We outline a framework in which accounting “valuation anchors" could be connected to expected stock returns. Under two general conditions, expected log returns is a log- linear function of a valuation (market value-to-accounting) multiple and the expected growth in the valuation anchor. We...

We provide the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are well-populated, but are unreliable outside the...

Despite their popularity as proxies of expected returns, the implied cost of capital's (ICC) measurement error properties are relatively unknown. Through an in-depth analysis of a popular implementation of ICCs by Gebhardt, Lee, and Swaminathan (2001) (GLS), I show that ICC measurement errors...

We integrate fundamental analysis with mean-variance portfolio optimization to form fully optimized fundamental portfolios. We find that fully optimized fundamental portfolios produce large out-of-sample factor alphas with high Sharpe ratios. They substantially outperform equal-weighted and...

The vast majority of U.S. public firms announce earnings in the post-close (between the closing bell and midnight, or PC) or the pre-open (between midnight and the opening bell, or PO). Prior literature generally treats PC and PO announcements as equivalent when measuring the market reaction to...

The same firm characteristics that help explain cross-sectional variation in expected stock returns, such as size, book-to-market and the earnings yield, also help explain cross-sectional variation in returns to trading in option-implied stock return volatility. This empirical phenomenon is...

We use a comprehensive panel of NYSE order book data to show that the liquidity and quoting efficiency improvements associated with algorithmic trading (AT) are attributable to enhanced monitoring by liquidity providers. We find that variation in liquidity provider monitoring uniquely explains...

This paper examines how changes in firms’ risk disclosures affect a key market measure of risk. Our proxy for changes in risk disclosures is the addition and removal of individual risk factors to firms’ 10-K annual filings, identified via textual analysis of the risk factors section. Our...