The book-to-market effect is often interpreted as evidence of high expected returns on stocks of "distressed" firms with poor past performance. We dispute this interpretation. We find that while a stock's future return is unrelated to the firm's past accounting-based performance, it is strongly...

type="main" <title type="main">ABSTRACT</title> <p>We find that a firm's investment is highly sensitive to the investments of other firms headquartered nearby, even those in very different industries. A firm's investment also responds to fluctuations in the cash flows and stock prices (q) of local firms outside its sector....</p>

This paper investigates the relation between firms' locations and their corporate finance decisions. We develop a model where being located within an industry cluster increases opportunities to make acquisitions, and to facilitate those acquisitions, firms within clusters maintain more financial...

This paper examines how cultural differences influence the returns of momentum strategies. Cross-country cultural differences are measured with an individualism index developed by <link rid="b32">Hofstede (2001)</link>, which is related to overconfidence and self-attribution bias. We find that individualism is...

This paper presents a theory of location choice that draws on insights from the incomplete contracts and investment flexibility (real option) literatures. Our analysis indicates that the choice of locating within rather than away from industry clusters is influenced by the extent to which...

We analyze the hedging decisions of firms, within an equilibrium setting that allows us to examine how a firm's hedging choice depends on the hedging choices of its competitors. Within this equilibrium some firms hedge while others do not, even though all firms are ex ante identical. The...