The Journal of Finance

IPO Pricing and Share Allocation: The Importance of Being Ignorant

Published: 1/10/2008,  Volume: 63,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2008.01321.x  |  Cited by: 44

CÉLINE GONDAT‐LARRALDE, KEVIN R. JAMES

Since an underwriter sets an IPO's offer price without knowing its market value, investors can acquire information about its value and avoid overpriced deals (“lemon‐dodge”). To mitigate this well‐known risk, the bank enters into a repeat game with a coalition of investors who do not lemon‐dodge in exchange for on‐average underpriced shares. We (i) derive and test a quantitative IPO pricing rule (showing that tech IPOs were not excessively underpriced during the boom of the 1990s); and (ii) analyzing a unique multibank data set, find strong support for the conjecture that a bank preferentially allocates shares to its coalition.

INTEREST RATE EXPECTATIONS AND THE DEMAND FOR MONEY IN CANADA: COMMENT

Published: 3/1973,  Volume: 28,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1973.tb01364.x  |  Cited by: 0

Kevin Clinton

A Note on Unanticipated Money Growth and Interest Rate Surprises: Mishkin and Makin Revisited

Published: 9/1986,  Volume: 41,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1986.tb04561.x  |  Cited by: 2

KEVIN B. GRIER

Asset Pricing with Conditioning Information: A New Test

Published: 2/2003,  Volume: 58,  Issue: 1  |  DOI: 10.1111/1540-6261.00521  |  Cited by: 123

Kevin Q. Wang

This paper presents a new test of conditional versions of the Sharpe‐Lintner CAPM, the Jagannathan and Wang (1996) extension of the CAPM, and the Fama and French (1993) three‐factor model. The test is based on a general nonparametric methodology that avoids functional form misspecification of betas, risk premia, and the stochastic discount factor. Our results provide a novel view of empirical performance of these models. In particular, we find that a nonparametric version of the Fama and French model performs well, even when challenged by momentum portfolios.

How Skilled Are Security Analysts?

Published: 2/20/2020,  Volume: 75,  Issue: 3  |  DOI: 10.1111/jofi.12890  |  Cited by: 57

ALAN CRANE, KEVIN CROTTY

The majority of security analysts are identified as skilled when the cross‐section of analyst performance is modeled as a mixture of multiple skill distributions. Analysts exhibit heterogeneous skill—some are high‐type, and some are low‐type. On average, the recommendation revisions of both types exhibit positive abnormal returns. The heterogeneity stems from differential ability to produce new information; all analysts can profitably process news. Top analysts outperform because more of their recommendations are influential (i.e., associated with statistically significant returns) and both their influential and noninfluential recommendations are more informative. A majority of research firms are also identified as skilled.

The Investment Performance of Low‐grade Bond Funds

Published: 3/1991,  Volume: 46,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1991.tb03744.x  |  Cited by: 110

BRADFORD CORNELL, KEVIN GREEN

This study extends the literature on the pricing of low‐grade bonds by examining the performance of low‐grade bond funds. The findings reveal that over the long run low‐grade bond fund returns are approximately equal to the returns provided by an index of high‐grade bonds. The relative risks of high and low‐grade bonds are more difficult to assess. Because of their shorter durations, low‐grade bonds are less sensitive to movements in interest rates than high‐grade bonds. On the other hand, low‐grade bonds are much more sensitive to changes in stock prices than high‐grade bonds. When adjusted for risk using a simple two‐factor model, the returns on low‐grade bond funds are not statistically different from the returns on high‐grade bonds.

Idiosyncratic Consumption Risk and the Cross Section of Asset Returns

Published: 10/2004,  Volume: 59,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2004.00697.x  |  Cited by: 89

KRIS JACOBS, KEVIN Q. WANG

This paper investigates the importance of idiosyncratic consumption risk for the cross‐sectional variation in asset returns. We find that besides the rate of aggregate consumption growth, the cross‐sectional variance of consumption growth is also a priced factor. This suggests that consumers are not fully insured against idiosyncratic consumption risk, and that asset returns reflect their attempts to reduce their exposure to this risk. The resulting two‐factor consumption‐based asset pricing model significantly outperforms the CAPM, and its performance compares favorably with that of the Fama–French three‐factor model.

Dividend Policy under Asymmetric Information

Published: 9/1985,  Volume: 40,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1985.tb02362.x  |  Cited by: 2119

MERTON H. MILLER, KEVIN ROCK

We extend the standard finance model of the firm's dividend/investment/financing decisions by allowing the firm's managers to know more than outside investors about the true state of the firm's current earnings. The extension endogenizes the dividend (and financing) announcement effects amply documented in recent research. But once trading of shares is admitted to the model along with asymmetric information, the familiar Fisherian criterion for optimal investment becomes time inconsistent: the market's belief that the firm is following the Fisher rule creates incentives to violate the rule.We show that an informationally consistent signalling equilibrium exists under asymmetric information and the trading of shares that restores the time consistency of investment policy, but leads in general to lower levels of investment than the optimum achievable under full information and/or no trading. Contractual provisions that change the information asymmetry or the possibility of profiting from it could eliminate both the time inconsistency and the inefficiency in investment policies, but these contractual provisions too are likely to involve dead‐weight costs. Establishing which route or combination of routes serves in practice to maintain consistency remains for future research.

Real Options Models of the Firm, Capacity Overhang, and the Cross Section of Stock Returns

Published: 5/3/2018,  Volume: 73,  Issue: 3  |  DOI: 10.1111/jofi.12617  |  Cited by: 62

KEVIN ARETZ, PETER F. POPE

We use a stochastic frontier model to obtain a stock‐level estimate of the difference between a firm's installed production capacity and its optimal capacity. We show that this “capacity overhang” estimate relates significantly negatively to the cross section of stock returns, even when controlling for popular pricing factors. The negative relation persists among small and large stocks, stocks with more or less reversible investments, and in good and bad economic states. Capacity overhang helps explain momentum and profitability anomalies, but not value and investment anomalies. Our evidence supports real options models of the firm featuring valuable divestment options.

IS THE “NEUTRALIZED MONEY STOCK” UNBIASED?*: COMMENT

Published: 12/1976,  Volume: 31,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1976.tb03231.x  |  Cited by: 0

James R. Barth, James T. Bennett

The Effect of Voluntary Spin‐off Announcements on Shareholder Wealth

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03843.x  |  Cited by: 173

JAMES A. MILES, JAMES D. ROSENFELD

This paper presents estimates of the effect of a voluntary spin‐off announcement on shareholder wealth. The results show that spin‐off announcements have a positive influence on stock prices and that the relative increase in share price is greater for large spin‐offs than for small ones.

Attracting Early‐Stage Investors: Evidence from a Randomized Field Experiment

Published: 3/21/2017,  Volume: 72,  Issue: 2  |  DOI: 10.1111/jofi.12470  |  Cited by: 356

SHAI BERNSTEIN, ARTHUR KORTEWEG, KEVIN LAWS

This paper uses a randomized field experiment to identify which start‐up characteristics are most important to investors in early‐stage firms. The experiment randomizes investors’ information sets of fund‐raising start‐ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. We provide evidence that the team is not merely a signal of quality, and that investing based on team information is a rational strategy. Together, our results indicate that information about human assets is causally important for the funding of early‐stage firms and hence for entrepreneurial success.

The Effect of Money Shocks on Interest Rates in the Presence of Conditional Heteroskedasticity

Published: 9/1993,  Volume: 48,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1993.tb04761.x  |  Cited by: 19

KEVIN B. GRIER, MARK J. PERRY

Most current empirical work finds no evidence that money shocks lower interest rates. We show that these nonresults are mainly due to a failure to model the conditional heteroskedasticity of interest rates. Autoregressive conditional heteroskedasticity (ARCH) models find a significant liquidity effect where ordinary least squares (OLS) models do not. The existence of a liquidity effect is found using different models and sample periods when ARCH models are used in estimation, but never when OLS is employed.

Disclosing to Informed Traders

Published: 12/17/2023,  Volume: 79,  Issue: 2  |  DOI: 10.1111/jofi.13296  |  Cited by: 16

SNEHAL BANERJEE, IVÁN MARINOVIC, KEVIN SMITH

We develop a model in which a firm's manager can voluntarily disclose to privately informed investors. In equilibrium, the manager only discloses sufficiently favorable news. If the manager is known to be informed but disclosure is costly, the probability of disclosure increases with market liquidity and the stock trades at a discount relative to expected cash flows. However, when investors are uncertain about whether the manager is informed, disclosure can decrease with market liquidity and the stock can trade at a premium relative to expected cash flows. Moreover, contrary to common intuition, public information can crowd in more voluntary disclosure.

BOOKS RECEIVED

Published: 3/1962,  Volume: 17,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1962.tb04263.x  |  Cited by: 0

James Gillies

BOOKS RECEIVED

Published: 12/1961,  Volume: 16,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1961.tb04243.x  |  Cited by: 0

James Gillies

BOOKS RECEIVED

Published: 3/1963,  Volume: 18,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1963.tb01633.x  |  Cited by: 0

James Gillies

The Effect of Common‐Stock Dividend Reductions on the Returns of Nonconvertible Preferred Stocks: A Note

Published: 6/1983,  Volume: 38,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1983.tb02517.x  |  Cited by: 2

JAMES ROSENFELD

An Analysis of Bank Loan Rate Indexation

Published: 6/1982,  Volume: 37,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1982.tb02225.x  |  Cited by: 13

CHRISTOPHER JAMES

This paper examines the economic rationale for the use of bank loan commitments and the effect on the allocation of bank credit of indexing the loan rate offered through the commitment to the prime. A simple model of the loan market is constructed and used to examine the effect changes in loan demand and the cost of bank funds have on the allocation of bank credit under indexation. It is shown that indexing implies changes in the relative cost of borrowing for certain groups of bank customers. For nonprime customers, an increase in the cost of bank funds results in a decline in the relative cost of borrowing under commitments. The pattern of commitment use is found to be consistent with the predictions of the model.

BOOKS RECEIVED

Published: 12/1963,  Volume: 18,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1963.tb01647.x  |  Cited by: 0

James Gillies

THE BURDEN OF THE PUBLIC DEBT: A REVIEW ARTICLE

Published: 12/1965,  Volume: 20,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1965.tb02936.x  |  Cited by: 15

James Tobin

REPLY

Published: 9/1966,  Volume: 21,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1966.tb00257.x  |  Cited by: 0

James Tobin

The Losses Realized in Bank Failures

Published: 9/1991,  Volume: 46,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1991.tb04616.x  |  Cited by: 294

CHRISTOPHER JAMES

This paper examines the losses realized in bank failures. Losses are measured as the difference between the book value of assets and the recovery value net of the direct expenses associated with the failure. I find the loss on assets is substantial, averaging 30 percent of the failed bank's assets. Direct expenses associated with bank closures average 10 percent of assets. An empirical analysis of the determinants of these losses reveals a significant difference in the value of assets retained by the FDIC and similar assets assumed by acquiring banks.

SOME FINANCIAL ASPECTS OF THE CANADIAN GOVERNMENT HOUSING PROGRAM: HISTORY AND PROSPECTIVE DEVELOPMENTS*

Published: 3/1953,  Volume: 8,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1953.tb01133.x  |  Cited by: 0

James Gillies

DOMESTIC POLICY OBJECTIVES AND THE BALANCE OF PAYMENTS

Published: 5/1966,  Volume: 21,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1966.tb00234.x  |  Cited by: 3

James Duesenberry

Bank Debt Restructurings and the Composition of Exchange Offers in Financial Distress

Published: 6/1996,  Volume: 51,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1996.tb02700.x  |  Cited by: 67

CHRISTOPHER JAMES

This article examines the relation between bank debt forgiveness and the structure of public debt exchange offers in financial distress. I find that the structure of exchange offers and the likelihood of an offer's success are significantly related to whether the bank participates in the restructuring transaction. Exchange offers made in conjunction with bank concessions are characterized by significantly greater reductions in public debt outstanding and significantly less senior debt offered to bondholders. Overall, the results suggest that the structure of a firm's public and private claims significantly affects the firm's ability to modify its capital structure in financial distress.

Relationship‐Specific Assets and the Pricing of Underwriter Services

Published: 12/1992,  Volume: 47,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1992.tb04686.x  |  Cited by: 96

CHRISTOPHER JAMES

This paper investigates the effect of setup costs on the pricing of investment banking services. The existence of setup costs is predicted to result in lower underwriter spreads in IPOs for firms that are expected to issue again. Consistent with this prediction, I find significantly lower spreads for firms that make subsequent issues. I also find that a firm's likelihood of changing underwriters in a subsequent offer is related to the time between offerings and the underwriter's pricing performance in the IPO. These results suggest that the deviations from optimal IPO pricing carry a penalty for the underwriter.

BOOKS RECEIVED

Published: 9/1962,  Volume: 17,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1962.tb04331.x  |  Cited by: 0

James Gillies

Testing the Expectations Hypothesis on the Term Structure of Volatilities in Foreign Exchange Options

Published: 6/1995,  Volume: 50,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1995.tb04794.x  |  Cited by: 61

JOSÉ MANUEL CAMPA, P. H. KEVIN CHANG

This article tests the expectations hypothesis in the term structure of volatilities in foreign exchange options. In particular, it addresses whether long‐dated volatility quotes are consistent with expected future short‐dated volatility quotes, assuming rational expectations. For options observed daily from December 1, 1989 to August 31, 1992 on dollar exchange rates against the pound, mark, yen, and Swiss franc, we are unable to reject the expectations hypothesis in the great majority of cases. The current spread between long‐ and short‐dated volatility rates proves to be a significant predictor of the direction of future short‐dated rates.

Feedback Effects and Systematic Risk Exposures

Published: 1/30/2025,  Volume: 80,  Issue: 2  |  DOI: 10.1111/jofi.13427  |  Cited by: 12

SNEHAL BANERJEE, BRADYN BREON‐DRISH, KEVIN SMITH

We model the “feedback effect” of a firm's stock price on investment in projects exposed to a systematic risk factor, like climate risk. The stock price reflects information about both the project's cash flows and its discount rate. A cash‐flow‐maximizing manager treats discount rate fluctuations as “noise,” but a price‐maximizing manager interprets such variation as information about the project's net present value. This difference qualitatively changes how investment behavior varies with the project's risk exposure. Moreover, traditional objectives (e.g., cash flow or price maximization) need not maximize welfare because they do not correctly account for hedging and risk‐sharing benefits of investment.

Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Security Code

Published: 11/18/2019,  Volume: 75,  Issue: 1  |  DOI: 10.1111/jofi.12846  |  Cited by: 62

KEVIN ARETZ, MURILLO CAMPELLO, MARIA‐TERESA MARCHICA

France's Ordonnance 2006‐346 repudiated the notion of possessory ownership in the Napoleonic Code, easing the pledge of physical assets in a country where credit was highly concentrated. A differences‐test strategy shows that firms operating newly pledgeable assets significantly increased their borrowing following the reform. Small, young, and financially constrained businesses benefitted the most, observing improved credit access and real‐side outcomes. Start‐ups emerged with higher “at‐inception” leverage, located farther from large cities, with more assets‐in‐place than before. Their exit and bankruptcy rates declined. Spatial analyses show that the reform reached firms in rural areas, reducing credit access inequality across France's countryside.

Agency Costs and Ownership Structure

Published: 2/2000,  Volume: 55,  Issue: 1  |  DOI: 10.1111/0022-1082.00201  |  Cited by: 1802

James S. Ang, Rebel A. Cole, James Wuh Lin

We provide measures of absolute and relative equity agency costs for corporations under different ownership and management structures. Our base case is Jensen and Meckling's (1976) zero agency‐cost firm, where the manager is the firm's sole shareholder. We utilize a sample of 1,708 small corporations from the FRB/NSSBF database and find that agency costs (i) are significantly higher when an outsider rather than an insider manages the firm; (ii) are inversely related to the manager's ownership share; (iii) increase with the number of nonmanager shareholders, and (iv) to a lesser extent, are lower with greater monitoring by banks.

THE CHANGING ROLE OF BANKS IN THE MARKET FOR EQUITIES

Published: 5/1965,  Volume: 20,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1965.tb00216.x  |  Cited by: 1

A. James Meigs

ASPECTS OF INSTRUMENT/TARGET LINKS IN CANADIAN MONETARY POLICY*

Published: 3/1974,  Volume: 29,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1974.tb00047.x  |  Cited by: 0

James W. Dean

ANNOUNCEMENT

Published: 9/1959,  Volume: 14,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1959.tb00137.x  |  Cited by: 0

James J. O'Leary

Marketplace Fragmentation, Competition, and the Efficiency of the Stock Exchange

Published: 3/1979,  Volume: 34,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1979.tb02078.x  |  Cited by: 52

JAMES L. HAMILTON

THE TWO FACES OF BOND REFUNDING

Published: 6/1975,  Volume: 30,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1975.tb01856.x  |  Cited by: 9

James S. Ang

THE DEVELOPMENT OF A GENERAL QUASI‐REORGANIZATION CONCEPT*

Published: 9/1956,  Volume: 11,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1956.tb00113.x  |  Cited by: 0

James S. Schindler

PROCESS OF ECONOMIC ADAPTATION IN A WORLD WAR II NEUTRAL: A CASE STUDY OF SWEDEN*

Published: 9/1961,  Volume: 16,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1961.tb02841.x  |  Cited by: 0

Daniel James Edwards

THE REPETITIVE BIDDING PROCESS IN MUNICIPAL BOND UNDERWRITING, A CHANCE‐CONSTRAINED PROGRAMMING APPROACH*

Published: 9/1974,  Volume: 29,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1974.tb03112.x  |  Cited by: 0

James Michael Kelly

DISCUSSION

Published: 5/1976,  Volume: 31,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1976.tb01884.x  |  Cited by: 0

James L. Bicksler

A MODEL OF STATE AND LOCAL GOVERNMENT PORTFOLIO AND REAL‐EXPENDITURE BEHAVIOR: 1952–1965*

Published: 6/1970,  Volume: 25,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1970.tb00538.x  |  Cited by: 0

James A. Chalmers

THE EQUAL CREDIT OPPORTUNITY ACT OF 1974: A COST/BENEFIT ANALYSIS

Published: 5/1977,  Volume: 32,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1977.tb03298.x  |  Cited by: 9

James F. Smith

ON THE THEORY OF CONGLOMERATE MERGERS

Published: 9/1977,  Volume: 32,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1977.tb03323.x  |  Cited by: 58

James H. Scott

THE DEMAND FUNCTIONS OF THE HOUSEHOLD SECTOR FOR FINANCIAL ASSETS: AN ECONOMETRIC STUDY*

Published: 9/1971,  Volume: 26,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1971.tb00943.x  |  Cited by: 0

James V. Koch

DISCUSSION

Published: 7/1986,  Volume: 41,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1986.tb04531.x  |  Cited by: 0

JAMES A. BRICKLEY

Additional Evidence on the Relation Between Divestiture Announcements and Shareholder Wealth

Published: 12/1984,  Volume: 39,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1984.tb04916.x  |  Cited by: 136

JAMES D. ROSENFELD

This paper presents estimates of the effect of voluntary divestiture announcements on shareholder wealth. The results show that both spin‐off and sell‐off announcements tend to have a positive influence on the stock prices of the divesting firms, and that the spin‐offs “outperform” the sell‐offs on the day of the event. We also find that the economic gains to the shareholders of the selling and acquiring firms are nearly identical, suggesting that the sell‐off decision is perceived by both investor groups as a positive net present value (NPV) transaction.

THE INTEREST SENSITIVITY OF THE FLOW OF FUNDS THROUGH LIFE INSURANCE COMPANIES: AN ECONOMETRIC ANALYSIS

Published: 9/1974,  Volume: 29,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1974.tb03089.x  |  Cited by: 22

James E. Pesando

Competition on the Nasdaq and the Impact of Recent Market Reforms

Published: 12/2000,  Volume: 55,  Issue: 6  |  DOI: 10.1111/0022-1082.00300  |  Cited by: 118

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.

LIQUIDITY AND CORPORATE SPENDING

Published: 12/1953,  Volume: 8,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1953.tb01185.x  |  Cited by: 3

James E. Walter