The Journal of Finance

A Tough Act to Follow: Contrast Effects in Financial Markets

Published: 5/24/2018,  Volume: 73,  Issue: 4  |  DOI: 10.1111/jofi.12685  |  Cited by: 108

SAMUEL M. HARTZMARK, KELLY SHUE

A contrast effect occurs when the value of a previously observed signal inversely biases perception of the next signal. We present the first evidence that contrast effects can distort prices in sophisticated and liquid markets. Investors mistakenly perceive earnings news today as more impressive if yesterday's earnings surprise was bad and less impressive if yesterday's surprise was good. A unique advantage of our financial setting is that we can identify contrast effects as an error in perceptions rather than expectations. Finally, we show that our results cannot be explained by an alternative explanation involving information transmission from previous earnings announcements.

The Dividend Disconnect

Published: 6/10/2019,  Volume: 74,  Issue: 5  |  DOI: 10.1111/jofi.12785  |  Cited by: 108

SAMUEL M. HARTZMARK, DAVID H. SOLOMON

Many individual investors, mutual funds, and institutions trade as if dividends and capital gains are disconnected attributes, not fully appreciating that dividends result in price decreases. Behavioral trading patterns (e.g., the disposition effect) are driven by price changes instead of total returns. Investors rarely reinvest dividends, and trade as if dividends are a separate, stable income stream. Analysts fail to account for the effect of dividends on price, leading to optimistic price forecasts for dividend‐paying stocks. Demand for dividends is systematically higher in periods of low interest rates and poor market performance, leading to lower returns for dividend‐paying stocks.

Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

Published: 8/29/2019,  Volume: 74,  Issue: 6  |  DOI: 10.1111/jofi.12841  |  Cited by: 1308

SAMUEL M. HARTZMARK, ABIGAIL B. SUSSMAN

Examining a shock to the salience of the sustainability of the U.S. mutual fund market, we present causal evidence that investors marketwide value sustainability: being categorized as low sustainability resulted in net outflows of more than $12 billion while being categorized as high sustainability led to net inflows of more than $24 billion. Experimental evidence suggests that sustainability is viewed as positively predicting future performance, but we do not find evidence that high‐sustainability funds outperform low‐sustainability funds. The evidence is consistent with positive affect influencing expectations of sustainable fund performance and nonpecuniary motives influencing investment decisions.

A New Test of Risk Factor Relevance

Published: 5/26/2022,  Volume: 77,  Issue: 4  |  DOI: 10.1111/jofi.13135  |  Cited by: 54

ALEX CHINCO, SAMUEL M. HARTZMARK, ABIGAIL B. SUSSMAN

Textbook models assume that investors try to insure against bad states of the world associated with specific risk factors when investing. This is a testable assumption and we develop a survey framework for doing so. Our framework can be applied to any risk factor. We demonstrate the approach using consumption growth, which makes our results applicable to most modern asset‐pricing models. Participants respond to changes in the mean and volatility of stock returns consistent with textbook models, but we find no evidence that they view an asset's correlation with consumption growth as relevant to investment decisions.

CONGLOMERATE PERFORMANCE MEASUREMENT: REPLY

Published: 6/1974,  Volume: 29,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1974.tb01501.x  |  Cited by: 1

Samuel R. Reid

THE RELATIONSHIP BETWEEN MONEY, INCOME AND PRICES IN THE SHORT AND LONG RUN

Published: 12/1973,  Volume: 28,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1973.tb01445.x  |  Cited by: 0

Samuel A. Morley

HOUSEHOLD DEMAND FOR SAVINGS DEPOSITS, 1921–1965

Published: 9/1969,  Volume: 24,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1969.tb00388.x  |  Cited by: 1

Samuel B. Chase

SHOULD A CORPORATION REPURCHASE ITS OWN STOCK?

Published: 6/1976,  Volume: 31,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1976.tb01933.x  |  Cited by: 9

Samuel S. Stewart

A STUDY OF PUBLIC HOUSING IN THE UNITED STATES*

Published: 9/1958,  Volume: 13,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1958.tb04209.x  |  Cited by: 0

Samuel E. Trotter

THE FUTURE OF STERLING

Published: 12/1955,  Volume: 10,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1955.tb01296.x  |  Cited by: 1

Samuel I. Katz

FRANK D. GRAHAM AND THE CLASSICAL THEORY OF INTERNATIONAL TRADE

Published: 3/1950,  Volume: 5,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1950.tb02472.x  |  Cited by: 0

Samuel E. Braden

A REPLY TO THE WESTON/MANSINGHKA CRITICISMS DEALING WITH CONGLOMERATE MERGERS

Published: 9/1971,  Volume: 26,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1971.tb00929.x  |  Cited by: 21

Samuel R. Reid

The Intra‐Industry Transfer of Information Inferred from Announcements of Corporate Security Offerings

Published: 12/1992,  Volume: 47,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1992.tb04689.x  |  Cited by: 55

SAMUEL H. SZEWCZYK

This study investigates the extent to which information inferred by investors from initial announcements of corporate security offerings affects share prices in the capital markets. The empirical tests measure the response in the common stock prices of both firms announcing a security offering and non‐announcing firms operating in the same industry. Small but significantly negative abnormal returns are shown by industry shares upon initial announcements of common stock, convertible debt, and straight debt public offerings. Such an industry response indicates that share prices incorporate an inside assessment of factors relevant to the valuation of an industry subset of firms.

Crisis Interventions in Corporate Insolvency

Published: 1/30/2025,  Volume: 80,  Issue: 2  |  DOI: 10.1111/jofi.13421  |  Cited by: 4

SAMUEL ANTILL, CHRISTOPHER CLAYTON

We model the optimal resolution of insolvent firms in general equilibrium. Collateral‐constrained banks lend to (i) solvent firms to finance investments and (ii) distressed firms to avoid liquidation. Liquidations create negative fire‐sale externalities. Liquidations also relieve bank balance–sheet congestion, enabling new firm loans that generate positive collateral externalities by lowering bank borrowing rates. Socially optimal interventions encourage liquidation when firms have high operating losses, high leverage, or low productivity. Surprisingly, larger fire sales promote interventions encouraging more liquidations. We study synergies between insolvency interventions and macroprudential regulation, bailouts, deferred loss recognition, and debt subordination. Our model elucidates historical crisis interventions.

Consumer Choice and Corporate Bankruptcy

Published: 3/23/2026,  Volume: ,  Issue:   |  DOI: 10.1111/jofi.70030  |  Cited by: 0

SAMUEL ANTILL, MEGAN HUNTER

We estimate the indirect costs of corporate bankruptcy associated with lost customers. In incentivized experiments, randomly informing consumers about a firm's Chapter 11 reorganization lowers their willingness to pay for the firm's products by 17% to 28%. Consumers worry that bankruptcy could reduce product quality or prevent future interactions with the bankrupt firm. On average, 38% of consumers are aware of major bankruptcies. Using our experiments to estimate a structural model, we show that these indirect costs of bankruptcy amount to 12% to 15% of a firm's value. We show that these costs are unlikely to arise before bankruptcy.

Share Issuance and Factor Timing

Published: 3/27/2012,  Volume: 67,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2012.01730.x  |  Cited by: 86

ROBIN GREENWOOD, SAMUEL G. HANSON

We show that characteristics of stock issuers can be used to forecast important common factors in stocks' returns such as those associated with book‐to‐market, size, and industry. Specifically, we use differences between the attributes of stock issuers and repurchasers to forecast characteristic‐related factor returns. For example, we show that large firms underperform after years when issuing firms are large relative to repurchasing firms. While our strongest results are for portfolios based on book‐to‐market (i.e., HML), size (i.e., SMB), and industry, our approach is also useful for forecasting factor returns associated with distress, payout policy, and profitability.

FINANCIAL STRUCTURE AND REGULATION: SOME KNOTTY PROBLEMS

Published: 5/1971,  Volume: 26,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1971.tb00917.x  |  Cited by: 1

Clifton H. Kreps, Samuel B. Chase

A Gap‐Filling Theory of Corporate Debt Maturity Choice

Published: 5/7/2010,  Volume: 65,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2010.01559.x  |  Cited by: 251

ROBIN GREENWOOD, SAMUEL HANSON, JEREMY C. STEIN

We argue that time variation in the maturity of corporate debt arises because firms behave as macro liquidity providers, absorbing the supply shocks associated with changes in the maturity structure of government debt. We document that when the government funds itself with more short‐term debt, firms fill the resulting gap by issuing more long‐term debt, and vice versa. This type of liquidity provision is undertaken more aggressively: (1) when the ratio of government debt to total debt is higher and (2) by firms with stronger balance sheets. Our theory sheds new light on market timing phenomena in corporate finance more generally.

Did FinTech Lenders Facilitate PPP Fraud?

Published: 2/25/2023,  Volume: 78,  Issue: 3  |  DOI: 10.1111/jofi.13209  |  Cited by: 69

JOHN M. GRIFFIN, SAMUEL KRUGER, PRATEEK MAHAJAN

In the $793 billion Paycheck Protection Program, we examine metrics related to potential misreporting including nonregistered businesses, multiple businesses at residential addresses, abnormally high implied compensation per employee, and large inconsistencies with jobs reported in another government program. These measures consistently concentrate in certain FinTech lenders and are cross‐verified by seven additional measures. FinTech market share increased significantly over time, and suspicious lending by FinTechs in 2021 is four times the level at the start of the program. Suspicious loans are being overwhelmingly forgiven at rates similar to other loans.

Underreaction to Dividend Reductions and Omissions?

Published: 4/2008,  Volume: 63,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2008.01337.x  |  Cited by: 40

YI LIU, SAMUEL H. SZEWCZYK, ZAHER ZANTOUT

Using a sample of 2,337 cash dividend reduction or omission announcements over the 1927 to 1999 period, this study reports significant negative post‐announcement long‐term abnormal returns, which last 1 year only. However, this long‐term abnormal performance is driven by the post‐earnings‐announcement drift. After controlling for the earnings performance and the skewness of buy‐and‐hold abnormal returns, there is no compelling evidence of a post‐dividend‐reduction or post‐dividend‐omission price drift.

Do Municipal Bond Dealers Give Their Customers “Fair and Reasonable” Pricing?

Published: 3/8/2023,  Volume: 78,  Issue: 2  |  DOI: 10.1111/jofi.13214  |  Cited by: 36

JOHN M. GRIFFIN, NICHOLAS HIRSCHEY, SAMUEL KRUGER

Municipal bonds exhibit considerable retail pricing variation, even for same‐size trades of the same bond on the same day, and even from the same dealer. Markups vary widely across dealers. Trading strongly clusters on eighth price increments, and clustered trades exhibit higher markups. Yields are often lowered to just above salient numbers. Machine learning estimates exploiting the richness of the data show that dealers that use strategic pricing have systematically higher markups. Recent Municipal Securities Rulemaking Board rules have had only a limited impact on markups. While a subset of dealers focus on best execution, many dealers appear focused on opportunistic pricing.

A Comparative‐Advantage Approach to Government Debt Maturity

Published: 7/23/2015,  Volume: 70,  Issue: 4  |  DOI: 10.1111/jofi.12253  |  Cited by: 245

ROBIN GREENWOOD, SAMUEL G. HANSON, JEREMY C. STEIN

We study optimal government debt maturity in a model where investors derive monetary services from holding riskless short‐term securities. In a setting where the government is the only issuer of such riskless paper, it trades off the monetary premium associated with short‐term debt against the refinancing risk implied by the need to roll over its debt more often. We extend the model to allow private financial intermediaries to compete with the government in the provision of short‐term money‐like claims. We argue that, if there are negative externalities associated with private money creation, the government should tilt its issuance more toward short maturities, thereby partially crowding out the private sector's use of short‐term debt.

THE REGULATION OF BANK HOLDING COMPANIES

Published: 5/1975,  Volume: 30,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1975.tb01810.x  |  Cited by: 4

Samuel B. Chase, John J. Mingo, Sherman J. Maisel

Predictable Financial Crises

Published: 3/10/2022,  Volume: 77,  Issue: 2  |  DOI: 10.1111/jofi.13105  |  Cited by: 139

ROBIN GREENWOOD, SAMUEL G. HANSON, ANDREI SHLEIFER, JAKOB AHM SØRENSEN

Using historical data on postwar financial crises around the world, we show that the combination of rapid credit and asset price growth over the prior three years, whether in the nonfinancial business or the household sector, is associated with a 40% probability of entering a financial crisis within the next three years. This compares with a roughly 7% probability in normal times, when neither credit nor asset price growth is elevated. Our evidence challenges the view that financial crises are unpredictable “bolts from the sky” and supports the Kindleberger‐Minsky view that crises are the byproduct of predictable, boom‐bust credit cycles. This predictability favors policies that lean against incipient credit‐market booms.