A Catering Theory of Dividends

We develop a theory in which the decision to pay dividends is driven by investor demand. Managers cater to investors by paying dividends when investors put a stock price premium on payers and not paying when investors prefer nonpayers. To test this prediction, we construct four time series measures of the investor demand for dividend payers. By each measure, nonpayers initiate dividends when demand for payers is high. By some measures, payers omit dividends when demand is low. Further analysis confirms that the results are better explained by the catering theory than other theories of dividends.

Investor Sentiment in the Stock Market

Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The "top down" approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the two broader and more irrefutable assumptions of behavioral finance -- sentiment and the limits to arbitrage -- to explain which stocks are likely to be most affected by sentiment. In particular, stocks of low capitalization, younger, unprofitable, high volatility, non-dividend paying, growth companies, or stocks of firms in financial distress, are likely to be disproportionately sensitive to broad waves of investor sentiment. We review the theoretical and empirical evidence for these predictions.

Market Liquidity as a Sentiment Indicator

We build a model that helps explain why increases in liquidity - such as lower bid-ask spreads, a lower price impact of trade, or higher share turnover - predict lower subsequent returns in both firm-level and aggregate data. The model features a class of irrational investors, who underreact to the information contained in order flow, thereby boosting liquidity. In the presence of short-sales constraints, unusually high liquidity is a symptom of the fact that the market is currently dominated by these irrational investors, and hence is overvalued. This theory can also explain how managers might successfully time the market for seasoned equity offerings (SEOs), by simply following a rule of thumb that involves issuing when the SEO market is particularly liquid. Empirically, we find that: i) aggregate measures of equity issuance and share turnover are highly correlated; yet ii) in a multiple regression, both have incremental predictive power for future equal-weighted market returns.

Global, local, and contagious investor sentiment

We construct indexes of investor sentiment for six major stock markets and decompose them into one global and six local indexes. Relative market sentiment is correlated with the relative prices of dual-listed companies, validating the indexes. Both global and local sentiment are contrarian predictors of the time series of major markets' returns. They are also contrarian predictors of the time series of cross-sectional returns within major markets: When sentiment from either global or local sources is high, future returns are low on various categories of difficult to arbitrage and difficult to value stocks. Sentiment appears to be contagious across markets based on tests involving capital flows, and this presumably contributes to the global component of sentiment.International finance ; Financial markets ; Stock market

Eighteenth-century sculpture and its interpretation

The publications submitted here comprise Figured in Marble. The Making and Viewing ofEigheenth-century Sculpture and my contribution to the main text of Roubiliac and the Eighteenth-century Monument. Sculpture as Theatre (pp. 207-273; 382-387). Appendix I consists ofthe Catalogue ofRoubiliac's Funerary Monuments from the latter study, which is almost entirely my own work but incorporates some material provided by David Bindman and Tessa Murdoch) and Appendix II lists ten articles that supplement the material presented in the two books. Together Roubiliac and the Eighteenth-century Monument and Figured in Marble, along with the related articles, draw on and to some degree re-work various genres of writing employed in studies of the history of sculpture. At the same time they also take account of the large literature about British art and, more particularly, the changing approaches apparent in studies of the past twenty years.My contribution to Roubiliac and the Eighteenth-century Monument (forming Part Part II, 'Making the Monuments') is concerned with the processes of designing and making the monuments that are discussed by David Bindman in Part I of the volume in terms of their typology and social and religious functions. The various types of evidence available for the procedures of commissioning, design and making followed by this one sculptor, Roubiliac, are considered here in relation to the practices adopted by other sculptors in England and abroad. But as well as situating Roubiliac's practice 1 in a wider context of sculptural activity, this text also very consciously departs from a simple descriptive account and throughout attempts to address the problem of how such workshop practices might be understood in terms oftransactions between patron, sculptor and viewer as well as a register ofthe sculptor's own self-presentation. This discussion, like David Bindman's Part I, constantly draws on the detailed evidence assembled in the Catalogue which forms Part III and is here submitted as Appendix III.. These extensive entries provide very full accounts of individual monuments, in which both details -textual as well as material -about every surviving or documented model or drawing, and the descriptions of completed monuments and their construction, are prefaced with a lengthy narrative account of each commission, from its inception to its later afterlife. Far from being summaries of what may be found elsewhere in the text, these catalogue entries constitute an independent but complementary text.Whereas Roubiliac and the Eighteenth-century Monument is a monograph (albeit of an ambitious kind) about a single artist, Figured in Marble has a more discursive form and attempts to suggest various ways of approaching eighteenth-century sculpture. After an initial introduction that argues for the centrality of sculpture in eighteenthcentury British visual culture, the text is arranged in four sections in each ofwhich a short methodological preamble is followed by three cases studies. The first section is concerned with the historiography ofBritish sculpture and the ways in which both arthistorical literature and museum displays have conditioned our viewing of it. The second section examines questions of design, making and materials while the third looks at categories and genres. The final section deals with collecting, displaying and viewing. As well as attempting to prompt historians ofBritish art into according sculpture the degree of attention commensurate with that given to it by contemporaries, Figured in Marble also argues for a closer linkage between making and viewing, so making explicit an approach put into practice in Roubiliac and the Eighteenth-century Monument.The critical review ofthese publications outlines the framework of debate about sculpture in Britain to which these writings both respond and contribute and situates them within an historiographical context. I look first at the literature on sculpture as a distinct category of art historical writing, considering the dominant issues and methodologies, the genres oftext in which these are addressed and then the place that writing about British sculpture have in this tradition. Having placed my own publications in relationship to this literature, I then go on to outline in the second section what I see as the new approaches to the history of sculpture that I have tried to develop in my work. The first two parts ofthis section look at sculpture as an aspect ofBritish art and British sculpture as an aspect ofEuropean sculpture. The third and fourth parts are concerned with two central issues - firstly, the question and reception and viewing and, secondly, that of production and consumption - and consider how they might addressed by those working on sculpture. A brief final coda attempts to draw these various strands together and to summarise how the publications submitted here represent an attempt at approaching eighteenth-century sculpture in these ways.1. Figured in Marble. The Making and Viewing of Eighteenth-century Sculpture, London and Los Angeles, 2000.  • 2. Roubiliac and The Eighteenth-century Monument. Sculpture as Theatre, New Haven and London, 1995, 207-273, 382-387  • 3. Critical Review  • Appendix I: Catalogue of Roubiliac's Funerary Monuments, forming Part III of Roubiliac and the Eighteenth-century Monument, 275-359   • Appendix II: A list of related articles: 1. 'Multiple heads: Pope, the portrait bust and patterns of repetition', essay in Ritual, Routine, and Regime. Institution of Repetition in Euro-American Cultures, 1650-1832, ed. Lorna Clymer, University of Toronto Press, 2003 (forthcoming)  • 2. 'Representing invention, viewing models', Displaying the Third Dimension. Models in the Sciences, Technology and Medicine, ed. Nick Hopwood and Soraya de Chadavarian, Stanford University Press, 2002 (forthcoming)  • 3. 'Some eighteenth-century frameworks for the Renaissance bronze: historiography, authorship and production',in The Small Bronze in the Renaissance, National Gallery of Art, Washington, Studies in the History ofArt, 62, 2001, 211-221  • 4. ' "A sort of corporate company": the portrait bust and its setting', in P. Curtis, P. Funnell and N. Kalinsky, Return to Life, (Flenry Moore Foundation, NPG and NPGS exhib.cat.) Leeds, 2000  • 5. 'Bouchardon's British sitterssculptural portraiture in Rome and the classicising bust around 1730', Burlington Magazine, CXLII (2000), 752-762 (with Colin Harrison and Alastair Laing)  • 6. ' 'La consommation de l'antique: le "grand tour" et les reproductions de sculpture classique' in J.-R. Gaborit and A. Pasquier eds., D'apres l'Antique, (Musee du Louvre exhib. cat.), Paris, 2000, 33-41  • 7. 'Public fame or private remembrance? The portrait bust as a mode of commemoration in eighteenth-century England', in Memory and Oblivion. Proceedings of the XXIXth International Conference of the History of Art held in Amsterdam, 1-7 September 1996, Amsterdam, Dordrecht, 1999, pp. 527-535  • 8. 'Limewood, Chiromancy and Narratives of Making. Writing about the Materials and Processes ofSculpture', Art History, 21(1998), pp. 498-530  • 9. 'Tyers, Roubiliac and a Sculpture's Fame: a poem about the commissioning of the Handel statue at Vauxhall', The Sculpture Journal, 2 (1998), pp.41-45  • 10. 'Roubiliac and Chelsea in 1745', Transactions of the English Ceramic Circle, 17 (1997), pp. 222-225  • 11. A Grand Design. The Art of the Victoria and Albert Museum, (co-edited with Brenda Richardson), exhibition catalogue for the Baltimore Museum of Art, New York and London: Abrams, 1997 1  • 12. 'Francis van Bossuit, Bottger stoneware and the Judith Reliefs', in R. Kahsnitz & P. Volk, eds., Skulptur in Siiddeutschland. Festschrift fur Alfred Schadler, Munich, 1998, pp. 281-294  • 13. 'The ivory multiplied: small-scale sculpture and its reproductions in the eighteenth century', in A. Hughes and E. Ranfft, Sculpture and its reproductions, 1997, pp. 61-78  • 14. 'The making of portrait busts in the mid eighteenth century: Roubiliac, Scheemakers and Trinity College, Dublin', Burlington Magazine, 137 (1995), pp.821-831.  • 15. 'A Rage for exhibitions: the display and viewing of Wedgwood's Frog service', in H. Young ed., The Genius of Wedgwood, London, 1995, pp.118-27, with catalogue entries F. 1-22 (pp. 128-133)  • 16. 'The Portrait Sculpture' in D. McKitterick ed., The Making of the Wren Library, Trinity College, Cambridge, Cambridge, 1995, pp. 110-137  • 17. 'English responses to continental sculpture in the 18th century', Handbook to the Grosvenor House Antiques Fair, London, 1993, pp. 12-17.  • 18. 'Roubiliac's Argyll monument and the interpretation of eighteenth-century sculptors' designs, Burlington Magazine, 134 (1992), pp.785-797.  • 19. 'John van Nost le Jeune, Portrait d'homme', Musee du Louvre. Nouvelles acquisitions du departement des Sculptures 1988-1991, Paris, 1992, pp.71-74.  • 20. ' "Proper Ornaments for a Library or Grotto": London Sculptors and their Scottish Patrons in the Eighteenth Century", in F. Pearson (ed.), Virtue and Vision. Sculpture and Scotland 1540-1990, Edinburgh (National Galleries ofScotland), 1991, pp.44-57.  • 21. ' "Odzooks! A man of stone". Earth, heaven and hell in eighteenth century tomb sculpture', in J. Miller (ed.), The Don Giovanni Book. Myths of Seduction and Betrayal, London, 1990, pp.62-69.  • 22. 'Giambologna, Donatello and the sale of the Gaddi, Marucelli and Stosch bronzes',  • Stadel Jahrbuch, N.F. 12 (1989), pp.179-194. 23. 'Rysbrack's terracotta model of Lady Foley and her daughter and the Foley monument at Great Witley', Stadel Jahrbuch, N.F., 11 (1987), pp.261-268.  • 24. 'Bernini's bust of Monsignor Carlo Antonio dal Pozzo', National Art-Collections Fund Review 1986, London, 1987, pp.99-101.  • 25. 'Roubiliac's models and 18th century sculptors' working practices' in P. Volk (ed.), Entwurf und Ausfuhrung in der europaischen Barockskulptur, Munich, 1986, pp. 133- 146.  • 26. 'Sir Henry Cheere and the response to the rococo in English sculpture' in C. Hind (ed.), The Rococo in England, London, 1986, pp. 143-160. 2  • 27. That "most rare Master Monsii Le Gros" and his Marsyas', Burlington Magazine, 127 (1985), pp.702-706. "  • 28. Catalogue entries 143, 144, 217, 218, 221, 225, 237, 238, 241, 478, 512, 513 in G.Jackson-Stops (ed.), Treasure Houses ofBritain, Washington, 1985.  • 29. 'Rococo Styles in English Sculpture' and catalogue entries on sculpture and designs for sculpture (E2, E25, Fl, F9, F10, S1-S54) in M. Snodin (ed.), Rococo. Art and Design in Hogarth's England, (exhibition catalogue), London, 1984, pp. 278-309.  • 30. 'Roubiliac and his European background', Apollo, 120 (1984), pp. 106-113. (Revised version published in K.Kalinowski (ed.), Studien zur Werkstattpraxis der Barockskulptur im 17. und 18. Jahrhundert, Poznan, 1992, pp.221-239  • 31. ' "A Peece of Wondrous Art" : Giambologna's Samson and a Philistine and its later copies', Antologia di Belle Arti, n.s., 23-24 (1984), pp.62-71.  • 32. 'Sculpture for Palladian Interiors: Rysbrack's reliefs and their setting', in K.Eustace (ed.), Michael Rysbrack, (exhibition catalogue), Bristol, 1982, pp. 35-41  • 33. 'Giuseppe Mazza's Judgment ofParis', Burlington Magazine, 121 (1979), pp.174-79.  • 34. 'Patrick Robertson's tea urn and the late 18th century Edinburgh silver trade', Connoisseur, 183 (1973), pp. 289-94

The Effect of Dividends on Consumption

Classical models predict that the division of stock returns into dividends and capital appreciation does not affect investor consumption patterns, while mental accounting and other economic frictions predict that investors have a higher propensity to consume from stock returns in the form of dividends. Using two micro data sets, we show that investors are indeed far more likely to consume from dividends than capital gains. In the Consumer Expenditure Survey, household consumption increases with dividend income, controlling for total wealth, total portfolio returns, and other sources of income. In a sample of household investment accounts data from a brokerage, net withdrawals from the accounts increase one-for-one with ordinary dividends of moderate size, controlling for total portfolio returns, and also increase with mutual fund and special dividends. We comment on several potential explanations for the results.

When Does the Market Matter? Stock Prices and the Investsment of Equity-Dependent Firms

We use a simple model to outline the conditions under which corporate investment will be sensitive to non-fundamental movements in stock prices. The key cross-sectional prediction of the model is that stock prices will have a stronger impact on the investment of firms that are “equity dependent†– firms that need external equity to finance their marginal investments. Using an index of equity dependence based on the work of Kaplan and Zingales (1997), we find strong support for this prediction. In particular, firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile. We also verify several other predictions of the model.

Pseudo Market Timing and Predictive Regressions

A number of studies claim that aggregate managerial decision variables, such as aggregate equity issuance, have power to predict stock or bond market returns. Recent research argues that these results may be driven by an aggregate time-series version of Schultz's (2003) pseudo market timing bias. We use standard simulation techniques to estimate the size of the aggregate pseudo market timing bias for a variety of predictive regressions based on managerial decision variables. We find that the bias can explain only about one percent of the predictive power of the equity share in new issues, and that it is also much too small to overturn prior inferences about the predictive power of corporate investment plans, insider trading, dividend initiations, or the maturity of corporate debt issues.

When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms

We use a simple model of corporate investment to determine when investment will be sensitive to non-fundamental movements in stock prices. The key cross-sectional prediction of the model is that stock prices will have a stronger impact on the investment of firms that are 'equity dependent' - firms that need external equity to finance their marginal investments. Using an index of equity dependence based on the work of Kaplan and Zingales (1997), we find strong support for this prediction. In particular, firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile. We also verify several other predictions of the model.

The Stock Market and Investment: Evidence from FDI Flows

Foreign direct investment offers a rich laboratory in which to study the broader economic effects of securities market mispricing. We outline and test two mispricing-based theories of FDI. The cheap assets' or fire-sale theory views FDI inflows as the purchase of undervalued host country assets, while the cheap capital' theory views FDI outflows as a natural use of the relatively lowcost capital available to overvalued firms in the source country. The empirical results support the cheap capital view: FDI flows are unrelated to host country stock market valuations, as measured by the aggregate market-to-book-value ratio, but are strongly positively related to source country valuations and negatively related to future source country stock returns. The latter effects are most pronounced in the presence of capital account restrictions, suggesting that such restrictions limit cross-country arbitrage and thereby increase the potential for mispricing-driven FDI.