Search results: 50.
THE EFFECT OF CREDIT ON THE INTEREST ELASTICITY OF THE TRANSACTION DEMAND FOR CASH: COMMENT
Published: 12/1971, Volume: 26, Issue: 5 | DOI: 10.1111/j.1540-6261.1971.tb01757.x | Cited by: 3
Robert H. Litzenberger
EQUILIBRIUM IN THE EQUITY MARKET UNDER UNCERTAINTY†
Published: 9/1969, Volume: 24, Issue: 4 | DOI: 10.1111/j.1540-6261.1969.tb00390.x | Cited by: 2
Robert H. Litzenberger
Swaps: Plain and Fanciful
Published: 7/1992, Volume: 47, Issue: 3 | DOI: 10.1111/j.1540-6261.1992.tb03996.x | Cited by: 58
ROBERT H. LITZENBERGER
The outstanding face amount of plain vanilla interest rate swaps exceeds two trillion dollars. While pricing and hedging of such swaps appear to be quite simple, many existing theories are based on the incorrect characterization of a swap as a simple exchange of a fixed for a floating rate note. This characterization is not consistent with standarized swap contracts and the treatment of swaps in bankruptcy. This paper provides an alternative perspective on swaps.
THE STRONG CASE FOR THE GENERALIZED LOGARITHMIC UTILITY MODEL AS THE PREMIER MODEL OF FINANCIAL MARKETS
Published: 5/1976, Volume: 31, Issue: 2 | DOI: 10.1111/j.1540-6261.1976.tb01906.x | Cited by: 13
Robert Litzenberger, Mark Rubinstein
This paper begins by comparing the available well‐developed micro‐economic models in finance which recognize uncertainty. It is argued that models whose distinctive simplifying assumption restricts utility functions are superior to those which instead restrict probability distributions, both with respect to the realism of their assumptions and richness of their conclusions. In particular, the most successful model, based on generalized logarithmic utility (GLUM), is a multiperiod consumption/portfolio and equilibrium model in discrete‐time which (1) requires decreasing absolute risk aversion; (2) tolerates increasing, constant, or decreasing proportional risk aversion; (3) assumes no exogenous specification of the contemporaneous or intertemporal stochastic process of security prices; (4) tolerates heterogeneity with respect to wealth, lifetime, time‐and risk‐preference and beliefs; (5) results in a complete specification of consumption/portfolio decision and sharing rules which include nontrivial multiperiod separation properties and explains demand for default‐free bonds of various maturities and options; (6) leads to a solution to the aggregation problem; (7) results in a complete specification of the contemporaneous and intertemporal process of security prices which reveals necessary and sufficient conditions for an unbiased term structure and the market portfolio to follow a random walk as a natural outcome of equilibrium; (8) provides an empirically testable aggregate consumption function relating per capita consumption to per capita wealth and the present value of a perpetual default‐free annuity which does not require inferences of ex ante beliefs from ex post data; (9) provides a nontrivial multiperiod extension of popular single‐period security valuation models which is empirically testable; (10) yields a simple multiperiod valuation formula for an uncertain income stream even when this income is serially correlated over time.
Dividends, Short Selling Restrictions, Tax‐Induced Investor Clienteles and Market Equilibrium
Published: 5/1980, Volume: 35, Issue: 2 | DOI: 10.1111/j.1540-6261.1980.tb02178.x | Cited by: 88
ROBERT H. LITZENBERGER, KRISHNA RAMASWAMY
On the Distributional Conditions for a Consumption‐oriented Three Moment CAPM
Published: 12/1983, Volume: 38, Issue: 5 | DOI: 10.1111/j.1540-6261.1983.tb03830.x | Cited by: 60
ALAN KRAUS, ROBERT LITZENBERGER
In this paper, we develop sufficient conditions on probability distributions for a three moment (mean, variance, and skewness) consumption‐oriented capital asset pricing model (CAPM) to price correctly a subset of assets. The assumptions that individuals in an allocationally efficient capital market have identical probability beliefs and monotone increasing strictly concave utility functions displaying nonincreasing absolute risk aversion imply an aggregate preference function that exhibits preference for expected return, aversion to variance of return, and preference for positive skewness. For otherwise arbitrary preferences, we show that quadratic characteristic lines are sufficient for a subset of assets to be priced according to a three moment consumption‐oriented CAPM.
SKEWNESS PREFERENCE AND THE VALUATION OF RISK ASSETS*
Published: 9/1976, Volume: 31, Issue: 4 | DOI: 10.1111/j.1540-6261.1976.tb01961.x | Cited by: 169
Alan Kraus, Robert H. Litzenberger
Backwardation in Oil Futures Markets: Theory and Empirical Evidence
Published: 12/1995, Volume: 50, Issue: 5 | DOI: 10.1111/j.1540-6261.1995.tb05187.x | Cited by: 207
ROBERT H. LITZENBERGER, NIR RABINOWITZ
Oil futures prices are often below spot prices. This phenomenon, known as strong backwardation, is inconsistent with Hotelling's theory under certainty that the net price of an exhaustible resource rises over time at the rate of interest. We introduce uncertainty and characterize oil wells as call options. We show that (1) production occurs only if discounted futures are below spot prices, (2) production is non‐increasing in the riskiness of future prices, and (3) strong backwardation emerges if the riskiness of future prices is sufficiently high. The empirical analysis indicates that U.S. oil production is inversely related and backwardation is directly related to implied volatility.
MARKET EQUILIBRIUM IN A MULTIPERIOD STATE PREFERENCE MODEL WITH LOGARITHMIC UTILITY†
Published: 12/1975, Volume: 30, Issue: 5 | DOI: 10.1111/j.1540-6261.1975.tb01050.x | Cited by: 14
Alan Kraus, Robert H. Litzenberger
A STATE‐PREFERENCE MODEL OF OPTIMAL FINANCIAL LEVERAGE
Published: 9/1973, Volume: 28, Issue: 4 | DOI: 10.1111/j.1540-6261.1973.tb01415.x | Cited by: 904
Alan Kraus, Robert H. Litzenberger
An International Study of Tax Effects on Government Bonds
Published: 3/1984, Volume: 39, Issue: 1 | DOI: 10.1111/j.1540-6261.1984.tb03857.x | Cited by: 48
ROBERT H. LITZENBERGER, JACQUES ROLFO
It is shown that coupon bonds alone are not sufficient to span time‐dated claims on ordinary income, capital gains, and non‐taxable wealth. In an incomplete bond market where the pure dated claims are not spanned by existing bonds, marginal rates of substitution between present consumption and pure dated claims on ordinary income, capital gains income, and non‐taxable wealth, respectively, can differ across bondholders. However, the relative pricing of coupon bonds in each of these countries is shown to be consistent with the tax status of the major (non‐tax‐exempt) holders of government debt.
The Effects of Dividends on Common Stock Prices Tax Effects or Information Effects?
Published: 5/1982, Volume: 37, Issue: 2 | DOI: 10.1111/j.1540-6261.1982.tb03565.x | Cited by: 259
ROBERT H. LITZENBERGER, KRISHNA RAMASWAMY
DECENTRALIZED CAPITAL BUDGETING DECISIONS AND SHAREHOLDER WEALTH MAXIMIZATION
Published: 9/1975, Volume: 30, Issue: 4 | DOI: 10.1111/j.1540-6261.1975.tb01016.x | Cited by: 3
Robert H. Litzenberger, O. Maurice Joy
TAXATION AND THE INCIDENCE OF HOMEOWNERSHIP ACROSS INCOME GROUPS
Published: 6/1978, Volume: 33, Issue: 3 | DOI: 10.1111/j.1540-6261.1978.tb02034.x | Cited by: 15
Robert H. Litzenberger, Howard B. Sosin
DISCUSSION
Published: 5/1975, Volume: 30, Issue: 2 | DOI: 10.1111/j.1540-6261.1975.tb01835.x | Cited by: 1
Keith V. Smith, Robert H. Litzenberger
THE THEORY OF RECAPITALIZATIONS AND THE EVIDENCE OF DUAL PURPOSE FUNDS
Published: 12/1977, Volume: 32, Issue: 5 | DOI: 10.1111/j.1540-6261.1977.tb03346.x | Cited by: 16
Robert H. Litzenberger, Howard B. Sosin
THE CAPITAL STRUCTURE AND THE COST OF CAPITAL: COMMENT
Published: 6/1970, Volume: 25, Issue: 3 | DOI: 10.1111/j.1540-6261.1970.tb00531.x | Cited by: 2
Robert H. Litzenberger, Charles P. Jones
LEVERAGE, DIVERSIFICATION AND CAPITAL MARKET EFFECTS ON A RISK‐ADJUSTED CAPITAL BUDGETING FRAMEWORK
Published: 6/1968, Volume: 23, Issue: 3 | DOI: 10.1111/j.1540-6261.1968.tb00818.x | Cited by: 27
Donald L. Tuttle, Robert H. Litzenberger
On the CAPM Approach to the Estimation of A Public Utility's Cost of Equity Capital
Published: 5/1980, Volume: 35, Issue: 2 | DOI: 10.1111/j.1540-6261.1980.tb02166.x | Cited by: 16
ROBERT LITZENBERGER, KRISHNA RAMASWAMY, HOWARD SOSIN
QUARTERLY EARNINGS REPORTS AND INTERMEDIATE STOCK PRICE TRENDS
Published: 3/1970, Volume: 25, Issue: 1 | DOI: 10.1111/j.1540-6261.1970.tb00420.x | Cited by: 99
Charles P. Jones, Robert H. Litzenberger
A Utility‐Based Model of Common Stock Price Movements
Published: 3/1986, Volume: 41, Issue: 1 | DOI: 10.1111/j.1540-6261.1986.tb04492.x | Cited by: 10
ROBERT H. LITZENBERGER, EHUD I. RONN
This paper develops and tests a nonlinear utility‐based econometric model of the temporal behavior of aggregate stock price movements based on a constant relative risk aversion utility function and an observable information set consisting of aggregate consumption, aggregate dividends, and past stock prices. The stochastic process derived from time‐series analyses of consumption and dividends measured over annual intervals is used to derive and empirically test a closed‐form solution for stock‐price movements. The endogenization of discount rate changes in the utility‐based model is shown to be more consistent with aggregate stock price movements over a twenty‐year holdout period than constant discount rate models. The model is also used to estimate the representative investor's relative risk aversion. The estimate of 4.22 is consistent with that used by Grossman and Shiller in their perfect foresight model and is significantly higher than the relative risk aversion of 1.0 implied by logarithmic utility.
LEVERAGE AND THE COST OF CAPITAL IN A LESS DEVELOPED CAPITAL MARKET: COMMENT
Published: 6/1971, Volume: 26, Issue: 3 | DOI: 10.1111/j.1540-6261.1971.tb01731.x | Cited by: 6
Cherukuri U. Rao, Robert H. Litzenberger
ELIMINATION OF THE DOUBLE TAXATION OF DIVIDENDS AND CORPORATE FINANCIAL POLICY
Published: 6/1978, Volume: 33, Issue: 3 | DOI: 10.1111/j.1540-6261.1978.tb02015.x | Cited by: 21
Robert H. Litzenberger, James C. Van Horne
The Pricing of Commodity Futures Contracts, Nominal Bonds and Other Risky Assets under Commodity Price Uncertainty
Published: 3/1979, Volume: 34, Issue: 1 | DOI: 10.1111/j.1540-6261.1979.tb02071.x | Cited by: 50
FREDERICK L. A. GRAUER, ROBERT H. LITZENBERGER
Empirical Tests of the Consumption‐Oriented CAPM
Published: 6/1989, Volume: 44, Issue: 2 | DOI: 10.1111/j.1540-6261.1989.tb05056.x | Cited by: 230
DOUGLAS T. BREEDEN, MICHAEL R. GIBBONS, ROBERT H. LITZENBERGER
The empirical implications of the consumption‐oriented capital asset pricing model (CCAPM) are examined, and its performance is compared with a model based on the market portfolio. The CCAPM is estimated after adjusting for measurement problems associated with reported consumption data. The CCAPM is tested using betas based on both consumption and the portfolio having the maximum correlation with consumption. As predicted by the CCAPM, the market price of risk is significantly positive, and the estimate of the real interest rate is close to zero. The performances of the traditional CAPM and the CCAPM are about the same.
CHANGES IN THE SUPPLY OF MONEY, THE FIRM'S MARKET VALUE AND COST OF CAPITAL
Published: 3/1973, Volume: 28, Issue: 1 | DOI: 10.1111/j.1540-6261.1973.tb01344.x | Cited by: 4
A. P. Budd, R. H. Litzenberger
SECULAR TRENDS IN RISK PREMIUMS
Published: 9/1972, Volume: 27, Issue: 4 | DOI: 10.1111/j.1540-6261.1972.tb01316.x | Cited by: 2
R. H. Litzenberger, A. P. Budd
FACTORS AFFECTING PRICE, VOLUME AND CREDIT RISK IN THE CONSUMER FINANCE INDUSTRY
Published: 5/1970, Volume: 25, Issue: 2 | DOI: 10.1111/j.1540-6261.1970.tb00676.x | Cited by: 5
Robert W. Johnson, Robert P. Shay
Toward a National Market System for U.S. Exchange–listed Equity Options
Published: 3/25/2004, Volume: 59, Issue: 2 | DOI: 10.1111/j.1540-6261.2004.00653.x | Cited by: 102
Robert Battalio, Brian Hatch, Robert Jennings
In its response to the 1975 Congressional mandate to implement a national market system for financial securities, the Securities and Exchange Commission (SEC) initially exempted the option market. Recent dramatic changes in the structure of the option market prompted the SEC to revisit this issue. We examine a sample of actively traded, multiply listed equity options to ask whether this market's characteristics appear consistent with the goals of producing economically efficient transactions and facilitating “best execution.” We find marked changes between June 2000, when quotes are often ignored, and January 2002, when the market more closely resembles a national market.
Reputation Effects in Trading on the New York Stock Exchange
Published: 5/8/2007, Volume: 62, Issue: 3 | DOI: 10.1111/j.1540-6261.2007.01235.x | Cited by: 56
ROBERT BATTALIO, ANDREW ELLUL, ROBERT JENNINGS
Theory suggests that reputations allow nonanonymous markets to attenuate adverse selection in trading. We identify instances in which New York Stock Exchange (NYSE) stocks experience trading floor relocations. Although specialists follow the stocks to their new locations, most brokers do not. We find a discernable increase in liquidity costs around a stock's relocation that is larger for stocks with higher adverse selection and greater broker turnover. We also find that floor brokers relocating with the stock obtain lower trading costs than brokers not moving and brokers beginning trading post‐move. Our results suggest that reputation plays an important role in the NYSE's liquidity provision process.
Asset Price Volatility, Bubbles, and Process Switching
Published: 9/1986, Volume: 41, Issue: 4 | DOI: 10.1111/j.1540-6261.1986.tb04551.x | Cited by: 54
ROBERT P. FLOOD, ROBERT J. HODRICK
Evidence of excess volatilities of asset prices compared with those of market fundamentals is often attributed to speculative bubbles. This study demonstrates that bubbles could in theory lead to excess volatility, but it shows that certain variance bounds tests preclude bubbles as an explanation. The evidence ought to be attributed to model misspecification or inappropriate statistical tests. One important misspecification occurs if a researcher incorrectly specifies the time series properties of market fundamentals. A bubble‐free example economy characterized by a potential switch in government policies produces asset prices that would appear, to an unwary researcher, to contain bubbles.
DISCUSSION
Published: 7/1985, Volume: 40, Issue: 3 | DOI: 10.1111/j.1540-6261.1985.tb05025.x | Cited by: 0
ROBERT HEINKEL
Error Rates in CRSP and COMPUSTAT: A Second Look
Published: 12/1980, Volume: 35, Issue: 5 | DOI: 10.1111/j.1540-6261.1980.tb02210.x | Cited by: 33
ROBERT BENNIN
Heterogeneous Expectations, Restrictions on Short Sales, and Equilibrium Asset Prices
Published: 12/1980, Volume: 35, Issue: 5 | DOI: 10.1111/j.1540-6261.1980.tb02198.x | Cited by: 213
ROBERT JARROW
Under heterogeneous expectations, the mean–variance model of capital market equilibrium is employed to determine the effect restricting short sales has on equilibrium asset prices. Two equivalent markets differing only with respect to short sale restrictions are compared. It is shown that, in general, risky asset prices can either rise or fall due to short sale constraints. However, under a homogeneity of beliefs for the covariance matrix of future prices, short sale constraints will only increase risky asset prices.
SHORT‐RUN EFFECTS OF STOCK MARKET SERVICES ON STOCK PRICES
Published: 3/1958, Volume: 13, Issue: 1 | DOI: 10.1111/j.1540-6261.1958.tb04173.x | Cited by: 3
Robert Ferber
Can Brokers Have It All? On the Relation between Make‐Take Fees and Limit Order Execution Quality
Published: 9/14/2016, Volume: 71, Issue: 5 | DOI: 10.1111/jofi.12422 | Cited by: 152
ROBERT BATTALIO, SHANE A. CORWIN, ROBERT JENNINGS
We identify retail brokers that seemingly route orders to maximize order flow payments, by selling market orders and sending limit orders to venues paying large liquidity rebates. Angel, Harris, and Spatt argue that such routing may not always be in customers’ best interests. For both proprietary limit order data and a broad sample of trades from TAQ, we document a negative relation between several measures of limit order execution quality and rebate/fee level. This finding suggests that order routing designed to maximize liquidity rebates does not maximize limit order execution quality and thus brokers cannot have it all.
A Theory of Capital Structure Relevance under Imperfect Information
Published: 12/1982, Volume: 37, Issue: 5 | DOI: 10.1111/j.1540-6261.1982.tb03608.x | Cited by: 113
ROBERT HEINKEL
Firms raise debt and equity capital to finance a positive net present value project in perfectly competitive capital markets; firm insiders know the function generating the random firm cash flow but potential capital suppliers do not. Taking into account the incentives of insiders to misrepresent their firm type, capital suppliers attempt to design financing mixes of debt and equity that eliminate the adverse incentives of insiders and correctly price securities. Necessary conditions for a costless separating equilibrium are developed to show that the amount of debt used by a firm is monotonically related to its unobservable true value.
Debt Financing and Tax Status: Tests of the Substitution Effect and the Tax Exhaustion Hypothesis Using Firms' Responses to the Economic Recovery Tax Act of 1981
Published: 9/1992, Volume: 47, Issue: 4 | DOI: 10.1111/j.1540-6261.1992.tb04670.x | Cited by: 70
ROBERT TREZEVANT
This study tests the joint prediction of the substitution effect and the tax exhaustion hypothesis that an increase in non‐debt tax shields leads to a decrease in leverage. Controls are introduced for the debt securability effect, the pecking order theory of financing, and the probability of losing tax shields. Using the relationship between changes in investment tax shields and changes in debt tax shields of firms in response to the Economic Recovery Tax Act of 1981, strong empirical support is found for predictions based on the substitution effect and the tax exhaustion hypothesis.
DISCUSSION
Published: 6/1978, Volume: 33, Issue: 3 | DOI: 10.1111/j.1540-6261.1978.tb02019.x | Cited by: 1
Robert Willig
Discussion
Published: 8/2000, Volume: 55, Issue: 4 | DOI: 10.1111/0022-1082.00270 | Cited by: 0
Robert Marquez
THE PRICING OF OPTIONS WITH STOCHASTIC DIVIDEND YIELD
Published: 5/1978, Volume: 33, Issue: 2 | DOI: 10.1111/j.1540-6261.1978.tb04871.x | Cited by: 40
Robert Geske
A formula is derived in discrete time for pricing options when the underlying stock has a stochastic dividend yield. The result implies that regarding the dividend yield as certain when it is not results in misestimation of the variance of the underlying stock. Comparative statics indicate that this adjustment could diminish a bias of the Black‐Scholes model. This model systematically underprices deep‐out‐of‐the‐money options. A numerical example demonstrates that this stochastic adjustment may be more important for longer‐lived options and warrants.
DISCUSSION
Published: 5/1969, Volume: 24, Issue: 2 | DOI: 10.1111/j.1540-6261.1969.tb01690.x | Cited by: 0
Robert Solomon
Quotes, Prices, and Estimates in a Laboratory Market
Published: 12/1996, Volume: 51, Issue: 5 | DOI: 10.1111/j.1540-6261.1996.tb05226.x | Cited by: 45
ROBERT BLOOMFIELD
This study examines the behavior of laboratory markets in which two uninformed market makers compete to trade with heterogeneously informed investors. The data provide three main results. First, market makers set quotes to protect against adverse selection and to control inventory. Second, when investors are less well‐informed, their trades are less reliable measures of their information, and market makers respond to those trades with greater skepticism. Third, errors in market makers' reactions to trades cause the time‐series behavior of quotes and prices to depend on the information environment in ways beyond those captured in extant theory.
The Meaning of Internal Rates of Return
Published: 12/1981, Volume: 36, Issue: 5 | DOI: 10.1111/j.1540-6261.1981.tb01072.x | Cited by: 56
ROBERT DORFMAN
Nearly one hundred years after Irving Fisher' persuasive argument that net present value is the fundamental criterion for appraising investment projects, businessmen and bankers continue to consider the internal rate of return. Business practice is justified in some circumstances. It has long been recognized that a firm will grow asymptotically at a rate equal to the largest real positive root of an individual project' rate of return equation if the net cash flows are continually reinvested in projects of the same type. That same root also controls the firm' asymptotic growth rate if any fixed proportion of the cash flows is reinvested. The other roots of the equation are important also, since the stability of the firm' growth path depends on them.
POSTWAR DEVELOPMENTS IN THE MARKET FOR CONSUMER INSTALMENT CREDIT*
Published: 5/1956, Volume: 11, Issue: 2 | DOI: 10.1111/j.1540-6261.1956.tb00705.x | Cited by: 0
Robert Shay
THE INFLATIONARY IMPACT OF EIGHT FEDERAL AID AGENCIES DURING THE YEARS 1946–1950*
Published: 12/1954, Volume: 9, Issue: 4 | DOI: 10.1111/j.1540-6261.1954.tb01252.x | Cited by: 0
Robert Freedman
JUSTIFICATION FOR DIRECT REGULATION OF CONSUMER CREDIT REAPPRAISED
Published: 5/1953, Volume: 8, Issue: 2 | DOI: 10.1111/j.1540-6261.1953.tb01167.x | Cited by: 0
Robert Bartels
Potential Competition And Actual Competition In Equity Options
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04566.x | Cited by: 40
ROBERT NEAL
THE CONCEPT OF YIELD ON COMMON STOCK
Published: 5/1964, Volume: 19, Issue: 2 | DOI: 10.1111/j.1540-6261.1964.tb00762.x | Cited by: 1
Robert Ortner
DISCUSSION
Published: 6/1978, Volume: 33, Issue: 3 | DOI: 10.1111/j.1540-6261.1978.tb00768.x | Cited by: 0
Robert Salomon