when do high stock returns trigger equity issues abstract one of the most prominent stylized facts in corporate finance is that equity issues tend to follow periods of high stock returns we document that firms exhibit such timing behavior only in response to high returns that coincide with strong institutional investor demand when not accompanied by institutional purchases stock price increases have little impact on the likelihood of equity issuance the results highlight the importance of market reception for the timing of equity issues

analyst forecasts and herding behavior the use of analyst forecasts as proxies for investors earnings expectations is commonplace in empirical research an implicit assumption behind their use is that they reflect analysts private information in an unbiased manner as demonstrated here this assumption is not necessarily valid there is shown to be a tendency for analysts to release forecasts closer to prior earnings expectations than is appropriate given their information further analysts exhibit herding behavior whereby they release forecasts similar to those previously announced by other analysts even when this is not justified by their information these results are shown to have interesting empirical implications article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

security analysis and trading patterns when some investors receive information before others in existing models of information acquisition all informed investors receive their information at the same time this article analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others the model implies that under some conditions investors will focus only on a subset of securities herding while neglecting other securities with identical exogenous characteristics in addition the model is consistent with empirical correlations that are suggestive of oft cited trading strategies such as profit taking short term position reversal and following the leader mimicking earlier trades in existing models of information acquisition all informed investors receive their information at the same time while these models provide many important insights in reality some investors either fortuitously or owing to superior skill acquire pertinent information before others by being first an investor can exploit this information to great advantage information that is uncovered only slightly later is less valuable even if it has not yet been publicly revealed we show in this article that the sequential nature of information arrival has a significant effect on both the trading decisions and the types of information collected by investors the model we develop describes the investment choices of a set of competitive risk averse investors who investigate the long term prospects of firms lucky or high ability investors uncover the

equity based natural resource allocation for infrastructure development evidence from large hydropower dams in africa and asia abstract large hydropower infrastructure development is a key energy priority in low and middle income countries as a means to increase energy access and promote national development nevertheless hydropower dams can also negatively impact people s livelihoods by reducing access to local natural resources such as land water and food this paper analyses equity based resource allocation from an ecological economics perspective by looking at local resource use competition between different uses food energy livelihoods and users villagers urban settlers local government and dam builders in selected case studies in asia and africa it also illustrates from a political ecology approach divergences between national priorities of energy production and growth and local development needs

the debt equity choice when firms adjust their capital structures they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt in contrast to previous empirical work out tests explicitly account for the fact that firms may face impediments to movements toward their target ratio and that the target ratio may change over time as the firm s profitability and stock price change a separate analysis of the size of the issue and repurchase transactions suggests that the deviation between the actual and the target ratios plays a more important role in the repurchase decision than in the issuance decision

momentum investment strategies portfolio performance and herding a study of mutual fund behavior this study analyzes the extent to which mutual funds purchase stocks based on their past returns as well as their tendency to exhibit herding behavior i e buying and selling the same stocks at the same time the authors find that 77 percent of the mutual funds were momentum investors buying stocks that were past winners however most did not systematically sell past losers on average funds that invested on momentum realized significantly better performance than other funds the authors also find relatively weak evidence that funds tended to buy and sell the same stocks at the same time copyright 1995 by american economic association

equity issues with time varying asymmetric information this paper develops a formal model of the effect of time varying asymmetric information on the timing and pricing of equity issues when managers are better informed than outside investors we assume that as time passes the adverse selection problem becomes more severe as more managers receive a private signal under this assumption the model predicts temporal variation in the quantity of issues with a bunching of issues after information releases it also predicts that the price drop at issue announcement increases with the time since the last information release these predictions are consistent with several recent empirical studies relating equity issues to earnings and dividend announcements

private information trading volume and stock return variances new evidence is provided on the determinants of stock return variances first when the tokyo stock exchange is open on saturday the weekend variance increases weekly variance is unaffected however despite an increase in weekly volume second the listing of u s stocks in tokyo substantially increases the number of trading hours but tokyo volume is negligible for these u s stocks and their 24 hour variance is unaffected the overall results are consistent with the predictions of private information based rational trading models but inconsistent with both the irrational trading noise and public information hypotheses

infrastructure and inequality abstract we develop a model in which public capital is both an engine of growth and a determinant of the distributions of wealth income and welfare government investment increases wealth inequality over time regardless of its financing the time path of income inequality is however highly sensitive to financing policies and is often characterized by sharp intertemporal tradeoffs with income inequality declining in the short run but increasing in the long run public investment generates a positive correlation between growth and income inequality along the transition path but their short run and long run relationship depends critically on i how externalities impinge on allocation decisions ii financing policies and iii the time period of consideration finally these policies also generate sharp trade offs between average welfare and its distribution with government investment improving average welfare but also increasing its dispersion our results are obtained numerically but extensive sensitivity analysis confirms their robustness across key parameter values

the behavior of stock prices around institutional trades all trades executed by 37 large investment management firms from july 1986 to december 1988 are used to study the price impact and execution cost of the entire sequence package of trades that we interpret as an order we find that market impact and trading cost are related to firm capitalization relative package size and most importantly to the identity of the management firm behind the trade money managers with high demands for immediacy tend to be associated with larger market impact financial economists have long studied the equity trading process and its impact on stock prices much prior empirical research isolates individual trades and analyzes the behavior of the stock price around each trade see for example kraus and stoll 1972a holthausen leftwich and mayers 1987 1990 keim and madhavan 1991 petersen and umlauf 1991 hausman lo and mackinlay 1992 and chan and lakonishok 1993 evaluating the behavior of stock prices around trades provides a means of discriminating among various hypotheses as to the elasticity of the demand for stocks yields an estimate of the cost of executing trades and a measure of the liquidity of a market and permits tests of different models of the determination of quotes and transaction prices for many institutional investors however even a moderately sized position in a stock may represent a large fraction of the stock s trading volume accordingly an investment manager s order is often broken up into several trades it is often misleading therefore to consider an individual trade as the basic unit of analysis in the study of trading activity and its effects on prices this paper uses the record of trades executed by 37 large investment manage

portfolio performance evaluation old issues and new insights this article presents a model that provides insights about various measures of portfolio performance the model explores several criticisms of these measures these include the problem of identifying an appropriate benchmark portfolio the possibility of overestimating risk because of market timing ability and the failure of informed investors to earn positive risk adjusted returns because of increasing risk aversion the article argues that these need not be serious impediments to performance evaluation

allocation distribution and scale towards an economics that is efficient just and sustainable abstract the practical policy of issuing tradeable permits for depletion and pollution requires for its implementation the clear separation of the three basic economic goals of efficient allocation equitable distribution and sustainable scale economic theory needs to catch up with policy in recognizing that scale issues cannot be reduced to either allocation or distribution

optimal fiscal and monetary policy equivalence results in this article we analyze the implications of price setting restrictions for the conduct of cyclical fiscal and monetary policy we consider standard monetary economies that differ in the price setting restrictions imposed on the firms we show that independently of the degree or type of price stickiness it is possible to implement the same efficient set of allocations and that each allocation in that set is implemented with policies that are also independent of the price stickiness in this sense environments with different price setting restrictions are equivalent

testing theories of capital structure and estimating the speed of adjustment this paper examines time series patterns of external financing decisions and shows that publicly traded u s firms fund a much larger proportion of their financing deficit with external equity when the cost of equity capital is low the historical values of the cost of equity capital have long lasting effects on firms capital structures through their influence on firms historical financing decisions we also introduce a new econometric technique to deal with biases in estimates of the speed of adjustment toward target leverage we find that firms adjust toward target leverage at a moderate speed with a half life of 3 7 years for book leverage even after controlling for the traditional determinants of capital structure and firm fixed effects

real business cycles a new keynesian perspective the debate over the source and propagation of economic fluctuations rages as fiercely today as it did 50 years ago in the aftermath of keynes s the general theory and in the midst of the great depression today as then there are two schools of thought the classical school emphasizes the optimization of private economic actors the adjustment of relative prices to equate supply and demand and the efficiency of unfettered markets the keynesian school believes that understanding economic fluctuations requires not just studying the intricacies of general equilibrium but also appreciating the possibility of market failure on a grand scale

corporate behavior in adjusting to capital structure and dividend targets an econometric study this study of financing decisions by u s corporations examines the issuance of long term debt issuance of short term debt maintenance of corporate liquidity issuance of new equity and payment of dividends given costs and imperfections inherent in markets a firm s financial behavior is characterized as partial adjustment to long run financial targets individual firm data are used so that speeds of adjustment are allowed to vary by company and over time the results suggest that financial decisions are interdependent and that firm size interest rate conditions and stock price levels affect speeds of adjustment this study of financing decisions by u s corporations examines the issuance of long term debt short term debt and equity the maintenance of corporate liquidity and the payment of dividends the firm s financial behavior is characterized as partial adjustment to long run financial targets and individual firm data 1966 1978 are used to estimate firm specific time varying speeds of adjustment the results suggest that financial decisions are interdependent and that firm size interest rate conditions and stock price levels affect speeds of adjustment also the estimated coefficients are more plausible than the very small taggart 28 or very large spies 26 values found in earlier studies section i of the paper introduces the general model in section ii a tractable empirical model is developed section iii presents the data to be used in the study and discusses econometric issues in section iv results and conclusions are offered

energy demand economic growth and energy efficiency the bakun dam induced sustainable energy policy revisited abstract in embarking on a dynamic course of economic development and industrial modernism malaysia sees the need to increase its electricity generation capacity through the development of a mega dam project the bakun dam although hydroelectricity generation offers one of the benign options in accommodating the increasing energy consumption per capita in malaysia it is argued that the construction of bakun s dam which involves a complete and irreversible destruction of 69 640 ha of old forest ecosystem remains a difficult and uncertain endeavour it is further argued that apart from mega dam technology there are also other means to orchestrate a sustainable energy system in malaysia these include the implementation of demand and supply initiatives such as the deployment of energy saving technology or influencing behavioral change towards a sustainable energy consumption pattern

do demand curves for stocks slope down since september 1976 stocks newly included into the standard and poor s 500 index have earned a significant positive abnormal return at the announcement of the inclusion this return does not disappear for at least ten days after the inclusion the returns are positively related to measures of buying by index funds consistent with the hypothesis that demand curves for stocks slope down the returns are not related to s p s bond ratings which is inconsistent with a plausible version of the hypothesis that inclusion is a certification of the quality of the stock

competition for land a sociometabolic perspective abstract possible negative effects of increased competition for land include pressures on biodiversity rising food prices and ghg emissions however neoclassical economists often highlight positive aspects of competition e g increased efficiency and innovation competition for land occurs when several agents demand the same good or service produced from a limited area it implies that when one agent acquires scarce resources from land less resource is available for competing agents the resource competed for is often not land but rather its function for biomass production which may be supplanted by other inputs that raise yields increased competition may stimulate efficiency but negative environmental effects are likely in the absence of appropriate regulations competition between affluent countries with poor people in subsistence economies likely results in adverse social and development outcomes if not mitigated through effective policies the socioecological metabolism approach is a framework to analyze land related limits and functions in particular with respect to production and consumption of biomass and carbon sequestration it can generate databases that consistently link land used with biomass flows which are useful in understanding interlinkages between different products and services and thereby help to analyze systemic feedbacks in the global land system

are ipo allocations for sale evidence from mutual funds combining data on brokerage commissions that mutual fund families paid for trade execution between 1996 and 1999 with data on mutual fund holdings of initial public offerings ipos i document a robust positive correlation between commissions paid to lead underwriters and reported holdings of the ipos they underwrite moreover i find that the correlation is limited to ipos with nonnegative first day returns and strongest for ipos that occur shortly before mutual funds report their holdings when the noise introduced by flipping is smallest overall the evidence suggests that business relationships with lead underwriters increase investor access to underpriced ipos during the hot initial public offering market of the late 1990s the typical initial public offering ipo was significantly underpriced and oversubscribed and the first day returns earned by investors in these ipos received considerable public attention 1 the source of these first day returns and related questions

environmental sustainability as the first principle of distributive justice towards an ecological communitarian normative foundation for ecological economics abstract the ecological economic concern with environmental sustainability embodies the normative orientations of the field this concern is foremost a matter of distributive justice the definition of which determines the relevance of the appropriate scale and efficient allocation criteria yet it would appear that the discipline lacks a shared internally consistent set of ethical premises by which this concern might be legitimized various authors have embraced a rawlsian conception of liberal justice as the appropriate banner for ecological economics in place of the consequentialist libertarian foundations of neoclassical economics including environmental economics it is argued here that this is insufficient in so far as it is premised on a vision of a discrete self sufficient economic actor instead it is posited that an ecological economic ethic must proceed from an understanding of the economic actor as community member a recognition implicit in recent ecological economic contributions focused on discourse ethics and deliberative democracy an ecological communitarian conception of distributive justice which views the well being of the individual as inseparable from the integrity of its implicate mutually constituting human and non human natural communities is advanced as the appropriate basis for the ecological economic world view in this light the thermodynamic foundations of ecological economics are seen to provide the necessary departure point for normative decision making oriented towards ensuring sustainability in economic organization

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

changes in institutional ownership and stock returns assessment and methodology although the relation between quarterly changes in institutional investor ownership and contemporaneous stock returns is well documented the source of the relation remains unclear because institutional ownership data are unavailable at higher frequencies in this study we develop a method to generate estimates of higher frequency covariances when one variable is observed at lower frequencies e g quarterly changes in institutional ownership and monthly stock returns our method provides evidence that institutional trading has both temporary and permanent price effects and that the latter is associated with information effects