Search

Financial research using the capital asset pricing model focuses on risk aversion and consumer preference in determining prices. A liquidity-based asset pricing model is presented that also factors the corporate distribution of wealth.

Research into upstairs market makers was conducted to determine to what extent they routed orders based on the perceived information content and whether they cannibalized the downstairs market. Research indicates that they do not cannibalize the downstairs market.

The diversification discount, in which the stock prices of diversified conglomerates are less than those of pure play firms, is held by recent research to be the result of capital spending inequities across divisions. New research indicates there may be measurement errors in the corpus of research.

Research into returns on the domestic equities markets since 1926 estimated the equity premium from the discount rate. Research results reveal that the equity premium is approximately three percent.

Research into 641 Japanese firms regarding the financial performance as it effects foreign subsidiary survival is given. The results show that survival and profitability are directly effected by host country experience.

A response to Naveen Khanna and Sheri Tice's 'The bright side of internal capital markets' is presented. Khanna and Tice's research elucidates diversified companies' allocation of capital in response to Wal-Mart Stores entering their market.

Research into financial contagion wherein convergence traders cut their losses by liquidating their portfolios is presented. Research results indicate that contagion negates the benefits of portfolio diversification.

Research models for asset pricing and investor psychology are investigated. The rational paradigm of asset pricing gradually is being replaced by models that incorporate the effect of investor psychology on markets.

Returns from the Paris Bourse and the NY Stock Exchange are used to research the benefits of automated trading over floor trading. Research results indicate that floor trading is less costly.

A response to Geert Bekaert and Robert J. Hordrick's 'Expectations hypotheses tests' is presented. The author finds that there is not a major difference in results when one uses asymptotic rather than empirical samples.

The report of the editor of the American Finance Association's 'The Journal of Finance' for the year 2000 is presented. The report includes data on submissions, editorial decisions, and the distribution of authors.

A response to Kumar Venkataraman's 'Automated versus floor trading: an analysis of execution costs on the Paris and New York exchanges' is presented. Research results indicate that human intermediation on trading floors such as that of the NYSE has distinct advantages over automated trading systems such as that of Paris.

Research into the effect on internal capital markets resulting from Wal-Mart Stores's entry into a market is presented. Diversified companies' capital expenditures prove to be sensitive to the productivity of their stores in the market.

Reseaerch into asset allocation strategies was conducted with a paradigm in which there is some predictability in the timing of returns. A portfolio management strategy is devised that elucidates the optimal time variations in investment opportunities.

Research into loss aversion in the stock market focused on investors whose investment strategies are based on either fluctuations of individual stocks or of the entire portfolio. The individual stock method was found to be more successful.

The foreign exchange market and interest rates are researched using the expectations hypotheses in order to elucidate the validity of the hypotheses. Research results refuting the hypotheses were weak.

Research into the equity premium, the stock market's expected rate of return, is presented. Financial researchers should use a long history of stock market returns to ensure the accuracy of their results.

A response to Michael Barberis and Ming Huang's 'Mental accounting, loss aversion, and individual stock returns' is presented. The authors have developed valuable new asset pricing modeling paradigms.

A response to Yacine Ait-Sahalia and Michael R. Brandt's 'Variable selection for portfolio choice' is presented. Ait-Sahalia and Brandt devised a formula by which academics can provide realistic advice predicated upon allowing the investor to chose the linear combination of variables for their portfolio.

Research into investors' behavior predicated upon the asset pricing theory and research elucidating the link between corporate finance and shareholders' interests often fails to incorporate the critical role played by financial institutions.

An obituary of Nobel Prize-winning economist Merton H. Miller that elucidates his seminal contributions to financial research is presented. Merton was a pioneer of economic research focusing on markets.

An appreciation of economist Merton H. Miller, the University of Chicago professor who won the Nobel Prize in Economics, is presented. Merton was highly respected for his truthfulness and trustworthiness, qualities valued by the world leaders he advised.

The HBS-HFE conference studies the empirical work involving the intensive examination of a number of events that are used to develop, test, apply and communicate theory.

Financial crises have been attributed to many causes such as financial panic, poor fundamentals, structural weaknesses or misguided macroeconomic policies. The author, however, attributes a crisis to two basic ingredients, namely, intrinsic volatility of exchange rates, and, peculiarities of financial markets.

ABSTRACT The purpose of this paper is to show that mainstream academic finance is founded on one paradigm, but with some fundamental changes it can gain much by exploiting perspectives [...]

A model of capital allocations made within divisions of a corporation is presented, focusing on the impact of bargaining powers among division managers and a chief executive officer. Topics include how concentration of power affects efficiency, the impact of outside investors, and the relationship between weak and strong divisions.

This article examines trading friction, or the degree of difficulty involved in trading an asset. Seven empirical measures of trading friction are computed from stock transaction data and analyzed to provide insight into the complex relationship between market structure, asset pricing, and trading friction.

Research suggests that the expectations hypothesis of the term structure can exist without arbitrage if fixed income markets are incomplete. Topics addressed include arbitrage, riskless portfolios, and fixed income markets.

Research presented concerns the fund flows and performance of mutual funds advertised in financial publications. Findings suggest that advertised mutual funds show no superior performance, although they do attract more money than a group of control funds.

Research presented concerns the role of trading volume in forecasting stock returns. Findings suggest high volume portfolios maintain greater returns than low volume portfolios, as low volume portfolios do not respond as quickly to information in market returns.

Techniques for option pricing and forecasting volatility in option prices are detailed. Topics addressed include the underlying price process of the security, and determining the probability of stock prices achieving a predetermined level in the future.

Financial forecasting research is outlined in this article. The research shows that optimal trading results can be achieved if we can forecast a key summary statistic of future prices.

A study comparing differences in the timeliness and conservatism of US and UK reported earnings is discussed. The study concludes that the US accounting regime is significantly more conservative than its UK counterpart when comparing earnings before extraordinary items but is less conservative when comparing the bottom line. Motivations for study include influencing standards setters. The research agenda is discussed in detail.

Based on a sample of 126 recently promoted faculty, different standards for full professor are observed between top 20 finance departments and lower ranked departments. Full professors affiliated with a top 20 department place an average of 1 out of 3 articles in either Journal of Finance, Review of Financial Studies, or Journal of Financial Economics compared to 1 out of 6 articles for professors at lower-ranked schools. Total citations and cites per year are also significantly different between top- and lower-ranked departments, but total articles and articles per year are not significantly different between these two groupings. (Reprinted by permission of the publisher.)

This article continues to operationally define and test the resource-based view of the firm in a study of the major U.S. film studios from 1936 to 1965. We found that property-based resources in the form of exclusive long-term contracts with stars and theaters helped financial performance in the stable, predictable environment of 1936-50. In contrast, knowledge-based resources in the form of production and coordinative talent and budgets boosted financial performance in the more uncertain (changing and unpredictable) post-television environment of 1951-65. (Reprinted by permission of the publisher.)

The debate over the causes of financial instability could be partly solved by focusing on historical cases. In such cases, financial instability had its roots in innovation, such as the expansion into new markets. Such economic structural change raised hopes for increased profitability and spurred speculative activity. The lack of information, however, proved to be damaging as traders began a wild speculative spree until the inevitable financial distress happened.