The authors estimate and compare a variety of continuous-time models of the short-term riskless rate using the Generalized Method of Moments. The authors find that the most successful models in capturing the dynamics of the short-term interest rate are those that allow the volatility of interest rate changes to be highly sensitive to the level of the riskless rate. A number of well-known models perform poorly in the comparisons because of their implicit restrictions on term structure volatility. They show that these results have important implications for the use of different term structure models in valuing interest rate contingent claims and in hedging interest rate risk. Coauthors are Andrew Karolyi, Francis A. Longstaff, and Anthony B. Sanders.

Many empirical studies find that the distribution of stock returns departs from normality. In such cases, it is desirable to employ a statistical estimation procedure that may be more efficient than ordinary least squares. This paper describes various robust methods, which have attracted increasing attention in the statistical literature, in the context of estimating beta risk. The empirical analysis documents the potential efficiency gains from using robust methods as an alternative to ordinary least squares, based on both simulated and actual returns data.

This paper examines the price effect of institutional stock trading, using a unique data set that reports the transactions (large and small) of 37 large institutional money management firms. The direction of each trade and the identity of the management firm behind each trade are known. Although institutional trades are associated with some price pressure, we find that the average effect is small. There is also a marked asymmetry between the price impact of buys versus sells. We relate our findings to various hypotheses on the elasticity of demand for stocks, the cost of executing transactions, and the determinants of market impact. Although market capitalization and relative trade size influence the market impact of a trade, the dominant influence is the identity of the money manager behind the trade.

We analyze the performance of Japanese open-type stock mutual funds for the 1981–1992 period. The results show that, regardless of the performance measures and benchmarks employed, most of the Japanese mutual funds underperform the benchmarks by between 3.6% and 10.8% per annum. These funds tend to invest more in large stocks with low book-to-market ratios. But this feature does not explain the underperformance. A potential explanation is the dilution effect caused by inflows of funds. In Japan, a new investor of an open-type fund only pays in the after-tax value of the net asset value. We conduct a bootstrap experiment to assess the magnitude of this dilution effect.

The authors compare execution costs (market impact plus commission) on the New York Stock Exchange (NYSE) and Nasdaq for institutional investors. The differences in cost generally conform to each market's area of specialization. Controlling for firm size, trade size, and the money management firm's identity, costs are lower on Nasdaq for trades in comparatively smaller firms, while costs for trading the larger stocks are lower on NYSE. The cost differences estimated from a regression model are, however, sensitive to the choice of time period.

ABSTRACT We compare execution costs (market impact plus commission) on the New York Stock Exchange (NYSE) and Nasdaq for institutional investors. The differences in cost generally conform to each market's area of specialization. Controlling for firm size, trade size, and the money management firm's identity, costs are lower on Nasdaq for trades in comparatively smaller firms, while costs for trading the larger stocks are lower on NYSE. The cost differences estimated from a regression model are, however, sensitive to the choice of time period.

We compare execution costs (market impact plus commission) on the New York Stock Exchange (NYSE) and Nasdaq for institutional investors. The differences in cost generally conform to each market's area of specialization. Controlling for firm size, trade size, and the money management firm's identity, costs are lower on Nasdaq for trades in comparatively smaller firms, while costs for trading the larger stocks are lower on NYSE. The cost differences estimated from a regression model are, however, sensitive to the choice of time period.

All trades executed by thirty-seven 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 the authors interpret as an order. The authors 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.

All trades executed by thirty-seven 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 the authors interpret as an order. The authors 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. Copyright 1995 by American Finance Association.