Contrary to the prevailing view, equity markets have not followed a consistent trend toward higher efficiency over the past century. Instead, we document a U-shaped pattern in the speed of price adjustment to new information from 1934 to 2018. Markets are more efficient in responding to both...

We examine the association between margin requirements and the market’s efficiency in incorporating firm-specific and market-level public news. Combining the Fed’s 22 changes in margin requirements with a hand-collected sample of earnings announcements between 1934-1975, we show that higher...

Unusually high aggregate stock trading volume in one week predicts higher excess market returns in the following week, especially when accompanied by high market volatility. This predictive relation is robust across alternative measures of aggregate trading volume. In out-of-sample forecasting...

Combining a large archive of public corporate news events with retail trading records from NYSE, we examine whether and how news releases affect the informedness of individual investors. We find a significantly positive relationship between retail order imbalance on days with positive news...

When investors anticipate the Fed increasing margin requirements, they bid up the riskier stocks in the long legs of hedge portfolios associated with the market, HML, and SMB factors relative to the less risky stocks in the short legs. Following such a policy change, the returns on these hedge...

We investigate the role of extreme positive payoffs in the distribution of monthly fund returns in investors' mutual fund preferences. We document a positive and significant relationship between the maximum style-adjusted monthly return (MAX) and future fund flows. The relationship is robust to...

This study shows that the recent trajectory of a firm's profits predicts future profitability and stock returns. The predictive information contained in the trend of profitability is not subsumed by the level of profitability, earnings momentum, or other well-known determinants of stock returns....

We examine whether boardroom connections help managers identify non-fundamental price shocks. We find that managers of well-connected firms are less likely to cut investment in response to exogenous non-fundamental drops in stock prices. Moreover, firms with stronger corporate governance and...