A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

• Ammer, J., & Mei, J. (1996). Measuring International Economic Linkages With Stock Market Data. The Journal of Finance, 51, 1743–1763.

  This article develops a new framework for measuring financial and real economic linkages between countries. Using U.S. and U.K. data from 1957 to 1989, the authors find closer financial linkages after the Bretton Woods currency arrangement was abandoned and Britain suspended exchange controls. In a pairwise application to fifteen countries over a shorter period, they also find that news about future dividend growth is more highly correlated between countries than contemporaneous output measures. This suggests that there are lags in the international transmission of economic shocks and that contemporaneous output correlation may understate the magnitude of integration.

• Beneish, M. D., & Whaley, R. E. (1996). An Anatomy of the “S&P Game”: The Effects of Changing the Rules. The Journal of Finance, 51, 1909–1930.

  This study analyzes the effects of changes in S&P 500 index composition from January 1986 through June 1994, a period during which Standard and Poor's began its practice of preannouncing changes five days beforehand. The new announcement practice has given rise to the 'S&P game' and has altered the way stock prices react. The authors find that prices increase abnormally from the close on the announcement day to the close on the effective day. The overall increase is greater than under the old announcement policy, although part of the increase reverses after the stock is included in the index.

• Bergman, Y. Z., Grundy, B. D., & Wiener, Z. (1996). General Properties of Option Prices. The Journal of Finance, 51, 1573–1610.

  When the underlying price process is a one-dimensional diffusion, as well as in certain restricted stochastic volatility settings, a contingent claim's delta is bounded by the infimum and supremum of its delta at maturity. Further, if the claim's payoff is convex (concave), the claim's price is a convex (concave) function of the underlying asset's value. However, when volatility is less specialized, or when the underlying process is discontinuous or non-Markovian, a call's price can be a decreasing, concave function of the underlying price over some range, increasing with the passage of time, and decreasing in the level of interest rates.

• Bloomfield, R. (1996). Quotes, Prices, and Estimates in a Laboratory Market. The Journal of Finance, 51, 1791–1808.

  This study examines the behavior of laboratory markets in which two uninformed marketmakers compete to trade with heterogeneously informed investors. The data provide three main results. First, marketmakers set quotes to protect against adverse selection and to control inventory. Second, when investors are 1ess well-informed, their trades are less reliable measures of their information, and marketmakers respond to those trades with greater skepticism. Third, errors in marketmakers' reactions to trades cause the time-series behavior of quotes and prices to depend on the information environment in ways beyond those captured in extant theory.

• Chan, L. K. C., Jegadeesh, N., & Lakonishok, J. (1996). Momentum Strategies. The Journal of Finance, 51, 1681–1713.

  We examine whether the predictability of future returns from past returns is due to the market's underreaction to information, in particular to past earnings news. Past return and past earnings surprise each predict large drifts in future returns after controlling for the other. Market risk, size, and book-to-market effects do not explain the drifts. There is little evidence of subsequent reversals in the returns of stocks with high price and earnings momentum. Security analysts' earnings forecasts also respond sluggishly to past news, especially in the case of stocks with the worst past performance. The results suggest a market that responds only gradually to new information.

• Fama, E. F., & French, K. R. (1996). The CAPM Is Wanted, Dead or Alive. The Journal of Finance, 51, 1947–1958.

  Kothari, Shanken, and Sloan (1995) claim that betas from annual returns produce a stronger positive relation between beta and average return than betas from monthly returns. They also contend that the relation between average return and book-to-market equity (BE/ME) is seriously exaggerated by survivor bias. We argue that survivor bias does not explain the relation between BE/ME and average return. We also show that annual and monthly betas produce the same inferences about the beta premium. Our main point on the beta premium is, however, more basic. It cannot save the Capital asset pricing model (CAPM), given the evidence that beta alone cannot explain expected return.

• Gemmill, G. (1996). Transparency and Liquidity: A Study of Block Trades on the London Stock Exchange Under Different Publication Rules. The Journal of Finance, 51, 1765–1790.

  This article examines whether reducing a market's transparency, by delaying the publication of prices for block trades, has any impact on liquidity. The analysis uses a sample of 5,987 blocks from the London Stock Exchange that cover three different publication regimes: immediate (1987/88), ninety minutes (1991/92), and twenty-four hours (1989/90). Delaying publication does not affect the time taken by prices to reach a new level, which is rapid under all regimes. Spreads differ across years but their size relates more closely to market volatility than to speed of publication. There is, therefore, no gain in liquidity from delayed publication.

• Grenadier, S. R. (1996). The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets. The Journal of Finance, 51, 1653–1679.

  This article develops an equilibrium framework for strategic option exercise games. The author focuses on a particular example: the timing of real estate development. An analysis of the equilibrium exercise policies of developers provides insights into the forces that shape market behavior. The model isolates the factors that make some markets prone to bursts of concentrated development. The model also provides an explanation for why some markets may experience building booms in the face of declining demand and property values. While such behavior is often regarded as irrational overbuilding, the model provides a rational foundation for such exercise patterns.

• Guedes, J., & Opler, T. (1996). The Determinants of the Maturity of Corporate Debt Issues. The Journal of Finance, 51, 1809–1833.

  The authors document the determinants of the term to maturity of 7,369 bonds and notes issued between 1982 and 1993. Their main finding is that large firms with investment grade credit ratings typically borrow at the short end and at the long end of the maturity spectrum, while firms with speculative grade credit ratings typically borrow in the middle of the maturity spectrum. This pattern is consistent with the theory that risky firms do not issue short-term debt in order to avoid inefficient liquidation, but are screened out of the long-term debt market because of the prospect of risky asset substitution.

• Handa, P., & Schwartz, R. A. (1996). Limit Order Trading. The Journal of Finance, 51, 1835–1861.

  The authors analyze the rationale for limit order trading. Use of limit orders involves two risks: (1) an adverse information event can trigger an undesirable execution, and (2) favorable news can result in a desirable execution not being obtained. On the other hand, a paucity of limit orders can result in accentuated short-term price fluctuations that compensate a limit order trader. The authors' empirical tests suggest that trading via limit orders dominates trading via market orders for market participants with relatively well-balanced portfolios, and that placing a network of buy and sell limit orders as a pure trading strategy is profitable.