We construct a degree-of-total-leverage framework to test whether and how shifts in product mix affect earnings volatility at 472 U.S. commercial banks between 1988 and 1995. Our framework, which accounts for cost and revenue synergies not captured in most previous studies, conceptually links earnings volatility to revenue volatility, expense fixity, and product mix. We find that replacing traditional lending activities with fee-based activities—an ongoing trend that may be strengthened by recent financial modernization—is associated with both higher revenue volatility and higher total leverage, which in this framework implies higher earnings volatility. Journal of Economic Literature Classification Numbers: G21, G32, D24.

This paper provides a detailed analysis of the call auction procedure on the Frankfurt Stock Exchange. We develop a direct measure of execution costs in a call auction that is comparable to the bid–ask spread in a continuous market. We find that transaction costs for small transactions in the call market are lower than the quoted spread in the continuous market, whereas transaction costs for large transactions in the call market are higher than the spread in the continuous market. An analysis of specialist (Makler) participation shows that Maklers provide a valuable service to the market. On average, their compensation is restricted to commission income rather than trading profits. Journal of Economic Literature Classification Number: G10.