This paper develops a signaling model with two signals, two attributes, and a continuum of signal levels and attribute-types to explain new issue underpricing. Both the fraction of the new issue retained by the issuer and its offering price convey to investors the unobservable "intrinsic" value...

The role that financial innovation plays in financial markets is very controversial. To provide insight into this role, we examine how market participants use the highly successful Treasury STRIPS program. We find that investors use the option to create Treasury-derivative STRIPS primarily to...

This study analyzes the role that two psychological attributes-sensation seeking and overconfidence-play in the tendency of investors to trade stocks. Equity trading data from Finland are combined with data from investor tax filings, driving records, and mandatory psychological profiles. We use...

This paper analyzes how mutual fund performance relates to past performance. These tests are based on a multiple portfolio benchmark that was formed on the basis of securities characteristics. The authors find evidence that differences in performance between funds persist over time and that this...

This paper documents a strong and prevalent momentum effect in industry components of stock returns which accounts for much of the individual stock momentum anomaly. Specifically, momentum investment strategies, which buy past winning stocks and sell past losing stocks, are significantly less...

Past research explains observed spreads between futures and forward Eurodollar yields as being due to the futures contract's mark-to-market feature. The authors derive closed-form solutions for this yield spread and show that, theoretically, it should be small. Also, differences in liquidity,...

This paper documents that investors are more likely to hold, buy, and sell the stocks of Finnish firms that are located close to the investor, that communicate in the investor's native tongue, and that have chief executives of the same cultural background. The influence of distance, language,...

A unique data set allows us to monitor the buys, sells, and holds of individuals and institutions in the Finnish stock market on a daily basis. With this data set, we employ Logit regressions to identify the determinants of buying and selling activity over a two-year period. We find evidence...