The Journal of Finance

Volatility increases Subsequent to NYSE and AMEX Stock Splits

Published: 3/1991,  Volume: 46,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1991.tb03759.x  |  Cited by: 66

DAVID A. DUBOFSKY

The post‐split increase in daily returns volatility is less for AMEX stocks than for NYSE stocks. The exchange trading location is a significant factor in explaining the volatility shift even after stock price and firm size are considered. Furthermore, when measured on a weekly basis, there is no increase in AMEX stocks' returns volatility. These results suggest that measurement errors created by bid‐ask spreads and the 1/8 effect, and also one or more of the elements that make the NYSE different from the AMEX, explain why the estimated volatility of daily stock returns increases after the ex split date.

Individual Investors and Volatility

Published: 7/19/2011,  Volume: 66,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2011.01668.x  |  Cited by: 316

THIERRY FOUCAULT, DAVID SRAER, DAVID J. THESMAR

We show that retail trading activity has a positive effect on the volatility of stock returns, which suggests that retail investors behave as noise traders. To identify this effect, we use a reform of the French stock market that raises the relative cost of speculative trading for retail investors. The daily return volatility of the stocks affected by the reform falls by 20 basis points (a quarter of the sample standard deviation of the return volatility) relative to other stocks. For affected stocks, we also find a significant decrease in the magnitude of return reversals and the price impact of trades.

DISCUSSION

Published: 7/1986,  Volume: 41,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1986.tb04539.x  |  Cited by: 0

DAVID FELDMAN

STATE OF THE FINANCE FIELD: FURTHER COMMENT

Published: 12/1968,  Volume: 23,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1968.tb00322.x  |  Cited by: 10

David Durand

MERGERS, DIVERSIFICATION AND THE THEORIES OF THE FIRM

Published: 3/1973,  Volume: 28,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1973.tb01368.x  |  Cited by: 0

David Gilbert

Remuneration, Retention, and Reputation Incentives for Outside Directors

Published: 10/2004,  Volume: 59,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2004.00699.x  |  Cited by: 624

DAVID YERMACK

I study incentives received by outside directors in Fortune 500 firms from compensation, replacement, and the opportunity to obtain other directorships. Previous research has only shown these relations to apply under limited circumstances such as financial distress. Together these incentive mechanisms provide directors with wealth increases of approximately 11 cents per $1,000 rise in firm value. Although smaller than the performance sensitivities of CEOs, outside directors' incentives imply a change in wealth of about $285,000 for a 1 standard deviation (SD) change in typical firm performance. Cross‐sectional patterns of director equity awards conform to agency and financial theories.

Political Connections and Allocative Distortions

Published: 1/7/2019,  Volume: 74,  Issue: 2  |  DOI: 10.1111/jofi.12751  |  Cited by: 293

DAVID SCHOENHERR

Exploiting a unique institutional setting in Korea, this paper documents that politicians can increase the amount of government resources allocated through their social networks to the benefit of private firms connected to these networks. After winning the election, the new president appoints members of his networks as CEOs of state‐owned firms that act as intermediaries in allocating government contracts to private firms. In turn, these state firms allocate significantly more procurement contracts to private firms with a CEO from the same network. Contracts allocated to connected private firms are executed systematically worse and exhibit more frequent cost increases through renegotiations.

GROWTH STOCKS AND THE PETERSBURG PARADOX*

Published: 9/1957,  Volume: 12,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1957.tb04143.x  |  Cited by: 13

David Durand

Transactions Costs and the Theory of Portfolio Selection

Published: 9/1976,  Volume: 31,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1976.tb01964.x  |  Cited by: 26

David Goldsmith

A QUARTERLY SERIES OF CORPORATE BASIC YIELDS, 1952–57, AND SOME ATTENDANT RESERVATIONS*

Published: 9/1958,  Volume: 13,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1958.tb04200.x  |  Cited by: 3

David Durand

DISCUSSION

Published: 7/1984,  Volume: 39,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1984.tb03648.x  |  Cited by: 0

DAVID EMANUEL

The Term Structure of Interest Rates in a Partially Observable Economy

Published: 7/1989,  Volume: 44,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1989.tb04391.x  |  Cited by: 29

DAVID FELDMAN

This paper investigates the term structure of interest rates in a multiperiod production and exchange economy with incomplete information. Unable to observe their stochastic investment opportunities, investors engage in dynamic Bayesian inference. This results in the endogenous identification of a more complex production function which generates a richer term structure, resembling the one that actual market prices imply. In addition, this paper introduces a characteristic function of the term structure and demonstrates that, in contrast with a fully observable economy, the widely investigated expectations hypothesis holds true only if interest rates are nonstochastic.

Presidential Address: Social Transmission Bias in Economics and Finance

Published: 5/27/2020,  Volume: 75,  Issue: 4  |  DOI: 10.1111/jofi.12906  |  Cited by: 263

DAVID HIRSHLEIFER

I discuss a new intellectual paradigm, social economics and finance—the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is social transmission bias: systematic directional shift in signals or ideas induced by social transactions. I use five “fables” (models) to illustrate the novelty and scope of the transmission bias approach, and offer several emergent themes. For example, social transmission bias compounds recursively, which can help explain booms, bubbles, return anomalies, and swings in economic sentiment.

Heterogeneous Beliefs, Speculation, and the Equity Premium

Published: 1/10/2008,  Volume: 63,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2008.01310.x  |  Cited by: 210

ALEXANDER DAVID

Agents with heterogeneous beliefs about fundamental growth do not share risks perfectly but instead speculate with each other on the relative accuracy of their models' predictions. They face the risk that market prices move more in line with the trading models of competing agents than with their own. Less risk‐averse agents speculate more aggressively and demand higher risk premiums. My calibrated model generates countercyclical consumption volatility, earnings forecast dispersion, and cross‐sectional consumption dispersion. With a risk aversion coefficient less than one, agents' speculation causes half the observed equity premium and lowers the riskless rate by about 1%.

Testing the Efficiency of the Canadian‐U.S. Exchange Market under the Assumption of no Risk Premium

Published: 3/1981,  Volume: 36,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1981.tb03533.x  |  Cited by: 45

DAVID LONGWORTH

The efficiency of the Canadian‐U.S. exchange market for the current float is examined more extensively than previously. Semi‐strong‐form tests which admit the lagged spot rate as a predictor are considered in addition to the standard weak‐form test. These stronger tests reject the joint null hypothesis of an efficient exchange market and no risk premium for the period ending in October 1976, although not for the entire period. For almost every year the current spot rate provided a better forecast of the future spot rate than did the current forward rate.

INCREASED TAXATION WITH INCREASED ACCEPTABILITY—A DISCUSSION OF NET WORTH TAXATION AS A FEDERAL REVENUE ALTERNATIVE

Published: 5/1973,  Volume: 28,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1973.tb01793.x  |  Cited by: 0

Martin David

Good Timing: CEO Stock Option Awards and Company News Announcements

Published: 6/1997,  Volume: 52,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1997.tb04809.x  |  Cited by: 621

DAVID YERMACK

This article analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.

A Theoretical Model for Valuing Preferred Stock

Published: 9/1983,  Volume: 38,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1983.tb02288.x  |  Cited by: 19

DAVID EMANUEL

This paper develops a model of preferred stock value which includes the possibility of dividends on the preferred stock being omitted. The analytical framework used is based on the option‐hedging methodology of Black and Scholes. Precise valuation formulae are obtained for cumulative and noncumulative preferred stock in a variety of contexts. The values obtained are quite different from those for either riskless or risky perpetual bonds, which have previously been proposed as being similar to preferred stock.

Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

Published: 2/5/2020,  Volume: 75,  Issue: 3  |  DOI: 10.1111/jofi.12880  |  Cited by: 122

JOHAN HOMBERT, ANTOINETTE SCHOAR, DAVID SRAER, DAVID THESMAR

We evaluate the effect of downside insurance on self‐employment. We exploit a large‐scale reform of French unemployment benefits that insured unemployed workers starting businesses. The reform significantly increased firm creation without decreasing the quality of new entrants. Firms started postreform were initially smaller, but their employment growth, productivity, and survival rates are similar to those prereform. New entrepreneurs' characteristics and expectations are also similar. Finally, jobs created by new entrants crowd out employment in incumbent firms almost one‐for‐one, but have a higher productivity than incumbents. These results highlight the benefits of encouraging experimentation by lowering barriers to entry.

Housing Collateral and Entrepreneurship

Published: 1/12/2017,  Volume: 72,  Issue: 1  |  DOI: 10.1111/jofi.12468  |  Cited by: 343

MARTIN C. SCHMALZ, DAVID A. SRAER, DAVID THESMAR

We show that collateral constraints restrict firm entry and postentry growth, using French administrative data and cross‐sectional variation in local house‐price appreciation as shocks to collateral values. We control for local demand shocks by comparing treated homeowners to controls in the same region that do not experience collateral shocks: renters and homeowners with an outstanding mortgage, who (in France) cannot take out a second mortgage. In both comparisons, an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on entry, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.

Report of the Executive Secretary and Treasurer for the Year Ending September 30, 2008

Published: 7/16/2009,  Volume: 64,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2009.01487.x  |  Cited by: 0

David H. Pyle

THE FINANCIAL DEVELOPMENT OF JAPAN, 1878–1958*

Published: 12/1961,  Volume: 16,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1961.tb04240.x  |  Cited by: 0

David J. Ott

Minutes of the Annual Membership Meeting

Published: 8/2000,  Volume: 55,  Issue: 4  |  DOI: 10.1111/0022-1082.00271  |  Cited by: 0

David H. Pyle

The Manipulation of Executive Stock Option Exercise Strategies: Information Timing and Backdating

Published: 11/25/2009,  Volume: 64,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2009.01513.x  |  Cited by: 69

DAVID C. CICERO

I identify three option exercise strategies executives engage in, including (i) exercising with cash and immediately selling the shares, (ii) exercising with cash and holding the shares, and (iii) delivering some shares to the company to cover the exercise costs and holding the remaining shares. Stock price patterns suggest executives manipulate option exercises. They use private information to increase the profitability of all three strategies, and likely backdated some exercise dates in the pre‐Sarbanes‐Oxley period to enhance the profitability of the latter two strategies, where the executive's company is the only counterparty. Backdating is associated with reporting of internal control weaknesses.

A MONETARIST MODEL OF THE MONETARY PROCESS*

Published: 5/1970,  Volume: 25,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1970.tb00506.x  |  Cited by: 0

David I. Fand

GOVERNMENT DEBT, INTERGENERATION WELFARE, AND ECONOMIC ACTIVITY*

Published: 6/1968,  Volume: 23,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1968.tb00836.x  |  Cited by: 0

David H. Kopf

DISCUSSION

Published: 5/1973,  Volume: 28,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1973.tb01795.x  |  Cited by: 0

David J. Ott

CORPORATE FINANCIAL POLICIES—DEBT VERSUS EQUITY*

Published: 6/1975,  Volume: 30,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1975.tb01873.x  |  Cited by: 0

David Patrick Rochester

A Note on Capital Budgeting Techniques and the Reinvestment Rate: Comment

Published: 3/1981,  Volume: 36,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1981.tb03545.x  |  Cited by: 2

DAVID J. NICOL

Liquidity and Liquidation: Evidence from Real Estate Investment Trusts

Published: 2/2000,  Volume: 55,  Issue: 1  |  DOI: 10.1111/0022-1082.00213  |  Cited by: 38

David T. Brown

This study provides evidence that highly leveraged owner‐managed properties liquidated assets during the commercial real estate decline of the late 1980s, and that this provided buying opportunities for better capitalized buyers. The analysis documents significant financial distress costs for highly leveraged firms during an industry‐wide downturn and shows that these costs are particularly large for owner‐managed firms.

Minutes of the Annual Membership Meeting

Published: 8/1999,  Volume: 54,  Issue: 4  |  DOI: 10.1111/0022-1082.00155  |  Cited by: 0

David H. Pyle

FIRM VALUATION, CORPORATE TAXES, AND DEFAULT RISK

Published: 12/1975,  Volume: 30,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1975.tb01053.x  |  Cited by: 11

David P. Baron

Risk‐Based Premiums for Insurance Guaranty Funds

Published: 9/1988,  Volume: 43,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1988.tb02607.x  |  Cited by: 148

J. DAVID CUMMINS

Insurance guaranty funds have been adopted in all states to compensate policyholders for losses resulting from insurance company insolvencies. The guaranty funds charge flat premium rates, usually a percentage of premiums. Flat premiums can induce insurers to adopt high‐risk strategies, a problem that can be avoided through the use of risk‐based premiums. This article develops risk‐based premium formulas for three cases: a) an ongoing insurer with stochastic assets and liabilities, b) an ongoing insurer also subject to jumps in liabilities (catastrophes), and c) a policy cohort, where claims eventually run off to zero. Premium estimates are provided and compared with actual guaranty fund assessment rates.

LEGAL ASPECTS OF REVENUE BOND FINANCING*

Published: 5/1955,  Volume: 10,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1955.tb01266.x  |  Cited by: 0

David M. Wood

SUPER PREMIUM SECURITY PRICES AND OPTIMAL CORPORATE FINANCING DECISIONS

Published: 5/1976,  Volume: 31,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1976.tb01903.x  |  Cited by: 6

David W. Glenn

DISCUSSION

Published: 5/1981,  Volume: 36,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1981.tb00464.x  |  Cited by: 7

DAVID P. SEIDERS

The Implications of Nonmarketable Income for Consumption‐Based Models of Asset Pricing

Published: 9/1988,  Volume: 43,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1988.tb02609.x  |  Cited by: 4

DAVID P. BROWN

A new representation of nonmarketable (NM) income is introduced in this essay. Using this representation and continuous trading, there exists a set of individuals who do not participate in the asset market and who consume at the rate of nonmarketable income derived from human capital. Because these individuals remain nonparticipants for a range of stochastic processes governing the NM income, consumption betas are not generally unique in value and the consumption‐based CAPM (CCAPM) does not obtain. However, the intertemporal CAPM (ICAPM) of Merton remains valid.

THE FINANCING OF INDUSTRIAL DEVELOPMENT IN COLORADO*

Published: 12/1954,  Volume: 9,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1954.tb01247.x  |  Cited by: 0

David L. Mosconi

SENIOR SECURITIES IN THE CAPITAL STRUCTURES OF COMMERCIAL BANKS*

Published: 3/1966,  Volume: 21,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1966.tb02964.x  |  Cited by: 0

David W. Cole

DISCUSSION

Published: 5/1976,  Volume: 31,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1976.tb01913.x  |  Cited by: 0

David H. Downes

The Crash of ʼ87: Was It Expected? The Evidence from Options Markets

Published: 7/1991,  Volume: 46,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1991.tb03775.x  |  Cited by: 505

DAVID S. BATES

Transactions prices of S&P 500 futures options over 1985‐1987 are examined for evidence of expectations prior to October 1987 of an impending stock market crash. First, it is shown that out‐of‐the‐money puts became unusually expensive during the year preceding the crash. Second, a model is derived for pricing American options on jump‐diffusion processes with systematic jump risk. The jump‐diffusion parameters implicit in options prices indicate that a crash was expected and that implicit distributions were negatively skewed during October 1986 to August 1987. Both approaches indicate no strong crash fears during the 2 months immediately preceding the crash.

MONEY SUPPLY CONTROL: RESERVES AS THE INSTRUMENT UNDER LAGGED ACCOUNTING

Published: 6/1976,  Volume: 31,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1976.tb01927.x  |  Cited by: 0

David A. Pierce

Fed Policy, Financial Market Efficiency, and Capital Flows

Published: 8/1999,  Volume: 54,  Issue: 4  |  DOI: 10.1111/0022-1082.00153  |  Cited by: 0

David M. Jones

THE EFFECT OF A CHANGE IN THE CEILING RATE ON DEPOSITS AT COMMERCIAL BANKS*

Published: 9/1967,  Volume: 22,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1967.tb02985.x  |  Cited by: 0

David E. Bond

The Equilibrium Valuation of Risky Discrete Cash Flows in Continuous Time

Published: 12/1989,  Volume: 44,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1989.tb02659.x  |  Cited by: 9

DAVID C. SHIMKO

This paper values a contingent claim to discrete stochastic cash flows generated by a Poisson arrival process with a randomly varying intensity parameter. In the most general case, both the size and the arrival intensity of cash flows may correlate wih state variables in a continuous time economy. Assuming the conditions of an intertemporal capital aset pricing model, solutions for the value of the contingent claim can be found using various techniques. The paper suggests immediate applications to the valuation of insurance contracts, the decision to build a firm with unknown future investment opportunities, and the pricing of mortgage‐backed securities.

Presidential Address: Pension Policy and the Financial System

Published: 8/2018,  Volume: 73,  Issue: 4  |  DOI: 10.1111/jofi.12710  |  Cited by: 63

DAVID S. SCHARFSTEIN

In this paper, I examine the effect of pension policy on the structure of financial systems around the world. In particular, I explore the hypothesis that policies that promote pension savings also promote the development of capital markets. I present a model that endogenizes the extent to which savings are intermediated through banks or capital markets, and derive implications for corporate finance, household finance, banking, and the size of the financial sector. I then present a number of facts that are broadly consistent with the theory and examine a variety of alternative explanations of my findings.

REPLY

Published: 12/1959,  Volume: 14,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1959.tb00143.x  |  Cited by: 0

David E. Novack

Investment Decisions Depend on Portfolio Disclosures

Published: 6/1999,  Volume: 54,  Issue: 3  |  DOI: 10.1111/0022-1082.00132  |  Cited by: 145

David K. Musto

AbstractA weekly database of retail money fund portfolio statistics is uneconomical for retail investors to observe, so it allows direct comparison of disclosed and undisclosed portfolios. This makes possible a more direct and unambiguous test for “window dressing” than elsewhere in the literature. The analysis shows that funds allocating between government and private issues hold more in government issues around disclosures than at other times, consistent with the theory that intermediaries prefer to disclose safer portfolios. Cross‐sectional comparisons locate the most intense rebalancing in the worst recent performers.

LIQUIDITY RATIOS AND RECENT BRITISH MONETARY EXPERIENCE

Published: 12/1958,  Volume: 13,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1958.tb04219.x  |  Cited by: 0

David E. Novack

Investment Policy, Optimality, and the Mean‐Variance Model

Published: 3/1979,  Volume: 34,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1979.tb02081.x  |  Cited by: 32

DAVID P. BARON