Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation is shown to be stronger for firms that have greater investment discretion, i.e., firms with higher cash flows and lower debt...

This paper empirically contrasts the Jensen Measure, the Positive Period Weighting Measure, developed in Grinblatt and Titman (1989b), and a measure developed from the Treynor-Mazuy (1966) quadratic regression on a sample of 279 mutual funds and 109 passive portfolios, using a variety of...

The 1986 Tax Reform Act (TRA) replaced non-synchronous tax year-ends with a common October 31 year-end for all mutual funds. After the TRA, we find that funds systematically accelerated the sale of losers prior to October 31. A similar pattern is not present for funds before the TRA, of for...

This study examines whether stock returns provide forecasts of changes in interest rates and inflation. In contrast to earlier work that indicated that changes in expected inflation negatively affect stock returns, we find a statistically significant positive relation between stock returns and...

This paper demonstrates that the various market imperfections that have been suggested to explain observed portfolio choices and capital structures can be circumvented if securities (e.g., options) can be traded that simulate forward contracts on stock. It is shown that if the risk-adjusted...

When firms adjust their capital structures, they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt. In contrast to previous empirical work, out tests explicitly account for the fact that firms may face impediments...

This study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries. We find that a country’s legal and tax system, corruption, and the preferences of capital suppliers explain a significant portion of...