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 and Expected Inflation
Published: 03/01/1986 | DOI: 10.1111/j.1540-6261.1986.tb04500.x
RENÉ M. STULZ
This paper provides an equilibrium model in which expected real returns on common stocks are negatively related to expected inflation and money growth. It is shown that the fall in real wealth associated with an increase in expected inflation decreases the real rate of interest and the expected real rate of return of the market portfolio. The expected real rate of return of the market portfolio falls less, for a given increase in expected inflation, when the increase in expected inflation is caused by an increase in money growth rather than by a worsening of the investment opportunity set. The model has empirical implications for the effect of a change in expected inflation on the cross‐sectional distribution of asset returns and can help to understand why assets whose return covaries positively with expected inflation may have lower expected returns. The model also agrees with explanations advanced by Fama [5] and Geske and Roll [10] for the negative relation between stock returns and inflation.
Erratum from the Editor
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00174
René M. Stulz
The Limits of Financial Globalization
Published: 08/12/2005 | DOI: 10.1111/j.1540-6261.2005.00775.x
RENÉ M. STULZ
Despite the dramatic reduction in explicit barriers to international investment activity over the last 60 years, the impact of financial globalization has been surprisingly limited. I argue that country attributes are still critical to financial decision‐making because of “twin agency problems” that arise because rulers of sovereign states and corporate insiders pursue their own interests at the expense of outside investors. When these twin agency problems are significant, diffuse ownership is inefficient and corporate insiders must co‐invest with other investors, retaining substantial equity. The resulting ownership concentration limits economic growth, financial development, and the ability of a country to take advantage of financial globalization.
EDITORIAL
Published: 04/18/2012 | DOI: 10.1111/j.1540-6261.1997.tb01110.x
René M. Stulz
On the Effects of Barriers to International Investment
Published: 09/01/1981 | DOI: 10.1111/j.1540-6261.1981.tb04893.x
RENÉ M. STULZ
A simple model is presented in which it is costly for domestic investors to hold foreign assets. The implications of the model for the composition of optimal portfolios at home and abroad are derived. It is shown that all foreign assets with a beta larger than some beta β* plot on either one of two security market lines. Some foreign assets with a beta smaller than β* are not held by domestic investors even if their expected return is increased slightly.
On the Determinants of Net Foreign Investment
Published: 05/01/1983 | DOI: 10.1111/j.1540-6261.1983.tb02252.x
RENÉ M. STULZ
Why Do Markets Move Together? An Investigation of U.S.‐Japan Stock Return Comovements
Published: 07/01/1996 | DOI: 10.1111/j.1540-6261.1996.tb02713.x
G. ANDREW KAROLYI, RENÉ M. STULZ
This article explores the fundamental factors that affect cross‐country stock return correlations. Using transactions data from 1988 to 1992, we construct overnight and intraday returns for a portfolio of Japanese stocks using their NYSE‐traded American Depository Receipts (ADRs) and a matched‐sample portfolio of U. S. stocks. We find that U. S. macroeconomic announcements, shocks to the Yen/Dollar foreign exchange rate and Treasury bill returns, and industry effects have no measurable influence on U.S. and Japanese return correlations. However, large shocks to broad‐based market indices (Nikkei Stock Average and Standard and Poor's 500 Stock Index) positively impact both the magnitude and persistence of the return correlations.
Is Sell‐Side Research More Valuable in Bad Times?
Published: 02/07/2018 | DOI: 10.1111/jofi.12611
ROGER K. LOH, RENÉ M. STULZ
Because uncertainty is high in bad times, investors find it harder to assess firm prospects and hence should value analyst output more. However, higher uncertainty makes analysts’ tasks harder, so it is unclear whether analyst output is more valuable in bad times. We find that in bad times, analyst revisions have a larger stock‐price impact, earnings forecast errors per unit of uncertainty fall, and analyst reports are more frequent and longer. The increased impact of analysts is also more pronounced for harder‐to‐value firms. These results are consistent with analysts working harder and investors relying more on analysts in bad times.
This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance during the Recent Financial Crisis
Published: 11/19/2012 | DOI: 10.1111/j.1540-6261.2012.01783.x
RÜDIGER FAHLENBRACH, ROBERT PRILMEIER, RENÉ M. STULZ
Are some banks prone to perform poorly during crises? If yes, why? In this paper, we show that a bank's stock return performance during the 1998 crisis predicts its stock return performance and probability of failure during the recent financial crisis. This effect is economically large. Our findings are consistent with persistence in a bank's risk culture and/or aspects of its business model that make its performance sensitive to crises. Banks that relied more on short‐term funding, had more leverage, and grew more are more likely to be banks that performed poorly in both crises.
Corporate Acquisitions, Diversification, and the Firm's Life Cycle
Published: 10/13/2015 | DOI: 10.1111/jofi.12362
ASLI M. ARIKAN, RENÉ M. STULZ
Agency theories predict that older firms make value‐destroying acquisitions to benefit managers. Neoclassical theories predict instead that such firms make wealth‐increasing acquisitions to exploit underutilized assets. Using IPO cohorts, we establish that, while younger firms make more related and diversifying acquisitions than mature firms, the acquisition rate follows a U‐shape over firms’ life cycle. Consistent with neoclassical theories, we show that acquiring firms have better performance and growth opportunities and create wealth through acquisitions of nonpublic firms throughout their life. Consistent with agency theories, older firms experience negative stock price reactions for acquisitions of public firms.