This paper derives and tests the cross-sectional predictions of an intertemporal equilibrium asset pricing model with generalized disappointment aversion and time-varying macroeconomic uncertainty. To the contrary of the existing literature, disappointment may result not only from a fall in the...

We examine the role of acquirers’ familiarity with targets’ significant downside risks in M&A. We introduce a measure of a firm’s familiarity with another firm’s business downsides using similarity of their risk factor descriptions. We first show that this measure is distinct from...