Past literature suggests that success rates in professional basketball are independent of past performance and this has been interpreted as evidence that the commonly shared belief in Hot Hands (<italic>HH</italic>) is a cognitive illusion. This is often cited as evidence of biased decision making, even when...

One finding of recent empirical studies is that financially distressed stocks have large dispersion in their book to market value of equity (BM) ratios. In this paper we provide an explanation based entirely on rational decision making by investors. Our main argument is that the likelihood of a...

Past literature suggests that success rates in professional basketball are independent of past performance and has been interpreted as evidence that the commonly-shared belief in Hot Hands (HH) is a cognitive illusion. This is often cited as evidence of biased decision-making even when financial...

Fama and French (2006) use the dividend-discount model to develop the role of expected profitability, expected investment, and the book-to-market ratio as predictors of stock returns. One reported empirical result is anomalous. The valuation model establishes that the comparative static relation...