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James Weston

Bio: James Weston is an academic researcher from Rice University. The author has contributed to research in topics: Market liquidity & Equity (finance). The author has an hindex of 30, co-authored 51 publications receiving 5870 citations. Previous affiliations of James Weston include University of Virginia & Saint Petersburg State University.


Papers
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Journal ArticleDOI
TL;DR: This paper examined the use of foreign currency derivatives by a sample of 720 large U.S. non-financial firms between 1990 and 1995 and its potential impact on firm value using Tobin's Q as an approximation of a firm's market valuation.
Abstract: This paper examines the use of foreign currency derivatives (FCDs) by a sample of 720 large U.S. nonfinancial firms between 1990 and 1995 and its potential impact on firm value. Using Tobin's Q as an approximation of a firm's market valuation, we find a positive relationship between firm value and the use of FCDs. The hedging premium is statistically and economically significant mostly after 1993 and is on average 5.7\% of firm value. This result is robust to a) controls for size, profitability, leverage, growth opportunities, ability to access financial markets, industrial and geographical diversification, credit quality, industry classification (4-digit SIC), year-dummies and firm fixed-effects; b) the use of a weight-adjusted industry Tobin's Q and other measures of value, such as the market to book and the market to sales ratios; and, c) alternative estimation techniques that handle the potential impact of outliers. Using the ratio of foreign currency derivatives to foreign sales as a proxy for the percentage of exposure that a firm hedges, we observe a significant dispersion in our measure of the hedge ratio. In univariate tests we find a nonlinear relationship between Q and our proxy. However, firm-specific factors explain this relationship in multivariate tests and it appears that firms are hedging optimally.

911 citations

Journal ArticleDOI
TL;DR: This paper examined the use of foreign currency derivatives (FCDs) in a sample of 720 large U.S. nonfinancial firms between 1990 and 1995 and its potential impact on firm value using Tobin's Q as a proxy for firm value.
Abstract: This article examines the use of foreign currency derivatives (FCDs) in a sample of 720 large U.S. nonfinancial firms between 1990and 1995 and its potential impact on firm value. Using Tobin’s Q as a proxy for firm value, we find a positive relation between firm value and the use of FCDs. The hedging premium is statistically and economically significant for firms with exposure to exchange rates and is on average 4.87% of firm value. We also find some evidence consistent with the hypothesis that hedging causes an increase in firm value.

770 citations

Journal ArticleDOI
TL;DR: In this article, the authors provide empirical evidence that a firm's overall visibility with investors, as measured by its product market advertising, has important consequences for the stock market and show that firms with greater advertising expenditures, ceteris paribus, have a larger number of both individual and institutional investors, and better liquidity of their common stock.
Abstract: We provide empirical evidence that a firm's overall visibility with investors, as measured by its product market advertising, has important consequences for the stock market. Specifically we show that firms with greater advertising expenditures, ceteris paribus, have a larger number of both individual and institutional investors, and better liquidity of their common stock. Our findings are robust to a variety of methodological approaches and to various measures of liquidity. These results sug

575 citations

Journal ArticleDOI
TL;DR: The authors found that the difference in the investment banking fee for firms in the most liquid vs. the least liquid quintile is about 101 basis points or 21% of the average investment banking fees in their sample.
Abstract: We show that stock market liquidity is an important determinant of the cost of raising external capital. Using a large sample of seasoned equity offerings, we find that, ceteris paribus, investment banks' fees are significantly lower for firms with more liquid stock. We estimate that the difference in the investment banking fee for firms in the most liquid vs. the least liquid quintile is about 101 basis points or 21% of the average investment banking fee in our sample. Our findings suggest that firms can reduce the cost of raising capital by improving the market liquidity of their stock.

372 citations

Journal ArticleDOI
TL;DR: In this paper, the authors investigated the relationship between bank lending to small businesses, banking company size and complexity, and bank consolidation and found that small business loans per dollar of asset rises, then falls, with bank company size, while the level of small business lending rises monotonically with size.
Abstract: This study investigates the relationship between bank lending to small businesses, banking company size and complexity, and bank consolidation. We consider two potential influences on small business lending associated with changes in the size distribution of the banking sector. On the one hand, organizational diseconomies may increase the costs of small business lending as the size and complexity of the banking company increases. On the other, size-related diversification may enhance lending to small businesses. We find first that small business loans per dollar of asset rises, then falls, with banking company size, while the level of small business lending rises monotonically with size. Second, consolidation among small banking companies serves to increase bank lending to small businesses, while other types of mergers or acquisitions have little effect. We interpret these findings as consistent with the diversification hypothesis.

358 citations


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Journal ArticleDOI
01 May 1981
TL;DR: This chapter discusses Detecting Influential Observations and Outliers, a method for assessing Collinearity, and its applications in medicine and science.
Abstract: 1. Introduction and Overview. 2. Detecting Influential Observations and Outliers. 3. Detecting and Assessing Collinearity. 4. Applications and Remedies. 5. Research Issues and Directions for Extensions. Bibliography. Author Index. Subject Index.

4,948 citations

Journal ArticleDOI
TL;DR: The authors comprehensively reexamine the performance of variables that have been suggested by the academic literature to be good predictors of the equity premium and find that by and large, these models have predicted poorly both in-sample and out-of-sample (OOS) for 30 years now.
Abstract: Our article comprehensively reexamines the performance of variables that have been suggested by the academic literature to be good predictors of the equity premium. We find that by and large, these models have predicted poorly both in-sample (IS) and out-of-sample (OOS) for 30 years now; these models seem unstable, as diagnosed by their out-of-sample predictions and other statistics; and these models would not have helped an investor with access only to available information to profitably time the market.

3,339 citations

Journal ArticleDOI
TL;DR: In this paper, the economics of small business finance in private equity and debt markets are examined. But the authors focus on the macroeconomic environment and do not consider the impact of the macro economic environment on small business.
Abstract: This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small business finance, and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of research and policy issues, review the literature, and suggest topics for future research.

2,778 citations

Journal ArticleDOI
TL;DR: In this paper, the authors test and confirm the hypothesis that individual investors are net buyers of attentiongrabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one-day returns.
Abstract: We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one-day returns. Attention-driven buying results from the difficulty that investors have searching the thousands of stocks they can potentially buy. Individual investors do not face the same search problem when selling because they tend to sell only stocks they already own. We hypothesize that many investors consider purchasing only stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set.

2,683 citations

Journal ArticleDOI
TL;DR: The authors proposed a variance estimator for the OLS estimator as well as for nonlinear estimators such as logit, probit, and GMM that enables cluster-robust inference when there is two-way or multiway clustering that is nonnested.
Abstract: In this article we propose a variance estimator for the OLS estimator as well as for nonlinear estimators such as logit, probit, and GMM. This variance estimator enables cluster-robust inference when there is two-way or multiway clustering that is nonnested. The variance estimator extends the standard cluster-robust variance estimator or sandwich estimator for one-way clustering (e.g., Liang and Zeger 1986; Arellano 1987) and relies on similar relatively weak distributional assumptions. Our method is easily implemented in statistical packages, such as Stata and SAS, that already offer cluster-robust standard errors when there is one-way clustering. The method is demonstrated by a Monte Carlo analysis for a two-way random effects model; a Monte Carlo analysis of a placebo law that extends the state–year effects example of Bertrand, Duflo, and Mullainathan (2004) to two dimensions; and by application to studies in the empirical literature where two-way clustering is present.

2,542 citations