The Journal of Finance

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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Search results: 3.

Competition on the Nasdaq and the Impact of Recent Market Reforms

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00300

James P. Weston

This paper examines the effect of recent market reforms on the competitive structure of the Nasdaq. Our results show that changes in inventory and information costs cannot explain the post‐reform decrease in bid‐ask spreads. We interpret this as evidence that the reforms have reduced Nasdaq dealers' rents. Additionally, we find that the difference between NYSE and Nasdaq spreads have been greatly diminished with the new rules. Further, the reforms have resulted in an exit, ceteris paribus, from the industry for market making. Overall, our results provide strong evidence that the reforms have improved competition on the Nasdaq.


Can Managers Successfully Time the Maturity Structure of Their Debt Issues?

Published: 08/03/2006   |   DOI: 10.1111/j.1540-6261.2006.00888.x

ALEXANDER W. BUTLER, GUSTAVO GRULLON, JAMES P. WESTON

This paper provides a rational explanation for the apparent ability of managers to successfully time the maturity of their debt issues. We show that a structural break in excess bond returns during the early 1980s generates a spurious correlation between the fraction of long‐term debt in total debt issues and future excess bond returns. Contrary to Baker, Taliaferro, and Wurgler (2006), we show that the presence of structural breaks can lead to nonsense regressions, whether or not there is any small sample bias. Tests using firm‐level data further confirm that managers are unable to time the debt market successfully.


Can Managers Forecast Aggregate Market Returns?

Published: 03/02/2005   |   DOI: 10.1111/j.1540-6261.2005.00752.x

ALEXANDER W. BUTLER, GUSTAVO GRULLON, JAMES P. WESTON

Previous studies have found that the proportion of equity in total new debt and equity issues is negatively correlated with future equity market returns. Researchers have interpreted this finding as evidence that corporate managers are able to predict the systematic component of their stock returns and to issue equity when the market is overvalued. In this article we show that the predictive power of the share of equity in total new issues stems from pseudo‐market timing and not from any abnormal ability of managers to time the equity markets.