Stock prices are more informative when the information has less social value. Speculators with limited resources making costly (private) information production decisions must decide to produce information about some firms and not others. We show that producing and trading on private information...

Changes in real stock-market prices have a lot of explanatory value of the growth rate of U.S. aggregate business investment, especially for long samples that begin in 1891 or 1921. Moreover, for the period since 1921 where data on a q-type variable are available, the stock market dramatically...

This paper investigates movements of market indicators of banking fragility, namely, Japan premium, stock prices, and credit derivative spreads of Japanese banks. Although the Japan premium in the euro-dollar market seemed to have virtually disappeared since April 1999, credit and default risks...

Using a data set on the investments made by a large number of retail investors from 1991 to 1996, we find that households exhibit a strong preference for local investment - the average household invests nearly a third of their portfolio in firms headquartered within 250 miles. We test whether...

This paper investigates the market reaction to the information released in security analyst reports. It shows that the market reacts significantly and positively to changes in recommendation levels, earnings forecasts, and price targets. While changes in price targets and earnings forecasts both...

We present strong evidence that option trading volume contains information about future stock price movements. Taking advantage of a unique dataset from the Chicago Board Options Exchange, we construct put-call ratios from option volume initiated by buyers to open new positions. On a...

This paper presents evidence on the characteristic speculative dynamics of a wide range of asset returns. It highlights three stylized facts. First, returns tend to be positively serially correlated at high frequency. Second, returns tend to be negatively serially correlated over long horizons....

Stock prices react significantly to the tone (negativity of words) managers use on earnings conference calls. This reaction reflects reasonably rational use of information. "Tone surprise" - the residual when negativity in managerial tone is regressed on the firm's recent economic performance...

We provide a first evaluation of the quality of banking stress tests in the European Union. We use stress tests scenarios and banks' estimated losses to recover bank level exposures to macroeconomic factors. Once macro outcomes are realized, we predict banks' losses and compare them to actual...

This paper investigates whether larger quantities of historical data affect a firm's ability to maintain market share in Internet search. We study whether the length of time that search engines retained their server logs affected the apparent accuracy of subsequent searches. Our analysis...