Search results: 50.
Evidence on the Characteristics of Cross Sectional Variation in Stock Returns
Published: 3/1997, Volume: 52, Issue: 1 | DOI: 10.1111/j.1540-6261.1997.tb03806.x | Cited by: 1174
KENT DANIEL, SHERIDAN TITMAN
Firm sizes and book‐to‐market ratios are both highly correlated with the average returns of common stocks. Fama and French (1993) argue that the association between these characteristics and returns arise because the characteristics are proxies for nondiversifiable factor risk. In contrast, the evidence in this article indicates that the return premia on small capitalization and high book‐to‐market stocks does not arise because of the comovements of these stocks with pervasive factors. It is the characteristics rather than the covariance structure of returns that appear to explain the cross‐sectional variation in stock returns.
Market Reactions to Tangible and Intangible Information
Published: 8/2006, Volume: 61, Issue: 4 | DOI: 10.1111/j.1540-6261.2006.00884.x | Cited by: 805
KENT DANIEL, SHERIDAN TITMAN
The book‐to‐market effect is often interpreted as evidence of high expected returns on stocks of “distressed” firms with poor past performance. We dispute this interpretation. We find that while a stock's future return is unrelated to the firm's past accounting‐based performance, it is strongly negatively related to the “intangible” return, the component of its past return that is orthogonal to the firm's past performance. Indeed, the book‐to‐market ratio forecasts returns because it is a good proxy for the intangible return. Also, a composite equity issuance measure, which is related to intangible returns, independently forecasts returns.
Monetary Policy and Reaching for Income
Published: 2/24/2021, Volume: 76, Issue: 3 | DOI: 10.1111/jofi.13004 | Cited by: 70
KENT DANIEL, LORENZO GARLAPPI, KAIRONG XIAO
Using data on individual portfolio holdings and on mutual fund flows, we find that low interest rates lead to significantly higher demand for income‐generating assets such as high‐dividend stocks and high‐yield bonds. We argue that this “reaching‐for‐income” phenomenon is driven by investors who follow the “living off income” rule‐of‐thumb. Our empirical analysis shows that this preference for current income affects both household portfolio choices and the prices of income‐generating assets. In addition, we explore the implications of reaching for income for capital allocation and the effectiveness of monetary policy.
Investor Psychology and Security Market Under‐ and Overreactions
Published: 12/1998, Volume: 53, Issue: 6 | DOI: 10.1111/0022-1082.00077 | Cited by: 4197
Kent Daniel, David Hirshleifer, Avanidhar Subrahmanyam
We propose a theory of securities market under‐ and overreactions based on two well‐known psychological biases: investor overconfidence about the precision of private information; and biased self‐attribution, which causes asymmetric shifts in investors' confidence as a function of their investment outcomes. We show that overconfidence implies negative long‐lag autocorrelations, excess volatility, and, when managerial actions are correlated with stock mispricing, public‐event‐based return predictability. Biased self‐attribution adds positive short‐lag autocorrelations (“momentum”), short‐run earnings “drift,” but negative correlation between future returns and long‐term past stock market and accounting performance. The theory also offers several untested implications and implications for corporate financial policy.
Overconfidence, Arbitrage, and Equilibrium Asset Pricing
Published: 6/2001, Volume: 56, Issue: 3 | DOI: 10.1111/0022-1082.00350 | Cited by: 714
Kent D. Daniel, David Hirshleifer, Avanidhar Subrahmanyam
This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firms' prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are linearly related to both risk and mispricing measures (e.g., fundamental/price ratios). With many securities, mispricing of idiosyncratic value components diminishes but systematic mispricing does not. The theory offers untested empirical implications about volume, volatility, fundamental/price ratios, and mean returns, and is consistent with several empirical findings. These include the ability of fundamental/price ratios and market value to forecast returns, and the domination of beta by these variables in some studies.
Explaining the Cross‐Section of Stock Returns in Japan: Factors or Characteristics?
Published: 4/2001, Volume: 56, Issue: 2 | DOI: 10.1111/0022-1082.00344 | Cited by: 244
Kent Daniel, Sheridan Titman, K.C. John Wei
Japanese stock returns are even more closely related to their book‐to‐market ratios than are their U.S. counterparts, and thus provide a good setting for testing whether the return premia associated with these characteristics arise because the characteristics are proxies for covariance with priced factors. Our tests, which replicate the Daniel and Titman (1997) tests on a Japanese sample, reject the Fama and French (1993) three‐factor model, but fail to reject the characteristic model.
Measuring Mutual Fund Performance with Characteristic‐Based Benchmarks
Published: 7/1997, Volume: 52, Issue: 3 | DOI: 10.1111/j.1540-6261.1997.tb02724.x | Cited by: 1544
KENT DANIEL, MARK GRINBLATT, SHERIDAN TITMAN, RUSS WERMERS
This article develops and applies new measures of portfolio performance which use benchmarks based on the characteristics of stocks held by the portfolios that are evaluated. Specifically, the benchmarks are constructed from the returns of 125 passive portfolios that are matched with stocks held in the evaluated portfolio on the basis of the market capitalization, book‐to‐market, and prior‐year return characteristics of those stocks. Based on these benchmarks, “Characteristic Timing” and “Characteristic Selectivity” measures are developed that detect, respectively, whether portfolio managers successfully time their portfolio weightings on these characteristics and whether managers can select stocks that outperform the average stock having the same characteristics. We apply these measures to a new database of mutual fund holdings covering over 2500 equity funds from 1975 to 1994. Our results show that mutual funds, particularly aggressive‐growth funds, exhibit some selectivity ability, but that funds exhibit no characteristic timing ability.
THE STABILITY OF FINANCIAL PATTERNS IN INDUSTRIAL ORGANIZATIONS
Published: 5/1973, Volume: 28, Issue: 2 | DOI: 10.1111/j.1540-6261.1973.tb01782.x | Cited by: 109
George E. Pinches, Kent A. Mingo, J. Kent Caruthers
Do Brokerage Analysts' Recommendations Have Investment Value?
Published: 3/1996, Volume: 51, Issue: 1 | DOI: 10.1111/j.1540-6261.1996.tb05205.x | Cited by: 1375
KENT L. WOMACK
An analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between prerecommendation prices and eventual values. The initial return at the time of the recommendations is large, even though few recommendations coincide with new public news or provide previously unavailable facts. However, these initial price reactions are incomplete. For buy recommendations, the mean postevent drift is modest (+2.4%) and short‐lived, but for sell recommendations, the drift is larger (−9.1%) and extends for six months. Analysts appear to have market timing and stock picking abilities.
An Analysis of Countercyclical Policies of The FHLBB
Published: 3/1981, Volume: 36, Issue: 1 | DOI: 10.1111/j.1540-6261.1981.tb03535.x | Cited by: 1
RICHARD J. KENT
Three policies of the Federal Home Loan Bank Board, the Specially Priced Advances Program in 1970–1, a program of advances at a reduced interest rate in 1974, and changes in the minimum liquidity ratio, are analyzed. A model of portfolio allocation is developed and estimated for savings and loan associations. Most of the net increase in advances borrowed under the first two programs have not been lent in the mortgage market. Reductions in the minimum liquidity requirement have resulted in an increase in mortgage lending, but substantial effects are not felt until a year after the liquidity requirement is reduced.
THE ROLE OF SUBORDINATION AND INDUSTRIAL BOND RATINGS
Published: 3/1975, Volume: 30, Issue: 1 | DOI: 10.1111/j.1540-6261.1975.tb03171.x | Cited by: 43
George E. Pinches, Kent A. Mingo
TOWARD THE DEVELOPMENT OF CLIENT‐SPECIFIED VALUATION MODELS
Published: 9/1974, Volume: 29, Issue: 4 | DOI: 10.1111/j.1540-6261.1974.tb03102.x | Cited by: 30
H. Kent Baker, John A. Haslem
A MULTIVARIATE ANALYSIS OF INDUSTRIAL BOND RATINGS
Published: 3/1973, Volume: 28, Issue: 1 | DOI: 10.1111/j.1540-6261.1973.tb01341.x | Cited by: 205
George E. Pinches, Kent A. Mingo
The Persistence of IPO Mispricing and the Predictive Power of Flipping
Published: 6/1999, Volume: 54, Issue: 3 | DOI: 10.1111/0022-1082.00135 | Cited by: 237
Laurie Krigman, Wayne H. Shaw, Kent L. Womack
AbstractThis paper examines underwriters' pricing errors and the information content of first‐day trading activity in IPOs. We show that first‐day winners continue to be winners over the first year, and first‐day dogs continue to be relative dogs. Exceptions are “extra‐hot” IPOs, which provide the worst future performance. We also demonstrate that large, supposedly informed, traders “flip” IPOs that perform the worst in the future. IPOs with low flipping generate abnormal returns of 1.5 percentage points per month over the first six months beginning on the third day. We show that flipping is predictable and conclude that underwriters' pricing errors are intentional.
Caveat Compounder: A Warning about Using the Daily CRSP Equal‐Weighted Index to Compute Long‐Run Excess Returns
Published: 2/1998, Volume: 53, Issue: 1 | DOI: 10.1111/0022-1082.165353 | Cited by: 91
Linda Canina, Roni Michaely, Richard Thaler, Kent Womack
This paper issues a warning that compounding daily returns of the Center for Research in Security Prices (CRSP) equal‐weighted index can lead to surprisingly large biases. The differences between the monthly returns compounded from the daily tapes and the monthly CRSP equal‐weighted indices is almost 0.43 percent per month, or 6 percent per year. This difference amounts to one‐third of the average monthly return, and is large enough to reverse the conclusions of a paper using the daily tape to compute the return on the benchmark portfolio. We also investigate the sources of these biases and suggest several alternative strategies to avoid them.
The Intertemporal Relation Between the U.S. and Japanese Stock Markets
Published: 9/1990, Volume: 45, Issue: 4 | DOI: 10.1111/j.1540-6261.1990.tb02438.x | Cited by: 32
KENT G. BECKER, JOSEPH E. FINNERTY, MANOJ GUPTA
This paper finds a high correlation between the open to close returns for U.S. stocks in the previous trading day and the Japanese equity market performance in the current period. In contrast, the Japanese market has only a small impact on the U.S. return in the current period. High correlations among open to close returns are a violation of the efficient market hypothesis; however, in trading simulations, the excess profits in Japan vanish when transactions costs and transfer taxes are included.
Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?
Published: 6/1995, Volume: 50, Issue: 2 | DOI: 10.1111/j.1540-6261.1995.tb04796.x | Cited by: 702
RONI MICHAELY, RICHARD H. THALER, KENT L. WOMACK
This article investigates market reactions to initiations and omissions of cash dividend payments. Consistent with prior literature we find that the magnitude of short‐run price reactions to omissions are greater than for initiations. In the year following the announcements, prices continue to drift in the same direction, though the drift following omissions is stronger and more robust. This post‐dividend initiation/omission price drift is distinct from and more pronounced than that following earnings surprises. A trading rule employing both samples earns positive returns in 22 out of 25 years. We find little evidence for clientele shifts in either sample.
Local Bank Financial Constraints and Firm Access to External Finance
Published: 9/10/2008, Volume: 63, Issue: 5 | DOI: 10.1111/j.1540-6261.2008.01393.x | Cited by: 282
DANIEL PARAVISINI
I exploit the exogenous component of a formula‐based allocation of government funds across banks in Argentina to test for financial constraints and underinvestment by local banks. Banks are found to expand lending by $0.66 in response to an additional dollar of external financing. Using novel data to measure risk and return on marginal lending, I show that the profitability of lending does not decline and total borrower debt increases during lending expansions, holding investment opportunities constant. Overall, financial shocks to constrained banks are found to have a quick, persistent, and amplified effect on the aggregate supply of credit.
How Do Financing Constraints Affect Firms’ Equity Volatility?
Published: 3/9/2018, Volume: 73, Issue: 3 | DOI: 10.1111/jofi.12610 | Cited by: 30
DANIEL CARVALHO
Theory suggests that financing frictions can have significant implications for equity volatility by shaping firms’ exposure to economic risks. This paper provides evidence that an important determinant of higher equity volatility among research and development (R&D)‐intensive firms is fewer financing constraints on firms’ ability to access growth options. I provide evidence for this effect by studying how persistent shocks to the value of firms’ tangible assets (real estate) affect their subsequent equity volatility. The analysis addresses concerns about the identification of these balance sheet effects and shows that these effects are consistent with broader patterns on the equity volatility of R&D‐intensive firms.
A NOTE ON THE USELESSNESS OF TRANSACTION DEMAND MODELS*
Published: 12/1974, Volume: 29, Issue: 5 | DOI: 10.1111/j.1540-6261.1974.tb03137.x | Cited by: 1
Daniel Orr
The Real Effects of Government‐Owned Banks: Evidence from an Emerging Market
Published: 3/17/2014, Volume: 69, Issue: 2 | DOI: 10.1111/jofi.12130 | Cited by: 303
DANIEL CARVALHO
Using plant‐level data for Brazilian manufacturing firms, this paper provides evidence that government control over banks leads to significant political influence over the real decisions of firms. I find that firms eligible for government bank lending expand employment in politically attractive regions near elections. These expansions are associated with additional (favorable) borrowing from government banks. Further, these persistent expansions take place just before competitive elections, and are associated with lower future employment growth by firms in other regions. The analysis suggests that politicians in Brazil use bank lending to shift employment towards politically attractive regions and away from unattractive regions.
Makin's MARP A Comment
Published: 6/1981, Volume: 36, Issue: 3 | DOI: 10.1111/j.1540-6261.1981.tb00658.x | Cited by: 0
DANIEL FRIEDMAN
EFFECTS OF GENERAL CREDIT CONTROLS ON NON‐FARM RESIDENTIAL CONSTRUCTION*
Published: 3/1960, Volume: 15, Issue: 1 | DOI: 10.1111/j.1540-6261.1960.tb04842.x | Cited by: 0
Coldwell Daniel
BUSINESS TAX PROVISIONS OF THE 1962 AND 1964 ACTS
Published: 5/1965, Volume: 20, Issue: 2 | DOI: 10.1111/j.1540-6261.1965.tb00209.x | Cited by: 0
Daniel M. Holland
Discussion
Published: 8/2000, Volume: 55, Issue: 4 | DOI: 10.1111/0022-1082.00268 | Cited by: 0
Daniel G. Weaver
LIQUID ASSETS: A NEGLECTED FACTOR IN THE FORMULATION OF HOUSING FINANCE POLICIES1
Published: 12/1952, Volume: 7, Issue: 4 | DOI: 10.1111/j.1540-6261.1952.tb02482.x | Cited by: 0
Daniel B. Rathbun
DIVIDEND UNDERREPORTING ON TAX RETURNS
Published: 5/1958, Volume: 13, Issue: 2 | DOI: 10.1111/j.1540-6261.1958.tb04192.x | Cited by: 1
Daniel M. Holland
THE ECONOMIC IMPACT OF LIFE INSURANCE INVESTMENTS ON THE AMERICAN ECONOMY*
Published: 3/1959, Volume: 14, Issue: 1 | DOI: 10.1111/j.1540-6261.1959.tb00491.x | Cited by: 1
Daniel E. Diamond
Mutual Fund Advisory Contracts: An Empirical Investigation
Published: 2/2002, Volume: 57, Issue: 1 | DOI: 10.1111/1540-6261.00417 | Cited by: 118
Daniel N. Deli
We investigate marginal compensation rates in mutual fund advisory contracts and find the following. Equity and foreign fund advisors receive higher marginal compensation than debt and domestic fund advisors. Advisors of funds with greater turnover receive higher marginal compensation. Also, closedend fund advisors receive higher marginal compensation than open‐end fund advisors. Finally, we find that marginal compensation is lower for advisors of large funds and members of large fund families. We argue that these differences in marginal compensation reflect differences in advisor marginal product, differences in the difficulty of monitoring performance, differences in control environments, and scale economies.
RESERVE MEASURES AS OPERATING VARIABLES OF MONETARY POLICY: AN EMPIRICAL ANALYSIS
Published: 6/1976, Volume: 31, Issue: 3 | DOI: 10.1111/j.1540-6261.1976.tb01928.x | Cited by: 1
Daniel E. Laufenberg
ASPECTS OF FEDERAL RESERVE POLICY, 1951–59 FACTS AND CONTROVERSIES*
Published: 9/1962, Volume: 17, Issue: 3 | DOI: 10.1111/j.1540-6261.1962.tb04329.x | Cited by: 0
Daniel S. Ahearn
An Analysis of the Impact of Interest Rate Ceilings
Published: 9/1982, Volume: 37, Issue: 4 | DOI: 10.1111/j.1540-6261.1982.tb03590.x | Cited by: 13
DANIEL J. VILLEGAS
The first aim of this study is to estimate the interest rates paid for motor vehicle loans. The second aim is to identify those potential borrowers most likely to be rationed out of the market by the imposition of rate ceilings. Rate ceilings constrain the rates paid by successful loan applicants to be no greater than the applicable ceiling level. These constraints are dealt with by treating the interest rate paid as a variable truncated at the ceiling level. Assuming the dependent variable is truncated normal, consistent estimates are obtained by employing the maximum likelihood method of Hausman and Wise.
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
SOME OBSERVATIONS ON RECENT STUDIES OF INVESTMENT RISK*
Published: 5/1953, Volume: 8, Issue: 2 | DOI: 10.1111/j.1540-6261.1953.tb01147.x | Cited by: 0
Eleanor Bagley Daniel
Prestige, Promotion, and Pay
Published: 12/21/2023, Volume: 79, Issue: 1 | DOI: 10.1111/jofi.13301 | Cited by: 15
DANIEL FERREIRA, RADOSLAWA NIKOLOWA
We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create less prestigious entry‐level jobs, which serve as currency for employees to pay for the right to compete for the more prestigious jobs. In optimal career structures, entry‐level employees (“associates”) compete for better‐paid and more prestigious positions (“managing directors” or “partners”). The model provides new implications relating job prestige to compensation, employment, competition, and the size of the financial sector.
Can Markets Discipline Government Agencies? Evidence from the Weather Derivatives Market
Published: 1/14/2016, Volume: 71, Issue: 1 | DOI: 10.1111/jofi.12366 | Cited by: 23
AMIYATOSH PURNANANDAM, DANIEL WEAGLEY
We analyze the role of financial markets in shaping the incentives of government agencies using a unique empirical setting: the weather derivatives market. We show that the introduction of weather derivative contracts on the Chicago Mercantile Exchange (CME) improves the accuracy of temperature measurement by 13% to 20% at the underlying weather stations. We argue that temperature‐based financial markets generate additional scrutiny of the temperature data measured by the National Weather Service, which motivates the agency to minimize measurement errors. Our results have broader implications: the visibility and scrutiny generated by financial markets can potentially improve the efficiency of government agencies.
Inside and Outside Information
Published: 6/10/2024, Volume: 79, Issue: 4 | DOI: 10.1111/jofi.13360 | Cited by: 9
DANIEL QUIGLEY, ANSGAR WALTHER
We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.
Underpricing of Newly Issued Bonds: Evidence from the Swiss Capital Market
Published: 12/1988, Volume: 43, Issue: 5 | DOI: 10.1111/j.1540-6261.1988.tb03963.x | Cited by: 18
WALTER WASSERFALLEN, DANIEL WYDLER
The pricing of newly issued bonds on the Swiss capital market is investigated over the years 1980–1982. The results reveal a slight underpricing of new bonds at the issue date that is roughly equal to the difference in transactions costs between the markets for new and seasoned bonds. Underpricing is no longer observed when the new bonds start to be traded on the stock exchange, that is, after about two days. Tests of several hypotheses show that unexpected changes in interest rates over the offering period explain part of the underpricing.
Option Pricing When the Underlying Asset Earns a Below‐Equilibrium Rate of Return: A Note
Published: 3/1984, Volume: 39, Issue: 1 | DOI: 10.1111/j.1540-6261.1984.tb03874.x | Cited by: 85
ROBERT MCDONALD, DANIEL SIEGEL
Glued to the TV: Distracted Noise Traders and Stock Market Liquidity
Published: 2/12/2020, Volume: 75, Issue: 2 | DOI: 10.1111/jofi.12863 | Cited by: 222
JOEL PERESS, DANIEL SCHMIDT
In this paper, we study the impact of noise traders’ limited attention on financial markets. Specifically, we exploit episodes of sensational news (exogenous to the market) that distract noise traders. We find that on “distraction days,” trading activity, liquidity, and volatility decrease, and prices reverse less among stocks owned predominantly by noise traders. These outcomes contrast sharply with those due to the inattention of informed speculators and market makers, and are consistent with noise traders mitigating adverse selection risk. We discuss the evolution of these outcomes over time and the role of technological changes.
Subtle Discrimination
Published: 10/6/2025, Volume: 81, Issue: 1 | DOI: 10.1111/jofi.13506 | Cited by: 5
ELENA S. PIKULINA, DANIEL FERREIRA
We introduce the concept of
subtle discrimination
—biased acts that cannot be objectively ascertained as discriminatory. When candidates compete for promotions by investing in skills, firms' subtle biases induce discriminated candidates to overinvest when promotions are low‐stakes (to distinguish themselves from favored candidates) but underinvest in high‐stakes settings (anticipating low promotion probabilities). This asymmetry implies that subtle discrimination raises profits in low‐productivity firms but lowers them in high‐productivity firms. Although subtle biases are small, they generate large gaps in skills and promotion outcomes. We derive further predictions in contexts such as equity analysis, lending, fund flows, banking careers, and entrepreneurial finance.
The Allocation of Socially Responsible Capital
Published: 1/22/2025, Volume: 80, Issue: 2 | DOI: 10.1111/jofi.13425 | Cited by: 50
DANIEL GREEN, BENJAMIN N. ROTH
Portfolio allocation decisions increasingly incorporate social values. We develop a tractable framework to study how competition between investors to own socially valuable assets affects social welfare. Relative to the most common social‐investing strategies, we identify alternative strategies that result in higher impact and higher financial returns. We identify strategies for investors to have impact when impact is difficult to measure. From the firm's perspective, increasing profitability can have greater impact than directly increasing social value. We present new empirical evidence on the social preferences of investors that demonstrates the practical relevance of our theory.
A Theory of Friendly Boards
Published: 1/11/2007, Volume: 62, Issue: 1 | DOI: 10.1111/j.1540-6261.2007.01206.x | Cited by: 1892
RENÉE B. ADAMS, DANIEL FERREIRA
We analyze the consequences of the board's dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade‐off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more intensively. Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, management‐friendly boards can be optimal. Using the insights from the model, we analyze the differences between sole and dual board systems. We highlight several policy implications of our analysis.
The Effect of Sequential Information Arrival on Asset Prices: An Experimental Study
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04585.x | Cited by: 72
THOMAS E. COPELAND, DANIEL FRIEDMAN
A complete understanding of security markets requires a simultaneous explanation of price behavior, trading volume, portfolio composition (ie., asset allocation), and bid‐ask spreads. In this paper, these variables are observed in a controlled setting—a computerized double auction market, similar to NASDAQ. Our laboratory allows experimental control of information arrival—whether simultaneously or sequentially received, and whether homogeneous or heterogeneous. We compare the price, volume, and share allocations of three market equilibrium models: telepathic rational expectations, which assumes that traders can read each others minds (strong‐form market efficiency); ordinary rational expectations, which assumes traders can use (some) market price information, (a type of semi‐strong form efficiency); and private information, where traders use no market information. We conclude 1) that stronger‐form market models predict equilibrium prices better than weaker‐form models, 2) that there were fewer misallocation forecasts in simultaneous information arrival (SIM) environments, 3) that trading volume was significantly higher in SIM environments, 4) and that bid‐ask spreads widen significantly when traders are exposed to price uncertainty resulting from information heterogeneity.
Partial Revelation of Information in Experimental Asset Markets
Published: 3/1991, Volume: 46, Issue: 1 | DOI: 10.1111/j.1540-6261.1991.tb03752.x | Cited by: 45
THOMAS E. COPELAND, DANIEL FRIEDMAN
We develop a model of market efficiency assuming private information is partially revealed to uninformed traders via the behavior of those who are informed. This partial revelation of information (PRE) model is tested in fourteen computerized double auction laboratory markets. It explains the market value and allocation of purchased information, and asset allocations, better than either a fully revealing information model (FRE strong‐form efficiency) or a nonrevealing expectations model; but it takes second place to FRE in explaining asset prices. We conjecture that refined versions of PRE may provide insight into “technical analysis” and minibubbles in securities markets.
A Theory of Pyramidal Ownership and Family Business Groups
Published: 12/2006, Volume: 61, Issue: 6 | DOI: 10.1111/j.1540-6261.2006.01001.x | Cited by: 640
HEITOR V. ALMEIDA, DANIEL WOLFENZON
We provide a new rationale for pyramidal ownership in family business groups. A pyramid allows a family to access all retained earnings of a firm it already controls to set up a new firm, and to share the new firm's nondiverted payoff with shareholders of the original firm. Our model is consistent with recent evidence of a small separation between ownership and control in some pyramids, and can differentiate between pyramids and dual‐class shares, even when either method can achieve the same deviation from one share–one vote. Other predictions of the model are consistent with both systematic and anecdotal evidence.
THE DEMAND FOR MONEY BY FIRMS: EXTENSIONS OF ANALYTIC RESULTS
Published: 12/1968, Volume: 23, Issue: 5 | DOI: 10.1111/j.1540-6261.1968.tb00314.x | Cited by: 46
Merton H. Miller, Daniel Orr
Do Firms Hedge in Response to Tax Incentives?
Published: 4/2002, Volume: 57, Issue: 2 | DOI: 10.1111/1540-6261.00443 | Cited by: 675
John R. Graham, Daniel A. Rogers
There are two tax incentives for corporations to hedge: to increase debt capacity and interest tax deductions, and to reduce expected tax liability if the tax function is convex. We test whether these incentives affect the extent of corporate hedging with derivatives. Using an explicit measure of tax function convexity, we find no evidence that firms hedge in response to tax convexity. Our analysis does, however, indicate that firms hedge to increase debt capacity, with increased tax benefits averaging 1.1 percent of firm value. Our results also indicate that firms hedge because of expected financial distress costs and firm size.
Before an Analyst Becomes an Analyst: Does Industry Experience Matter?
Published: 3/21/2017, Volume: 72, Issue: 2 | DOI: 10.1111/jofi.12466 | Cited by: 309
DANIEL BRADLEY, SINAN GOKKAYA, XI LIU
Using hand‐collected biographical information on financial analysts from 1983 to 2011, we find that analysts making forecasts on firms in industries related to their preanalyst experience have better forecast accuracy, evoke stronger market reactions to earning revisions, and are more likely to be named
Institutional Investor
all‐stars. Plausibly exogenous losses of analysts with related industry experience have real financial market implications—changes in firms’ information asymmetry and price reactions are significantly larger than those of other analysts. Overall, industry expertise acquired from preanalyst work experience is valuable to analysts, consistent with the emphasis placed on their industry knowledge by institutional investors.
THE ROLE OF GOVERNMENT IN THE SAN FRANCISCO BAY AREA MORTGAGE MARKET*
Published: 12/1951, Volume: 6, Issue: 4 | DOI: 10.1111/j.1540-6261.1951.tb04480.x | Cited by: 0
Paul F. Wendt, Daniel B. Rathbun