The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Relation between Stock Market Movements and NYSE Seat Prices
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00308
Donald B. Keim, Ananth Madhavan
Exchange seat prices are widely reported and followed as measures of market sentiment. This paper analyzes the information content of NYSE seat prices using: (1) annual seat prices from 1869 to 1998, and (2) the complete record of trades, bids and offers for the seat market from 1973 to 1994. Seat market volumes have predictive power regarding future stock market returns, consistent with a model where seat market activity is a proxy for unobserved factors affecting expected returns. We find abnormally large price movements in seats prior to October 1987, consistent with the hypothesis that seat prices capture market sentiment.
A Further Investigation of the Weekend Effect in Stock Returns
Published: 07/01/1984 | DOI: 10.1111/j.1540-6261.1984.tb03675.x
DONALD B. KEIM, ROBERT F. STAMBAUGH
This study uses a longer time period and additional stocks to further investigate the weekend effect. We find consistently negative Monday returns (1) for the S & P Composite as early as 1928, (2) for Exchange‐traded stocks of firms of all sizes, and (3) for actively traded over‐the‐counter (OTC) stocks. The OTC results are based on bid prices and therefore appear to reject specialist‐related explanations. For the 30 individual stocks of the Dow Jones Industrial Index, the average correlation between Friday and Monday returns is positive and the highest of all pairs of successive days. The latter finding is inconsistent with fairly general measurement‐error explanations.
Earnings Yields, Market Values, and Stock Returns
Published: 03/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02408.x
JEFFREY JAFFE, DONALD B. KEIM, RANDOLPH WESTERFIELD
Earlier evidence concerning the relation between stock returns and the effects of size and earnings to price ratio (E/P) is not clear‐cut. This paper re‐examines these two effects with (a) a substantially longer sample period, 1951–1986, (b) data that are reasonably free of survivor biases, (c) both portfolio and seemingly unrelated regression tests, and (d) an emphasis on the important differences between January and other months. Over the entire period, the earnings yield effect is significant in both January and the other eleven months. Conversely, the size effect is significantly negative only in January. We also find evidence of consistently high returns for firms of all sizes with negative earnings.
General Tests of Latent Variable Models and Mean‐Variance Spanning
Published: 03/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04704.x
WAYNE E. FERSON, STEPHEN R. FOERSTER, DONALD B. KEIM
The methods of Gibbons and Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean‐variance spanning generalizes Huberman and Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size‐based common stock portfolios proxy for the risk factors, we reject the hypothesis that four of them describe the conditional expected returns of the other assets.
Returns and Volatility of Low‐Grade Bonds 1977–1989
Published: 03/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb03745.x
MARSHALL E. BLUME, DONALD B. KEIM, SANDEEP A. PATEL
This paper examines the risks and returns of long‐term low‐grade bonds for the period 1977–1989. We find: (1) low‐grade bonds realized higher returns than higher‐grade bonds and lower returns than common stocks, and low‐grade bonds exhibited less volatility than higher‐grade bonds due to their call features and high coupons; (2) there is no relation between the age of low‐grade bonds and their realized returns; cyclical factors explain much of the observed relation between default rates and bond age; and (3) low‐grade bonds behave like both bonds and stocks. Despite this complexity there is no evidence that low‐grade bonds are systematically over‐ or under‐priced.