The Journal of Finance

Nonnormalities and Tests of Asset Pricing Theories

Published: 9/1989,  Volume: 44,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1989.tb02629.x  |  Cited by: 76

JOHN AFFLECK‐GRAVES, BILL MCDONALD

The robustness of the multivariate test of Gibbons, Ross, and Shanken (1986) to nonnormalities in the residual covariance matrix is examined. After considering the relative performance of various tests of normality, simulation techniques are used to determine the effects of nonnormalities on the multivariate test. It is found that, where the sample nonnormalities are severe, the size and/or power of the test can be seriously misstated. However, it is also shown that these extreme sample values may overestimate the population parameters. Hence, we conclude that the multivariate test is reasonably robust with respect to typical levels of nonnormality.

Trading Mechanisms and the Components of the Bid‐Ask Spread

Published: 9/1994,  Volume: 49,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1994.tb02462.x  |  Cited by: 74

JOHN AFFLECK‐GRAVES, SHANTARAM P. HEGDE, ROBERT E. MILLER

We compare the relative magnitudes of the components of the bid‐ask spread for New York Stock Exchange (NYSE)/American Stock Exchange (AMEX) stocks to those of National Association of Securities Dealers Automated Quotations (NASDAQ)/National Market System (NMS) stocks. We find that the order‐processing cost component is smaller, and the adverse selection component is greater on the NYSE/AMEX trading systems than on the NASDAQ/NMS system. The inventory holding component is also greater for exchange‐traded stocks than for NASDAQ/NMS stocks, but this may be attributable to differences in the characteristics of the firms whose stocks trade on the respective systems.

PENSION PLAN LIABILITIES AND CORPORATE FINANCIAL STRATEGIES*

Published: 12/1974,  Volume: 29,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1974.tb03136.x  |  Cited by: 6

Irwin Tepper, A. R. P. Affleck

What Moves the Stock and Bond Markets? A Variance Decomposition for Long‐Term Asset Returns

Published: 3/1993,  Volume: 48,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1993.tb04700.x  |  Cited by: 382

JOHN Y. CAMPBELL, JOHN AMMER

This paper uses a vector autoregressive model to decompose excess stock and 10‐year bond returns into changes in expectations of future stock dividends, inflation, short‐term real interest rates, and excess stock and bond returns. In monthly postwar U.S. data, stock and bond returns are driven largely by news about future excess stock returns and inflation, respectively. Real interest rates have little impact on returns, although they do affect the short‐term nominal interest rate and the slope of the term structure. These findings help to explain the low correlation between excess stock and bond returns.

Top‐Management Compensation and Capital Structure

Published: 7/1993,  Volume: 48,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1993.tb04026.x  |  Cited by: 410

TERESA A. JOHN, KOSE JOHN

The interrelationship between top‐management compensation and the design and mix of external claims issued by a firm is studied. The optimal managerial compensation structures depend on not only the agency relationship between shareholders and management, but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus. We analyze in detail the optimal management compensation for the cases when the external claims are (1) equity and risky debt, and (2) equity and convertible debt. In addition to the role of aligning managerial incentives with shareholder interests, managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt. The optimal management compensation derived has low pay‐performance sensitivity. With convertible debt, instead of straight debt, the corresponding optimal managerial compensation has high pay‐to‐performance sensitivity. A negative relationship between pay‐performance sensitivity and leverage is derived. Our results provide a reconciliation of the puzzling evidence of Jensen and Murphy ( 1990 ) with agency theory. Other testable implications include (1) a relationship between the risk premium in corporate bond yields and top‐management compensation structures, and (2) the announcement effect of adoption of executive stock option plans on bond prices. The model yields implications for management compensation in banks and Federal Deposit Insurance reform. Our results explain the dynamics of top‐management compensation in firms going through financial distress and reorganization.

Evaluating and Comparing Projects: Simple Detection of False Alarms

Published: 12/1979,  Volume: 34,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1979.tb00068.x  |  Cited by: 11

JOHN W. PRATT, JOHN S. HAMMOND

Explaining the Poor Performance of Consumption‐based Asset Pricing Models

Published: 12/2000,  Volume: 55,  Issue: 6  |  DOI: 10.1111/0022-1082.00310  |  Cited by: 207

John Y. Campbell, John H. Cochrane

We show that the external habit‐formation model economy of Campbell and Cochrane (1999) can explain why the Capital Asset Pricing Model (CAPM) and its extensions are betterapproximate asset pricing models than is the standard onsumption‐based model. The model economy produces time‐varying expected eturns, tracked by the dividend–price ratio. Portfolio‐based models capture some of this variation in state variables, which a state‐independent function of consumption cannot capture. Therefore, though the consumption‐based model and CAPM are both perfect conditional asset pricing models, the portfolio‐based models are better approximate unconditional asset pricing models.

Asset Writedowns: Managerial Incentives and Security Returns

Published: 7/1987,  Volume: 42,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1987.tb04574.x  |  Cited by: 241

JOHN S. STRONG, JOHN R. MEYER

Risk Adjusted Equity Performance Measurement

Published: 5/1982,  Volume: 37,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1982.tb03576.x  |  Cited by: 2

JOHN NAGORNIAK

The Case for Intervening in Bankers’ Pay

Published: 5/21/2012,  Volume: 67,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2012.01736.x  |  Cited by: 116

JOHN THANASSOULIS

This paper studies the default risk of banks generated by investment and remuneration pressures. Competing banks prefer to pay their banking staff in bonuses and not in fixed wages as risk sharing on the remuneration bill is valuable. Competition for bankers generates a negative externality, driving up market levels of banker remuneration and hence rival banks’ default risk. Optimal financial regulation involves an appropriately structured limit on the proportion of the balance sheet used for bonuses. However, stringent bonus caps are value destroying, default risk enhancing, and suboptimal for regulators who control only a small number of banks.

DISCUSSION

Published: 5/1972,  Volume: 27,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1972.tb00972.x  |  Cited by: 1

John Lintner

MONETARY POLICY AND EXTERNAL SURPLUSES: THE GERMAN EXPERIENCE, 1955–61*

Published: 9/1963,  Volume: 18,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1963.tb02855.x  |  Cited by: 0

John Hein

THE COUPON EFFECT ON YIELD TO MATURITY

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03245.x  |  Cited by: 24

John Caks

INFLATION AND SECURITY RETURNS*

Published: 5/1975,  Volume: 30,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1975.tb01809.x  |  Cited by: 66

John Lintner

DISCUSSION

Published: 5/1981,  Volume: 36,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1981.tb00443.x  |  Cited by: 0

JOHN LINTNER

WEALTH, WELFARE, AND THE PRICE OF RISK

Published: 5/1972,  Volume: 27,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1972.tb00970.x  |  Cited by: 12

John Long

Nontransferable Interest‐Bearing National Debt

Published: 9/1980,  Volume: 35,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1980.tb03518.x  |  Cited by: 2

JOHN BRYANT

A NOTE ON THE USE OF INDEX CLAUSES ABROAD

Published: 12/1960,  Volume: 15,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1960.tb02768.x  |  Cited by: 0

John Hein

SECURITY PRICES, RISK, AND MAXIMAL GAINS FROM DIVERSIFICATION*

Published: 12/1965,  Volume: 20,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1965.tb02930.x  |  Cited by: 477

John Lintner

Efficient Funds in a Financial Market with Options: a New Irrelevance Proposition

Published: 6/1981,  Volume: 36,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1981.tb00653.x  |  Cited by: 13

KOSE JOHN

Under the same assumptions that Ross used to assert the existence of an efficient fund (on which a spanning set of options can be written) we prove that almost any portfolio is an efficient fund. From a constructive point of view, a randomly chosen vector of portfolio weights yields an efficient fund. When the Ross assumptions are relaxed, a limited notion of efficiency‐maximal efficiency‐is the best attainable. The maximally efficient funds are also everywhere dense in the portfolio space. Some implications are discussed and illustrative examples given.

BANK RESERVE REQUIREMENTS AND HOW THEIR EFFECTIVENESS AS AN INSTRUMENT OF MONETARY CONTROL MAY BE ENHANCED*

Published: 3/1956,  Volume: 11,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1956.tb00690.x  |  Cited by: 0

John Livingston

A NOTE ON THE GIRO TRANSFER SYSTEM

Published: 12/1959,  Volume: 14,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1959.tb00145.x  |  Cited by: 6

John Hein

THE COST OF CAPITAL AND OPTIMAL FINANCING OF CORPORATE GROWTH

Published: 5/1963,  Volume: 18,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1963.tb00725.x  |  Cited by: 46

John Lintner

Competition and Misconduct

Published: 4/12/2023,  Volume: 78,  Issue: 4  |  DOI: 10.1111/jofi.13227  |  Cited by: 20

JOHN THANASSOULIS

Misconduct is widespread. Practices such as misselling, pump and dump, and money laundering cause harm while raising profits. This paper presents a mechanism that can determine what sorts of misconduct can be sustained in competitive equilibrium in concentrated markets, oligopoly settings, and markets with many small competing firms. The model studied allows general demand and distinguishes types of ethical dilemma using current psychological understanding. The paper shows, for example, that markets with many small competing firms are not vulnerable to misconduct if firms respond to entry with niche strategies or if the ethical dilemma draws an emotional response.

Risk‐Shifting Incentives and Signalling Through Corporate Capital Structure

Published: 7/1987,  Volume: 42,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1987.tb04573.x  |  Cited by: 36

KOSE JOHN

This paper examines optimal corporate financing arrangements under asymmetric information for different patterns of temporal resolution of uncertainty in the underlying technology. An agency problem, a signalling problem and an agency‐signalling problem arise as special cases. The associated informational equilibria and the optimal financing arrangements are characterized and compared. In the agency‐signalling equilibrium the private information of corporate insiders at the time of financing is signalled through capital structure choices which deviate optimally from agency‐cost minimizing financing arrangements, which in turn induce risk‐shifting incentives in the investment policy. In the pure signalling case the equilibrium is characterized by direct contractual precommitments to implement investment policies which are riskier than pareto‐optimal levels. Empirical implications for debt covenants and the announcement effect of investment policies and leverage increasing transactions on existing stock and bond prices are explicitly derived.

CORPORATE DEBT DECISIONS: A NEW ANALYTICAL FRAMEWORK

Published: 12/1978,  Volume: 33,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1978.tb03421.x  |  Cited by: 4

John Caks

TOWARD A THEORY OF WORKING CAPITAL MANAGEMENT

Published: 5/1955,  Volume: 10,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1955.tb01259.x  |  Cited by: 24

John Sagan

The Volatility and Price Sensitivities of Managerial Stock Option Portfolios and Corporate Hedging

Published: 4/2002,  Volume: 57,  Issue: 2  |  DOI: 10.1111/1540-6261.00442  |  Cited by: 341

John D. Knopf, Jouahn Nam, John H. Thornton

We use estimates of the Black—Scholes sensitivity of managers' stock option portfolios to stock return volatility and the sensitivity of managers' stock and stock option portfolios to stock price to test the relationship between managers' risk preferences and hedging activities. We find that as the sensitivity of managers' stock and stock option portfolios to stock price increases, firms tend to hedge more. However, as the sensitivity of managers' stock option portfolios to stock return volatility increases, firms tend to hedge less.

WELLESLEY, A CASE HISTORY IN NEW ENGLAND TOWN FINANCE*

Published: 12/1952,  Volume: 7,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1952.tb02492.x  |  Cited by: 0

Alice John Vandermeulen

DEVALUATION: ITS INTERSPATIAL AND INTERTEMPORAL PRICE EFFECTS ON FUTURES MARKETS*

Published: 9/1973,  Volume: 28,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1973.tb01434.x  |  Cited by: 0

John R. Dominguez

DISCUSSION

Published: 5/1970,  Volume: 25,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1970.tb00508.x  |  Cited by: 0

John P. Shelton

THE INTERNATIONAL ECONOMIC POSITION OF MEXICO, 1900 TO 1949*

Published: 12/1952,  Volume: 7,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1952.tb02490.x  |  Cited by: 0

John William Simpson

A TIME SERIES ANALYSIS OF POST‐ACCORD INTEREST RATES: COMMENT

Published: 9/1974,  Volume: 29,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1974.tb03110.x  |  Cited by: 2

John E. Pippenger

RISK, RETURN AND THE COMPETITIVE STRUCTURE OF COMMERCIAL BANKING*

Published: 9/1970,  Volume: 25,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1970.tb00572.x  |  Cited by: 0

John Thomas Emery

A STRUCTURAL STUDY OF THE INCOME VELOCITY OF CIRCULATION

Published: 9/1974,  Volume: 29,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1974.tb03087.x  |  Cited by: 0

John M. Mason

THE EVEN KEEL POLICY OF THE FEDERAL RESERVE SYSTEM‐ORIGIN, DEFINITION, IMPLEMENTATION AND IMPORT*

Published: 6/1973,  Volume: 28,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1973.tb01402.x  |  Cited by: 0

John D. Markese

AN EXAMINATION OF THE YIELDS OF CORPORATE BONDS AND STOCKS: COMMENT

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03255.x  |  Cited by: 1

John S. McCallum

TIGHT MONEY AS A CAUSE OF INFLATION: COMMENT

Published: 3/1971,  Volume: 26,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1971.tb00599.x  |  Cited by: 2

John H. Hotson

PORTFOLIO THEORY AND THE PROBLEM OF FOREIGN EXCHANGE RISK

Published: 5/1978,  Volume: 33,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1978.tb04865.x  |  Cited by: 33

John H. Makin

THE ROLE OF SALES AND EXCISE TAXATION IN THE OVER‐ALL TAX STRUCTURE

Published: 5/1956,  Volume: 11,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1956.tb00702.x  |  Cited by: 0

John F. Due

A MODEL OF COMMERCIAL BANKING SYSTEM BEHAVIOR: AN ECONOMETRIC PREDICTIVE TEST*

Published: 9/1967,  Volume: 22,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1967.tb02986.x  |  Cited by: 0

John A. Doukas

CRITERIA OF “ADEQUATE” GOVERNMENTAL EXPENDITURE AND THEIR IMPLICATIONS

Published: 3/1951,  Volume: 6,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1951.tb04438.x  |  Cited by: 0

Alice John Vandermeulen

THE CAPITAL DECISION IN COMMERCIAL BANKS

Published: 6/1974,  Volume: 29,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1974.tb01483.x  |  Cited by: 24

John J. Pringle

Production‐Based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations

Published: 3/1991,  Volume: 46,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1991.tb03750.x  |  Cited by: 526

JOHN H. COCHRANE

This paper describes a production‐based asset pricing model. It is analogous to the standard consumption‐based model, but it uses producers and production functions in the place of consumers and utility functions. The model ties stock returns to investment returns (marginal rates of transformation) which are inferred from investment data via a production function. The production‐based model is used to examine forecasts of stock returns by business‐cycle related variables and the association of stock returns with subsequent economic activity.

FRENCH MUTUAL FUND PERFORMANCE: EVALUATION OF INTERNATIONALLY‐DIVERSIFIED PORTFOLIOS

Published: 12/1973,  Volume: 28,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1973.tb01448.x  |  Cited by: 21

John G. McDonald

ON BERNOULLI, SHARPE, FINANCIAL RISK AND THE ST. PETERSBURG PARADOX

Published: 6/1976,  Volume: 31,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1976.tb01938.x  |  Cited by: 4

John T. Sennetti

THE TERM STRUCTURE OF INTEREST RATES: A THEORETICAL AND EMPIRICAL STUDY*

Published: 9/1963,  Volume: 18,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1963.tb02861.x  |  Cited by: 0

John H. Wood

CONCENTRATION IN BANKING IN OHIO DURING THE POSTWAR PERIOD*

Published: 12/1962,  Volume: 17,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1962.tb04350.x  |  Cited by: 0

John T. Hackett

THE MANAGEMENT OF CORPORATE LIQUID ASSETS*

Published: 9/1963,  Volume: 18,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1963.tb02853.x  |  Cited by: 0

John Campbell Burton

DISCRIMINATION AMONG ECONOMIC MODELS: A BAYESIAN ANALYSIS WITH APPLICATION TO AGGREGATE DEMAND FOR MONEY*

Published: 3/1972,  Volume: 27,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1972.tb00640.x  |  Cited by: 0

John C. Wiginton