Search results: 31.
Stock Market Return Expectations: Some General Properties
Published: 9/1980, Volume: 35, Issue: 4 | DOI: 10.1111/j.1540-6261.1980.tb03510.x | Cited by: 38
JOSEF LAKONISHOK
AbstractThis paper examines how and how well do leading economists forecast stock market returns. This question is fundamental in finance, since the Capital Asset Pricing foundation rests upon assumptions about the properties of investors' expectations for stock market returns. The results reveal that economists' expectations of market returns as exemplified in Livingston's data do not meet the necessary conditions of efficiency. It should be noted however, that in later period some improvement in the quality of economists' forecasts was observed.
The Weekend Effect: Trading Patterns of Individual and Institutional Investors
Published: 3/1990, Volume: 45, Issue: 1 | DOI: 10.1111/j.1540-6261.1990.tb05089.x | Cited by: 247
JOSEF LAKONISHOK, EDWIN MABERLY
In this paper, we document regularities in trading patterns of individual and institutional investors related to the day of the week. We find a relative increase in trading activity by individuals on Mondays. In addition, there is a tendency for individuals to increase the number of sell transactions relative to buy transactions, which might explain at least part of the weekend effect.
Weekend Effects on Stock Returns: A Reply
Published: 3/1985, Volume: 40, Issue: 1 | DOI: 10.1111/j.1540-6261.1985.tb04957.x | Cited by: 5
JOSEF LAKONISHOK, MAURICE LEVI
Stock Splits and Stock Dividends: Why, Who, and When
Published: 9/1987, Volume: 42, Issue: 4 | DOI: 10.1111/j.1540-6261.1987.tb03919.x | Cited by: 193
JOSEF LAKONISHOK, BARUCH LEV
This study investigates empirically why firms split their stock or distribute stock dividends and why the market reacts favorably to these distributions. The findings suggest that stock splits are mainly aimed at restoring stock prices to a “normal range.” Some support can also be found for the oft‐mentioned signalling motive of stock splits. Stock dividends are altogether different from stock splits, and they appear to be a decreasing phenomenon. The clue to stock dividend distributions may lie in their perceived substitution for relatively low cash dividends.
Anomalous Price Behavior Around Repurchase Tender Offers
Published: 6/1990, Volume: 45, Issue: 2 | DOI: 10.1111/j.1540-6261.1990.tb03698.x | Cited by: 223
JOSEF LAKONISHOK, THEO VERMAELEN
This paper reports anomalous price behavior around repurchase tender offers. Buying shares before the expiration date of a repurchase tender offer and tendering to the firm produces, on average, abnormal returns of more than 9 percent over a period shorter than one week. In addition, we find that repurchasing companies experience economically and statistically significant abnormal returns in the two years after the repurchase. The upward price drift is mainly caused by the behavior of the small firms in the sample.
Volume for Winners and Losers: Taxation and Other Motives for Stock Trading
Published: 9/1986, Volume: 41, Issue: 4 | DOI: 10.1111/j.1540-6261.1986.tb04559.x | Cited by: 149
JOSEF LAKONISHOK, SEYMOUR SMIDT
Capital gains taxes create incentives to trade. Our major finding is that turnover is higher for winners (stocks, the prices of which have increased) than for losers, which is not consistent with the tax prediction. However, the turnover in December and January is evidence of tax‐motivated trading; there is a relatively high turnover for losers in December and for winners in January. We conclude that taxes influence turnover, but other motives for trading are more important. We were unable to find evidence that changing the length of the holding period required to qualify for long‐term capital gains treatment affected turnover.
Tax Reform and Ex‐Dividend Day Behavior
Published: 9/1983, Volume: 38, Issue: 4 | DOI: 10.1111/j.1540-6261.1983.tb02289.x | Cited by: 80
JOSEF LAKONISHOK, THEO VERMAELEN
This paper investigates the effect of a major Canadian tax reform on the ex‐dividend day behavior of companies on the Toronto Stock Exchange. The results are inconsistent with the hypothesis that price changes on ex‐dividend days reflect the relative taxation of dividends and capital gains for the “representative” investor, but are consistent with the hypothesis that ex‐dividend day price behavior reflects short‐term trading activities.
Weekend Effects on Stock Returns: A Note
Published: 6/1982, Volume: 37, Issue: 3 | DOI: 10.1111/j.1540-6261.1982.tb02231.x | Cited by: 309
JOSEF LAKONISHOK, MAURICE LEVI
The Behavior of Stock Prices Around Institutional Trades
Published: 9/1995, Volume: 50, Issue: 4 | DOI: 10.1111/j.1540-6261.1995.tb04053.x | Cited by: 580
LOUIS K. C. CHAN, JOSEF LAKONISHOK
All trades executed by 37 large investment management firms from July 1986 to December 1988 are used to study the price impact and execution cost of the entire sequence (“package”) of trades that we interpret as an order. We find that market impact and trading cost are related to firm capitalization, relative package size, and, most importantly, to the identity of the management firm behind the trade. Money managers with high demands for immediacy tend to be associated with larger market impact.
Simple Technical Trading Rules and the Stochastic Properties of Stock Returns
Published: 12/1992, Volume: 47, Issue: 5 | DOI: 10.1111/j.1540-6261.1992.tb04681.x | Cited by: 1581
WILLIAM BROCK, JOSEF LAKONISHOK, BLAKE LeBARON
This paper tests two of the simplest and most popular trading rules—moving average and trading range break—by utilizing the Dow Jones Index from 1897 to 1986. Standard statistical analysis is extended through the use of bootstrap techniques. Overall, our results provide strong support for the technical strategies. The returns obtained from these strategies are not consistent with four popular null models: the random walk, the AR(1), the GARCH‐M, and the Exponential GARCH. Buy signals consistently generate higher returns than sell signals, and further, the returns following buy signals are less volatile than returns following sell signals, and further, the returns following buy signals are less volatile than returns following sell signals. Moreover, returns following sell signals are negative, which is not easily explained by any of the currently existing equilibrium models.
Stock Repurchases in Canada: Performance and Strategic Trading
Published: 10/2000, Volume: 55, Issue: 5 | DOI: 10.1111/0022-1082.00291 | Cited by: 300
David Ikenberry, Josef Lakonishok, Theo Vermaelen
During the 1980s, U.S. firms announcing stock repurchases earned favorable long‐run returns. Recently, concerns have been raised over the robustness of these findings. This concern comes at a time of explosive growth in repurchase programs. Thus, we study new evidence from the 1990s for 1,060 Canadian repurchase programs. Moreover, because of Canadian law, we can carefully track repurchase activity monthly. Similarly to the situation in the United States, the Canadian stock market discounts the information in repurchase announcements, particularly for value stocks. Completion rates in Canada are sensitive to mispricing. Trades also appear linked to price movements; managers buy more shares when prices fall.
Institutional Equity Trading Costs: NYSE Versus Nasdaq
Published: 6/1997, Volume: 52, Issue: 2 | DOI: 10.1111/j.1540-6261.1997.tb04819.x | Cited by: 151
LOUIS K. C. CHAN, JOSEF LAKONISHOK
We compare execution costs (market impact plus commission) on the New York Stock Exchange (NYSE) and Nasdaq for institutional investors. The differences in cost generally conform to each market's area of specialization. Controlling for firm size, trade size, and the money management firm's identity, costs are lower on Nasdaq for trades in comparatively smaller firms, while costs for trading the larger stocks are lower on NYSE. The cost differences estimated from a regression model are, however, sensitive to the choice of time period.
Stock Prices and Financial Analysts' Recommendations
Published: 3/1983, Volume: 38, Issue: 1 | DOI: 10.1111/j.1540-6261.1983.tb03634.x | Cited by: 116
JAMES H. BJERRING, JOSEF LAKONISHOK, THEO VERMAELEN
The recommendations of a Canadian brokerage house are evaluated by a number of techniques. The results reveal that an investor following the recommendations would have achieved significantly positive abnormal returns, even after allowing for transactions cost.
Fundamentals and Stock Returns in Japan
Published: 12/1991, Volume: 46, Issue: 5 | DOI: 10.1111/j.1540-6261.1991.tb04642.x | Cited by: 848
LOUIS K. C. CHAN, YASUSHI HAMAO, JOSEF LAKONISHOK
This paper relates cross‐sectional differences in returns on Japanese stocks to the underlying behavior of four variables: earnings yield, size, book to market ratio, and cash flow yield. Alternative statistical specifications and various estimation methods are applied to a comprehensive, high‐quality data set that extends from 1971 to 1988. The sample includes both manufacturing and nonmanufacturing firms, companies from both sections of the Tokyo Stock Exchange, and also delisted securities. Our findings reveal a significant relationship between these variables and expected returns in the Japanese market. Of the four variables considered, the book to market ratio and cash flow yield have the most significant positive impact on expected returns.
Contrarian Investment, Extrapolation, and Risk
Published: 12/1994, Volume: 49, Issue: 5 | DOI: 10.1111/j.1540-6261.1994.tb04772.x | Cited by: 3109
JOSEF LAKONISHOK, ANDREI SHLEIFER, ROBERT W. VISHNY
For many years, scholars and investment professionals have argued that value strategies outperform the market. These value strategies call for buying stocks that have low prices relative to earnings, dividends, book assets, or other measures of fundamental value. While there is some agreement that value strategies produce higher returns, the interpretation of why they do so is more controversial. This article provides evidence that value strategies yield higher returns because these strategies exploit the suboptimal behavior of the typical investor and not because these strategies are fundamentally riskier.
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
INFLATION RISK AND REGULATORY LAG
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02247.x | Cited by: 2
WILLARD T. CARLETON, DONALD R. CHAMBERS, JOSEF LAKONISHOK
The Stock Market Valuation of Research and Development Expenditures
Published: 12/2001, Volume: 56, Issue: 6 | DOI: 10.1111/0022-1082.00411 | Cited by: 1398
Louis K. C. Chan, Josef Lakonishok, Theodore Sougiannis
We examine whether stock prices fully value firms' intangible assets, specifically research and development (R&D). Under current U.S. accounting standards, financial statements do not report intangible assets and R&D spending is expensed. Nonetheless, the average historical stock returns of firms doing R&D matches the returns of firms without R&D. However, the market is apparently too pessimistic about beaten‐down R&D‐intensive technology stocks' prospects. Companies with high R&D to equity market value (which tend to have poor past returns) earn large excess returns. A similar relation exists between advertising and stock returns. R&D intensity is positively associated with return volatility.
Momentum Strategies
Published: 12/1996, Volume: 51, Issue: 5 | DOI: 10.1111/j.1540-6261.1996.tb05222.x | Cited by: 1481
LOUIS K. C. CHAN, NARASIMHAN JEGADEESH, JOSEF LAKONISHOK
We examine whether the predictability of future returns from past returns is due to the market's underreaction to information, in particular to past earnings news. Past return and past earnings surprise each predict large drifts in future returns after controlling for the other. Market risk, size, and book–to–market effects do not explain the drifts. There is little evidence of subsequent reversals in the returns of stocks with high price and earnings momentum. Security analysts' earnings forecasts also respond sluggishly to past news, especially in the case of stocks with the worst past performance. The results suggest a market that responds only gradually to new information.
The Level and Persistence of Growth Rates
Published: 3/21/2003, Volume: 58, Issue: 2 | DOI: 10.1111/1540-6261.00540 | Cited by: 247
Louis K. C. Chan, Jason Karceski, Josef Lakonishok
Expectations about long‐term earnings growth are crucial to valuation models and cost of capital estimates. We analyze historical long‐term growth rates across a broad cross section of stocks using several indicators of operating performance. We test for persistence and predictability in growth. While some firms have grown at high rates historically, they are relatively rare instances. There is no persistence in long‐term earnings growth beyond chance, and there is low predictability even with a wide variety of predictor variables. Specifically, IBES growth forecasts are overly optimistic and add little predictive power. Valuation ratios also have limited ability to predict future growth.
Good News for Value Stocks: Further Evidence on Market Efficiency
Published: 6/1997, Volume: 52, Issue: 2 | DOI: 10.1111/j.1540-6261.1997.tb04825.x | Cited by: 592
RAFAEL LA PORTA, JOSEF LAKONISHOK, ANDREI SHLEIFER, ROBERT VISHNY
This article examines the hypothesis that the superior return to so‐called value stocks is the result of expectational errors made by investors. We study stock price reactions around earnings announcements for value and glamour stocks over a 5‐year period after portfolio formation. The announcement returns suggest that a significant portion of the return difference between value and glamour stocks is attributable to earnings surprises that are systematically more positive for value stocks. The evidence is inconsistent with a risk‐based explanation for the return differential.
Debt, Agency Costs, and Industry Equilibrium
Published: 12/1991, Volume: 46, Issue: 5 | DOI: 10.1111/j.1540-6261.1991.tb04637.x | Cited by: 134
VOJISLAV MAKSIMOVIC, JOSEF ZECHNER
We show that risk characteristics of projects' cash flows are endogenously determined by the investment decisions of all firms in an industry. As a result, in reasonable settings, financial structures which create incentives to expropriate debtholders by increasing risk are shown not to reduce value in an industry equilibrium. Without taxes, capital structure is irrelevant for individual firms despite its effect on the equityholders' incentives, but the maximum total amount of debt in the industry is determinate. Allowing for a corporate tax advantage of debt, capital structure becomes relevant but firms are indifferent between distinct alternative debt levels.
Influence Costs and Capital Structure
Published: 7/1993, Volume: 48, Issue: 3 | DOI: 10.1111/j.1540-6261.1993.tb04027.x | Cited by: 21
LAURIE SIMON BAGWELL, JOSEF ZECHNER
This paper analyzes the role of capital structure in the presence of intrafirm influence activities. The hierarchical structure of large organizations inevitably generates attempts by members to influence the distributive consequences of organizational decisions. In corporations, for example, top management can reallocate or eliminate quasi rents earned by their employees, while at the same time, they must rely on these employees to provide them with information vital to their decision making. This creates the opportunity for lower level managers to influence top management's discretionary decisions. As a result, divisional managers may attempt to inflate the corporate perception of their relative contributions to the firm, or to take actions that make the elimination of their rents more costly for the firm. This incentive to influence is especially acute when managers fear losing their jobs, for example in the event of a divestiture.Since the firm's capital structure can affect future divestiture decisions, it can be chosen to reduce or increase the divisional managers' incentives to influence top management's decisions. The control of influence activities arises at the expense of restrictions on future divestiture decisions. Hence, there emerges an optimal capital structure that trades off the costs of influence activities against the costs of making poor divestiture decisions. The findings suggest that capital structure can also be chosen to control influence activities that arise under less extreme motivations.We identify several key factors that determine the optimal capital structure: the top management's prior assessment of the likelihood that it will be optimal to divest a specific division; the costs of influence activities to the firm and to the divisional managers; and the difference in the valuation of the division's assets in the current firm and under alternative uses.
The Cross‐Section of Credit Risk Premia and Equity Returns
Published: 11/10/2014, Volume: 69, Issue: 6 | DOI: 10.1111/jofi.12143 | Cited by: 164
NILS FRIEWALD, CHRISTIAN WAGNER, JOSEF ZECHNER
We explore the link between a firm's stock returns and credit risk using a simple insight from structural models following Merton (): risk premia on equity and credit instruments are related because all claims on assets must earn the same compensation per unit of risk. Consistent with theory, we find that firms' stock returns increase with credit risk premia estimated from CDS spreads. Credit risk premia contain information not captured by physical or risk‐neutral default probabilities alone. This sheds new light on the “distress puzzle”—the lack of a positive relation between equity returns and default probabilities—reported in previous studies.
Low‐Risk Anomalies?
Published: 6/13/2020, Volume: 75, Issue: 5 | DOI: 10.1111/jofi.12910 | Cited by: 146
PAUL SCHNEIDER, CHRISTIAN WAGNER, JOSEF ZECHNER
This paper shows that low‐risk anomalies in the capital asset pricing model and in traditional factor models arise when investors require compensation for coskewness risk. Empirically, we find that option‐implied ex ante skewness is strongly related to ex post residual coskewness, which allows us to construct coskewness factor‐mimicking portfolios. Controlling for skewness renders the alphas of betting‐against‐beta and betting‐against‐volatility insignificant. We also show that the returns of beta‐ and volatility‐sorted portfolios are driven largely by a single principal component, which in turn is explained largely by skewness.
Comment on Forward Markets, Stock Markets, and the Theory of the Firm
Published: 6/1989, Volume: 44, Issue: 2 | DOI: 10.1111/j.1540-6261.1989.tb05072.x | Cited by: 1
VOJISLAV MAKSIMOVIC, GORDON SICK, JOSEF ZECHNER
In a recent article, MacMinn [5] argues that the presence of forward markets eliminates the incentives of the firm's manager to choose production levels that maximize firm value. In this comment, we show that his results do not depend on the presence of forward markets. The critical assumptions are that the manager is endowed with money rather than stock in the firm and that there is no competitive labor market for managers. In addition, his results require time‐inconsistent behavior on the part of the firm's manager.
Intermediated Investment Management
Published: 5/23/2011, Volume: 66, Issue: 3 | DOI: 10.1111/j.1540-6261.2011.01656.x | Cited by: 121
NEAL M. STOUGHTON, YOUCHANG WU, JOSEF ZECHNER
Intermediaries such as financial advisers serve as an interface between portfolio managers and investors. A large fraction of their compensation is often provided through kickbacks from the portfolio manager. We provide an explanation for the widespread use of intermediaries and kickbacks. Depending on the degree of investor sophistication, kickbacks are used either for price discrimination or aggressive marketing. We explore the effects of these arrangements on fund size, flows, performance, and investor welfare. Kickbacks allow higher management fees to be charged, thereby lowering net returns. Competition among active portfolio managers reduces kickbacks and increases the independence of advisory services.
Human Capital, Bankruptcy, and Capital Structure
Published: 5/7/2010, Volume: 65, Issue: 3 | DOI: 10.1111/j.1540-6261.2010.01556.x | Cited by: 490
JONATHAN B. BERK, RICHARD STANTON, JOSEF ZECHNER
We derive the optimal labor contract for a levered firm in an economy with perfectly competitive capital and labor markets. Employees become entrenched under this contract and so face large human costs of bankruptcy. The firm's optimal capital structure therefore depends on the trade‐off between these human costs and the tax benefits of debt. Optimal debt levels consistent with those observed in practice emerge without relying on frictions such as moral hazard or asymmetric information. Consistent with empirical evidence, persistent idiosyncratic differences in leverage across firms also result. In addition, wages should have explanatory power for firm leverage.
Dynamic Capital Structure Choice: Theory and Tests
Published: 3/1989, Volume: 44, Issue: 1 | DOI: 10.1111/j.1540-6261.1989.tb02402.x | Cited by: 1066
EDWIN O. FISCHER, ROBERT HEINKEL, JOSEF ZECHNER
This paper develops a model of dynamic capital structure choice in the presence of recapitalization costs. The theory provides the optimal dynamic recapitalization policy as a function of firm‐specific characteristics. We find that even small recapitalization costs lead to wide swings in a firm's debt ratio over time. Rather than static leverage measures, we use the observed debt ratio range of a firm as an empirical measure of capital structure relevance. The results of empirical tests relating firms' debt ratio ranges to firm‐specific features strongly support the theoretical model of relevant capital structure choice in a dynamic setting.
Vendor Financing
Published: 12/1988, Volume: 43, Issue: 5 | DOI: 10.1111/j.1540-6261.1988.tb03960.x | Cited by: 390
MICHAEL J. BRENNAN, VOJISLAV MAKSIMOVICs, JOSEF ZECHNER
This paper shows that, even in the presence of a perfectly competitive banking industry, it is optimal for firms with market power to engage in vendor financing if credit customers have lower reservation prices than cash customers or if adverse selection makes it infeasible to write credit contracts that separate customers according to their credit risk. We analyze how the advantage of vendor financing depends on the relative size of the cash and credit markets, the heterogeneity of credit customers, and the number of firms in the industry.
The Geography of Equity Listing: Why Do Companies List Abroad?
Published: 12/2002, Volume: 57, Issue: 6 | DOI: 10.1111/1540-6261.00509 | Cited by: 575
Marco Pagano, Ailsa A. Röell, Josef Zechner
This paper documents aggregate trends in the foreign listings of companies, and analyzes their distinctive prelisting characteristics and postlisting performance. In 1986–1997, many European companies listed abroad, mainly on U.S. exchanges, while the number of U.S. companies listed in Europe decreased. European companies that cross‐list tend to be large and recently privatized firms, and expand their foreign sales after listing abroad. They differ sharply depending on where they cross‐list: The U.S. exchanges attract high‐tech and export‐oriented companies that expand rapidly without significant leveraging. Companies cross‐listing within Europe do not grow unusually fast, and increase their leverage after cross‐listing.