We present the puzzling evidence that, from 1962 to 2009, an average 10.2% of large public nonfinancial US firms have zero debt and almost 22% have less than 5% book leverage ratio. Zero-leverage behavior is a persistent phenomenon. Dividend-paying zero-leverage firms pay substantially higher...

In a pure-exchange, continuous-time economy, agents, who have different subjective discount rates and heterogenous beliefs on the fundamentals, trade with each other motivated not only by the benefit of risk sharing but also by speculation. This aggressiveness in trading can increase stock price...

We examine the properties of firms' forecasting records and whether the accuracy of their prior earnings forecasts affects investor response to their subsequent forecasts. Within the context of a Bayesian model of investor learning, we find that the stock price response to management forecast...

Circuit breakers (price limits and trading halts) are regulatory instruments aiming to reduce severe price volatility and provide markets with a cooling off period. The paper investigated empirically, using daily returns of two Egyptian Stock Market indices the Hermes Financial Index (HFI) and...

If investors are not fully rational, what can smart money do? This paper provides an example in which smart money can strategically take advantage of investors' behavioral biases and manipulate the price process to make profit. The paper considers three types of traders, behavior-driven...

We offer an alternative framework for the analysis of mutual funds and use it to examine the rationale behind existing regulations that require mutual fund adviser fees to be of the quot;fulcrumquot; variety. We find little justification for the regulations. Indeed, we find that asymmetric...

This paper investigates whether seasonalities in daily stock returns are related to the trading behavior of individual and institutional investors. The change in the investor structure of B-share markets in Shanghai and Shenzhen after the abolition of ownership restrictions in 2001 provides a...

Information provided by the U.S. Department of Homeland Security regarding potential terrorist attacks significantly affects the U.S. equity market. When the government raises the perceived threat level, investors' perceptions of risk increase (as measured by the conditional volatility of...

This paper studies the impact of a regulatory change of listing rules on the long-term IPO performance in the Hong Kong stock market. This regulatory change, introduced in 1994, imposed a three-year prelisting earning requirement on new issues. Our sample includes 287 IPOs registered on the Hong...