The Journal of Finance

COMPETITIVE INFORMATION IN THE STOCK MARKET: AN EMPIRICAL STUDY OF EARNINGS, DIVIDENDS AND ANALYSTS' FORECASTS*

Published: 05/01/1976   |   DOI: 10.1111/j.1540-6261.1976.tb01911.x

Paul A. Griffin

The Effects of Inflation and Money Supply Announcements on Interest Rates

Published: 09/01/1984   |   DOI: 10.1111/j.1540-6261.1984.tb03901.x

THOMAS URICH, PAUL WACHTEL

This paper examines the impact of the money supply and inflation rate announcements on interest rates. Survey data on expectations of the money supply and consumer and producer price indexes are used to distinguish anticipated and unanticipated components of the announcements. This distinction is used to test for the efficiency of the financial market response to the announcements of new information. The results indicate that the unanticipated components of the announced changes in the Producers Price Index and in the money supply have an immediate positive effect on short‐term interest rates. The Consumer Price Index announcement has no apparent effect. There is no evidence of a delayed announcement effect. However, there is some indication of a liquidity effect of the money supply change on interest rates. This takes place when reserves are changing and several weeks prior to the information announcement.

TERM LOANS TO SMALL BUSINESS IN CALIFORNIA, 1945–46

Published: 06/01/1948   |   DOI: 10.1111/j.1540-6261.1948.tb01512.x

Paul F. Wendt

COMPETITION IN INVESTMENT BANKING*

Published: 05/01/1953   |   DOI: 10.1111/j.1540-6261.1953.tb01169.x

Paul L. Howell

CONCENTRATION AND COMPETITION IN NEW ENGLAND BANKING*

Published: 12/01/1959   |   DOI: 10.1111/j.1540-6261.1959.tb00152.x

Paul Michael Horvitz

An Analysis of Brokers' and Analysts' Unpublished Forecasts of UK Stock Returns

Published: 12/01/1984   |   DOI: 10.1111/j.1540-6261.1984.tb04907.x

ELROY DIMSON, PAUL MARSH

This paper describes an empirical study of over 4000 specific share return forecasts made by 35 UK stockbrokers and by the internal analysts of a large UK investment institution. A comparison of forecast and realised returns reveals a small but potentially useful degree of forecasting ability. A large part of the information content of the forecasts, however, appears to be discounted in the market place within the first month. Nevertheless, an analysis of some 3000 transactions motivated by, and executed at the time of, the forecasts shows that the apparent predictive ability of the recommendations could be translated into superior performance by the fund's investment managers. Differences in forecasting ability between brokers do not appear to persist over time, but predictive accuracy can be improved by pooling simultaneous forecasts from different sources.

PREMIUMS ON CONVERTIBLE BONDS: COMMENT

Published: 09/01/1970   |   DOI: 10.1111/j.1540-6261.1970.tb00566.x

Paul D. Cretien

Capital Requirements for Securities Firms

Published: 07/01/1995   |   DOI: 10.1111/j.1540-6261.1995.tb04038.x

ELROY DIMSON, PAUL MARSH

Regulatory authorities set capital requirements to cover the position risk of securities firms and to protect against losses arising from fluctuations in the value of their holdings. The requirements may be set using the comprehensive approach required by the U.S. Securities and Exchange Commission, the building‐block approach required by the European Community, or the portfolio approach required by the United Kingdom. We compare these three alternatives using a large sample of U.K. equity trading books. The portfolio approach systematically specifies larger requirements for riskier books, and vice versa. It is more efficient than the building‐block approach, and far more efficient than the comprehensive approach.

Regulatory Uncertainty and Market Liquidity: The 2008 Short Sale Ban's Impact on Equity Option Markets

Published: 11/14/2011   |   DOI: 10.1111/j.1540-6261.2011.01700.x

ROBERT BATTALIO, PAUL SCHULTZ

We examine how the September 2008 short sale restrictions and the accompanying confusion and regulatory uncertainty impacted equity option markets. We find that the short sale ban is associated with dramatically increased bid‐ask spreads for options on banned stocks. In addition, synthetic share prices for banned stocks become significantly lower than actual share prices during the ban. We find similar results for synthetic share prices of hard‐to‐borrow stocks, suggesting that the dislocation in actual and synthetic share prices is attributable to the increased hedging costs for options on banned stocks during the short sale ban.

A Simple Way to Estimate Bid‐Ask Spreads from Daily High and Low Prices

Published: 03/27/2012   |   DOI: 10.1111/j.1540-6261.2012.01729.x

SHANE A. CORWIN, PAUL SCHULTZ

We develop a bid‐ask spread estimator from daily high and low prices. Daily high (low) prices are almost always buy (sell) trades. Hence, the high–low ratio reflects both the stock's variance and its bid‐ask spread. Although the variance component of the high–low ratio is proportional to the return interval, the spread component is not. This allows us to derive a spread estimator as a function of high–low ratios over 1‐day and 2‐day intervals. The estimator is easy to calculate, can be applied in a variety of research areas, and generally outperforms other low‐frequency estimators.

Options and the Bubble

Published: 09/19/2006   |   DOI: 10.1111/j.1540-6261.2006.01051.x

ROBERT BATTALIO, PAUL SCHULTZ

Many believe that a bubble existed in Internet stocks in the 1999 to 2000 period, and that short‐sale restrictions prevented rational investors from driving Internet stock prices to reasonable levels. In the presence of such short‐sale constraints, option and stock prices could decouple during a bubble. Using intraday options data from the peak of the Internet bubble, we find almost no evidence that synthetic stock prices diverged from actual stock prices. We also show that the general public could cheaply short synthetically using options. In summary, we find no evidence that short‐sale restrictions affected Internet stock prices.

DISCUSSION

Published: 05/01/1983   |   DOI: 10.1111/j.1540-6261.1983.tb02254.x

ALLAN W. KLEIDON, PAUL PFLEIDERER

THE ECONOMICS OF THE ASSET DEPRECIATION RANGE SYSTEM: THE CASE AGAINST ADR

Published: 05/01/1972   |   DOI: 10.1111/j.1540-6261.1972.tb00979.x

Harold Somers, Paul Taubman

Pricing Warrants: An Empirical Study of the Black‐Scholes Model and Its Alternatives

Published: 09/01/1990   |   DOI: 10.1111/j.1540-6261.1990.tb02432.x

BENI LAUTERBACH, PAUL SCHULTZ

This paper uses a sample of over 25,000 daily warrant prices to empirically investigate potential problems with the commonly used warrant pricing model proposed by Black and Scholes as an extension of their call option model. One problem seems to be especially important: the constant variance assumption of the dilution adjusted Black‐Scholes model appears to cause biases in model prices for almost all warrants and over the entire sample period. We show that more accurate price forecasts are obtained with a specific form of the constant elasticity of variance model.

Market Response to the Weekly Money Supply Announcements in the 1970s

Published: 12/01/1981   |   DOI: 10.1111/j.1540-6261.1981.tb01076.x

THOMAS URICH, PAUL WACHTEL

The hypothesis that the weekly announcement of the money supply affects interest rates is examined. The announcement effect is interpreted as a policy anticipation effect. That is, an unanticipated increase in the money supply leads to an increase in interest rates in anticipation of future tightening by the Federal Reserve. Estimates of this effect with proxies for the unanticipated change constructed from a survey of money supply forecasts and an ARIMA model indicate that: (a) financial markets respond very quickly to the announcement; and (b) the response was largest when policymakers emphasized the importance of the monetary aggregates.

Venture Capital Distributions: Short‐Run and Long‐Run Reactions

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00086

Paul Gompers, Josh Lerner

Venture capital distributions, a legal form of insider trading, provides an ideal arena for examining the share price impact of transactions by informed parties. These sales, which occur after substantial run‐ups in share value, generate a substantial price reaction immediately around the event. In the months after distribution, returns apparently continue to be negative. When the short‐ and long‐run reactions are decomposed, they are consistent with the view that venture capitalists use inside information to time stock distributions: Distributions of firms brought public by lower quality underwriters and of less seasoned firms have more negative price reactions.

Why Do Investors Hold Socially Responsible Mutual Funds?

Published: 08/01/2017   |   DOI: 10.1111/jofi.12547

ARNO RIEDL, PAUL SMEETS

To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.

DISCUSSION

Published: 05/01/1964   |   DOI: 10.1111/j.1540-6261.1964.tb00763.x

Ernest Bloch, Paul H. Cootner

Futures‐Trading Activity and Stock Price Volatility

Published: 12/01/1992   |   DOI: 10.1111/j.1540-6261.1992.tb04695.x

HENDRIK BESSEMBINDER, PAUL J. SEGUIN

We examine whether greater futures‐trading activity (volume and open interest) is associated with greater equity volatility. We partition each trading activity series into expected and unexpected components, and document that while equity volatility covaries positively with unexpected futures‐trading volume, it is negatively related to forecastable futures‐trading activity. Further, though futures‐trading activity is systematically related to the futures contract life cycle, we find no evidence of a relation between the futures life cycle and spot equity volatility. These findings are consistent with theories predicting that active futures markets enhance the liquidity and depth of the equity markets.

The Gender Gap in Housing Returns

Published: 02/07/2023   |   DOI: 10.1111/jofi.13212

PAUL GOLDSMITH‐PINKHAM, KELLY SHUE

Using detailed transactions data across the United States, we find that single women earn 1.5 percentage points lower annualized returns on housing relative to single men. Forty‐five percent of the gap is explained by transaction timing and location. The remaining gap arises from a 2% gender difference in execution prices at purchase and sale. Consistent with a negotiation channel, women list for less and experience worse negotiated discounts. The gender gap shrinks in tight markets, where negotiation is replaced by quasi‐auctions. Overall, gender differences in housing explain 30% of the gender gap in wealth accumulation for the median household.