While the value of listing equity securities has been researched extensively, no studies have examined the market reaction to the decision to list corporate debt. Since the listing of corporate bonds on the major exchanges is a significant corporate activity, this study examines the impact of bond listing on shareholder wealth. Using a variety of possible announcement dates as well as cumulative abnormal returns between dates, no detectable market reaction to debt listing is found. Therefore, the listing of corporate bonds does not appear to be valued by the common shareholders of those same firms.

Lawrence Fisher, Jules H. Kamin, Forecasting Systematic Risk: Estimates of "Raw" Beta that Take Account of the Tendency of Beta to Change and the Heteroskedasticity of Residual Returns, The Journal of Financial and Quantitative Analysis, Vol. 20, No. 2 (Jun., 1985), pp. 127-149

The need for an empirical measure of the relative value of financial theories becomes more important as we increase their number and sophistication. Although there are several methods of determining value, here we emphasize relative predictive power. According to this single criterion, a theory is insignificant if it fails to increase our present ability to predict future events. We recognize, however, that a theory can be useful if it merely increases our understanding of real events, or if it is based upon realistic assumptions.

Michael D. Joehnk, H. Russell Fogler, Charles E. Bradley, The Price Elasticity of Discounted Bonds: Some Empirical Evidence, The Journal of Financial and Quantitative Analysis, Vol. 13, No. 3 (Sep., 1978), pp. 559-566

H. Russell Fogler, William A. Groves, James G. Richardson, Bond Portfolio Strategies, Returns, and Skewness: A Note, The Journal of Financial and Quantitative Analysis, Vol. 12, No. 1 (Mar., 1977), pp. 127-140

Intelligent corporate financial planning has been necessary for as long as the corporate form of business enterprise has existed. Only in recent years, however, have computer technology and academic theorizing been harnessed to meet this practical need. Without wishing to minimize the impact and value of these efforts on the practice of corporate finance, we do think there are grounds for believing that the new finance “tools” have been less than maximally effective. In this article we contrast typical financial modeling theory in order to interpret the gap between the two. Then we describe a financial policy model whose characteristics might be expected to be more acceptable in practice. Finally, we discuss the implications of the theory/practice gap and our experience with this model for future scholarly activities in the modeling of financial policies.

Using synchronous transactions data for IBM from the New York, Pacific, and Midwest Stock Exchanges, we estimate an error correction model to investigate whether each of the exchanges is contributing to price discovery. Johansen's test yields two cointegrating vectors, which together verify the expected long-run equilibrium of equal prices across the three exchanges. Two error correction terms specified as the differences from IBM prices on the NYSE indicate that adjustments maintaining the long-run cointegration equilibrium take place on all three exchanges. That is, IBM prices on the NYSE adjust toward IBM prices on the Midwest and Pacific Exchanges, just as Midwest and Pacific prices adjust to the NYSE.

We demonstrate the benefits of merging traditional hypothesis-driven research with new methods from machine learning that enable high-dimensional inference. Because the literature on post-earnings announcement drift (PEAD) is characterized by a “zoo” of explanations, limited academic consensus on model design, and reliance on massive data, it will serve as a leading example to demonstrate the challenges of high-dimensional analysis. We identify a small set of variables associated with momentum, liquidity, and limited arbitrage that explain PEAD directly and consistently, and the framework can be applied broadly in finance.

We examine the structural stability of Gaussian shadow rate term structure models in a sample of Treasury yields that includes the “effective lower bound” (ELB) period from 2008 to 2015. After highlighting the challenges of testing for structural breaks in a latent-factor model, we proceed to document various pieces of empirical evidence for a structural break. As one of several practical implications, the expected policy rate paths during ELB years are notably shallower in our model that accommodates a structural break compared with a model that imposes structurally stability.

We use credit card data to estimate the impact of increasing minimum payments on delinquency, payments, spending, and write-offs. Our identification strategy exploits an unusual institutional feature: Borrowers can use their account to make purchases with both revolving loans (on which minimum payments increased) and term loans (on which there was no change). Payment increases by delinquent borrowers are insufficient to match increasing minimums, resulting in lower cure rates and an increase in write-offs. Affected borrowers migrate away from these accounts by decreasing charges and increasing payments, consequently lowering the interest earned by the bank.