Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S....

I use uniquely comprehensive data on financial news events to test four predictions from an asymmetric information model of a firm's stock price. Certain investors trade on information before it becomes public; then, public news levels the playing field for other investors, increasing their...

Information markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. They can provide real-time information on the likely benefits and costs of different kinds of policies and projects.We argue that information...

Information markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. They have the potential to improve decision making and policies throughout the economy. The demand for information markets appears to be...

This paper tests whether stock market investors appropriately distinguish new and old information about firms. The staleness of a news story is its textual similarity to the previous ten stories about the same firm. The tests show that firms' stock returns are less responsive to stale news. Even...

I investigate the relationship between liquidity and market efficiency using data from short horizon binary outcome securities listed on the TradeSports exchange. I find that liquidity does not reduce, and sometimes increases, deviations of prices from financial and sporting event outcomes. One...

We examine whether a simple quantitative measure of language can be used to predict individual firms' accounting earnings and stock returns. Our three main findings are: (1) the fraction of negative words in firm-specific news stories forecasts low firm earnings; (2) firms' stock prices briefly...

Although prices in financial markets play an important role in improving allocative efficiency in the real economy, few models of securities markets explicitly incorporate resource allocation decisions. In this paper, we study the equilibrium in a securities market when the market price provides...

I quantitatively measure the nature of the media's interactions with the stock market using daily content from a popular Wall Street Journal column. I find that high media pessimism predicts downward pressure on market prices followed by a reversion to fundamentals, and unusually high or low...

Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity...