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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Syndicate Size, Spreads, and Market Power during the Introduction of Shelf Registration
Published: 03/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02412.x
F. DOUGLAS FOSTER
The introduction of shelf registration in 1982 is used to examine the extent of price‐taking behavior among investment banks. Changes in underwriting syndicates are compared with the concomitant adjustment in underwriting spreads and management fees. The evidence is consistent with higher organizing costs and/or market power in the underwriting syndicate. Evidence on the components of the spreads and syndicate composition during the introduction of shelf registration is also presented.
Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models
Published: 03/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04706.x
F. DOUGLAS FOSTER, S. VISWANATHAN
Patterns in stock market trading volume, trading costs, and return volatility are examined using New York Stock Exchange data from 1988. Intraday test results indicate that, for actively traded firms trading volume, adverse selection costs, and return volatility are higher in the first half‐hour of the day. This evidence is inconsistent with the Admati and Pfleiderer (1988) model which predicts that trading costs are low when volume and return volatility are high. Interday test results show that, for actively traded firms, trading volume is low and adverse selection costs are high on Monday, which is consistent with the predictions of the Foster and Viswanathan (1990) model.
Strategic Trading When Agents Forecast the Forecasts of Others
Published: 09/01/1996 | DOI: 10.1111/j.1540-6261.1996.tb04075.x
F. DOUGLAS FOSTER, S. VISWANATHAN
We analyze a multi‐period model of trading with differentially informed traders, liquidity traders, and a market maker. Each informed trader's initial information is a noisy estimate of the long‐term value of the asset, and the different signals received by informed traders can have a variety of correlation structures. With this setup, informed traders not only compete with each other for trading profits, they also learn about other traders' signals from the observed order flow. Our work suggests that the initial correlation among the informed traders' signals has a significant effect on the informed traders' profits and the informativeness of prices.
Assessing Goodness‐of‐Fit of Asset Pricing Models: The Distribution of the Maximal R2
Published: 04/18/2012 | DOI: 10.1111/j.1540-6261.1997.tb04814.x
F. DOUGLAS FOSTER, TOM SMITH, ROBERT E. WHALEY
The development of asset pricing models that rely on instrumental variables together with the increased availability of easily‐accessible economic time‐series have renewed interest in predicting security returns. Evaluating the significance of these new research findings, however, is no easy task. Because these asset pricing theory tests are not independent, classical methods of assessing goodness‐of‐fit are inappropriate. This study investigates the distribution of the maximal R2 when k of m regressors are used to predict security returns. We provide a simple procedure that adjusts critical R2 values to account for selecting variables by searching among potential regressors.