The Journal of Finance

Compensating Financial Experts

Published: 11/10/2016,  Volume: 71,  Issue: 6  |  DOI: 10.1111/jofi.12372  |  Cited by: 38

VINCENT GLODE, RICHARD LOWERY

We propose a labor market model in which financial firms compete for a scarce supply of workers who can be employed as either bankers or traders. While hiring bankers helps create a surplus that can be split between a firm and its trading counterparties, hiring traders helps the firm appropriate a greater share of that surplus away from its counterparties. Firms bid defensively for workers bound to become traders, who then earn more than bankers. As counterparties employ more traders, the benefit of employing bankers decreases. The model sheds light on the historical evolution of compensation in finance.

Financial Expertise as an Arms Race

Published: 9/12/2012,  Volume: 67,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2012.01771.x  |  Cited by: 109

VINCENT GLODE, RICHARD C. GREEN, RICHARD LOWERY

We show that firms intermediating trade have incentives to overinvest in financial expertise. In our model, expertise improves firms’ ability to estimate value when trading a security. Expertise creates asymmetric information, which, under normal circumstances, works to the advantage of the expert as it deters opportunistic bargaining by counterparties. This advantage is neutralized in equilibrium, however, by offsetting investments by competitors. Moreover, when volatility rises the adverse selection created by expertise triggers breakdowns in liquidity, destroying gains to trade and thus the benefits that firms hope to gain through high levels of expertise.

Trading Complex Assets

Published: 9/10/2013,  Volume: 68,  Issue: 5  |  DOI: 10.1111/jofi.12029  |  Cited by: 70

BRUCE IAN CARLIN, SHIMON KOGAN, RICHARD LOWERY

We perform an experimental study to assess the effect of complexity on asset trading. We find that higher complexity leads to increased price volatility, lower liquidity, and decreased trade efficiency especially when repeated bargaining takes place. However, the channel through which complexity acts is not simply due to the added noise induced by estimation error. Rather, complexity alters the bidding strategies used by traders, making them less inclined to trade, even when we control for estimation error across treatments. As such, it appears that adverse selection plays an important role in explaining the trading abnormalities caused by complexity.

Collusion in Brokered Markets

Published: 3/18/2025,  Volume: 80,  Issue: 3  |  DOI: 10.1111/jofi.13432  |  Cited by: 6

JOHN WILLIAM HATFIELD, SCOTT DUKE KOMINERS, RICHARD LOWERY

High commissions in the U.S. residential real estate agency market pose a puzzle for economic theory because brokerage is not a concentrated industry. We model brokered markets as a game in which agents post prices for customers and then choose which other agents to work with. We show that there exists an equilibrium in which each agent conditions working with other agents on those agents' posted prices. Prices can therefore be meaningfully higher than the competitive level (for a fixed discount factor), regardless of the number of agents. Thus, brokered markets can remain uncompetitive even with low concentration and easy entry.

A Simple Implicit Measure of the Effective Bid‐Ask Spread in an Efficient Market

Published: 9/1984,  Volume: 39,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1984.tb03897.x  |  Cited by: 1411

RICHARD ROLL

In an efficient market, the fundamental value of a security fluctuates randomly. However, trading costs induce negative serial dependence in successive observed market price changes. In fact, given market efficiency, the effective bid‐ask spread can be measured by where “cov” is the first‐order serial covariance of price changes. This implicit measure of the bid‐ask spread is derived formally and is shown empirically to be closely related to firm size.

AMBIGUITY WHEN PERFORMANCE IS MEASURED BY THE SECURITIES MARKET LINE

Published: 9/1978,  Volume: 33,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1978.tb02047.x  |  Cited by: 300

Richard Roll

MONETARY EQUILIBRIUM AND INTERNATIONAL RESERVE FLOWS IN AUSTRALIA

Published: 12/1974,  Volume: 29,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1974.tb03133.x  |  Cited by: 6

Richard Zecher

CORPORATE BORROWING DECISIONS AND THE EVALUATION OF INTEREST RATE FORECASTS*

Published: 9/1974,  Volume: 29,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1974.tb03113.x  |  Cited by: 0

Richard Kolodny

Industrial Structure and the Comparative Behavior of International Stock Market Indices

Published: 3/1992,  Volume: 47,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1992.tb03977.x  |  Cited by: 506

RICHARD ROLL

Stock Price Indices are compared across countries in an attempt to explain why they exhibit such disparate behavior. Three separate explanatory influences are empirically documented. First, part of the behavior can be attributed to a technical aspect of index construction; some indices are more diversified than others. Second, each country's industrial structure plays a major role in explaining stock price behavior. Third, for the majority of countries, a portion of national equity index behavior can be ascribed to exchange rate behavior. Exchange rates explain a significant portion of common currency denominated national index returns, although the amount explained by exchange rates is less than the amount explained by industrial structure for most countries.

A Possible Explanation of the Small Firm Effect

Published: 9/1981,  Volume: 36,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1981.tb04890.x  |  Cited by: 230

RICHARD ROLL

Recent empirical studies have found that small listed firms yield higher average returns than large firms even when their riskiness is equal. The riskiness of small firms, however, has been improperly measured. Apparently, the error is due to auto‐correlation in portfolio returns caused by infrequent trading. Other anomalous predictors of riskadjusted returns, such as price/earnings ratios and dividend yields, may also derive some of their apparent power from this spurious source.

Bankruptcy Risk and Optimal Capital Structure

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03845.x  |  Cited by: 185

RICHARD CASTANIAS

This study finds shortcomings in empirical tests of the capital structure irrelevance hypothesis. The alternative hypothesis is that firms choose value maximizing mixes of debt and equity on account of bankruptcy costs and the tax deductibility of interest payments. Based upon the cross‐sectional implications of the tax shelter‐bankruptcy cost hypothesis, an alternative test of the irrelevance hypothesis is performed. The test examines the relationship between failure rates and leverage ratios for 36 lines of business. The results are inconsistent with the irrelevance hypothesis.

THE REFUNDING DECISION IN NEAR PERFECT MARKETS

Published: 12/1974,  Volume: 29,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1974.tb03128.x  |  Cited by: 2

Richard Kolodny

THE AMERICAN CAPITAL MARKET, 1846–1914: A STUDY OF THE EFFECTS OF PUBLIC POLICY ON ECONOMIC DEVELOPMENT*

Published: 9/1970,  Volume: 25,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1970.tb00579.x  |  Cited by: 1

Richard Sylla

IMPUTED RENT OF OWNER‐OCCUPIED DWELLINGS UNDER THE INCOME TAX

Published: 12/1960,  Volume: 15,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1960.tb02766.x  |  Cited by: 19

Richard Goode

AN EMPIRICAL TEST OF THE ALTERNATIVE HYPOTHESES OF NATIONAL AND INTERNATIONAL PRICING OF RISKY ASSETS

Published: 5/1977,  Volume: 32,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1977.tb03287.x  |  Cited by: 136

Richard Stehle

DISCUSSION

Published: 7/1984,  Volume: 39,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1984.tb03652.x  |  Cited by: 0

RICHARD RUBACK

A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk

Published: 12/1997,  Volume: 52,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1997.tb02748.x  |  Cited by: 295

RICHARD STANTON

This article presents a technique for nonparametrically estimating continuous‐time diffusion processes that are observed at discrete intervals. We illustrate the methodology by using daily three and six month Treasury Bill data, from January 1965 to July 1995, to estimate the drift and diffusion of the short rate, and the market price of interest rate risk. While the estimated diffusion is similar to that estimated by Chan, Karolyi, Longstaff, and Sanders (1992), there is evidence of substantial nonlinearity in the drift. This is close to zero for low and medium interest rates, but mean reversion increases sharply at higher interest rates.

DEPOSIT COMPOSITION AND COMMERCIAL BANK EARNINGS*

Published: 12/1971,  Volume: 26,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1971.tb01762.x  |  Cited by: 0

Richard Bond

R2

Published: 7/1988,  Volume: 43,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1988.tb04591.x  |  Cited by: 633

RICHARD ROLL

Even with hindsight, the ability to explain stock price changes is modest. s were calculated for the returns of large stocks as explained by systematic economic influences, by the returns on other stocks in the same industry, and by public firm‐specific news events. The average adjusted is only about .35 with monthly data and .20 with daily data. There is little relation between explanatory power and either the firm's size or its industry. There is little improvement in from eliminating all dates surrounding news reports in the financial press. However, the sample kurtosis is quite different when such news events are eliminated, thereby revealing a mixture of return distributions. Non‐news dates also indicate the presence of a distributional mixture, perhaps due to traders acting on private information.

BALANCE‐OF‐PAYMENTS PROBLEMS OF DEVELOPING COUNTRIES*

Published: 3/1954,  Volume: 9,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1954.tb01207.x  |  Cited by: 0

Richard Perlman

INTEREST RATES ON MONETARY ASSETS AND COMMODITY PRICE INDEX CHANGES

Published: 5/1972,  Volume: 27,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1972.tb00958.x  |  Cited by: 56

Richard Roll

SOME CONSIDERATIONS ON THE INCIDENCE OF THE CORPORATION INCOME TAX (Discussion)

Published: 6/1951,  Volume: 6,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1951.tb04458.x  |  Cited by: 0

Richard Goode

EVIDENCE ON THE “GROWTH‐OPTIMUM” MODEL

Published: 6/1973,  Volume: 28,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1973.tb01378.x  |  Cited by: 17

Richard Roll

INVESTMENT DIVERSIFICATION AND BOND MATURITY

Published: 3/1971,  Volume: 26,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1971.tb00588.x  |  Cited by: 40

Richard Roll

EXPECTATIONS, RISK, AND THE TERM STRUCTURE OF INTEREST RATES*

Published: 6/1970,  Volume: 25,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1970.tb00545.x  |  Cited by: 1

Richard C. Sutch

DEPOSIT COMPOSITION AND COMMERCIAL BANK EARNINGS

Published: 3/1971,  Volume: 26,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1971.tb00587.x  |  Cited by: 5

Richard E. Bond

A Note on Capital Budgeting Techniques and the Reinvestment Rate

Published: 12/1979,  Volume: 34,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1979.tb00070.x  |  Cited by: 10

RICHARD L. MEYER

A General Diversification Theorem: A Note

Published: 6/1984,  Volume: 39,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1984.tb02327.x  |  Cited by: 13

RICHARD D. MacMINN

INITIAL AND INVESTMENT ALLOWANCES UNDER THE BRITISH INCOME TAX AND COUNTER‐CYCLICAL POLICY*

Published: 9/1962,  Volume: 17,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1962.tb04304.x  |  Cited by: 0

Richard Miller Bird

A NOTE ON THE COST OF TRADE CREDIT AND THE DISCRIMINATORY EFFECTS OF MONETARY POLICY

Published: 12/1974,  Volume: 29,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1974.tb03140.x  |  Cited by: 1

Richard H. Keehn

Report of the Editor of The Journal of Finance for the Year 2002

Published: 7/15/2003,  Volume: 58,  Issue: 4  |  DOI: 10.1111/1540-6261.00585  |  Cited by: 0

SOME VALUE‐ADDED TAX IMPACTS ON THE INTERNATIONAL COMPETITIVENESS OF PRODUCERS

Published: 9/1968,  Volume: 23,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1968.tb00848.x  |  Cited by: 0

Richard W. Lindholm

DISCUSSION

Published: 3/1950,  Volume: 5,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1950.tb00098.x  |  Cited by: 0

Richard C. Youngdahl

AN ANALYSIS OF THE USE OF COST‐OF‐CAPITAL CONCEPTS IN NATURAL‐GAS‐PIPELINE RATE REGULATION*

Published: 9/1968,  Volume: 23,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1968.tb00858.x  |  Cited by: 0

Richard A. Oppedahl

Macroinformation and the Variability of Stock Market Prices

Published: 5/1979,  Volume: 34,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1979.tb02107.x  |  Cited by: 43

RICHARD P. CASTANIAS

DISCUSSION

Published: 5/1981,  Volume: 36,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1981.tb00473.x  |  Cited by: 2

RICHARD L. PETERSON

REPLY

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03256.x  |  Cited by: 0

Richard L. Norgaard

CORPORATE INVESTMENT, DIVIDENDS, AND FINANCE: A SIMULTANEOUS APPROACH*

Published: 9/1973,  Volume: 28,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1973.tb01438.x  |  Cited by: 0

Richard R. Spies

ADMINISTERED PRICES AND THE MARKET REACTION: THE CASE OF URBAN CORE PROPERTY INSURANCE

Published: 3/1973,  Volume: 28,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1973.tb01352.x  |  Cited by: 2

Richard F. Syron

Forward Markets, Stock Markets, and the Theory of the Firm

Published: 12/1987,  Volume: 42,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1987.tb04359.x  |  Cited by: 17

RICHARD D. MacMINN

This paper models a competitive financial market economy in which there are forward markets as well as stock and bond markets. Although there are separation theorems in the stock and forward markets literatures, this analysis shows that neither separation theorem survives in this integrated financial market economy. Next, the analysis shows that the separation results hold and are equivalent if the manager has an appropriate compensation package. Then the model is modified to allow for depreciation charges and tax credits. A positive theory of hedging is developed that shows that the corporation can preserve deductions and credits by hedging and so increase corporate value.

THE DYNAMICS OF CORPORATE CAPITAL BUDGETING

Published: 6/1974,  Volume: 29,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1974.tb01486.x  |  Cited by: 8

Richard R. Spies

A NOTE ON THE IMPLICATIONS OF PERIODIC “CASH FLOW”

Published: 12/1962,  Volume: 17,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1962.tb04341.x  |  Cited by: 0

M. Richard Sussman

DISCUSSION

Published: 7/1985,  Volume: 40,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1985.tb05029.x  |  Cited by: 0

RICHARD P. CASTANIAS

RETIREMENT OF NON‐CALLABLE PREFERRED STOCK

Published: 12/1970,  Volume: 25,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1970.tb00875.x  |  Cited by: 3

Richard A. Stevenson

TRADING IN WARRANTS BY MECHANICAL SYSTEMS

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03244.x  |  Cited by: 1

Richard J. Rogalski

DISCUSSION

Published: 5/1969,  Volume: 24,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1969.tb01686.x  |  Cited by: 1

Richard S. Bower

AN ANALYSIS OF CREDIT INSURANCE*

Published: 3/1957,  Volume: 12,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1957.tb04118.x  |  Cited by: 0

Mark Richard Greene

Usury Laws and Consumer Credit: A Note

Published: 9/1983,  Volume: 38,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1983.tb02299.x  |  Cited by: 16

RICHARD L. PETERSON

A STUDY OF THE BORROWING PATTERNS OF EIGHTEEN CLEVELAND‐TERRITORY, FOURTH FEDERAL RESERVE DISTRICT MEMBER BANKS OVER THE PERIOD, 1961–1965*

Published: 3/1970,  Volume: 25,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1970.tb00427.x  |  Cited by: 0

George Richard Dreese

A CROSS SECTION STUDY OF THE DEMAND FOR MONEY: THE UNITED STATES, 1960–62

Published: 3/1974,  Volume: 29,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1974.tb00025.x  |  Cited by: 10

Richard E. Peterson