Edwin J. Elton, Martin J. Gruber, Zvi Lieber, Valuation, Optimum Investment and Financing for the Firm Subject to Regulation, The Journal of Finance, Vol. 30, No. 2, Papers and Proceedings of the Thirty-Third Annual Meeting of the American Finance Association, San Francisco, California, December 28-30, 1974 (May, 1975), pp. 401-425

This paper uses intraday data from the interdealer government bond market to investigate the effects of scheduled macroeconomic announcements on prices, trading volume, and bid-ask spreads. We find that 17 public news releases, as measured by the surprise in the announced quantity, have a significant impact on the price of at least one of the following instruments: a three-month bill, a two-year note, a 10-year note, and a 30-year bond. These effects vary significantly according to maturity. Public news can explain a substantial fraction of price volatility in the aftermath of announcements, and the adjustment to news generally occurs within one minute after the announcement. We document significant and persistent increases in volatility and trading volume after the announcements. Bid-ask spreads, on the other hand, widen at the time of the announcements, but then revert to normal values after five to 15 minutes. The effects that we document have relevant implications for yield curve modeling and for the microstructure of bond markets. I.

This paper examines the effect of incentive fees on the behavior of mutual fund managers. Funds with incentive fees exhibit positive stock selection ability, but a beta less than one results in funds not earning positive fees. From an investor's perspective, positive alphas plus lower expense ratios make incentive‐fee funds attractive. However, incentive‐fee funds take on more risk than non‐incentive‐fee funds, and they increase risk after a period of poor performance. Incentive fees are useful marketing tools, since more new cash flows go into incentive‐fee funds than into non‐incentive‐fee funds, ceteris paribus.

This paper examines problems in the CRSP Survivor Bias Free U.S. Mutual Fund Database (CRSP, 1998) and compares returns contained in it to those in Morningstar. The CRSP database has an omission bias that has the same effects as survivorship bias. Although all mutual funds are listed in CRSP, return data is missing for many and the characteristics of these funds differ from the populations. The CRSP return data is biased upward and merger months are inaccurately recorded about half the time. Differences in returns in Morningstar and CRSP are a problem for older data and small funds.

In this article, we develop relative pricing (APT) models that are successful in explaining expected returns in the bond market. We utilize indexes as well as unanticipated changes in economic variables as factors driving security returns. An innovation in this article is the measurement of the economic factors as changes in forecasts. The return indexes are the most important variables in explaining the time series of returns. However, the addition of the economic variables leads to a large improvement in the explanation of the cross-section of expected returns. We utilize our relative pricing models to examine the performance of bond funds.

In this article, we develop relative pricing (APT) models that are successful in explaining expected returns in the bond market. We utilize indexes as well as unanticipated changes in economic variables as factors driving security returns. An innovation in this article is the measurement of the economic factors as changes in forecasts. The return indexes are the most important variables in explaining the time series of returns. However, the addition of the economic variables leads to a large improvement in the explanation of the cross‐section of expected returns. We utilize our relative pricing models to examine the performance of bond funds.