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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The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the United States
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00134
Stephen R. Foerster, G. Andrew Karolyi
Non‐U.S. firms cross‐listing shares on U.S. exchanges as American Depositary Receipts earn cumulative abnormal returns of 19 percent during the year before listing, and an additional 1.20 percent during the listing week, but incur a loss of 14 percent during the year following listing. We show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing. Our tests provide support for the market segmentation hypothesis and Merton's (1987) investor recognition hypothesis.
General Tests of Latent Variable Models and Mean‐Variance Spanning
Published: 03/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04704.x
WAYNE E. FERSON, STEPHEN R. FOERSTER, DONALD B. KEIM
The methods of Gibbons and Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean‐variance spanning generalizes Huberman and Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size‐based common stock portfolios proxy for the risk factors, we reject the hypothesis that four of them describe the conditional expected returns of the other assets.
Retail Financial Advice: Does One Size Fit All?
Published: 04/12/2017 | DOI: 10.1111/jofi.12514
STEPHEN FOERSTER, JUHANI T. LINNAINMAA, BRIAN T. MELZER, ALESSANDRO PREVITERO
Using unique data on Canadian households, we show that financial advisors exert substantial influence over their clients' asset allocation, but provide limited customization. Advisor fixed effects explain considerably more variation in portfolio risk and home bias than a broad set of investor attributes that includes risk tolerance, age, investment horizon, and financial sophistication. Advisor effects remain important even when controlling flexibly for unobserved heterogeneity through investor fixed effects. An advisor's own asset allocation strongly predicts the allocations chosen on clients' behalf. This one‐size‐fits‐all advice does not come cheap: advised portfolios cost 2.5% per year, or 1.5% more than life cycle funds.