The Journal of Finance

General Risk Aversion and Attitude Towards Risk

Published: 06/01/1980   |   DOI: 10.1111/j.1540-6261.1980.tb03492.x

YAKOV AMIHUD

Trading Mechanisms and Stock Returns: An Empirical Investigation

Published: 07/01/1987   |   DOI: 10.1111/j.1540-6261.1987.tb04567.x

YAKOV AMIHUD, HAIM MENDELSON

This paper examines the effects of the mechanism by which securities are traded on their price behavior. We compare the behavior of open‐to‐open and close‐to‐close returns on NYSE stocks, given the differences in execution methods applied in the opening and closing transactions. Opening returns are found to exhibit greater dispersion, greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns. We study the effects of the bid‐ask spread and the price‐adjustment process on the estimated return variances and covariances and discuss the associated biases. We conclude that the trading mechanism has a significant effect on stock price behavior.

Liquidity, Maturity, and the Yields on U.S. Treasury Securities

Published: 09/01/1991   |   DOI: 10.1111/j.1540-6261.1991.tb04623.x

YAKOV AMIHUD, HAIM MENDELSON

The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined for bonds (Treasury notes and bills with matched maturities of less than 6 months). The yield to maturity is higher on notes, which have lower liquidity. The yield differential between notes and bills is a decreasing and convex function of the time to maturity. The results provide a robust confirmation of the liquidity effect in asset pricing.

Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market

Published: 12/01/1991   |   DOI: 10.1111/j.1540-6261.1991.tb04643.x

YAKOV AMIHUD, HAIM MENDELSON

We study the joint effect of the trading mechanism and the time at which transactions take place on the behavior of stock returns using data from Japan. The Tokyo Stock Exchange employs a periodic clearing procedure twice a day, at the opening of both the morning and the afternoon sessions. This enables us to discern the effect of the clearing mechanism from the effect of the overnight trading halt. While the periodic clearing at the beginning of the trading day is noisy and inefficient, the midday clearing transaction appears to be no worse than the two closing transactions.

Dividends, Taxes, and Signaling: Evidence from Germany

Published: 04/18/2012   |   DOI: 10.1111/j.1540-6261.1997.tb03822.x

YAKOV AMIHUD, MAURIZIO MURGIA

The higher taxation of dividends in the United States gave rise to theories that explain why companies pay dividends. Tax‐based signaling models propose that the higher tax on dividends is a necessary condition to make them informative about companies' values. In Germany, where dividends are not tax‐disadvantaged and in fact are taxed lower for most investor classes, these models predict that dividends are not informative. However, we find that the stock price reaction to dividend news in Germany is similar to that found in the United States. This suggests other reasons, beyond taxation, that make dividends informative.

The Effects of Beta, Bid‐Ask Spread, Residual Risk, and Size on Stock Returns

Published: 06/01/1989   |   DOI: 10.1111/j.1540-6261.1989.tb05067.x

YAKOV AMIHUD, HAIM MENDELSON

Merton's [26] recent extension of the CAPM proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson's [2] proposition that asset returns increase with their illiquidity (measured by the bid‐ask spread), we jointly estimate the effects of these four factors on stock returns.

The Foundations of Freezeout Laws in Takeovers

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00664.x

Yakov Amihud, Marcel Kahan, Rangarajan K. Sundaram

We provide an economic basis for permitting freezeouts of nontendering shareholders following successful takeovers. We describe a specific freezeout mechanism based on easily verifiable information that induces desirable efficiency and welfare properties in models of both corporations with widely dispersed shareholdings and corporations with large pivotal shareholders. The mechanism dominates previous proposals along some important dimensions. We also examine takeover premia that arise in the presence of competition among raiders. Our mechanism is closely related to the practice of takeover law in the United States; thus, our analysis may be thought of as analyzing the economic foundations of current regulations.

Number of Shareholders and Stock Prices: Evidence from Japan

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00141

Yakov Amihud, Haim Mendelson, Jun Uno

Merton (1987) proposes that an increase in a firm's investor base increases the firm's value. In Japan, companies can reduce their stock's minimum trading unit—the number of shares in a “round lot”—which facilitates trading in the stock by small investors. We find that a reduction in the minimum trading unit greatly increases a firm's base of individual investors and its stock liquidity, and is associated with a significant increase in the stock price. Further, the stock price appreciation is positively related to an increase in the number of shareholders.

Corporate Control and the Choice of Investment Financing: The Case of Corporate Acquisitions

Published: 06/01/1990   |   DOI: 10.1111/j.1540-6261.1990.tb03706.x

YAKOV AMIHUD, BARUCH LEV, NICKOLAOS G. TRAVLOS

We test the proposition that corporate control considerations motivate the means of investment financing—cash (and debt) or stock. Corporate insiders who value control will prefer financing investments by cash or debt rather than by issuing new stock which dilutes their holdings and increases the risk of losing control. Our empirical results support this hypothesis: in corporate acquisitions, the larger the managerial ownership fraction of the acquiring firm the more likely the use of cash financing. Also, the previously observed negative bidders' abnormal returns associated with stock financing are mainly in acquisitions made by firms with low managerial ownership.