Friction

Article Abstract:

This article examines trading friction, or the degree of difficulty involved in trading an asset. Seven empirical measures of trading friction are computed from stock transaction data and analyzed to provide insight into the complex relationship between market structure, asset pricing, and trading friction.

Legislative Bodies, Finance, Capital market, Capital markets, Capital assets

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The diversification discount: cash flow versus returns

Article Abstract:

The diversification discount, whereby the stock price of diversified conglomerates is less than that of comparable single-segment corporations, is linked to differences in future returns or future cash flow. Research results show that a little more than half the discount is linked to cash flow variations.

Stock-exchange, Securities industry, Cash flow

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Excessive extrapolation and the allocation of 401(k) accounts to company stock

Article Abstract:

Approximately one-third of 401(k) plan assets are invested in the stock of the employer giving lie to earlier research predicting people would want diversified portfolios. New research indicates that employees of companies with strongly performing stocks invest more of their assets in the employer's stock.

Investments, Salary reduction savings plans, 401K plans

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