The Journal of Finance

The Pre‐FOMC Announcement Drift

Published: 1/19/2015,  Volume: 70,  Issue: 1  |  DOI: 10.1111/jofi.12196  |  Cited by: 580

DAVID O. LUCCA, EMANUEL MOENCH

We document large average excess returns on U.S. equities in anticipation of monetary policy decisions made at scheduled meetings of the Federal Open Market Committee (FOMC) in the past few decades. These pre‐FOMC returns have increased over time and account for sizable fractions of total annual realized stock returns. While other major international equity indices experienced similar pre‐FOMC returns, we find no such effect in U.S. Treasury securities and money market futures. Other major U.S. macroeconomic news announcements also do not give rise to preannouncement excess equity returns. We discuss challenges in explaining these returns with standard asset pricing theory.

The Narrow Channel of Quantitative Easing: Evidence from YCC Down Under

Published: 12/30/2023,  Volume: 79,  Issue: 2  |  DOI: 10.1111/jofi.13307  |  Cited by: 13

DAVID O. LUCCA, JONATHAN H. WRIGHT

We study the recent Australian experience with yield curve control (YCC) as perhaps the best evidence of how this policy might work in other developed economies. YCC seemingly worked well in 2020, when the market expected short rates to stay at zero for a long period of time. As the global recovery and inflation gained momentum in 2021, liftoff expectations moved up, the Reserve Bank of Australia purchased most of the targeted government bond outstanding, and the target bond's yield dislocated from other financial market instruments. The evidence suggests that central bank bond purchase programs can operate more narrowly than previously considered.

Resource Allocation in Bank Supervision: Trade‐Offs and Outcomes

Published: 6/2022,  Volume: 77,  Issue: 3  |  DOI: 10.1111/jofi.13127  |  Cited by: 50

THOMAS M. EISENBACH, DAVID O. LUCCA, ROBERT M. TOWNSEND

We estimate a structural model of resource allocation on work hours of Federal Reserve bank supervisors to disentangle how supervisory technology, preferences, and resource constraints impact bank outcomes. We find a significant effect of supervision on bank risk and large technological scale economies with respect to bank size. Consistent with macroprudential objectives, revealed supervisory preferences disproportionately weight larger banks, especially post‐2008 when a resource reallocation to larger banks increased risk on average across all banks. Shadow cost estimates show tight resources around the financial crisis and counterfactuals indicate that binding constraints have large effects on the distribution of bank outcomes.

Political Connections and Allocative Distortions

Published: 1/7/2019,  Volume: 74,  Issue: 2  |  DOI: 10.1111/jofi.12751  |  Cited by: 307

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.

Individual Investors and Volatility

Published: 7/19/2011,  Volume: 66,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2011.01668.x  |  Cited by: 330

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.

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: 641

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.

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

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

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

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.

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

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: 214

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%.

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

DISCUSSION

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

DAVID EMANUEL

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

DAVID FELDMAN

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: 631

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.

Presidential Address: Social Transmission Bias in Economics and Finance

Published: 5/27/2020,  Volume: 75,  Issue: 4  |  DOI: 10.1111/jofi.12906  |  Cited by: 276

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.

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.

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.

Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

Published: 2/5/2020,  Volume: 75,  Issue: 3  |  DOI: 10.1111/jofi.12880  |  Cited by: 137

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: 360

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.

Minutes of the Annual Membership Meeting, January 7, 2012

Published: 7/19/2012,  Volume: 67,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2012.01756.x  |  Cited by: 0

DAVID H. PYLE

AN ECONOMIC ANALYSIS OF CREDIT UNIONS IN MICHIGAN*

Published: 12/1966,  Volume: 21,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1966.tb00285.x  |  Cited by: 1

David L. McKee

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

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

PREMIUMS ON CONVERTIBLE BONDS: COMMENT

Published: 9/1970,  Volume: 25,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1970.tb00567.x  |  Cited by: 2

David Tell Duvel

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.

A BEHAVIORAL MODEL FOR COMMERCIAL BANKING*

Published: 9/1971,  Volume: 26,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1971.tb00941.x  |  Cited by: 0

David Neil Hyman

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

Capital Structure as a Strategic Variable: Evidence from Collective Bargaining

Published: 5/7/2010,  Volume: 65,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2010.01565.x  |  Cited by: 530

DAVID A. MATSA

I analyze the strategic use of debt financing to improve a firm's bargaining position with an important supplier—organized labor. Because maintaining high levels of corporate liquidity can encourage workers to raise their wage demands, a firm with external finance constraints has an incentive to use the cash flow demands of debt service to improve its bargaining position with workers. Using both firm‐level collective bargaining coverage and state changes in labor laws to identify changes in union bargaining power, I show that strategic incentives from union bargaining appear to have a substantial impact on corporate financing decisions.

INVESTOR PREFERENCE AND THE STRUCTURE OF INTEREST RATES IN THE U.S. GOVERNMENT SECURITIES MARKET, 1953–1961*

Published: 3/1964,  Volume: 19,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1964.tb00753.x  |  Cited by: 0

David A. Bowers

DISCUSSION

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

David H. Downes

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

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: 7

David W. Glenn

FORECASTING STOCK MARKET PRICES

Published: 5/1977,  Volume: 32,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1977.tb03282.x  |  Cited by: 20

David A. Umstead

Expectations and the Treasury Bill‐Federal Funds Rate Spread over Recent Monetary Policy Regimes

Published: 6/1990,  Volume: 45,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1990.tb03703.x  |  Cited by: 23

DAVID P. SIMON

This paper shows that the spread between the 3–month Treasury bill and the federal funds rate has significant predictive power for the future change in the federal funds rate during the volatile nonborrowed reserves operating regime, but it has less and no predictive power during the borrowed reserves regime and the federal funds targeting regime, respectively. These findings suggest that Treasury bill rates forecast future federal funds rates most accurately when the Federal Reserve follows a well‐defined rule that does not smooth the impact of shocks on the federal funds rate.

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

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

Selective Publicity and Stock Prices

Published: 3/27/2012,  Volume: 67,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2012.01726.x  |  Cited by: 328

DAVID H. SOLOMON

I examine how media coverage of good and bad corporate news affects stock prices, by studying the effect of investor relations (IR) firms. I find that IR firms “spin” their clients' news, generating more media coverage of positive press releases than negative press releases. This spin increases announcement returns. Around earnings announcements, however, IR firms cannot spin the news and their clients' returns are significantly lower. This pattern is consistent with positive media coverage increasing investor expectations, creating disappointment around hard information. Using reporter connections and geographical links, I argue that IR firms causally affect both media coverage and returns.

A SHORT‐RUN MODEL OF COMMERCIAL BANK PORTFOLIO BEHAVIOR*

Published: 9/1967,  Volume: 22,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1967.tb02990.x  |  Cited by: 0

David T. Hulett

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

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

PARETO‐OPTIMALITY OF AUTHENTIC INFORMATION

Published: 12/1977,  Volume: 32,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1977.tb03365.x  |  Cited by: 9

David S. Ng

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.

Report of the Executive Secretary and Treasurer

Published: 8/2004,  Volume: 59,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2004.00686.x  |  Cited by: 0

David H. Pyle

DISCUSSION

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

David J. Ott

REPLY

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

David E. Novack

Report of the Executive Secretary and Treasurer

Published: 8/2002,  Volume: 57,  Issue: 4  |  DOI: 10.1111/0022-1082.00380-i1  |  Cited by: 0

David H. Pyle

DISCUSSION

Published: 7/1984,  Volume: 39,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1984.tb03668.x  |  Cited by: 1

DAVID S. KIDWELL