Private equity placement data allow us to determine whether sophisticated investors can uncover the true value of firms. This can be done by defining sophisticated investors as those who meet the stringent participation requirements of the private equity market. Our results show private equity...

Results of research on whether changes in earnings can predict future stock returns are inconclusive. We add to this debate by using long-term data from 1871 to 2004 to examine the predictive power of changes in earnings in periods of intrinsic bubbles and in periods absent intrinsic bubbles....