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

• Ahn, D.-H., Boudoukh, J., Richardson, M., & Whitelaw, R. F. (2002). Partial Adjustment or Stale Prices? Implications from Stock Index and Futures Return Autocorrelations. Review of Financial Studies, 15, 655–689.

  We investigate the relation between returns on stock indices and their corresponding futures contracts to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we generate empirical implications for both microstructure and partial adjustment models. The major findings are (i) return autocorrelations of indices are generally positive even though futures contracts have autocorrelations close to zero, and (ii) these autocorrelation differences are maintained under conditions favorable for spot-futures arbitrage and are most prevalent during low-volume periods. These results point toward microstructure-based explanations and away from explanations based on behavioral models. Copyright 2002, Oxford University Press.

• Ahn, D.-H., & Dittmar, R. F. (2002). Quadratic Term Structure Models: Theory and Evidence. Review of Financial Studies, 15, 243–288.

  This article theoretically explores the characteristics underpinning quadratic term structure models (QTSMs), which designate the yield on a bond as a quadratic function of underlying state variables. We develop a comprehensive QTSM, which is maximally flexible and thus encompasses the features of several diverse models including the double square-root model of Longstaff (1989), the univariate quadratic model of Beaglehole and Tenney (1992), and the squared-autoregressive-independent-variable nominal term structure (SAINTS) model of Constantinides (1992). We document a complete classification of admissibility and empirical identification for the QTSM, and demonstrate that the QTSM can overcome limitations inherent in affine term structure models (ATSMs). Using the efficient method of moments of Gallant and Tauchen (1996), we test the empirical performance of the model in determining bond prices and compare the performance to the ATSMs. The results of the goodness-of-fit tests suggest that the QTSMs outperform the ATSMs in explaining historical bond price behavior in the United States.

• Barber, B. M., & Odean, T. (2002). Online Investors: Do the Slow Die First? Review of Financial Studies, 15, 455–488.

  We analyze 1,607 investors who switched from phone-based to online trading during the 1990s. Those who switch to online trading perform well prior to going online, beating the market by more than 2% annually. After going online, they trade more actively, more speculatively, and less profitably than before–lagging the market by more than 3% annually. Reductions in market frictions (lower trading costs, improved execution speed, and greater ease of access) do not explain these findings. Overconfidence–augmented by self-attribution bias and the illusions of knowledge and control–can explain the increase in trading and reduction in performance of online investors. Copyright 2002, Oxford University Press.

• Battalio, R., Greene, J., & Hatch, B. (2002). Does the Limit Order Routing Decision Matter? Review of Financial Studies, 15, 159–194.

  We examine the impact deciding to route limit orders away from the New York Stock Exchange (NYSE) has on three dimensions of execution quality with methodologies controlling for market conditions and order submission strategies. Overall differences in limit order execution quality between regional stock exchanges and the NYSE are small, suggesting that the order routing decision may not affect retail limit order traders substantively. Conditioning on the distance between the limit order's price and prevailing quotes, however, reveals systematic differences in execution quality. This implies that brokers can strategically route limit orders to improve retail limit order execution quality. Copyright 2002, Oxford University Press.

• Brav, A., & Heaton, J. B. (2002). Competing Theories of Financial Anomalies. Review of Financial Studies, 15, 575–606.

  We compare two competing theories of financial anomalies: "behavioral" theories built on investor irrationality, and "rational structural uncertainty" theories built on incomplete information about the structure of the economic environment. We find that although the theories relax opposite assumptions of the rational expectations ideal, their mathematical and predictive similarities make them difficult to distinguish. Even if irrationality generates financial anomalies, their disappearance still may hinge on rational learning–that is, on the ability of rational arbitrageurs and their investors to reject competing rational explanations for observed price patterns. Copyright 2002, Oxford University Press.

• Cagetti, M., Hansen, L. P., Sargent, T., & Williams, N. (2002). Robustness and Pricing with Uncertain Growth. Review of Financial Studies, 15, 363–404.

  We study how decision-makers' concerns about robustness affect prices and quantities in a stochastic growth model. In the model economy, growth rates in technology are altered by infrequent large shocks and continuous small shocks. An investor observes movements in the technology level but cannot perfectly distinguish their sources. Instead the investor solves a signal extraction problem. We depart from most of the macroeconomics and finance literature by presuming that the investor treats the specification of technology evolution as an approximation. To promote a decision rule that is robust to model misspecification, an investor acts as if a malevolent player threatens to perturb the actual data-generating process relative to his approximating model. We study how a concern about robustness alters asset prices. We show that the dynamic evolution of the risk-return trade-off is dominated by movements in the growth-state probabilities and that the evolution of the dividend-price ratio is driven primarily by the capital-technology ratio. Copyright 2002, Oxford University Press.

• Cao, H. H., Coval, J. D., & Hirshleifer, D. (2002). Sidelined Investors, Trading-Generated News, and Security Returns. Review of Financial Studies, 15, 615–648.

  This article studies information blockages and the asymmetric release of information in a security market with fixed setup costs of trading. In this setting, "sidelined" investors may delay trading until price movements validate their private signals. Trading thereby internally generates the arrival of further news to the market. This leads to (1) negative skewness following price run-ups and positive skewness following price rundowns (even though the model is ex ante symmetric), (2) a lack of correspondence between large price changes and the arrival of external information, and (3) increases in volatility following large price changes. Copyright 2002, Oxford University Press.

• Chacko, G. (2002). Pricing Interest Rate Derivatives: A General Approach. Review of Financial Studies, 15, 195–241.

  The relationship between affine stochastic processes and bond pricing equations in exponential term structure models has been well established. We connect this result to the pricing of interest rate derivatives. If the term structure model is exponential affine, then there is a linkage between the bond pricing solution and the prices of many widely traded interest rate derivative securities. Our results apply to m-factor processes with n diffusions and l jump processes. The pricing solutions require at most a single numerical integral, making the model easy to implement. We discuss many options that yield solutions using the methods of the article. Copyright 2002, Oxford University Press.

• Chen, J., & Hong, H. (2002). Discussion of “Momentum and Autocorrelation in Stock Returns.” Review of Financial Studies, 15, 565–574.
• Daniel, K. (2002). Discussion of “Why Don’t Issuers Get Upset About Leaving Money on the Table in IPOs?” Review of Financial Studies, 15, 445–454.