We show analytically and empirically that the positive abnormal returns from Betting-Against-Beta (BAB) – a beta-neutral portfolio long in low beta stocks and short in high beta stocks – are consistent with market segmentation due to costly information acquisition, as in Merton (1987)....

This paper proposes a model of how biased individuals update beliefs in the presence of informational ambiguity. Individuals are ambiguous about the actual signal-generating process and interpret signals according to the model that can best support their biases. This paper provides a complete...

This paper addresses and resolves the problems caused by microstructure effects when measuring the relative importance of home and U.S. market in the price discovery process of internationally cross listed stocks. In order to avoid large bounds for information shares, previous studies applying...