The Journal of Finance

SEPARATION, DECOMPOSITION, AND DIVERSIFICATION IN THE SINGLE‐PERIOD PORTFOLIO PROBLEM*

Published: 12/1973,  Volume: 28,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1973.tb01470.x  |  Cited by: 0

Stephen A. Buser

DISCUSSION

Published: 5/1979,  Volume: 34,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1979.tb02118.x  |  Cited by: 0

STEPHEN A. BUSER

LaPlace Transforms as Present Value Rules: A Note

Published: 3/1986,  Volume: 41,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1986.tb04502.x  |  Cited by: 17

STEPHEN A. BUSER

The present value equation in finance is shown to be equivalent to the Laplace transformation in mathematics. Based on this observation, the list of known analytic solutions for the present value problem is increased from a handful to more than one hundred. General properties of the Laplace transform are examined as well in light of the newly discovered significance for finance.

Portfolio Diversification at Commercial Banks

Published: 3/1979,  Volume: 34,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1979.tb02068.x  |  Cited by: 5

EDWARD J. KANE, STEPHEN A. BUSER

Federal Deposit Insurance, Regulatory Policy, and Optimal Bank Capital*

Published: 3/1981,  Volume: 36,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1981.tb03534.x  |  Cited by: 92

STEPHEN A. BUSER, ANDREW H. CHEN, EDWARD J. KANE

This paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the FDIC. Essentially, the FDIC sells two products—insurance and regulation. To span the product space, it must and does set two prices. We argue that the need to establish regulatory disincentives to bank risk‐taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value (i.e., the value of their right to continue in business) stands at the center of these disincentives and in front of the FDIC's insurance reserves.

Hedging Performance and Basis Risk in Stock Index Futures

Published: 7/1984,  Volume: 39,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1984.tb03654.x  |  Cited by: 275

STEPHEN FIGLEWSKI

USES OF FLOW‐OF‐FUNDS ACCOUNTS IN THE FEDERAL RESERVE SYSTEM*

Published: 5/1963,  Volume: 18,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1963.tb00720.x  |  Cited by: 1

Stephen Taylor

Futures Trading and Volatility in the GNMA Market

Published: 5/1981,  Volume: 36,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1981.tb00461.x  |  Cited by: 147

STEPHEN FIGLEWSKI

Information Diversity and Market Behavior: A Reply

Published: 3/1984,  Volume: 39,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1984.tb03881.x  |  Cited by: 1

STEPHEN FIGLEWSKI

Information Diversity and Market Behavior

Published: 3/1982,  Volume: 37,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1982.tb01097.x  |  Cited by: 29

STEPHEN FIGLEWSKI

The paper addresses two major issues raised by information diversity in a speculative market. First, we analyze what property of an investor's information leads to an expected speculative profit and show that independence is more important than accuracy. Second, we consider whether the market price must become fully efficient, in the sense that every investor's information is accurately discounted, when traders use it rationally as an information source. We prove that for any information structure there is a unique equilibrium weighting of investor beliefs at which the price is fully efficient and also every trader's expected profit is zero. Except for special structures, however, this equilibrium need not be attained in finite time.

Options Arbitrage in Imperfect Markets

Published: 12/1989,  Volume: 44,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1989.tb02654.x  |  Cited by: 221

STEPHEN FIGLEWSKI

Option valuation models are based on an arbitrage strategy—hedging the option against the underlying asset and rebalancing continuously until expiration—that is only possible in a frictionless market. This paper simulates the impact of market imperfections and other problems with the “standard” arbitrage trade, including uncertain volatility, transactions costs, indivisibilities, and rebalancing only at discrete intervals. We find that, in an actual market such as that for stock index options, the standard arbitrage is exposed to such large risk and transactions costs that it can only establish very wide bounds on equilibrium options prices. This has important implications for price determination in options markets, as well as for testing of valuation models.

MONETARY POLICY IN CONTINENTAL WESTERN EUROPE, 1944–52*

Published: 12/1956,  Volume: 11,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1956.tb04097.x  |  Cited by: 0

Stephen F. Sherwin

SOME NOTES ON FINANCIAL INCENTIVE‐SIGNALLING MODELS, ACTIVITY CHOICE AND RISK PREFERENCES

Published: 6/1978,  Volume: 33,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1978.tb02018.x  |  Cited by: 33

Stephen A. Ross

COMMERCIAL BANK BEHAVIOR AND THE LEVEL OF ECONOMIC ACTIVITY: AN ECONOMETRIC STUDY*

Published: 9/1965,  Volume: 20,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1965.tb02918.x  |  Cited by: 0

Stephen M. Goldfeld

Personal Lending Relationships

Published: 12/14/2017,  Volume: 73,  Issue: 1  |  DOI: 10.1111/jofi.12589  |  Cited by: 134

STEPHEN ADAM KAROLYI

I identify the effects of personal relationships on loan contracting using executive deaths and retirements at other firms as a source of exogenous variation in executive turnover. After plausibly exogenous turnover, borrowers choose lenders with which their new executives have personal relationships 4.1 times as frequently, and loans from these lenders have 20 basis points lower spreads and 12.5% larger amounts. Personal relationships benefit firms across loan terms, especially during macroeconomic downturns. Increased financial flexibility from personal relationships insulated firms from financial shocks during the recent financial crisis: they exhibited less constrained investment and were less likely to layoff employees.

Survival

Published: 7/1995,  Volume: 50,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1995.tb04039.x  |  Cited by: 369

STEPHEN J. BROWN, WILLIAM N. GOETZMANN, STEPHEN A. ROSS

Empirical analysis of rates of return in finance implicitly condition on the security surviving into the sample. We investigate the implications of such conditioning on the time series of rates of return. In general this conditioning induces a spurious relationship between observed return and total risk for those securities that survive to be included in the sample. This result has immediate implications for the equity premium puzzle. We show how these results apply to other outstanding problems of empirical finance. Long‐term autocorrelation studies focus on the statistical relation between successive holding period returns, where the holding period is of possibly extensive duration. If the equity market survives, then we find that average return in the beginning is higher than average return near the end of the time period. For this reason, statistical measures of long‐term dependence are typically biased towards the rejection of a random walk. The result also has implications for event studies. There is a strong association between the magnitude of an earnings announcement and the postannouncement performance of the equity. This might be explained in part as an artefact of the stock price performance of firms in financial distress that survive an earnings announcement. The final example considers stock split studies. In this analysis we implicitly exclude securities whose price on announcement is less than the prior average stock price. We apply our results to this case, and find that the condition that the security forms part of our positive stock split sample suffices to explain the upward trend in event‐related cumulated excess return in the preannouncement period.

Discussion

Published: 8/2001,  Volume: 56,  Issue: 4  |  DOI: 10.1111/0022-1082.00374  |  Cited by: 2

Stephen A. Ross

THE THEORETICAL VALUE OF A STOCK RIGHT: A COMMENT

Published: 9/1956,  Volume: 11,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1956.tb00111.x  |  Cited by: 1

Stephen H. Archer

Compensation, Incentives, and the Duality of Risk Aversion and Riskiness

Published: 2/2004,  Volume: 59,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2004.00631.x  |  Cited by: 529

Stephen A. Ross

The common folklore that giving options to agents will make them more willing to take risks is false. In fact, no incentive schedule will make all expected utility maximizers more or less risk averse. This paper finds simple, intuitive, necessary and sufficient conditions under which incentive schedules make agents more or less risk averse. The paper uses these to examine the incentive effects of some common structures such as puts and calls, and it briefly explores the duality between a fee schedule that makes an agent more or less risk averse, and gambles that increase or decrease risk.

THE INTERNAL DRAIN AND BANK CREDIT EXPANSION*

Published: 12/1953,  Volume: 8,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1953.tb01187.x  |  Cited by: 0

Stephen L. McDonald

FINANCIAL STRUCTURE AND THE THEORY OF PRODUCTION

Published: 12/1970,  Volume: 25,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1970.tb00868.x  |  Cited by: 6

Stephen J. Turnovsky

AN INTEGRATED DECISION MODEL OF THE FIRM*

Published: 6/1973,  Volume: 28,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1973.tb01403.x  |  Cited by: 0

Stephen P. Mezger

DISCUSSION

Published: 5/1977,  Volume: 32,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1977.tb03280.x  |  Cited by: 0

Stephen A. Ross

Information and Volatility: The No‐Arbitrage Martingale Approach to Timing and Resolution Irrelevancy

Published: 3/1989,  Volume: 44,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1989.tb02401.x  |  Cited by: 492

STEPHEN A. ROSS

The no‐arbitrage martingale analysis is used to study the effect on asset prices of changes in the rate of information flow. The analysis is first used to develop some simple tools for asset pricing in a continuous‐time setting. These tools are then applied to determine the effect of information on prices and price volatility, to extend Samuelson's theorem on prices fluctuating randomly, and to study the impact on prices of the resolution of uncertainty. The conditions under which uncertainty resolution is irrelevant for asset pricing are shown to be similar to those which support the MM irrelevance theorems.

EFFICIENT CAPITAL MARKETS: COMMENT

Published: 3/1976,  Volume: 31,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1976.tb03204.x  |  Cited by: 55

Stephen F. LeRoy

Foreign Exchange Rate Forecasting Techniques: Implications for Business and Policy

Published: 5/1979,  Volume: 34,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1979.tb02104.x  |  Cited by: 42

STEPHEN H. GOODMAN

A SIMPLE MODEL OF INFORMATION AND LENDING BEHAVIOR: COMMENT

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03257.x  |  Cited by: 1

Stephen M. Miller

SOME FACTORS AFFECTING THE INCREASED RELATIVE USE OF CURRENCY SINCE 1939*

Published: 9/1956,  Volume: 11,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1956.tb00107.x  |  Cited by: 0

Stephen L. McDonald

DISCUSSION

Published: 7/1984,  Volume: 39,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1984.tb03683.x  |  Cited by: 1

STEPHEN J. BROWN

AN EMPIRICAL TEST OF GUIDES TO SELECTION OF INDUSTRIAL COMMON STOCKS FOR INSTITUTIONS*

Published: 3/1960,  Volume: 15,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1960.tb04838.x  |  Cited by: 0

Stephen H. Archer

Debt and Taxes and Uncertainty

Published: 7/1985,  Volume: 40,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1985.tb04986.x  |  Cited by: 63

STEPHEN A. ROSS

With a graduated personal tax schedule, Miller showed that there could be an equilibrium debt supply for the corporate sector as a whole. In the presence of uncertainty there is also a unique debt/equity ratio for each individual firm, and this ratio is related to the firm's operational risk characteristics. However, if firms merge and spin off in response to tax incentives, the identity of firms is ambiguous and only the corporate sector is a meaningful construct. These arguments are developed in both discrete and continuous models that employ extensions of the arbitrage‐free pricing theory.

DISCUSSION

Published: 5/1980,  Volume: 35,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1980.tb02171.x  |  Cited by: 4

STEPHEN M. SCHAEFER

THE CAPITAL ASSET PRICING MODEL (CAPM), SHORT‐SALE RESTRICTIONS AND RELATED ISSUES

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03251.x  |  Cited by: 90

Stephen A. Ross

AN EMPIRICAL INVESTIGATION OF COMMERCIAL PAPER SUB‐MARKETS: 1955–1968*

Published: 9/1975,  Volume: 30,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1975.tb01041.x  |  Cited by: 0

Stephen E. Skomp

Expectations Models of Asset Prices: A Survey of Theory

Published: 3/1982,  Volume: 37,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1982.tb01103.x  |  Cited by: 41

STEPHEN F. LEROY

This paper identifies restrictions on preferences under which various classes of “expectations” theories of asset prices—i.e., uncertainty models of asset prices which coincide with the corresponding certainty theory except that expected future prices replace actual future prices—are valid. Major classes of expectations models surveyed are martingale models, the expectations hypothesis of the term structure of interest rates, and models of exhaustible resources and futures markets. In each case the required restriction is related to the assumptiono f risk—neutrality, but the precise nature of the required restriction is shown to differ significantly among the various classes of expectations theories.

The Predictive Content of Earnings Forecasts and Dividends

Published: 9/1983,  Volume: 38,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1983.tb02290.x  |  Cited by: 96

STEPHEN H. PENMAN

This paper compares the properties of dividend announcements and management earnings forecasts as predictors of earnings and firm value. First, the two predictors are compared on the basis of their ability to predict earnings. Then the information they convey about firm value is assessed by comparison of the performance of investment strategies based on values of the two predictors. Finally, the effects of dividend announcements on stock prices are considered.

The Structure of Corporate Ownership in Japan

Published: 7/1992,  Volume: 47,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1992.tb04007.x  |  Cited by: 387

STEPHEN D. PROWSE

I examine the structure of corporate ownership in a sample of Japanese firms in the mid 1980s. Ownership is highly concentrated in Japan, with financial institutions by far the most important large shareholders. Ownership concentration in independent Japanese firms is positively related to the returns from exerting greater control over management. This is not the case in firms that are members of corporate groups (keiretsu). Ownership concentration and the accounting profit rate in both independent and keiretsu firms are unrelated. The results are consistent with the notion that there exist two distinct corporate governance systems in Japan —one among independent firms and the other among firms that are members of keiretsu.

DISCUSSION

Published: 7/1988,  Volume: 43,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1988.tb04604.x  |  Cited by: 0

STEPHEN J. BROWN

A RE‐EXAMINATION OF MARKET AND INDUSTRY FACTORS IN STOCK PRICE BEHAVIOR

Published: 6/1973,  Volume: 28,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1973.tb01390.x  |  Cited by: 45

Stephen L. Meyers

DISCUSSION

Published: 5/1970,  Volume: 25,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1970.tb00673.x  |  Cited by: 0

Stephen H. Archer

A Note on Inflation, Taxation and Investment Returns

Published: 3/1980,  Volume: 35,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1980.tb03480.x  |  Cited by: 4

STEPHEN M. CROSS

ON OPTIMAL FINANCING OF CYCLICAL CASH NEEDS: COMMENT

Published: 9/1975,  Volume: 30,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1975.tb01029.x  |  Cited by: 0

H. Stephen Grace

The Number of Factors in Security Returns

Published: 12/1989,  Volume: 44,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1989.tb02652.x  |  Cited by: 129

STEPHEN J. BROWN

Both factor analysis of security returns and the analysis of eigenvalues seem to indicate that a market factor explains the major part of security returns. We find that such evidence is consistent with an economy where there are in fact k “equally important” priced factors; eigenvalue analysis in the context of such an economy will lead an investigator to the false inference that the one important “factor” is the return on an equally weighted market index.

Institutional Markets, Financial Marketing, and Financial Innovation

Published: 7/1989,  Volume: 44,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1989.tb04377.x  |  Cited by: 165

STEPHEN A. ROSS

Firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations. Because of these agency theoretic relations, institutional behavior in financial markets is not a simple reflection of the preference structures of individuals. Institutional preferences give rise to a demand for new financial instruments and innovations, even when the returns on these instruments are “spanned” in the sense of complete pricing. The innovations can be thought of as solving moral hazard problems. An agency theoretic example serves to illustrate the demand, supply, and financial marketing of stripped securities. In short, institutions matter.

Optimal Aggregation of Money Supply Forecasts: Accuracy, Profitability and Market Efficiency

Published: 6/1983,  Volume: 38,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1983.tb02497.x  |  Cited by: 52

STEPHEN FIGLEWSKI, THOMAS URICH

We present a general procedure for aggregating expert forecasts which exploits regularities in the structure of information within the forecaster population. Specific information structures lead to aggregation methods which adjust for additive bias, differences in individual accuracy, and correlation among forecasts. As an application, we construct composite predictions of the weekly change in the money supply from forecasts made by twenty major securities dealers, for which high positive correlation is found to be a significant characteristic. Due to instability in the information structure, our methods cannot improve on the accuracy of a simple average in this case. However, they do capture information about the correlation among money supply forecasts which is not fully impounded in short‐term interest rates. Forecasts from our models accurately predict the direction of price changes for Treasury bills and Treasury bill futures after a money supply announcement.

A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory: A Reply

Published: 6/1984,  Volume: 39,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1984.tb02313.x  |  Cited by: 43

RICHARD ROLL, STEPHEN A. ROSS

On the Cross‐sectional Relation between Expected Returns and Betas

Published: 3/1994,  Volume: 49,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1994.tb04422.x  |  Cited by: 168

RICHARD ROLL, STEPHEN A. ROSS

There is an exact linear relation between expected returns and true “betas” when the market portfolio is on the ex ante mean‐variance efficient frontier, but empirical research has found little relation between sample mean returns and estimated betas. A possible explanation is that market portfolio proxies are mean‐variance inefficient. We categorize proxies that produce particular relations between expected returns and true betas. For the special case of a zero relation, a market portfolio proxy must lie inside the efficient frontier, but it may be close to the frontier.

A Note on the Local Expectations Hypothesis: A Discrete‐Time Exposition—Erratum

Published: 6/1987,  Volume: 42,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1987.tb02580.x  |  Cited by: 0

CHRISTIAN GILLES, STEPHEN F. LeROY

Meeting Targets in Competitive Product Markets

Published: 6/24/2024,  Volume: 79,  Issue: 4  |  DOI: 10.1111/jofi.13369  |  Cited by: 6

EMILIO BISETTI, STEPHEN A. KAROLYI

We show that public banks face negative stock return jumps after missing their earnings per share (EPS) targets, and theoretically and quantitatively link these jumps to bunching behavior in the EPS surprise distribution. Bunching banks cut deposit rates to meet their targets, but do so at the expense of deposit outflows and franchise value losses. Local competitors, including private banks unexposed to capital market pressure, increase deposit rates, compensating depositors for switching. Our results provide new evidence that performance targeting incentives can affect consumer product prices, and suggest that competition may provide a check on public firms' targeting efforts.

Market Risk and Model Risk for a Financial Institution Writing Options

Published: 8/1999,  Volume: 54,  Issue: 4  |  DOI: 10.1111/0022-1082.00152  |  Cited by: 177

T. Clifton Green, Stephen Figlewski

Derivatives valuation and risk management involve heavy use of quantitative models. To develop a quantitative assessment of model risk as it affects the basic option writing strategy that might be followed by a financial institution, we conduct an empirical simulation, with and without hedging, using data from 1976 to 1996. Results indicate that imperfect models and inaccurate volatility forecasts create sizable risk exposure for option writers. We consider to what extent the damage due to model risk can be limited by pricing options using a higher volatility than the best estimate from historical data.