Using a unique data set that contains the complete ownership structure of the German stock market, we study the momentum and contrarian trading of different investor groups. Foreign investors and financial institutions, and especially mutual funds, are momentum traders, whereas private...

Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff...

This paper investigates how the stock market reacts to firm level liquidity shocks. We find that negative and persistent liquidity shocks not only lead to lower contemporaneous returns, but also predict negative returns for up to six months in the future. Long-short portfolios sorted on past...

The recent financial crisis renewed concerns about a possible destabilizing impact of derivatives trading. Despite a very active research, the question whether or not derivatives tend to destabilize financial markets has not yet been answered to satisfaction. This contribution aims to revise the...

We find, unlike earlier studies, that there is no rise in the market betas of stocks that enter the S&P 500 index when the estimated factor model is that of Fama and French (1993). We also find that SMB and HML factor betas decline after the stocks are added to the index. This decline is...

Does the presence of arbitrageurs decrease equilibrium asset price volatility? I study an economy with arbitrageurs, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy assets in response to temporary price declines (the...

Returns from a zero-investment portfolio that is long in US firms whose dividends alter during a year, and short in firms whose dividends remain the same, produces positive returns in 52 of the 53 years between 1955 and 2007. These positive returns are related to expected inflation, which...

We examine the roles of rational and behavioural factors in explaining long-run premiums/discounts on closed-end funds, using evidence on equity funds from the US and UK. Although the processes by which fund prices converge towards long-run premiums or discounts are similar in the two countries,...

When trading frequencies between liquidity traders and short term, heterogeneously informed investors differ, asset prices reflect Higher Order Expectations (HOEs) about both fundamentals and liquidity trading, and multiple, self-fulfilling equilibria arise. Differential information and...

This paper studies the excess returns on stocks, associated to various company fundamentals on a panel of US stocks from 1979 to 2008. The returns premia are measured using a random coefficient panel data model on the individual stock level. We show that the HML and SMB factors in the Fama and...