We use a previously unexploited data base, specifically debt offerings by AT&T and its subsidiaries in the period 1970–1974, to examine the relative costliness of competitive and negotiated offerings. A sample based on the experience of a single issuer allows us to minimize the influence of agency considerations and differential riskiness of the issuers. We find no systematic ex post cost difference, and we also find that negotiation was chosen during comparatively unsettled times.

We analyze 114 NYSE- or AMEX-listed corporations with majority shareholders. Majority shareholders are approximately equally divided between corporations and individuals and are typically both directors and officers. When majority blocks trade, stock prices increase and there is substantial management turnover. Although majority shareholders are typically paid larger salaries than officers in diffusely held firms, the difference is small and of marginal significance. Investment policies, the frequency of corporate-control transactions, accounting return, and Tobin's Q are similar for majority-owned and diffusely held firms. Differences in these dimensions do emerge, however, between firms with corporate and individual majority shareholders.

Carl Icahn, Irwin Jacobs, Carl Lindner, David Murdock, Victor Posner, and the late Charles Bluhdorn are usually portrayed as corporate ‘raiders’. The evidence here, however, shows that between 1977 and 1982 when it was first announced that they had purchased stock in a given firm, stock prices on average increased significantly. The investors' activities in target firms for the two years following the initial stock purchase are likewise inconsistent with ‘raiding’. We discuss two hypotheses that are consistent with the evidence: first, these investors improve the management of target firms; second, they are systematically able to identify under-priced stocks.

We investigate the timing of open market share repurchases and the resultant impact on firm liquidity. Using the Stock Exchange of Hong Kong's unique disclosure environment, we identify the exact implementation dates for more than five thousand equity buybacks. We find that managers exhibit substantial timing ability. Consistent with the information-asymmetry hypothesis, bid–ask spreads widen and depths narrow during repurchase periods. We decompose bid–ask spreads and show that adverse selection costs increase substantially as market participants respond to the presence of informed managerial trading. Our findings provide additional insight into how markets process information and have significant implications for corporate payout and disclosure policies.

Examination of 1,600 seasoned equity offerings reveals little evidence that underwriters systematically set offer prices below the market price on the major exchanges, though they may do so for NASDAQ issues. Quick round-trip transactions in seasoned offerings are not profitable, but subscribing to an offering and holding the stock for 30 days seems to be very profitable, especially in the NASDAQ market. In addition to seasoned offerings, we analyze 250 issues of new classes of preferred stock. These issues are not underpriced.

An examination of rates of return and dollar value returns for various classes of merging firms' securities indicates that acquired companies' common stockholders, convertible and non-convertible preferred stockholders, and convertible bondholders gain in merger, as do acquiring companies' convertible preferred stockholders. Acquired companies' non-convertible bondholders and acquiring companies' convertible and non-convertible bondholders and non-convertible preferred stockholders neither gain nor lose. There is no evidence that acquiring companies' common stockholders lose and there is statistically reliable evidence that they gain. Additionally, the dollar value of both acquired and acquiring firms increase, as does the dollar value of the combined acquired and acquiring companies.

Using nonparametric techniques, we develop a methodology for estimating and testing conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The estimators and tests can be implemented for a single asset or jointly across portfolios. The traditional Gibbons, Ross, and Shanken (1989) test arises as a special case of no time variation in the alphas and factor loadings and homoskedasticity. As applications of the methodology, we estimate conditional CAPM and multifactor models on book-to-market and momentum decile portfolios. We reject the null that long-run alphas are equal to zero even though there is substantial variation in the conditional factor loadings of these portfolios.

We develop a new approach to approximating asset prices in the context of continuous-time models. For any pricing model that lacks a closed-form solution, we provide a closed-form approximate solution, which relies on the expansion of the intractable model around an “auxiliary” one. We derive an expression for the difference between the true (but unknown) price and the auxiliary one, which we approximate in closed-form, and use to create increasingly improved refinements to the initial mispricing induced by the auxiliary model. The approach is intuitive, simple to implement, and leads to fast and extremely accurate approximations. We illustrate this method in a variety of contexts including option pricing with stochastic volatility, computation of Greeks, and the term structure of interest rates.