The Journal of Finance

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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Asset Pricing, Higher Moments, and the Market Risk Premium: A Note

Published: September 1985   |   DOI: 10.1111/j.1540-6261.1985.tb02376.x

R. STEPHEN SEARS, K. C. JOHN WEI


Asset Pricing, Higher Moments, and the Market Risk Premium: A Note

Published: September 1985   |   DOI: 10.1111/j.1540-6261.1985.tb02376.x

R. STEPHEN SEARS, K. C. JOHN WEI


An Asset‐Pricing Theory Unifying the CAPM and APT

Published: September 1988   |   DOI: 10.1111/j.1540-6261.1988.tb02610.x

K. C. JOHN WEI

This study shows that the competitive‐equilibrium version of the APT may be extended to develop an exact model if idiosyncratic risks obey the Ross separating distribution. The results indicate that one only need add the market portfolio as an extra factor to the factor model in order to obtain an exact asset‐pricing relation. Thus, this study presents an extension and integration of the CAPM and APT. The “empirical” APT is also generalized to allow for some factors to be omitted from the econometric model employed to test the theory. The developed model is extremely robust and may be reduced to the CAPM or expanded to approximate Ross's APT depending upon the number of omitted factors. Further, the importance of the market portfolio is shown to be a monotonic increasing function of the number of omitted factors. Finally, the study demonstrates that, in a finite economy, the pricing‐error bound of the Ross APT in a correlated‐residuals factor structure is an increasing function of the absolute value of market‐residual beta, rather than the weight of the asset in the market portfolio as is the case of uncorrelated factor residuals. However, under the normality assumption, the pricing error becomes an extra component related to the market‐portfolio factor, and the exact asset‐pricing relation is once again obtained.


Institutional Ownership and Changes in the S&P 500

Published: June 1989   |   DOI: 10.1111/j.1540-6261.1989.tb05070.x

STEPHEN W. PRUITT, K. C. JOHN WEI

Several recent articles have provided new evidence for the existence of price pressures by examining the price and volume effects associated with changes in the S&P 500. The present study extends this work by examining actual changes in institutional holdings following both additions to and deletions from the S&P 500. The results show that changes in institutional holdings in response to additions or deletions from the S&P 500 are positively correlated. In addition to providing further evidence for the existence of price pressure effects, the results also provide evidence of the very large institutional elasticities of demand for stock.


Individualism and Momentum around the World

Published: 01/13/2010   |   DOI: 10.1111/j.1540-6261.2009.01532.x

ANDY C.W. CHUI, SHERIDAN TITMAN, K.C. JOHN WEI

This paper examines how cultural differences influence the returns of momentum strategies. Cross‐country cultural differences are measured with an individualism index developed by Hofstede (2001), which is related to overconfidence and self‐attribution bias. We find that individualism is positively associated with trading volume and volatility, as well as to the magnitude of momentum profits. Momentum profits are also positively related to analyst forecast dispersion, transaction costs, and the familiarity of the market to foreigners, and negatively related to firm size and volatility. However, the addition of these and other variables does not dampen the relation between individualism and momentum profits.