bluuebunny/crossref_metadata_2025_split huggingface dataset:
The Impact of Public Information on the Stock Market
Authors: MITCHELL MARK L. , MULHERIN J. HAROLD 
Published: April 2012

AbstractWe study the relation between the number of news announcements reported daily by Dow Jones & Company and aggregate measures of securities market activity including trading volume and market returns. We find that the number of Dow Jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day‐of‐the‐week dummy variables, news importance as proxied by large New York Times headlines and major macroeconomic announcements, and noninformation sources of market activity as measured by dividend capture and triple witching trading. However, the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day‐of‐the‐week seasonalities in market activity. Our analysis of the Dow Jones database confirms the difficulty of linking volume and volatility to observed measures of information.
Interactions of Corporate Financing and Investment Decisions: A Dynamic Framework
Authors: MAUER DAVID C. , TRIANTIS ALEXANDER J. 
Published: April 2012

ABSTRACTThis article analyzes the interaction between a firm's dynamic investment, operating, and financing decisions in a model with operating adjustment and recapitalization costs. Using numerical analysis, we solve the model for cases that highlight interaction effects. We find that higher production flexibility (due to lower costs of shutting down and reopening a production facility) enhances the firm's debt capacity, thereby increasing the net tax shield value of debt financing. While higher financial flexibility (resulting from lower recapitalization costs) has a similar effect, production flexibility and financial flexibility are, to some extent, substitutes. We find that the impact of debt financing on the firm's investment and operating decisions is economically insignificant.
Exploiting the Conditional Density in Estimating the Term Structure: An Application to the Cox, Ingersoll, and Ross Model
Authors: PEARSON NEIL D. , SUN TONG‐SHENG 
Published: April 2012

ABSTRACTWe propose an empirical method that utilizes the conditional density of the state variables to estimate and test a term structure model with known price formulae, using data on both discount and coupon bonds. The method is applied to an extension of a two‐factor model due to Cox, Ingersoll, and Ross (1985; CIR). Our results show that estimates based on only bills imply unreasonably large price errors for longer maturities. We reject the original CIR model using a likelihood ratio test, and conclude that the extended CIR model also fails to provide a good description of the Treasury market.
Public Information Arrival
Authors: BERRY THOMAS D. , HOWE KEITH M. 
Published: April 2012

ABSTRACTWe develop a measure of public information flow to financial markets and use it to document the patterns of information arrival, with an emphasis on the intraday flows. The measure is the number of news releases by Reuter's News Service per unit of time. We find that public information arrival is nonconstant, displaying seasonalities and distinct intraday patterns. Next we relate our measure of public information to aggregate measures of intraday market activity. Our results suggest a positive, moderate relationship between public information and trading volume, but an insignificant relationship with price volatility.
Signaling and Takeover Deterrence with Stock Repurchases: Dutch Auctions versus Fixed Price Tender Offers
Authors: PERSONS JOHN C. 
Published: April 2012

ABSTRACTThis article presents a model of repurchase tender offers in which firms choose between the Dutch auction method and the fixed price method. Dutch auction repurchases are more effective takeover deterrents, while fixed price repurchases are more effective signals of undervaluation. The model yields empirical implications regarding price effects of repurchases, likelihood of takeover, managerial compensation, and cross‐sectional differences in the elasticity of the supply curve for shares.
The Effect of Bankruptcy Protection on Investment: Chapter 11 as a Screening Device
Authors: MOORADIAN ROBERT M. 
Published: April 2012

ABSTRACTAsymmetric information and conflicts of interest between equity and debt holders can force a distressed but efficient firm to liquidate and may enable a distressed inefficient firm to continue. In the extreme, if it is costless for an inefficient firm to mimic an efficient firm in a debt restructuring, efficient and inefficient firms are equally likely to continue or liquidate. This article shows that Chapter 11 procedures impose costs on inefficient firms that would otherwise mimic efficient firms. This separation induces voluntary filing for bankruptcy by inefficient firms and consequently enables efficient firms to continue when they would otherwise be liquidated.
The Role of ESOPs in Takeover Contests
Authors: CHAPLINSKY SUSAN , NIEHAUS GREG 
Published: April 2012

ABSTRACTThis article examines both the shareholder wealth effects of employee stock ownership plans (ESOPs) announced by firms subject to takeover pressure and the takeover incidence of targets with and without ESOPs. Although we do not find that defensive ESOPs significantly reduce shareholder wealth on average, we identify two factors—the change in managerial and employee ownership due to the ESOP and the simultaneous announcement of other defensive tactics—that are associated with negative stock price reactions. We find that ESOPs are strong deterrents to takeover. ESOP targets that are acquired earn higher returns than targets without ESOPs, but the difference is not statistically significant.
Trading Volume and Transaction Costs in Specialist Markets
Authors: GEORGE THOMAS J. , KAUL GAUTAM , NIMALENDRAN M. 
Published: April 2012

ABSTRACTPrior work with competitive rational expectations equilibrium models indicates that there should be a positive relation between trading volume and differences in beliefs or information among traders. We show that this result is sensitive to whether and how transaction costs are modeled. In a specialist market with endogenous transaction costs we show that trading volume can be negatively related to the degree of informational asymmetry in the market. Our analysis highlights the dependence of volume on market structure, and our results suggest that the “volume effects” of corporate or macroeconomic events reflect a decrease, rather than an increase, in heterogeneity of beliefs or asymmetry of information.
The Benefits of Lending Relationships: Evidence from Small Business Data
Authors: PETERSEN MITCHELL A. , RAJAN RAGHURAM G. 
Published: April 2012

ABSTRACTThis paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm. We analyze data collected in a survey of small firms by the Small Business Administration. The primary benefit of building close ties with an institutional creditor is that the availability of financing increases. We find smaller effects on the price of credit. Attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit. In sum, relationships are valuable and appear to operate more through quantities rather than prices.
The Effect of a Rating Downgrade on Outstanding Commercial Paper
Authors: CRABBE LELAND , POST MITCHELL A. 
Published: April 2012

ABSTRACTDiamond (1991) argues that a firm's reputation determines whether it borrows directly or through an intermediary. We test the Diamond model by examining the quantity response of commercial paper issued by bank holding companies to a rating downgrade. From 1986 to 1991, cumulative abnormal declines averaged 6.69 percent in the first two weeks after the downgrade and 11.05 percent in the subsequent 12 weeks. In contrast to commercial paper issued by bank holding companies, large CDs issued by affiliated banks did not change significantly in the period around a downgrade, suggesting that deposit insurance may have removed market discipline from the CD market.
Mortgage Redlining: Race, Risk, and Demand
Authors: HOLMES ANDREW , HORVITZ PAUL 
Published: April 2012

ABSTRACTCharges that geographical redlining is widely practiced by mortgage lenders and is associated with racial discrimination have received much attention. However, empirical research in this area has yet to document a convincing answer to the question of whether redlining even exists. Much of the previous research in this area has suffered from failure to account for variations in risk, and/or failure to adequately control for geographical differences in demand. This study addresses these problems in an effort to determine whether the disparity in the flow of mortgage credit can be explained by differences in risk and demand.
The Effect of Dividend Changes on Stock and Bond Prices
Authors: DHILLON UPINDER S. , JOHNSON HERB 
Published: April 2012

ABSTRACTThis study examines stock and bond price reactions to dividend changes. The positive stock market response to dividend increases has several potential explanations, two of the more commonly discussed being information content and wealth redistribution between stockholders and bondholders. The evidence presented supports the wealth redistribution hypothesis but does not rule out the information content hypothesis. Typically we find that the bond price reaction to announcements of large dividend changes is opposite to the stock price reaction. Our results differ from those of Handjinicolaou and Kalay.
The Interaction between Nonexpected Utility and Asymmetric Market Fundamentals
Authors: HUNG MAO‐WEI 
Published: April 2012

ABSTRACTThis paper studies a nonexpected utility, general equilibrium asset pricing model in which market fundamentals follow a bivariate Markov switching process. The results show that nonexpected utility is capable of exactly matching the means of the risk‐free rate and the risk premium. Asymmetric market fundamentals are capable of generating a negative sample correlation between the risk‐free rate and the risk premium. Moreover, an equilibrium asset pricing model endowed with asymmetric market fundamentals is consistent with all five first and second moments of the risk‐free rate and the risk premium in the U.S. data.
Parameter‐based Decision Making under Estimation Risk: An Application to Futures Trading
Authors: LENCE SERGIO H. , HAYES DERMOT J. 
Published: April 2012

ABSTRACTThis study shows how the standard portfolio model of futures trading should be modified when there is less than perfect information about the relevant parameters (estimation risk). The standard and the optimal decision rules for futures trading in the presence of estimation risk are compared and discussed. An operational model of futures trading for use under estimation risk is advanced. In the presence of relevant prior and sample information, the model can be used to optimally blend both types of information.
The Cross‐Section of Realized Stock Returns: The Pre‐COMPUSTAT Evidence
Authors: DAVIS JAMES L. 
Published: April 2012

ABSTRACTUsing a database that is free of survivorship bias, this article finds that book‐to‐market equity, earnings yield, and cash flow yield have significant explanatory power with respect to the cross‐section of realized stock returns during the period from July 1940 through June 1963. There is a strong January seasonal in the explanatory power of these variables, even though small stocks are, by construction, excluded from the sample.
Industry Returns and the Fisher Effect
Authors: BOUDOUKH JACOB , RICHARDSON MATTHEW , WHITELAW ROBERT F. 
Published: April 2012

ABSTRACTWe investigate the cross‐sectional relation between industry‐sorted stock returns and expected inflation, and we find that this relation is linked to cyclical movements in industry output. Stock returns of noncyclical industries tend to covary positively with expected inflation, while the reverse holds for cyclical industries. From a theoretical perspective, we describe a model that captures both (i) the cross‐sectional variation in these relations across industries, and (ii) the negative and positive relation between stock returns and inflation at short and long horizons, respectively. The model is developed in an economic environment in which the spirit of the Fisher model is preserved.
Why Did NASDAQ Market Makers Stop Avoiding Odd‐Eighth Quotes?
Authors: CHRISTIE WILLIAM G. , HARRIS JEFFREY H. , SCHULTZ PAUL H. 
Published: April 2012

ABSTRACTOn May 26 and 27, 1994 several national newspapers reported the findings of Christie and Schultz (1994) who cannot reject the hypothesis that market makers of active NASDAQ stocks implicitly colluded to maintain spreads of at least $0.25 by avoiding odd‐eighth quotes. On May 27, dealers in Amgen, Cisco Systems, and Microsoft sharply increased their use of odd‐eighth quotes, and mean inside and effective spreads fell nearly 50 percent. This pattern was repeated for Apple Computer the following trading day. Using individual dealer quotes for Apple and Microsoft, we find that virtually all dealers moved in unison to adopt odd‐eighth quotes.
Explorations Into Factors Explaining Money Market Returns
Authors: KNEZ PETER J. , LITTERMAN ROBERT , SCHEINKMAN JOSÉ 
Published: April 2012

ABSTRACTIn this article, we measure and interpret the common “factors” that describe money market returns. Results are presented for both three‐and four‐factor models. We find that the three‐factor model explains, on average, 86 percent of the total variation in most money market returns while the four‐factor model explains, on average, 90 percent of this variation. Using mimicking portfolios, we provide an interpretation of the systematic risks represented by these factors.
Managers, Owners, and The Pricing of Risky Debt: An Empirical Analysis
Authors: BAGNANI ELIZABETH STROCK , MILONAS NIKOLAOS T. , SAUNDERS ANTHONY , TRAVLOS NICKOLAOS G. 
Published: April 2012

ABSTRACTThis article examines managerial ownership structure and return premia on corporate bonds. It is argued that when managerial ownership is low, an increase in managerial ownership increases management's incentives to increase stockholder wealth at the expense of bondholder wealth. When ownership increases more, however, it is argued that management becomes more risk averse, with incentives more closely aligned with bondholders. This study finds a positive relation between managerial ownership and bond return premia in the low to medium (5 to 25 percent) ownership range. There is also weak evidence for a nonpositive relation in the large (over 25 percent) ownership range.
Mean Reversion of Standard & Poor's 500 Index Basis Changes: Arbitrage‐induced or Statistical Illusion?
Authors: MILLER MERTON H. , MUTHUSWAMY JAYARAM , WHALEY ROBERT E. 
Published: April 2012

ABSTRACTMean reversion in stock index basis changes has been presumed to be driven by the trading activity of stock index arbitragers. We propose here instead that the observed negative autocorrelation in basis changes is mainly a statistical illusion, arising because many stocks in the index portfolio trade infrequently. Even without formal arbitrage, reported basis changes would appear negatively autocorrelated as lagging stocks eventually trade and get updated. The implications of this study go beyond index arbitrage, however. Our analysis suggests that spurious elements may creep in whenever the price‐change or return series of two securities or portfolios of securities are differenced.
Time Variations and Covariations in the Expectation and Volatility of Stock Market Returns
Authors: WHITELAW ROBERT F. 
Published: April 2012

ABSTRACTThis article investigates empirically the comovements of the conditional mean and volatility of stock returns. It extends the results in the literature by demonstrating the role of the commercial paper—Treasury yield spread in predicting time variation in volatility. The conditional mean and volatility exhibit an asymmetric relation, which contrasts with the contemporaneous relation that has been tested previously. The volatility leads the expected return, and this time series relation is documented using offset correlations, short‐horizon contemporaneous correlations, and a vector autoregression. These results bring into question the value of modeling expected returns as a constant function of conditional volatility.
On Stock Market Returns and Returns on Investment
Authors: RESTOY FERNANDO , ROCKINGER G. MICHAEL 
Published: April 2012

ABSTRACTThis article presents general conditions under which it is possible to obtain asset pricing relations from the intertemporal optimal investment decision of the firm. Under the assumption of linear homogeneous production and adjustment cost functions (the Hayashi (1982) conditions), it is possible to establish, state by state, the equality between the return on investment and the market return of the financial claims issued by the firm. This result proves to be, in essence, robust to the consideration of very general constraints on investment and the inclusion of taxes.
A Characterization of the Daily and Intraday Behavior of Returns on Options
Authors: SHEIKH AAMIR M. , RONN EHUD I. 
Published: April 2012

ABSTRACTThe daily and intraday behavior of returns on Chicago Board Options Exchange options is examined. Option returns contain systematic patterns even after adjusting for patterns in the means and variances of the underlying assets. This is consistent with the hypothesis that informed trading in options can make the order flow in the options market informative about the value of the underlying asset, making options nonredundant. The intraday patterns in adjusted option return variances are further consistent with a model of strategic trading by informed and discretionary liquidity traders.
The Spinoff and Merger Ex‐Date Effects
Authors: VIJH ANAND M. 
Published: April 2012

ABSTRACTThis article shows that some of the wealth gains from financial decisions involving changes in security form occur on predictable ex dates. For a sample of 113 spinoffs during 1964 to 90, we document an average excess return of 3.0 percent on ex dates, roughly the same magnitude as the average announcement‐date return. We conjecture that the spinoff ex‐date return arises because the parent and subsidiary stocks attract different investors who prefer to buy the separated shares after the ex date. We also document that, on average, the target shareholders in stock‐for‐stock mergers earn an excess return of 1.5 percent on merger ex dates.
Relative Significance of Journals, Authors, and Articles Cited in Financial Research
Authors: ALEXANDER JOHN C. , MABRY RODNEY H. 
Published: April 2012

ABSTRACTWe evaluate journals based on their relative contributions to top‐level finance research in a recent period. Journals are ranked according to the number of citations found in articles published in Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, and Review of Financial Studies. The analysis controls for both the average number of articles and average number of words published annually in each cited journal. We identify the fifty most frequently cited journals during this period. We also list the fifty most frequently cited authors and articles and note topical trends in the research.
A Simple Approach to Valuing Risky Fixed and Floating Rate Debt
Authors: LONGSTAFF FRANCIS A. , SCHWARTZ EDUARDO S. 
Published: April 2012

ABSTRACTWe develop a simple approach to valuing risky corporate debt that incorporates both default and interest rate risk. We use this approach to derive simple closed‐form valuation expressions for fixed and floating rate debt. The model provides a number of interesting new insights about pricing and hedging corporate debt securities. For example, we find that the correlation between default risk and the interest rate has a significant effect on the properties of the credit spread. Using Moody's corporate bond yield data, we find that credit spreads are negatively related to interest rates and that durations of risky bonds depend on the correlation with interest rates. This empirical evidence is consistent with the implications of the valuation model.
The Priority Structure of Corporate Liabilities
Authors: BARCLAY MICHAEL J. , SMITH CLIFFORD W. 
Published: April 2012

ABSTRACTMost discussions of corporate capital structure effectively assume that all debt is the same. Yet debt differs by maturity, covenant restrictions, conversion rights, call provisions, and priority. Here, we examine priority structure across a sample of 4995 COMPUSTAT industrial firms from 1981 to 1991. We analyze the variation in the use of capital leases, secured debt, ordinary debt, subordinated debt, and preferred stock both as a fraction of the firm's market value and as a fraction of total fixed claims. Our evidence provides consistent support for contracting cost hypotheses, mixed support for tax hypotheses, and little support for the signaling hypothesis.
Fundamental Economic Variables, Expected Returns, and Bond Fund Performance
Authors: ELTON EDWIN J. , GRUBER MARTIN J. , BLAKE CHRISTOPHER R. 
Published: April 2012

ABSTRACTIn this article, we develop relative pricing (APT) models that are successful in explaining expected returns in the bond market. We utilize indexes as well as unanticipated changes in economic variables as factors driving security returns. An innovation in this article is the measurement of the economic factors as changes in forecasts. The return indexes are the most important variables in explaining the time series of returns. However, the addition of the economic variables leads to a large improvement in the explanation of the cross‐section of expected returns. We utilize our relative pricing models to examine the performance of bond funds.
Convertible Bonds Are Not Called Late
Authors: ASQUITH PAUL 
Published: April 2012

ABSTRACTStarting with Ingersoll (1977b), the academic literature has repeatedly sought to explain why convertible bonds are called late. The findings here demonstrate there is no call delay to explain. This paper finds that most convertible bonds, given their call protection, are called as soon as possible. For those that are not, there are significant cash flow advantages to delaying. The median call delay for all convertible bonds is less than four months. If a safety premium is desired to assure the conversion value will exceed the call price at the end of call notice period, the median call period is less than a month.
Did J. P. Morgan's Men Add Liquidity? Corporate Investment, Cash Flow, and Financial Structure at the Turn of the Twentieth Century
Authors: RAMIREZ CARLOS D. 
Published: April 2012

ABSTRACTThis article presents evidence suggesting that the relationship that existed between the partnership of J. P. Morgan and its client firms partially resolved the latter's external financing problems by diminishing the principal‐agent and asymmetric information problems. I estimate and compare investment regression equations for a sample of Morgan‐affiliated companies and a control group of nonaffiliated companies. The econometric results seem to indicate that companies not affiliated to the House of Morgan were liquidity constrained.