The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
AFA members can log in to view full-text articles below.
View past issues
Search the Journal of Finance:
Search results: 7.
Short Sales Restrictions and Kinks on the Mean Variance Frontier
Published: 03/01/1984 | DOI: 10.1111/j.1540-6261.1984.tb03871.x
PHILIP H. DYBVIG
With a short sales restriction, there may be switching points along the mean variance frontier corresponding to changes in the set of assets held. Traditional wisdom holds that each switching point corresponds to a kink, while Ross has claimed that kinks never occur. This paper shows that the truth lies between the two views, since the efficient frontier may or may not be kinked at a switching point. There is some indication that kinks are rare, since a kink corresponds to a portfolio in which all assets have the same expected return.
Tax Clienteles and Asset Pricing
Published: 07/01/1986 | DOI: 10.1111/j.1540-6261.1986.tb04540.x
PHILIP H. DYBVIG, STEPHEN A. ROSS
Taxation of asset returns can create various clientele effects. If every agent is marginal on all assets, no clientele effects arise. If some (but not every) agent is marginal on all assets, there arises a clientele effect in quantities but none in prices. If no agent is marginal on all assets, there arise clientele effects in both quantities and prices. In the first two cases, standard asset pricing and martingale results extend to analogous aftertax results. In the third case, linear asset pricing works only on subsets of assets, and the standard martingale results become after‐tax supermartingale results.
Differential Information and Performance Measurement Using a Security Market Line
Published: 06/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb04963.x
PHILIP H. DYBVIG, STEPHEN A. ROSS
An uninformed observer using the tools of mean variance and security market line analysis to measure the performance of a portfolio manager who has superior information is unlikely to be able to make any reliable inferences. While some positive results of a very limited nature are possible, e.g., when there is a riskless asset or when information is restricted to be “security specific,” in general anything is possible. In particular, a manager with superior information can appear to the observer to be below or above the security market line and inside or outside of the mean‐variance efficient frontier, and any combination of these is possible.
Yes, The APT Is Testable
Published: 09/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb02370.x
PHILIP H. DYBVIG, STEPHEN A. ROSS
The Arbitrage Pricing Theory (APT) has been proposed as an alternative to the mean‐variance Capital Asset Pricing Model (CAPM). This paper considers the testability of the APT and points out the irrelevance for testing of the approximation error. We refute Shanken's objections, including his assertion that Roll's critique of the CAPM is applicable to the APT. We also explain the testability of the APT on subsets, and we explore the relationship between the APT and the CAPM.
The Empirical Implications of the Cox, Ingersoll, Ross Theory of the Term Structure of Interest Rates
Published: 07/01/1986 | DOI: 10.1111/j.1540-6261.1986.tb04523.x
STEPHEN J. BROWN, PHILIP H. DYBVIG
The one‐factor version of the Cox, Ingersoll, and Ross model of the term structure is estimated using monthly quotes on U.S. Treasury issues trading from 1952 through 1983. Using data from a single yield curve, it is possible to estimate implied short and long term zero coupon rates and the implied variance of changes in short rates. Analysis of residuals points to a probable neglected tax effect.
The Analytics of Performance Measurement Using a Security Market Line
Published: 06/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb04964.x
PHILIP H. DYBVIG, STEPHEN A. ROSS
Security market line (SML) analysis, while an important tool, has never been fully justified from a theoretical standpoint. Assuming symmetric information and an inefficient index, we show that SML analysis can be grossly misleading, since, in general, efficient and inefficient portfolios can plot above and below the SML. On a more positive note, if SML analysis uses the return on a marketed riskless asset for the zero‐beta rate, efficient portfolios must plot above the SML. Nonetheless, arbitrarily inefficient portfolios also plot above the SML.