One of their most recent publications is Is normative portfolio theory dead?. Which was published in journal Journal of Economics and Business.

More information about George M. Frankfurter research including statistics on their citations can be found on their Copernicus Academic profile page.

George M. Frankfurter's Articles: (6)

Chapter 1 - Introduction

Publisher SummaryDividends are commonly defined as the distribution of earnings in real assets among the shareholders of the firm in proportion to their ownership. There are three parts of this definition: (1) dividends can be distributed only from earnings and not from any other source of equity, (2) dividends must be in the form of real asset, and (3) all stockholders share in dividends relative to their holdings in the corporation. This chapter discusses Fisher Black's editorial, “Why Firms Pay Dividends,” in detail. Dividend payment behavior, which is also termed as “dividend policy,” evolved with modern corporation over a period of four centuries. Financial economists posited a variety of theories that tried to justify the payment of dividends using the principles of wealth maximization and the logic of the “homo economics” (the economic man—should be economic person to be politically correct). The dividend issue, as both a policy and an act, is one of the most intriguing topics of financial economics.

Chapter 9 - Models of Asymmetric Information and Empirical Research

Publisher SummaryThe free cash flow hypothesis combines attributes of both signaling and agency costs paradigms, where the payment of dividends can decrease the level of funds available for perquisite consumption by corporate managers. A stock price change resulting from a change in dividend payout because of the informational content of dividends represents differences in the private information known by corporate managers and the information available to the public. Communication of managerial expectations using dividends is less ambiguous than earnings announcements, as dividend policy is solely at the discretion of management and represents a costly cash outflow to shareholders. The model combines dividends and external financing that are stylized as different sides of the same coin. Each alternative has distinct signaling properties, and the distribution's size and the announcement effect's magnitude are uncorrelated. If firms have identical production possibilities but dissimilar cash levels, firms with decreasing absolute risk aversion are more likely to hold higher levels of cash and have a lower relative cost of stochastic disbursement.

Chapter 16 - Conclusions: Future Research and Thinking

Publisher SummaryThis chapter discusses why there is an urgent need to understand what investors and their professional advisers think about dividends and how they should be educated to overcome mistaken beliefs as part of future research to comprehend the dividend phenomenon and practice. The whole theory of modern finance in general and the notion of market efficiency in particular are based on the axiom of investor's risk aversion. In a recession when most stock prices are depressed, the yield can look reassuring one moment and totally lousy the next. Also, there is this little problem of taxes, which may be avoided in a case of a tax-exempt bond, for which both price and yield are more stable, constituting a less risky investment instrument. There are some preconceived notions among financial decision makers, one of which is to maintain dividends and increase dividends only if the firm can continue paying the higher dividend for years to come. It will be prudent to presume that shareholders will reward a prudent response to the ever-changing economic conditions rather than sticking to a strategy that may bring about tragic consequences.

The prescriptive turn in behavioral finance

AbstractHomo economicus has undergone a transformation. The first stage was from “a model of “to” the model of.” The second stage has been from “the model of” to “the model for,” using the word “model” in a slightly different sense as something to be emulated. The so-called “behavioral finance” literature has taken a markedly prescriptive turn. Its implicit purpose is to discover and remedy deviations from rational choices, presuming that if people do not behave according to the prescription of theory, then something is wrong with people and not with the theory.

The Theory of Fair Markets (TFM) toward a new finance paradigm

AbstractIn this paper I offer the Theory of Fair Markets (TFM) as an alternative to the ubiquitous CAPM/EMH that has been ruling unabated academia's financial economics for the last four decades. According to the TFM what counts is whether society is better off with a market system which is carefully monitored and corrected by a democratically elected government and social, labor, and other laws that serve as its infrastructure than with the notion of laissez faire. Admittedly, the theory is in its infancy and as such it is subject to both evolutionary changes/modification and exploratory empirical research. Without a doubt, it is also subject to criticism. Nevertheless, I contend that the EMH should be scrutinized and abandoned, because it is a reality-retardant theory, falsely implying Pareto optimality.

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