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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DISCUSSION
Published: 05/01/1967 | DOI: 10.1111/j.1540-6261.1967.tb00003.x
H. Martin Weingartner
Real Rates, Expected Inflation, and Inflation Risk Premia
Published: 12/17/2002 | DOI: 10.1111/0022-1082.75591
Martin D. D. Evans
This paper studies the term structure of real rates, expected inflation, and inflation risk premia. The analysis is based on new estimates of the real term structure derived from the prices of index‐linked and nominal debt in the U.K. I find strong evidence to reject both the Fisher Hypothesis and versions of the Expectations Hypothesis for real rates. The estimates also imply the presence of time‐varying inflation risk premia throughout the term structure.
FX Trading and Exchange Rate Dynamics
Published: 12/17/2002 | DOI: 10.1111/1540-6261.00501
Martin D. D. Evans
I examine the sources of exchange rate dynamics by focusing on the information structure of FX trading. This structure permits the existence of an equilibrium distribution of transaction prices at a point in time. I develop and estimate a model of the price distribution using data from the Deutsche mark/dollar market that prroduces two striking results: (1) Much of the short‐term volatility in exchange rates comes from sampling the heterogeneous trading decisions of dealers in a distribution that, under normal market conditions, changes comparatively slowly; (2) public news is rarely the predominant source of exchange rate movements over any horizon.
Spanning with Short‐Selling Restrictions
Published: 06/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04740.x
MARTIN RAAB, ROBERT SCHWAGER
In principle, the set of attainable payoff vectors is reduced if assets cannot be sold short. However, we show that the original space of payoff vectors is spanned despite short sale restrictions if there is one additional asset whose payoff is a positively weighted sum of the payoffs of the original assets. For example, this condition is automatically fulfilled if the original assets are stocks and the additional asset is an index future consisting of these stocks.
The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership
Published: 09/01/1996 | DOI: 10.1111/j.1540-6261.1996.tb04068.x
KENNETH J. MARTIN
This article examines the motives underlying the payment method in corporate acquisitions. The findings support the notion that the higher the acquirer's growth opportunities, the more likely the acquirer is to use stock to finance an acquisition. Acquirer managerial ownership is not related to the probability of stock financing over small and large ranges of ownership, but is negatively related over a middle range. In addition, the likelihood of stock financing increases with higher pre‐acquisition market and acquiring firm stock returns. It decreases with an acquirer's higher cash availability, higher institutional shareholdings and blockholdings, and in tender offers.
DETERMINANTS OF COMMON STOCK PRICES*
Published: 12/01/1966 | DOI: 10.1111/j.1540-6261.1966.tb00282.x
Martin Jay Gruber
Expected Returns, Time‐varying Risk, and Risk Premia
Published: 06/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb05156.x
MARTIN D. D. EVANS
A new empirical model for intertemporal capital asset pricing is presented that allows both time‐varying risk premia and betas where the latter are identified from the dynamics of the conditional covariance of returns. The model is more successful in explaining the predictable variations in excess returns when the returns on the stock market and corporate bonds are included as risk factors than when the stock market is the single factor. Although changes in the covariance of returns induce variations in the betas, most of the predictable movements in returns are attributed to changes in the risk premia.
Another Puzzle: The Growth in Actively Managed Mutual Funds
Published: 07/01/1996 | DOI: 10.1111/j.1540-6261.1996.tb02707.x
MARTIN J. GRUBER
Mutual funds represent one of the fastest growing type of financial intermediary in the American economy. The question remains as to why mutual funds and in particular actively managed mutual funds have grown so fast, when their performance on average has been inferior to that of index funds. One possible explanation of why investors buy actively managed open end funds lies in the fact that they are bought and sold at net asset value, and thus management ability may not be priced. If management ability exists and it is not included in the price of open end funds, then performance should be predictable. If performance is predictable and at least some investors are aware of this, then cash flows into and out of funds should be predictable by the very same metrics that predict performance. Finally, if predictors exist and at least some investors act on these predictors in investing in mutual funds, the return on new cash flows should be better than the average return for all investors in these funds. This article presents empirical evidence on all of these issues and shows that investors in actively managed mutual funds may have been more rational than we have assumed.
DISCUSSION
Published: 05/01/1972 | DOI: 10.1111/j.1540-6261.1972.tb00981.x
Robert M. Coen, Martin David
Consumption, Aggregate Wealth, and Expected Stock Returns
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00347
Martin Lettau, Sydney Ludvigson
This paper studies the role of fluctuations in the aggregate consumption–wealth ratio for predicting stock returns. Using U.S. quarterly stock market data, we find that these fluctuations in the consumption–wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate. We also find that this variable is a better forecaster of future returns at short and intermediate horizons than is the dividend yield, the dividend payout ratio, and several other popular forecasting variables. Why should the consumption–wealth ratio forecast asset returns? We show that a wide class of optimal models of consumer behavior imply that the log consumption–aggregate wealth (human capital plus asset holdings) ratio summarizes expected returns on aggregate wealth, or the market portfolio. Although this ratio is not observable, we provide assumptions under which its important predictive components for future asset returns may be expressed in terms of observable variables, namely in terms of consumption, asset holdings and labor income. The framework implies that these variables are cointegrated, and that deviations from this shared trend summarize agents' expectations of future returns on the market portfolio.
REPLY
Published: 12/01/1968 | DOI: 10.1111/j.1540-6261.1968.tb00327.x
Edwin Elton, Martin Gruber