In this paper, we examine formally Keynes' idea that higher order beliefs can drive a wedge between an asset price and its fundamental value based on expected future payoffs. In a dynamic noisy rational expectations model, higher order expectations add an additional term, which we call the...

We examine the effect of regularly scheduled macroeconomic announcements on the beliefs and preferences of participants in the U.S. Treasury market by comparing the option-implied state-price density (SPD) of bond prices shortly before and after the announcements. We find that the announcements...

Morck, Yeung and Yu (MYY, 2000) show that R2 and other measures of stock market synchronicity are higher in countries with less developed financial systems and poorer corporate governance. MYY and Campbell, Lettau, Malkiel and Xu (2001) also find a secular decline in R2 in the United States over...

Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. Whether dealers in such a market operate competitively is an empirical issue, but a difficult one to study. Data in such markets is generally not centrally recorded. We analyze a...

This paper investigates the relative performance of local and foreign financial analysts on Latin American emerging markets. There is strong evidence that foreign financial analysts outperform local analysts on these markets. Foreign analysts produce more timely and more accurate forecasts. A...

We examine the long-run performance of firms that offer seasoned equity on the Swiss market. Swiss firms use offerings with rights to raise new equity and they can issue three types of securities. Moreover, the tax law has for some firms the effect of increasing the issuing frequency. We find...

I analyze the impact of the arrival of public information on the intraday trading of highly liquid stocks quoted on the Paris Bourse. Using the Reuters alert system, I gather a large sample of firm-specific news and analyze market behavior around news releases. I estimate the transaction cost...

During the last decade, a surprisingly high percentage of U.S. companies has fulfilled or beaten analysts’ earnings per share forecasts. One of the most frequently cited reasons for this growing tendency is a change in the nature of U.S. executive compensation structure. As stock options have...

Over the period 2002 to 2003,Switzerland and the European Union (EU) were engaged in negotiations regarding banking secrecy. The EU's stated goal was for Switzerland to abolish banking secrecy. Switzerland refused and offered to impose a withholding tax on interest income instead. The two...