Search results: 50.
DISCUSSION
Published: 7/1988, Volume: 43, Issue: 3 | DOI: 10.1111/j.1540-6261.1988.tb04604.x | Cited by: 0
STEPHEN J. BROWN
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.
DISCUSSION
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03683.x | Cited by: 1
STEPHEN J. BROWN
Survival
Published: 7/1995, Volume: 50, Issue: 3 | DOI: 10.1111/j.1540-6261.1995.tb04039.x | Cited by: 371
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.
Estimation Risk and Simple Rules for Optimal Portfolio Selection
Published: 9/1983, Volume: 38, Issue: 4 | DOI: 10.1111/j.1540-6261.1983.tb02284.x | Cited by: 34
SON‐NAN CHEN, STEPHEN J. BROWN
A New Approach to Testing Asset Pricing Models: The Bilinear Paradigm
Published: 6/1983, Volume: 38, Issue: 3 | DOI: 10.1111/j.1540-6261.1983.tb02498.x | Cited by: 104
STEPHEN J. BROWN, MARK I. WEINSTEIN
We propose a new approach to estimating and testing asset pricing models in the context of a bilinear paradigm introduced by Kruskal [18]. This approach is both simple and at the same time quite general. As an illustration we apply it to the special case of the arbitrage pricing model where the number of factors is pre‐specified. The data appear to be generally in conflict with a five or seven factor representation of the model used by Roll and Ross [30]. When we consider the number of replications of our test and the large number of observations on which it is performed, the frequency with which we reject the three factor APM does not lead us to conclude that this model is unrepresentative of security returns. Further, the rejection of the five and seven factor versions is to be expected if the three factor version is correct. The paradigm gives insight into the appropriate specification of the model and suggests that there may be a small number of economy wide factors that affect security returns.
Performance Persistence
Published: 6/1995, Volume: 50, Issue: 2 | DOI: 10.1111/j.1540-6261.1995.tb04800.x | Cited by: 817
STEPHEN J. BROWN, WILLIAM N. GOETZMANN
We explore performance persistence in mutual funds using absolute and relative benchmarks. Our sample, largely free of survivorship bias, indicates that relative risk‐adjusted performance of mutual funds persists; however, persistence is mostly due to funds that lag the S&P 500. A probit analysis indicates that poor performance increases the probability of disappearance. A year‐by‐year decomposition of the persistence effect demonstrates that the relative performance pattern depends upon the time period observed, and it is correlated across managers. Consequently, it is due to a common strategy that is not captured by standard stylistic categories or risk adjustment procedures.
Anomalies in Security Returns and the Specification of the Market Model
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03673.x | Cited by: 5
STEPHEN J. BROWN, CHRISTOPHER B. BARRY
We examine the hypothesis originally advanced by Roll[12]that observed anomalies in excess returns can be explained by misspecification of the market model used to estimate systematic risk. We find substantial misspecifications in the model systematically related to size and period of listing of the securities in question. There is some evidence that these misspecifications are associated with systemic biases in measured betas used to construct excess returns.
The Empirical Implications of the Cox, Ingersoll, Ross Theory of the Term Structure of Interest Rates
Published: 7/1986, Volume: 41, Issue: 3 | DOI: 10.1111/j.1540-6261.1986.tb04523.x | Cited by: 213
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 Dow Theory: William Peter Hamilton's Track Record Reconsidered
Published: 8/1998, Volume: 53, Issue: 4 | DOI: 10.1111/0022-1082.00054 | Cited by: 108
Stephen J. Brown, William N. Goetzmann, Alok Kumar
Alfred Cowles' test of the Dow Theory apparently provides strong evidence against the ability of Wall Street's most famous chartist to forecast the stock market. Cowles (1934) analyzes editorials published by the chief exponent of the Dow Theory, William Peter Hamilton. We review Cowles' evidence and find that it supports the contrary conclusion. Hamilton's timing strategies actually yield high Sharpe ratios and positive alphas for the period 1902 to 1929. Neural net modeling to replicate Hamilton's market calls provides interesting insight into the Dow Theory and allows us to examine the properties of the theory itself out of sample.
Sensation Seeking and Hedge Funds
Published: 11/9/2018, Volume: 73, Issue: 6 | DOI: 10.1111/jofi.12723 | Cited by: 79
STEPHEN BROWN, YAN LU, SUGATA RAY, MELVYN TEO
We show that, motivated by sensation seeking, hedge fund managers who own powerful sports cars take on more investment risk but do not deliver higher returns, resulting in lower Sharpe ratios, information ratios, and alphas. Moreover, sensation‐seeking managers trade more frequently, actively, and unconventionally, and prefer lottery‐like stocks. We show further that some investors are themselves susceptible to sensation seeking and that sensation‐seeking investors fuel the demand for sensation‐seeking managers. While investors perceive sensation seekers to be less competent, they do not fully appreciate the superior investment skills of sensation‐avoiding fund managers.
Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration
Published: 11/11/2008, Volume: 63, Issue: 6 | DOI: 10.1111/j.1540-6261.2008.01413.x | Cited by: 187
STEPHEN BROWN, WILLIAM GOETZMANN, BING LIANG, CHRISTOPHER SCHWARZ
Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV disclosures. Leverage and ownership structures suggest that lenders and equity investors were already aware of operational risk. However, operational risk does not mediate flow‐performance relationships. Investors either lack this information or regard it as immaterial. These findings suggest that regulators should account for the endogenous production of information and the marginal benefit of disclosure to different investment clienteles.
Careers and Survival: Competition and Risk in the Hedge Fund and CTA Industry
Published: 10/2001, Volume: 56, Issue: 5 | DOI: 10.1111/0022-1082.00392 | Cited by: 345
Stephen J. Brown, William N. Goetzmann, James Park
Investors in hedge funds and commodity trading advisors (CTAs) are concerned with risk as well as return. We investigate the volatility of hedge funds and CTAs in light of managerial career concerns. We find an association between past performance and risk levels consistent with previous findings for mutual fund managers. Variance shifts depend upon relative rather than absolute fund performance. The importance of relative rankings points to the importance of reputation costs in the investment industry. Our analysis of factors contributing to fund disappearance shows that survival depends on absolute and relative performance, excess volatility, and on fund age.
The Implications of Nonmarketable Income for Consumption‐Based Models of Asset Pricing
Published: 9/1988, Volume: 43, Issue: 4 | DOI: 10.1111/j.1540-6261.1988.tb02609.x | Cited by: 4
DAVID P. BROWN
A new representation of nonmarketable (NM) income is introduced in this essay. Using this representation and continuous trading, there exists a set of individuals who do not participate in the asset market and who consume at the rate of nonmarketable income derived from human capital. Because these individuals remain nonparticipants for a range of stochastic processes governing the NM income, consumption betas are not generally unique in value and the consumption‐based CAPM (CCAPM) does not obtain. However, the intertemporal CAPM (ICAPM) of Merton remains valid.
THE RATE OF RETURN OF SELECTED INVESTMENT PROJECTS
Published: 9/1978, Volume: 33, Issue: 4 | DOI: 10.1111/j.1540-6261.1978.tb02064.x | Cited by: 7
Keith C. Brown
Liquidity and Liquidation: Evidence from Real Estate Investment Trusts
Published: 2/2000, Volume: 55, Issue: 1 | DOI: 10.1111/0022-1082.00213 | Cited by: 38
David T. Brown
This study provides evidence that highly leveraged owner‐managed properties liquidated assets during the commercial real estate decline of the late 1980s, and that this provided buying opportunities for better capitalized buyers. The analysis documents significant financial distress costs for highly leveraged firms during an industry‐wide downturn and shows that these costs are particularly large for owner‐managed firms.
EARNINGS CHANGES, STOCK PRICES, AND MARKET EFFICIENCY
Published: 3/1978, Volume: 33, Issue: 1 | DOI: 10.1111/j.1540-6261.1978.tb03386.x | Cited by: 35
Stewart L. Brown
A NOTE ON THE APPARENT BIAS OF NET REVENUE ESTIMATES FOR CAPITAL INVESTMENT PROJECTS
Published: 9/1974, Volume: 29, Issue: 4 | DOI: 10.1111/j.1540-6261.1974.tb03098.x | Cited by: 28
Keith C. Brown
THE SIGNIFICANCE OF DUMMY VARIABLES IN MULTIPLE REGRESSIONS INVOLVING FINANCIAL AND ECONOMIC DATA
Published: 6/1968, Volume: 23, Issue: 3 | DOI: 10.1111/j.1540-6261.1968.tb00824.x | Cited by: 5
Keith C. Brown
THE POLICY ACCEPTANCE IN THE UNITED STATES OF RELIANCE ON AUTOMATIC FISCAL STABILIZERS
Published: 3/1959, Volume: 14, Issue: 1 | DOI: 10.1111/j.1540-6261.1959.tb00484.x | Cited by: 1
E. Cary Brown
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
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
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.
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.
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: 277
STEPHEN FIGLEWSKI
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
Biased Estimators and Unstable Betas
Published: 3/1980, Volume: 35, Issue: 1 | DOI: 10.1111/j.1540-6261.1980.tb03470.x | Cited by: 7
ELTON SCOTT, STEWART BROWN
MUTUAL FUND PORTFOLIO ACTIVITY, PERFORMANCE, AND MARKET IMPACT
Published: 5/1963, Volume: 18, Issue: 2 | DOI: 10.1111/j.1540-6261.1963.tb00730.x | Cited by: 5
F. E. Brown, Douglas Vickers
Mutual Fund Flows and Cross‐Fund Learning within Families
Published: 1/14/2016, Volume: 71, Issue: 1 | DOI: 10.1111/jofi.12263 | Cited by: 93
DAVID P. BROWN, YOUCHANG WU
We develop a model of performance evaluation and fund flows for mutual funds in a family. Family performance has two effects on a member fund's estimated skill and inflows: a positive common‐skill effect, and a negative correlated‐noise effect. The overall spillover can be either positive or negative, depending on the weight of common skill and correlation of noise in returns. Its absolute value increases with family size, and declines over time. The sensitivity of flows to a fund's own performance is affected accordingly. Empirical estimates of fund flow sensitivities show patterns consistent with rational cross‐fund learning within families.
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.
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
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
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.
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
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: 528
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.
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
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: 97
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 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
Personal Lending Relationships
Published: 12/14/2017, Volume: 73, Issue: 1 | DOI: 10.1111/jofi.12589 | Cited by: 136
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.
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
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.
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 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
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
DISCUSSION
Published: 5/1970, Volume: 25, Issue: 2 | DOI: 10.1111/j.1540-6261.1970.tb00673.x | Cited by: 0
Stephen H. Archer
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
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
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: 166
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.
DISCUSSION
Published: 5/1977, Volume: 32, Issue: 2 | DOI: 10.1111/j.1540-6261.1977.tb03280.x | Cited by: 0
Stephen A. Ross
DISCUSSION
Published: 5/1979, Volume: 34, Issue: 2 | DOI: 10.1111/j.1540-6261.1979.tb02118.x | Cited by: 0
STEPHEN A. BUSER