Although the fraud-on-the-market presumption has been a legal cornerstone for nearly four decades, the mechanics underpinning this presumption have received limited analysis in the law and economics literature. This paper introduces a formal model that elucidates the mechanisms behind the...

Liens provide secured debt holders with the right to foreclose on collateral under specific circumstances and priority rights to collection during a debtor's bankruptcy proceedings. This paper investigates the economic value of such liens in secured corporate debt contracts. The economic value...

This article explores price impact in the context of securities fraud litigation, focusing on the probability of observing directionally-consistent abnormal returns (those that go in the direction of a plaintiff's theory of liability) under the hypothesis of price impact versus no price impact....

Prior evidence suggests a puzzling absence of compensating returns to the common stocks of highly-distressed companies. I examine three sets of highly-distressed common stocks - one set from the crash of the internet bubble (1999 to 2002), one from the financial crisis (2007 through 2008), and...

The dividend (Gordon) growth model (DGM) is a simple stock valuation equation in four variables: (1) price; (2) next-period cash flow; (3) a perpetual and constant rate of growth in the periodic cash flow; and (4) a perpetually-constant discount rate. The DGM can be expressed to equate the...

I analyze hedge fund activism within a simple behavioral finance framework where managers are excessively optimistic about their firm's long-run prospects, the market is efficient, and hedge fund activists are excessively pessimistic as a result of a behavioral winner's curse. This generates a...

Nations around the world have pledged for decades to address climate change, but no significant actions have been taken. This is hardly surprising, since there is no precedent in human history for such cooperation. Greenhouse gas emissions continue to rise, not fall. I argue that optimism about...

Prior work demonstrates that neither Altman Z-score nor Merton distance-to-default predict bankruptcy in unbalanced datasets. I show that one-year stock returns are a powerful bankruptcy predictor. In U.S. public firms from December 31, 1995 through December 31, 2021 that are members of the...

Market capitalization does not equal market value. Demand curves for fungible assets like common stock or cryptocurrency are downward sloping at any given point in time, implying that even a small additional sale, all else equal, may have required a lower price to induce even a slightly larger...

The discounted cash flow (DCF) valuation methodology is ubiquitous in finance, but as a single equation in a potentially-infinite set of unobservable unknowns, it is unfalsifiable and therefore untestable. While bonds can be viewed as examples of DCF pricing, this depends on their prices often...