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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Search results: 5.

Earnings Announcements, Stock Price Adjustment, and the Existence of Option Markets

Published: 03/01/1986   |   DOI: 10.1111/j.1540-6261.1986.tb04494.x

ROBERT JENNINGS, LAURA STARKS

This paper employs a new approach to study the effects of option trading on the behavior of underlying stock prices. Extant research compares distributional properties of the stock price at two points in time divided by an event in the option market that might affect price behavior. As an alternative, we examine the stock price adjustment to the release of quarterly earnings using samples of firms with and without listed options. We find the two samples exhibit different adjustment processes, with the nonoption firms requiring substantially more time to adjust.


Reputation Effects in Trading on the New York Stock Exchange

Published: 05/08/2007   |   DOI: 10.1111/j.1540-6261.2007.01235.x

ROBERT BATTALIO, ANDREW ELLUL, ROBERT JENNINGS

Theory suggests that reputations allow nonanonymous markets to attenuate adverse selection in trading. We identify instances in which New York Stock Exchange (NYSE) stocks experience trading floor relocations. Although specialists follow the stocks to their new locations, most brokers do not. We find a discernable increase in liquidity costs around a stock's relocation that is larger for stocks with higher adverse selection and greater broker turnover. We also find that floor brokers relocating with the stock obtain lower trading costs than brokers not moving and brokers beginning trading post‐move. Our results suggest that reputation plays an important role in the NYSE's liquidity provision process.


Toward a National Market System for U.S. Exchange–listed Equity Options

Published: 03/25/2004   |   DOI: 10.1111/j.1540-6261.2004.00653.x

Robert Battalio, Brian Hatch, Robert Jennings

In its response to the 1975 Congressional mandate to implement a national market system for financial securities, the Securities and Exchange Commission (SEC) initially exempted the option market. Recent dramatic changes in the structure of the option market prompted the SEC to revisit this issue. We examine a sample of actively traded, multiply listed equity options to ask whether this market's characteristics appear consistent with the goals of producing economically efficient transactions and facilitating “best execution.” We find marked changes between June 2000, when quotes are often ignored, and January 2002, when the market more closely resembles a national market.


Can Brokers Have It All? On the Relation between Make‐Take Fees and Limit Order Execution Quality

Published: 05/23/2016   |   DOI: 10.1111/jofi.12422

ROBERT BATTALIO, SHANE A. CORWIN, ROBERT JENNINGS

We identify retail brokers that seemingly route orders to maximize order flow payments, by selling market orders and sending limit orders to venues paying large liquidity rebates. Angel, Harris, and Spatt argue that such routing may not always be in customers’ best interests. For both proprietary limit order data and a broad sample of trades from TAQ, we document a negative relation between several measures of limit order execution quality and rebate/fee level. This finding suggests that order routing designed to maximize liquidity rebates does not maximize limit order execution quality and thus brokers cannot have it all.


An Equilibrium Model of Asset Trading with Sequential Information Arrival

Published: 03/01/1981   |   DOI: 10.1111/j.1540-6261.1981.tb03540.x

ROBERT H. JENNINGS, LAURA T. STARKS, JOHN C. FELLINGHAM

In an effort to better understand the dynamic market price adjustment process, this paper develops a model which describes the impact of new information on a financial market. The primary emphasis is on the price change‐volume relationship in the presence of a margin requirement. We find that the margin requirement significantly affects the relation of price change to volume. Furthermore, this relationship is shown to be affected by the number of investors in the market, the degree of information dissemination, differences in interpretation of information and the implicit cost of the margin requirement.