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

• Admati, A. R., & Pfleiderer, P. (1991). Sunshine Trading and Financial Market Equilibrium. Review of Financial Studies, 4, 443–481.

  In this article, we consider the possibility that some liquidity traders preannounce the size of their orders, a practice that has come to be known as "sunshine trading." Two possible effects preannouncement might have on the equilibrium are examined. First, since it identifies certain trades as informationless, preannouncement changes the nature of any informational asymmetries in the market. Second, preannouncement can coordinate the supply and demand of liquidity in the market. We show that preannouncement typically reduces the trading costs of those who preannounce, but its effects on the trading costs and welfare of other traders are ambiguous. We also examine the implications of preannouncement for the distribution of prices and the amount of information that prices reveal.

• Berkovitch, E., & Khanna, N. (1991). A Theory of Acquisition Markets: Mergers versus Tender Offers, and Golden Parachutes. Review of Financial Studies, 4, 149–174.

  We develop a model of the acquisition market in which the acquirer has a choice between two takeover mechanisms: mergers and tender offers. A merger is modeled as a bargaining game between the acquiring and target firms; whereas a tender offer is modeled as an auction in which bidders arrive sequentially and compete for the target. At any stage of the bargaining game the acquiring firm can stop negotiating and make a tender offer. In equilibrium, there is a unique level of synergy gains below which the acquiring firm makes only a merger attempt as it expects to lose in the competition resulting from a tender offer. For synergy gains above this level, tender offers can occur. However, to get tender offers, target shareholders must give their managers golden parachutes that give higher payoffs in tender offers than in mergers.

• Best, M. J., & Grauer, R. R. (1991). On the Sensitivity of Mean-Variance-Efficient Portfolios to Changes in Asset Means: Some Analytical and Computational Results. Review of Financial Studies, 4, 315–342.

  This paper investigates the sensitivity of mean-variance(MV)-efficient portfolios to changes in the means of individual assets. When only a budget constraint is imposed on the investment problem, the analytical results indicate that an MV-efficient portfolio's weights, mean, and variance can be extremely sensitive to changes in asset means. When nonnegativity constraints are also imposed on the problem, the computational results confirm that a positively weighted MV-efficient portfolio's weights are extremely sensitive to changes in asset means, but the portfolio's returns are not. A surprisingly small increase in the mean of just one asset drives half the securities from the portfolio. Yet the portfolio's expected return and standard deviation are virtually unchanged.

• Bhattacharya, U., & Spiegel, M. (1991). Insiders, Outsiders, and Market Breakdowns. Review of Financial Studies, 4, 255–282.

  A simple classical Walrasian framework is proposed for the study of manipulation among asymmetrically informed risk-averse traders in financial markets, and it is used to analyze the occurrence of a market breakdown in the trading system. Such a phenomenon occurs when the outsiders refuse to trade with the insiders because the informational motive for trade of the insider outweighs her hedging motive. We demonstrate the robustness of our results by proving that the market collapse condition extends not only to the linear strategy function, but to the whole class of feasible nonlinear strategy function, but to the whole class of feasible nonlinear strategy functions. Implications for insider-trading regulation are sketched.

• Bhushan, R. (1991). Trading Costs, Liquidity, and Asset Holdings. Review of Financial Studies, 4, 343–360.

  In this article I develop a model that accounts for interdependence between trading costs in various asset markets arising from the optimizing behavior of liquidity traders. The model suggests that noise trading is an important determinant of the liquidity of asset markets and provides a positive theory for diversified asset holding by risk-neutral liquidity traders.

• Bossaerts, P., & Hillion, P. (1991). Market Microstructure Effects of Government Intervention in the Foreign Exchange Market. Review of Financial Studies, 4, 513–541.

  An asymmetric information model of the bid-ask spread is developed for a foreign exchange market subject to occasional government interventions. Traditional tests of the unbiasedness of the forward rate as a predictor of the future spot rate are shown to be inconsistent when the rates are measured as the average of their respective bid and ask quotes. Larger bid-ask spreads on Fridays are documented. Reliable evidence of asymmetric bid-ask spreads for all days of the week, albeit more pronounced on Fridays, are presented. The null hypothesis that the forward rate is an unbiased predictor of the future spot rate continues to be rejected. The regression slope coefficients increase toward unity, however, indicating a less variable risk premium.

• Chan, K. C., Chan, K., & Karolyi, G. A. (1991). Intraday Volatility in the Stock Index and Stock Index Futures Markets. Review of Financial Studies, 4, 657–684.

  We examine the intraday relationship between returns and returns volatility in the stock index and stock index futures markets. Our results indicate a strong intermarket dependence in the volatility of the cash and futures returns. Price innovations that originate in either the stock or futures markets can predict the future volatility in the other market. We show that this relationship persists even during periods in which the dependence in the returns themselves appears to weaken. The findings are robust to controlling for potential market frictions such as asynchronous trading in the stock index. Our results have implications for understanding the pattern of information flows between the two markets.

• Chowdhry, B. (1991). What Is Different about International Lending? Review of Financial Studies, 4, 121–148.

  An attempt is made to explain how enforceability is achieved n international debt contracts. Each bank announces the policy of denying credit to borrowers who default and chooses to adhere to it to maintain its reputation of being a tough bank to discipline its other borrowers. Loans are made by syndicates of banks in order to make the penalty for default severe enough so borrowers would choose not to default voluntarily. The model predicts that the interest rate charged on loans is smaller for the larger borrowers. Also, for any given borrower, the interest rate may fall after each successive default.

• Chowdhry, B., & Nanda, V. (1991). Multimarket Trading and Market Liquidity. Review of Financial Studies, 4, 483–511.

  When a security trades at multiple locations simultaneously, an informed trader has several avenues in which to exploit his private information. The greater the proportion of liquidity trading by "large" traders who can split their trades across markets, the larger is the correlation between volume in different markets and the smaller is the informativeness of prices. We show that one of the markets emerges as the dominant location for trading in that security. When informed traders can use their information for more than one trading period, the timely release of price information by market makers at one location adversely affects the profits informed traders expect to make subsequently at other locations. Market makers, competing to offer the lowest cost of trading at their location, consequently deter informed trading be voluntarily making the price information public and by "cracking down" on insider trading.

• Conrad, J., Gultekin, M. N., & Kaul, G. (1991). Asymmetric Predictability of Conditional Variances. Review of Financial Studies, 4, 597–622.

  We show that there is an asymmetry in the predictability of the volatilities of large versus small firms. Using both univariate and multivariate ARMA-GARCH-M parameterizations, we find that volatility surprises to large market value firms are important to the future dynamics of their own returns as well as the returns of smaller firms. Conversely, however, shocks to smaller firms have no impact on the behavior of either the mean or the variance of the returns of larger capitalization companies.