Search results: 50.
(Why) Do Central Banks Care about Their Profits?
Published: 7/6/2023, Volume: 78, Issue: 5 | DOI: 10.1111/jofi.13257 | Cited by: 36
IGOR GONCHAROV, VASSO IOANNIDOU, MARTIN C. SCHMALZ
We document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially when political pressure is greater, the public is more receptive to extreme political views, and central bank governors are eligible for reappointment. The propensity to report small profits over small losses is correlated with higher inflation and lower interest rates. We conclude that there are agency problems at central banks, which give rise to discontinuous profit incentives that correlate with central banks’ policy choices and outcomes. These findings inform the debate about the political economy of central banking and central bank design.
Anticompetitive Effects of Common Ownership
Published: 8/2018, Volume: 73, Issue: 4 | DOI: 10.1111/jofi.12698 | Cited by: 841
JOSÉ AZAR, MARTIN C. SCHMALZ, ISABEL TECU
Many natural competitors are jointly held by a small set of large institutional investors. In the U.S. airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities.
Within‐route changes in common ownership concentration robustly correlate with route‐level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost—reduced product market competition—accompanies the private benefits of diversification and good governance.
Housing Collateral and Entrepreneurship
Published: 1/12/2017, Volume: 72, Issue: 1 | DOI: 10.1111/jofi.12468 | Cited by: 343
MARTIN C. SCHMALZ, DAVID A. SRAER, DAVID THESMAR
We show that collateral constraints restrict firm entry and postentry growth, using French administrative data and cross‐sectional variation in local house‐price appreciation as shocks to collateral values. We control for local demand shocks by comparing treated homeowners to controls in the same region that do not experience collateral shocks: renters and homeowners with an outstanding mortgage, who (in France) cannot take out a second mortgage. In both comparisons, an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on entry, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.
COMPETITIVE EQUILIBRIUM CONTINGENT COMMODITIES AND INFORMATION*
Published: 3/1977, Volume: 32, Issue: 1 | DOI: 10.1111/j.1540-6261.1977.tb03253.x | Cited by: 0
Martin Shubik
Another Puzzle: The Growth in Actively Managed Mutual Funds
Published: 7/1996, Volume: 51, Issue: 3 | DOI: 10.1111/j.1540-6261.1996.tb02707.x | Cited by: 1459
MARTIN J. GRUBER
Mutual funds represent one of the fastest growing type of financial intermediary in the American economy. The question remains as to why mutual funds and in particular actively managed mutual funds have grown so fast, when their performance on average has been inferior to that of index funds. One possible explanation of why investors buy actively managed open end funds lies in the fact that they are bought and sold at net asset value, and thus management ability may not be priced. If management ability exists and it is not included in the price of open end funds, then performance should be predictable. If performance is predictable and at least some investors are aware of this, then cash flows into and out of funds should be predictable by the very same metrics that predict performance. Finally, if predictors exist and at least some investors act on these predictors in investing in mutual funds, the return on new cash flows should be better than the average return for all investors in these funds. This article presents empirical evidence on all of these issues and shows that investors in actively managed mutual funds may have been more rational than we have assumed.
AN INVESTOR EXPECTATIONS STOCK PRICE PREDICTIVE MODEL USING CLOSED‐END FUND PREMIUMS
Published: 3/1973, Volume: 28, Issue: 1 | DOI: 10.1111/j.1540-6261.1973.tb01346.x | Cited by: 102
Martin E. Zweig
CAPITAL RATIONING: n AUTHORS IN SEARCH OF A PLOT
Published: 12/1977, Volume: 32, Issue: 5 | DOI: 10.1111/j.1540-6261.1977.tb03345.x | Cited by: 41
H. Martin Weingartner
The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership
Published: 9/1996, Volume: 51, Issue: 4 | DOI: 10.1111/j.1540-6261.1996.tb04068.x | Cited by: 410
KENNETH J. MARTIN
This article examines the motives underlying the payment method in corporate acquisitions. The findings support the notion that the higher the acquirer's growth opportunities, the more likely the acquirer is to use stock to finance an acquisition. Acquirer managerial ownership is not related to the probability of stock financing over small and large ranges of ownership, but is negatively related over a middle range. In addition, the likelihood of stock financing increases with higher pre‐acquisition market and acquiring firm stock returns. It decreases with an acquirer's higher cash availability, higher institutional shareholdings and blockholdings, and in tender offers.
A STUDY OF CREDITORS' PRACTICES IN THE FINANCING OF RELIGIOUS INSTITUTIONS*
Published: 12/1959, Volume: 14, Issue: 4 | DOI: 10.1111/j.1540-6261.1959.tb00147.x | Cited by: 0
Mother Martin Byrne
PRICING A BANKING SERVICE—THE SPECIAL CHECKING ACCOUNT
Published: 9/1960, Volume: 15, Issue: 3 | DOI: 10.1111/j.1540-6261.1960.tb01601.x | Cited by: 0
Martin H. Seiden
DETERMINANTS OF COMMON STOCK PRICES*
Published: 12/1966, Volume: 21, Issue: 4 | DOI: 10.1111/j.1540-6261.1966.tb00282.x | Cited by: 1
Martin Jay Gruber
DISCUSSION
Published: 5/1967, Volume: 22, Issue: 2 | DOI: 10.1111/j.1540-6261.1967.tb00003.x | Cited by: 1
H. Martin Weingartner
MONETARY POLICY AND INTERNATIONAL PAYMENTS*
Published: 3/1963, Volume: 18, Issue: 1 | DOI: 10.1111/j.1540-6261.1963.tb01617.x | Cited by: 0
William McChesney Martin
THE EFFECT OF SHARE REPURCHASE ON THE VALUE OF THE FIRM*
Published: 3/1968, Volume: 23, Issue: 1 | DOI: 10.1111/j.1540-6261.1968.tb03002.x | Cited by: 13
Edwin Elton, Martin Gruber
The Perception of Dependence, Investment Decisions, and Stock Prices
Published: 12/13/2020, Volume: 76, Issue: 2 | DOI: 10.1111/jofi.12993 | Cited by: 44
MICHAEL UNGEHEUER, MARTIN WEBER
How do investors perceive dependence between stock returns; and how does their perception of dependence affect investments and stock prices? We show experimentally that investors understand differences in dependence, but not in terms of correlation. Participants invest as if applying a simple counting heuristic for the frequency of comovement. They diversify more when the frequency of comovement is lower even if correlation is higher due to dependence in the tails. Building on our experimental findings, we empirically analyze U.S. stock returns. We identify a robust return premium for stocks with high frequencies of comovement with the market return.
REPLY
Published: 12/1968, Volume: 23, Issue: 5 | DOI: 10.1111/j.1540-6261.1968.tb00327.x | Cited by: 2
Edwin Elton, Martin Gruber
Spanning with Short‐Selling Restrictions
Published: 6/1993, Volume: 48, Issue: 2 | DOI: 10.1111/j.1540-6261.1993.tb04740.x | Cited by: 9
MARTIN RAAB, ROBERT SCHWAGER
In principle, the set of attainable payoff vectors is reduced if assets cannot be sold short. However, we show that the original space of payoff vectors is spanned despite short sale restrictions if there is one additional asset whose payoff is a positively weighted sum of the payoffs of the original assets. For example, this condition is automatically fulfilled if the original assets are stocks and the additional asset is an index future consisting of these stocks.
How Does Household Portfolio Diversification Vary with Financial Literacy and Financial Advice?
Published: 3/12/2015, Volume: 70, Issue: 2 | DOI: 10.1111/jofi.12231 | Cited by: 512
HANS‐MARTIN VON GAUDECKER
Household investment mistakes are an important concern for researchers and policymakers alike. Portfolio underdiversification ranks among those mistakes that are potentially most costly. However, its roots and empirical importance are poorly understood. I estimate quantitatively meaningful diversification statistics and investigate their relationship with key variables. Nearly all households that score high on financial literacy or rely on professionals or private contacts for advice achieve reasonable investment outcomes. Compared to these groups, households with below‐median financial literacy that trust their own decision‐making capabilities lose an expected 50 bps on average. All group differences stem from the top of the loss distribution.
The Market for Conflicted Advice
Published: 11/8/2019, Volume: 75, Issue: 2 | DOI: 10.1111/jofi.12848 | Cited by: 22
BRIANA CHANG, MARTIN SZYDLOWSKI
We present a model of the market for advice in which advisers have conflicts of interest and compete for heterogeneous customers through information provision. The competitive equilibrium features information dispersion and partial disclosure. Although conflicted fees lead to distorted information, they are irrelevant for customers' welfare: banning conflicted fees improves only the information quality, not customers' welfare. Instead, financial literacy education for the least informed customers can improve all customers' welfare because of a spillover effect. Furthermore, customers who trade through advisers realize lower average returns, which rationalizes empirical findings.
Repo over the Financial Crisis
Published: 2/10/2025, Volume: 80, Issue: 2 | DOI: 10.1111/jofi.13406 | Cited by: 3
ADAM COPELAND, ANTOINE MARTIN
This paper uses new data to provide a comprehensive view of repo activity during the 2007 global financial crisis. We show that activity declined much more in the bilateral segment of the market than in the tri‐party segment. Surprisingly, a large share of the decline in activity is driven by repos backed by Treasury securities. Further, a disproportionate share of the decline in repo activity is connected to securities dealer's market‐making activity. In particular, the evidence suggests that at least part of the decline is not driven by clients pulling away from securities dealers because of counterparty credit concerns.
Expected Returns, Time‐varying Risk, and Risk Premia
Published: 6/1994, Volume: 49, Issue: 2 | DOI: 10.1111/j.1540-6261.1994.tb05156.x | Cited by: 49
MARTIN D. D. EVANS
A new empirical model for intertemporal capital asset pricing is presented that allows both time‐varying risk premia and betas where the latter are identified from the dynamics of the conditional covariance of returns. The model is more successful in explaining the predictable variations in excess returns when the returns on the stock market and corporate bonds are included as risk factors than when the stock market is the single factor. Although changes in the covariance of returns induce variations in the betas, most of the predictable movements in returns are attributed to changes in the risk premia.
Pension Funding, Share Prices, and National Savings
Published: 9/1981, Volume: 36, Issue: 4 | DOI: 10.1111/j.1540-6261.1981.tb04885.x | Cited by: 77
MARTIN FELDSTEIN, STEPHANIE SELIGMAN
This paper examines empirically the effect of unfunded pension obligations on corporate share prices and discusses the implications of these estimates for national saving, the decline of the stock market in recent years, and the rationality of corporate financial behavior. The analysis uses the information on inflation‐adjusted income and assets which large firms were required to provide for 1976 and subsequent years.The evidence for a sample of nearly 200 manufacturing firms is consistent with the conclusion that share prices fully reflect the value of unfunded pension obligations. Since the conventional accounting measure of the unfunded pension liability has a number of problems (which we examine in the paper), it would be more accurate to say that the data are consistent with the conclusion that shareholders accept the conventional measure as the best available information and reduce share prices by a corresponding amount.The most important implication of the share price response is that the existence of unfunded private pension liabilities does not necessarily entail a reduction in total private saving. Because the pension liability reduces the equity value of the firm, shareholders are given notice of its existence and an incentive to save more themselves. For this reason, unfunded private pensions differ fundamentally from the unfunded Social Security pension and the other unfunded federal government civilian and military pensions.
FX Trading and Exchange Rate Dynamics
Published: 12/2002, Volume: 57, Issue: 6 | DOI: 10.1111/1540-6261.00501 | Cited by: 133
Martin D. D. Evans
I examine the sources of exchange rate dynamics by focusing on the information structure of FX trading. This structure permits the existence of an equilibrium distribution of transaction prices at a point in time. I develop and estimate a model of the price distribution using data from the Deutsche mark/dollar market that prroduces two striking results: (1) Much of the short‐term volatility in exchange rates comes from sampling the heterogeneous trading decisions of dealers in a distribution that, under normal market conditions, changes comparatively slowly; (2) public news is rarely the predominant source of exchange rate movements over any horizon.
What Is the Cost of Privatization for Workers?
Published: 5/30/2025, Volume: 80, Issue: 4 | DOI: 10.1111/jofi.13462 | Cited by: 15
MARTIN OLSSON, JOACIM TÅG
Privatization of state‐owned enterprises is on the agenda across the globe. Using Swedish data covering two decades, we show that productivity gains and headcount reductions are associated with economic costs for incumbent workers. Workers experience income losses and higher unemployment, but half of the losses are covered by the social safety net. We also find small positive effects on entrepreneurship and cash holdings but no meaningful effects on other labor market, family, health, or household finance outcomes. Productivity improves when the CEO is replaced, and the gains outweigh workers' income declines by a factor of between two and six.
Consumption, Aggregate Wealth, and Expected Stock Returns
Published: 6/2001, Volume: 56, Issue: 3 | DOI: 10.1111/0022-1082.00347 | Cited by: 1702
Martin Lettau, Sydney Ludvigson
This paper studies the role of fluctuations in the aggregate consumption–wealth ratio for predicting stock returns. Using U.S. quarterly stock market data, we find that these fluctuations in the consumption–wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate. We also find that this variable is a better forecaster of future returns at short and intermediate horizons than is the dividend yield, the dividend payout ratio, and several other popular forecasting variables. Why should the consumption–wealth ratio forecast asset returns? We show that a wide class of optimal models of consumer behavior imply that the log consumption–aggregate wealth (human capital plus asset holdings) ratio summarizes expected returns on aggregate wealth, or the market portfolio. Although this ratio is not observable, we provide assumptions under which its important predictive components for future asset returns may be expressed in terms of observable variables, namely in terms of consumption, asset holdings and labor income. The framework implies that these variables are cointegrated, and that deviations from this shared trend summarize agents' expectations of future returns on the market portfolio.
Should Derivatives Be Privileged in Bankruptcy?
Published: 11/12/2015, Volume: 70, Issue: 6 | DOI: 10.1111/jofi.12201 | Cited by: 63
PATRICK BOLTON, MARTIN OEHMKE
Derivatives enjoy special status in bankruptcy: they are exempt from the automatic stay and effectively senior to virtually all other claims. We propose a corporate finance model to assess the effect of these exemptions on a firm's cost of borrowing and incentives to engage in derivative transactions. While derivatives are value‐enhancing risk management tools, seniority for derivatives can lead to inefficiencies: it transfers credit risk to debtholders, even though this risk is borne more efficiently in the derivative market. Seniority for derivatives is efficient only if it provides sufficient cross‐netting benefits to derivative counterparties that provide hedging services.
Real Rates, Expected Inflation, and Inflation Risk Premia
Published: 2/1998, Volume: 53, Issue: 1 | DOI: 10.1111/0022-1082.75591 | Cited by: 182
Martin D. D. Evans
This paper studies the term structure of real rates, expected inflation, and inflation risk premia. The analysis is based on new estimates of the real term structure derived from the prices of index‐linked and nominal debt in the U.K. I find strong evidence to reject both the Fisher Hypothesis and versions of the Expectations Hypothesis for real rates. The estimates also imply the presence of time‐varying inflation risk premia throughout the term structure.
DISCUSSION
Published: 5/1968, Volume: 23, Issue: 2 | DOI: 10.1111/j.1540-6261.1968.tb00814.x | Cited by: 0
Richard T. Pratt, Preston Martin
Ambiguity, Information Quality, and Asset Pricing
Published: 1/10/2008, Volume: 63, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01314.x | Cited by: 649
LARRY G. EPSTEIN, MARTIN SCHNEIDER
When ambiguity‐averse investors process news of uncertain quality, they act as if they take a worst‐case assessment of quality. As a result, they react more strongly to bad news than to good news. They also dislike assets for which information quality is poor, especially when the underlying fundamentals are volatile. These effects induce ambiguity premia that depend on idiosyncratic risk in fundamentals as well as skewness in returns. Moreover, shocks to information quality can have persistent negative effects on prices even if fundamentals do not change.
Why Is Long‐Horizon Equity Less Risky? A Duration‐Based Explanation of the Value Premium
Published: 1/11/2007, Volume: 62, Issue: 1 | DOI: 10.1111/j.1540-6261.2007.01201.x | Cited by: 328
MARTIN LETTAU, JESSICA A. WACHTER
We propose a dynamic risk‐based model that captures the value premium. Firms are modeled as long‐lived assets distinguished by the timing of cash flows. The stochastic discount factor is specified so that shocks to aggregate dividends are priced, but shocks to the discount rate are not. The model implies that growth firms covary more with the discount rate than do value firms, which covary more with cash flows. When calibrated to explain aggregate stock market behavior, the model accounts for the observed value premium, the high Sharpe ratios on value firms, and the poor performance of the CAPM.
DISCUSSION
Published: 5/1972, Volume: 27, Issue: 2 | DOI: 10.1111/j.1540-6261.1972.tb00981.x | Cited by: 0
Robert M. Coen, Martin David
DISCUSSION
Published: 5/1963, Volume: 18, Issue: 2 | DOI: 10.1111/j.1540-6261.1963.tb00728.x | Cited by: 1
Albert Ando, Martin J. Bailey
The Maturity Rat Race
Published: 3/7/2013, Volume: 68, Issue: 2 | DOI: 10.1111/jofi.12005 | Cited by: 284
MARKUS K. BRUNNERMEIER, MARTIN OEHMKE
Why do some firms, especially financial institutions, finance themselves so short‐term? We show that extreme reliance on short‐term financing may be the outcome of a maturity rat race: a borrower may have an incentive to shorten the maturity of an individual creditor's debt contract because this dilutes other creditors. In response, other creditors opt for shorter maturity contracts as well. This dynamic toward short maturities is present whenever interim information is mostly about the probability of default rather than the recovery in default. For borrowers that cannot commit to a maturity structure, equilibrium financing is inefficiently short‐term.
Sovereign Default, Domestic Banks, and Financial Institutions
Published: 3/17/2014, Volume: 69, Issue: 2 | DOI: 10.1111/jofi.12124 | Cited by: 471
NICOLA GENNAIOLI, ALBERTO MARTIN, STEFANO ROSSI
We present a model of sovereign debt in which, contrary to conventional wisdom, government defaults are costly because they destroy the balance sheets of domestic banks. In our model, better financial institutions allow banks to be more leveraged, thereby making them more vulnerable to sovereign defaults. Our predictions: government defaults should lead to declines in private credit, and these declines should be larger in countries where financial institutions are more developed and banks hold more government bonds. In these same countries, government defaults should be less likely. Using a large panel of countries, we find evidence consistent with these predictions.
Learning to Navigate a New Financial Technology
Published: 6/17/2026, Volume: , Issue: | DOI: 10.1111/jofi.70062 | Cited by: 0
EMILY BREZA, MARTIN KANZ, LEORA KLAPPER
We present results from a field experiment that introduced digital payroll accounts to unbanked factory workers to examine how inexperienced consumers learn to use a new financial technology. We find that exposure to payroll accounts leads to increased account use, accelerated learning, and avoidance of common consumer protection risks. Those receiving electronic wage payments gradually build trust in the technology, learn to use accounts without assistance, and avoid illicit fees. Using experimental variation in assignment to bank versus mobile money accounts, we show that these impacts are concentrated in mobile money accounts, the newer, more complex, and less trusted financial technology.
Volatility, Valuation Ratios, and Bubbles: An Empirical Measure of Market Sentiment
Published: 8/31/2021, Volume: 76, Issue: 6 | DOI: 10.1111/jofi.13068 | Cited by: 70
CAN GAO, IAN W. R. MARTIN
We define a sentiment indicator based on option prices, valuation ratios, and interest rates. The indicator can be interpreted as a lower bound on the expected growth in fundamentals that a rational investor would have to perceive to be happy to hold the market. The bound was unusually high in the late 1990s, reflecting dividend growth expectations that in our view were unreasonably optimistic. Our approach exploits two key ingredients. First, we derive a new valuation ratio decomposition that is related to the Campbell–Shiller loglinearization but that resembles the Gordon growth model more closely and has certain other advantages. Second, we introduce a volatility index that provides a lower bound on the market's expected log return.
Report of the Managing Editors of the Journal of Finance for 1987
Published: 7/1988, Volume: 43, Issue: 3 | DOI: 10.1111/j.1540-6261.1988.tb04612.x | Cited by: 0
EDWIN J. ELTON, MARTIN J. GRUBER
THE ECONOMIC VALUE OF THE CALL OPTION*
Published: 9/1972, Volume: 27, Issue: 4 | DOI: 10.1111/j.1540-6261.1972.tb01319.x | Cited by: 4
Edwin J. Elton, Martin J. Gruber
Weekend Effects on Stock Returns: A Comment
Published: 3/1985, Volume: 40, Issue: 1 | DOI: 10.1111/j.1540-6261.1985.tb04956.x | Cited by: 28
EDWARD A. DYL, STANLEY A. MARTIN
Report of the Managing Editors of the Journal of Finance for 1983
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03689.x | Cited by: 0
EDWIN J. ELTON, MARTIN J. GRUBER
Report of the Managing Editors of the Journal of Finance for 1986
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04588.x | Cited by: 2
EDWIN J. ELTON, MARTIN J. GRUBER
PORTFOLIO THEORY WHEN INVESTMENT RELATIVES ARE LOGNORMALLY DISTRIBUTED
Published: 9/1974, Volume: 29, Issue: 4 | DOI: 10.1111/j.1540-6261.1974.tb03103.x | Cited by: 27
Edwin J. Elton, Martin J. Gruber
Thinking about Prices versus Thinking about Returns in Financial Markets
Published: 9/3/2019, Volume: 74, Issue: 6 | DOI: 10.1111/jofi.12835 | Cited by: 66
MARKUS GLASER, ZWETELINA ILIEWA, MARTIN WEBER
Prices and returns are alternative ways to present information and to elicit expectations in financial markets. But do investors think of prices and returns in the same way? We present three studies in which subjects differ in the level of expertise, amount of information, and type of incentive scheme. The results are consistent across all studies: asking subjects to forecast returns as opposed to prices results in higher expectations, whereas showing them return charts rather than price charts results in lower expectations. Experience is not a useful remedy but cognitive reflection mitigates the impact of format changes.
VALUATION AND THE COST OF CAPITAL FOR REGULATED INDUSTRIES
Published: 6/1971, Volume: 26, Issue: 3 | DOI: 10.1111/j.1540-6261.1971.tb01719.x | Cited by: 26
Edwin J. Elton, Martin J. Gruber
BANKRUPTCY COSTS: SOME EVIDENCE
Published: 5/1977, Volume: 32, Issue: 2 | DOI: 10.1111/j.1540-6261.1977.tb03274.x | Cited by: 105
Martin J. Gruber, Jerold B. Warner
VALUATION AND ASSET SELECTION UNDER ALTERNATIVE INVESTMENT OPPORTUNITIES
Published: 5/1976, Volume: 31, Issue: 2 | DOI: 10.1111/j.1540-6261.1976.tb01904.x | Cited by: 9
Edwin J. Elton, Martin J. Gruber
Repo Runs: Evidence from the Tri‐Party Repo Market
Published: 11/10/2014, Volume: 69, Issue: 6 | DOI: 10.1111/jofi.12205 | Cited by: 232
ADAM COPELAND, ANTOINE MARTIN, MICHAEL WALKER
The repo market has been viewed as a potential source of financial instability since the 2007 to 2009 financial crisis, based in part on findings that margins increased sharply in a segment of this market. This paper provides evidence suggesting that there was no system‐wide run on repo. Using confidential data on tri‐party repo, a major segment of this market, we show that, the level of margins and the amount of funding were surprisingly stable for most borrowers during the crisis. However, we also document a sharp decline in the tri‐party repo funding of Lehman in September 2008.
Non‐Standard C.A.P.M.'s and the Market Portfolio
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03686.x | Cited by: 7
EDWIN J. ELTON, MARTIN J. GRUBER