During 2002 and 2003, 140 publicly traded U.S. firms announced their intention to recognize an accounting expense when stock options are granted to employees. Many similar firms elected not to expense options. We study the stock market’s reaction. There is no evidence whatsoever that...

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...

Note: This paper has been published in the "International Review of Finance." It is published in: Vol 3, No.1, March 2002,pp. 27-52 of the journal.

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...

We provide a model in which irrational investors trade based upon considerations that are not inherently related to fundamentals. However, because trading activity affects market prices, and because of feedback from security prices to cash flows, the irrational trades influence underlying...

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...