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: 4.
Which Shorts Are Informed?
Published: 04/01/2008 | DOI: 10.1111/j.1540-6261.2008.01324.x
EKKEHART BOEHMER, CHARLES M. JONES, XIAOYAN ZHANG
We construct a long daily panel of short sales using proprietary NYSE order data. From 2000 to 2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that shorting constraints are not widespread. As a group, these short sellers are well informed. Heavily shorted stocks underperform lightly shorted stocks by a risk‐adjusted average of 1.16% over the following 20 trading days (15.6% annualized). Institutional nonprogram short sales are the most informative; stocks heavily shorted by institutions underperform by 1.43% the next month (19.6% annualized). The results indicate that, on average, short sellers are important contributors to efficient stock prices.
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.
Does Algorithmic Trading Improve Liquidity?
Published: 01/06/2011 | DOI: 10.1111/j.1540-6261.2010.01624.x
TERRENCE HENDERSHOTT, CHARLES M. JONES, ALBERT J. MENKVELD
Algorithmic trading (AT) has increased sharply over the past decade. Does it improve market quality, and should it be encouraged? We provide the first analysis of this question. The New York Stock Exchange automated quote dissemination in 2003, and we use this change in market structure that increases AT as an exogenous instrument to measure the causal effect of AT on liquidity. For large stocks in particular, AT narrows spreads, reduces adverse selection, and reduces trade‐related price discovery. The findings indicate that AT improves liquidity and enhances the informativeness of quotes.
Oil and the Stock Markets
Published: June 1996 | DOI: 10.1111/j.1540-6261.1996.tb02691.x
CHARLES M. JONES, GAUTAM KAUL
We test whether the reaction of international stock markets to oil shocks can be justified by current and future changes in real cash flows and/or changes in expected returns. We find that in the postwar period, the reaction of United States and Canadian stock prices to oil shocks can be completely accounted for by the impact of these shocks on real cash flows alone. In contrast, in both the United Kingdom and Japan, innovations in oil prices appear to cause larger changes in stock prices than can be justified by subsequent changes in real cash flows or by changing expected returns.