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

• Bartov, E., & Bodnar, G. M. (1994). Firm Valuation, Earnings Expectations, and the Exchange-Rate Exposure Effect. The Journal of Finance, 49, 1755–1785.

  Consistent with previous research, the authors fail to find a significant correlation between the abnormal returns of their sample firms with international activities and changes in the dollar. They investigate the possibility that this failure is due to mispricing. Lagged changes in the dollar are a significant variable in explaining current abnormal returns of the authors' sample firms, suggesting that misprizing does occur. A simple trading strategy based upon these results generates significant abnormal returns. Corroborating evidence from returns around earnings announcements as well as errors in analysts' forecasts of earnings is also provided.

• Boudoukh, J., Richardson, M., & Whitelaw, R. F. (1994). Industry Returns and the Fisher Effect. The Journal of Finance, 49, 1595–1615.

  The authors investigate the cross-sectional relation between industry-sorted stock returns and expected inflation, and they find that this relation is linked to cyclical movements in industry output. Stock returns of noncyclical industries tend to covary positively with expected inflation, while the reverse holds for cyclical industries. From a theoretical perspective, the authors describe a model that captures both (1) the cross-sectional variation in these relations across industries and (2) the negative and positive relation between stock returns and inflation at short and long horizons, respectively. The model is developed in an economic environment in which the spirit of the Fisher model is preserved.

• Christie, W. G., Harris, J. H., & Schultz, P. H. (1994). Why Did Nasdaq Market Makers Stop Avoiding Odd-Eighth Quotes? The Journal of Finance, 49, 1841–1860.

  On May 26 and 27, 1994, several national newspapers reported the findings of W. Christie and P. Schultz (1994) who cannot reject the hypothesis that marketmakers of active NASDAQ stocks implicitly colluded to maintain spreads of at least $0.25 by avoiding odd-eighth quotes. On May 27, dealers in Amgen, Cisco Systems, and Microsoft sharply increased their use of odd-eighth quotes, and mean inside and effective spreads fell nearly 50 percent. This pattern was repeated for Apple Computer the following trading day. Using individual dealer quotes for Apple and Microsoft, the authors find that virtually all dealers moved in unison to adopt odd-eighth quotes.

• Christie, W. G., & Nanda, V. (1994). Free Cash Flow, Shareholder Value, and the Undistributed Profits Tax of 1936 and 1937. The Journal of Finance, 49, 1727–1754.

  In 1936, the federal government unexpectedly imposed a tax on undistributed corporate profits. Despite the direct costs of the tax, its announcement produced a positive revaluation of corporate equity, particularly among lower-payout firms. The authors interpret this as evidence of a divergence between managerial and shareholder preferences regarding dividend payout policies, consistent with the presence of agency costs. They also find that, despite the incentives created by the tax, the actual growth in dividends during 1936 was lower among firms judged more likely to be subject to higher agency costs after controlling for liquidity, debt, and the growth in earnings.

• Christie, W. G., & Schultz, P. H. (1994). Why Do Nasdaq Market Makers Avoid Odd-Eighth Quotes? The Journal of Finance, 49, 1813–1840.

  The NASDAQ multiple dealer market is designed to produce narrow bid-ask spreads through the competition for order flow among individual dealers. However, the authors find that odd-eighth quotes are virtually nonexistent for 70 of 100 actively traded NASDAQ securities, including Apple Computer and Lotus Development. The lack of odd-eighth quotes cannot be explained by the negotiation hypothesis of L. Harris (1991), trading activity, or other variables thought to impact spreads. This result implies that the inside spread for a large number of NASDAQ stocks is at least $0.25 and raises the question of whether NASDAQ dealers implicitly collude to maintain wide spreads.

• Cook, D. O., & Easterwood, J. C. (1994). Poison Put Bonds: An Analysis of Their Economic Role. The Journal of Finance, 49, 1905–1920.

  This article examines the effect of issuing debt with and without 'poison put' covenants on outstanding debt and equity claims for the period 1988 to 1989. The analysis shows that poison put covenants affect stockholders negatively and outstanding bondholders positively, while debt issued without such covenants has no effect. The study also finds a negative relationship between stock and bond returns for firms issuing poison put debt. These results are consistent with a 'mutual interest hypothesis,' which suggests that the issuance of poison put debt protects managers and, coincidentally, bondholders at the expense of stockholders.

• Davis, J. L. (1994). The Cross-Section of Realized Stock Returns: The Pre-Compustat Evidence. The Journal of Finance, 49, 1579–1593.

  Using a database that is free of survivorship bias, this article finds that book-to-market equity, earnings yield, and cash flow yield have significant explanatory power with respect to the cross-section of realized stock returns during the period from July 1940 through June 1963. There is a strong January seasonal in the explanatory power of these variables, even though small stocks are, by construction, excluded from the sample.

• Denis, D. J., & Kadlec, G. B. (1994). Corporate Events, Trading Activity, and the Estimation of Systematic Risk: Evidence From Equity Offerings and Share Repurchases. The Journal of Finance, 49, 1787–1811.

  The authors investigate the relation between trading activity, the measurement of security returns, and the evolution of security prices by examining estimates of systematic risk surrounding equity offerings and share repurchases. In contrast to prior studies, they find no evidence of changes in systematic risk following either equity offerings or share repurchases after correcting for biases caused by infrequent trading and price adjustment delays. Moreover, changes in ordinary least squares beta estimates are significantly related to contemporaneous changes in trading activity. The authors' results have implications for studies interested in the properties of security returns, particularly those examining periods in which trading activity changes.

• Eades, K. M., Hess, P. J., & Kim, E. H. (1994). Time-Series Variation in Dividend Pricing. The Journal of Finance, 49, 1617–1638.

  Ex-dividend day returns vary over time. The ex-day returns of high-yield stocks are persistently positive for some time periods and negative for others; in contrast, ex-day returns of low-yield stocks are always positive and less variable. The authors are unable to explain the variation with changes in the tax code but they do find a strong effect for the introduction of negotiated commissions. The authors find evidence that corporate dividend capturing is affecting ex-day returns and confirm the findings of R. H. Gordon and D. F. Bradford (1980) that the price of dividends is countercyclical.

• Hiemstra, C., & Jones, J. D. (1994). Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation. The Journal of Finance, 49, 1639–1664.

  Linear and nonlinear Granger causality tests are used to examine the dynamic relation between daily Dow Jones stock returns and percentage changes in New York Stock Exchange trading volume. The authors find evidence of significant bidirectional nonlinear causality between returns and volume. They also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by P. Clark's (1973) latent common-factor model. After controlling for volatility persistence in returns, the authors continue to find evidence of nonlinear causality from volume to returns.