Mutual fund splits occur in high‐priced funds after unusually high returns. Split factors are related to the deviation of a fund's price from the mean of all fund prices. Post‐split prices are below the mean of other funds' prices. Post‐split numbers of shareholders and assets do not increase compared with funds having similar rates of asset growth. However, I find evidence that mutual fund splits bring per account shareholdings back up to normal levels. I argue that signaling, liquidity, and tick size theories do not apply to mutual fund splits.

I test the disposition effect, the tendency of investors to hold losing investments too long and sell winning investments too soon, by analyzing trading records for 10,000 accounts at a large discount brokerage house. These investors demonstrate a strong preference for realizing winners rather than losers. Their behavior does not appear to be motivated by a desire to rebalance portfolios, or to avoid the higher trading costs of low priced stocks. Nor is it justified by subsequent portfolio performance. For taxable investments, it is suboptimal and leads to lower after‐tax returns. Tax‐motivated selling is most evident in December.

Value stocks have higher returns than growth stocks in markets around the world. For the period 1975 through 1995, the difference between the average returns on global portfolios of high and low book‐to‐market stocks is 7.68 percent per year, and value stocks outperform growth stocks in twelve of thirteen major markets. An international capital asset pricing model cannot explain the value premium, but a two‐factor model that includes a risk factor for relative distress captures the value premium in international returns.

We examine the effects of bank–firm relationships on firm performance in Japan. When access to capital markets is limited, close bank–firm ties increase the availability of capital to borrowing firms, but do not lead to higher profitability or growth. The cost of capital of firms with close bank ties is higher than that of their peers. This indicates that most of the benefits from these relationships are appropriated by the banks. Finally, the slow growth rates of bank clients suggest that banks discourage firms from investing in risky, profitable projects. However, liberalization of financial markets reduces the banks' market power.