We consider the estimation methods for the rank of a beta matrix corresponding to a multifactor model and study which method would be appropriate for data with a large number of assets. Our simulation results indicate that a restricted version of Cragg and Donald's (1997) Bayesian Information...

We provide plausibly causal evidence for the role of cultural and linguistic diversity in stock price crash risk. Using unique data from China, we show that firms headquartered in linguistically diverse areas, instrumented by the extent of geographical isolation, have higher stock price crash...

We analyze the effects of spot market short-sale constraints on derivatives trading using a unique Chinese stock market futures trading database. Due to short-sale constraints, investors' pessimistic views on the underlying index can be expressed solely through short futures positions, while...

We investigate the effect of diversity on market reactions to financial disclosure. We show elevated trading volume and stock return volatility around earnings announcements for firms headquartered in culturally and linguistically diverse locales. These results continue to hold when earnings...

Using textual analysis of stock message board posts, we find that investors’ sentiment expressed through messages can predict future one-day stock returns. For small stocks, message board sentiment can predict up to two-day cumulative future returns. This increased predictive power on small...