This paper tests a generalized version of the investor clientele hypothesis of Amihud and Mendelson [J. Finan. Econ. 17 (1986) 223]. This international trade-venue clientele effect hypothesis is supported for the Canadian cross-listed firms undifferentiated and differentiated by US trade venue, except for TSE shares cross-listed on NASDAQ. The hypothesized relationship between relative holding periods (measured using shares outstanding and share float) and effective half-spreads changes after TSE decimalization, and differs if the cross-listed shares have options traded on them. The empirical findings suggest that the TSE lost (won) executed order flow relative to the AMEX and to NYSE for shares with (without) options traded on them.

In June 2004, the SEC required mutual fund boards to disclose additional information about the inputs and processes involved in advisory contract approvals to help investors make more informed decisions and to encourage independent directors to act more independently when negotiating advisory fees. We find that CEF advisory fees are more likely to decrease after the 2004 SEC amendments, especially for those CEFs with high advisory fees and low investment performances. After the 2004 SEC amendments, CEF advisory rates decrease on average and the magnitudes of their decreases increase. We find that more board meetings and the likelihood of a decrease in advisory fees after the amendments increases with the number of board meetings. Our results are not only supported by textual analysis and type of filing downloads but are also robust to time-series placebo tests, changes in the ratios of independent directors, and funds belonging to “scandal” families. Overall, our results are consistent with the notion that the 2004 SEC amendments successfully encouraged independent fund directors to exert more effort and to act more independently in negotiating advisory fees with fund advisors.

Using a unique, large, and partially hand-collected panel database of U.S. closed-end funds (CEFs) during 1994–2013, we examine relations between board effectiveness and board structure. CEF boards with higher percentages of independent directors are associated with lower expense ratios and different CEF benchmark-adjusted returns, but not with CEF premiums. Thus, independent directors are more effective in monitoring and influencing fund performance measures that are less complex and more directly controllable (fees versus CEF returns). These results are consistent with theoretical and empirical findings in the literature that interested directors can better monitor and control firms with high degrees of information asymmetry, uncertainty, and require specialized knowledge to operate. Our results suggest that CEFs with higher board ownerships are better aligned with shareholders' interests. Ownerships of directors are positively and significantly associated with most variables that are expected to indicate greater value from the monitoring of directors. Using a dynamic panel two-step system generalized method of moments estimator, our results are robust in the presence of endogeneity concerns (reverse causality, unobserved heterogeneity, and simultaneity).

Based on Markowitz's pioneering study [40], Sharpe [56] and Lintner [38] advanced the first positivist formulations of the capital asset pricing model (CAPM). Their models were subsequently refined by Mossin [45], Fama [15], Black [1], and others. Even though the CAPM has been studied extensively, it has not been empirically validated. According to Roll [48], the CAPM cannot be tested in an unambiguous fashion because of a number of intractable measurement and computational difficulties, and the joint nature of the hypotheses to be tested.

In a paper published in 1978, Levy [5] proposed a general capital asset pricing model (GCAPM), which he obtained by maximizing investors' utility when the number of securities held in each investor's portfolio is constrained. Although Levy's resultant asset pricing model is somewhat different in appearance than the asset pricing model proposed by Mao [8] in 1971, it can be shown that both models are not only quite comparable in content but that both result in some very promising theoretical and empirical implications. Thus, the purpose of this paper is twofold. First, these two important contributions to the literature on asset pricing in imperfect markets will be compared and contrasted. Second, it will be shown that both models can yield a “clinical” form of the traditional CAPM, which appears to be more desirable for empirical testing purposes.

The microstructure of the Saudi Stock Market (SSM) under the new computerized trading system, ESIS, is described, and order and other generated data sets are used to examine the patterns in the order book, the dynamics of order flow, and the probability of executing limit orders. Although the SSM has a distinct structure, its intraday patterns are surprisingly similar to those found in other markets with different structures. We find that liquidity, as commonly measured by width and depth, is relatively low on the SSM. However, liquidity is exceptionally high when measured by immediacy. Limit orders that are priced reasonably, on average, have a short duration before being executed, and have a high probability of subsequent execution.

Spread costs and their adverse selection and temporary components for Canadian SEOs follow an approximate V-shaped pattern with a trough at the closing window. Enhanced ownership diffusion partly explains the decrease in these spread costs post-SEO completion versus pre-SEO announcement. SEO spread costs decrease after the April 1996 TSX decimalization. The adverse selection cost of privately-placed Canadian SEOs decreases after Multilateral Instrument 45-102 reduced the lock-up period to four months in 2001. Consistent with results for non-US SEOs, negative abnormal returns (ARs) occur in announcement windows for undifferentiated SEOs. ARs are significantly different for public (significantly negative) versus private (insignificantly positive) SEOs consistent with their associated differential reductions in information asymmetry. Conditional residual volatilities decrease post-announcement, consistent with a diminished temporary spread cost and expected behavior following an unanticipated event.