The Journal of Finance

Financial Market Design and the Equity Premium: Electronic versus Floor Trading

Published: 11/10/2005,  Volume: 60,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2005.00822.x  |  Cited by: 160

PANKAJ K. JAIN

We assemble the announcement and actual introduction dates of electronic trading by the leading exchanges of 120 countries to examine the impact of automation, controlling for risk factors and economic conditions. Dividend growth models and international CAPM suggest a significant decline in the equity premium, especially in emerging markets. Consistent with this reduction in the equity premium in the long run, there is a positive short‐term price reaction to the switch. Further analysis of trading turnover supports the notion that electronic trading enhances the liquidity and informativeness of stock markets, leading to a reduction in the cost of capital.

International Evidence on Institutional Trading Behavior and Price Impact

Published: 3/25/2004,  Volume: 59,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2004.00651.x  |  Cited by: 227

Chiraphol N. Chiyachantana, Pankaj K. Jain, Christine Jiang, Robert A. Wood

This study characterizes institutional trading in international stocks from 37 countries during 1997 to 1998 and 2001. We find that the underlying market condition is a major determinant of the price impact and, more importantly, of the asymmetry between price impacts of institutional buy and sell orders. In bullish markets, institutional purchases have a bigger price impact than sells; however, in the bearish markets, sells have a higher price impact. This differs from previous findings on price impact asymmetry. Our study further suggests that price impact varies depending on order characteristics, firm‐specific factors, and cross‐country differences.

The Effect of Voluntary Sell‐off Announcements on Shareholder Wealth

Published: 3/1985,  Volume: 40,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1985.tb04945.x  |  Cited by: 150

PREM C. JAIN

Sell‐off activities arise when a firm sells part of its assets (e.g., a segment, a division, etc.) but continues to exist in essentially the same form. This study investigates the effect of voluntary sell‐offs on stock returns. From a sample of over 1000 sell‐off events (first public announcements), the evidence shows that both sellers and buyers earn significant positive excess returns from these transactions. The excess returns earned by buyers are smaller than those earned by sellers. There is also evidence that sell‐off announcements are preceded by a period of significant negative returns for the sellers which suggests that the sellers, on average, performed poorly prior to their sell‐off activities.

Flattening of Bond Yield Curves for Long Maturities

Published: 3/1982,  Volume: 37,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1982.tb01101.x  |  Cited by: 9

MILES LIVINGSTON, SURESH JAIN

The paper presents a theoretical proof that flattening of yield curves for par bonds is inevitable for long maturities. This proof implies that behavioral explanations of flattening are unnecessary. The proof also implies that the use of yields to maturity of couponbearing bonds to estimate the true term structure (as well as forward rates) for long maturities has potentially infinite bias, suggesting that a greater effort should be made to directly estimate the true term structure in empirical work.

An Analysis of the Recommendations of the “Superstar” Money Managers at Barron's Annual Roundtable

Published: 9/1995,  Volume: 50,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1995.tb04057.x  |  Cited by: 29

HEMANG DESAI, PREM C. JAIN

We examine the performance of common stock recommendations made by prominent money managers at Barron's Annual Roundtable from 1968 to 1991. To avoid survivorship bias, we examine the performance of recommendations by all the participants. The buy recommendations earn significant abnormal returns of 1.91 percent from the recommendation day to the publication day, a period of about 14 days. However, the abnormal returns are essentially zero for one to three year postpublication day holding periods. Thus, an individual investing according to the Roundtable recommendations published in Barron's would not benefit from the advice.

The Post‐Issue Operating Performance of IPO Firms

Published: 12/1994,  Volume: 49,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1994.tb04778.x  |  Cited by: 396

BHARAT A. JAIN, OMESH KINI

This article investigates the change in operating performance of firms as they make the transition from private to public ownership. A significant decline in operating performance subsequent to the initial public offering (IPO) is found. Additionally, there is a significant positive relation between post‐IPO operating performance and equity retention by the original entrepreneurs, but no relation between post‐IPO operating performance and the level of initial underpricing. Post‐issue declines in the market‐to‐book ratio, price/earnings ratio, and earnings per share are also documented.

Truth in Mutual Fund Advertising: Evidence on Future Performance and Fund Flows

Published: 4/2000,  Volume: 55,  Issue: 2  |  DOI: 10.1111/0022-1082.00232  |  Cited by: 388

Prem C. Jain, Joanna Shuang Wu

We examine a sample of 294 mutual funds that are advertised in Barron's or Money magazine. The preadvertisement performance of these funds is significantly higher than that of the benchmarks. We test whether the sponsors select funds to signal continued superior performance or they use the past superior performance to attract more money into the funds. Our analysis shows that there is no superior performance in the postadvertisement period. Thus, the results do not support the signaling hypothesis. On the other hand, we find that the advertised funds attract significantly more money in comparison with a group of control funds.