Portfolio Selection and the CAPM

 

  1. Markowitz, H., 1952, “Portfolio Selection,” Journal of Finance, 7, 77-91.

 

  1. Sharpe, W., 1964, “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk,” Journal of Finance, Vol. 19, 425-442.

 

  1. Campbell, JY, 1996, “Understanding Risk and Return,” Journal of Political Economy 104, 298-345.

 

  1. Lettau and Ludvigson, 2001, “Resurrecting the (C)CAPM: A Cross-Sectional Test When Risk Premia are Time-Varying,” Journal of Political Economy, 6, 1238-1287.

 

  1. Craig MacKinlay and Lubos Pastor, 2000, “Asset Pricing Models: Implications for Expected Returns and Portfolio Selection”, Review of Financial Studies 13:4, 883-916.

 

  1. Friend, Irwin, and Marshall Blume, 1975, “The Demand for Risky Assets,” American Economic Review 65, 900-922.

 

  1. Heaton, John and Deborah Lucas, 2000, “Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk,” Journal of Finance, 55, 1163-1198.

 

  1. Poterba, JM and Samwick, 1995, “Stock Ownership Patterns, Stock Market Fluctuations, and Consumption,” Brookings Papers on Economic Activity 0(2), 295-357.

 

  1. Poterba, JM, 2001, “Demographic Structure and Asset Returns’, Review of Economics and Statistics,” 83:4, 565–584.

 

 

Multifactor Models

 

  1. A. Craig MacKinlay, 1995, “Multifactor models do not explain deviations from the CAPM,” Journal of Financial Economics, 38:1, 3-28
  2. Fama, E., and K. French, 1995, “Size and Book-to-Market Factors in Earnings and Returns,” Journal of Finance 50:1, 131-155.

 

  1. Eugene F. Fama, Kenneth R. French, 1996, “Multifactor Explanations of Asset Pricing Anomalies” Journal of Finance 51:1, 55 – 84.

 

  1. Daniel, K., and S. Titman, 1997, “Evidence on the Characteristics of Cross Sectional Variation in Stock Returns,” Journal of Finance, 52:1, 1-33.

 

  1. Mark J. Flannery and Aris A. Protopapadakis, 2002, “Macroeconomic Factors Do Influence Aggregate Stock Returns,” Review Financial Studies 15:2, 751 - 782.

 

  1. John M. Griffin , Michael L. Lemmon, 2002, “Book–to–Market Equity, Distress Risk, and Stock Returns” Journal of Finance 57:5, 2317 – 2336.

 

  1. Ashiq Ali, Lee-Seok Hwang and Mark A. Trombley, 2003, “Arbitrage risk and the book-to-market anomaly,” Journal of Financial Economics, 69: 2, 355-373

 

  1. Fama, E., and K. French, 2002, “The Equity Premium,” Journal of Finance, 57:2, 637- 659.

 

  1. Amit Goyal and Pedro Santa-Clara “Idiosyncratic Risk Matters!”, The Journal of Finance, Vol. 58, No. 3, June 2003.

 

 

Market Efficiency

 

1.  E. Fama, 1970, “Efficient Capital Markets:  A Review of Theory and Empirical Work,” Journal of Finance (May 1970)

 

2.  E. F. Fama, 1965 “The Behavior of Stock Market Prices,” Journal of Business (January 1965).

 

3.  Benoit Mandelbrot, Forecasts of Future Prices, Unbiased Markets, and Martingale Models, Journal of Business (Special Supplement, January 1966), 242-255.

 

4.  LeRoy, S., 1989 “Efficient Capital Markets and Martingales,” Journal of Economic Literature, 1583 – 1621.

 

5.  Grossman, S., 1975, “On the Efficiency of Competitive Stock Markets Where Trades Have Diverse Information,” Journal of Finance, 31:2, 573 – 585.

 

6.  Grossman, S., and J. Stiglitz, 1980, “On The Impossibility of Informationally Efficient Markets,” American Economic Review, 70:3, 393 – 408.

 

  1. Veronesi, P. 1999, “Stock Market Overreaction to Bad News in Good Times: A Rational Expectations Equilibrium Model,” Review of Financial Studies, 12, 5,

 

  1. Steve Hogan, Robert Jarrow, Melvyn Teo and Mitch Warachka, 2004, “Testing market efficiency using statistical arbitrage with applications to momentum and value strategies,” Journal of Financial Economics 73: 3, 525-565.

 

  1. Pastor L., and P. Veronesi, 2003, “Stock Valuation and Learning about Profitability,” with, Journal of Finance, 58:5, October 2003. (Lead Article.) Winner of 2003 Smith Breeden First Prize.

 

 

Momentum and Reversals

 

  1. Lakonishok, J., L.K.C. Chan, N. Jegadeesh, 1996, “Momentum Strategies,” Journal of Finance, 51:5, 1681 – 1713.

 

  1. Jegadeesh, N, and S. Titman, 1993, “Returns to Buying winners and Selling Losers: Implications for Stock Market Efficiency,” Journal of Finance, 48, 65-91.

 

  1. Moskowitz , T. J., M. Grinblatt, 1999, “Do Industries Explain Momentum?” Journal of Finance, 54:4,

 

  1. Hong, H., and J.C. Stein, 1999, “A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets,” Journal of Finance, 54:6, 2143 – 2184.

 

  1. Jegadeesh, N, and S. Titman, 2001, “Profitability of Momentum Strategies: An Evaluation of Alternative Explanations,” Journal of Finance, 56:2, 699 – 720.

 

  1. Narasimhan Jegadeesh and Sheridan Titman 2002, “Cross-Sectional and Time-Series Determinants of Momentum Returns,” Rev. Financ. Stud., 15:1, 143 - 157.

 

  1. David A. Lesmond, Michael J. Schill and Chunsheng Zhou, 2004, “The illusory nature of momentum profits,” Journal of Financial Economics 71:2, 349 – 380.

 

  1. Connolly, R., and C. Stivers, 2003, “Momentum and Reversals in Equity-Index Returns During Periods of Abnormal Turnover and Return Dispersion,” Journal of Finance, 58:4, 1521-55.

 

  1. Tarun Chordia and Lakshmanan Shivakumar, 2006, “Earnings and price momentum,” Journal of Financial Economics 80: 3, 627-656.

 

 

Liquidity and Price

 

  1. O'Hara, M., 2003, “Liquidity and Price Discovery,” Journal of Finance 58:4, 1335 – 1354.

 

  1. Huang, R., June 2002, “The Quality of ECN and Nasdaq Market Maker Quotes,” Journal of Finance.

 

  1. Elliott, William B. and Richard S. Warr, Autumn 2003, “Price Pressure on the NYSE and Nasdaq: Evidence from S&P 500 Index Changes,” Financial Management, pp. 85-99.

 

  1. Amihud, Y., 2002, “Illiquidity and stock returns: Cross-Section and Time-Series Effects,” Journal of Financial Markets 5, 31-56.

 

  1. Pastor, L., and R. F. Stambaugh, 2003, “Liquidity Risk and Expected Stock Returns,” Journal of Political Economy, 111, 642-685.

 

  1. JL Koski and R Michaely, 2000, “Prices, liquidity, and the information content of trades,” Review Financial Studies 13:4 659 - 696.

 

  1. Jay F. Coughenour and Mohsen M. Saad, 2004, “Common market makers and commonality in liquidity,” Journal of Financial Economics 73:1, 37-69.

 

  1. Viral V. Acharya and Lasse Heje Pedersen , 2005, “Asset pricing with liquidity risk,” Journal of Financial Economics  77: 2, 375-410 .

 

  1. Weimin Liu, 2006, “A liquidity-augmented capital asset pricing model,” Journal of Financial Economics 82:3, 631-671

 

 

Volume and Price

 

  1. Jonathan M. Karpoff , 1986, “A Theory of Trading Volume,” Journal of Finance 41:5, 1069 – 1087.

 

  1. Admati and Pfleiderer, “A Theory of Intraday Patterns: Volume and Price Volatility,” Review of Financial Studies, 1, 1988, pp. 3-40.

 

  1. Lamoureux, C. G., and W. D. Lastrapes, 1990, “Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects,” Journal of Finance 45:1, 221 – 229.

 

  1. AR Gallant, PE Rossi, and G Tauchen, 1992, “Stock prices and volume,” Review Financial Studies 5:2, 199 - 242.

 

  1. Easley, D., L. Blume, and M. O’Hara, 1994, “Market Statistics and Technical Analysis: The Role of Volume,” 49:1, 153 – 181.

 

  1. Chordia, T., and B. Swaminathan, 2000, “Trading Volume and Cross-Autocorrelations in Stock Returns,” Journal of Finance 55:2, 913 – 935.

 

  1. Lee, C.M.C., and B. Swaminathan, 2000, “Price Momentum and Trading Volume,” Journal of Finance 55:5, 2017 – 2069.

 

  1. Joseph Chen, Harrison Hong and Jeremy C. Stein, 2001, “Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices,” Journal of Financial Economics 61:3, 345-381 .

 

  1. Chae, J., 2005, “Trading Volume, Information Asymmetry, and Timing Information,” Journal of Finance 60:1, 413 – 442.

 

 

Volatility

 

  1. Stoll, Hans R. and Robert E. Whaley, 1990, “Stock Market Structure and Volatility,” Review of Financial Studies, 3:1, pp. 37-71.

 

  1. Jones, CM, G Kaul, and ML Lipson 1994, “Transactions, Volume, and Volatility,” Review of Financial Studies, 7: 4, 631 - 651.

 

  1. Lamoureux, CG, and WD Lastrapes, 1993, “Forecasting stock-return variance: toward an understanding of stochastic implied volatilities,” Review of Financial Studies, 6:2, 293 - 326.

 

  1. Shalen CT, 1993, “Volume, volatility, and the dispersion of beliefs” Review of Financial Studies, 6:2 405 - 434.

 

  1. Wu G., 2001, “The Determinants of Asymmetric Volatility” Review of Financial Studies, 14:3 837 - 859.

 

  1. Alizadeh, S., M.W. Brandt , F.X. Diebold, “Range-Based Estimation of Stochastic Volatility Models,” Journal of Finance, 57:3, 1047 – 1091.

 

  1. Maheu J.M. and T.H. McCurdy, 2004 “News Arrival, Jump Dynamics, and Volatility Components for Individual Stock Returns,” 59: 2, 755 – 793.

 

  1. Grant McQueen and Keith Vorkink, 2004, “Whence GARCH? A Preference-Based Explanation for Conditional Volatility,” Review Financial Studies, 17:4, 915 - 949.

 

  1. Fleming, J., C. Kirby, and B. Ostdiek, 2006 “Stochastic Volatility, Trading Volume, and the Daily Flow of Information,” Journal of Business 79: 1551 -1590

 

 

Price Discovery and Information Flow

 

  1. Merton, R., 1986, “A Simple Model of Capital Market Equilibrium with Incomplete Information,” Journal of Finance, 42:3, 483-510.

 

  1. Hasbrouck, J., 1995, “One Security, Many Markets: Determining the Contributions to Price Discovery,” Journal of Finance.

 

  1. Veronesi, P., 2000, “How does Information Quality Affect Stock Returns?” Journal of Finance, 55:2,

 

  1. Easley, D., S. Hvidkjaer , M. O’Hara, 2002, “Is Information Risk a Determinant of Asset Returns?”, Journal of Finance 57:5, 2185 – 2221.

 

  1. Chen, H., G. Noronha, and V. Singal, 2003, “The Asymmetric Price Response to S&P 500 Index Additions and Deletions: Evidence and Explanation,” Journal of Finance 59, 1901-1940.

 

  1. Chakravarty, S., H. Gulen, and S. Mayhew, 2004, “Informed Trading in Stock and Options Markets,” Journal of Finance, 59:3, 1235 - 1258.

 

  1. Knill, A., K. Minnick, and A. Nejadmalayeri, 2006, “Selective Hedging, Information Asymmetry, and Futures Prices,” Journal of Business, 79:3, 1475-1502

 

  1. Thomas J. George and Chuan-Yang Hwang, 2001, “Information Flow and Pricing Errors: A Unified Approach to Estimation and Testing,” Review Financial Studies 14:4, 979 - 1020.

 

 

Event Studies and Market Effects

 

  1. David Hirshleifer and Tyler Shumway “Good Day Sunshine: Stock Returns and the Weather”, Journal of Finance, Vol. 58, No. 3, June 2003.

 

  1. Patrick J. Dennis and Deon Strickland “Who Blinks in Volatile Markets, Individuals or Institutions?”, The Journal of Finance, Vol. 57, No. 5, October 2002.

 

  1. Michael J. Cooper, John J. McConnell and Alexei V. Ovtchinnikov, 2006, “The other January effect,” Journal of Financial Economics 82: 2, 315-341.

 

  1. Nicholas Barberis and Andrei Shleifer “Style Investing”, The Journal of Financial Economics, Vol. 68, No. 2, May 2003.

 

  1. Wayne E. Ferson, Sergei Sarkissian and Timothy T. Simin “Spurious Regressions in Financial Economics?”, The Journal of Finance, Vol. 58, No. 4, August 2003.

 

  1. BE Eckbo, V Maksimovic, and J Williams “Consistent estimation of cross-sectional models in event studies” Rev. Financ. Stud., Fall 1990; 3: 343 - 365.

 

  1. Subhankar Nayak and Nagpurnanand R. Prabhala “Disentangling the Dividend Information in Splits: A Decomposition Using Conditional Event-Study Methods,” Rev. Financ. Stud., Winter 2001; 14: 1083 - 1116.

 

Analysts and Earnings

 

  1. Terence Lim, 2001, “Rationality and Analysts’ Forecast Bias” 56:1,

 

  1. Harrison Hong and Jeffrey D. Kubik “Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts”, Journal of Finance, Vol. 58, No. 1, February 2003.

 

  1. Narasimhan Jegadeesh , Joonghyuk Kim , Susan D. Krische , Charles M. C. Lee, 2004 “Analyzing the Analysts: When Do Recommendations Add Value?” 59:3,

 

  1. Dan Bernhardt, Murillo Campello and Edward Kutsoati, 2006, “Who herds?,” Journal of Financial Economics, 80:3, 657-675.

 

  1. Chen, Q., and W. Jiang, 2003, “Analysts’ Weighting of Private and Public Information,” Rev. Financ. Stud., 19:1 319 - 355.

 

  1. Easterwood, JC, and S.R. Nutt “Inefficiency in Analysts’ Earnings Forecasts: Systematic Misreaction or Systematic Optimism?” Journal of Finance, 54:5,

 

  1. Agrawal et al. 2006. Sell-Side Analysts and Fair Disclosure. Journal of Business 79: 2811-2834

 

  1. Siew Hong Teoh and T. J. Wong, “Why New Issues and High-Accrual Firms Underperform: The Role of Analysts' Credulity,” Rev. Financ. Stud., Summer 2002; 15: 869 - 900.

 

 

IPOs and SEOs

 

  1. Smith, C., 1986, “Investment Banking and the Capital Acquisition Process,” Journal of Financial Economics, 15, 3.-29.

 

  1. Beatty, Randolph P. and Jay R. Ritter, 1986, “Investment Banking, Reputation, and the Underpricing of Initial Public Offerings,” Journal of Financial Economics, 15, 213-232.

 

  1. Ritter, J., “The long-run performance of Initial Public Offerings,” Journal of Finance, 46, 3-27.

 

  1. Loughran, T, and J. Ritter, 1995, “The New Issues Puzzle,” Journal of Finance, 50, 23-51.

 

  1. Bayless, M., and S. Chaplinsky, 1996, “Is There a Window of Opportunity for Seasoned Equity Issuance?,” Journal of Finance, 51, 253-278.

 

  1. Barber, Brad M., and John Lyon, 1997, “Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics,” Journal of Financial Economics, 43, 341-374.

 

  1. Carter, Richard B., Frederick H. Dark, and Ajai K. Singh, 1997, “Underwriter Reputation, Initial Returns, and the Long-Run Performance of IPO Stocks,” Journal of Finance, 53, 285-312.

 

  1. Lyon, John, Brad M. Barber, and Chih-Ling Tsai,1999, “Improved Methods for Tests of Long-Run Abnormal Stock Returns,” Journal of Finance, 54, 165-201.

 

  1. Pastor, L., and P. Veronesi, 2005, “Rational IPO Waves,” Journal of Finance, 60:4, 1713 – 1757.

 

 

Mutual Fund

 

  1. Jensen, M., 1969, “Risk, The Pricing of Capital Assets and the Evaluation of Investment Portfolios,” Journal of Business, Vol. 42, 167-247.

 

  1. Edwin Elton, Martin Gruber, George Commor, and Kai Li “Spiders: Where are the Bugs?”, Journal of Business, Vol. 75, No. 3, July 2002.

 

  1. Diane Del Cuercio and Paula A. Tkac “The Determinants of the Flow of Funds of Managed Portfolios: Mutual Funds vs. Pension Funds”, Journal of Financial and Quantitative Analysis, Vol. 37, No. 4, December 2002.

 

  1. S.P. Kothari , Jerold B. Warner, 2001, “Evaluating Mutual Fund Performance” Journal of Finance, 56:5, October 2001

 

  1. Nicolas P., B. Bollen, Jeffrey A. Busse , 2001, “On the Timing Ability of Mutual Fund Managers,” Journal of Finance, 56:3, June 2001

 

  1. Louis K. C. Chan, Hsiu-Lang Chen, and Josef Lakonishok, 2002, “On Mutual Fund Investment Styles,” Rev. Financ. Stud., 15:4, 1407 - 1437.

 

  1. Kent Daniel, Mark Grinblatt, Russ Wermers, Sheridan Titman, 1997, “Measuring Mutual Fund Performance with Characteristic-Based Benchmarks,” Journal of Finance, 52:3, July 1997

 

  1. Lu Zheng, 1999, “Is Money Smart? A Study of Mutual Fund Investors’ Fund Selection Ability” Journal of Finance, 54:3,  June 1999

 

  1. Russ Wermers, 2000, “Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses,” Journal of Finance 55:4, 1655-1703.

 

 

Market Micro-structure; Bid-Ask Spread

 

  1. Paul R. Milgrom, 1981, “Rational Expectations, Information Acquisition, and Competitive Bidding,” Econometrica 49:4, 921 – 943.

 

  1. Amihud and Mendelson, Dec 1986, “Asset Pricing and the Bid-Ask Spread,” Journal of Financial Economics, pp. 223-246.

 

  1. Glosten, Lawrence and Lawrence Harris, 1988, “Estimating the Components of the Bid-Ask Spread,” Journal of Financial Economics, 21, pp. 115-134.

 

  1. Huang, R. and H. Stoll, 1997, “The Components of the Bid-Ask Spread: A General Approach,” Review of Financial Studies, 4, 995-1034.

 

  1. William G. Christie; Paul H. Schultz, 1994, “Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?” Journal of Finance 49:5, 1813 – 1840.

 

  1. William G. Christie; Jeffrey H. Harris; Paul H. Schultz, 1994, “Why did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?” Journal of Finance 49:5, 1841 – 1860.

 

  1. Chung, Kee H., Bonnie F. Van Ness, and Robert A. Van Ness, August 1999, “Limit Orders and the Bid-Ask Spread,” Journal of Financial Economics, pp. 255-287.

 

  1. Roger D. Huang; Hans R. Stoll, 2001, “Tick Size, Bid-Ask Spreads, and Market Structure,” Journal of Financial and Quantitative Analysis 36:4, 503 – 522.

 

  1. Nicolas P. B. Bollen , Tom Smith and Robert E. Whaley, 2004, “Modeling the bid/ask spread: measuring the inventory-holding premium,” Journal of Financial Economics  72: 1, 97-141.

 

  1. Stewart Mayhew, 2002, “Competition, Market Structure, and Bid-Ask Spreads in Stock Option Markets,” 57:2, 931 – 958.

 

  1. Patrick de Fontnouvelle; Raymond P. H. Fishe; Jeffrey H. Harris, 2003, “The Behavior of Bid-Ask Spreads and Volume in Options Markets during the Competition for Listings in 1999,” Journal of Finance 58:6, 2437-2463.

 

Behavioral Finance

 

  1. Kahneman, D., and A. Tversky, 1979, “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica, 47, 263-291.

 

  1. Fama, E., 1998, "Market Efficiency, Long-term Returns, and Behavioral Finance," Journal of Financial Economics, 49, 283-306.

 

  1. Odean, T., 1998, "Are Investors Reluctant to Realize Their Losses," Journal of Finance, 53, 1775-1798.

 

  1. Kent Daniel; David Hirshleifer; Avanidhar Subrahmanyam, 1998, “Investor Psychology and Security Market under- and Overreactions,” Journal of Finance 53:6, 1839 – 1885.

 

  1. Kent D. Daniel; David Hirshleifer; Avanidhar Subrahmanyam, 2001, “Overconfidence, Arbitrage, and Equilibrium Asset Pricing,” Journal of Finance 56:3, 921 – 965.

 

  1. Hirshleifer, D, 2001, "Investor Psychology and Asset Pricing," Journal of Finance, 56:4, 1533-1597.

 

  1. Barberis, N., and R. Thaler, 2002, "A Survey of Behavioral Finance," working paper on SSRN.

 

  1. Chan, W., Kothari, S., Frankel, R., 2004, “Testing Behavioral Finance Theories Using Trends and Consistency in Financial Performance,” Journal of Accounting & Economics 38, 3-50.

 

  1. Kothari, S., Lewellen, J., Warner, J., 2006, “Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance,” Journal of Financial Economics 79, 537-568.

 

  1. Coval, J., and T. Shumway, 2005, "Do Behavioral Biases Affect Prices?," Journal of Finance, 60:1, 1-34.

 

  1. Nicholas Barberis; Ming Huang, 2001, “Mental Accounting, Loss Aversion, and Individual Stock Returns” Journal of Finance 56:4, 1247 – 1292.