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

• Bakshi, G., Cao, C., & Chen, Z. (1997). Empirical Performance of Alternative Option Pricing Models. The Journal of Finance, 52, 2003–2049.

  Substantial progress has been made in developing more realistic option pricing models. Empirically, however, it is not known whether and by how much each generalization improves option pricing and hedging. The authors fill this gap by first deriving an option model that allows volatility, interest rates, and jumps to be stochastic. Using S&P 500 options, they examine several alternative models from three perspectives: (1) internal consistency of implied parameters/volatility with relevant time-series data, (2) out-of-sample pricing, and (3) hedging. Overall, incorporating stochastic volatility and jumps is important for pricing and internal consistency. But for hedging, modeling stochastic volatility alone yields the best performance.

• Balduzzi, P., & Kallal, H. (1997). Risk Premia and Variance Bounds. The Journal of Finance, 52, 1913–1949.

  If a pricing kernel assigns a premium to a risk variable that differs from the one assigned by the minimum-variance admissible kernel, then the pricing kernel must exhibit more variability than the minimum-variance kernel. Based on this intuition, the authors derive a variance bound that is more stringent than that of Lars Peter Hansen and Ravi Jagannathan (1991). When the authors apply their bound to the kernel of a representative consumer with power utility, they find that the consumption risk premium increases the severity of the 'equity-premium puzzle' of Rajnish Mehra and Edward C. Prescott (1985).

• Brav, A., & Gompers, P. A. (1997). Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence From Venture and Nonventure Capital-Backed Companies. The Journal of Finance, 52, 1791–1821.

  The authors investigate the long-run underperformance of recent initial public offering (IPO) firms in a sample of 934 venture-backed IPOs from 1972 to 1992 and 3,407 nonventure-backed IPOs from 1975 to 1992. They find that venture-backed IPOs outperform nonventure-backed IPOs using equal weighted returns. Value weighting significantly reduces performance differences and substantially reduces underperformance for nonventure-backed IPOs. In tests using several comparable benchmarks and the Fama-French (1993) three factor asset pricing model, venture-backed companies do not significantly underperform, while the smallest nonventure-backed firms do. Underperformance, however, is not an IPO effect. Similar size and book-to-market firms that have not issued equity perform as poorly as IPOs.

• Brennan, M. J., & Cao, H. H. (1997). International Portfolio Investment Flows. The Journal of Finance, 52, 1851–1880.

  This article develops a model of international equity portfolio investment flows based on differences in informational endowments between foreign and domestic investors. It is shown that, when domestic investors possess a cumulative information advantage over foreign investors about their domestic market, investors tend to purchase foreign assets in periods when the return on foreign assets is high and to sell when the return is low. The implications of the model are tested using data on U.S. equity portfolio flows.

• Clyde, P., Schultz, P., & Zaman, M. (1997). Trading Costs and Exchange Delisting: The Case of Firms That Voluntarily Move From the American Stock Exchange to the Nasdaq. The Journal of Finance, 52, 2103–2112.

  The authors examine forty-seven stocks that voluntarily left the American Stock Exchange from 1992 through 1995 and listed on the NASDAQ . They find that both effective and quoted spreads increase by about 100 percent after listing on the NASDAQ. These spread changes are consistent across stocks. In contrast, excess returns are positive when firms announce a switch from the American Stock Exchange to the NASDAQ. The authors are unable to explain this apparent contradiction.

• Corrado, C. J., & Ferris, S. P. (1997). Journal Influence on the Design of Finance Doctoral Education. The Journal of Finance, 52, 2091–2102.

  This article surveys the influence of research journals on finance doctoral education. Influence is measured by citations from syllabi of finance seminars. A sample of 101 distinct syllabi submitted by thirty-three finance doctoral programs yields a list of 1,031 articles cited by at least two schools. These 1,031 articles generate 3,273 citations referencing seventeen finance, economics, and accounting journals, where multiple citations from a single school are counted as a single citation. The most notable findings are the wide variety of seminar content across finance doctoral programs and the dominance of five finance journals in providing this diverse content.

• De Santis, G., & Gerard, B. (1997). International Asset Pricing and Portfolio Diversification With Time-Varying Risk. The Journal of Finance, 52, 1881–1912.

  The authors test the conditional capital asset pricing model (CAPM) for the world's eight largest equity markets using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) parameterization. Their methodology can be applied simultaneously to many assets and, at the same time, accommodate general dynamics of the conditional moments. The evidence supports most of the pricing restrictions of the model, but some of the variation in risk-adjusted excess returns remains predictable during periods of high interest rates. The authors' estimates indicate that, although severe market declines are contagious, the expected gains from international diversification for a U.S. investor average 2.11 percent per year and have not significantly declined over the last two decades.

• Eleswarapu, V. R. (1997). Cost of Transacting and Expected Returns in the Nasdaq Market. The Journal of Finance, 52, 2113–2127.

  This article empirically examines the liquidity premium predicted by the Amihud and Mendelson (1986) model using NASDAQ data over the 1973-90 period. The results support the model and are much stronger than for the New York Stock Exchange (NYSE), as reported by Nai-Fu Chen and Raymond Kan (1989) and Venkat R. Eleswarapu and Marc R. Reinganum (1993). The author conjectures that the stronger evidence on the NASDAQ is due to the dealers' inside spreads on the NASDAQ being a better proxy for the actual cost of transacting than the quoted spreads on the NYSE, since the NASDAQ dealers do not face competition from limit orders or floor traders.

• Erickson, J., Li, Y., & Wang, K. (1997). A New Look at the Monday Effect. The Journal of Finance, 52, 2171–2186.

  It is well documented that expected stock returns vary with the day of the week (the Monday or weekend effect). In this article, the authors show that the well-known Monday effect occurs primarily in the last two weeks (fourth and fifth weeks) of the month. In addition, the mean Monday return of the first three weeks of the month is not significantly different from zero. This result holds for most of the subperiods during the 1962-93 sampling period and for various stock return indexes. The monthly effect reported by Robert A. Ariel (1987) and Josef Lakonishok and Seymour Smidt (1988) cannot fully explain this phenomenon.

• Hollifield, B., & Uppal, R. (1997). An Examination of Uncovered Interest Rate Parity in Segmented International Commodity Markets. The Journal of Finance, 52, 2145–2170.

  The authors examine the effect of segmented commodity markets on the relation between forward future spot exchange rates in a dynamic economy. They calculate the slope coefficient in their theoretical economy from regressing exchange rate changes on forward premia. With reasonable parameter values, the slope coefficient is less than unity. However, even for extreme parameters the slope is not less than zero, as found in the data. A negative slope coefficient in a nominal version of the model requires the covariance between monetary shocks and relative output shocks to be significantly negative, in contrast to the covariance in the data.