February's Journal of Finance

As readers of these pages are aware, if you really want to know what's new in finance, forget The Wall Street Journal, Wall Street Week, and Forbes. You've no choice but to consult the primary finance literature, particularly the JoF. The only problem here is that most of its pages serve up a choking bolus of jargon and stochastic formulae, incomprehensible to most nonacademics.

The February issue is a remarkable departure from this grim tradition, with several important and nearly entertaining pieces which speak to all investors. It's online and free to all. All of the articles are published in pdf format, which requires the Acrobat reader, available for free here.

Agency Problems and Dividend Policies Around the World, Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny. Why do corporations distribute dividends? Basically, because their shareholders don't trust them. And with good reason, as demonstrated by the next two articles:

The Cost of Diversity: The Diversication Discount and Inefficient Investment, Raghuram Rajan, Henri Servaes, and Luigi Zingales. The authors show that large, multiindustry conglomerates are not likely to make efficient use of your capital.

Agency Costs and Ownership Structure, James S. Ang, Rebel A. Cole, and James Wuh Lin. So you think that the interests of the managers and shareholders of companies are well-aligned? Guess again.

Characteristics, Covariances, and Average Returns: 1929 to 1997, James L. Davis, Eugene F. Fama, and Kenneth R. French. The world's foremost financial economists confirm the existence of premia for both small and value stocks, and make a powerful argument that the excess returns from these factors are due to risk, and not mispricing.

Copyright © 2000, William J. Bernstein. All rights reserved.