Christopher Neely, Paul Weller, Rob Dittmar, Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach, The Journal of Financial and Quantitative Analysis, Vol. 32, No. 4 (Dec., 1997), pp. 405-426

Lawrence M. Benveniste, Walid Y. Busaba, Bookbuilding vs. Fixed Price: An Analysis of Competing Strategies for Marketing IPOs, The Journal of Financial and Quantitative Analysis, Vol. 32, No. 4 (Dec., 1997), pp. 383-403

Marc Bremer, Takato Hiraki, Richard J. Sweeney, Predictable Patterns after Large Stock Price Changes on the Tokyo Stock Exchange, The Journal of Financial and Quantitative Analysis, Vol. 32, No. 3 (Sep., 1997), pp. 345-365

The National Association of Security Dealers alleges that professional-trader use of the Small Order Execution System (SOES) causes greater security price volatility. We docu? ment bidirectional Granger causality between a proxy for professional SOES trading (the frequency of maximum-sized SOES trades) and a measure of stock price volatility. We find that high levels of volatility precede high levels of maximum-sized SOES trades, suggesting that volatility causes more frequent large SOES trades. Likewise, over a one-minute time interval, high levels of maximum-sized SOES trades cause high volatility. Over longer periods, however, intense maximum-sized SOES trading causes lower volatility. Inter? preted in conjunction with Harris and Schultz (1997), these results suggest that high levels of maximum-sized SOES trades lead to more efficient price discovery. In light of these results, we believe that efforts to eliminate SOES based on volatility considerations are unwarranted.

The properties of variance ratio tests across trading and non-trading periods are examined using the generalized method of moments. For the case of opening and closing return variances, the joint tests indicate that the null hypothesis that the variance of opening returns equals the variance of closing returns cannot be rejected for a sample of New York Stock Exchange stocks. This example demonstrates the importance of accounting for overlapping observations and cross correlation in such frameworks. The conventional average (across assets) variance ratio test is shown to be biased against the null in small samples. Specifically, when non-zero correlations are ignored, previous tests have the wrong asymptotic size. This bias persists in other frameworks as well: although this study confirms earlier findings that the return variance during non-trading periods is significantly lower than during trading periods, test statistics that ignore correlations are shown to be inflated.

Pierluigi Balduzzi, Silverio Foresi, David J. Hait, Price Barriers and the Dynamics of Asset Prices in Equilibrium, The Journal of Financial and Quantitative Analysis, Vol. 32, No. 2 (Jun., 1997), pp. 137-159

This study examines the joint influence of board composition, leadership structure, and board ownership structure on the market's reaction to corporate antitakeover amendment proposals. The stock price reaction to antitakeover amendments is more negative when the board is dominated by inside and affiliated outside board members. Further, for firms in which the CEO also chairs the board, the reaction becomes increasingly negative as inside and affiliated outside board members increase their ownership stake in the firm and proportional representation on the board. In contrast, board composition and ownership structure have little power to explain the stock price reaction when the CEO does not chair the board. We conclude that monitoring by outside independent board members is important particularly when the CEO is also the board chair. The separation of ownership and control in the corporate form of business creates potential conflicts of interest between managers and shareholders. These conflicts can be mitigated by such internal governance characteristics as the compo? sition, ownership structure, and leadership structure ofthe firm's board of directors. In this study, we analyze the joint effect of these board monitoring characteristics on the stock market response to antitakeover amendment proposals. The study of antitakeover amendments is of particular importance because of the unresolved nature of the theoretical debate surrounding the amendments and the conflicting empirical evidence. Various types of antitakeover amendments exist, but all ostensibly make the takeover of a target firm more difficult with? out the cooperation of incumbent management. The amendments can be either beneficial or detrimental, depending on how managers use them. Managers can use the amendments to extract a higher takeover bid or to entrench themselves at shareholders' expense. The empirical evidence on the market's reaction to amend? ment announcements is also mixed. For example, Linn and McConnell (1983) and

We examine the fit between the ownership data provided by four surrogate databases and the data collected from proxy statements. We discover an unambiguous pecking order among the surrogates relative to the benchmark ownership statistics of corporate proxy statements. Corporate Text is first, followed in descending order by Compact Disclosure, Value Line, and Spectrum. Further tests show that reporting discrepancies in the Value Line and Spectrum databases could affect economic inferences drawn from regressions using their ownership data. A field guide describing each data source's reporting conventions, formats, and strate? gies for data aggregation may be downloaded from the Journal of Financial and Quantitative Analysis' web site (http.V/weber.u.washington.edu/~jfqa/hola7andeapdx.pdf).

Center for Research in Financial Services for financial support. The standard disclaimer applies. Optimal Financial Contracts for a Start-Up with Unlimited Operating Discretion This paper presents a model in which asymmetric information and extreme uncertainty lead to the exclusive use of equity and riskless debt for small business financing. The paper derives these results without any restrictions on the available contract space, the distribution function governing a project’s payoff, or the risk aversion of most potential entrepreneurs. Linear securities derive from the assumption that small business financing involves more uncertainty than is captured in most financial models. Instead of assuming that business people are faced with a given menu of projects, the model allows entrepreneurs to create (over time) an unlimited number of non-positive net present value projects with any payoff distribution they desire. Also, outside investors cannot observe project choice but only terminal cash flows. As a result, suppliers of funds must design contracts so that in equilibrium entrepreneurs do not wish to undertake undesirable investments. Further analysis of the model shows that in equilibrium entrepreneurs must contribute some

Jeff Hubbard, Roni Michaely, Do Investors Ignore Dividend Taxation? A Reexamination of the Citizens Utilities Case, The Journal of Financial and Quantitative Analysis, Vol. 32, No. 1 (Mar., 1997), pp. 117-135