The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Search results: 7.
Time Variation in Liquidity: The Role of Market‐Maker Inventories and Revenues
Published: 01/13/2010 | DOI: 10.1111/j.1540-6261.2009.01530.x
CAROLE COMERTON‐FORDE, TERRENCE HENDERSHOTT, CHARLES M. JONES, PAMELA C. MOULTON, MARK S. SEASHOLES
We show that market‐maker balance sheet and income statement variables explain time variation in liquidity, suggesting liquidity‐supplier financing constraints matter. Using 11 years of NYSE specialist inventory positions and trading revenues, we find that aggregate market‐level and specialist firm‐level spreads widen when specialists have large positions or lose money. The effects are nonlinear and most prominent when inventories are big or trading results have been particularly poor. These sensitivities are smaller after specialist firm mergers, consistent with deep pockets easing financing constraints. Finally, compared to low volatility stocks, the liquidity of high volatility stocks is more sensitive to inventories and losses.
Relationship Banking, Liquidity, and Investment in the German Industrialization
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00070
Caroline Fohlin
Close bank relationships are thought to ameliorate firms' liquidity constraints—a phenomenon frequently measured by liquidity sensitivity of investment. Using German firms during the formative years of universal banking (1903–1913), this paper shows that, even controlling for selection bias, investment is more sensitive to internal liquidity for bank‐networked firms than unattached firms. The firm exhibiting the greatest liquidity sensitivity, however, faced no apparent liquidity constraint. The findings yield two implications: they support recent research rejecting a linear relationship between liquidity sensitivity and financing constraints, and they suggest that relationship banking provides no consistent lessening of firms' liquidity sensitivity.
The Effect of Banking Relationships on the Firm's IPO Underpricing
Published: 11/27/2005 | DOI: 10.1111/j.1540-6261.2004.00720.x
CAROLA SCHENONE
This paper investigates the effects of pre‐IPO banking relationships on a firm's IPO. Using a new and unique data set, which compares the firm's pre‐IPO banking relationships to the underwriters managing the firm's new issue, I test whether banking relationships established before the firm's IPO ameliorate asymmetric informa tion problems behind high IPO underpricing. The results show that firms with a pre‐IPO banking relationship with a prospective underwriter face about 17% lower underpricing than firms without such banking relationships. These results are robust to controlling for the firm's endogenous selection of the pre‐IPO banking institution.
Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis
Published: 09/11/2003 | DOI: 10.1111/1540-6261.00588
Carol L. Osler
This paper documents clustering in currency stop‐loss and take‐profit orders, and uses that clustering to provide an explanation for two familiar predictions from technical analysis: (1) trends tend to reverse course at predictable support and resistance levels, and (2) trends tend to be unusually rapid after rates cross such levels. The data are the first available on individual currency stop‐loss and take‐profit orders. Take‐profit orders cluster particularly strongly at round numbers, which could explain the first prediction. Stop‐loss orders cluster strongly just beyond round numbers, which could explain the second prediction.
Common Ownership Does Not Have Anticompetitive Effects in the Airline Industry
Published: 08/21/2022 | DOI: 10.1111/jofi.13176
PATRICK DENNIS, KRISTOPHER GERARDI, CAROLA SCHENONE
Institutions often own equity in multiple firms that compete in the same product market. Prior research has shown that these institutional “common owners” induce anticompetitive pricing behavior in the airline industry. This paper reevaluates this evidence and shows that the documented positive correlation between common ownership and airline ticket prices stems from the market share component of the common ownership measure, and not the ownership and control components. We further show that the results are sensitive to measures of investor control and to assumptions about equity holders' ownership and control during bankruptcy.
Efficient Analytic Approximation of American Option Values
Published: 06/01/1987 | DOI: 10.1111/j.1540-6261.1987.tb02569.x
GIOVANNI BARONE‐ADESI, ROBERT E. WHALEY
This paper provides simple, analytic approximations for pricing exchange‐traded American call and put options written on commodities and commodity futures contracts. These approximations are accurate and considerably more computationally efficient than finite‐difference, binomial, or compound‐option pricing methods.