The Journal of Finance

THE INSIDE LAGS OF MONETARY POLICY: 1952–1960

Published: 12/01/1967   |   DOI: 10.1111/j.1540-6261.1967.tb00294.x

Mark H. Willes

The Numeraire Problem and Foreign Exchange Risk

Published: 05/01/1981   |   DOI: 10.1111/j.1540-6261.1981.tb00456.x

MARK R. EAKER

AN ANALYSIS OF CREDIT INSURANCE*

Published: 03/01/1957   |   DOI: 10.1111/j.1540-6261.1957.tb04118.x

Mark Richard Greene

THE INTEREST ELASTICITY OF THE RATIO OF FIXED INVESTMENT TO NATIONAL INCOME AS ESTIMATED FROM ENGINEERING PAYOUT STUDIES*

Published: 09/01/1964   |   DOI: 10.1111/j.1540-6261.1964.tb02878.x

Mark Liddell Wehle

Executive Option Repricing, Incentives, and Retention

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00659.x

Mark A. Chen

While many firms grant executive stock options that can be repriced, other firms systematically restrict or prohibit repricing. This article investigates the determinants of firms' repricing policies and the consequences of such policies for executive turnover and retention. Firms that have better internal governance, that use more powerful stock‐based incentives, or that face less shareholder scrutiny are more likely to maintain repricing flexibility. Firms that restrict repricing are more vulnerable to voluntary executive turnover following stock price declines. When share price declines are severe, restricting firms appear to award unusually large numbers of new options.

Borrower Misreporting and Loan Performance

Published: 03/27/2014   |   DOI: 10.1111/jofi.12156

MARK J. GARMAISE

Borrower misreporting is associated with seriously adverse loan outcomes. Significantly more residential mortgage borrowers reported personal assets just above round number thresholds than just below. Borrowers who reported above‐threshold assets were almost 25 percentage points more likely to become delinquent (mean delinquency was 20%). For applicants with unverified assets, the increase in delinquency was greater than 40 percentage points. Misreporting was most frequent in areas with low financial literacy or social capital. Incorporating behavioral cues such as threshold effects into a risk assessment model improves its ability to uncover delinquencies, though at a cost of mischaracterizing some safe loans.

The Persistence of Mutual Fund Performance

Published: 12/01/1992   |   DOI: 10.1111/j.1540-6261.1992.tb04692.x

MARK GRINBLATT, SHERIDAN TITMAN

This paper analyzes how mutual fund performance relates to past performance. These tests are based on a multiple portfolio benchmark that was formed on the basis of securities characteristics. We find evidence that differences in performance between funds persist over time and that this persistence is consistent with the ability of fund managers to earn abnormal returns.

THE SEASONING PROCESS OF NEW CORPORATE BOND ISSUES

Published: 12/01/1978   |   DOI: 10.1111/j.1540-6261.1978.tb03424.x

Mark I. Weinstein

Bank Loan Supply, Lender Choice, and Corporate Capital Structure

Published: 05/20/2009   |   DOI: 10.1111/j.1540-6261.2009.01461.x

MARK T. LEARY

This paper explores the relevance of capital market supply frictions for corporate capital structure decisions. To identify this relationship, I study the effect on firms' financial structures of two changes in bank funding constraints: the 1961 emergence of the market for certificates of deposit, and the 1966 Credit Crunch. Following an expansion (contraction) in the availability of bank loans, leverage ratios of bank‐dependent firms significantly increase (decrease) relative to firms with bond market access. Concurrent changes in the composition of financing sources lend further support to the role of credit supply and debt market segmentation in capital structure choice.

The Sampling Error in Estimates of Mean‐Variance Efficient Portfolio Weights

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00120

Mark Britten‐Jones

This paper presents an exact finite‐sample statistical procedure for testing hypotheses about the weights of mean‐variance efficient portfolios. The estimation and inference procedures on efficient portfolio weights are performed in the same way as for the coefficients in an OLS regression. OLS t‐ and F‐statistics can be used for tests on efficient weights, and when returns are multivariate normal, these statistics have exact t and F distributions in a finite sample. Using 20 years of data on 11 country stock indexes, we find that the sampling error in estimates of the weights of a global efficient portfolio is large.

A MEAN‐VARIANCE SYNTHESIS OF CORPORATE FINANCIAL THEORY

Published: 03/01/1973   |   DOI: 10.1111/j.1540-6261.1973.tb01356.x

Mark E. Rubinstein

DISCUSSION

Published: 05/01/1981   |   DOI: 10.1111/j.1540-6261.1981.tb00475.x

MARK J. FLANNERY

DISCUSSION

Published: 05/01/1980   |   DOI: 10.1111/j.1540-6261.1980.tb02186.x

Mark A. Wolfson

On Persistence in Mutual Fund Performance

Published: 04/18/2012   |   DOI: 10.1111/j.1540-6261.1997.tb03808.x

Mark M. Carhart

Using a sample free of survivor bias, I demonstrate that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk‐adjusted returns. Hendricks, Patel and Zeckhauser's (1993) “hot hands” result is mostly driven by the one‐year momentum effect of Jegadeesh and Titman (1993), but individual funds do not earn higher returns from following the momentum strategy in stocks. The only significant persistence not explained is concentrated in strong underperformance by the worst‐return mutual funds. The results do not support the existence of skilled or informed mutual fund portfolio managers.

Relative Pricing of Eurodollar Futures and Forward Contracts

Published: 09/01/1996   |   DOI: 10.1111/j.1540-6261.1996.tb04077.x

MARK GRINBLATT, NARASIMHAN JEGADEESH

Past research explains observed spreads between futures and forward Eurodollar yields as being due to the futures contract's mark‐to‐market feature. We derive closed form solutions for this yield spread and show that, theoretically, it should be small. Also, differences in liquidity, taxation, and default risk cannot account for the large spreads observed. We also present evidence that the spreads, which are nonnegligible primarily in the first half of the sample period, are likely to be attributable to the mispricing of futures contracts relative to the forward rates and that the mispricing was gradually eliminated over time.

Is There a Window of Opportunity for Seasoned Equity Issuance?

Published: 03/01/1996   |   DOI: 10.1111/j.1540-6261.1996.tb05209.x

MARK BAYLESS, SUSAN CHAPLINSKY

The aggregate volume of equity issues is used to search for periods when seasoned equity capital can be raised at favorable terms. We find that the price reaction to equity issue announcements in high equity issue volume (HOT) periods is approximately 200 basis points lower on average than in low equity issue volume (COLD) periods. The lower price reaction in hot markets is economically important and is independent of the macroeconomic characteristics of hot and cold markets. The evidence supports the existence of windows of opportunity for equity issues that result at least partially from reduced levels of asymmetric information.

Sensation Seeking, Overconfidence, and Trading Activity

Published: 03/13/2009   |   DOI: 10.1111/j.1540-6261.2009.01443.x

MARK GRINBLATT, MATTI KELOHARJU

This study analyzes the role that two psychological attributes—sensation seeking and overconfidence—play in the tendency of investors to trade stocks. Equity trading data from Finland are combined with data from investor tax filings, driving records, and mandatory psychological profiles. We use these data, obtained from a large population, to construct measures of overconfidence and sensation seeking tendencies. Controlling for a host of variables, including wealth, income, age, number of stocks owned, marital status, and occupation, we find that overconfident investors and those investors most prone to sensation seeking trade more frequently.

THE STRONG CASE FOR THE GENERALIZED LOGARITHMIC UTILITY MODEL AS THE PREMIER MODEL OF FINANCIAL MARKETS

Published: 05/01/1976   |   DOI: 10.1111/j.1540-6261.1976.tb01906.x

Robert Litzenberger, Mark Rubinstein

This paper begins by comparing the available well‐developed micro‐economic models in finance which recognize uncertainty. It is argued that models whose distinctive simplifying assumption restricts utility functions are superior to those which instead restrict probability distributions, both with respect to the realism of their assumptions and richness of their conclusions. In particular, the most successful model, based on generalized logarithmic utility (GLUM), is a multiperiod consumption/portfolio and equilibrium model in discrete‐time which (1) requires decreasing absolute risk aversion; (2) tolerates increasing, constant, or decreasing proportional risk aversion; (3) assumes no exogenous specification of the contemporaneous or intertemporal stochastic process of security prices; (4) tolerates heterogeneity with respect to wealth, lifetime, time‐and risk‐preference and beliefs; (5) results in a complete specification of consumption/portfolio decision and sharing rules which include nontrivial multiperiod separation properties and explains demand for default‐free bonds of various maturities and options; (6) leads to a solution to the aggregation problem; (7) results in a complete specification of the contemporaneous and intertemporal process of security prices which reveals necessary and sufficient conditions for an unbiased term structure and the market portfolio to follow a random walk as a natural outcome of equilibrium; (8) provides an empirically testable aggregate consumption function relating per capita consumption to per capita wealth and the present value of a perpetual default‐free annuity which does not require inferences of ex ante beliefs from ex post data; (9) provides a nontrivial multiperiod extension of popular single‐period security valuation models which is empirically testable; (10) yields a simple multiperiod valuation formula for an uncertain income stream even when this income is serially correlated over time.

Insider Trading in Financial Signaling Models

Published: 12/01/1992   |   DOI: 10.1111/j.1540-6261.1992.tb04688.x

MARK BAGNOLI, NAVEEN KHANNA

We study the impact of voluntary trade by the manager. We find that, in contrast to standard signaling models, an action is good news for some firms and bad news for others, depending on observable characteristics of the firm, its managers, and their compensation plans. Further, voluntary trade eliminates separating equilibria and thus the possibility of exactly inferring the manager's private information. This may cause the manager to take inefficient actions so as to earn trading profits. Such undesirable behavior can be more effectively constrained by compensation contracts based on phantom shares or nontradeable options instead of large stockholdings.

How Distance, Language, and Culture Influence Stockholdings and Trades

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00355

Mark Grinblatt, Matti Keloharju

This paper documents that investors are more likely to hold, buy, and sell the stocks of Finnish firms that are located close to the investor, that communicate in the investor's native tongue, and that have chief executives of the same cultural background. The influence of distance, language, and culture is less prominent among the most investment‐savvy institutions than among both households and less savvy institutions. Regression analysis indicates that the marginal effect of distance is less for firms that are more nationally known, for distances that exceed 100 kilometers, and for investors with more diversified portfolios.