Journal•ISSN: 0021-9398
The Journal of Business
University of Chicago Press
About: The Journal of Business is an academic journal. The journal publishes majorly in the area(s): Investment (macroeconomics) & Portfolio. It has an ISSN identifier of 0021-9398. Over the lifetime, 1869 publications have been published receiving 211939 citations. The journal is also known as: Journal of Business.
Papers published on a yearly basis
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TL;DR: In this paper, the effect of differences in dividend policy on the current price of shares in an ideal economy characterized by perfect capital markets, rational behavior, and perfect certainty is examined.
Abstract: In the hope that it may help to overcome these obstacles to effective empirical testing, this paper will attempt to fill the existing gap in the theoretical literature on valuation. We shall begin, in Section I , by examining the effects the effects of differences in dividend policy on the current price of shares in an ideal economy characterized by perfect capital markets, rational behavior, and perfect certainty. Still within this convenient analytical framework we shall go on in Section II and III to consider certain closely related issues that appear to have been responsible for considerable misunderstanding of the role of dividend policy. In particular, Section II will focus on the longstanding debate about what investors "really" capitalize when they buy shares; and Section III on the much mooted relations between price, the rate of growth of profits, and the rate of dividends per share. Once these fundamentals have been established, we shall proceed in Section IV to drop the assumption of certainty and to see the extent to which the earlier conclusions about dividend policy must be modified. Finally, in Section V , we shall briefly examine the implications for the dividend policy problem of certain kinds of market imperfections.
6,265 citations
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TL;DR: In this paper, the authors test whether innovations in macroeconomic variables are risks that are rewarded in the stock market, and they find that these sources of risk are significantly priced and neither the market portfolio nor aggregate consumption are priced separately.
Abstract: This paper tests whether innovations in macroeconomic variables are risks that are rewarded in the stock market. Financial theory suggests that the following macroeconomic variables should systematically affect stock market returns: the spread between long and short interest rates, expected and unexpected inflation, industrial production, and the spread between high- and low-grade bonds. We find that these sources of risk are significantly priced. Furthermore, neither the market portfolio nor aggregate consumption are priced separately. We also find that oil price risk is not separately rewarded in the stock market.
5,266 citations
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TL;DR: The classic model of the temporal variation of speculative prices (Bachelier 1900) assumes that successive changes of a price Z(t) are independent Gaussian random variables as discussed by the authors.
Abstract: The classic model of the temporal variation of speculative prices (Bachelier 1900) assumes that successive changes of a price Z(t) are independent Gaussian random variables. But, even if Z(t) is replaced by log Z(t),this model is contradicted by facts in four ways, at least:
(1)
Large price changes are much more frequent than predicted by the Gaussian; this reflects the “excessively peaked” (“leptokurtic”) character of price relatives, which has been well-established since at least 1915.
(2)
Large practically instantaneous price changes occur often, contrary to prediction, and it seems that they must be explained by causal rather than stochastic models.
(3)
Successive price changes do not “look” independent, but rather exhibit a large number of recognizable patterns, which are, of course, the basis of the technical analysis of stocks.
(4)
Price records do not look stationary, and statistical expressions such as the sample variance take very different values at different times; this nonstationarity seems to put a precise statistical model of price change out of the question.
4,973 citations
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TL;DR: In this article, the authors trace the violations of the rational theory of choice to the rules that govern the framing of decision and to the psychological principles of evaluation embodied in prospect theory, and argue that these rules are normatively essential but descriptively invalid.
Abstract: Alternative descriptions of a decision problem often give rise to different preferences, contrary to the principle of invariance that underlines the rational theory of choice. Violations of this theory are traced to the rules that govern the framing of decision and to the psychological principles of evaluation embodied in prospect theory. Invariance and dominance are obeyed when their application is transparent and often violated in other situations. Because these rules are normatively essential but descriptively invalid, no theory of choice can be both normatively adequate and descriptively accurate.
4,243 citations