helps account for aggregate financing patterns.

A Nonlinear Factor Analysis of S&P 500 Index Option Returns

Published: 9/19/2006,  Volume: 61,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2006.01059.x  |  Cited by: 137

CHRISTOPHER S. JONES

Growing evidence suggests that extraordinary average returns may be obtained by trading equity index options, and that at least part of this abnormal performance is attributable to volatility and jump risk premia. This paper asks whether such priced risk factors are alone sufficient to explain these average returns. To provide an answer in as general as possible a setting, I estimate a flexible class of nonlinear models using all S&P 500 Index futures options traded between 1986 and 2000. The results show that priced factors contribute to these expected returns but are insufficient to explain their magnitudes, particularly for short‐term out‐of‐the‐money puts.

The Geography of Equity Analysis

Published: 3/2/2005,  Volume: 60,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2005.00744.x  |  Cited by: 749

CHRISTOPHER J. MALLOY

I provide evidence that geographically proximate analysts are more accurate than other analysts. Stock returns immediately surrounding forecast revisions suggest that local analysts impact prices more than other analysts. These effects are strongest for firms located in small cities and remote areas. Collectively these results suggest that geographically proximate analysts possess an information advantage over other analysts, and that this advantage translates into better performance. The well‐documented underwriter affiliation bias in stock recommendations is concentrated among distant affiliated analysts; recommendations by local affiliated analysts are unbiased. This finding reveals a geographic component to the agency problems in the industry.

Initial Public Offering Underpricing: The Issuer's View—A Comment

Published: 9/1989,  Volume: 44,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1989.tb02642.x  |  Cited by: 41

CHRISTOPHER B. BARRY

I consider the underpricing of initial public offerings (IPOs) and the wealth transfers implicit in that underpricing. I find that initial returns properly measure the “issue cost” effect of underpricing as a fraction of offer size, as in Ritter (1987). I present a measure of the wealth effect of underpricing per share retained. In general, the wealth effects on existing shareholders depend on the extent to which they participate in the offering. From the perspective of issuer's wealth, I find that Dawson's (1987) measure is appropriate only in the special case in which all of the prior owners'; shares are sold in the IPO.

FEDERAL RESERVE POLICY, 1955–58*

Published: 12/1968,  Volume: 23,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1968.tb00329.x  |  Cited by: 0

Christopher L. Bach

DISCUSSION

Published: 5/1981,  Volume: 36,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1981.tb00469.x  |  Cited by: 0

CHRISTOPHER A. SIMS

PORTFOLIO ANALYSIS UNDER UNCERTAIN MEANS, VARIANCES, AND COVARIANCES

Published: 5/1974,  Volume: 29,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1974.tb03064.x  |  Cited by: 114

Christopher B. Barry

Tobin's Q , Debt Overhang, and Investment

Published: 8/2004,  Volume: 59,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2004.00677.x  |  Cited by: 301

Christopher A. Hennessy

Incorporating debt in a dynamic real options framework, we show that underinvestment stems from truncation of equity's horizon at default. Debt overhang distorts both the level and composition of investment, with underinvestment being more severe for long‐lived assets. An empirical proxy for the shadow price of capital to equity is derived. Use of this proxy yields a structural test for debt overhang and its mitigation through issuance of additional secured debt. Using measurement error‐consistent GMM estimators, we find a statistically significant debt overhang effect regardless of firms' ability to issue additional secured debt.

Taxable vs. Tax‐Exempt Bonds: A Note on the Effect of Uncertain Taxable Income

Published: 6/1987,  Volume: 42,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1987.tb02576.x  |  Cited by: 1

CHRISTOPHER D. PIROS

Crisis Interventions in Corporate Insolvency

Published: 1/30/2025,  Volume: 80,  Issue: 2  |  DOI: 10.1111/jofi.13421  |  Cited by: 5

SAMUEL ANTILL, CHRISTOPHER CLAYTON

We model the optimal resolution of insolvent firms in general equilibrium. Collateral‐constrained banks lend to (i) solvent firms to finance investments and (ii) distressed firms to avoid liquidation. Liquidations create negative fire‐sale externalities. Liquidations also relieve bank balance–sheet congestion, enabling new firm loans that generate positive collateral externalities by lowering bank borrowing rates. Socially optimal interventions encourage liquidation when firms have high operating losses, high leverage, or low productivity. Surprisingly, larger fire sales promote interventions encouraging more liquidations. We study synergies between insolvency interventions and macroprudential regulation, bailouts, deferred loss recognition, and debt subordination. Our model elucidates historical crisis interventions.

Bank Information Monopolies and the Mix of Private and Public Debt Claims

Published: 12/1996,  Volume: 51,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1996.tb05229.x  |  Cited by: 582

JOEL HOUSTON, CHRISTOPHER JAMES

This article examines the determinants of the mix of private and public debt using detailed information on the debt structure of 250 publicly traded corporations from 1980 through 1990. We find that the relationship between bank borrowing and the importance of growth opportunities depends on the number of banks the firm uses and whether the firm has public debt outstanding. For firms with a single bank relationship, the reliance on bank debt is negatively related to the importance of growth opportunities. In contrast, among firms borrowing from multiple banks, the relationship is positive.

Putting the Price in Asset Pricing

Published: 10/9/2024,  Volume: 79,  Issue: 6  |  DOI: 10.1111/jofi.13391  |  Cited by: 14

THUMMIM CHO, CHRISTOPHER POLK

We propose a novel way to estimate a portfolio's abnormal price, the percentage gap between price and the present value of dividends computed with a chosen asset pricing model. Our method, based on a novel identity, resembles the time‐series estimator of abnormal returns, avoids the issues in alternative approaches, and clarifies the role of risk and mispricing in long‐horizon returns. We apply our techniques to study the cross‐section of price levels relative to the capital asset pricing model (CAPM) and find that a single characteristic, adjusted value, provides a parsimonious model of CAPM‐implied abnormal price.

Connected Stocks

Published: 5/8/2014,  Volume: 69,  Issue: 3  |  DOI: 10.1111/jofi.12149  |  Cited by: 394

MIGUEL ANTÓN, CHRISTOPHER POLK

We connect stocks through their common active mutual fund owners. We show that the degree of shared ownership forecasts cross‐sectional variation in return correlation, controlling for exposure to systematic return factors, style and sector similarity, and many other pair characteristics. We argue that shared ownership causes this excess comovement based on evidence from a natural experiment—the 2003 mutual fund trading scandal. These results motivate a novel cross‐stock‐reversal trading strategy exploiting information contained in ownership connections. We show that long‐short hedge fund index returns covary negatively with this strategy, suggesting these funds may exacerbate this excess comovement.

THE WEIGHTED AVERAGE COST OF CAPITAL: SOME QUESTIONS ON ITS DEFINITION, INTERPRETATION, AND USE: COMMENT

Published: 6/1975,  Volume: 30,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1975.tb01861.x  |  Cited by: 1

Ted Bloomfield, Ronald Ma

Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps

Published: 7/15/2003,  Volume: 58,  Issue: 4  |  DOI: 10.1111/1540-6261.00580  |  Cited by: 1212

Ravi Jagannathan, Tongshu Ma

Green and Hollifield (1992) argue that the presence of a dominant factor would result in extreme negative weights in mean‐variance efficient portfolios even in the absence of estimation errors. In that case, imposing no‐short‐sale constraints should hurt, whereas empirical evidence is often to the contrary. We reconcile this apparent contradiction. We explain why constraining portfolio weights to be nonnegative can reduce the risk in estimated optimal portfolios even when the constraints are wrong. Surprisingly, with no‐short‐sale constraints in place, the sample covariance matrix performs as well as covariance matrix estimates based on factor models, shrinkage estimators, and daily data.

Persuading Investors: A Video‐Based Study

Published: 8/14/2025,  Volume: 80,  Issue: 5  |  DOI: 10.1111/jofi.13471  |  Cited by: 29

ALLEN HU, SONG MA

Persuasive communication functions through not only content but also delivery—facial expression, tone of voice, and diction. This paper examines the persuasiveness of delivery in startup pitches. Using machine learning algorithms to process full pitch videos, we quantify persuasion in visual, vocal, and verbal dimensions. We find that positive (i.e., passionate, warm) pitches increase funding probability. However, conditional on funding, startups with higher levels of pitch positivity underperform. Women are more heavily judged on delivery when evaluated in single‐gender teams, but they are neglected when copitching in mixed‐gender teams. Using an experiment, we show that persuasion delivery works mainly through leading investors to form inaccurate beliefs.

A STUDY OF THE PEOPLE'S BANK OF CHINA*

Published: 9/1962,  Volume: 17,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1962.tb04308.x  |  Cited by: 0

James Chao‐seng Ma

The Effect of Taxation on Immunization Rules and Duration Estimation

Published: 12/1981,  Volume: 36,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1981.tb01080.x  |  Cited by: 5

CHRISTOPHER A. HESSEL, LUCY HUFFMAN

Investments in default‐free bonds can be insulated from financial loss due to interest rate changes (via additive shock) by a process known as immunization. The literature on this process ignores taxes. This manuscript focuses on three issues. The first is the development of the tax‐adjusted immunization process with a comparison to the existing literature. The second issue is the microeconomic effect of a shift in only the individual's tax rates on immunization and investment behavior. The third issue is the macroeconomic effect of an across‐the‐board shift in tax rates on immunization and investment behavior.

The Diversification Discount: Cash Flows Versus Returns

Published: 10/2001,  Volume: 56,  Issue: 5  |  DOI: 10.1111/0022-1082.00386  |  Cited by: 132

Owen A. Lamont, Christopher Polk

Diversified firms have different values from comparable portfolios of single‐segment firms. These value differences must be due to differences in either future cash flows or future returns. Expected security returns on diversified firms vary systematically with relative value. Discount firms have significantly higher subsequent returns than premium firms. Slightly more than half of the cross‐sectional variation in excess values is due to variation in expected future cash flows, with the remainder due to variation in expected future returns and to covariation between cash flows and returns.

Worrying about the Stock Market: Evidence from Hospital Admissions

Published: 5/11/2016,  Volume: 71,  Issue: 3  |  DOI: 10.1111/jofi.12386  |  Cited by: 128

JOSEPH ENGELBERG, CHRISTOPHER A. PARSONS

Using individual patient records for every hospital in California from 1983 to 2011, we find a strong inverse link between daily stock returns and hospital admissions, particularly for psychological conditions such as anxiety, panic disorder, and major depression. The effect is nearly instantaneous (within the same day) for psychological conditions, suggesting that anticipation over future consumption directly influences instantaneous utility.

The Slope of the Credit Yield Curve for Speculative‐Grade Issuers

Published: 10/1999,  Volume: 54,  Issue: 5  |  DOI: 10.1111/0022-1082.00170  |  Cited by: 234

Jean Helwege, Christopher M. Turner

Many theoretical bond pricing models predict that the credit yield curve facing risky bond issuers is downward‐sloping. Previous empirical research (Sarig and Warga (1989), Fons (1994)) supports these models. Our study examines sets of bonds issued by the same firm with equal priority in the liability structure, but with different maturities, thus holding credit quality constant. We find, counter to prior research, that risky bonds typically have upward‐sloping credit yield curves. Moreover, when we combine our matched sets of bonds (no longer controlling credit quality), the estimated slope is negative, indicating a sample selection bias problem associated with maturity.

Option Mispricing around Nontrading Periods

Published: 1/16/2018,  Volume: 73,  Issue: 2  |  DOI: 10.1111/jofi.12603  |  Cited by: 35

CHRISTOPHER S. JONES, JOSHUA SHEMESH

We find that option returns are significantly lower over nontrading periods, the vast majority of which are weekends. Our evidence suggests that nontrading returns cannot be explained by risk, but rather are the result of widespread and highly persistent option mispricing driven by the incorrect treatment of stock return variance during periods of market closure. The size of the effect implies that the broad spectrum of finance research involving option prices should account for nontrading effects. Our study further suggests how alternative industry practices could improve the efficiency of option markets in a meaningful way.

Regulation and the Determination of Bank Capital Changes: A Note

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03848.x  |  Cited by: 22

J. KIMBALL DIETRICH, CHRISTOPHER JAMES

The effectiveness of bank capital adequacy requirements is examined in this paper. Using empirical tests similar to those employed by Peltzman and Mingo, no significant relationship is found between changes in bank capital and the capital standards imposed by regulators. The findings conflict with those of previous studies. The conflict in findings, it is argued, results from the failure of previous studies to account for the effect of binding deposit rate ceilings.

Skin in the Game and Moral Hazard

Published: 7/18/2014,  Volume: 69,  Issue: 4  |  DOI: 10.1111/jofi.12161  |  Cited by: 95

GILLES CHEMLA, CHRISTOPHER A. HENNESSY

What determines securitization levels, and should they be regulated? To address these questions we develop a model where originators can exert unobservable effort to increase expected asset quality, subsequently having private information regarding quality when selling ABS to rational investors. Absent regulation, originators may signal positive information via junior retentions or commonly adopt low retentions if funding value and price informativeness are high. Effort incentives are below first‐best absent regulation. Optimal regulation promoting originator effort entails a menu of junior retentions or one junior retention with size decreasing in price informativeness. Zero retentions and opacity are optimal among regulations inducing zero effort.

The Relation Between Common Stock Returns Trading Activity and Market Value

Published: 9/1983,  Volume: 38,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1983.tb02283.x  |  Cited by: 43

CHRISTOPHER JAMES, ROBERT O. EDMISTER

This study examines the relation between common stock returns, trading activity and market value. Our results indicate that although firm size and trading activity are highly correlated, differences in trading activity are not the underlying reason for the firm size anomaly, the finding of systematic differences in risk adjusted returns across stocks of firms of different size.

The Market Reaction to Stock Splits

Published: 12/1987,  Volume: 42,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1987.tb04370.x  |  Cited by: 198

CHRISTOPHER G. LAMOUREUX, PERCY POON

In this paper, a model of market reaction to stock splits is presented and tested. We argue that the announcement of a split sets off the following chain of events. The market recognizes that, subsequent to the (reverse) split ex‐day, the daily number of transactions along with the raw volume of shares traded will increase (decrease). This increase in volume results in an increase in the noisiness of the security's return process. The increase in noise raises the tax‐option value of the stock, and it is this value that generates the announcement effect of stock splits. Empirical evidence using security returns, daily trading volume, and shareholder data strongly supports this theory. The evidence, in conjunction with this theory, also agrees with extant literature that splits result in decreased liquidity, but there is no evidence that this reduction in liquidity is priced.

Founder‐CEO Compensation and Selection into Venture Capital‐Backed Entrepreneurship

Published: 8/22/2024,  Volume: 79,  Issue: 5  |  DOI: 10.1111/jofi.13383  |  Cited by: 5

MICHAEL EWENS, RAMANA NANDA, CHRISTOPHER STANTON

We show theoretically that a critical determinant of the attractiveness of venture capital (VC)‐backed entrepreneurship for high‐earning potential founders is the expected time to develop a startup's initial product. This is because founder‐CEOs' cash compensation increases substantially after product development, alleviating the nondiversifiable risk that founders face at startup birth. Consistent with the model's predictions of where the supply of entrepreneurial talent is likely to be most constrained, we find that technological shocks differentially altering the expected time to product across industries can explain changes in both the rate of entry and characteristics of individuals selecting into VC‐backed entrepreneurship.

Beyond Random Assignment: Credible Inference and Extrapolation in Dynamic Economies

Published: 12/19/2019,  Volume: 75,  Issue: 2  |  DOI: 10.1111/jofi.12862  |  Cited by: 21

CHRISTOPHER A. HENNESSY, ILYA A. STREBULAEV

We derive analytical relationships between shock responses and theory‐implied causal effects (comparative statics) in dynamic settings with linear profits and linear‐quadratic stock accumulation costs. For permanent profitability shocks, responses can have incorrect signs, undershoot, or overshoot depending on the size and sign of realized changes. For profitability shocks that are i.i.d., uniformly distributed, binary, or unanticipated and temporary, there is attenuation bias, which exceeds 50% under plausible parameterizations. We derive a novel sufficient condition for profitability shock responses to equal causal effects: martingale profitability. We establish a battery of sufficient conditions for correct sign estimation, including stochastic monotonicity. Simple extrapolation/error correction formulas are presented.

The Causal Impact of Media in Financial Markets

Published: 1/6/2011,  Volume: 66,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2010.01626.x  |  Cited by: 984

JOSEPH E. ENGELBERG, CHRISTOPHER A. PARSONS

Disentangling the causal impact of media reporting from the impact of the events being reported is challenging. We solve this problem by comparing the behaviors of investors with access to  different  media coverage of the  same  information event. We use zip codes to identify 19 mutually exclusive trading regions corresponding with large U.S. cities. For all earnings announcements of S&P 500 Index firms, we find that  local  media coverage strongly predicts  local  trading, after controlling for earnings, investor, and newspaper characteristics. Moreover, local trading is strongly related to the timing of local reporting, a particular challenge to nonmedia explanations.

Do Banks Provide Financial Slack?

Published: 6/2002,  Volume: 57,  Issue: 3  |  DOI: 10.1111/1540-6261.00464  |  Cited by: 242

Charles J. Hadlock, Christopher M. James

We study the decision to choose bank debt rather than public securities in a firm's marginal financing choice. Using a sample of 500 firms over the 1980 to 1993 time period, we find that firms are relatively more likely to choose bank loans when variables that measure asymmetric information problems are elevated. The sensitivity of the likelihood of choosing bank debt to information problems is greater for firms with no public debt outstanding. These results are consistent with the hypothesis that banks help alleviate asymmetric information problems and that firms weigh these information benefits against a wide range of contracting costs when choosing bank financing.

The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions

Published: 9/1984,  Volume: 39,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1984.tb03898.x  |  Cited by: 557

MARK J. FLANNERY, CHRISTOPHER M. JAMES

This paper examines the relation between the interest rate sensitivity of common stock returns and the maturity composition of the firm's nominal contracts. Using a sample of actively traded commerical banks and stock savings and loan associations, common stock returns are found to be correlated with interest rate changes. The co‐movement of stock returns and interest rate changes is positively related to the size of the maturity difference between the firm's nominal assets and liabilities.

Investment Management and Risk Sharing with Multiple Managers

Published: 6/1984,  Volume: 39,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1984.tb02321.x  |  Cited by: 27

CHRISTOPHER B. BARRY, LAURA T. STARKS

This paper addresses the investor's decision to employ multiple managers for the management of investment funds. Under conditions such that specialization of managers and diversification among managers are not motives for the use of multiple managers, the paper shows that risk sharing considerations may be sufficient. A model is developed in which the decision to use multiple managers is explicitly treated, and conditions are studied such that an increase or decrease in the number of managers would be desirable. Under some conditions, a multiple manager solution is preferred over a single manager solution.

When It's Not The Only Game in Town: The Effect of Bilateral Search on the Quality of a Dealer Market

Published: 6/1997,  Volume: 52,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1997.tb04818.x  |  Cited by: 36

CHRISTOPHER G. LAMOUREUX, CHARLES R. SCHNITZLEIN

We report results from experimental asset markets with liquidity traders and an insider where we allow bilateral trade to take place, in addition to public trade with dealers. In the absence of the search alternative, dealer profits are large—unlike in models with risk‐neutral, competitive dealers. However, when we allow traders to participate in the search market, dealer profits are close to zero. Dealers compete more aggressively with the alternative trading avenue than with each other. There is no evidence that price discovery is less efficient when the specialists are not the only game in town.

Empirical Analysis of the Yield Curve: The Information in the Data Viewed through the Window of Cox, Ingersoll, and Ross

Published: 6/2002,  Volume: 57,  Issue: 3  |  DOI: 10.1111/1540-6261.00467  |  Cited by: 32

Christopher G. Lamoureux, H. Douglas Witte

This paper uses recent advances in Bayesian estimation methods to exploit fully and efficiently the time‐series and cross‐sectional empirical restrictions of the Cox, Ingersoll, and Ross model of the term structure. We examine the extent to which the cross‐sectional data (five different instruments) provide information about the model. We find that the time‐series restrictions of the two‐factor model are generally consistent with the data. However, the model's cross‐sectional restrictions are not. We show that adding a third factor produces a significant statistical improvement, but causes the average time‐series fit to the yields themselves to deteriorate.

Lazy Prices

Published: 2/22/2020,  Volume: 75,  Issue: 3  |  DOI: 10.1111/jofi.12885  |  Cited by: 387

LAUREN COHEN, CHRISTOPHER MALLOY, QUOC NGUYEN

Using the complete history of regular quarterly and annual filings by U.S. corporations, we show that changes to the language and construction of financial reports have strong implications for firms’ future returns and operations. A portfolio that shorts “changers” and buys “nonchangers” earns up to 188 basis points per month in alpha (over 22% per year) in the future. Moreover, changes to 10‐Ks predict future earnings, profitability, future news announcements, and even future firm‐level bankruptcies. Unlike typical underreaction patterns, we find no announcement effect, suggesting that investors are inattentive to these simple changes across the universe of public firms.

Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance

Published: 1/21/2026,  Volume: 81,  Issue: 2  |  DOI: 10.1111/jofi.70007  |  Cited by: 6

CHRISTOPHER MARTIN, MANJU PURI, ALEXANDER UFIER

Using unique, daily, account‐level data, we investigate deposit outflows and inflows in a distressed bank. We observe an outflow of uninsured depositors following bad regulatory news. Both regular and temporary deposit insurance reduce outflows. We provide important new evidence that, simultaneous with deposit outflows, deposit inflows are first order. Uninsured deposit outflows were largely offset with new insured deposit inflows as the bank approached failure, with the bank increasing term deposit rates. This phenomenon holds in a large sample of banks that faced regulatory action, suggesting that insured deposit inflows are an important mechanism that weakens depositor discipline.

A BAYESIAN MODEL FOR PORTFOLIO SELECTION AND REVISION

Published: 3/1975,  Volume: 30,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1975.tb03169.x  |  Cited by: 32

Robert L. Winkler, Christopher B. Barry

Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects

Published: 3/1990,  Volume: 45,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1990.tb05088.x  |  Cited by: 801

CHRISTOPHER G. LAMOUREUX, WILLIAM D. LASTRAPES

This paper provides empirical support for the notion that Autoregressive Conditional Heteroskedasticity (ARCH) in daily stock return data reflects time dependence in the process generating information flow to the market. Daily trading volume, used as a proxy for information arrival time, is shown to have significant explanatory power regarding the variance of daily returns, which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns. Furthermore, ARCH effects tend to disappear when volume is included in the variance equation.

The Efficiency of the Treasury Bill Futures Market

Published: 9/1979,  Volume: 34,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1979.tb03443.x  |  Cited by: 89

RICHARD J. RENDLEMAN, CHRISTOPHER E. CARABINI

Rewriting History

Published: 7/16/2009,  Volume: 64,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2009.01484.x  |  Cited by: 170

ALEXANDER LJUNGQVIST, CHRISTOPHER MALLOY, FELICIA MARSTON

We document widespread changes to the historical I/B/E/S analyst stock recommendations database. Across seven I/B/E/S downloads, obtained between 2000 and 2007, we find that between 6,580 (1.6%) and 97,582 (21.7%) of matched observations are different from one download to the next. The changes include alterations of recommendations, additions and deletions of records, and removal of analyst names. These changes are nonrandom, clustering by analyst reputation, broker size and status, and recommendation boldness, and affect trading signal classifications and back‐tests of three stylized facts: profitability of trading signals, profitability of consensus recommendation changes, and persistence in individual analyst stock‐picking ability.

Decoding Inside Information

Published: 5/21/2012,  Volume: 67,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2012.01740.x  |  Cited by: 684

LAUREN COHEN, CHRISTOPHER MALLOY, LUKASZ POMORSKI

Exploiting the fact that insiders trade for a variety of reasons, we show that there is predictable, identifiable “routine” insider trading that is not informative about firms’ futures. A portfolio strategy that focuses solely on the remaining “opportunistic” traders yields value‐weighted abnormal returns of 82 basis points per month, while abnormal returns associated with routine traders are essentially zero. The most informed opportunistic traders are local, nonexecutive insiders from geographically concentrated, poorly governed firms. Opportunistic traders are significantly more likely to have SEC enforcement action taken against them, and reduce trading following waves of SEC insider trading enforcement.

How Costly Is External Financing? Evidence from a Structural Estimation

Published: 8/2007,  Volume: 62,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2007.01255.x  |  Cited by: 915

CHRISTOPHER A. HENNESSY, TONI M. WHITED

We apply simulated method of moments to a dynamic model to infer the magnitude of financing costs. The model features endogenous investment, distributions, leverage, and default. The corporation faces taxation, costly bankruptcy, and linear‐quadratic equity flotation costs. For large (small) firms, estimated marginal equity flotation costs start at 5.0% (10.7%) and bankruptcy costs equal to 8.4% (15.1%) of capital. Estimated financing frictions are higher for low‐dividend firms and those identified as constrained by the Cleary and Whited‐Wu indexes. In simulated data, many common proxies for financing constraints actually decrease when we increase financing cost parameters.

Firm Size and Turn‐of‐the‐Year Effects in the OTC/NASDAQ Market

Published: 12/1989,  Volume: 44,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1989.tb02651.x  |  Cited by: 51

CHRISTOPHER G. LAMOUREUX, GARY C. SANGER

This paper examines the turn‐of‐the‐year effect, the firm size effect, and the relation between these two effects for a sample of OTC stocks traded via the NASDAQ reporting system over the period 1973–1985. We find results similar to those based solely on listed stocks. The importance of these findings stems from the existence of nontrivial differences between the characteristics of the OTC/NASDAQ sample and the samples of listed firms examined previously in the literature. We also find that NASDAQ quoted bid‐ask spreads are highly negatively correlated with firm size, are not highly seasonal, and are large enough to preclude trading profits based upon a knowledge of the seasonality of small firms' returns.