Search results: 41.
Does the Stock Market Overreact?
Published: 7/1985, Volume: 40, Issue: 3 | DOI: 10.1111/j.1540-6261.1985.tb05004.x | Cited by: 4104
WERNER F. M. De BONDT, RICHARD THALER
Research in experimental psychology suggests that, in violation of Bayes' rule, most people tend to “overreact” to unexpected and dramatic news events. This study of market efficiency investigates whether such behavior affects stock prices. The empirical evidence, based on CRSP monthly return data, is consistent with the overreaction hypothesis. Substantial weak form market inefficiencies are discovered. The results also shed new light on the January returns earned by prior “winners” and “losers.” Portfolios of losers experience exceptionally large January returns as late as five years after portfolio formation.
Further Evidence On Investor Overreaction and Stock Market Seasonality
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04569.x | Cited by: 1174
WERNER F. M. De BONDT, RICHARD H. THALER
In a previous paper, we found systematic price reversals for stocks that experience extreme long‐term gains or losses: Past losers significantly outperform past winners. We interpreted this finding as consistent with the behavioral hypothesis of investor overreaction. In this follow‐up paper, additional evidence is reported that supports the overreaction hypothesis and that is inconsistent with two alternative hypotheses based on firm size and differences in risk, as measured by CAPM‐betas. The seasonal pattern of returns is also examined. Excess returns in January are related to both short‐term and long‐term past performance, as well as to the previous year market return.
Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards
Published: 6/2004, Volume: 59, Issue: 3 | DOI: 10.1111/j.1540-6261.2004.00662.x | Cited by: 1945
Werner Antweiler, Murray Z. Frank
Financial press reports claim that Internet stock message boards can move markets. We study the effect of more than 1.5 million messages posted on Yahoo! Finance and Raging Bull about the 45 companies in the Dow Jones Industrial Average and the Dow Jones Internet Index. Bullishness is measured using computational linguistics methods.
Wall Street Journal
news stories are used as controls. We find that stock messages help predict market volatility. Their effect on stock returns is statistically significant but economically small. Consistent with
Harris and Raviv (1993)
, disagreement among the posted messages is associated with increased trading volume.
Does Risk Sharing Motivate Interdealer Trading?
Published: 10/1998, Volume: 53, Issue: 5 | DOI: 10.1111/0022-1082.00068 | Cited by: 98
PETER C. REISS, INGRID M. WERNER
We use unique data from the London Stock Exchange to test whether interdealer trade facilitates inventory risk sharing among dealers. We develop a methodology that focuses on periods of “extreme” inventories—inventory cycles. We further distinguish between inventory cycles that are unanticipated and those that are anticipated because of “worked” orders. The pattern of interdealer trade during inventory cycles matches theoretical predictions for the direction of trade and the inventories of trade counterparts. We also show that London dealers receive higher trading revenues for taking larger positions.
It's SHO Time! Short‐Sale Price Tests and Market Quality
Published: 1/23/2009, Volume: 64, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01428.x | Cited by: 345
KARL B. DIETHER, KUAN‐HUI LEE, INGRID M. WERNER
We examine the effects of the Securities and Exchange Commission (SEC)‐mandated temporary suspension of short‐sale price tests for a set of Pilot securities. While short‐selling activity increases both for NYSE‐ and Nasdaq‐listed Pilot stocks, returns and volatility at the daily level are unaffected. NYSE‐listed Pilot stocks experience more symmetric trading patterns and a slight increase in spreads and intraday volatility after the suspension while there is a smaller effect on market quality for Nasdaq‐listed Pilot stocks. The results suggest that the effect of the price tests on market quality can largely be attributed to distortions in order flow created by the price tests themselves.
Reusing Natural Experiments
Published: 6/7/2023, Volume: 78, Issue: 4 | DOI: 10.1111/jofi.13250 | Cited by: 127
DAVIDSON HEATH, MATTHEW C. RINGGENBERG, MEHRDAD SAMADI, INGRID M. WERNER
After a natural experiment is first used, other researchers often reuse the setting, examining different outcome variables. We use simulations based on real data to illustrate the multiple hypothesis testing problem that arises when researchers reuse natural experiments. We then provide guidance for future inference based on popular empirical settings including difference‐in‐differences, instrumental variables, and regression discontinuity designs. When we apply our guidance to two extensively studied natural experiments, business combination laws and the Regulation SHO pilot, we find that many results that were statistically significant using single hypothesis testing do not survive corrections for multiple hypothesis testing.
What Explains Differences in Finance Research Productivity during the Pandemic?
Published: 5/3/2021, Volume: 76, Issue: 4 | DOI: 10.1111/jofi.13028 | Cited by: 87
BRAD M. BARBER, WEI JIANG, ADAIR MORSE, MANJU PURI, HEATHER TOOKES, INGRID M. WERNER
Based on a survey of American Finance Association members, we analyze how demographics, time allocation, production mechanisms, and institutional factors affect research production during the pandemic. Consistent with the literature, research productivity falls more for women and faculty with young children. Independently, and novel, extra time spent on teaching (much more likely for women) negatively affects research productivity. Also novel, concerns about feedback, isolation, and health have large negative research effects, which disproportionately affect junior faculty and PhD students. Finally, faculty who express greater concerns about employers’ finances report larger negative research effects and more concerns about feedback, isolation, and health.
PRIVATE PROPERTY AND DISPERSION OF OWNERSHIP IN LARGE CORPORATIONS
Published: 9/1973, Volume: 28, Issue: 4 | DOI: 10.1111/j.1540-6261.1973.tb01409.x | Cited by: 16
Louis De Alessi
Managerial Incentives and Internal Capital Markets
Published: 5/6/2003, Volume: 58, Issue: 3 | DOI: 10.1111/1540-6261.00563 | Cited by: 41
Adolfo de Motta
AbstractCapital budgeting in multidivisional firms depends on the external assessment of the whole firm, as well as on headquarters' assessment of the divisions. While corporate headquarters may create value by directly monitoring divisions, the external assessment of the firm is a public good for division managers who, consequently, are tempted to free ride. As the number of divisions increases, the free‐rider problem is aggravated, and internal capital markets substitute for external capital markets in the provision of managerial incentives. The analysis relates the value of diversification to characteristics of the firm, the industry, and the capital market.
WHAT SHOULD U.S. HOUSING POLICIES BE?
Published: 5/1974, Volume: 29, Issue: 2 | DOI: 10.1111/j.1540-6261.1974.tb03080.x | Cited by: 1
FRANK DE LEEUW
DISCUSSION
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02255.x | Cited by: 1
JORGE BRAGA DE MACEDO
What Drives Investors' Portfolio Choices? Separating Risk Preferences from Frictions
Published: 12/17/2025, Volume: 81, Issue: 1 | DOI: 10.1111/jofi.70013 | Cited by: 7
TAHA CHOUKHMANE, TIM DE SILVA
We study the role of risk preferences and frictions in portfolio choice using variation in 401(k) default options. Patterns of active choice in response to different default funds imply that, absent participation frictions, 94% of investors prefer holding stocks, with an equity share of retirement wealth declining with age—patterns markedly different from observed allocations. We use this quasi‐experiment to estimate a life‐cycle model and find a relative risk aversion of 2.5, elasticity of intertemporal substitution (EIS) of 0.25, and $160 portfolio adjustment cost. The results suggest that low levels of stock market participation in retirement accounts are due to participation frictions rather than nonstandard preferences such as loss aversion.
International Asset Pricing and Portfolio Diversification with Time‐Varying Risk
Published: 12/1997, Volume: 52, Issue: 5 | DOI: 10.1111/j.1540-6261.1997.tb02745.x | Cited by: 321
GIORGIO DE SANTIS, BRUNO GERARD
We test the conditional capital asset pricing model (CAPM) for the world's eight largest equity markets using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) parameterization. Our methodology can be applied simultaneously to many assets and, at the same time, accommodate general dynamics of the conditional moments. The evidence supports most of the pricing restrictions of the model, but some of the variation in risk‐adjusted excess returns remains predictable during periods of high interest rates. Our estimates indicate that, although severe market declines are contagious, the expected gains from international diversification for a U.S. investor average 2.11 percent per year and have not significantly declined over the last two decades.
FREE RESERVES, INTEREST RATES, AND DEPOSITS A SYNTHESIS
Published: 6/1970, Volume: 25, Issue: 3 | DOI: 10.1111/j.1540-6261.1970.tb00525.x | Cited by: 8
Patric H. Hendershott, Frank DE Leeuw
THE CHANNELS OF MONETARY POLICY: A FURTHER REPORT ON THE FEDERAL RESERVE—M.I.T. MODEL
Published: 5/1969, Volume: 24, Issue: 2 | DOI: 10.1111/j.1540-6261.1969.tb01681.x | Cited by: 5
Frank de Leeuw, Edward M. Gramlich
The Theory of Bank Risk Taking and Competition Revisited
Published: 5/3/2005, Volume: 60, Issue: 3 | DOI: 10.1111/j.1540-6261.2005.00763.x | Cited by: 1545
JOHN H. BOYD, GIANNI DE NICOLÓ
There is a large body of literature that concludes that—when confronted with increased competition—banks rationally choose more risky portfolios. We argue that this literature has had a significant influence on regulators and central bankers. We review the empirical literature and conclude that the evidence is best described as “mixed.” We then show that existing theoretical analyses of this topic are fragile, since there exist fundamental risk‐incentive mechanisms that operate in exactly the opposite direction, causing banks to become more risky as their markets become more concentrated. These mechanisms should be essential ingredients of models of bank competition.
Risk Aversion, Transparency, and Market Performance
Published: 4/2002, Volume: 57, Issue: 2 | DOI: 10.1111/1540-6261.00448 | Cited by: 42
M. Ángeles De Frutos, Carolina Manzano
Using a model of market making with inventories based on Biais (1993), we find that investors obtain more favorable execution prices, and they hence invest more, when markets are fragmented. In our model, risk‐averse dealers use less aggressive price strategies in more transparent markets (centralized) because quote dissemination alleviates uncertainty about the prices quoted by other dealers and, hence, reduces the need to compete aggressively for order flow. Further, we show that the move toward greater transparency (centralization) may have detrimental effects on liquidity and welfare.
Going for Broke: Bank Reputation and the Performance of Opaque Securities
Published: 10/6/2025, Volume: 80, Issue: 6 | DOI: 10.1111/jofi.13503 | Cited by: 2
ABE DE JONG, TIM KOOIJMANS, PETER KOUDIJS
Can banks’ reputational concerns improve the quality of opaque, off‐balance sheet securities, such as mortgage‐backed securities? We study this question in a uniquely parsimonious setting. In the 1760s, Dutch banking partnerships securitized West‐Indian plantation mortgages that were risky and opaque. High‐reputation banks originated better mortgages and issued securities that, on average, retained 17.5% more of their value during a market collapse. Reputational effects are attenuated when the managing partners were married into wealth or received a large share of profits in the short term, suggesting that bank reputation only works if bankers are personally exposed to (long‐run) reputational losses.
Attracting Attention: Cheap Managerial Talk and Costly Market Monitoring
Published: 5/9/2008, Volume: 63, Issue: 3 | DOI: 10.1111/j.1540-6261.2008.01361.x | Cited by: 72
ANDRES ALMAZAN, SANJAY BANERJI, ADOLFO DE MOTTA
We provide a theory of informal communication—cheap talk—between firms and capital markets that incorporates the role of agency conflicts between managers and shareholders. The analysis suggests that a policy of discretionary disclosure that encourages managers to attract the market's attention when the firm is substantially undervalued can create shareholder value. The theory also relates the credibility of managerial announcements to the use of stock‐based compensation, the presence of informed trading, and the liquidity of the stock. Our results are consistent with the existence of positive announcement effects produced by apparently innocuous corporate events (e.g., stock dividends, name changes).
Debt Contracting on Management
Published: 3/13/2020, Volume: 75, Issue: 4 | DOI: 10.1111/jofi.12893 | Cited by: 38
BRIAN AKINS, DAVID DE ANGELIS, MACLEAN GAULIN
Change of management restrictions (CMRs) in loan contracts give lenders explicit ex ante control rights over managerial retention and selection. This paper shows that lenders use CMRs to mitigate risks arising from CEO turnover, especially those related to the loss of human capital and replacement uncertainty, thereby providing evidence that human capital risk affects debt contracting. With a CMR in place, the likelihood of CEO turnover decreases by more than half, and future firm performance improves when retention frictions are important, suggesting that lenders can influence managerial turnover, even outside of default states, and help the borrower retain talent.
Derivative Pricing with Liquidity Risk: Theory and Evidence from the Credit Default Swap Market
Published: 1/6/2011, Volume: 66, Issue: 1 | DOI: 10.1111/j.1540-6261.2010.01630.x | Cited by: 277
DION BONGAERTS, FRANK DE JONG, JOOST DRIESSEN
We derive an equilibrium asset pricing model incorporating liquidity risk, derivatives, and short‐selling due to hedging of nontraded risk. We show that illiquid assets can have lower expected returns if the short‐sellers have more wealth, lower risk aversion, or shorter horizon. The pricing of liquidity risk is different for derivatives than for positive‐net‐supply assets, and depends on investors' net nontraded risk exposure. We estimate this model for the credit default swap market. We find strong evidence for an expected liquidity premium earned by the credit protection seller. The effect of liquidity risk is significant but economically small.
Transparency in the Financial System: Rollover Risk and Crises
Published: 7/23/2015, Volume: 70, Issue: 4 | DOI: 10.1111/jofi.12270 | Cited by: 158
MATTHIEU BOUVARD, PIERRE CHAIGNEAU, ADOLFO DE MOTTA
We present a theory of optimal transparency when banks are exposed to rollover risk. Disclosing bank‐specific information enhances the stability of the financial system during crises, but has a destabilizing effect in normal economic times. Thus, the regulator optimally increases transparency during crises. Under this policy, however, information disclosure signals a deterioration of economic fundamentals, which gives the regulator ex post incentives to withhold information. This commitment problem precludes a disclosure policy that provides ex ante optimal insurance against aggregate shocks, and can result in excess opacity that increases the likelihood of a systemic crisis.
Opening the Black Box: Internal Capital Markets and Managerial Power
Published: 7/16/2013, Volume: 68, Issue: 4 | DOI: 10.1111/jofi.12046 | Cited by: 125
MARKUS GLASER, FLORENCIO LOPEZ‐DE‐SILANES, ZACHARIAS SAUTNER
We analyze the internal capital markets of a multinational conglomerate, using a unique panel data set of planned and actual allocations to business units and a survey of unit CEOs. Following cash windfalls, more powerful managers obtain larger allocations and increase investment substantially more than their less connected peers. We identify cash windfalls as a source of misallocation of capital, as more powerful managers overinvest and their units exhibit lower ex post performance and productivity. These findings contribute to our understanding of frictions in resource allocation within firms and point to an important channel through which power may lead to inefficiencies.
Marketwide Private Information in Stocks: Forecasting Currency Returns
Published: 9/10/2008, Volume: 63, Issue: 5 | DOI: 10.1111/j.1540-6261.2008.01398.x | Cited by: 50
RUI ALBUQUERQUE, EVA DE FRANCISCO, LUIS B. MARQUES
We present a model of equity trading with informed and uninformed investors where informed investors trade on firm‐specific and marketwide private information. The model is used to identify the component of order flow due to marketwide private information. Estimated trades driven by marketwide private information display little or no correlation with the first principal component in order flow. Indeed, we find that co‐movement in order flow captures variation mostly in liquidity trades. Marketwide private information obtained from equity market data forecasts industry stock returns, and also currency returns.
What Works in Securities Laws?
Published: 1/20/2006, Volume: 61, Issue: 1 | DOI: 10.1111/j.1540-6261.2006.00828.x | Cited by: 1937
RAFAEL LA PORTA, FLORENCIO LOPEZ‐DE‐SILANES, ANDREI SHLEIFER
We examine the effect of securities laws on stock market development in 49 countries. We find little evidence that public enforcement benefits stock markets, but strong evidence that laws mandating disclosure and facilitating private enforcement through liability rules benefit stock markets.
Financial Structure, Acquisition Opportunities, and Firm Locations
Published: 3/19/2010, Volume: 65, Issue: 2 | DOI: 10.1111/j.1540-6261.2009.01543.x | Cited by: 193
ANDRES ALMAZAN, ADOLFO DE MOTTA, SHERIDAN TITMAN, VAHAP UYSAL
This paper investigates the relation between firms' locations and their corporate finance decisions. We develop a model where being located within an industry cluster increases opportunities to make acquisitions, and to facilitate those acquisitions, firms within clusters maintain more financial slack. Consistent with our model we find that firms located within industry clusters make more acquisitions, and have lower debt ratios and larger cash balances than their industry peers located outside clusters. We also document that firms in high‐tech cities and growing cities maintain more financial slack. Overall, the evidence suggests that growth opportunities influence firms' financial decisions.
Hedging Pressure Effects in Futures Markets
Published: 6/2000, Volume: 55, Issue: 3 | DOI: 10.1111/0022-1082.00253 | Cited by: 403
Frans A. De Roon, Theo E. Nijman, Chris Veld
We present a simple model implying that futures risk premia depend on both own‐market and cross‐market hedging pressures. Empirical evidence from 20 futures markets, divided into four groups (financial, agricultural, mineral, and currency) indicates that, after controlling for systematic risk, both the futures own hedging pressure and cross‐hedging pressures from within the group significantly affect futures returns. These effects remain significant after controlling for a measure of price pressure. Finally, we show that hedging pressure also contains explanatory power for returns on the underlying asset, as predicted by the model.
Government Ownership of Banks
Published: 2/2002, Volume: 57, Issue: 1 | DOI: 10.1111/1540-6261.00422 | Cited by: 1564
Rafael La Porta, Florencio Lopez‐De‐Silanes, Andrei Shleifer
We assemble data on government ownership of banks around the world. The data show that such ownership is large and pervasive, and higher in countries with low levels of per capita income, backward financial systems, interventionist and inefficient governments, and poor protection of property rights. Higher government ownership of banks in 1970 is associated with slower subsequent financial development and lower growth of per capita income and productivity. This evidence supports “political” theories of the effects of government ownership of firms.
Corporate Ownership Around the World
Published: 4/1999, Volume: 54, Issue: 2 | DOI: 10.1111/0022-1082.00115 | Cited by: 7493
Rafael La Porta, Florencio Lopez‐De‐Silanes, Andrei Shleifer
We use data on ownership structures of large corporations in 27 wealthy economies to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to Berle and Means's image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management.
Global Currency Hedging
Published: 1/13/2010, Volume: 65, Issue: 1 | DOI: 10.1111/j.1540-6261.2009.01524.x | Cited by: 221
JOHN Y. CAMPBELL, KARINE SERFATY‐DE MEDEIROS, LUIS M. VICEIRA
Over the period 1975 to 2005, the U.S. dollar (particularly in relation to the Canadian dollar), the euro, and the Swiss franc (particularly in the second half of the period) moved against world equity markets. Thus, these currencies should be attractive to risk‐minimizing global equity investors despite their low average returns. The risk‐minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the U.S. dollar. There is little evidence that risk‐minimizing investors should adjust their currency positions in response to movements in interest differentials.
The Behavior of Bid‐Ask Spreads and Volume in Options Markets during the Competition for Listings in 1999
Published: 11/7/2003, Volume: 58, Issue: 6 | DOI: 10.1046/j.1540-6261.2003.00611.x | Cited by: 108
Patrick De Fontnouvelle, Raymond P. H. Fishe, Jeffrey H. Harris
AbstractIn August 1999, U.S. exchanges began to compete directly for order flow in many options that had been exclusively listed on another exchange, shifting 37% of option volume to multiple‐listing status by the end of September. Effective and quoted bid–ask spreads decrease significantly after multiple listings with spreads generally maintaining their initial lower levels 1 year later. These results hold for both time series and pooled regressions and are robust. We reject that economies of scale in market making cause the decrease in spreads and support the view that interexchange competition reduces option transaction costs.
Testing for Mean‐Variance Spanning with Short Sales Constraints and Transaction Costs: The Case of Emerging Markets
Published: 4/2001, Volume: 56, Issue: 2 | DOI: 10.1111/0022-1082.00343 | Cited by: 212
Frans A. De Roon, Theo E. Nijman, Bas J. M. Werker
We propose regression‐based tests for mean‐variance spanning in the case where investors face market frictions such as short sales constraints and transaction costs. We test whether U.S. investors can extend their efficient set by investing in emerging markets when accounting for such frictions. For the period after the major liberalizations in the emerging markets, we find strong evidence for diversification benefits when market frictions are excluded, but this evidence disappears when investors face short sales constraints or small transaction costs. Although simulations suggest that there is a possible small‐sample bias, this bias appears to be too small to affect our conclusions.
An Anatomy of Commodity Futures Risk Premia
Published: 1/7/2014, Volume: 69, Issue: 1 | DOI: 10.1111/jofi.12096 | Cited by: 320
MARTA SZYMANOWSKA, FRANS DE ROON, THEO NIJMAN, ROB VAN DEN GOORBERGH
We identify two types of risk premia in commodity futures returns: spot premia related to the risk in the underlying commodity, and term premia related to changes in the basis. Sorting on forecasting variables such as the futures basis, return momentum, volatility, inflation, hedging pressure, and liquidity results in sizable spot premia between 5% and 14% per annum and term premia between 1% and 3% per annum. We show that a single factor, the high‐minus‐low portfolio from basis sorts, explains the cross‐section of spot premia. Two additional basis factors are needed to explain the term premia.
Investor Protection and Corporate Valuation
Published: 6/2002, Volume: 57, Issue: 3 | DOI: 10.1111/1540-6261.00457 | Cited by: 2761
Rafael La Porta, Florencio Lopez‐De‐Silanes, Andrei Shleifer, Robert Vishny
We present a model of the effects of legal protection of minority shareholders and of cash‐flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 539 large firms from 27 wealthy economies. Consistent with the model, we find evidence of higher valuation of firms in countries with better protection of minority shareholders and in firms with higher cash‐flow ownership by the controlling shareholder.
Legal Determinants of External Finance
Published: 7/1997, Volume: 52, Issue: 3 | DOI: 10.1111/j.1540-6261.1997.tb02727.x | Cited by: 5988
RAFAEL LA PORTA, FLORENCIO LOPEZ‐DE‐SILANES, ANDREI SHLEIFER, ROBERT W. VISHNY
Using a sample of 49 countries, we show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries.
The Size and Incidence of the Losses from Noise Trading
Published: 7/1989, Volume: 44, Issue: 3 | DOI: 10.1111/j.1540-6261.1989.tb04385.x | Cited by: 173
J. BRADFORD DE LONG, ANDREI SHLEIFER, LAWRENCE H. SUMMERS, ROBERT J. WALDMANN
Recent empirical research has identified a significant amount of volatility in stock prices that cannot easily be explained by changes in fundamentals; one interpretation is that asset prices respond not only to news but also to irrational “noise trading.” We assess the welfare effects and incidence of such noice trading using an overlapping‐generations model that gives investors short horizons. We find that the additional risk generated by noise trading can reduce the capital stock and consumption of the economy, and we show that part of that cost may be borne by rational investors. We conclude that the welfare costs of noise trading may be large if the magnitude of noise in aggregate stock prices is as large as suggested by some of the recent empirical litrature on the excess volatility of the market.
Agency Problems and Dividend Policies around the World
Published: 2/2000, Volume: 55, Issue: 1 | DOI: 10.1111/0022-1082.00199 | Cited by: 2157
Rafael La Porta, Florencio Lopez‐de‐Silanes, Andrei Shleifer, Robert W. Vishny
This paper outlines and tests two agency models of dividends. According to the “outcome model,” dividends are paid because minority shareholders pressure corporate insiders to disgorge cash. According to the “substitute model,” insiders interested in issuing equity in the future pay dividends to establish a reputation for decent treatment of minority shareholders. The first model predicts that stronger minority shareholder rights should be associated with higher dividend payouts; the second model predicts the opposite. Tests on a cross section of 4,000 companies from 33 countries with different levels of minority shareholder rights support the outcome agency model of dividends.
Positive Feedback Investment Strategies and Destabilizing Rational Speculation
Published: 6/1990, Volume: 45, Issue: 2 | DOI: 10.1111/j.1540-6261.1990.tb03695.x | Cited by: 1247
J. BRADFORD DE LONG, ANDREI SHLEIFER, LAWRENCE H. SUMMERS, ROBERT J. WALDMANN
Analyses of rational speculation usually presume that it dampens fluctuations caused by “noise” traders. This is not necessarily the case if noise traders follow positive‐feedback strategies—buy when prices rise and sell when prices fall. It may pay to jump on the bandwagon and purchase ahead of noise demand. If rational speculators' early buying triggers positive‐feedback trading, then an increase in the number of forward‐looking speculators can increase volatility about fundamentals. This model is consistent with a number of empirical observations about the correlation of asset returns, the overreaction of prices to news, price bubbles, and expectations.
Nonstandard Errors
Published: 4/17/2024, Volume: 79, Issue: 3 | DOI: 10.1111/jofi.13337 | Cited by: 112
ALBERT J. MENKVELD, ANNA DREBER, FELIX HOLZMEISTER, JUERGEN HUBER, MAGNUS JOHANNESSON, MICHAEL KIRCHLER, SEBASTIAN NEUSÜß, MICHAEL RAZEN, UTZ WEITZEL, DAVID ABAD‐DÍAZ, MENACHEM (MENI) ABUDY, TOBIAS ADRIAN, YACINE AIT‐SAHALIA, OLIVIER AKMANSOY, JAMIE T. ALCOCK, VITALI ALEXEEV, ARASH ALOOSH, LIVIA AMATO, DIEGO AMAYA, JAMES J. ANGEL, ALEJANDRO T. AVETIKIAN, AMADEUS BACH, EDWIN BAIDOO, GAETAN BAKALLI, LI BAO, ANDREA BARBON, OKSANA BASHCHENKO, PARAMPREET C. BINDRA, GEIR H. BJØNNES, JEFFREY R. BLACK, BERNARD S. BLACK, DIMITAR BOGOEV, SANTIAGO BOHORQUEZ CORREA, OLEG BONDARENKO, CHARLES S. BOS, CIRIL BOSCH‐ROSA, ELIE BOURI, CHRISTIAN BROWNLEES, ANNA CALAMIA, VIET NGA CAO, GUNTHER CAPELLE‐BLANCARD, LAURA M. CAPERA ROMERO, MASSIMILIANO CAPORIN, ALLEN CARRION, TOLGA CASKURLU, BIDISHA CHAKRABARTY, JIAN CHEN, MIKHAIL CHERNOV, WILLIAM CHEUNG, LUDWIG B. CHINCARINI, TARUN CHORDIA, SHEUNG‐CHI CHOW, BENJAMIN CLAPHAM, JEAN‐EDOUARD COLLIARD, CAROLE COMERTON‐FORDE, EDWARD CURRAN, THONG DAO, WALE DARE, RYAN J. DAVIES, RICCARDO DE BLASIS, GIANLUCA F. DE NARD, FANY DECLERCK, OLEG DEEV, HANS DEGRYSE, SOLOMON Y. DEKU, CHRISTOPHE DESAGRE, MATHIJS A. VAN DIJK, CHUKWUMA DIM, THOMAS DIMPFL, YUN JIANG DONG, PHILIP A. DRUMMOND, TOM DUDDA, TEODOR DUEVSKI, ARIADNA DUMITRESCU, TEODOR DYAKOV, ANNE HAUBO DYHRBERG, MICHAŁ DZIELIŃSKI, ASLI EKSI, IZIDIN EL KALAK, SASKIA TER ELLEN, NICOLAS EUGSTER, MARTIN D. D. EVANS, MICHAEL FARRELL, ESTER FELEZ‐VINAS, GERARDO FERRARA, EL MEHDI FERROUHI, ANDREA FLORI, JONATHAN T. FLUHARTY‐JAIDEE, SEAN D. V. FOLEY, KINGSLEY Y. L. FONG, THIERRY FOUCAULT, TATIANA FRANUS, FRANCESCO FRANZONI, BART FRIJNS, MICHAEL FRÖMMEL, SERVANNA M. FU, SASCHA C. FÜLLBRUNN, BAOQING GAN, GE GAO, THOMAS P. GEHRIG, ROLAND GEMAYEL, DIRK GERRITSEN, JAVIER GIL‐BAZO, DUDLEY GILDER, LAWRENCE R. GLOSTEN, THOMAS GOMEZ, ARSENY GORBENKO, JOACHIM GRAMMIG, VINCENT GRÉGOIRE, UFUK GÜÇBILMEZ, BJÖRN HAGSTRÖMER, JULIEN HAMBUCKERS, ERIK HAPNES, JEFFREY H. HARRIS, LAWRENCE HARRIS, SIMON HARTMANN, JEAN‐BAPTISTE HASSE, NIKOLAUS HAUTSCH, XUE‐ZHONG (TONY) HE, DAVIDSON HEATH, SIMON HEDIGER, TERRENCE HENDERSHOTT, ANN MARIE HIBBERT, ERIK HJALMARSSON, SETH A. HOELSCHER, PETER HOFFMANN, CRAIG W. HOLDEN, ALEX R. HORENSTEIN, WENQIAN HUANG, DA HUANG, CHRISTOPHE HURLIN, KONRAD ILCZUK, ALEXEY IVASHCHENKO, SUBRAMANIAN R. IYER, HOSSEIN JAHANSHAHLOO, NAJI JALKH, CHARLES M. JONES, SIMON JURKATIS, PETRI JYLHÄ, ANDREAS T. KAECK, GABRIEL KAISER, ARZÉ KARAM, EGLE KARMAZIENE, BERNHARD KASSNER, MARKKU KAUSTIA, EKATERINA KAZAK, FEARGHAL KEARNEY, VINCENT VAN KERVEL, SAAD A. KHAN, MARTA K. KHOMYN, TONY KLEIN, OLGA KLEIN, ALEXANDER KLOS, MICHAEL KOETTER, ALEKSEY KOLOKOLOV, ROBERT A. KORAJCZYK, ROMAN KOZHAN, JAN P. KRAHNEN, PAUL KUHLE, AMY KWAN, QUENTIN LAJAUNIE, F. Y. ERIC C. LAM, MARIE LAMBERT, HUGUES LANGLOIS, JENS LAUSEN, TOBIAS LAUTER, MARKUS LEIPPOLD, VLADIMIR LEVIN, YIJIE LI, HUI LI, CHEE YOONG LIEW, THOMAS LINDNER, OLIVER LINTON, JIACHENG LIU, ANQI LIU, GUILLERMO LLORENTE, MATTHIJS LOF, ARIEL LOHR, FRANCIS LONGSTAFF, ALEJANDRO LOPEZ‐LIRA, SHAWN MANKAD, NICOLA MANO, ALEXIS MARCHAL, CHARLES MARTINEAU, FRANCESCO MAZZOLA, DEBRAH MELOSO, MICHAEL G. MI, ROXANA MIHET, VIJAY MOHAN, SOPHIE MOINAS, DAVID MOORE, LIANGYI MU, DMITRIY MURAVYEV, DERMOT MURPHY, GABOR NESZVEDA, CHRISTIAN NEUMEIER, ULF NIELSSON, MAHENDRARAJAH NIMALENDRAN, SVEN NOLTE, LARS L. NORDEN, PETER O'NEILL, KHALED OBAID, BERNT A. ØDEGAARD, PER ÖSTBERG, EMILIANO PAGNOTTA, MARCUS PAINTER, STEFAN PALAN, IMON J. PALIT, ANDREAS PARK, ROBERTO PASCUAL, PAOLO PASQUARIELLO, LUBOS PASTOR, VINAY PATEL, ANDREW J. PATTON, NEIL D. PEARSON, LORIANA PELIZZON, MICHELE PELLI, MATTHIAS PELSTER, CHRISTOPHE PÉRIGNON, CAMERON PFIFFER, RICHARD PHILIP, TOMÁŠ PLÍHAL, PUNEET PRAKASH, OLIVER‐ALEXANDER PRESS, TINA PRODROMOU, MARCEL PROKOPCZUK, TALIS PUTNINS, YA QIAN, GAURAV RAIZADA, DAVID RAKOWSKI, ANGELO RANALDO, LUCA REGIS, STEFAN REITZ, THOMAS RENAULT, REX W. RENJIE, ROBERTO RENO, STEVEN J. RIDDIOUGH, KALLE RINNE, PAUL RINTAMÄKI, RYAN RIORDAN, THOMAS RITTMANNSBERGER, IÑAKI RODRÍGUEZ LONGARELA, DOMINIK ROESCH, LAVINIA ROGNONE, BRIAN ROSEMAN, IOANID ROŞU, SAURABH ROY, NICOLAS RUDOLF, STEPHEN R. RUSH, KHALADDIN RZAYEV, ALEKSANDRA A. RZEŹNIK, ANTHONY SANFORD, HARIKUMAR SANKARAN, ASANI SARKAR, LUCIO SARNO, OLIVIER SCAILLET, STEFAN SCHARNOWSKI, KLAUS R. SCHENK‐HOPPÉ, ANDREA SCHERTLER, MICHAEL SCHNEIDER, FLORIAN SCHROEDER, NORMAN SCHÜRHOFF, PHILIPP SCHUSTER, MARCO A. SCHWARZ, MARK S. SEASHOLES, NORMAN J. SEEGER, OR SHACHAR, ANDRIY SHKILKO, JESSICA SHUI, MARIO SIKIC, GIORGIA SIMION, LEE A. SMALES, PAUL SÖDERLIND, ELVIRA SOJLI, KONSTANTIN SOKOLOV, JANTJE SÖNKSEN, LAIMA SPOKEVICIUTE, DENITSA STEFANOVA, MARTI G. SUBRAHMANYAM, BARNABAS SZASZI, OLEKSANDR TALAVERA, YUEHUA TANG, NICK TAYLOR, WING WAH THAM, ERIK THEISSEN, JULIAN THIMME, IAN TONKS, HAI TRAN, LUCA TRAPIN, ANDERS B. TROLLE, M. ANDREEA VADUVA, GIORGIO VALENTE, ROBERT A. VAN NESS, AURELIO VASQUEZ, THANOS VEROUSIS, PATRICK VERWIJMEREN, ANDERS VILHELMSSON, GRIGORY VILKOV, VLADIMIR VLADIMIROV, SEBASTIAN VOGEL, STEFAN VOIGT, WOLF WAGNER, THOMAS WALTHER, PATRICK WEISS, MICHEL VAN DER WEL, INGRID M. WERNER, P. JOAKIM WESTERHOLM, CHRISTIAN WESTHEIDE, HANS C. WIKA, EVERT WIPPLINGER, MICHAEL WOLF, CHRISTIAN C. P. WOLFF, LEONARD WOLK, WING‐KEUNG WONG, JAN WRAMPELMEYER, ZHEN‐XING WU, SHUO XIA, DACHENG XIU, KE XU, CAIHONG XU, PRADEEP K. YADAV, JOSÉ YAGÜE, CHENG YAN, ANTTI YANG, WOONGSUN YOO, WENJIA YU, YIHE YU, SHIHAO YU, BART Z. YUESHEN, DARYA YUFEROVA, MARCIN ZAMOJSKI, ABALFAZL ZAREEI, STEFAN M. ZEISBERGER, LU ZHANG, S. SARAH ZHANG, XIAOYU ZHANG, LU ZHAO, ZHUO ZHONG, Z. IVY ZHOU, CHEN ZHOU, XINGYU S. ZHU, MARIUS ZOICAN, REMCO ZWINKELS
In statistics, samples are drawn from a population in a data‐generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence‐generating process (EGP). We claim that EGP variation across researchers adds uncertainty—nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer‐review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.