The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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DISCUSSION
Published: 07/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb05007.x
HAIM MENDELSON
Trading Mechanisms and Stock Returns: An Empirical Investigation
Published: 07/01/1987 | DOI: 10.1111/j.1540-6261.1987.tb04567.x
YAKOV AMIHUD, HAIM MENDELSON
This paper examines the effects of the mechanism by which securities are traded on their price behavior. We compare the behavior of open‐to‐open and close‐to‐close returns on NYSE stocks, given the differences in execution methods applied in the opening and closing transactions. Opening returns are found to exhibit greater dispersion, greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns. We study the effects of the bid‐ask spread and the price‐adjustment process on the estimated return variances and covariances and discuss the associated biases. We conclude that the trading mechanism has a significant effect on stock price behavior.
Crossing Networks and Dealer Markets: Competition and Performance
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00281
Terrence Hendershott, Haim Mendelson
This paper studies the interaction between dealer markets and a relatively new form of exchange, passive crossing networks, where buyers and sellers trade directly with one another. We find that the crossing network is characterized by both positive (‘liquidity’) and negative (‘crowding’) externalities, and we analyze the effects of its introduction on the dealer market. Traders who use the dealer market as a ‘market of last resort’ can induce dealers to widen their spread and can lead to more efficient subsequent prices, but traders who only use the crossing network can provide a counterbalancing effect by reducing adverse selection and inventory holding costs.
Liquidity, Maturity, and the Yields on U.S. Treasury Securities
Published: 09/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb04623.x
YAKOV AMIHUD, HAIM MENDELSON
The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined for bonds (Treasury notes and bills with matched maturities of less than 6 months). The yield to maturity is higher on notes, which have lower liquidity. The yield differential between notes and bills is a decreasing and convex function of the time to maturity. The results provide a robust confirmation of the liquidity effect in asset pricing.
Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market
Published: 12/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb04643.x
YAKOV AMIHUD, HAIM MENDELSON
We study the joint effect of the trading mechanism and the time at which transactions take place on the behavior of stock returns using data from Japan. The Tokyo Stock Exchange employs a periodic clearing procedure twice a day, at the opening of both the morning and the afternoon sessions. This enables us to discern the effect of the clearing mechanism from the effect of the overnight trading halt. While the periodic clearing at the beginning of the trading day is noisy and inefficient, the midday clearing transaction appears to be no worse than the two closing transactions.
The Effects of Beta, Bid‐Ask Spread, Residual Risk, and Size on Stock Returns
Published: 06/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb05067.x
YAKOV AMIHUD, HAIM MENDELSON
Merton's [26] recent extension of the CAPM proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson's [2] proposition that asset returns increase with their illiquidity (measured by the bid‐ask spread), we jointly estimate the effects of these four factors on stock returns.
Number of Shareholders and Stock Prices: Evidence from Japan
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00141
Yakov Amihud, Haim Mendelson, Jun Uno
Merton (1987) proposes that an increase in a firm's investor base increases the firm's value. In Japan, companies can reduce their stock's minimum trading unit—the number of shares in a “round lot”—which facilitates trading in the stock by small investors. We find that a reduction in the minimum trading unit greatly increases a firm's base of individual investors and its stock liquidity, and is associated with a significant increase in the stock price. Further, the stock price appreciation is positively related to an increase in the number of shareholders.