Are CEOs unable to learn? This surprising question deserves to be raised in the light of the declining pattern of cumulative abnormal returns observed in M&A programs. This paper shows that this pattern is the expected ex post empirical evidence for rational risk averse CEOs. Our theoretical...

We present a dynamic model of production in which a firm’s output increases when its managers share their information. Communication of ideas depends on the quality of the firm’s internal language. We prove that firms with richer languages (i.e., more organizational capital) will...

We analyze the relation between analyst attributes (years of experience, reputation of the analysts’ brokerage houses) and the short- and long-term price reactions to recommendations made by the analysts. We find that in the long-term, the recommendation changes of highly experienced...

This paper explores how fincial market prices directly inflnce a firm’s cash flows. Feedback from financial market prices to crash flows arises when firms’ non-financial stakeholders, e.g., its customers, employees, and suppliers, make decisions that are contingent on the...

We study how daily returns and volume behave around the Jewish High Holy Days. We find that on both Rosh HaShanah and Yom Kippur, volume is down significantly, relative to that on all trading days in the sample period. When we consider a cumulative measure that allows for preemptive or delayed...

This paper provides a rationale for markets in baskets of securities (e.g. the stock index futures markets) by demonstrating that they provide a convenient trading medium for liquidity traders. The reason advanced is that the transaction costs suffered by these liquidity traders due to adverse...

In this study, we employ order imbalance measures to provide evidence that there exists an individual/institutional dichotomy in reactions to seasoned equity offerings (SEOs). The evidence supports the notion that small, possibly naıve, individual investors keep trading SEO stocks...

Prior research finds that momentum strategies (buying past losers and selling past winners) generate abnormal returns over medium-term (3- to 12-month) horizons. The Fama and French factors are unable to account for this effect, though they account for long-term reversals in asset returns. We...

We study the consumption-investment problem of a CRRA agent who possesses private information about the future prospects of a stock. We compute the value of the information to the agent by comparing the utility equivalent with and without the information of the agent. The value of private of...

This paper investigates the effect of company brand perceptions on investor incentives to hold stocks. We find that, after controlling for other postulated determinants of stockholdings, there is a negative and significant cross-sectional relation between percentage institutional holdings and...