Search results: 50.
The Dynamics of Institutional and Individual Trading
Published: 11/7/2003, Volume: 58, Issue: 6 | DOI: 10.1046/j.1540-6261.2003.00606.x | Cited by: 424
John M. Griffin, Jeffrey H. Harris, Selim Topaloglu
AbstractWe study the daily and intradaily cross‐sectional relation between stock returns and the trading of institutional and individual investors in Nasdaq 100 securities. Based on the previous day's stock return, the top performing decile of securities is 23.9% more likely to be bought in net by institutions (and sold by individuals) than those in the bottom performance decile. Strong contemporaneous daily patterns can largely be explained by net institutional (individual) trading positively (negatively) following past intradaily excess stock returns (or the news associated therein). In comparison, evidence of return predictability and price pressure are economically small.
Why Did NASDAQ Market Makers Stop Avoiding Odd‐Eighth Quotes?
Published: 12/1994, Volume: 49, Issue: 5 | DOI: 10.1111/j.1540-6261.1994.tb04783.x | Cited by: 151
WILLIAM G. CHRISTIE, JEFFREY H. HARRIS, PAUL H. SCHULTZ
On May 26 and 27, 1994 several national newspapers reported the findings of Christie and Schultz (1994) who cannot reject the hypothesis that market makers of active NASDAQ stocks implicitly colluded to maintain spreads of at least $0.25 by avoiding odd‐eighth quotes. On May 27, dealers in Amgen, Cisco Systems, and Microsoft sharply increased their use of odd‐eighth quotes, and mean inside and effective spreads fell nearly 50 percent. This pattern was repeated for Apple Computer the following trading day. Using individual dealer quotes for Apple and Microsoft, we find that virtually all dealers moved in unison to adopt odd‐eighth quotes.
The Development of Secondary Market Liquidity for NYSE‐Listed IPOs
Published: 10/2004, Volume: 59, Issue: 5 | DOI: 10.1111/j.1540-6261.2004.00701.x | Cited by: 50
SHANE A. CORWIN, JEFFREY H. HARRIS, MARC L. LIPSON
For NYSE‐listed IPOs, limit order submissions and depth relative to volume are unusually low on the first trading day. Initial buy‐side liquidity is higher for IPOs with high‐quality underwriters, large syndicates, low insider sales, and high premarket demand, while sell‐side liquidity is higher for IPOs that represent a large fraction of outstanding shares and have low premarket demand. Our results suggest that uncertainty and offer design affect initial liquidity, though order flow stabilizes quickly. We also find that submission strategies are influenced by expected underwriter stabilization and preopening order flow contains information about both initial prices and subsequent returns.
Nasdaq Trading Halts: The Impact of Market Mechanisms on Prices, Trading Activity, and Execution Costs
Published: 6/2002, Volume: 57, Issue: 3 | DOI: 10.1111/1540-6261.00466 | Cited by: 97
William G. Christie, Shane A. Corwin, Jeffrey H. Harris
We study the effects of alternative halt and reopening procedures on prices, transaction costs, and trading activity for a sample of news‐related trading halts on Nasdaq. For intraday halts that reopen after only a five‐minute quotation period, inside quoted spreads more than double following halts and volatility increases to more than nine times normal levels. In contrast, halts that reopen the following day with a longer 90‐minute quotation period are associated with insignificant spread effects and significantly dampened volatility effects. These results are consistent with the hypothesis that increased information transmission during the halt results in reduced posthalt uncertainty.
Who Drove and Burst the Tech Bubble?
Published: 7/19/2011, Volume: 66, Issue: 4 | DOI: 10.1111/j.1540-6261.2011.01663.x | Cited by: 223
JOHN M. GRIFFIN, JEFFREY H. HARRIS, TAO SHU, SELIM TOPALOGLU
From 1997 to March 2000, as technology stocks rose more than five‐fold, institutions bought more new technology supply than individuals. Among institutions, hedge funds were the most aggressive investors, but independent investment advisors and mutual funds (net of flows) actively invested the most capital in the technology sector. The technology stock reversal in March 2000 was accompanied by a broad sell‐off from institutional investors but accelerated buying by individuals, particularly discount brokerage clients. Overall, our evidence supports the bubble model of Abreu and Brunnermeier (2003), in which rational arbitrageurs fail to trade against bubbles until a coordinated selling effort occurs.
The Behavior of Bid‐Ask Spreads and Volume in Options Markets during the Competition for Listings in 1999
Published: 11/7/2003, Volume: 58, Issue: 6 | DOI: 10.1046/j.1540-6261.2003.00611.x | Cited by: 109
Patrick De Fontnouvelle, Raymond P. H. Fishe, Jeffrey H. Harris
AbstractIn August 1999, U.S. exchanges began to compete directly for order flow in many options that had been exclusively listed on another exchange, shifting 37% of option volume to multiple‐listing status by the end of September. Effective and quoted bid–ask spreads decrease significantly after multiple listings with spreads generally maintaining their initial lower levels 1 year later. These results hold for both time series and pooled regressions and are robust. We reject that economies of scale in market making cause the decrease in spreads and support the view that interexchange competition reduces option transaction costs.
Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks
Published: 2/1999, Volume: 54, Issue: 1 | DOI: 10.1111/0022-1082.00097 | Cited by: 232
Michael J. Barclay, William G. Christie, Jeffrey H. Harris, Eugene Kandel, Paul H. Schultz
The relative merits of dealer versus auction markets have been a subject of significant and sometimes contentious debate. On January 20, 1997, the Securities and Exchange Commission began implementing reforms that would permit the public to compete directly with Nasdaq dealers by submitting binding limit orders. Additionally, superior quotes placed by Nasdaq dealers in private trading venues began to be displayed in the Nasdaq market. We measure the impact of these new rules on various measures of performance, including trading costs and depths. Our results indicate that quoted and effective spreads fell dramatically without adversely affecting market quality.
NET CASH MONEYFLOWS THROUGH LIFE INSURANCE COMPANIES
Published: 12/1956, Volume: 11, Issue: 4 | DOI: 10.1111/j.1540-6261.1956.tb04085.x | Cited by: 0
Harris Loewy
DISCUSSION
Published: 7/1988, Volume: 43, Issue: 3 | DOI: 10.1111/j.1540-6261.1988.tb04600.x | Cited by: 4
LAWRENCE HARRIS
THE FLOW OF NET CASH SAVINGS THROUGH LIFE INSURANCE COMPANIES*
Published: 3/1955, Volume: 10, Issue: 1 | DOI: 10.1111/j.1540-6261.1955.tb01570.x | Cited by: 0
Harris Loewy
FELLOW OF THE AMERICAN FINANCE ASSOCIATION FOR 2011
Published: 5/23/2011, Volume: 66, Issue: 3 | DOI: 10.1111/j.1540-6261.2011.01676.x | Cited by: 0
Milton Harris
Statistical Properties of the Roll Serial Covariance Bid/Ask Spread Estimator
Published: 6/1990, Volume: 45, Issue: 2 | DOI: 10.1111/j.1540-6261.1990.tb03704.x | Cited by: 119
LAWRENCE HARRIS
Exact small sample population moments of the standard serial covariance and variance estimators are derived under the assumptions of the Roll bid/ask spread model. Noise explains why serial covariance estimates are often positive in annual samples of daily and weekly returns. Small sample estimator bias partially explains why weekly estimates are more negative than daily estimates. Noise causes the Roll spread estimator to be severely biased by Jensen's inequality. The French‐Roll adjusted variance estimator is unbiased but noisy. Empirical tests confirm the major implications.
The October 1987 S&P 500 Stock‐Futures Basis
Published: 3/1989, Volume: 44, Issue: 1 | DOI: 10.1111/j.1540-6261.1989.tb02405.x | Cited by: 97
LAWRENCE HARRIS
Five‐minute changes in the S&P 500 index and futures contract are examined over a ten‐day period surrounding the October 1987 stock market crash. Since nonsynchronous trading problems are severe in these data, new index estimators are derived and used. The estimators use the complete transaction history of all 500 stocks. Nonsynchronous trading explains part of the large absolute futures‐cash basis observed during the crash. The remainder may be due to disintegration of the two markets. Even after adjustment for nonsynchronous trading, the index displays more autocorrelation than does the futures and the futures leads the index.
S&P 500 Cash Stock Price Volatilities
Published: 12/1989, Volume: 44, Issue: 5 | DOI: 10.1111/j.1540-6261.1989.tb02648.x | Cited by: 153
LAWRENCE HARRIS
S&P 500 stock return volatilities are compared to the volatilities of a matched set of stocks, after controlling for cross‐sectional differences in firm attributes known to affect volatility. No significant difference in volatility is observed between 1975 and 1983—before the start of trade in index futures and index options. Since then, S&P 500 stocks have been relatively more volatile. The difference is statistically, but not economically, significant. The relative increase occurs primarily in daily returns and only to a lesser extent in longer interval returns. Other factors besides the start of derivative trade could be responsible for the small increase in volatility.
FEDERAL MARGIN REQUIREMENTS: A SELECTIVE INSTRUMENT OF MONETARY POLICY*
Published: 12/1959, Volume: 14, Issue: 4 | DOI: 10.1111/j.1540-6261.1959.tb00150.x | Cited by: 0
Robert E. Harris
DISCUSSION
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02239.x | Cited by: 0
ROBERT S. HARRIS
SOME EVIDENCE ON DIFFERENTIAL LENDING PRACTICES AT COMMERCIAL BANKS
Published: 12/1973, Volume: 28, Issue: 5 | DOI: 10.1111/j.1540-6261.1973.tb01459.x | Cited by: 2
Duane G. Harris
THE CAPITAL STRUCTURE IN AMERICAN BANKING
Published: 12/1954, Volume: 9, Issue: 4 | DOI: 10.1111/j.1540-6261.1954.tb01253.x | Cited by: 3
George Taylor Harris
COST OF THE MARSHALL PLAN TO THE UNITED STATES*
Published: 2/1948, Volume: 3, Issue: 1 | DOI: 10.1111/j.1540-6261.1948.tb01009.x | Cited by: 0
Seymour E. Harris
The Capital Budgeting Process: Incentives and Information
Published: 9/1996, Volume: 51, Issue: 4 | DOI: 10.1111/j.1540-6261.1996.tb04065.x | Cited by: 275
MILTON HARRIS, ARTUR RAVIV
We study the capital allocation process within firms. Observed budgeting processes are explained as a response to decentralized information and incentive problems. It is shown that these imperfections can result in underinvestment when capital productivity is high and overinvestment when it is low. We also investigate how the budgeting process may be expected to vary with firm or division characteristics such as investment opportunities and the technology for information transfer.
The Theory of Capital Structure
Published: 3/1991, Volume: 46, Issue: 1 | DOI: 10.1111/j.1540-6261.1991.tb03753.x | Cited by: 2343
MILTON HARRIS, ARTUR RAVIV
This paper surveys capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations (but excluding tax‐based theories). For each type of model, a brief overview of the papers surveyed and their relation to each other is provided. The central papers are described in some detail, and their results are summarized and followed by a discussion of related extensions. Each section concludes with a summary of the main implications of the models surveyed in the section. Finally, these results are collected and compared to the available evidence. Suggestions for future research are provided.
Price and Volume Effects Associated with Changes in the S&P 500 List: New Evidence for the Existence of Price Pressures
Published: 9/1986, Volume: 41, Issue: 4 | DOI: 10.1111/j.1540-6261.1986.tb04550.x | Cited by: 563
LAWRENCE HARRIS, EITAN GUREL
Attempts to identify price pressures caused by large transactions may be inconclusive if the transactions convey new information to the market. This problem is addressed in an examination of prices and volume surrounding changes in the composition of the S&P 500. Since these changes cause some investors to adjust their holdings of the affected securities and since it is unlikely that the changes convey information about the future prospects of these securities, they provide an excellent opportunity to study price pressures. The results are consistent with the price‐pressure hypothesis: immediately after an addition is announced, prices increase by more than 3 percent. This increase is nearly fully reversed after 2 weeks.
A Sequential Signalling Model of Convertible Debt Call Policy
Published: 12/1985, Volume: 40, Issue: 5 | DOI: 10.1111/j.1540-6261.1985.tb02382.x | Cited by: 87
MILTON HARRIS, ARTUR RAVIV
In this paper we attempt to resolve two puzzles concerning convertible debt calls. The first is that although it has been shown that conversion of these bonds should optimally be forced as soon as this is feasible, actual calls are significantly delayed relative to this prescription. The second is that common stock returns are significantly negative around the announcement of the call of a convertible debt issue. Our purpose is to simultaneously rationalize managers' observed call decisions and the market's reaction to them in a framework in which managers behave optimally given their private information, compensation schemes, and investors' reactions to their call decisions. Moreover, investors' reactions are rational in the sense of Bayes' rule given managers' call policy. In equilibrium, a decision to call is (correctly) perceived by the market as a signal of unfavorable private information. In addition to rationalizing observed call delays and negative stock returns at call announcement, several other testable implications are derived.
Capital Structure and the Informational Role of Debt
Published: 6/1990, Volume: 45, Issue: 2 | DOI: 10.1111/j.1540-6261.1990.tb03693.x | Cited by: 793
MILTON HARRIS, ARTUR RAVIV
This paper provides a theory of capital structure based on the effect of debt on investors' information about the firm and on their ability to oversee management. We postulate that managers are reluctant to relinquish control and unwilling to provide information that could result in such an outcome. Debt is a disciplining device because default allows creditors the option to force the firm into liquidation and generates information useful to investors. We characterize the time path of the debt level and obtain comparative statics results on the debt level, bond yield, probability of default, probability of reorganization, etc.
The Effects of Mission‐Oriented Public R & D Spending on Private Industry
Published: 6/1981, Volume: 36, Issue: 3 | DOI: 10.1111/j.1540-6261.1981.tb00648.x | Cited by: 16
JEFFREY CARMICHAEL
This paper addresses the question of how government mission‐oriented R & D spending affects private R & D spending and thereby the total investment in technology. The problem is approached within the context of the capital asset pricing model in which the firm views investment projects in terms of their risk and return characteristics. The firm is assumed to produce jointly an established product and an R & D‐intensive product, where the latter generates an additional output of technology, or spillover, that is used as an input into the former. By investing in R & D the firm alters its risk and return characteristics in two ways: through the expected profits from the sale of the R & D‐intensive good; and through the expected profits from the spillover. In this model, government mission‐oriented R & D contracting affects the firm by enabling it to separate to some extent these two sources of risk and return. The main implication of the analysis is that while some public crowding out of private R & D is likely, this is almost certain to be incomplete. The empirical evidence from the U.S. transport industry supports the model and suggests that each dollar of government funding adds around 92 cents to total R & D spending; crowding out private investment by as little as eight percent.
The Role of Acquisitions in Foreign Direct Investment: Evidence from the U.S. Stock Market
Published: 7/1991, Volume: 46, Issue: 3 | DOI: 10.1111/j.1540-6261.1991.tb03767.x | Cited by: 204
ROBERT S. HARRIS, DAVID RAVENSCRAFT
This paper examines foreign direct investment by studying shareholder wealth gains for 1273 U.S. firms acquired during the period 1970‐1987. Three findings stand out. First, cross‐border takeovers are more frequent in research and development intensive industries than are domestic acquisitions; furthermore, in three‐fourths of cross‐border transactions the buyer and seller are in related industries. These industry patterns suggest that costs and imperfections in product markets play an important role in foreign direct investment. Second, targets of foreign buyers have significantly higher wealth gains than do targets of U.S. firms. This cross‐border effect is comparable in size to the wealth effects of all‐cash and multiple bids, two effects receiving substantial attention in the finance literature, and is robust to inclusion of these two variables. Third, while the cross‐border effect on wealth gains is not well explained by industry and tax variables, it is positively related to the weakness of the U.S. dollar, indicating a significant role for exchange rate movements in foreign direct investment.
Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study
Published: 3/1984, Volume: 39, Issue: 1 | DOI: 10.1111/j.1540-6261.1984.tb03864.x | Cited by: 325
ABOLHASSAN JALILVAND, ROBERT S. HARRIS
This study of financing decisions by U.S. corporations examines the issuance of long term debt, issuance of short term debt, maintenance of corporate liquidity, issuance of new equity, and payment of dividends. Given costs and imperfections inherent in markets, a firm's financial behavior is characterized as partial adjustment to long run financial targets. Individual firm data are used so that speeds of adjustment are allowed to vary by company and over time. The results suggest that financial decisions are interdependent and that firm size, interest rate conditions, and stock price levels affect speeds of adjustment.
ON THE USE OF PUBLIC INFORMATION IN FINANCIAL MARKETS
Published: 6/1975, Volume: 30, Issue: 3 | DOI: 10.1111/j.1540-6261.1975.tb01853.x | Cited by: 14
Jeffrey F. Jaffe
Taxes and the Capital Structure of Partnerships, REIT's, and Related Entities
Published: 3/1991, Volume: 46, Issue: 1 | DOI: 10.1111/j.1540-6261.1991.tb03757.x | Cited by: 41
JEFFREY F. JAFFE
Academic finance has explored the effect of taxes on corporate capital structure in great detail. By contrast, the effect of taxes on the capital structure of partnerships, REIT's, and related entities has received little attention. The present paper shows that, under general conditions, the values of partnerships and REIT's are invariant to leverage, contradicting the sparse literature in the area. A proof similar to that of Modigliani‐Miller is employed. The effect of real world imperfections is also examined.
A NOTE ON TAXATION AND INVESTMENT
Published: 12/1978, Volume: 33, Issue: 5 | DOI: 10.1111/j.1540-6261.1978.tb03430.x | Cited by: 11
Jeffrey F. Jaffe
DISCUSSION
Published: 5/1973, Volume: 28, Issue: 2 | DOI: 10.1111/j.1540-6261.1973.tb01784.x | Cited by: 0
Jeffrey E. Jarrett
A NOTE ON EARNINGS RISK AND THE COEFFICIENT OF VARIATION: COMMENT
Published: 12/1970, Volume: 25, Issue: 5 | DOI: 10.1111/j.1540-6261.1970.tb00877.x | Cited by: 4
Jeffrey E. Jarrett
Relative Risk in Municipal and Corporate Debt
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02274.x | Cited by: 25
JEFFREY L. SKELTON
Secondary Trading Costs in the Municipal Bond Market
Published: 5/16/2006, Volume: 61, Issue: 3 | DOI: 10.1111/j.1540-6261.2006.00875.x | Cited by: 283
LAWRENCE E. HARRIS, MICHAEL S. PIWOWAR
Using new econometric methods, we separately estimate average transaction costs for over 167,000 bonds from a 1‐year sample of all U.S. municipal bond trades. Municipal bond transaction costs decrease with trade size and do not depend significantly on trade frequency. Also, municipal bond trades are substantially more expensive than similar‐sized equity trades. We attribute these results to the lack of bond market price transparency. Additional cross‐sectional analyses show that bond trading costs increase with credit risk, instrument complexity, time to maturity, and time since issuance. Investors, and perhaps ultimately issuers, might benefit if issuers issued simpler bonds.
Optimal Hedging under Intertemporally Dependent Preferences
Published: 9/1990, Volume: 45, Issue: 4 | DOI: 10.1111/j.1540-6261.1990.tb02440.x | Cited by: 17
ERIC BRIYS, MICHEL CROUHY, HARRIS SCHLESINGER
This paper examines optimal hedging behavior in a market where preferences for current consumption are partly determined by the consumer's past consumption history. The model considers an individual exposed to price risk, who allocates wealth between consumption and futures contracts over a (continuous‐time) finite planning horizon. The speculative component of the hedge ratio is shown to be smaller and the consumption path smoother than in models where preferences are separable over time. Some comparative‐static properties of the hedge ratio are also examined.
A Catering Theory of Dividends
Published: 6/2004, Volume: 59, Issue: 3 | DOI: 10.1111/j.1540-6261.2004.00658.x | Cited by: 944
Malcolm Baker, Jeffrey Wurgler
We propose that the decision to pay dividends is driven by prevailing investor demand for dividend payers. Managers cater to investors by paying dividends when investors put a stock price premium on payers, and by not paying when investors prefer nonpayers. To test this prediction, we construct four stock price‐based measures of investor demand for dividend payers. By each measure, nonpayers tend to initiate dividends when demand is high. By some measures, payers tend to omit dividends when demand is low. Further analysis confirms that these results are better explained by catering than other theories of dividends.
Investor Sentiment and the Cross‐Section of Stock Returns
Published: 8/2006, Volume: 61, Issue: 4 | DOI: 10.1111/j.1540-6261.2006.00885.x | Cited by: 5309
MALCOLM BAKER, JEFFREY WURGLER
We study how investor sentiment affects the cross‐section of stock returns. We predict that a wave of investor sentiment has larger effects on securities whose valuations are highly subjective and difficult to arbitrage. Consistent with this prediction, we find that when beginning‐of‐period proxies for sentiment are low, subsequent returns are relatively high for small stocks, young stocks, high volatility stocks, unprofitable stocks, non‐dividend‐paying stocks, extreme growth stocks, and distressed stocks. When sentiment is high, on the other hand, these categories of stock earn relatively low subsequent returns.
Market Timing and Capital Structure
Published: 2/2002, Volume: 57, Issue: 1 | DOI: 10.1111/1540-6261.00414 | Cited by: 2457
Malcolm Baker, Jeffrey Wurgler
It is well known that firms are more likely to issue equity when their market values are high, relative to book and past market values, and to repurchase equity when their market values are low. We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to historical market values. The results suggest the theory that capital structure is the cumulative outcome of past attempts to time the equity market.
The Week‐End Effect in Common Stock Returns: The International Evidence
Published: 6/1985, Volume: 40, Issue: 2 | DOI: 10.1111/j.1540-6261.1985.tb04966.x | Cited by: 281
JEFFREY JAFFE, RANDOLPH WESTERFIELD
This paper examines the daily stock market returns for four foreign countries. We find a so‐called “week‐end effect” in each country. In addition, the lowest mean returns for the Japanese and Australian stock markets occur on Tuesday.The remainder of the paper answers four questions. Are seasonal patterns in foreign stock markets independent of those previously reported in the U.S.? Do Japan and Australia exhibit a seasonal one day out of phase due to different time zones? Do settlement procedures across countries bias week‐end effects? Does the seasonal pattern in foreign exchange offset the week‐end effect in stocks for Americans investing overseas?
Share Issuance and Cross‐sectional Returns
Published: 4/2008, Volume: 63, Issue: 2 | DOI: 10.1111/j.1540-6261.2008.01335.x | Cited by: 526
JEFFREY PONTIFF, ARTEMIZA WOODGATE
Post‐1970, share issuance exhibits a strong cross‐sectional ability to predict stock returns. This predictive ability is more statistically significant than the individual predictive ability of size, book‐to‐market, or momentum. Our finding is related to research that finds that long‐run returns are associated with share repurchase announcements, seasoned equity offerings, and stock mergers, although our results remain strong even after exclusion of the data used in these studies. We estimate the issuance relation pre‐1970 and find no statistically significant predictive ability for most holding periods.
The Equity Share in New Issues and Aggregate Stock Returns
Published: 10/2000, Volume: 55, Issue: 5 | DOI: 10.1111/0022-1082.00285 | Cited by: 818
Malcolm Baker, Jeffrey Wurgler
The share of equity issues in total new equity and debt issues is a strong predictor of U.S. stock market returns between 1928 and 1997. In particular, firms issue relatively more equity than debt just before periods of low market returns. The equity share in new issues has stable predictive power in both halves of the sample period and after controlling for other known predictors. We do not find support for efficient market explanations of the results. Instead, the fact that the equity share sometimes predicts significantly negative market returns suggests inefficiency and that firms time the market component of their returns when issuing securities.
Do Taxes Affect Corporate Financing Decisions?
Published: 12/1990, Volume: 45, Issue: 5 | DOI: 10.1111/j.1540-6261.1990.tb03724.x | Cited by: 673
JEFFREY K. MacKIE‐MASON
This paper provides clear evidence of substantial tax effects on the choice between issuing debt or equity; most studies fail to find significant effects. The relationship between tax shields and debt policy is clarified. Other papers miss the fact that most tax shields have a negligible effect on the marginal tax rate for most firms. New predictions are strongly supported by an empirical analysis; the method is to study incremental financing decisions using discrete choice analysis. Previous researchers examined debt/equity ratios, but tests based on incremental decisions should have greater power.
Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts
Published: 2/2003, Volume: 58, Issue: 1 | DOI: 10.1111/1540-6261.00526 | Cited by: 1129
Harrison Hong, Jeffrey D. Kubik
We examine security analysts' career concerns by relating their earnings forecasts to job separations. Relatively accurate forecasters are more likely to experience favorable career outcomes like moving up to a high‐status brokerage house. Controlling for accuracy, analysts who are optimistic relative to the consensus are more likely to experience favorable job separations. For analysts who cover stocks underwritten by their houses, job separations depend less on accuracy and more on optimism. Job separations were less sensitive to accuracy and more sensitive to optimism during the recent stock market mania. Brokerage houses apparently reward optimistic analysts who promote stocks.
Does Academic Research Destroy Stock Return Predictability?
Published: 1/14/2016, Volume: 71, Issue: 1 | DOI: 10.1111/jofi.12365 | Cited by: 1345
R. DAVID MCLEAN, JEFFREY PONTIFF
We study the out‐of‐sample and post‐publication return predictability of 97 variables shown to predict cross‐sectional stock returns. Portfolio returns are 26% lower out‐of‐sample and 58% lower post‐publication. The out‐of‐sample decline is an upper bound estimate of data mining effects. We estimate a 32% (58%–26%) lower return from publication‐informed trading. Post‐publication declines are greater for predictors with higher in‐sample returns, and returns are higher for portfolios concentrated in stocks with high idiosyncratic risk and low liquidity. Predictor portfolios exhibit post‐publication increases in correlations with other published‐predictor portfolios. Our findings suggest that investors learn about mispricing from academic publications.
THE VALUE OF THE FIRM UNDER REGULATION
Published: 5/1976, Volume: 31, Issue: 2 | DOI: 10.1111/j.1540-6261.1976.tb01915.x | Cited by: 6
Jeffrey F. Jaffe, Gershon Mandelker
How Are Derivatives Used? Evidence from the Mutual Fund Industry
Published: 4/1999, Volume: 54, Issue: 2 | DOI: 10.1111/0022-1082.00126 | Cited by: 319
Jennifer Lynch Koski, Jeffrey Pontiff
We investigate investment managers' use of derivatives by comparing return distributions for equity mutual funds that use and do not use derivatives. In contrast to public perception, derivative users have risk exposure and return performance that are similar to nonusers. We also analyze changes in fund risk in response to prior fund performance. Changes in risk are substantially less severe for funds using derivatives, consistent with the explanation that managers use derivatives to reduce the impact of performance on risk. We provide new evidence regarding the implications of cash flows and managerial gaming for the relation between performance and risk.
Benefits of Bank Diversification: The Evidence from Shareholder Returns
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03682.x | Cited by: 26
ROBERT A. EISENBEIS, ROBERT S. HARRIS, JOSEF LAKONISHOK
Private Equity Performance: What Do We Know?
Published: 9/12/2014, Volume: 69, Issue: 5 | DOI: 10.1111/jofi.12154 | Cited by: 502
ROBERT S. HARRIS, TIM JENKINSON, STEVEN N. KAPLAN
We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. Venture capital funds outperformed public equities in the 1990s, but underperformed in the 2000s. Our conclusions are robust to various indices and risk controls. Performance in Cambridge Associates and Preqin is qualitatively similar to that in Burgiss, but is lower in Venture Economics.
A Test of the Relative Pricing Effects of Dividends and Earnings: Evidence from Simultaneous Announcements in Japan
Published: 6/2000, Volume: 55, Issue: 3 | DOI: 10.1111/0022-1082.00245 | Cited by: 79
Robert M. Conroy, Kenneth M. Eades, Robert S. Harris
We study the pricing effects of dividend and earnings announcements by taking advantage of the unique setting in Japan where managers simultaneously announce the current year's dividends and earnings as well as forecasts of next year's dividends and earnings. Defining surprises as deviations from analysts' forecasts, we find that share price reactions are significantly affected by earnings surprises, especially management forecasts of next year's earnings. The information content of dividends is marginal and is restricted to announcements of next year's dividends. Consistent with Modigliani and Miller's dividend irrelevance proposition, current dividend surprises have no material impact on stock prices in Japan.
Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships
Published: 12/2000, Volume: 55, Issue: 6 | DOI: 10.1111/0022-1082.00307 | Cited by: 480
Jeffrey W. Allen, Gordon M. Phillips
This paper examines long‐term block ownership by corporations and performance changes in firms with corporate block owners. We also examine potential reasons for corporate ownership including benefits in product market relationships, alleviation of financing constraints, and board monitoring by corporate owners. We find the largest significant increases in targets' stock prices, investment, and operating profitability when ownership is combined with alliances, joint ventures, and other product market relationships between purchasing and target firms, especially in industries with high research and development. Our findings are consistent with the conclusion that block ownership by corporations has significant benefits in product market relationships.