Search results: 50.
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.
Wholesale Funding Dry‐Ups
Published: 2/21/2018, Volume: 73, Issue: 2 | DOI: 10.1111/jofi.12592 | Cited by: 122
CHRISTOPHE PÉRIGNON, DAVID THESMAR, GUILLAUME VUILLEMEY
We empirically explore the fragility of wholesale funding of banks, using transaction‐level data on short‐term, unsecured certificates of deposit in the European market. We do not observe a market‐wide freeze during the 2008 to 2014 period. Yet, many banks suddenly experience funding dry‐ups. Dry‐ups predict, but do not cause, future deterioration in bank performance. Furthermore, during periods of market stress, banks with high future performance tend to increase reliance on wholesale funding. We therefore fail to find evidence consistent with adverse selection models of funding market freezes. Our evidence is in line with theories highlighting heterogeneity between informed and uninformed lenders.
Housing Collateral and Entrepreneurship
Published: 1/12/2017, Volume: 72, Issue: 1 | DOI: 10.1111/jofi.12468 | Cited by: 345
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.
Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985
Published: 3/20/2007, Volume: 62, Issue: 2 | DOI: 10.1111/j.1540-6261.2007.01218.x | Cited by: 394
MARIANNE BERTRAND, ANTOINETTE SCHOAR, DAVID THESMAR
We investigate how the deregulation of the French banking industry in the 1980s affected the real behavior of firms and the structure and dynamics of product markets. Following deregulation, banks are less willing to bail out poorly performing firms and firms in the more bank‐dependent sectors are more likely to undertake restructuring activities. At the industry level, we observe an increase in asset and job reallocation, an improvement in allocative efficiency across firms, and a decline in concentration. Overall, these findings support the view that a more efficient banking sector helps foster a Schumpeterian process of “creative destruction.”
The WACC Fallacy: The Real Effects of Using a Unique Discount Rate
Published: 5/11/2015, Volume: 70, Issue: 3 | DOI: 10.1111/jofi.12250 | Cited by: 134
PHILIPP KRÜGER, AUGUSTIN LANDIER, DAVID THESMAR
In this paper, we test whether firms properly adjust for risk in their capital budgeting decisions. If managers use a single discount rate within firms, we expect that conglomerates underinvest (overinvest) in relatively safe (risky) divisions. We measure division relative risk as the difference between the division's asset beta and a firm‐wide beta. We establish a robust and significant positive relationship between division‐level investment and division relative risk. Next, we measure the value loss due to this behavior in the context of acquisitions. When the bidder's beta is lower than that of the target, announcement returns are significantly lower.
Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France
Published: 2/5/2020, Volume: 75, Issue: 3 | DOI: 10.1111/jofi.12880 | Cited by: 127
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.
Quantifying Reduced‐Form Evidence on Collateral Constraints
Published: 6/15/2022, Volume: 77, Issue: 4 | DOI: 10.1111/jofi.13158 | Cited by: 48
SYLVAIN CATHERINE, THOMAS CHANEY, ZONGBO HUANG, DAVID SRAER, DAVID THESMAR
This paper quantifies the aggregate effects of financing constraints. We start from a standard dynamic investment model with collateral constraints. In contrast to the existing quantitative literature, our estimation does not target the mean leverage ratio to identify the scope of financing frictions. Instead, we use a reduced‐form coefficient from the recent corporate finance literature that connects exogenous debt capacity shocks to corporate investment. Relative to a frictionless benchmark, collateral constraints induce losses of 7.1% for output and 1.4% for total factor productivity (TFP) (misallocation). We show these estimated losses tend to be more robust to misspecification than estimates obtained by targeting leverage.
Sticky Expectations and the Profitability Anomaly
Published: 10/31/2018, Volume: 74, Issue: 2 | DOI: 10.1111/jofi.12734 | Cited by: 263
JEAN‐PHILIPPE BOUCHAUD, PHILIPP KRÜGER, AUGUSTIN LANDIER, DAVID THESMAR
We propose a theory of the “profitability” anomaly. In our model, investors forecast future profits using a signal and sticky belief dynamics. In this model, past profits forecast future returns (the profitability anomaly). Using analyst forecast data, we measure expectation stickiness at the firm level and find strong support for three additional model predictions: (1) analysts are on average too pessimistic regarding the future profits of high‐profit firms, (2) the profitability anomaly is stronger for stocks that are followed by stickier analysts, and (3) the profitability anomaly is stronger for stocks with more persistent profits.
DISCUSSION
Published: 7/1986, Volume: 41, Issue: 3 | DOI: 10.1111/j.1540-6261.1986.tb04539.x | Cited by: 0
DAVID FELDMAN
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: 211
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%.
Political Connections and Allocative Distortions
Published: 1/7/2019, Volume: 74, Issue: 2 | DOI: 10.1111/jofi.12751 | Cited by: 295
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.
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.
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
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
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
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.
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.
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
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
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: 622
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: 271
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.
Minutes of the Annual Membership Meeting
Published: 8/2002, Volume: 57, Issue: 4 | DOI: 10.1111/0022-1082.00061-i1 | Cited by: 0
David H. Pyle
Tender Offers and Management Resistance
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02237.x | Cited by: 56
DAVID P. BARON
Presidential Address: Pension Policy and the Financial System
Published: 8/2018, Volume: 73, Issue: 4 | DOI: 10.1111/jofi.12710 | Cited by: 64
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.
Report of the Executive Secretary and Treasurer for the Year Ending September 30, 1999
Published: 8/2000, Volume: 55, Issue: 4 | DOI: 10.1111/0022-1082.00272 | Cited by: 0
David H. Pyle
INTERDEPENDENCE OF UTILITY RATE‐BASE TYPE, PERMITTED RATE OF RETURN, AND UTILITY EARNINGS*
Published: 3/1962, Volume: 17, Issue: 1 | DOI: 10.1111/j.1540-6261.1962.tb04247.x | Cited by: 2
David K. Eiteman
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
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: 70
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.
Investment Decisions Depend on Portfolio Disclosures
Published: 6/1999, Volume: 54, Issue: 3 | DOI: 10.1111/0022-1082.00132 | Cited by: 146
David K. Musto
Abstract
A 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.
ON THE UTILITY THEORETIC FOUNDATIONS OF MEAN‐VARIANCE ANALYSIS
Published: 12/1977, Volume: 32, Issue: 5 | DOI: 10.1111/j.1540-6261.1977.tb03363.x | Cited by: 47
David P. Baron
THE IMPACT OF CORPORATE GROWTH ON THE RISK OF COMMON STOCKS
Published: 5/1975, Volume: 30, Issue: 2 | DOI: 10.1111/j.1540-6261.1975.tb01827.x | Cited by: 18
David R. Fewings
Chaos and Nonlinear Dynamics: Application to Financial Markets
Published: 12/1991, Volume: 46, Issue: 5 | DOI: 10.1111/j.1540-6261.1991.tb04646.x | Cited by: 760
DAVID A. HSIEH
After the stock market crash of October 19, 1987, interest in nonlinear dynamics, especially deterministic chaotic dynamics, has increased in both the financial press and the academic literature. This has come about because the frequency of large moves in stock markets is greater than would be expected under a normal distribution. There are a number of possible explanations. A popular one is that the stock market is governed by chaotic dynamics. What exactly is chaos and how is it related to nonlinear dynamics? How does one detect chaos? Is there chaos in financial markets? Are there other explanations of the movements of financial prices other than chaos? The purpose of this paper is to explore these issues.
REGIONAL INTEREST RATES: MUNICIPAL BONDS IN CALIFORNIA, 1900–1957*
Published: 9/1962, Volume: 17, Issue: 3 | DOI: 10.1111/j.1540-6261.1962.tb04307.x | Cited by: 0
David Alexander Baerncopf
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.
Portfolio Disclosures and Year‐End Price Shifts
Published: 9/1997, Volume: 52, Issue: 4 | DOI: 10.1111/j.1540-6261.1997.tb01121.x | Cited by: 82
DAVID K. MUSTO
Commercial paper sells at an extra discount if it matures in the next calendar year but Treasury bills do not. The discount is apparent in downward price shifts before the year‐end, and upward price shifts at the turn of the year that are significantly correlated with the simultaneous returns to small stocks, and that cannot reflect tax‐loss selling. Cross‐sectional and time‐series tests on prices, as well as low of funds evidence on trades by institutional investors, indicate that both the debt and equity patterns reflect agency problems related to portfolio disclosures.
A SUGGESTION FOR THE CONTROL OF PEACETIME INFLATION*
Published: 12/1949, Volume: 4, Issue: 4 | DOI: 10.1111/j.1540-6261.1949.tb02359.x | Cited by: 0
David Gordon Tyndall
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
SECURITY‐BASED CONGLOMERATE ACQUISITIONS: THE EFFECT ON RESIDUAL OWNERSHIP*
Published: 3/1971, Volume: 26, Issue: 1 | DOI: 10.1111/j.1540-6261.1971.tb00611.x | Cited by: 0
David Foster Rankin
THE S.E.C. SPECIAL STUDY AND THE EXCHANGE MARKETS
Published: 5/1966, Volume: 21, Issue: 2 | DOI: 10.1111/j.1540-6261.1966.tb00230.x | Cited by: 2
David K. Eiteman
THE RESPONSE OF STATE AND LOCAL GOVERNMENTS TO FEDERAL GRANT‐IN‐AID PAYMENTS*
Published: 6/1968, Volume: 23, Issue: 3 | DOI: 10.1111/j.1540-6261.1968.tb00839.x | Cited by: 0
David L. Smith
What Do Entrepreneurs Pay for Venture Capital Affiliation?
Published: 8/2004, Volume: 59, Issue: 4 | DOI: 10.1111/j.1540-6261.2004.00680.x | Cited by: 1057
David H. Hsu
This study empirically evaluates the certification and value‐added roles of reputable venture capitalists (VCs). Using a novel sample of entrepreneurial start‐ups with
multiple
financing offers, I analyze financing offers made by competing VCs at the first professional round of start‐up funding, holding characteristics of the start‐up fixed. Offers made by VCs with a high reputation are three times more likely to be accepted, and high‐reputation VCs acquire start‐up equity at a 10–14% discount. The evidence suggests that VCs' “extra‐financial” value may be more distinctive than their functionally equivalent financial capital. These extra‐financial services can have financial consequences.