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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How Does Size Affect Mutual Fund Behavior?
Published: 11/11/2008 | DOI: 10.1111/j.1540-6261.2008.01417.x
JOSHUA M. POLLET, MUNGO WILSON
If actively managed mutual funds suffer from diminishing returns to scale, funds should alter investment behavior as assets under management increase. Although asset growth has little effect on the behavior of the typical fund, we find that large funds and small‐cap funds diversify their portfolios in response to growth. Greater diversification, especially for small‐cap funds, is associated with better performance. Fund family growth is related to the introduction of new funds that hold different stocks from their existing siblings. Funds with many siblings diversify less rapidly as they grow, suggesting that the fund family may influence a fund's portfolio strategy.
Capital Budgeting versus Market Timing: An Evaluation Using Demographics
Published: 12/27/2012 | DOI: 10.1111/j.1540-6261.2012.01799.x
STEFANO DELLAVIGNA, JOSHUA M. POLLET
Using demand shifts induced by demographics, we evaluate capital budgeting and market timing. Capital budgeting implies that industries anticipating positive demand shifts in the near future should issue more equity to finance greater capacity. To the extent that demand shifts in the distant future are not incorporated into equity prices, market timing implies that industries anticipating positive shifts in the distant future should issue less equity due to undervaluation. The evidence supports both theories: new listings and equity issuance respond positively to demand shifts during the next 5 years and negatively to demand shifts further in the future.
Investor Inattention and Friday Earnings Announcements
Published: 03/13/2009 | DOI: 10.1111/j.1540-6261.2009.01447.x
STEFANO DELLAVIGNA, JOSHUA M. POLLET
Does limited attention among investors affect stock returns? We compare the response to earnings announcements on Friday, when investor inattention is more likely, to the response on other weekdays. If inattention influences stock prices, we should observe less immediate response and more drift for Friday announcements. Indeed, Friday announcements have a 15% lower immediate response and a 70% higher delayed response. A portfolio investing in differential Friday drift earns substantial abnormal returns. In addition, trading volume is 8% lower around Friday announcements. These findings support explanations of post‐earnings announcement drift based on underreaction to information caused by limited attention.
Is There a Risk Premium in the Stock Lending Market? Evidence from Equity Options
Published: 04/03/2022 | DOI: 10.1111/jofi.13129
DMITRIY MURAVYEV, NEIL D. PEARSON, JOSHUA M. POLLET
Recent research argues that uncertainty about future stock borrowing fees hinders short‐selling, and this risk explains the performance of short strategies. One possible mechanism is that borrowing fee risk carries a risk premium. Since the present value of the uncertain borrowing fee is reflected in options prices, the difference between option‐implied and realized fees estimates this premium. We find that the risk premium is small. Moreover, if the risk premium is substantial, it should be reflected in the returns to short‐selling stock after adjusting for stock borrowing fees. However, borrowing fee risk does not predict fee‐adjusted returns.