The Journal of Finance

An Examination of Ex‐Dividend Day Stock Price Movements: The Case of Nontaxable Master Limited Partnership Distributions

Published: 6/1991,  Volume: 46,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1991.tb02685.x  |  Cited by: 18

WAYNE H. SHAW

This study examines the unit (stock) price and volume behavior of master limited partnerships (MLP) around the ex‐dividend day. Since the dividends of MLPs are not taxable to the unitholder, tax based hypotheses predict no abnormal unit movements around the ex‐day. Significant positive excess returns and volume are found before the ex‐dividend day, and significant negative excess returns are found on the ex‐dividend day. The findings which are not significantly impacted by the Tax Reform Act of 1986 suggest ex‐day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior.

Deposit Insurance and Wealth Effects: The Value of Being “Too Big to Fail”

Published: 12/1990,  Volume: 45,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1990.tb03729.x  |  Cited by: 147

MAUREEN O'HARA, WAYNE SHAW

This paper investigates the effect on bank equity values of the Comptroller of the Currency's announcement that some banks were “too big to fail” and that for those banks total deposit insurance would be provided. Using an event study methodology, we find positive wealth effects accruing to TBTF banks, with corresponding negative effects accruing to non‐included banks. We demonstrate that the magnitude of these effects differed with bank solvency and size. We also show that the policy to which the market reacted was that suggested by the Wall Street Journal and not that actually intended by the Comptroller.

Investing in Bankrupt Firms

Published: 12/1988,  Volume: 43,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1988.tb03964.x  |  Cited by: 53

DALE MORSE, WAYNE SHAW

We examine the investment characteristics of firms electing to enter bankruptcy, between 1973 and 1982. Comparisons are made before and after the Bankruptcy Reform Act of 1978. Our results indicate that the 1978 Act had no significant impact on bankruptcy decisions or resolutions for actively traded firms. Trading in bankrupt firms' securities is becoming more common, but no abnormal returns appear to be available. Systematic risk does not change significantly with the filing of bankruptcy, but there is a significant increase in return variance. The financial markets also react to various announcements of stages in the reorganization process.

The Persistence of IPO Mispricing and the Predictive Power of Flipping

Published: 6/1999,  Volume: 54,  Issue: 3  |  DOI: 10.1111/0022-1082.00135  |  Cited by: 237

Laurie Krigman, Wayne H. Shaw, Kent L. Womack

AbstractThis paper examines underwriters' pricing errors and the information content of first‐day trading activity in IPOs. We show that first‐day winners continue to be winners over the first year, and first‐day dogs continue to be relative dogs. Exceptions are “extra‐hot” IPOs, which provide the worst future performance. We also demonstrate that large, supposedly informed, traders “flip” IPOs that perform the worst in the future. IPOs with low flipping generate abnormal returns of 1.5 percentage points per month over the first six months beginning on the third day. We show that flipping is predictable and conclude that underwriters' pricing errors are intentional.

Changes in Expected Security Returns, Risk, and the Level of Interest Rates

Published: 12/1989,  Volume: 44,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1989.tb02650.x  |  Cited by: 148

WAYNE E. FERSON

Regressions of security returns on treasury bill rates provide insight about the behavior of risk in rational asset pricing models. The information in one‐month bill rates implies time variation in the conditional covariances of portfolios of stocks and fixed‐income securities with benchmark pricing variables, over extended samples and within five‐year subperiods. There is evidence of changes in conditional “betas” associated with interest rates. Consumption and stock market data are examined as proxies for marginal utility, in a general framework for asset pricing with time‐varying conditional covariances.

DISCUSSION

Published: 7/1984,  Volume: 39,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1984.tb03681.x  |  Cited by: 1

WAYNE H. MIKKELSON

HORSE RACING: TESTING THE EFFICIENT MARKETS MODEL

Published: 9/1978,  Volume: 33,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1978.tb02051.x  |  Cited by: 133

Wayne W. Snyder

Are the Latent Variables in Time‐Varying Expected Returns Compensation for Consumption Risk?

Published: 6/1990,  Volume: 45,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1990.tb03696.x  |  Cited by: 41

WAYNE E. FERSON

Multibeta asset pricing models are examined using proxies for economic state variables in a framework which exploits time‐varying expected returns to estimate conditional betas. Examples include multiple consumption‐beta models and models where asset returns proxy for the state variables. When the state variables are not specified, the tests indicate two or three time‐varying expected risk premiums in the sample of quarterly asset returns. Conditional betas relative to consumption generate less striking evidence against the model than betas relative to asset returns, but both the consumption and the market variables fail to proxy for the state variables.

DISCUSSION

Published: 7/1986,  Volume: 41,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1986.tb04524.x  |  Cited by: 0

WAYNE E. FERSON

THE PERFORMANCE OF PRIMARY COMMON STOCK OFFERINGS: A CANADIAN COMPARISON

Published: 12/1971,  Volume: 26,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1971.tb01751.x  |  Cited by: 17

David C. Shaw

THE HISTORY, ORGANIZATION, AND POLICIES OF THE BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION*

Published: 12/1953,  Volume: 8,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1953.tb01191.x  |  Cited by: 0

Edward P. Shaw

Alpha and Performance Measurement: The Effects of Investor Disagreement and Heterogeneity

Published: 7/18/2014,  Volume: 69,  Issue: 4  |  DOI: 10.1111/jofi.12165  |  Cited by: 70

WAYNE FERSON, JERCHERN LIN

The literature has not established that a positive alpha, as traditionally measured, means that an investor would want to buy a fund. When alpha is defined using the client's utility function, a positive alpha generally means the client would want to buy. When markets are incomplete, investors will disagree about the attractiveness of a fund. We provide bounds on the expected disagreement with a traditional alpha and study the cross‐sectional relation of disagreement and investor heterogeneity with the flow response to past fund alphas. The effects are both economically and statistically significant.

DISCUSSION

Published: 5/1975,  Volume: 30,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1975.tb01832.x  |  Cited by: 0

Gail R. Wilensky, Wayne Vroman

THE COST OF CAPITAL AND VALUATION OF A TWO‐COUNTRY FIRM: COMMENT

Published: 9/1977,  Volume: 32,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1977.tb03334.x  |  Cited by: 1

Michael A. Goldberg, Wayne Y. Lee

Conditioning Variables and the Cross Section of Stock Returns

Published: 8/1999,  Volume: 54,  Issue: 4  |  DOI: 10.1111/0022-1082.00148  |  Cited by: 645

Wayne E. Ferson, Campbell R. Harvey

Previous studies identify predetermined variables that predict stock and bond returns through time. This paper shows that loadings on the same variables provide significant cross‐sectional explanatory power for stock portfolio returns. The loadings are significant given the three factors advocated by Fama and French (1993) and the four factors of Elton, Gruber, and Blake (1995). The explanatory power of the loadings on lagged variables is robust to various portfolio grouping procedures and other considerations. The results carry implications for risk analysis, performance measurement, cost‐of‐capital calculations, and other applications.

Seasonality and Consumption‐Based Asset Pricing

Published: 6/1992,  Volume: 47,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1992.tb04400.x  |  Cited by: 71

WAYNE E. FERSON, CAMPBELL R. HARVEY

Most of the evidence on consumption‐based asset pricing is based on seasonally adjusted consumption data. The consumption‐based models have not worked well for explaining asset returns, but with seasonally adjusted data there are reasons to expect spurious rejections of the models. This paper examines asset pricing models using not seasonally adjusted aggregate consumption data. We find evidence against models with time‐separable preferences, even when the models incorporate seasonality and allow seasonal heteroskedasticity. A model that uses not seasonally adjusted consumption data and nonseparable preferences with seasonal effects works better according to several criteria. The parameter estimates imply a form of seasonal habit persistence in aggregate consumption expenditures.

The Efficient Use of Conditioning Information in Portfolios

Published: 6/2001,  Volume: 56,  Issue: 3  |  DOI: 10.1111/0022-1082.00351  |  Cited by: 154

Wayne E. Ferson, Andrew F. Siegel

We study the properties of unconditional minimum‐variance portfolios in the presence of conditioning information. Such portfolios attain the smallest variance for a given mean among all possible portfolios formed using the conditioning information. We provide explicit solutions for n risky assets, either with or without a riskless asset. Our solutions provide insights into portfolio management problems and issues in conditional asset pricing.

Measuring Fund Strategy and Performance in Changing Economic Conditions

Published: 6/1996,  Volume: 51,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1996.tb02690.x  |  Cited by: 1255

WAYNE E. FERSON, RUDI W. SCHADT

The use of predetermined variables to represent public information and time‐variation has produced new insights about asset pricing models, but the literature on mutual fund performance has not exploited these insights. This paper advocates conditional performance evaluation in which the relevant expectations are conditioned on public information variables. We modify several classical performance measures to this end and find that the predetermined variables are both statistically and economically significant. Conditioning on public information controls for biases in traditional market timing models and makes the average performance of the mutual funds in our sample look better.

COST OF CAPITAL FOR A DIVISION OF A FIRM: COMMENT

Published: 12/1977,  Volume: 32,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1977.tb03373.x  |  Cited by: 4

J. Fred Weston, Wayne Y. Lee

FINANCIAL INTERMEDIARIES AND THE SAVING‐INVESTMENT PROCESS*

Published: 5/1956,  Volume: 11,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1956.tb00707.x  |  Cited by: 14

John G. Gurley, Edward S. Shaw

When Is Bad News Really Bad News?

Published: 12/2002,  Volume: 57,  Issue: 6  |  DOI: 10.1111/1540-6261.00504  |  Cited by: 207

Jennifer Conrad, Bradford Cornell, Wayne R. Landsman

We examine whether the price response to bad and good earnings shocks changes as the relative level of the market changes. The study is based on a complete sample of annual earnings announcements during the period 1988 to 1998. The relative level of the market is based on the difference between the current market P/E and the average market P/E over the prior 12 months. We find that the stock price response to negative earnings surprises increases as the relative level of the market rises. Furthermore, the difference between bad news and good news earnings response coefficients rises with the market.

The Rule 415 Experiment: Equity Markets

Published: 12/1985,  Volume: 40,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1985.tb02390.x  |  Cited by: 84

SANJAI BHAGAT, M. WAYNE MARR, G. RODNEY THOMPSON

Rule 415 allows a firm to register all the securities it reasonably expects to sell over the next two years and then, at the management's option, to sell those securities over these two years whenever it chooses. This paper examines whether equity offerings made under Rule 415 (shelf offerings) differ in issuing costs from equity offerings not sold under this rule. We find that shelf offerings cost 13% less for syndicated issues and 51% less for nonsyndicated issues. We also investigate the empirical relevance of the market overhang argument which suggests that shelf registrations depress the price of the registering firm's shares more than traditional registrations. Our data does not support the market overhang argument.

THE ROLE OF THE MULTINATIONAL FIRM IN THE INTEGRATION OF SEGMENTED CAPITAL MARKETS

Published: 5/1977,  Volume: 32,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1977.tb03286.x  |  Cited by: 0

Michael Adler, Wayne Y. Lee, Kanwal S. Sachdeva

Screening, Market Signalling, and Capital Structure Theory

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03837.x  |  Cited by: 11

WAYNE L. LEE, ANJAN V. THAKOR, GAUTAM VORA

This paper develops an equilibrium model in which informational asymmetries about the qualities of products offered for sale are resolved through a mechanism which combines the signalling and costly screening approaches. The model is developed in the context of a capital market setting in which bondholders produce costly information about a firm's a priori imperfectly known earnings distribution and use this information in specifying a bond valuation schedule to the firm. Given this schedule, the firm's optimal choices of debt‐equity ratio and debt maturity structure subsequently signal to prospective shareholders the relevant parameters of the firm's earnings distribution.

Spurious Regressions in Financial Economics?

Published: 7/15/2003,  Volume: 58,  Issue: 4  |  DOI: 10.1111/1540-6261.00571  |  Cited by: 437

Wayne E. Ferson, Sergei Sarkissian, Timothy T. Simin

Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974). Data mining for predictor variables interacts with spurious regression bias. The two effects reinforce each other, because more highly persistent series are more likely to be found significant in the search for predictor variables. Our simulations suggest that many of the regressions in the literature, based on individual predictor variables, may be spurious.

Tests of Asset Pricing with Time‐Varying Expected Risk Premiums and Market Betas

Published: 6/1987,  Volume: 42,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1987.tb02564.x  |  Cited by: 92

WAYNE E. FERSON, SHMUEL KANDEL, ROBERT F. STAMBAUGH

Tests of asset‐pricing models are developed that allow expected risk premiums and market betas to vary over time. These tests exploit the relation between expected excess returns and current market values. Using weekly data for 1963 through 1982 on ten common stock portfolios formed according to equity capitalization, a single‐risk‐premium model is not rejected if the expected premium is time varying and is not constrained to correspond to a market factor. Conditional mean‐variance efficiency of a value‐weighted stock index is rejected, and the rejection is insensitive to how much variability of expected risk premiums is assumed.

Managers' Trading Around Stock Repurchases

Published: 12/1992,  Volume: 47,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1992.tb04690.x  |  Cited by: 120

D. SCOTT LEE, WAYNE H. MIKKELSON, M. MEGAN PARTCH

We analyze personal open market trades by managers around stock repurchases by tender offer. With the exception of Dutch auction offers, managers trade their firm's shares prior to repurchase announcements as though repurchases convey favorable inside information to outsiders. Prior to fixed price repurchase offers that do not follow takeover‐related events, managers increase their buying and reduce their selling of their firm's shares. Prior to repurchases that follow takeover‐related events, only a decrease in selling is found. No abnormal trading precedes Dutch auction repurchase offers.

Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Investors' Expectations

Published: 3/9/2006,  Volume: 61,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2006.00851.x  |  Cited by: 672

JOHN E. CORE, WAYNE R. GUAY, TJOMME O. RUSTICUS

We investigate Gompers, Ishii, and Metrick's (2003) finding that firms with weak shareholder rights exhibit significant stock market underperformance. If the relation between poor governance and poor returns is causal, we expect that the market is negatively surprised by the poor operating performance of weak governance firms. We find that firms with weak shareholder rights exhibit significant operating underperformance. However, analysts' forecast errors and earnings announcement returns show no evidence that this underperformance surprises the market. Our results are robust to controls for takeover activity. Overall, our results do not support the hypothesis that weak governance causes poor stock returns.

General Tests of Latent Variable Models and Mean‐Variance Spanning

Published: 3/1993,  Volume: 48,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1993.tb04704.x  |  Cited by: 59

WAYNE E. FERSON, STEPHEN R. FOERSTER, DONALD B. KEIM

The methods of Gibbons and Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean‐variance spanning generalizes Huberman and Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size‐based common stock portfolios proxy for the risk factors, we reject the hypothesis that four of them describe the conditional expected returns of the other assets.

Sending Out an SMS: Automatic Enrollment Experiments for Overdraft Alerts

Published: 12/26/2024,  Volume: 80,  Issue: 1  |  DOI: 10.1111/jofi.13404  |  Cited by: 4

MICHAEL D. GRUBB, DARRAGH KELLY, JEROEN NIEBOER, MATTHEW OSBORNE, JONATHAN SHAW

At‐scale field experiments at major U.K. banks show that automatic enrollment into “just‐in‐time” text alerts reduces unarranged overdraft and unpaid item charges 17% to 19% and arranged overdraft charges 4% to 8%, implying annual market‐wide savings of £170 million to £240 million. Incremental benefits from “early‐warning” alerts are statistically insignificant, although economically significant effects are not ruled out. Prior to the experiments, over half of overdrafts could have been avoided by using lower‐cost liquidity available in savings and credit card accounts. Alerts help consumers achieve less than half of these potential savings.