The Journal of Finance

Year‐End Tax‐Induced Sales and Stock Market Seasonality

Published: 3/1983,  Volume: 38,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1983.tb03633.x  |  Cited by: 46

DAN GIVOLY, ARIE OVADIA

The paper relates two phenomena in the stock market: the high return during the month of January and the apparent existence of widespread sales of stocks for tax purposes towards the end of the fiscal year. The findings suggest that, due to the tax‐induced sales, the price of many stocks over the last 35 years was temporarily depressed in December but recovered in the following January. This price recovery is a major contributor to the high returns observed in January. The tax effect is present in firms of all sizes but much more pronounced for small firms. The analysis also indicates that a more precise identification of the tax‐switch candidates may prove that the tax‐induced sales are, in fact, the sole contributor to the high January's returns.

Raising Capital from Investor Syndicates with Strategic Communication

Published: 4/10/2025,  Volume: 80,  Issue: 3  |  DOI: 10.1111/jofi.13453  |  Cited by: 0

DAN LUO

An entrepreneur makes offers to multiple investors to fund a project that requires a minimum investment. Concerned about other investors' decisions, each investor strategically communicates information about the project to others. When investors have conflicts of interest, those with contractually stronger incentives to invest attempt to persuade others to invest. Depending on the project's ex ante quality, the entrepreneur may promise investors different returns to create conflicts of interest and induce persuasion, or may promise investors an identical return to align their interests and induce truthful communication. The paper illustrates a new motivation for syndication and hierarchy within syndicates.

THE DEBT‐EQUITY RATIO*

Published: 3/1961,  Volume: 16,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1961.tb02802.x  |  Cited by: 0

Dan Usher

A Proposal for Indexes for Traded Call Options

Published: 12/1979,  Volume: 34,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1979.tb00062.x  |  Cited by: 20

DAN GALAI

LEVERAGE, DIVIDEND POLICY AND THE COST OF CAPITAL: COMMENT

Published: 12/1973,  Volume: 28,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1973.tb01468.x  |  Cited by: 1

Dan B. Hemmings

GOVERNMENT FINANCIAL AID TO SMALL BUSINESS: FISCAL POLICY

Published: 6/1951,  Volume: 6,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1951.tb04453.x  |  Cited by: 0

Dan Throop Smith

Financial Speculators' Underperformance: Learning, Self‐Selection, and Endogenous Liquidity

Published: 5/8/2007,  Volume: 62,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2007.01237.x  |  Cited by: 40

REZA MAHANI, DAN BERNHARDT

We develop an equilibrium model of learning by rational traders to reconcile several empirical regularities: Cross sectionally, most individual speculators lose money; large speculators outperform small speculators; past performance positively affects subsequent trade intensity; most new traders lose money and cease speculation; and performance shows persistence. Learning from trading generates substantial endogenous liquidity, reducing bid–ask spreads and the impact of exogenous liquidity shocks on asset prices, but amplifying the effects of real shocks. Introducing slightly overconfident traders increases bid–ask spreads, hurting all traders. Finally, behavioral theories cannot reconcile all of these empirical regularities.

Informed Trading When Information Becomes Stale

Published: 2/2004,  Volume: 59,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2004.00635.x  |  Cited by: 63

Dan Bernhardt, Jianjun Miao

This paper characterizes informed trade when speculators can acquire distinct signals of varying quality about an asset's value at different dates. The most reasonable characterization of private information about stocks is that while information is long‐lived, new information will arrive over time, information that may be acquired by others. Hence, while a speculator may know more than others at a moment, in the future, his information will become stale, but not valueless. In an environment that allows for arbitrary correlations among signals, we characterize equilibrium outcomes including trading, prices, and profits. We provide explicit numerical characterizations for different informational environments.

Liquidity or Credit Risk? The Determinants of Very Short‐Term Corporate Yield Spreads

Published: 9/4/2007,  Volume: 62,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2007.01276.x  |  Cited by: 132

DAN COVITZ, CHRIS DOWNING

Employing a comprehensive database on transactions of commercial paper issued by domestic U.S. nonfinancial corporations, we study the determinants of very short‐term corporate yield spreads. We find that liquidity plays a role in the determination of spreads but, somewhat surprisingly, credit quality is the more important determinant of spreads, even at horizons of less than 1 month. These results are robust across a variety of proxies for liquidity and credit risk, and have important implications for the literature on the modeling of corporate bond prices.

Rent Extraction with Securities Plus Cash

Published: 4/6/2021,  Volume: 76,  Issue: 4  |  DOI: 10.1111/jofi.13018  |  Cited by: 24

TINGJUN LIU, DAN BERNHARDT

In our target‐initiated theory of takeovers, a target approaches potential acquirers that privately know their standalone values and merger synergies, where higher synergy acquirers tend to have larger standalone values. Despite their information disadvantage, targets can extract all surplus when synergies and standalone values are concavely related by offering payment choices that are combinations of cash and equity. Targets exploit the reluctance of high‐valuation acquirers to cede equity claims, inducing them to bid more cash. When synergies and standalone values are not concavely related, sellers can gain by combining cash with securities that are more information sensitive than equities.

Near‐sighted Justice

Published: 12/2004,  Volume: 59,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2004.00712.x  |  Cited by: 18

DAN BERNHARDT, ED NOSAL

Chapter 11 structures complex negotiations between creditors and debtors that are overseen by a bankruptcy court. We identify conditions where the court should sometimes err in determining which firms should be liquidated. Such errors affect actions by both good and bad entrepreneurs. We first characterize the optimal error rate without renegotiation. When creditors and debtors can renegotiate to circumvent an error‐riven court, for one class of actions a blind court that ignores all information is optimal. For another class, the court should place the burden of proof on the entrepreneur. The robust feature is that the court should sometimes err.

Dealer Networks

Published: 11/5/2018,  Volume: 74,  Issue: 1  |  DOI: 10.1111/jofi.12728  |  Cited by: 221

DAN LI, NORMAN SCHÜRHOFF

Dealers in the over‐the‐counter municipal bond market form trading networks with other dealers to mitigate search frictions. Regulatory data show that this network has a core‐periphery structure with 10 to 30 hubs and over 2,000 peripheral broker‐dealers in which bonds flow from periphery to core and partially back. Central dealers charge investors up to double the round‐trip markups compared to peripheral dealers. In turn, central dealers provide immediacy by matching buyers with sellers more directly and prearranging fewer trades, especially during stress times. Investors thus face a trade‐off between execution cost and speed, consistent with network models of decentralized trade.

Cross‐Asset Speculation in Stock Markets

Published: 9/10/2008,  Volume: 63,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2008.01400.x  |  Cited by: 51

DAN BERNHARDT, BART TAUB

In practice, heterogeneously informed speculators combine private information about multiple stocks with information in prices, taking into account how their trades influence the inferences of other speculators via prices. We show how this speculation causes prices to be more correlated than asset fundamentals, raising price volatility. The covariance structure of asset fundamentals drives that of prices, while the covariance structure of liquidity trade drives that of order flows. We characterize how speculator profits vary with the distributions of information and liquidity trade across assets and speculators, and relate the cross‐asset factor structure of order flows to that of returns.

PRICING OF WARRANTS AND THE VALUE OF THE FIRM

Published: 12/1978,  Volume: 33,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1978.tb03423.x  |  Cited by: 108

Dan Galai, Meir I. Schneller

A PORTFOLIO APPROACH TO FOSSIL FUEL PROCUREMENT IN THE ELECTRIC UTILITY INDUSTRY

Published: 6/1976,  Volume: 31,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1976.tb01935.x  |  Cited by: 103

Dan Bar‐Lev, Steven Katz

Information Effects on the Bid‐Ask Spread

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03834.x  |  Cited by: 907

THOMAS E. COPELAND, DAN GALAI

An individual who chooses to serve as a market‐maker is assumed to optimize his position by setting a bid‐ask spread which maximizes the difference between expected revenues received from liquidity‐motivated traders and expected losses to information‐motivated traders. By characterizing the cost of supplying quotes, as writing a put and a call option to an information‐motivated trader, it is shown that the bid‐ask spread is a positive function of the price level and return variance, a negative function of measures of market activity, depth, and continuity, and negatively correlated with the degree of competition. Thus, the theory of information effects on the bid‐ask spread proposed in this paper is consistent with the empirical literature.

Investor Tax Heterogeneity and Ex‐Dividend Day Trading Volume

Published: 1/20/2006,  Volume: 61,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2006.00842.x  |  Cited by: 72

DAN DHALIWAL, OLIVER ZHEN LI

We propose that ex‐dividend day excess volume is motivated by tax heterogeneity among investors, and thus is increasing in investor tax heterogeneity. Institutional ownership is our measure of heterogeneity. Since investor heterogeneity is a concave function of institutional ownership, we hypothesize that ex‐day volume is a concave function of institutional ownership. Cross‐sectional tests support the tax‐motivated trading hypothesis. Additional tests, using trade size and pension ownership as proxies for institutional trades, yield similar results. We contribute to the literature by considering the interaction between payout policy and ownership structure in explaining the cross‐sectional variation in ex‐day volume.

ADDITIONAL EVIDENCE ON THE TIME SERIES PROPERTIES OF REPORTED EARNINGS PER SHARE: COMMENT

Published: 12/1977,  Volume: 32,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1977.tb03377.x  |  Cited by: 17

Gerald L. Salamon, E. Dan Smith

Price Discovery in Illiquid Markets: Do Financial Asset Prices Rise Faster Than They Fall?

Published: 9/21/2010,  Volume: 65,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2010.01590.x  |  Cited by: 126

RICHARD C. GREEN, DAN LI, NORMAN SCHÜRHOFF

We study price discovery in municipal bonds, an important OTC market. As in markets for consumer goods, prices “rise faster than they fall.” Round‐trip profits to dealers on retail trades increase in rising markets but do not decrease in falling markets. Further, effective half‐spreads increase or decrease more when movements in fundamentals favor dealers. Yield spreads relative to Treasuries also adjust with asymmetric speed in rising and falling markets. Finally, intraday price dispersion is asymmetric in rising and falling markets, as consumer search theory would predict.

The High‐Volume Return Premium

Published: 6/2001,  Volume: 56,  Issue: 3  |  DOI: 10.1111/0022-1082.00349  |  Cited by: 682

Simon Gervais, Ron Kaniel, Dan H. Mingelgrin

The idea that extreme trading activity contains information about the future evolution of stock prices is investigated. We find that stocks experiencing unusually high (low) trading volume over a day or a week tend to appreciate (depreciate) over the course of the following month. We argue that this high‐volume return premium is consistent with the idea that shocks in the trading activity of a stock affect its visibility, and in turn the subsequent demand and price for that stock. Return autocorrelations, firm announcements, market risk, and liquidity do not seem to explain our results.

Relationship Trading in Over‐the‐Counter Markets

Published: 12/22/2019,  Volume: 75,  Issue: 2  |  DOI: 10.1111/jofi.12864  |  Cited by: 136

TERRENCE HENDERSHOTT, DAN LI, DMITRY LIVDAN, NORMAN SCHÜRHOFF

We examine the network of trading relationships between insurers and dealers in the over‐the‐counter (OTC) corporate bond market. Regulatory data show that one‐third of insurers use a single dealer, whereas other insurers have large dealer networks. Execution prices are nonmonotone in network size, initially declining with more dealers but increasing once networks exceed 20 dealers. A model of decentralized trade in which insurers trade off the benefits of repeat business and faster execution quantitatively fits the distribution of insurers' network size and explains the price–network size relationship. Counterfactual analysis shows that regulations to unbundle trade and nontrade services can decrease welfare.

Fire‐Sale Spillovers in Debt Markets

Published: 9/27/2021,  Volume: 76,  Issue: 6  |  DOI: 10.1111/jofi.13078  |  Cited by: 105

ANTONIO FALATO, ALI HORTAÇSU, DAN LI, CHAEHEE SHIN

Fire sales induced by investor redemptions have powerful spillover effects among funds that hold the same assets, hurting peer funds' performance and flows, and leading to further asset sales with negative bond price impact. A one‐standard‐deviation increase in our fire‐sale spillover measure leads to a 45 (90) bp decrease in peer fund returns (flows) and a two percentage point increase in the likelihood of a large bond price drop. The results hold in a regression‐discontinuity design addressing identification concerns. Timing, heterogeneity, instrumental‐variable, and placebo tests further support the price‐impact mechanism. Model‐based counterfactual and stress‐test analyses quantify the financial stability implications.

Quote Competition in Corporate Bonds

Published: 5/22/2026,  Volume: 81,  Issue: 4  |  DOI: 10.1111/jofi.70048  |  Cited by: 0

TERRENCE HENDERSHOTT, DAN LI, DMITRY LIVDAN, NORMAN SCHÜRHOFF, KUMAR VENKATARAMAN

Dealer quotes in corporate bonds, though indicative, lower trading costs and increase trading volume. Dealers offering higher quality quotes attract more order flow and execute trades at favorable prices. Dealers advertise quotes to manage their inventories and attract orders from nonrelationship clients. However, quote competition is imperfect. The best quotes often fail to attract orders, and trade‐throughs are common. Nevertheless, quote competition is important as clients exploit quotes from other dealers in negotiations, forcing dealers with lower quality quotes to offer price improvements. Quoting is not a zero‐sum game, as more active bond‐level quoting leads to more bond‐level trading.